the market system amplifies injustice

[sophiaserpentia]

When you study Economics 101, you're taught about the functioning of the free market. In theory, the price of any item is determined by demand and supply. Price therefore reflects human behavior in the face of resource scarcity. The higher the demand for an item, the more people are willing to pay for it; the higher the supply, the less people are willing to pay for it, and so on.

According to theory the prices in the free market seek a state of equilibrium -- which is said to be a state of maximum resource allocation.

Similarly, it is said that labor is also sold on a free market. Laborers seek employment and are paid a wage which is supposed to balance out to the marginal product (profit) of the items they produce.

Okay, here we're veering into Economics 201 territory. But bear with me. What this means is that the amount of profit a producer can expect to make, is the fair labor-market wage owed to the people who make the product. Any difference is called exploitation, which is endemic in capitalism, because the suppliers of capital want to keep as much of the profit as possible. This is justified with an appeal to "entrepreneurial risk" (never mind the risks that laborers take; their risks don't count).

On paper, one can be convinced that these are reasonable arguments. But you have to overlook that these arguments depend on outrageous assumptions. One such assumption is that humans will always act in their own best economic interest, and will therefore tend to maximize the effectiveness of their work and lifestyle decisions. The second assumption is that the market is "free," that is, that each person has total freedom to participate or not in the market.

Anyone with eyes and/or ears can see the flaws in these assumptions.

In recent days there has been a lot of concern in the news about rising energy prices. Hurricanes Katrina and Rita, increasing worldwide demand for oil, and (some contend) the peaking of oil production worldwide, are resulting in higher prices for gasoline and natural gas. This in turn means that shipping costs more; since virtually everything we buy nowadays is shipped in from somewhere else, this means that we can expect prices all across the board to go up. On top of this, home heating costs are expected to rise 30% over last year's 30% home heating bill hike. Even the price of firewood is going up, as people try to explore alternative heating options in the face of what is expected to be a bitter winter.

In America, there is little that can be done to reduce one's demand for fuel or natural gas. If you depend on a car, especially to get to work, there are not many opportunities to consolidate or eliminate trips. If you have a home or apartment, you can only cut back so much on home heating, warm showers, and stove-cooked meals. Even a small reduction from your current usage can represent a dramatic dip in your quality of life. So your "freedom" to participate in the energy market is curtailed.

Now, we all know that not everyone is going to be affected to exactly the same degree by energy price inflation. One does not need a degree in economics to know that those with no or lower income are going to be impacted much more severely than those who have highed income.

Similarly, one does not need a degree in sociology to understand why there are groups in America which live at different levels of income.

Those who are already disadvantaged are going to be even more greatly disadvantaged by inflation of energy prices. Market instabilities tend to amplify disadvantage, and therefore economic injustice, because the brunt of the market fluctuation is felt by those at the lowest income levels. And while economic theorists claim they are free to choose other options (and therefore the suffering of the poor is their own fault, why didn't they just stay in school when their uninsured mother got sick and their brothers and sisters needed to eat and the rent had to be paid?) there are no other options to choose.

It is not just the energy market where we find this problem. Participation in many other markets is similarly not free: education, food, housing, labor, transportation. In fact, only the markets for "widgets" like iPods or remote control toys are truly free. In most of the important sectors of our resource consumption, we are driven by necessity. Unless one can do without and is willing to live and scavenge on the streets (an option which is being increasingly criminalized), one has no choice but to participate.

Those who promote the idea of a "free market" have no true answer to this conundrum, just as they have no true answer to the "paradox of libertarianism" which i articulated a few weeks ago. Ironically, both they and i are motivated by the same goal: removing restraints on genuine freedom. But this ideal, i am convinced, is not attainable until we achieve post-scarcity. And so, post-scarcity should be our primary goal.

Comments

[herbalgrrl.livejournal.com]

"And so, post-scarcity should be our primary goal."


Which won't come til we have clean, cheap, renewable energy.

[sophiaserpentia.livejournal.com]

Indeed. As MIT's Daniel Nocera said about advances in cheap energy: "If it doesn't [work], we will cease to exist as humanity."

[ubiquity.livejournal.com]

What do you two think of the argument that we've already attained post-scarcity, and that it's the incredibly inefficient distribution of resources that's causing the problems?

[sophiaserpentia.livejournal.com]

I don't buy it. The affluence and bounty of modern American society is largely the result of economic neo-colonialism. Worldwide: the poor are getting poorer, and the rich are getting richer. From the perspective of people in the United States, things are great! But that's because we've been sucking in resources from the rest of the world. We have a trade deficit that we are paying off with money we're borrowing from Japan and China. This pattern is not sustainable.

[ubiquity.livejournal.com]

The fact that the poor are getting poorer and the rich are getting richer is exactly what I mean by incredibly inefficient distribution of resources. Well, I guess I also mean things like the amount of resources spent on military buildup and such.

Do you think that if we took all the wealth away from all the rich, and redistributed it to everyone, that we would end up with enough to end poverty (tuba poverty), or not?

[sophiaserpentia.livejournal.com]

Once we reach post-scarcity, i suppose there would be a two-to-three generation "learning curve" where humanity started to grok that the old exclusion games no longer made sense. But poor getting poorer and rich getting richer is not simply an indication of economic scarcity, it is an indication also of inhumane governance: the people at the top feeling entitled to take what they want without concern for consequence.

Global Robin-Hoodism would improve the lives of many, but it wouldn't solve the problems of discrimination, nationalism, racism, and sexism. The wealth would just build back up into piles again, until we solve these cultural/memetic issues.

[ubiquity.livejournal.com]

Well, yeah. I totally agree. Are we just talking about different things? What do you mean when you say "post-scarcity"?

I thought you meant something along the lines of "Having enough resources to give everyone in the world a non-sucky standard of living".

[sophiaserpentia.livejournal.com]

I thought you meant something along the lines of "Having enough resources to give everyone in the world a non-sucky standard of living".

Well, yeah. But we also have to be able to get things to people. We might be able to produce enough food for everyone, but we cannot get it to everyone who needs it without incurring cost. So those who argue on food production that the only remaining problem is greed/injustice are overlooking the problem of cheap energy.

[sophiaserpentia.livejournal.com]

Here's another thought on that. Even if we now produce enough calories worth of food to feed everyone on earth, we have not achieved post-scarcity with respect to transportation costs. We also have to worry about the effects on food production of what now appears to be runaway global warming (meaning that it looks increasingly doubtful that we could stop it now).

[ubiquity.livejournal.com]

What you say is true, but I think we actually have achieved post-scarcity, even including transportation costs. However, this conversation makes me realize that I need to learn and read more about this so that I can actually back up my point of view (or learn its negation).

[sophiaserpentia.livejournal.com]

Along those lines, i may have to re-examine my own presumptions, because my primary thought against the argument that we've now achieved post-scarcity is based on a form of the 'rationality' presumption in economic thought that i argued against above. Hmm....

[ubiquity.livejournal.com]

This is the first thing I intend to read to learn more about it.

[sable-twilight.livejournal.com]

I don't know if that really is the goal. I mean, it is, for people like us, who would benifit a great deal from post-scarcity, and for the truely poor, who would benifit even more. But it's not really the goal of those in power, since that would threaten their power base, which is based on scarcity and control over that scarcity.

[ubiquity.livejournal.com]

Exactly. But we don't like that, and there are more of us.

[sophiaserpentia.livejournal.com]

The thought is that once post-scarcity is achieved, greed is no longer relevant, since we can all take as much as we want. There might be a generation or two where people learn to get over the survival-acquired instinct to hoarde, but over time people would slowly start to realize that there is no point in playing power games, since there is nothing scarce to fight over.

[supergee.livejournal.com]

I used to believe in post-scarcity, but now I fear it will always beoutrun by the rich stealing more and the poor breeding more.

[pooperman.livejournal.com]

Good post.

I bought a hybrid and now I work from home 2 (perhaps 3 in the future) days each week, which has significantly cut down on my fuel consumption. I want to put ~1kW of solar electric plus a solar water heater up next, but I don't quite have the money for it this year.

Of course, I realize that I have some options not available to most people given the nature of my job and my level of income (not to mention that I own my house).

You are spot-on about the whole labor market observation--even given my employability, I am not truly free to choose my jobs and go to the highest bidder. There are several reasons for this:

1. I don't want to move--it would upset my son's education and I'm pretty much either stuck here for the next 14 years until he goes to college or I've got to yank him from his friends every time I change jobs.

2. Employers can easily spot people who hop from job to job to go to the highest bidder and after a couple of jumps they will simply stop offering you a job. There is just too much investment to get someone of my skill level up to speed in the specific job I would be doing.

3. I like the people I work with and would hate to have to make new friends every time some employer offered me a higher wage.

There are more, but you get the point.

I'm a little skeptical of "post-scarcity". I don't think it is attainable. Scarcity is what drives economics. Think of what a catastrophe it would be if tomorrow somebody discovered and made public the discovery of a vein of gold that was easily/cheaply-mined and was 500 times the current world reserves.

Not sure--I am interested in why you think post-scarcity is not only achievable but desirable. I don't necessarily disagree with you, but I am interested in hearing you make your case.

[sophiaserpentia.livejournal.com]

Think of what a catastrophe it would be if tomorrow somebody discovered and made public the discovery of a vein of gold that was easily/cheaply-mined and was 500 times the current world reserves.

Catastrophe? ::grins with schadenfreude::

Actually i think we would just very quickly find a new monetary standard.


Not sure--I am interested in why you think post-scarcity is not only achievable but desirable.

I'm not entirely sure it is achievable. I think it is desirable because abundance is what has historically allowed human thought, spirit, and rationality to flourish. The periods of our greatest advances have been times of plenty.

[pooperman.livejournal.com]

"The periods of our greatest advances have been times of plenty."

Hmmm... I'm skeptical of this claim. I'm not saying it is wrong, it just seems to come from intuition rather than an assessment of history. Perhaps you've established this with a list of technological advancements and the economic conditions surrounding them, or you've seen it done by somebody else?

It seems I could make a similar claim about wartime technological advances and still not desire a war.

[el-christador.livejournal.com]

Hang on. Is your point basically that the aim of the society should not be maximum resource allocation but that it would be good to sacrifice some resource allocation if it makes the poorest people better off? I mean, it doesn't sound like an issue of economics, it sounds like an issue of goals.

Those who promote the idea of a "free market" have no true answer to this conundrum

I don't think there's any conundrum; I think everyone -- fan of free markets or not -- agrees it sucks to be poor and that increases in the prices of necessities are worse on the poor than the rich.

[sophiaserpentia.livejournal.com]

Hang on. Is your point basically that the aim of the society should not be maximum resource allocation but that it would be good to sacrifice some resource allocation if it makes the poorest people better off? I mean, it doesn't sound like an issue of economics, it sounds like an issue of goals.

Economics is the study of human resource allocations, so allocation goals are a valid economic concern.

IMO the most efficient allocation of resources would involve giving access to a reasonable standard of living for all. Poverty is very costly to society as a whole, because it keeps people from living up to their fullest potential.


I think everyone -- fan of free markets or not -- agrees it sucks to be poor and that increases in the prices of necessities are worse on the poor than the rich.

But not everyone would agree that the market system makes some people poor by amplifying existing disadvantages. I see the market as a way for the rich to grab from the poor in an environment of conceptual "legitimacy."