This is a new thread that is a take-off of the old BC economy one. Since we have gone on to more fundamental things, (and that was getting too long and stale anyway) I moved it here with my responses to David’s responses to my responses to his responses to my responses to….and everyone else’s comments as well (and, no , I don’t mean dog piling).

Hence, we hereby introduce: The Economics Exchange—NOW DON”T GO AWAY! THIS CAN ACTUALLY BE FUN!!!

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We are starting to agree on too many things, so let me crank up the heat a bit. ;-)

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WHAT!!!!????? No way! Things get boring on this site when people agree too much! Gotta do sumthin bout this! OK, let’s see.

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Shame on you ER. Economists do not subscribe to any "attitude" other than the principle that people should be paid according to how other people (the market) values their services. What this implies is that lower-skilled people should be paid less than higher-skilled people. People should be free to choose their most preferred skill level (by making human capital investments)

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Holy Moly, David, ya got it wrong! Sure economists subscribe to classist, as well as many contradictory attitudes, and there some of them are right in your quote here!

First of all, it’s true, as you say, that “people should be paid according to how other people (the market) values their services.” That is an outright socialistic, even Marxist view as much as anything (bet you never thought I would associate you with these—ha ha! Way to go, man, way to go)!

However, as you can probably tell out there today, most of our markets are either outright controlled or unduly influenced by large corporate monopolies, elite investment agencies and corporate lobbies or government-sanctioned monopolies. These have a serious distorting effect on markets everywhere, including the coercive lowering of pay rates for most working people, and in some cases, raising them for a few, regardless of how people in general value their services.

For example, most people seem to value the skills and labours of nurses, childcare workers, doctors, teachers, construction trades, etc. than professional athletes. Yet, none of these trades come anywhere close in pay scales to what our favourite hockey, football and especially baseball stars get.

The marketplace is rife with these distorted situations where legions of workers are working at highly valued, yet modestly or lowly paid jobs, while a small group of people are getting ridiculous amounts of bucks for doing practically zippo.

Why, for example, does a Bill Gates or Jim Pattison or Conrad Black or Donald Trump get to sit on hundreds of billions of accumulated dollars, while those who both work in these empires (employees) and those who provide the market for them (consumers) have to survive on mostly modest or low incomes? It is because they are state-sanctioned dictatorial rulers over a large array of productive means. Therefore, they can dictate where the capital created by the workers in these enterprises is used.

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No one questions the value of being a janitor. What we can question is whether a government should steal money from other citizens and pay the janitor more than he is worth on the market.

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But that’s just the point though, where we run into a big contradiction. Most people recognize the fundamental importance of trades like cleaning, or childcare, or various medical and health care positions, or teaching or helping those in need, as well as hard risky and dangerous industrial production jobs.

Yet in our capitalistic dominated markets, these are often the lowest paid, or sometimes just modestly paid, out there. Given the high social value put on these jobs, you would likely have to pay a janitor what an NBA star player makes in order to “over-pay” him.

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What we can question is whether a government should steal money from other citizens and pay the janitor more than he is worth on the market.

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Huh?! Sorry, David, but yer a=losin it here. How does the government paying a janitor via the revenues it collects from people for the janitor’s services constitute “stealing?”

No offense, but this sounds like a bit of Michael Walker/Michael Campbell/Fraser Institute BS/crapola. History is a constant stream of developments of people agreeing, either personally or collectively, to pay in some way for things they feel they need and want that are worth paying for.

Folks can argue about what’s the best way to pay, or to meet those needs and wants and where the payments should go and the best ways to use them—but unless someone is not getting what they paid for, it can’t be stealing.

Of course our capitalist dominated economy is also rife with examples of fraud and stealing—often legally sanctioned, often not.

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To do so is bad for two reasons: [1] it distorts incentives, so that too many people want to become janitors; and [2] you are forcing people (taxpayers) to pay more for services than they are willing to pay

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Sorry David, but, with due respect, I think that good old classist attitude shows up here again, because you seem to be making some pretty big assumptions here that are not necessarily market-oriented.

First, in terms of distorting incentives, in all my years as an activist in labour, co-ops, ethical small business and non-profit groups, as well as many reports I have read, I have never seen this as a major problem anywhere, in any business in any sector.

My industry, mining, is a perfect example. All of it is pretty much unionized. The base rates for both line labour production (in the actual mines, rigs, quarries, etc.), or in the office and professional end (jobs like receptionist, assistant secretary, etc.) are fairly well paid compared to non-union sectors.

Yet the demand for trade advancement, professional development and apprenticeships is always well beyond the capacity of these union programs to meet it. Way beyond. According to friends and relatives who are union activists in the public sector, the same is true there, as it is in the forest, construction, film, etc. industries.

Sure, there are lots of people who, for whatever reasons, choose to stay in the less skilled jobs. But that is by no means anywhere near enough to give your suggestion any basis.

Second, again, this makes a huge assumption. Of course, most people likely say they don’t like paying taxes. But then again, they also likely say they don’t like paying retail prices, mortgages, credit card loans, utility bills, etc. and often say they are paying too much.

But when you ask them if they appreciate the various things they are getting for all these payments, and the answers start to vary. When someone tells me (which ain’t very often) they think public sector workers should take pay cuts because it might supposedly—stress supposedly, since in most cases it ain’t true—lower their taxes, I ask them (if they are in the private sector) if they would take a pay cut so consumers might supposedly—stress supposedly, since in most cases it ain’t true either—get a break on the price. Guess what the answer always is.

Even more hypocritical is when I hear some privileged corporate whiner on TV demanding that working people take pay cuts to supposedly—stress supposedly, since it is almost never true—make “business” (as in the corporate boss) more competitive.

I once challenged the local chamber of commerce hack who was whining about this here by suggesting if high income corporate pork-choppers like him would lower their incomes by a significant amount (re-invest some of their accumulated equity at no cost), it would go a lot further to helping our economy. Guess what he thought of that suggestion.

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I'm not sure where you get your "historic fact" that the private sector "pushes wages down." Sure, it is natural for business owners to keep wage (and other costs) to a minimum.

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But again, that, or at least the ways it is traditionally predominantly done, is a big part of what pushes wages down and stifles economies in the long-term in order for capitalists and bureaucrats to maximize short-term capital accumulation.

Keeping wages down as a way of trying to keep a business viable is one big way that people are impoverished and markets (and therefore economic activity) are suffocated by lack of consumer or public investment.

It’s one of the biggest curses of any kind of capitalist economics. Viewing wages and workers as a burdensome cost, instead of what they really are, which is the productive forces that create practical wealth, capital and markets that make economies happen, is one of the most destructive, oppressive backward-ass attitudes of the last thousand years, and the results are there to prove it every day.

The basic problem is that most business owners are in fact not workers—earning their money by exploiting workers and taking advantage of consumer demand (most consumers are workers), instead of being workers themselves, earning their living by directly creating wealth in the form of useful goods and services in a democratic setting with other workers.

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When we hire the neighbor's kid to mow our lawn, do we pay the kid $100?

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Come on, David. You, as an economist and professor, should know it makes little sense just to toss out a dollar figure like that without some context. You know one of the biggest influences on pay scales is cost of living and CPI, as well as poverty levels generally.

With today’s conditions, where we live, of course we wouldn’t likely pay anyone $100 just to mow a lawn (that is, of course, assuming—there we go with the assumptions again—that the lawn is a part of a standard 33X 120 urban lot. I doubt the kid would take any less than $100 to mow an estate lawn).

But if, say, a CD by the kid’s favourite band costs $130 (instead of about $20 now); and a trans-fat McDonald’s burger costs $30; and a movie admission costs $40, etc., then the $100 fee doesn’t seem so high any more, especially if we’re all makin $140,000 a year or more, and minimum wage is $25 an hour.

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As for historic facts, the fact is that the real wage in capitalist economies have been rising by 2% per annum (on average) for over 100 years (in contrast to "fairer" communist regimes). Real wages rise not out of the goodness of peoples' hearts -- real wages have risen because the demand for labor has risen and *competition* among firms forces them to increase wages in line with the rising productivity of workers.

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Hold on there. You know that’s only part of a much larger story of history. Real wages may have been rising on average by that amount for the last century. But that hasn’t been steadily every year for sure, and it’s certainly not just because of rising productivity and certainly not mainly because of competition between firms.

How many times throughout the last century have we seen wages fall through the floor? They did at the turn of the century, and then again in the late 1920s and early 1930s. And for the last 25 years or so, according to Statistics Canada, wages have been falling behind the cost of living, and that’s the biggest cause of worsening poverty, more or less constant economic stagnation and worsening debt.

The fact is wages have increased the most in periods following mass social unrest, growth in unionization, cooperatives and community enterprises and resulting social reforms by governments in response to public pressure.

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What does it mean "to run a business democratically?"

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Come on David. You know what this means. You are an economist, which mean you know about the separation of working people from the means of production and from the wealth they create via exclusive property and state coercion.

Cooperatives, credit unions, one-person-one-vote shareholder decisions, labour-sponsored ventures, community economic development, self-employed owner-operator workers, equal partnership enterprises, etc., are all examples of democratically run businesses—as opposed to elite capitalists, unaccountable bosses and executives.

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In a democratic and free society, a business owner should be free to run a business as he/she feels fit (without breaking any laws). At the same time, workers are free not to work for an owner if they find his/her operating procedures undesirable.

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Wrong. The situation you describe above is the very fundamental enemy of democracy and freedom, and is reminiscent of a totalitarian feudal order. The boss is still the master, dictating policy and conditions to those who are doing the productive work creating the goods and services for trade on the market with no accountability.

Despite the fact the workers are doing exactly what gives the business its value, and therefore have a direct interest in the firm, they are completely denied any binding say in what happens to the firm and therefore their own economic destiny. If they can’t agree with what the boss dictates, they then must leave and sacrifice or jeopardize their own economic security or standing and risk looking for work elsewhere under yet another exploitative situation where they will likely have no say either.

It is this very dictatorial and stifling structure that is the basis for war, dictatorships, poverty and depression, alienation, etc. The whole history of liberty and democracy is the public fight against this type of economic tyranny.

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These workers are free to set up their own businesses and run them however they wish

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As an economist, you that how “free” people are to set up businesses or do anything else depends on their degree of access to the wealth they create. One of the biggest curses of any form of capitalism seems to be that it seems to take the bulk of wealth created by a working population out of its hands and centralize it into various select clubs and bureaucracies which then set all kinds of coercive conditions on the economy in order to re-circulate it.

That’s another fundamental problem with our economy.

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Is it really the government's (i.e., taxpayer) role to educate people in this way? Let them educate themselves. As you point out, there are (and have always been) many "cooperative" arrangements out there. Let them spread the word.

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Good executive talent is scarce...this is why it gets paid so much. (To argue that good executives are not worth their salt is to profess some ignorance as to how difficult their jobs really are).

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Wrong. The main reason why executives compensate themselves so well is not due to their scarce skills or lack. Rather, it’s because of their position of power over the firm, the labour, the money and the policy. You know that.

They determine who gets what; they control the information that gets to the shareholders; they make policy and investment decisions and impose them on everyone else, and they force everyone else to deal with the consequences.

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. If I am unhappy with their bonuses, I am free to sell my shares.

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There again, is the old feudal tyrannical attitude. Why should you have to sell your shares when it’s the management that is supposed to be accountable to you? Yet you don’t get any input in the decisions. If you don’t like it, then you have to leave, despite your interest in the firm. I don’t think that’s fair at all.

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A government has the tendency to reward its employees on the basis of buying their political support or paying off friends.

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Garbola! You know that government wages in general tend to reflect the wages of workers in similar type businesses and situations in the private sector—unless there is a specific express goal of raising public sector pay scales to pressure the private sector to do the same. Look at any public sector negotiations and you’ll see this constantly comes up as a measuring stick, and is always a source of debate as to how similar various industries in each sector are, the value they create and what they do.

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. The government does not have to worry about "angry shareholders" selling their shares in protest.

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No, it has to worry about angry voters throwing them out of office. That’s why lying economy-wreckers like the BC Liberals and their elite corporate backers are spending so much money they make off everyone else on misleading ads and exercising their influence over the major media they control to convince us all they are worth re-electing (when we have already shown they are not).

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When a private company behaves badly, the company is punished quickly and severely (e.g. Enron). Money flows immediately away from the bad company to many better alternatives.

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The example you give here shows exactly how untrue this is in far too many cases. In the Enron situation, like WorldCom, Tyco, Bre-X, and a billion others, most shareholders, namely pension funds and seniors’ retirement savings, couldn’t get their shares out in time, due to the information being kept from them by the executives, who put aside huge multi-billion-dollar parachutes for themselves.

As to what a “bad” company is, the executives, not the shareholders, who, unless they have executive stock and inside ties, simply react on the basis of what the executives tell them, again exclusively decide that. It should be up to the shareholders (which should include the workers) to democratically decide what’s “good” and “bad” in the company. As it is now, it is a small clique that most often decides this.

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This is why we should keep the public sector to a minimum (which is not to say zero). Either that, or public sector contracts should be structured more in line with the way they are in the private sector.

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Wrong. First, contrary to the endless whining and corporate media lies, there are huge economic sectors and industries where the public sector does a much better job at meeting needs: health care, education, transportation, utilities, etc. We see this all over the globe all the time.

The biggest problem with our public sector is that it far too closely imitates the large scale corporate capitalist private sector: top-down corporate bureaucracies, over-paid/under-worked unaccountable executives with too much power and greedy agendas and largely disenfranchised workers, with the public playing the role of mindless reactive consumers.

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[1] Pay individuals in accordance with the value of what they produce (where "value" is determined by how much other people -- the market-- is willing to pay). This is the only "fair" way of getting resources allocated efficiently in an economy.

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Fine. But, as said, in order to do this, we need to remove the market and economy distorting and oppressive capitalistic structures of elite property, top-down bureaucracy, and secretive and exclusive decision-making for the interests of a privileged club at the expense of everyone else. That means democratizing our businesses and industries as suggested above.

Otherwise, we get the same old shit we got now, or worse.

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[2] In the private sector, "value" is determined by an anonymous market place (no politics are involved).

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Wrong! The very example you listed above, backed up by mine, show as things are today, the private sector is loaded with mostly anti-democratic, inefficient, self-serving elitist politics that negatively influence the value of both workers and goods and services.

In additions, the politicians these elites support and the laws they pass affecting the private sector clearly show that power politics is very much a part of this process.

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[3] In the public sector, "value" is determined largely by the whim of a politician (and not an anonymous market). If the politician is "fair and honest" (free of political obligations), he/she may do the right thing. (But who ever heard of politician being free of political obligations?)

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Wrong. As said, anyone who follows the bargaining situations of public sector workers knows that much of what happens in the private sector, especially the large corporate controlled sectors, has a huge influence on these things.

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[4] None of the above denies a role for redistribution. The point is just that redistribution cannot come in the form of wages (since it distorts incentives). Redistribution must come from private charity (e.g., Bill Gates has donated billions) or from a cleverly designed government tax/transfer system.

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Wrong. It’s clearly established here the higher wages do not distort incentives, but rather quite often give people more opportunities to consider their options for advancement.

Furthermore, it’s clearly better to democratize economic structures to allow for workers and consumers to have a greater say, share more of the wealth and look to long-term prosperity initiatives that prevent a few elite individuals like Bill Gates from gaining so much wealth and power to begin with, rather than rely on his charity to correct the problem.

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[1] Pay individuals in accordance with the value of what they produce (where "value" is determined by how much other people -- the market-- is willing to pay). This is the only "fair" way of getting resources allocated efficiently in an economy.

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"The market" is an abstraction. Realistically, those who have a large store of wealth can influence the market to produce what they desire.

Those who don't, can't.

So, capitalism doesn't ever have a shortage of yachts or private jets. Only family housing.