Trego's Mountain Ear

"Serving North Lincoln County"

Tag: Economics

  • Capital, Labor and Lincoln

    Somehow, 160 years after the war between the states, there are a lot of people who have forgotten (or never learned) that the Republican party that nominated Abraham Lincoln wasn’t exactly a capitalist. It has been fun to look at Lincoln’s writings, and quotations. I never wrote a test asking students to identify whether the author was Lincoln or Marx – but I kept these quotes on hand in case I ever decided to write an extremely tough test.

    “Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.” Abraham Lincoln

    “We all declare for liberty; but in using the same word we do not all mean the same thing. With some the word liberty may mean for each man to do as he pleases with himself, and the product of his labor; while with others, the same word many mean for some men to do as they please with other men, and the product of other men’s labor. Here are two, not only different, but incompatible things, called by the same name – liberty. And it follows that each of the things is, by the respective parties, called by two different and incompatible names – liberty and tyranny.” Abraham Lincoln

    “A commodity has a value because it is a crystallization of social labor. The greatness of its value, or its relative value, depends upon the greater or less amount of that social substance contained in it; that is to say, on the relative mass of labor necessary for its production.” Karl Marx

    “Labor, being itself a commodity, is measured as such by the labor time needed to produce the labor-commodity. And what is needed to produce this labor-commodity? Just enough labor time to produce the objects indispensable to the constant maintenance of labor, that is, to keep the worker alive and in a condition to propagate his race. The natural price of labor is no other than the wage minimum.” Karl Marx

    “All that serves labor serves the Nation. All ^ that harms labor is treason to America. No line can be drawn between these two. If any man tells you he loves America, yet hates labor, he is a liar. If any man tells you he trusts America, yet fears labor, he is a fool. There is no America without labor, and to fleece the one is to rob the other.” Abraham Lincoln

    “The values of commodities are directly as the times of labor employed in their production, and are inversely as the productive powers of the labor employed.” Karl Marx

    “And, inasmuch [as] most good things are produced by labour, it follows that all such things of right belong to those whose labour has produced them. But it has so happened in all ages of the world, that some have laboured, and others have, without labour, enjoyed a large proportion of the fruits. This is wrong, and should not continue. To [secure] to each labourer the whole product of his labour, or as nearly as possible, is a most worthy object of any good government.” Abraham Lincoln

    “Capital is dead labor, which, vampire-like, lives only by sucking living labor, and lives the more, the more labor it sucks.” Karl Marx

    “Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.” Abraham Lincoln

    “The product of mental labor – science – always stands far below its value, because the labor-time necessary to reproduce it has no relation at all to the labor-time required for its original production.” I didn’t say I would give all of the answers – figure out who this sounds most like.

  • Economic Activity or Pocketknife Swaps?

    I noticed that Tim Walz has explained that EBT (once known as Food Stamps) creates $1.80 in economic activity for every dollar that goes out. Economic activity is a term that doesn’t necessarily mean what it seems. An old rancher described it as swapping pocketknives – “I spend ten grand buying a herd bull from my neighbor this year, next year he spends ten grand buying a bull from me.” That’s economic activity – each needs a herd bull, and they pay each other an inflated price to (hopefully) raise the value of their livestock to other potential buyers.

    I took a class in economics back when I was a college freshman – the professor opened the first class by explaining no Republican had ever got better than a C in his class, then went on to explain Keynesian economics. I understood why – The Motley Fool describes Keynesian economics: “The United States has had a complicated history with Keynesian economics. While Keynesianism has frequently been used during downturns, the jury is still out on its long-term effectiveness.” https://www.fool.com/terms/k/keynesian-economics/

    Not all “economic activity” creates wealth – pocketknife swaps merely create the illusion of value. John Maynard Keynes theorized that “government intervention is needed to stimulate demand and stabilize the economy, particularly during recessions.” While Adam Smith held that a free market would provide full employment (meaning employees would accept the wages offered), Keynesians held that government spending would increase demand. I’m pretty sure that the amount of government spending we have means we’re all Keynesians. No other choices in a world filled with deficit spending.

    To Adam Smith, labor and the accumulation of capital were key components of economics – and Karl Marx basically agreed when he defined capital as dead labor (there are a lot of custom rifles built on old Mauser military actions, with new barrels and stocks added – pick your own example if you like). A pocketknife swap neither includes labor nor the accumulation of capital. It does include the illusion of value.

    I figure the SNAP program increases labor (some share of producing and processing food) and accumulation of capital (though that may go more to Sam Walton’s heirs). But I’m skeptical whenever a politician uses the words ‘economic activity.’ After all, I ended a career one floor above the economics department.

  • Inflation

    Inflation is one of the very basic, very important economic concepts. It is deceptively simple. Increase the supply of money, and it’s like inflating a balloon. The amount of air in the balloon increases, the amount of money in the system increases. This is essentially what happens whenever the government prints more money.

    When the amount increases, the value of each individual unit goes down. This becomes more difficult to understand, because a dollar is still a dollar. However, a dollar doesn’t purchase as much.

    Think back. Remember. How much was gasoline ten years ago? Twenty? Thirty? But it’s not always the price that increases. Sometimes, the amount goes down. Candy-bars, anyone? They’ve shrunk considerably since I was a child admiring them in the checkout isle. Of course, some things increase in efficiency and decrease in price, even while others do the opposite. Why? Developing technology can really reduce the costs of making something, sometimes enough that the price declines, even as the value of money goes down.

    The federal reserve aims for an inflation rate of 2%. But that’s a number with very little meaning to most people. We care more about how much the grocery bill will increase by. For that, we look at the consumer price index. Calculating how much the value of money has changed is as simple as having two reference points. Pick an item. What does it cost today? What did it cost back then? Do a little subtraction, and then a little division.

    Of course, you could also use the CPI inflation calculator provided by the government. In that case, it told me that a 100$ in 1920 had the same purchasing power as $1,342.65 in 2020.

    Why do we care about inflation? Sure, groceries cost more, gas costs more, electricity costs more, but we’re earning more too, right? Eventually, probably. What’s really concerning is when inflation is high, when you see the kind of chance the US dollar had from 1920 to 2020 over the course of a year. Wages just can’t keep up.

    Literally printing more money, while the obvious (and easiest) means of causing inflation, isn’t the only way to go about it, but the alternatives are a bit complex for this summary.