"The optimistic view is that our collective ingenuity will create so many things for people to do that are so attractive to the rich that they will pay through the nose for them and so recreate a middle-class society."
This going to sound snarky. Do the rich, collectively, have that much foresight or wisdom? What if some of them fall into promoting meme stocks? Or, live on the sea, returning and departing strategically from land to "optimize" the tax bill? Or, have offshore accounts to minimize taxes? One would think that they'd have enough wisdom to realize that they are beneficiaries of so many positive externalities, even dumb luck. But they often might not. And may be unwilling to pay through their noses to recreate a middle class. The middle class is a recent modern thing. I suspect that when people become uber wealthy, they compare themselves to pre-modern royalty, the very people that had little or no use for a middle class.
"Moreover as Suresh Naidu pointed to me, there is a third huge mistake for this time: Marx thought increased investment and capital accumulation diminished the value of labor to employers, and thus diminished the bargaining power of workers -- when actually it increased it."
Yep, he (Karl) should've said instead that the marginal product of capital would approach zero. Or, by extension, the real interest rate would be zero. Probably nobody that studied modern economics would've believed it -- until it happened this last decade. Wasn't it Keynes who got the issue right instead -- the death of the rentier -- or am I confusing the matters? That is, when long-term capital accumulation/savings meets inadequate demand for various underlying reasons that may not have anything to do with the labor theory if value. We still see prominent countries that are probably going through this.
"Thus he takes a demonstration that labor's share of income might fall and without noticing turns it into a claim that the working class will starve."
Wrong inferences often happen when people confuse levels and shares. It is probably best to be polite about pointing out that sort of thing. Because something as simple -- levels versus shares -- requires people to drastically revise their cherished, often long-held, views. And they don't like it.
"Moreover as Suresh Naidu pointed to me, there is a third huge mistake for this time: Marx thought increased investment and capital accumulation diminished the value of labor to employers, and thus diminished the bargaining power of workers -- when actually it increased it."
That seems to conflate labor's "bargaining power" and scarcity, or, the marginal product of labor. There are laws, even labor laws, that can prevent bargaining power from emerging due to relative scarcity of labor. Plus, the instantaneous effect of deploying labor-substituting technologies can lead to "structural" unemployment for some time, thus exhibiting diminished "bargaining power" of labor. After all, even in the neoclassical growth model, we do say that marginal product of capital approaches infinity when capital level approaches zero. This is usually meant to apply to the initial stages of capital accumulation. I could be wrong.
"Marx could not fully grok that rising real material living standards for the working class might well go along with a rising rate of exploitation and a smaller labor share."
It's a pretty basic hypothesis, given that it never got taken seriously by Uncle Whiskers. To what extent was the LTOV an intentional move to avoid consideration of this radioactive (for command socialism) possibility?
IIRC, Marx was living at a time, and published Das Kapital, when some thought all inventions had been made and there was no further need for patent offices. So was it truly entirely wrongheaded then?
SCIFI writers have been creating scenarios where machines did all the work (Pohl, Kornbluth, Asimov, or that society had become stagnant, at least as far back as the 1940s. Computers putting people out of work was the theme of the Tracy-Hepburn comedy "Desk Set", the rise of PCs in the early 1980s, and now AI in the early 21st. As we come up against the global limits (already exceeded?) of industrialization and population, are these fears really wrong based on the idea that "this time is no different from the past", but really "this time is different". IDK, but I suspect economics is the wrong domain to provide answers to these questions, other than the basic models that ground the connections between capital and labor in some sort of reality, even as politics and social sciences might better answer how to ensure that the population is well supported and rewarded for the labor they contribute. I have no doubt that science and technology will continue to increase our knowledge and capabilities, and some of it will surely continue to bring new ideas, processes, and products into the world. But just as contemporary LLM AIs are more parasitic than useful at the moment, how much of what we can, and should do, will be able to maintain a population with a decent standard of living? Today, that does not look good, as the new robber barons and rentiers try to extract more from the economy than they add.
"The optimistic view is that our collective ingenuity will create so many things for people to do that are so attractive to the rich that they will pay through the nose for them and so recreate a middle-class society."
This going to sound snarky. Do the rich, collectively, have that much foresight or wisdom? What if some of them fall into promoting meme stocks? Or, live on the sea, returning and departing strategically from land to "optimize" the tax bill? Or, have offshore accounts to minimize taxes? One would think that they'd have enough wisdom to realize that they are beneficiaries of so many positive externalities, even dumb luck. But they often might not. And may be unwilling to pay through their noses to recreate a middle class. The middle class is a recent modern thing. I suspect that when people become uber wealthy, they compare themselves to pre-modern royalty, the very people that had little or no use for a middle class.
"Moreover as Suresh Naidu pointed to me, there is a third huge mistake for this time: Marx thought increased investment and capital accumulation diminished the value of labor to employers, and thus diminished the bargaining power of workers -- when actually it increased it."
Yep, he (Karl) should've said instead that the marginal product of capital would approach zero. Or, by extension, the real interest rate would be zero. Probably nobody that studied modern economics would've believed it -- until it happened this last decade. Wasn't it Keynes who got the issue right instead -- the death of the rentier -- or am I confusing the matters? That is, when long-term capital accumulation/savings meets inadequate demand for various underlying reasons that may not have anything to do with the labor theory if value. We still see prominent countries that are probably going through this.
"Thus he takes a demonstration that labor's share of income might fall and without noticing turns it into a claim that the working class will starve."
Wrong inferences often happen when people confuse levels and shares. It is probably best to be polite about pointing out that sort of thing. Because something as simple -- levels versus shares -- requires people to drastically revise their cherished, often long-held, views. And they don't like it.
"Moreover as Suresh Naidu pointed to me, there is a third huge mistake for this time: Marx thought increased investment and capital accumulation diminished the value of labor to employers, and thus diminished the bargaining power of workers -- when actually it increased it."
That seems to conflate labor's "bargaining power" and scarcity, or, the marginal product of labor. There are laws, even labor laws, that can prevent bargaining power from emerging due to relative scarcity of labor. Plus, the instantaneous effect of deploying labor-substituting technologies can lead to "structural" unemployment for some time, thus exhibiting diminished "bargaining power" of labor. After all, even in the neoclassical growth model, we do say that marginal product of capital approaches infinity when capital level approaches zero. This is usually meant to apply to the initial stages of capital accumulation. I could be wrong.
"Marx could not fully grok that rising real material living standards for the working class might well go along with a rising rate of exploitation and a smaller labor share."
It's a pretty basic hypothesis, given that it never got taken seriously by Uncle Whiskers. To what extent was the LTOV an intentional move to avoid consideration of this radioactive (for command socialism) possibility?
My view is the the LToV was something he inherited from Ricardo, and then could not break away from... Brad
IIRC, Marx was living at a time, and published Das Kapital, when some thought all inventions had been made and there was no further need for patent offices. So was it truly entirely wrongheaded then?
SCIFI writers have been creating scenarios where machines did all the work (Pohl, Kornbluth, Asimov, or that society had become stagnant, at least as far back as the 1940s. Computers putting people out of work was the theme of the Tracy-Hepburn comedy "Desk Set", the rise of PCs in the early 1980s, and now AI in the early 21st. As we come up against the global limits (already exceeded?) of industrialization and population, are these fears really wrong based on the idea that "this time is no different from the past", but really "this time is different". IDK, but I suspect economics is the wrong domain to provide answers to these questions, other than the basic models that ground the connections between capital and labor in some sort of reality, even as politics and social sciences might better answer how to ensure that the population is well supported and rewarded for the labor they contribute. I have no doubt that science and technology will continue to increase our knowledge and capabilities, and some of it will surely continue to bring new ideas, processes, and products into the world. But just as contemporary LLM AIs are more parasitic than useful at the moment, how much of what we can, and should do, will be able to maintain a population with a decent standard of living? Today, that does not look good, as the new robber barons and rentiers try to extract more from the economy than they add.
This suggests to me that we desperately need a new theory for the present and near future.
I hope you now write a column answering the same question for stafford beer!