Home > rethinking economics > The human capital controversy

The human capital controversy

from David Ruccio

Like the capital controversy of the 1960s, the current controversy over human capital pits neoclassical economics against its critics.

The capital controversy (also known as the Cambridge controversy, because it was staged between neoclassical economists at MIT, and thus of Cambridge, Massachusetts, and non-neoclassical economists at Cambridge University, and thus of Cambridge, England), which actually took place between the mid-1950s and mid-1970s, was narrowly about the internal consistency of neoclassical economics and more generally about the role of capital in economic theory. The basic idea is that, in a world of heterogeneous capital goods (e.g., a shovel and an automobile assembly-line), you need to know the price of capital (the interest rate or rate of return on capital) in order to determine the quantity of capital (i.e., in order to add up all those different kinds of physical capital). But, in neoclassical economics, you need to use the quantity of capital in order to determine the price of capital (via supply and demand in the “capital market”), which creates a fundamental problem for the neoclassical theory of capital.

Hence, Joan Robinson’s famous question, “What is capital?” To which neoclassical economists responded with gobbledy-gook. And so Robinson repeated her question, the neoclassicals withgobbledy-gook, and the controversy continued without resolution. Neoclassical economists, like Robert Solow, resorted to an aggregate production function (where the problem of heterogenous goods is simply defined away), while Robinson and the other anti-neoclassical economists on the other side of the pond entered into increasingly arcane areas of dispute, such as reswitching and capital-reversing.*

As I have long explained to students, the theory of capital is the most controversial topic in the history of economic thought because the theory of capital is the theory of profits—and therefore an answer to the question, do the capitalists deserve the profits they get?

The original capital controversy was never resolved. But now there’s a new capital controversy, a debate about human capital. It was launched by Branko Milanovic, based on Thomas Piketty’s refusal to include human capital in the other forms of capital he measures in his inquiry about the history and future prospects of wealth inequality.** Basically, Milanovic argues that labor is not a form of capital because labor involves a “doing” (work has to be performed in order for skills to be used and wages to be paid) while other forms of capital are characterized not by work but by nonwork, that is, ownership (financial capital generates a return based on owning some of financial claim, and no work is involved in making such a claim).

why is “human capital” such a disastrous turn of phrase? There are two reasons. First, it obfuscates the crucial difference between labor and capital by terminologically conflating the two. Labor now seems to be just a subspecies of capital. Second and more important, it leads to a perception — and sometimes to the argument used by insufficiently careful economists — that all individuals, whether owners of real capital or not, are basically capitalists. Even if you have human capital and I have financial capital, we are fundamentally the same. Entirely lost is the key distinction that for you to get an income from your human capital, you have to work. For me to get an income from my financial capital, I do not.

I’m with Milanovic on this. There is a fundamental difference between doing and owning, between labor and capital. But I also think the human capital controversy has even larger implications.

First, a bit of history: the idea of human capital was invented in the early 1960s by neoclassical economist Theodore Schultz [pdf] as part of a more general attack on Marxian-inspired notions of capital (capital that is connected to profits and therefore exploitation), an extension of Adam Smith’s theory of the causes of the wealth of nations (which now, Schultz argued, should include the accumulation of all prior investments in education, on-the-job training, health, migration, and other factors that increase individual productivity), and an attempt to depict all economic agents, including laborers, as capitalists (who “invest” in and “manage a portfolio” of skills and abilities). Human capital can thus be seen as, simultaneously, a blunting of the critical dimension of capital (broadening it to matters other than profits and thus a particular set of claims on the surplus) and a step in the creation of the neoliberal subject (who seeks a “return” on its “investments” in itself).

Second, the problems associated with the notion of human capital, which Piketty’s correctly does not include in his definition of wealth (since, for Piketty, “capital is defined as the sum total of nonhuman assets that can be owned and exchanged on some market”), also serve to undermine at least part of Piketty’s project. One of the elements missing from Piketty’s approach to capital as wealth is any kind of “doing.” It’s all about owning (of “real property” as well as of “financial and professional capital”), without any discussion of the labor that has to be performed in order to generate some kind of extra value and thus a return on capital.

And so, as it alway does in economics, it comes down to a theory of value. In neoclassical theory, all factors of production get, in the form of income, an amount equal to their marginal contributions to production. Everyone contributes and everyone, within free markets, gets their “just deserts.” In Piketty’s world, the owners of capital manage to capture a larger and larger portion of the national income if the rate of economic growth is less than the rate of return on capital (which exacerbates the already-unequal distribution of income, based largely on CEO salaries). In a Marxian world, capital is a social relationship that both generates a surplus (because “industrial capital” exploits “productive labor”) and represents a distributed claim on one or another portion of the surplus (in the form of “financial capital,” the ownership of land, and so on), based on the idea that the “doing” of labor occurs simultaneously—as both cause and effect—with the “owning” of capital. Three different theories of value and thus three very different theories of capital.

But it doesn’t stop there. In recent years, we have seen a dreary expansion of the idea of capital beyond even physical/financial capital and human capital. It now includes—in the hands of business professors, economists, and other social scientists—intellectual, organizational, social, and other forms of capital. Somehow, if they call it capital, they think it deserves to be taken more seriously.

As I see it, all these new forms of capital, like human capital, are ways of expanding Smith’s wealth of nations; they all seen as contributing to the production of more “stuff”—more use-values, the “immense accumulation of commodities.” But the expanding universe of capital also serves to hide the extent to which all that stuff, which is in reality socially produced, is then privately appropriated—leading to a growing gap between a tiny minority at the top and everyone else. In other words, it’s a pattern of private capitalist appropriation that creates a more and more unequal distribution of income and wealth.

The capital controversy will remain with us, then, as long as we refuse to solve the problem of capital.

*Avi J. Cohen and G. C. Harcourt [pdf] provide a useful overview of the capital controversy.

**Nick Rowe and Tim Worstall have since criticized Milanovic and his call to junk the notion of human capital, and he in turn has responded to their criticisms.

  1. February 23, 2015 at 12:27 am

    Human capital is two things: It’s investment, which can be quite large and yield returns that scale far beyond the Marxian “capacity to do work”. CEOs work hard, but no more than 2-3 times as hard as any worker. They’re paid hundreds of times more because of things they own: trust, relationships, track record, a certain set of morals, luck, skills.

    Human capital is also bound to people and not able to be owned and accumulated like financial claims or machines. This leads some to believe that human capital is an egalitarian good, like Marxian labour. I disagree. Although human capital is not transferable, it’s very unequal as the education investment and the trust networks that bring it into being are not egalitarian at all.

    For Piketty it would have been better to include the high incomes of CEOs as “income to capital” instead of “income to labour”. That would have painted an even more alarming picture of inequality than we already find in his book.

  2. blocke
    February 23, 2015 at 9:13 am

    Pavos. “For Piketty it would have been better to include the high incomes of CEOs as “income to capital” instead of “income to labour”. That would have painted an even more alarming picture of inequality than we already find in his book.” Right, and this is what people who have studied the financialization of the world are well aware of.

    Petra Dunhaupt points out that, “given the proximity of CEOs’ position to capital owners rather than to workers, the stock option (to which the growing gap between the top one and bottom 99 percent can be entirely attributed ) is closer to capital income than to wage income and should be classified with financialization rahtn than with earned wages.” (See Locke, rwer, issue 68).

    And yet David, you write approvingly of the following statement of Milanovic “why is ‘human capital’ such a disastrous turn of phrase? There are two reasons. First, it obfuscates the crucial difference between labor and capital by terminologically conflating the two. Labor now seems to be just a subspecies of capital. Second and more important, it leads to a perception — and sometimes to the argument used by insufficiently careful economists — that all individuals, whether owners of real capital or not, are basically capitalists. Even if you have human capital and I have financial capital, we are fundamentally the same. Entirely lost is the key distinction that for you to get an income from your human capital, you have to work. For me to get an income from my financial capital, I do not.

    This seems a step backwards from an understanding of capital and labor in the era of financialization.

    Then you argue “First, a bit of history: the idea of human capital was invented in the early 1960s by neoclassical economist Theodore Schultz [pdf] as part of a more general attack on Marxian-inspired notions of capital (capital that is connected to profits and therefore exploitation), an extension of Adam Smith’s theory of the causes of the wealth of nations (which now, Schultz argued, should include the accumulation of all prior investments in education, on-the-job training, health, migration, and other factors that increase individual productivity.”

    David, the idea of human capital was not invented in the early 1960s by neoclassical economist Theodore Schultz, but came into existence at the same time that classical economists were inventing their theories in the first half of the 19th century. See my book, Appreciating Mental Capital in the World Economics Association’s ebook series and Arno Mong Daastol’s dissertation on Friedrich List. Daastøl, A. M. (2014). Friedrich List’s Heart, Wit, and Will: Mental Capital as the Productive Forces of Progress. Dissertation Erfurt University. Staatswissenschaftliche Faculty. Document 24133. Doctorate awarded 29 Nov. 2011.
    And you approve of Milanovic’s attack on the uselessness of concept of human capital:

    “Since Adam Smith, economists have known that there is a difference between more and less skilled labor. Under skill, we include education (measured by years of formal schooling), experience (measured by the years one has worked) and, less precisely definable, knowledge. Whether using Marxian or neoclassical economic theory, people with greater skills are supposed to be paid more because they produce greater value.”

    The discussions of human capital formation referred to are based on market based conceptions of individualism; people talking about human or mental capital long before the 1960s had a communitarian-national-institutional view of mental capital that you do not acknowledge.

    Don’t dismiss the idea of human or mental capital, David, which such mediocre reasoning and historical ignorance.

  3. Ack Nice
    February 23, 2015 at 1:30 pm

    Thanks ever so much for this, Mr. Ruccio. It certainly isn’t YOU who has displayed “mediocre reasoning” above. To counter all the myopia and mere rationalizations masquerading as sound reasoning that are swirling around giving higher pay for things like skill and experience etc:

    Chapter 6

    The irrationality of the reasons for higher-than-average hourly pay.

    To get an idea of the maximum just fortune, we need to establish the maximum hours of work per individual, and the maximum fairpay per hour per individual, and then multiply them together.

    The maximum hours per individual is easy. No one can work more than about 100 hours a week for 50 years, which is 250,000 hours per individual per lifetime. Very, very few people indeed work harder than this. There may be no one who has worked that many hours. So 250,000 is a very generous upper limit for number of hours. A graph of the lifetime average hours per week would peak somewhere around 60 to 70 hours a week and decline to nothing or almost nothing at 100 hours a week. 2 billion housewives may work up to over 90 hours a week, but their lifetime average would be lower than this. Broadly speaking, the underpaid work longer hours per week. Generally speaking, the more underpaid, the longer the hours. The Swedes have for decades had a 32-hour official work week, before overtime rates kick in. The Kalahari bushmen people get by on 12 hours a week. Winston Churchill sometimes worked 120 hour weeks during the war, but he was good at catnapping. In Japan, working over 100 hours a week causes overwork death. Medical Interns are for some obscure bad reason forced to work 100 hour weeks, but it is bad for them.

    Paying for gifts of nature like talents, skills, brains, beauty, brawn, aptitude for leading, etc is universally accepted as sensible, but is irrational. The person does no work, makes no sacrifice to get these gifts of nature.

    Payment for study, training, practice, etc, is proper, because it is work, sacrifice of time. But it is not a rational excuse for limitless overpay after studying. Tertiary students should in justice be paid for studying. It is sacrifice. It is time spent in which the student cannot work to keep himself. But paying a premium for life for the services of a student after studying cannot be justified rationally. That is, it cannot be justified. If we pay students for studying, we do not need to pay people for having studied. Paying people for qualifications beyond their deserts for time spent studying is legal theft. It is a false excuse for higher-than-average hourly rates of pay, and society causes its self-destruction by injustice in permitting it. It is pay without work, which must mean, which cannot NOT mean, work without pay for others, which must mean ever-escalating anger and danger and suffering and social breakdown. Inequality ever-grows.

    Once again, the support for payment without limit for qualifications, beyond the fair compensation for having studied, is supported by people seeing the upside of payment for qualifications, and being blind to the downside, which is financing the overpay and financing the violence engendered, with money, life, order, social and global survival and happiness. Seeing the close-up connections, seeing the easily imaginable gains and not the more distant connections to loss. Letting the pleasure principle obscure our awareness of the tremendous loss side. To avoid stepping in dog doo, you have to see it. It is far less unpleasant to see it than to step in it. We are so sensitive, we can’t bear to see the downside, and so we have suffered the downside for centuries without learning.

    Paying tertiary students for studying may seem strange, but in fact we already pay them for studying. They don’t live on air. But the parents or scholarships pay them for studying, whereas society is the beneficiary of this studying. It is another legal theft. Society gets a gift from parents.

    The society paying tertiary students for studying instead of hoisting the cost on parents will mean also that all bright people can study, which will enrich society 10-fold, since at the moment 90% of bright people’s talents are wasted by poverty. Science will go ahead 10 times faster from this cause alone. Medical science will go ahead 50 times faster, because at the moment 80% of research money is wasted on finding generics to get around patents.

    Of course, society will have to limit the number of students in each area of learning that it funds, but that is fair, because why should society pay for more students than it wants to buy? And when no one is overpaid for having studied, there will not be such a rush to study as now. Numbers will not be excessive. And students will be more genuine, studying for sincere reasons, not for the overpay.

    Business risk is another excuse for higher-than-average hourly payrates which is universally but incorrectly swallowed.

    Our compassion and empathy seems to be in proportion to money. Our irrational desire to compensate for risk has evaporated when it comes down to the streetvendor, the prospector, the fisherman, and the worker. Risk and workers hardly seem to go together in our minds, although 1000s of workers die yearly because of their work, and virtually no businessmen do. The underpaid pay for all, in pay and lives, and are too meek even to know that they do. Protection for the worker in mines, in the fishing industry, protection for the worker against layoffs, danger, unemployment, is slow and ever-too-little. But compassion for the brave and heroic businessman, willingness to allow him unlimited profits because he is taking a risk, is boundless. The poor businessman, venturing his own capital for our benefit, taking risks that we are more scared to do. Saviour of us all. Kingpin of the system. Let his reward be liberal, unconfined.

    We do not see that 99% have to pay financially for this payment, and 100% have to pay in loss of 99% of happiness for this payment.

    It seems to us that we do pay for business risk and that we ought to pay for business risk. Whereas the facts are clearly and simply that we do not pay for business risk, we cannot pay for business risk and we ought not.

    It is true that there is business risk, and that businessmen make profits, but there is no causal connection between the two. In the first place, we would have to be able to measure risk, we would have to measure risk, and we would have to assess a proper reward per unit of risk. None of which we have done or can do.

    There are high risk, low risk, high rewards and low rewards. But no causal connection between risks and rewards. The very meaning of risk prevents there being any connection, any correlation between risk and reward. Risk is risking losing ‘your’ money. I say ‘your’, because capital in unlimited-fortunes systems, like communism and present capitalism, is mostly others’ earnings, capital is mostly overfortune.

    Do we have any intention of paying the riverside fisherman for his risk? Do we have loving compassion for the lonely prospector who returns with empty bag? The businessperson is risking a sprat to catch a mackerel, as they say. He is engaged in the pursuit of money, often without proportionate work. His aims are for himself alone. And yet we treat him as a hero who deserves our unstinted support, and pay him without knowing we pay him. The egotism of the businessman, his assumption of his heroism, infects and brainwashes us into support. Which we don’t feel for the smaller player. Who is more likely to be risking his own earnings, his own life and health. We feel for the merchant who sends a ship out on stormy seas to win a fortune, but we have no thought or care for the sailor who climbs the mast in freezing weather around the wild Cape Horn, who was often thrown from freezing mast to freezing sea with frozen thumbs.

    We don’t give knighthoods and other honours to little girls dragging coal through freezing tunnels, nor to the child chained to a carpet loom, nor to the world’s workers, whose wealth-creation is greater, but to the top man, whose contribution is smaller and merely symbolic.

    Is there any correlation between risk and reward? To answer that, we would have to be able to measure risk. By the definition of risk, we are unable to measure the risk. We lock on to the instances where there seems to be risk and profit, and assume a correlation. We ignore the instances where there are high risk and low returns, low risk and high returns, which weaken the correlation to nothing.

    In addition, the plums of low risk and high reward are reserved for the big players, and the higher risk and lower rewards are the lot of the small players, the 99% suckers.

    There is always some degree of inside information, which makes investment safer for those in the know. The gross tendency of the stockmarket is to shift money from the small players to the big players. Just as in gambling. The small player has less information, slower information, and mis-information put out by the big players. As we see portrayed in the film Trading Places.

    The English Rothschild makes sure he receives news of Waterloo first, and then very visibly starts unloading his English shares, convincing everyone that England has lost the battle, and then secretly buys up English shares at rockbottom prices, which then rocket. This is clearly big money for very little work. Which means a lot of work for very little money for others.

    Can we afford to allow a fool and his money to be so easily and limitlessly parted, when we are all money-fools relative to the most money-smart person? Can we be smart enough to put a cap on overfortune at the maximum that one person can earn by his own work in a lifetime, and thus limit overfortunes to the maximum just fortune?

    In this Rothschild example, the risk is very low, the rewards very high. And what is true in this example is true in all markets in all places and times. The small player can never be sure that the information he receives is true or is misinformation put out by big players. I say, let such legal theft and all legal thefts be limited to the maximum self-earnable fortune, and not escalate to infinite violence, universal misery and global extinction.

    The big player has enough money-muscle to control the market. The big player can buy and sell in sufficient quantity to affect the stock price. So he can buy in, thus raise the price, sell out, thus lower the price, buy in again, and so on endlessly. Simply a money pump.

    And the same applies to private control of the money supply. And to public control of the money supply without intelligent and effective vigilance against price manipulation for private gain. There is no use in putting a lower functionary in charge of inspecting the work of a higher functionary. The higher functionary will just pull rank, and go on doing what he likes. The more powerful the individual, the more reluctance there is to inspecting his work. This failure to effectively monitor high-ups is just issuing them a license to commit theft.

    Stocks go where the big institutional money managers send them. Buybacks boost share value, and CEO income. American companies are putting more money into buybacks than into R & D.

    The French Rothschild had enough overfortune to be able to plunge the stockmarket by selling his shares, in order to force his acceptance into high society.

    There must always be someone or some group who receives stockmarket-affecting news first. And these are generally those with most money to buy information, and with more money to hire people to follow the market for them. And the ones who have more money are those who can get greater benefit from the information by investing more. Those who have most get most. Everything conspires to drive inequality, legal theft. More money grows faster, less money grows more slowly, or shrinks to fund the overpay or legal theft.

    When you think of it, money makes money has to mean that the person didn’t make the money, which has to mean others made the money. But people are chanting money makes money as if it was salvation instead of catastrophe. Get rich quick and aid global catastrophe. Open season on the social pool of wealth, grab all you can and be a dead hero. There is no doubt that the current philosophy is: Everything I can grab is mine, whether by private inheritance, gambling, unjust profits, interest, or lottery. Interest is the product of profits. Equally, there is no doubt that overfortune is injury and that injury is not tolerated.

    It is logically impossible, that is, selfcontradictory, for risk to be rewarded, since risk means risk of losing money.

    And risk is a personal affair, in which others are not at all obligated to reward, nor to allow legal theft.

    But how much hard thinking by how many people will be sufficient to dig out the universal misconception of the right to reward for risk, and avoid global catastrophe? How many people have the mental courage to allow themselves the liberty of testing the wheels of private inheritance, profits, etc, with the silver hammer of thought? The fate of humanity hangs on the answer to that question.

    Similar arguments apply to the notion that people are paid for responsibility in jobs and that they ought to be so paid.

    And what is there in responsibility that it ought to be paid for? Does the responsible person in a responsible job sacrifice anything in the responsibleness that should therefore be compensated? Does the responsible person use up more calories, so that he needs more money, a finer whisky, to replenish his responsibility? Or is responsibility a natural gift, a gift of character, or merely an accident of fortune, that therefore costs the person nothing to have and to use? If responsibility is a burden, can money compensate for whatever it is that is lost in carrying that burden? And is responsibility a burden only to those who are unfit to be carrying it, to those who have taken on the responsible position for the money, not because they are naturally fit for responsibility? If we do not pay for responsibility, the ones who take it on will be those whose nature equips them to carry it without effort. Just as money might tempt a weaker man to try to do a physically demanding job he is not fitted to do without unnatural effort.

    And then, what guarantee do we have that persons in responsible jobs are acting responsibly? People could never agree on what constituted responsible behaviour. Is the CEO focused on maximising legal theft, with no regard for global sustainability and conservation, acting responsibly?

    Again, we have no measurement of responsibility, and no way of establishing the proper compensation per unit of responsibility. And the costs of measuring responsibility would be very great, and would invite bureaucratic corruption.

    The person in the responsible job is not necessarily acting any more responsibly than anyone else further down the hierarchy. Everyone is acting with equal responsibility. Every block in the pyramid is contributing equally.

    Again, we focus on cases where jobs that seem to be more responsible jobs are paid more highly, and ignore cases which erode the correlation to nothing. What is the responsibility of the busdriver or the car mechanic? The busdriver has more lives in his hands than the surgeon has under his scalpel. But we assume that lowpaid jobs involve less responsibility, and then we use that conclusion to confirm our belief that people are being paid for responsibility. A circular argument, that is, using the conclusion in the premises. We think: People are paid for responsibility, because people in lowpaid jobs are in less responsible jobs. How do we know that people in lowpaid jobs are in less responsible jobs? Because we know that people are paid for responsibility.

    In reality, higher hourly payrates create irresponsibility in high places. The greed factor makes the greedy elbow their way into higher-paid jobs, elbowing out those with natural gifts of being truly responsible. Jeffersons and Lincolns are few. At the very least, the more responsible and ethically aware and sensitive will have, as part of their job, the constant fighting off of greedy people without responsibility. Like Abraham Lincoln’s labours against place-seekers. And this is another example of the fighting at the top.

    Nature gives a variety of gifts, which are quite possibly a proper balance of variety of abilities. Unequal hourly payrates introduce a distortion into this natural balance, encouraging everyone into the wrong jobs for them, lowering the quality of work, and lowering job satisfaction. With equal hourly pay, everyone will gravitate to the in-demand work they are naturally most made for. Overpay forces out nature’s choice of people to do the job, and replaces them with the greedy. That is, with the least aware that overpay is unhappiness for them, not happiness.

    But righteous rulers will be increasingly rare where wealth-power is concentrated. Money like manure is best when spread. The bigger the heap, the more flies. The standard of American Presidents is ever falling as overpay-underpay increases. The truest leaders were in the relatively egalitarian beginning of the American dream of freedom from tyranny. There has been ever less concern about wealth-poverty range as the range has increased.

    Again, people think it is in their interests to be paid for skill and experience. But paying for skill and experience opens the floodgates to unlimited pay on these excuses, thus net impoverishing most of the workers who are being paid for skill and experience. And there is no reason to pay for skill, which is either natural gift, or training, which should have been paid for. And no reason to pay for experience, which is gained while being paid, and so costs the worker nothing. Removal of these excuses for unlimited overpay will stop workers’ earnings sucking up to the overpaid, and will increase the pay of most people, and will make everyone’s pay just, and make everyone’s lives 99% free of war and other violence.

    So, in short, it is clear that, provided we pay tertiary students for studying, there are no reasons for higher than average hourly payrates.

    This conclusion then allows us to discover the maximum self-earnable fortune, by simply multiplying the maximum possible number of lifetime workhours by the world average hourly payrate. As approximate as this figure must be, with the millions of details that are involved in any reality, it does give us a usable idea of the general area in which the maximum self-earnable fortune lies. And it is of the order of US$3.75 million in 2007 dollars, less minimum lifetime spending. Which means a lot less for the 1% overpaid. And a lot more for the 99% underpaid. And that means a lot more equal distribution of political power, and that means a lot more democracy and freedom, a lot more of the American dream and the human dream. And a lot more freedom from violence for all. And a great deal more happiness for all. That is, safety, peace, order, survival, education, health, wisdom, progress.

    Once again, it is very simple. We have erroneously allowed earnings and political power to depart from us. If we but see the error, we get back our happy. We get back a future, and a far, far happier future. Overpay comes down, when these excuses for overpay are seen to be false. Underpay comes up. Level seas for all. Pacific sailing forevermore.

    We can all immediately, right now, know that it will be a far, far happier future, because we all already know how devastating to happiness it would be for a government to commit the injustice of taking 90% of aftertax income off 90% of citizens and giving it all to 1%, and we know that we have far worse injustice than that in the world today, after thousands of years of accumulating legal theft, of unjust money drift from all to few.

    We can all immediately, right now, see how easy it will be to convince almost all, because we ourselves can already see how simple it is.

    Can we, at this very late stage of the corruption of everything in culture by misinformation and erroneous thinking, dig ourselves out from the rubble of non-sense?

    Minimum wage is putting the cart before the horse. As long as the money-sucking system of unlimited fortunes exists, companies will be forced, not to pay minimum wages and employ all, but rather to employ fewer people, and work them harder. It is like trying to get a branch into the right place without trying to get the trunk in the right place. The branch will snap and die. Whereas maximum fortune and maximum income, and equal, direct, electronic distribution of overfortunes to all, will inevitably mean the more just and happy distribution of pay. Maximum fortune and wage will mean that the lowest hourly payrate will automatically be far higher than the minimum wage, which is after all an insult.

    If everyone comes to see the existence of legal theft, everyone will see the justice and sense in limiting fortunes to the most a person can earn in a lifetime.

    The overfortunes can, for the sake of the administrative simplicity and the bureaucratic cost-saving of the simplicity, be distributed equally among all world workers, because 1. 99% of people are underpaid, and, 2. overfortunes are being trimmed anyway, so that the shares going back to the 1% overpaid will be being trimmed away.

    Or the overfortunes could with relative simplicity be redistributed only to those below the world-average hourly payrate. But that would involve vast files and universal inspections of income. Which would be a huge waste of lives serving that bureaucracy, and a huge waste of taxmoney.

    One enormous advantage of much more equal hourly pay for all jobs will be that people will not be tempted away by higher pay from the work that gives them most intrinsic satisfaction. This will mean far more job satisfaction, and will mean quality of workmanship will be higher. People will not only have the happiness of being better paid, they will have the happiness of being in jobs that give more intrinsic satisfaction, and of producing goods that give them satisfaction. Doctors will be real doctors. Politicians will be real politicians. Lawyers will be real lawyers.

    It doesn’t mean that everyone will be free to get paid for doing whatever they like. It means that they will be free to choose the work they like most, from among the jobs for which there is human demand for the job-products.

    Also, it makes sense that capital in unlimited-fortunes systems will tend to concentrate around products of highest profit, and thus starve products of lower profit of a fair share of capital. And jobs will tend to be in production where unjust profits are greatest, and not so much in products people want. That is, the distribution of capital and jobs will be shaped by unjust profits, not by human want. An obvious example of which is global food.

    Many will be alarmed at the idea of getting rid of higher-than-average hourly payrates, but this is once again because of seeing the false upside, more money more happiness, and not the far greater, true downside, namely, less money, less happiness for 99%, and ever-escalating violence and misery for all, ever-higher defense taxes, repair costs, ever-lower wages for 99%, and ever-higher medical and legal costs, for example. They are looking only at the loss of the upside, and not the gain of the removal of the far greater downside. They are doing this because of the tendency to look at the pleasant and ignore the unpleasant, the tendency to see the small and not the large, and the tendency to see the higher and not the lower. And the upside which they have come to think of as pleasant, is not as pleasant as it seems from the other side of the fence.

    Grass looks greener on the other side of the fence because you see it at a low angle, so that the grass hides the dirt areas. When you look straight down on the ground, there are many bare areas between the grass blades.

    And, once again, it is not a matter of imposing equal hourly payrates, nor of limiting profits, gambling, interest, lottery, etc, but, through the just limitation of fortunes and income, and distribution of overfortunes, naturally automatically causing far more equal hourly payrates, and hence causing human survival and far more global peace and friendliness. And over-profit, over-gambling, over-interest will fade away.

    As long as people have failed to put the trunk of the system in the right place, society has engendered an endlessly growing bureaucracy trying and necessarily failing to get and keep all the branches in the right place. Every empire, from before the Egyptian and after, has suffocated to death on its relentlessly growing bureaucracy. Higher pay for the heads of bigger departments has meant encouragement to heads to increase the size of their departments, and to prevent the rise of better heads and hearts. So pay justice also means far less law and bureaucracy, far less government interference, and far lower legal costs. Hence far lower taxes.

    It is easier for people to see small things than large, and they see branches and not the trunk.

    Even before the happiness of getting unlost, is the happiness of knowing one has the right map to get unlost.

    Is there one person on the planet who would choose a world in which there was a range of pay for a fortnight’s work from $1,000,000,000 to $1, where there was a 99% chance of getting less than the average, and a 90% chance of getting between a 10th and a 1000th of average pay per hour, and a 100% chance of the society accelerating violence and weaponry to self-extinction, over a world in which there was a 100% chance of equal pay for equal work, and plenty for all, and perpetual peace?

    I think not one. Therefore we are all very nearly agreed that we want limited-fortunes social systems.

    Is there one person who would choose the first option, even if they knew that they were going to be the one paid $1,000,000,000 a fortnight, or knew that they were not going to be among the 99% underpaid?

    I think not one who thinks a little.

    Since we are very near to agreement, we are very close to the colossal happiness that justly limited-fortunes systems will unleash. The only conflict will be with those who would rather die than think. The incorrigibly selfdestructive. The incorrigibly unthinking. Those who are stubbornly, unthinkingly attached to the status quo. Those who adamantly refuse to believe that it is possible for us to have been wrong. Those who get wildly passionate, angry and murderous at anyone having ideas. Remember there is no force in this. Either the idea is true or it isn’t. If everyone agrees, we are free to do it. If not everyone agrees, then perhaps the idea is wrong, or people didn’t think. No doubt, when the law against murder was first proposed, there were people who objected violently just because it was a change. Some people, without any reason or thought, find any proposal for change highly offensive. Like tribes killing any stranger without examination.

    I hope, and I think it is reasonable to hope, that very few people would rather die than think a little. However, it would take some quality thought and grit for people to realise and face the fact that they are in global misery and heading for extinction, so that they know that the real choice facing us at the present time is between misery now, followed by extinction soonish, and 100-fold happiness. Head-in-the-sand may soon kill every living thing on the planet.

    And the transition can be effected very smoothly and quietly, with no disruption of present societies. Smoothness and quietness will begin to increase immediately, will increase for a long time, and will level off at the return of natural levels of happiness, about 100 times present levels.

    But I hear a cry of: Pay the surgeon for studying, and then pay him the same as a janitor?! Absurd!

    So let us see. First, let us remember that the surgeon’s pay will be what the janitor will get under fairpay, will be much higher than what the janitor gets now. Next, let us take away the mindless confidence we get from mindless custom. Let us imagine that the custom is exactly that, to pay the surgeon the same as the janitor, and that we have to argue for a change in the custom, from paying the surgeon the same as the janitor. We have to find reasons for paying the surgeon more, on top of paying him or her for studying.

    And we will take away the emotional force of the mindless bias in favour of men, and in favour of alpha males, by making the surgeon a woman.

    The janitor is only pushing a mop, the surgeon has lives under her scalpel, some will say. But the surgeon is only standing there, pushing a scalpel. Her brain is full of knowledge and her hands are full of skill, perhaps, but she has already been paid for this, insofar as her knowledge and skills are from study and previous paid work, and she doesn’t deserve compensation for those things insofar as they are nature’s gifts, which she is given free. Is the more mental work of surgery more exhausting than the more physical work of janitoring? No one knows. And the cost of replenishing any presumed greater energy sacrifice is very small. What is left? They both have equal needs and desires for food, comfort, democratic share of political power and social standing. They have equal sacrifice of themselves per hour. They are both human. They are equally sensitive to social slighting or inferiorisation. They have equal right to equal compensation for equal sacrifice. It benefits everyone to put everyone on an equality basis, it horribly degrades everyone to put everyone in a hierarchy of superiority and inferiority. The truly superior have no desire to be on pedestals. The truly superior wish to be among the human tribe, neither above nor below. In mutual respect. Inferiorisation puts everyone in a state of tension, of fear, because it is driving wedges among the members of the tribe. Superiorisation abets arrogance, which is a degree of insanity. The human tribe is the greatest, surest wealth for humans, and driving wedges within it is destruction of the greatest wealth, the comfort and trust of the tribe by the tribe. It is of enormous happiness-value to be able to look out the window and see people we have in no way cheated.

    Remember the anti-intellectual element of Nazism, and the cultural revolution in China, the destruction of the mandarin class, of those who thought having more gifts of nature entitled them to higher pays, more power. These show us that inferiorisation of people produces a backlash, produces deep hatreds, horrible revenges. 40% of the Nazis were primary-school teachers. See Male fantasies, by Klaus Theweleit. Fear the inevitable backlash from those you assign to poorer houses for life. It is easy to say: I deserve more. It is a little harder to say: He, or she, deserves less. We ought to look down on people who want to be paid more highly than their equals in humanity.

    Do we see inferiorisation among animal tribes? We see fights for alpha position, but I don’t think we see inferiorisation. Alphas may indeed eat first, but they don’t deny omegas their necessary share of the killing made. The alpha does not assume the omega’s lesser rank cancels his survival needs. Animal alphas are only alphas by being best at providing for and protecting the tribe.

    And is our understanding so good that we always recognise superiority? We can measure IQ, but we can’t measure intelligence. We have yet to measure social intelligence, emotional intelligence and other forms of intelligence we haven’t even yet thought of.

    There is another argument.

    Job specialisation is a social phenomenon. There is no job specialisation without society. Job specialisation is a community effort. So in some sense, specialised jobs are the property of all the members of the society equally. Specialised jobs are created by everyone contributing. The natural ownership is everyone owning bits of every job. The benefits of job-specialisation are intended for all. All contribute equally. Everyone gives up every bit-job except one, and receives bits of one job from everyone else. Job specialisation is a community product. One person takes over the surgeon’s lettuce-growing so that the surgeon can concentrate on surgery. The surgeon gets paid so she can buy lettuces. So we may say that no one can take their specialised job personally, and take special rewards for it. In nature, before job specialisation, the surgeon person, doing all her own jobs, is unlikely to be very much more productive than another. So, in justice, her reward in society should be the same as her production in nature, multiplied by the efficiency factor of job specialisation. If the production of goods becomes twice as efficient with job specialisation, the surgeon’s just recompense is twice what she would produce doing all her own jobs. The same recompense of everyone. Job specialisation is not an excuse for beginning the endless growth of inequality and violence. Specialised jobs are not the property of the individual, but of the society that produced the specialised jobs, that is, of everyone equally.

    People above us in money-power have freedom and power to hurt us. People below us have a will to hurt us, and still have some power to hurt us. Some people, getting nervous about the power of those below us, push them down further, as for instance, the lynching in America, and the racial brutality in apartheid South Africa, and the troika demanding more austerity for Greece after Syriza won the election. This decreases those people’s power to hurt us, and increases their will to hurt us. Perhaps we overpay the powerful above us in the hope of reducing their will to hurt us, but paying them more increases their power and freedom to hurt us.

    Unequal pay per hour is self-harming.

    The large point is as simple as this. Two children, two school lunches. If one takes the other’s lunch, he gains: One more lunch than he can use. He loses: Amity, peace, friendship, play, freedom from constant fighting with the other trying to recover his lunch. He gains practically nothing, he loses almost everything. He even loses his own lunch, because he has no peace to eat it. The fight, which must go on as long as the theft continues, must in time use all the energy he gets even from his own lunch.

    Theft is a lose-lose situation.

    Therefore nontheft is a win-win situation.

    Therefore we can all be much happier.

  4. Ack Nice
    February 23, 2015 at 2:37 pm

    by the way, and for contrast, if you think you’ve already heard the worst thoughts of the wealthy, check this out:

    Daily Mail, UK – A financial services CEO worth $70 million told the Daily Show that he opposes the minimum wage because workers are simply ‘worth what they’re worth.’

    ‘I’m not going to say that we’re all created equal,’ Peter Schiff, CEO of Euro Pacific Capital and outspoken libertarian, told correspondent Samantha Bee.

    Schiff said some people are only worth $2 per hour, specifically the ‘mentally retarded.’

    Millionaire financial commentator Peter Schiff said he’s totally behind paying ‘mentally retarded’ workers $2 per hour

    ‘If we eliminated the minimum wage law then individuals would be free to accept jobs at whatever pay they’re able to get,’ said the millionaire Beverly Hills High School alum.

    Last month, he posted a video online in which he protested Wal-Mart workers who were demonstrating outside a store as part of a campaign that would raise the retail giant’s–and largest employer in America’s–hourly wage.

    ‘Would you contribute 15 percent of the price of that TV for the Wal-Mart workers?’ he shouted at a man carrying a TV out of the store. ‘They are counting on you to pay higher prices!’

    ‘You’re worth what you’re worth’: The outspoken libertarian says that not everyone is created equal and it all just boils down to supply and demand. Besides, he said of fast food workers, ‘they don’t seem desperate and hungry to me’

    The workers were part of a group fighting to get full-time Wal-Mart workers paid just $25,000 per year.

    The U.C. Berkeley grad, who’s father Irwin Schiff is serving a 13 year prison term for tax evasion, made it clear that he believes that workers are too often painted as hapless underdogs.

    ‘It’s socialism that creates scarcity, that creates famine,’ Schiff said. ‘In a free market, there’s plenty of food for everybody, especially the poor.’

    Unbridled libertarianism is a mental illness – a cult of death and destruction – a crank belief system – with nothing to recommend it, People.

    Wake up.

  5. Norman L. Roth
    February 23, 2015 at 4:42 pm

    Feb.23, 2015
    M. “blocke”, Whoever you are: You are quite correct about the origins of the term “human capital”. The “idea of human capital” was indeed, not “invented” by some body named Theodor Schulz. Please reference page 132 of Chapter 5 of TELOS & TECHNOS, The Teleology of Economic Activity and the Origins of Markets[197 page edition} by Norman L. Roth. Proceed to line 17. Therein you will discover that the great John Stuart Mill was more explicit than any of his contemporaries in coining the idea in 1848. {Very interesting year}.
    To whit: “The acquired skills of the artisan are in principle a kind of capital in themselves…Just like the machinery and tools they use.” We, at this end suggest that you and David Ruccio try to read chapter 5 {CAPITAL} in its entirety. It could disabuse you {plural} of the other misunderstandings that seem to perplex so many of you. If you have any questions , I stand ready to assist you on demand. i.e. Just ‘ack’. You don’t even have to be “nice” about it. I have a very thick skin. Thank you for your patience.

    Norman L. Roth, Toronto, Canada

    • blocke
      February 23, 2015 at 11:08 pm

      Norman, please don’t abuse me with this John Stuart Mill Stuff, as being the first discussion about human capital. Can’t you get out of English language literature, and spread your wings a little. Maybe you would even find me in the discussion somewhere because I am not “whoever you are” but a distinct person, who demands more respect than you seem able to give.

  6. Ack Nice
    February 23, 2015 at 5:41 pm

    The artisan’s skills are honed and/or increased as he does work – which he is being paid to do – and it is no greater sacrifice on his part to work using his increased skills – the ones he acquired whilst doing paid work, ahem – – than others are sacrificing – as a matter of fact, greater skills make it easier to do one’s work, not harder.

    In the same way having won greater intellect or health or talents etc. in the birth lottery make it easier, not harder, to make one’s way through this difficult and complex thing we call life – where you must work to feed your stomach – and rest – we all eat and sleep or die – true for rich and poor.

    (How many people ever realize… before they lie on their death bed… that *time* is the only currency any human ever really has to spend, eh?)

    And btw, to the sub-rational who argue for inequality of pay per hour on the basis that work is unequal so pay should be unequal: inequality of work, of hardness of jobs, does nothing to argue for allowing pay to range widely – to the rational mind it argues only for pay to range as exactly widely as work ranges – which is about 2 to 1 maximum.

    Which is light years away from where we are.

    Time to get real.

  7. blocke
    February 24, 2015 at 10:34 am

    First, a bit of history: the idea of human capital was invented in the early 1960s by neoclassical economist Theodore Schultz [pdf] as part of a more general attack on Marxian-inspired notions of capital (capital that is connected to profits and therefore exploitation”

    David, consider Henri, Come de Saint-Simon, who died in 1825, when looking at the subject of human capital.

    The opening letter in his journal l’Organisateur (1817) amounted to a scathing indictment of the current holders of power – the clergy, wealthy owners of industry, aristocracy, government and civil service, whom Saint-Simon characterised as useless idlers. (Today, I would put the scions of financialization there).

    He went on to claim that if they were all to die it would not harm France at all, while if the leading scientists, artists and skilled workers – the real producers of wealth – were to die then the country would truly suffer. Here unlike later conceptions by others of a working class being manual labors alone, Saint-Simon’s conception of this class of the real producers of wealth included all people engaged in productive work that contributed to society, that included businesspeople, managers, scientists, bankers, along with manual labourers amongst others. But not the idlers. They or the institutions that create them (i.e., schools of finance ) are idlers.

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