Per Bylund Profile picture
May 12, 2018 19 tweets 4 min read Twitter logo Read on Twitter
The term #capitalism is highly confusing. The definition is clear enough: the private ownership of the means of production (capital). But the implications are very different depending on one's political or economic perspective. Both are right and wrong. Let's take a look at them.
Politically speaking, private ownership of the means of production provides owners with power. Why? Because society is dependent on production of value, and production is undertaken using capital. Whoever has ownership of capital can then influence society. Consequently, it is
only intuitive that owners of immense capital can make demands from policy-makers, who need to at least consider this perspective when making new laws. So the power of the state (usually thought of as the power of "the people") is in a sense limited by capital ownership. And, no
doubt, policy-makers feel that their power is to some extent circumscribed by the influence of capital owners. (Whether this is a good or bad thing is a different issue.) So there's a constant scratching of each other's backs between the state and capital owners, as should be
expected. Both want it their way, and the state's apparatus (and the state's means, to refer to Oppenheimer) only allows for *one* way. So no wonder capital owners and politicians are both cooperating and covering their own behinds.
In other words, politically capitalism is about power because capital ownership implies influence over the political process and capital owners are, in fact, invited to take part in policy-making by political decision-makers. They both gain from such wheeling and dealing.
Economically speaking, this analysis makes little sense. Why? Because capital as a means of production has value only because and to the extent it is used to satisfy consumers' wants. As Menger famously exemplified this point already in 1871, a machine used to produce tobacco
products has value because consumers like to buy and use tobacco products. But should they, suddenly, not be interested in (and thus not demand) tobacco products, that machine would immediately become worthless. (Or, rather, it would have only scrap value.) In other words,
capital ownership is strictly in the service of consumers. Whenever a capital owner chooses to restrict his/her use of existing capital, it becomes valueless. Capital that is not in use simply has no value. Capital that is used suboptimally has more value in the hands of other
capital owners, which means the owner's greatest "power" is achieved by selling it! But capital owners have no power over consumers: the consumer is still king and is sovereign in deciding what goods/services are worth his/her time and money. In other words, what uses of capital
are to be valuable. This is hardly a position of power for capital owners - it is the position of a servant. Capitalists have wealth only to the degree the are and continue to be of service to consumers (that is, the "masses"). As soon as they stop, they lose that value or are
"forced" (in an economic sense) to sell their capital to producers who better understand how to serve consumers. So how does this servant become a master? That's the question that requires an answer in order to bridge the economic and political definitions.
One way is to adopt a faulty economic theory, such as Marx's, and thus claim that capital has objective or intrinsic economic value and that people are desperate to get jobs. But such a theory only begs the question, and leads back to the political dimension. Because there is
nothing in an economy forcing anyone to work for a "capitalist." The very existence of productive capital implies that the economy is somewhat advanced. And this, in turn, means labor is specialized and productive. Which means there are options (see my book on the Unrealized).
The reason there are *not* options for people, so that they "have to" be employed by capitalists, has an extra-economic cause: it is, in other words, of political origin. So we're necessarily back to politics.
Another way is to consider a different political system, one that which is not based on hierarchical power claiming the monopoly of violence, which would then not provide policy-makers with power (as there would be no policies to be made) and thus no wheeling and dealing with
capital owners: the former would need to contribute to the economy rather than be a burden on it, and the latter would be strictly servient of consumers.
The problem here is to treat both dimensions as they are equal. People of the left focus on the power aspect, and assert that it somehow has economic origin (in other words, they're economically illiterate). People of the right focus on the economic aspect, and assert that there
is no power (or, at least, no problem) due to capital ownership (in other words, they're ignorant of the state's influence on society and economy). Still, they use the same term for their very different concepts. No wonder there is confusion!

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More from @PerBylund

Aug 24, 2018
There's a whole lot of buzz about the #sharingeconomy. Many seem to think it is something new, with some calling for a 'new economics' to explain it while others deride the 'gig economy' as a higher level of exploitation, inequality, and poverty. Neither is a good analysis.
First things firs: the sharing economy was facilitated by advances in technology alongside consumer preferences changing from goods to services and thus from ownership to lease. These are not separate processes, but mutually constituting changes where each increases the other.
The advances in technology that brought about the sharing economy are those that allow for cheaper, faster, and more accurate communication, verification of factual claims, decentralized corroborated trust/reputation etc. They overall lower transaction costs by making information
Read 20 tweets
Aug 17, 2018
Scarcity is a somewhat misused term in policy and popular-economic commentary because it is used in the sense that something is scarce if it is valuable and we have "almost run out" of it. Hence "post-scarcity" is made out to mean "we have plenty." But scarcity as "almost out of"
is a terrible definition for actual analysis, and thus not how it is used in economics. Because "almost out of" is relative actual use or actual existing reserves - or both. And it assumes value as an objective aspect of the resource, given technology. Any analysis based on such
sloppy, shifting, and interdependent definitions will itself be sloppy, shifting, and indistinct. As usual, therefore, the terms mean different things in economic analysis than they mean in everyday speech. (Just like 'theory' in science means 'the best bloody explanation we know
Read 22 tweets
May 3, 2018
Three commonly held but untrue views seem to nicely summarize this "report":
1. Selling your goods below cost is a success strategy
2. Being "big" means you cannot be disrupted
3. Government wants to save us from "market power"
#1 only produces a return if one can then raise prices and still sell big volumes *and* no one else can enter the market. How can firms "protect" their staked-out market space? Without government privilege there's only one way: by offering goods of higher quality at lower prices.
So to be successful, either the firm produces better goods or they're more efficient (lower cost). Neither is much of a problem for consumers. And if they charge prices above what consumers think it's worth, both the good itself and the purchasing power of their money, they fail.
Read 13 tweets

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