Comments on Mutualist Blog: Free Market Anti-Capitalism: Economic Calculation in the Corporate Commonwealth...

Thanks to you, too, Adem, for the insightful comme...

2007-03-20T22:05:00.000-07:00

Thanks to you, too, Adem, for the insightful comments. I doubt personally that eliminating inflationary central bank policy alone would put an end to capital market volatility; profitable speculation would remain possible from entrepreneurial judgments as to which factors would be valued differently as product demand and production methods changed.

But I do find fault with Mises for the historically conditioned nature of his understanding of the "entrepreneurial" function. Rothbard specifically quoted him as identifying the existence of large-scale capital markets with "capitalism," or rather with the unfettered play of entrepreneurialism.

In fact, though, the entrepreneurial function is simply that of steering factors into their most economical use. There is no inherent reason this function should be exercised mainly exercised by billionaire rentiers shuffling money from one firm to another within their investment portfolios. Absent primitive accumulation, in an economy characterized by more diffuse property ownership and widespread cooperative ownership, the "entrepreneurial" function would be exercised mainly by worker-owners deciding the best way of reinvesting their surplus so as to increase their income or reduce necessary labor in the future.

Not to beat on my favorite dying horse, but the pr...

2007-03-20T09:28:00.000-07:00

Not to beat on my favorite dying horse, but the problems that external capital markets face largely stem from 3 major factors:
1. The level of oligopoly in the larger economy reduces the options for shareholders to place their money.
2. The Central Banks inflate short term gains at the expense of long term profitability, encouraging speculation (because you need 12%+ gains to beat inflation), and thus, managers pushing short term "tricks" to fool the market. In a free-market monetary world, where money prices always cleared properly, there would be very little movement in stock prices in the short term, and thus very little incentive to manipulate that movement, and a lot of potential risk (if they get caught). There would still be "stock market gambling" at the margins, but it would be, like casino gambling today, a fools game.
3. A large part of what the SEC does is to stabilize and absorb the risk involved in large-scale speculation, making the above much worse. Of course, that involves pricing or regulating the small investors out of the speculative markets, which also reduces the amount of information conveyed by the markets.

PML and Laurent Guerby,It's an interesting coincid...

2007-03-19T10:09:00.000-07:00

PML and Laurent Guerby,

It's an interesting coincidence you both should mention transfer pricing, and that Iain should have mentioned state-planned economies. The excerpt I posted was from the middle of a three-part article.

Part One was on Mises' statement of the calculation problem. My chief development of it was that his observation on the separation of entrepreneurial from technical knowledge works the other way: decisions based solely on economic calculations like the prices of inputs and products, while treating the production process as a black box, take place equally in an environment of calculational chaos. I also critiqued the culture-bound nature of his conception of entrepreneurship (i.e., the assumption of large concentrations of wealth in the hands of an absentee class of rentiers, and the separation of ownership from labor), and pointed out that the entrepreneurial function could be exercised in a wide variety of institutional environments.

Part Three examines Rothbard's expansion of Mises' calculation argument to cover transfer pricing within the firm. In it I draw my own comparison with the irrational allocation of resources and uneven development of a state socialist economy.

P.M.Lawrence, I poped up the comment window when I...

2007-03-18T14:20:00.000-07:00

P.M.Lawrence, I poped up the comment window when I read the paragraph about double entry bookkeeping wanting to grumble about missing price info and transfer pricing but it looks like you said it before me :).

It's unbelievable naivete from Mises, did he really write that?

Oh, from my perspective Iain's quotation from the ...

2007-03-17T22:46:00.000-07:00

Oh, from my perspective Iain's quotation from the anarchist FAQ -like his Stalinist analogy - reveals a rare understanding of the dynamics of a Tragedy of the Commons in action, whereby honest managers are also penalised by sceptical stock markets. This, of course, adds to why market incentives based on relative profit of firms don't pick up system wide failings that have been made system wide by things like this.

(Ironically, this also drives firms in corrupt countries to have to pay bribes - the reputation for integrity or otherwise is spread among at least a sector, so disbelieving bribees will hang in there rather than back down.)

That remark about double entry bookkeeping omits t...

2007-03-17T22:38:00.000-07:00

That remark about double entry bookkeeping omits the crucial area, the notional prices for internal activities - which is precisely why you have a problem at all, not one of calculation so much as one of assessment. It's the same as the "transfer pricing problem" that annoys states so much when they want to tax companies with offshore subsidiaries - the department results are allocated according to internal number crunching decisions.

Without "accurate" internal prices you get (say) the reductio ad absurdum that you should eliminate the double entry bookkeeping itself, since that isn't "profitable". (The superficial notion of profitable is "bringing in cash", so obviously the right thing to do is to go even further and eliminate production and purchasing while concentrating on sales and running down existing stocks!)

At a deeper level, consider the idea that accurate prices can be taken by copying competitors that have those functions outside themselves, so you are copying the market prices they are using. If you really should be a conglomerate, you aren't comparing like with like - you aren't apportioning the synergies. If you are comparing like with like, there is no synergy gain from being a large organisation. But - punchline - if the gain is the cost cutting from having only one central management group, you don't get that gain if you pay them all the savings! (I omit any strategic gain from having more clout, since that is not actually productive - it comes from grabbing more quasi-monopolistically, not from being "better".)

Thanks a lot for the quote, Iain. I'll have to re...

2007-03-16T11:15:00.000-07:00

Thanks a lot for the quote, Iain. I'll have to read that book. And I expect I'll incorporate that quote from the FAQ into the final version of the article--it's perfect!

This may be of interest (from "An Anarchist FAQ" -...

2007-03-16T04:14:00.000-07:00

This may be of interest (from "An Anarchist FAQ" -- www.anarchistfaq.org -- section I.4):

'Moreover, the existence of a stock market has serious (negative) effects on investment. As Henwood notes, there "are serious communication problems between managers and shareholders." This is because "[e]ven if participants are aware of an upward bias to earnings estimates [of companies], and even if they correct for it, managers would still have an incentive to try to fool the market. If you tell the truth, your accurate estimate will be marked down by a sceptical market. So, it's entirely rational for managers to boost profits in the short term, either through accounting gimmickry or by making only investments with quick paybacks." So, managers "facing a market [the stock market] that is famous for its preference for quick profits today rather than patient long-term growth have little choice but to do its bidding. Otherwise, their stock will be marked down, and the firm ripe for takeover." While "[f]irms and economies can't get richer by starving themselves" stock market investors "can get richer when the companies they own go hungry -- at least in the short term. As for the long term, well, that's someone else's problem the week after next." [Wall Street, p. 171]

'Ironically, this situation has a parallel with Stalinist central planning. Under that system manager of State workplaces had an incentive to lie about their capacity to the planning bureaucracy. The planner would, in turn, assume higher capacity, so harming honest managers and encouraging them to lie. This, of course, had a seriously bad impact on the economy. Unsurprisingly, the similar effects caused by capital markets on economies subject to them as just as bad, downplaying long term issues and investment.'

This is obviously in addition to the information flow problems within the capitalist firm.

It is strange to read right-"libertarians" go on about how wonderful corporations and business hierarchies are while, at the same time, attacking the state. It is amazing how the magic words "private property" can transform identical social relationships between people from "bad" (the state) to "good" (the boss or landlord).

Overall, I do wish people would read Proudhon. It would save a lot of self-contradictory nonsense being written. Particularly if they call themselves "anarchists"!

Oh, and good post Kevin. Keep up the good work!

Iain

Speaking of Dick Armey, I suspect that I agree mor...

2007-03-15T00:17:00.000-07:00

Speaking of Dick Armey, I suspect that I agree more with the punk band Dick Army, even though I've never heard their material.

Anon,Thanks for the kind words, but I must confess...

2007-03-14T23:09:00.000-07:00

Anon,

Thanks for the kind words, but I must confess I've got an ISBN now, so I can market the book through Amazon. Bummer.

Bizzyblog,

I'm glad you stopped by. I added your new remarks on Nardelli to the main post.

quasibill,

That sounds about right. I've had similar experiences with Walgreen's (I add the apostrophe because I'm not illiterate). Every time I go to that store I feel like I'm travelling back in time to the old USSR. They've got "convenient drive-thrus at every location," but keep the windows so understaffed the wait is like a Soviet bread line. And if you need anything, anything at all, that's the least bit off-script (and this includes something as simple as writing a rain check for items on special), they've got to call the manager (who may not be there) for his permission. If it's another notch out of the ordinary, the manager's got to start working through the branch ministry for pharmaceutical sales, the ministry for retail outlets, and Gosplan. I wonder if they've got a setup like a nuclear submarine, where two people have to turn a key at the same time.

--Kevin Carson

Funny, I wasn't even aware of the problems with HD...

2007-03-14T06:14:00.000-07:00

Funny, I wasn't even aware of the problems with HD, and yet it confirms my experience from January.

I'm remodelling my kitchen and needed to buy a replacement cabinet to fit in. HD had the closest looking style to my old style, so I called over an associate to order it (it was a strange size that they didn't keep in stock at my local store). After checking on the computer for nearly an hour, the associate returned to me and said that Home Depot no longer does business with that manufacturer and that I should contact the manufacturer directly.

Well, that was alot of work, because everything from the manufacturer said 'please contact HD" for any information, but eventually I was able to find a contact, who, of course, told me that they still did business with Home Depot, to try going to another store.

I went to another local store, where I spoke with the associate, and she told me the computers had been on the fritz for a couple of days, that she'd try to enter the order as soon as they were working. I called the third local store (on my cell) and they told me the computer problem was system wide, not just my store. So I told the associate to go ahead an order when she could.

Several days later, she called me and said it had finally been ordered.

I thought it was just random bad luck at the time.

Kevin -

If you want to get snarky, perhaps you could title this post "Von Mises and the Underpants Gnomes"

Thanks for noticing the post.I have since learned ...

2007-03-13T13:22:00.000-07:00

Thanks for noticing the post.

I have since learned that Nardelli, in the last months before he walked, took the entire purchasing function out of Atlanta and moved it to .... India -- Of all the things to pick for foreign outsourcing.

I am told that "out of touch" doesn't even begin to describe how bad it is now between HD stores and Purchasing, and between HD Purchasing and suppliers.

Not only is there a language dialect barrier, but the purchasing people in India don't know the "language" of American hardware -- or even what half the stuff the stores and suppliers are describing even is.

I am told that an incredible amount of time, money, and energy is being wasted -- all in the name of what was in all likelihood a bonus-driven goal for cutting headcount and making G&A expenses look low ("look" low because the expenses have been pushed down to the stores and suppliers).

Kevin, I'm only posting this here because I know t...

2007-03-13T03:06:00.000-07:00

Kevin, I'm only posting this here because I know that the fascists are too stupid to read that entire post and get to the comments without their brain starting to hurt really bad.

http://www.reason.com/blog/show/119088.html

Parallel conversation going on at my diary at Daily Kos. We all have our language prisons, after all...

http://www.dailykos.com/story/2007/3/13/4854/76943

NATO
Stands for NO ANARCHISTS TRIPPING OUT.

So in this union of opposites you have a choice. You can do the Common Good goose-step at the daily cause, I mean the Daily Kos. Or if you want to TRY to be an individual, you read the Reason "Dot Com" slash-Blog.
...
P.S. If you don't appreciate Nietzsche, then you've probably never been in a language prison. Right now I am working on breaking the civil libertarians out of the "Capitalism" language prison as well as springing the progressive democrats from the "Marxist" language prison.

mutualist.blogspot.com

Kevin Carson is so underground that his book doesn't even have an ISBN number. He has some very interesting theories concerning the Right called the right to SELF TREATMENT. This is an idea that I am very interested in promoting.

Now say it with me now:

YOU ARE ALL INDIVIDUALS!

"We are all individuals"

YOU'RE GOING TO HAVE TO WORK IT OUT FOR YOURSELVES!

"We're going to have to work it out for ourselves"

"Oh, there you go, bringing class into it AGAIN!"

"BUT THAT'S WHAT IT's ALL ABOUT!"

"Oh, stop worrying about class, Dennis, and just worry about the mud!"