Wednesday, September 8, 2010

Even When He's Not Blogging Plato, Rufus Makes FLG's Head Hurt

Rufus F watched Harlan County, USA, which FLG has never seen but will rectify soon; however, that has nothing to do with his objection to Rufus' post on the topic.

Rufus writes:
For me, working people are family. I spent a decade working construction, road crew, factory work and grocery stock, and met some of the brightest, most interesting and resolutely individual people I’ve ever known. I grew up with the same sort of men, eating at our house after their shift ended. After getting his psych degree, my father decided he would rather work outdoors. He made his living by his labor, first as a lineman and then as a lobsterman and part-time machine shop worker. From him, and other members of my family, I absorbed the belief that “working” means labor that causes sweat and strain, while what people like myself do with papers and computers is something less than working. The simple reality is that, without the people who get up at five a.m. to work on road crews, factories, warehouses, driving trucks, and all the rest, society would come to a halt; without “consultants” and middle managers, life would go on. I was therefore raised to see laborers as the finest people in society.

This, I suspect, is why I’ve felt alienated from that wing of supposed “libertarians” who mouth a Randian inversion of Communist ideology: laborers as parasites with the capitalists who “produce wealth” as their natural superiors and engine of progress. I think I have a healthy respect for capitalism and the market, but frankly I could care less if chubby, pencil pushing MBA egotists “go Galt”. Put those guys shoulder to shoulder with my dad on a construction outfit and they’d be reduced to tears.

Now, for FLG, this did, in fact, immediately make him think of Marxist ideology. Why? Because it places a superior moral value on labor, and in particular physical labor, than other economic factors (e.g. captial, land, etc.). This doesn't mean FLG thinks Rufus is a Marxist, but this basic stance is most associated with Marxism in FLG's mind. And, he thinks that this stance followed to its logical conclusion leads to Marxist/Socialist policies. But there are many stops along the way to that conclusion and so FLG doesn't worry that all who think like this are in the end Marxists.

Ah, but then Rufus throws this out there:
Adam Smith, of course, was right that the price of goods is reflective of labor. Harlan County USA poses a simple question: If a mine turns a profit of, say, two million dollars in a given year, how much are the men who actually got down in the cold, dirty, unsafe conditions to extract that coal entitled to be paid? How much more, or less, is the guy who sits in the office making calls, filling out papers, and paying fines for numerous safety violations entitled to be paid? Which decisions by management can be attributed to the need to remain competitive, and which are attributable to greed? Ultimately, what is a fair price for labor?

Notice the "of course." This is the subtle language of somebody who wants to preclude further investigation. Say you'd never read Smith, but you see that "of course." Well, what's the point in looking into it? Rufus is saying it's a no brainer that this was Smith's stance.

Well, FLG has read Smith, and apparently unlike Rufus, FLG actually comprehends the material he reads. Smith writes:
The real value of all the different component parts of price, it must be observed, is measured by the quantity of labour which they can, each of them, purchase or command. Labour measures the value not only of that part of price which resolves itself into labour, but of that which resolves itself into rent, and of that which resolves itself into profit.

So, it's not the labor itself, but the price it can command that determines its value, which means the purchaser of that labor ultimately determines it. Furthermore, Smith includes rent and profit in the price of labor. In short, Rufus either misunderstands or was intentionally misconstruing Smith's stance. Personally, FLG doesn't think Rufus is malicious. He just thinks he's an ill-educated buffoon. In any case, go read Book I, Chapter VI Of the Component Parts of the Price of Commodities, it's not that long, and see if it supports Rufus at all.

UPDATE:
FLG received an email saying that this passage seems to support Rufus:
the one species of labour should be more severe than the other, some allowance will naturally be made for this superior hardship; and the produce of one hour's labour in the one way may frequently exchange for that of two hours labour in the other.

Again, FLG said read the whole thing. That way you don't look like a fucking jackass. Here Smith is talking about labor, which all other things being equal should pay the same. Given that some labors are harder or more severe, he's saying that an allowance should be made. And luckily the market works that out because people want, all other things being equal, to be paid more for harder work, which decreases the supply of people who want to work. This increases the wages. Thus, the invisible hand increases the allowance for harder work.

But Rufus is talking about, for lack of a better distinction, blue collar versus white collar pay. Here, Smith explicitly disagrees:
The profits of stock, it may perhaps be thought, are only a different name for the wages of a particular sort of labour, the labour of inspection and direction. They are, however, altogether different, are regulated by quite different principles, and bear no proportion to the quantity, the hardship, or the ingenuity of this supposed labour of inspection and direction. They are regulated altogether by the value of the stock employed, and are greater or smaller in proportion to the extent of this stock.

So, a blue collar worker in a harder job ought to be paid more than somebody in a less strenuous job, but inspection and direction, white color work, are regulated by quite different principles from the blue collar work.

4 comments:

Withywindle said...

John Derbyshire remembered his grandfather, a coal miner, saying "You can never pay a man too much for digging coal." It's a natural sentiment, and one I have a great deal of sympathy for, regardless of the ideologies built up around it. And regardless, I suppose, of when I support policies that contradict it.

FLG said...

Withy:

I don't object to the sentiment. It's completely understandable, and I largely agree with it. But it's also a moral claim, and not really an economic one. We look at the physical danger and toll of coal mining, and then make a moral claim about the just remuneration. Indeed, Derbyshire's quote is explicitly moral because the just wage is infinite.

So, I don't dispute the validity of the moral claim. I simply object to the use of Smith's name in articulating it.

Andrew Stevens said...

When I read the quote from Rufus, what amused me is that I thought that everybody knew that Adam Smith, David Ricardo, and Karl Marx all subscribed to various labor theories of value and that everybody knew that this is where they all erred. Unlike Marx, Smith knew the labor theory of value was wrong and made the various subtle alterations you point out in this post to try to make it work as best he could, but he didn't quite have the insight to completely replace it with the modern marginal utility theory of value which virtually all modern economists now agree with. That would have to wait for Alfred Marshall.

So more amusing to me was the claim that "Adam Smith was right, of course" on the one thing that everybody knows Adam Smith was wrong about.

FLG said...

Andrew:

If he'd referred to Ricardo or Marx, then I wouldn't have been upset. I was so pissed he got Smith wrong that the rightness or wrongness of Smith's claim themselves never even popped into my head. I guess I'm sympathetic to somebody who reads Smith as political philosophy, but isn't as well versed in economic theory.

 
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