Monday, February 23, 2015

Matt Bruenig on "Human Capital".


Matt Bruenig joins the "human capital" controversy.

Bruening comments on Branko Milanovic's pieces, and on some other related stuff. For him "Milanovic's basic point about the confusion engendered by 'human capital' is exactly correct". He has made this point before, and, for what it is worth, I agreed with him then.

But then, Bruenig writes:
"Ultimately, ideology determines whether the classical distinction between income from working and income from owning truly matters. But the distinction carries a lot of weight in many common ideological frames."
While Bruenig is an astute observer, that is a common and unnecessary mistake.

Classical authors of radically different ideological perspectives, like Marx, Ricardo and Smith, had no difficulty accepting that capital and labour were objectively distinct. Their opposed ideologies did not stop them from seeing what is evident. They evaluated it in different ways, to be sure; but they did not deny reality.

They were not alone, either. Before them, other pre-classical authors divided society and the economy along similar lines. Across the pond, people like John C. Calhoun also conceived society as built upon labour (see also or here).

Indeed, the attempt to blur the distinction between labour and capital became a central concern in economics only with the works of John Bates Clark, Knut Wicksell and Philip Wicksteed (suggestively, Veblen called them "neoclassicals").

Mind you, it's not like these three authors were secretive about their underlying political motivations; quite to the contrary, they were very open and upfront about that:
"The welfare of the laboring classes depends on whether they get much or little; but their attitude toward other classes—and, therefore, the stability of the social state—depends chiefly on the question, whether the amount that they get, be it large or small, is what they produce. If they create a small amount of wealth and get the whole of it, they may not seek to revolutionize society; but if it were to appear that they produce an ample amount and get only a part of it, many of them would become revolutionists, and all would have the right to do so. The indictment that hangs over society is that of 'exploiting labor.' 'Workmen' it is said, 'are regularly robbed of what they produce. This is done within the forms of law, and by the natural working of competition.' If this charge were proved, every right-minded man should become a socialist; and his zeal in transforming the industrial system would then measure and express his sense of justice. If we are to test the charge, however, we must enter the realm of production. We must resolve the product of social industry into its component elements, in order to see whether the natural effect of competition is or is not to give to each producer the amount of wealth that he specifically brings into existence." (John Bates Clark; for a comment on Wicksell, here).
There are two ironies here.

For starters, the intellectual progeny of Clark, Wicksell and Wicksteed now want to claim the non-ideological high ground.

And smart people, who otherwise know better, leave them the battle ground uncontested.

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