Factors of Production and the main flaw with apologists of capitalism and socialism

[Masterhawk]

The factors of production are the fundamental categories of what makes an economy. According to classical economics, there are three categories:

Land: Anything made by nature such as resources, water, and land itself

Capital: Anything made by man

Labor: Effort by man to provide goods or services

Profit is likewise split into three categories based on its source: rent (land), wages (labor), and interest (capital).

Of the three, land is a bit different from the other two because no one made it. This insight was pointed out by Adam Smith, David Ricardo, and Thomas Paine. Paine believed that the value of land should be taxed because doing so does not rescue the amount of land and also deters land speculation. In addition, he believed that the revenue from such a tax should be redistributed as a basic income. In the late 19th century, Henry George started a movement advocating for a land value tax. This tax would have taxed the value of land. Unlike a property tax, it would only affect the land rather than the improvements made to the land. Thus it would incentivize landowners to make the most efficient use of their land.

In contrast, the marxian school renames them to labor, subjects of labor (land), and instruments of labor (capital). They're essentially the same thing but it's very clear that Marx was trying to say that labor is the only active ingredient in the production of wealth. This is also where we get the labor theory of value which states that the value of a product is the amount of socially necessary labor required to produce it. It's similar to the cost theory of value except it only focuses on labor. It's the whole cornerstone of socialism. The LTV is used to say that owners of capital are rent seekers because they're not providing any labor, the profit made by capital owners is called surplus labor. This all begs the question of how the capital got there in the first place. Socialists seem to either assume that it started from land rent or ignore the question entirely. If land rent is really the cause of all of capitalism's flaws, perhaps the LVT is the solution.

Neoclassicals have the opposite problem. Like the marxists, they conflate land with capital but give both the capital treatment rather than the land treatment. What I mean is that they completely ignore the concept of land rent that classical economists talked about. According to them, gains from land speculation are just as legit as gains from running a business. Neoclassical economics (as well as the austrian school) originates from the marginal revolution from which we get the subjective theory of value. Neoclassical economics differs from classical economics in that while the latter, detailed how gains made from rent are unearned, neoclassical economics throws it out the window. Keynesian economics is along the same lines. The boom bust cycle is just the natural result of people overspending during the good times and saving too much during the recessions. This school teaches that the best way to alleviate recessions is for the government to spend more money. Like the neoclassicals, keynesians consider rent to be as valid as interest and wages.

In economics, one that really seems to divide the right and left is whether we should prioritize efficiency or equity. The right favors efficiency-based policies while assuring everyone that they also bring about some equity. The left favors equity-based policies while assuring everyone that they also bring more efficiency. But the LVT promises to bring forth a great deal of both. It would be efficient because it would make land more easily available and focus investment on capital rather than land speculation. It would be equitable because land ownership is correlated with wealth and it would make rent and home ownership more affordable.

To learn more about the LVT, click here: https://debatepolitics.com/threads/a-tax-which-could-solve-many-economic-problems-today.464081/

 

[AConcernedCitizen]

In contrast, the marxian school renames them to labor, subjects of labor (land), and instruments of labor (capital). They're essentially the same thing but it's very clear that Marx was trying to say that labor is the only active ingredient in the production of wealth. This is also where we get the labor theory of value which states that the value of a product is the amount of socially necessary labor required to produce it. It's similar to the cost theory of value except it only focuses on labor. It's the whole cornerstone of socialism. The LTV is used to say that owners of capital are rent seekers because they're not providing any labor, the profit made by capital owners is called surplus labor. This all begs the question of how the capital got there in the first place. Socialists seem to either assume that it started from land rent or ignore the question entirely. If land rent is really the cause of all of capitalism's flaws, perhaps the LVT is the solution.

I disagree. Marx wrote at length about how capital got there in the first place. In fact, that is rather fundamentally what Das Kapital is all about.

 

[bluesmoke]

Capitalism isn't working for the equitable distribution of wealth. When private industry is unable or unwilling to satisfy a need of people, our economy or our society that cannot otherwise be met, that is when govt steps in to satisfy that need. Hence, Social Security, Medicare/Medicaid, social safety nets, Affordable Care Act, our national highway system, etc. Unfortunately, it is govt that is doing just the opposite of the need for equitable distribution of wealth and instead using the tax code to further enrich the rich and large corps with little if any favor to those with less. If we can't even revert to the pre-Trump tax plan, when the wealth gap was still widening and large corps were at record after-tax profits, I don't see much a chance at all for LVT unless implemented as so whittled-down as to be ineffective for any purpose of equitable wealth distribution.

BTW, Capitalism v Socialism is a false dichotomy in economic production and governance. Our form of economic production is capitalism. Social Security is a form of social welfare, not socialism. Cap v Soc is a political argument.

 

[Nomad4Ever]

This all begs the question of how the capital got there in the first place. Socialists seem to either assume that it started from land rent or ignore the question entirely.

That is not the case at all.

So the process of primitive accumulation created the changes in social relations, property relations, and the accumulation of wealth that permitted the creation of the capital-labor relation and factory-based capitalism.

Primitive accumulation

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understandingsociety.blogspot.com

Otherwise very good post though. Georgism is a very interesting topic. I'm sympathetic to many of the arguments.

 

[Masterhawk]

That is not the case at all.

Primitive accumulation

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understandingsociety.blogspot.com

Otherwise very good post though. Georgism is a very interesting topic. I'm sympathetic to many of the arguments.

It appears that primitive accumulation arose specifically from the accumulation of land. In that case, an LVT would drastically even the playing field.

 

[Nomad4Ever]

It appears that primitive accumulation arose specifically from the accumulation of land. In that case, an LVT would drastically even the playing field.

For the enclosure movement, sure. But Marx broadly attributed it to imperialism; the mass importation of wealth from colonies.

 

[Masterhawk]

For the enclosure movement, sure. But Marx broadly attributed it to imperialism; the mass importation of wealth from colonies.

In either case, it would have come from ownership of natural resources. Once again, the LVT is the proper remedy.

 

[bluesmoke]

In either case, it would have come from ownership of natural resources. Once again, the LVT is the proper remedy.

We just 4 yrs ago passed regressive tax code that enriched the rich and large corps. Now, the cowardly Dems are proposing that we increase the tax on the rich and large corps to no where near what it was before the Trum/Rep tax giveaway. So we leapfrog over all that to LVT? As if those whom are obviously in power will go for that? I don't think so. The cowardly Dems can't push menial tax reform that benefits most Americans. If the Dems had any balls/ovum, I'd say "Go for it!" My recommendation is that the Dems grow a pair and go for it. That's how Reps win over Dems.

 

[Masterhawk]

We just 4 yrs ago passed regressive tax code that enriched the rich and large corps. Now, the cowardly Dems are proposing that we increase the tax on the rich and large corps to no where near what it was before the Trum/Rep tax giveaway. So we leapfrog over all that to LVT? As if those whom are obviously in power will go for that? I don't think so. The cowardly Dems can't push menial tax reform that benefits most Americans. If the Dems had any balls/ovum, I'd say "Go for it!" My recommendation is that the Dems grow a pair and go for it. That's how Reps win over Dems.

And yet the LVT should be accepted by both parties. We generally assume that there's a tradeoff between economic efficiency and equality. The LVT would increase both.

 

[bluesmoke]

And yet the LVT should be accepted by both parties. We generally assume that there's a tradeoff between economic efficiency and equality. The LVT would increase both.

"should be"? What reason would a Rep/con have to go with LVT? Most wealth is in real estate. It's one thing to tax income. It's another to tax what they already have, on unimproved property. It's the most economically efficient, but a much less realistic accomplishment.

 

[bomberfox]

I still hold to the subjective theory of value at least when it comes to valuation of things in the market. There is use value of course but we cant just ignore the subjective valuation of people.

 

[bluesmoke]

I still hold to the subjective theory of value at least when it comes to valuation of things in the market. There is use value of course but we cant just ignore the subjective valuation of people.

The value of any object is largely determined by the individual who buys or sells it (the Subjective Theory of Value, as you say). The objective facts of the matter are arranged in a manner to support the individuals' subjective opinion of the price. The facts are collected and rearranged at will. The entire stock market, for example.

 

[psikeyhackr]

And where does planned obsolescence fit in?

Economic theory before 1900 did not have to deal with products so complicated that consumers could not evaluate them. I asked a PhD economists from the University of Chicago to explain how an automobile engine worked.

He could not even start.

I am typing this on a 6 year old smartphone and not even thinking about upgrading. Our nitwit economists do not discuss the depreciation of durable consumer goods.