Patent Trolling: Just Another Form of Capitalism

The dawn of the information age has ushered in a new form of value in intellectual property. Patents are based upon the innovative character of new kinds of tools, business models and processes with economic value. And like all economic functions, the patent occurs in, and helps to propagate, a specific social relationship of value.

Enter the "patent troll:" an irreverent term referring to those who deal in the purchase and defense of patent rights. Patent trolls purchase troves of patents, then litigate to turn a profit on their purchase. Sometimes, the patent merchants get a cut of the proceeds from litigation executed by their customers. All this is justified as defense of intellectual property and encouragement of innovation. But this is actually a simple form of capitalism.

The Job Creator's Tragedy

It's tough being a job creator these days. High taxes make it virtually impossible to hire more workers and an atmosphere of uncertainty is discouraging more investment in capital. Nobody would propose raising taxes on job creators under these conditions, right?

George Washington oversees the "car in the ditch" economy on Wall St / September 16th, 1920

That's the setting for the latest tragedy, that is. The job creator, ever heroic and noble, is accosted at all sides in his attempt to get the economy back on track. He confronts the Hydra of government and the armies of ignorance in his uncompromising quest to get the economy back on track. And this truly is a tragedy - our hero could perhaps be known as Supervacuo, and his tragic weakness - the fact that the job creator has absolutely no interest in creating jobs.

Measuring Marxism: Where Did We Go Wrong?

 In my previous series, I assessed one aspect of the moral vision in Marxism - its relationship to individualism. This time around I want to confront the so-called "failure" of Marxism, and how can we measure his vision of socialism. This post is part of a series attempting to quantify Marx's theory of socialism.

Comprehensive privatization in China. The bureaucratization that plagued the Soviet Union. Repressive policies in nearly all 'socialist' states. The dilution of democratic apparatuses in the same. The data seem conclusive: Marxism has failed. Either that, or our measurements are off.

In fact, these failures reveal a number of conditions which do more to support Marxism than anything else. The accurate measurement of the Marxist framework has very little to do with the propaganda efforts of the NATO / Soviet blocs, which often invoke the imagery of workers' power for their own political gain.

Furthermore, it is the self-proclaimed anti-communists themselves who long ago quantified the very measurements which prove just how right Marx was.

Individualism: The Basis of Socialism

This is part 3 of a 3-post series dealing with the Marxist concept of Socialism and Individualism.

Part 3: The Basis of Socialism


Socialism is on the one hand the transfer of the control over the means of production to the working class, in order to relieve this oppression. It is to overthrow the irrational, free-market state of political economy. But it serves a far more fundamental purpose for human society. As we have seen, socialism seeks to abolish the state of things wherein human labor is objectified. Human labor should, given the conditions of emancipation, serve the essential interests of the human being in the context of satisfied human needs. Erich Fromm:

"For Marx, socialism (or communism) is not flight or abstraction from, or loss of the objective world which men have created by the objectification of their faculties. It is not an impoverished return to unnatural, primitive simplicity. It is rather the first real emergence, the genuine actualization of man's nature as something real. Socialism, for Marx, is a society which permits the actualization of man's essence, bu overcoming his alienation. It is nothing less than creating the conditions for the truly free, rational, active and independent man; it is the fulfillment of the prophetic aim: the destruction of the idols."⁷

The socialization of the political economy is in keeping with the rejection of values, processes and constructs which do not meet the essential interests of a society of human beings. It is the judgement of capitalism, and all forms of organization, for the specific value in terms of rights and privileges it bestows on its members.

Individualism: The Freedom of Independence

This is part 2 of a 3-post series dealing with the Marxist concept of Socialism and Individualism.
 
Part 2: The Freedom of Independence


Human existence is a social phenomenon. The "individualist" ideal of capitalism seeks to privatize the sum of human relations in order to free the human being. Indeed, the many libertarian ideals seek to arrange society in such a way that "nobody steps on anybody else's toes." Property should exist as an extension of the individual. And the individuals, in turn, voluntarily exchange property.³

“The rate of privation between members of society is precisely the antithesis to the rate of independence or individualism.”

The facts, however, paint a different picture. The calculus of human "utility" posits that the disutility of uncomfortable jobs should incur greater pay - the opposite is true. Jobs with less autonomy, greater physical requirement, greater tolls on health and dirtier conditions tend to pay less. The social supply of labor, rather than the individual valuation of labor is the chief determinant of the value paid to workers. It is precisely this irrational construct which determines that an increase in the available productive forces of society, that is an increase in supply of labor, should instead decrease the value and incentive of a worker. What appears as an obvious supply-demand function is in the aggregate an irrational transfer of value to a minority - the capitalist who can pay his or her workers less, and yet has more supply (labor) available, and a larger potential market (laborers as consumers).^{3, 4}

Individualism: The Myth of Utopian Socialism

This is part 1 of a 3-post series dealing with the Marxist concept of Socialism and Individualism.

Part 1: The Myth of Utopian Socialism

Socialism: the penultimate state of equality. Everything shared, the power and interests of each individual so intertwined that the most minor discomfort will be done away with: Utopia. But Utopia is, by definition, an unattainable state of things: it means "no place." Nature itself precludes perfection.

But socialism isn't a utopia, either. The closest proximity it ever gets to Utopia is that socialism defines the conditions which allow for humans to strive for utopia. The daily struggle to subsist, wherein basic human need resolves itself into conflicts between individuals, stands in the the way of Utopia more than nature. But the triumph over the conditions which create these conflicts could allow humans to redirect their efforts.

If the problem of hunger is restricted to our history, we can then seek to resolve the intricate issues of human inter-personal relations. The state of the individual in need is a state of oppression, for the simple reason that it disallows the free actualization of the human being: in such a state, one is tied above all to the very struggle to exist before one can exist as a free person:

Nothing is as Sure as U.S. Debt Payments

For all the hype about fiscal deficits, the numbers don't add up to any significant threat to the U.S. economy: The U.S. is highly unlikely to default on its debts, and debts are mostly held by private and public U.S. firms and individuals.

As Ludwig von Mises famously argued, if you print money (or create loans) you'll get inflation, and whoever gets the money first benefits from it most. But whom does inflation hurt? In a global economy, it is the relative debt/capital holdings that matter. These are called "net account balance" and "capital account balance." The U.S. far supersedes other nations in terms of net debt and net capital. What will expanded government purchases do to this dynamic? It depends on where those purchases go. If we look at the current data from the U.S. Treasury, we see that U.S. debt goes primarily to U.S. interests: 70.7 percent of U.S. debt is owed to U.S. firms or individuals.

If we decide to take Rep. Paul Ryan's advice, we will be reducing government purchases that expand net capital in the U.S. and net debt to entities in the U.S. If we follow these plans, the U.S.'s place in the global economy will contract: Capital will leave the nation.

In a nation with fiat currency, the government can simply create money. The trend in government borrowing is a testament to this fact; as Binyamin Appelbaum noted on "NewsHour": "Nothing is as sure in financial markets than that the United States government will repay its debts. And so the government gets the cheapest rates available."

(Originally at Richmond Times Dispatch: Letters to the Editor: Dean Sayers: Nothing is as Sure as U.S. Dept Payments)

Capital Volume 1 Chapter 1 Notes

This is part 1 of a series in which I'll be summarizing the framework of Marx's Capital, Volume 1. For this series I am using the translation by Ben Fowkes, © 1990 & published by Penguin Classics.

All numbered and lettered lists are as they appear in the literature; further organization is my own doing. Occasionally, notes appear outside of the section they are sourced from in the book. This was done to improve the organization and flow of the notes.

I. The Two Factors of the Commodity: Use Value and Value (Substance of value; Magnitude of Value)

-There are two kinds of value applicable to commodities:

Use-value (substance: subjectively represents usability to consumer, represents wealth)

Depository for exchange value

Exchange Value (magnitude: realized by way of market exchange)

Since magnitude of value is our subject, ‘value’ and ‘magnitude of value’ are often used interchangeably.

-…and two creative factors for value:

Labor Value (prerequisite, subsumed into commodity, creates commodity value)
A value or quantity of labor is the common denominator among commodities
Resources (See Section II)

Economic Liberals Admit it: Capitalists Own Us

"Don't tax the rich, as they create jobs," so the mantra goes. However, this line of thinking betrays the underlying structure of production: namely, that the capitalist class has executive control over the means of production - control which is a concern of public policy, as Cato and the Heritage Foundation admit by requesting policy that regards its standing. Despite that fact, policy proposals argue for diminished public input. Indeed, history shows us that such control has always underlined this graft:^1,2,3,4

• Today, the Capitalist creates jobs by allowing the working class to use the means of production and sell their labor to him.
• Before that, the Lord created jobs by allowing the working class to use the means of production and give part of their labor to him.
• Before that, the Slaver created jobs by having the working class use the means of production and he (and it was always a man - patriarchy and all that) provided basic subsistence to them.

It has always been the narrow control over the means of production that allowed the interests of a group of oligarchs to consistently stand as a barrier to the production process. Interestingly, when these power structures shifted, it was always by diminishing the returns that older systems could replicate. The oft-revered Mises agrees: it is by diminishing the surplus value on capital investment that the same is disincentivized.² Is calling for safer structures for capitalism simply another incarnation of the tactical perpetuation of power? And does this activity fit the theoretical model of consumer-driven capitalism?

Thomas Jefferson: Marxist

"I am conscious that an equal division of property is impracticable. But the consequences of this enormous inequality producing so much misery to the bulk of mankind, legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. The descent of property of every kind therefore to all the children, or to all the brothers and sisters, or other relations in equal degree is a politic measure, and a practicable one. Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise. Whenever there is in any country, uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. The earth is given as a common stock for man to labour and live on. If, for the encouragement of industry we allow it to be appropriated, we must take care that other employment be furnished to those excluded from the appropriation. If we do not the fundamental right to labour the earth returns to the unemployed." Thomas Jefferson - Letter to James Madison (Oct. 28, 1785) / My Emphasis / HT:ExiledOnline.com

 Some highlights:

• Cites the disproportionate dispensation of property as the cause of misery
• Government would do well to increasingly "subdivide property" or break up this accumulation of property
• Supports progressive taxation
• Property rights "violate natural right" when it acts as a barrier between the working class and resources (a.k.a. capital)
• Earth is "common stock"
• Labor is a fundamental right

Expansion of Financial Credit Eventually Leads to Negative Growth

VoxEU: Too Much Finance?

"Our results show that the marginal effect of financial development on output growth becomes negative when credit to the private sector surpasses 110% of GDP. This result is surprisingly consistent across different types of estimators (simple regressions and semi-parametric estimations) and data (country-level and industry-level). The threshold at which we find that financial development starts having a negative effect on growth is similar to the threshold at which Easterly et al. 2000 find that financial development starts increasing volatility. This finding is consistent with the literature on the relationship between volatility and growth (Ramey and Ramey 1995) and that on the persistence of negative output shocks (Cerra and Saxena 2008)."

The Wage Rate and Globalization

VoxEU on the Euro and competition for capital:

"This analysis leads to the conclusion that if the underlying problem of Europe’s periphery were lack of competitiveness, it should relate to the types of products they export (vis-à-vis Germany) and not to the fact that their labour is expensive (their wage rates are substantially lower), or that labour productivity has not increased (it has significantly). The problem is that they are stuck in the manufacturing goods also produced by many other countries, especially the low-wage countries. Reducing wages would not solve the problem. What would an across-the-board reduction in nominal wages of 20%–30% achieve? The most obvious effect would be a very significant compression of demand. But would this measure restore competitiveness? We argue that it would not allow many firms to compete with German firms, which export a different basket, and in all likelihood it will not be enough to be able to compete with China’s wages." -VoxEU

This is more confirmation of the point that competition for capital along varying economies transfers market shares to economies which demand less labor compensation. This same process depresses the average for this and other standards across the board.

HT: Yves Smith at Naked Capitalism

Marx, wrong on one count

One of the preeminent aspects of Marxism is the conflict between the capitalist, who owns the means of production, and the producer, who is represented by the working class that executes the labor required to bring the commodity-value to the table. It is precisely this conflict of interests, the competition for the value this operation provides, that leads to working-class upheavals across the globe.


Marx noted the upheavals in his day, and suspected that a new class would soon rule over the means of production once these conflicts were resolved. In terms of the shifting of value to the hands of the working class, this indeed occurred across the globe during the innovation and industrialization of many of the high-infrastructure  societies of today - a feat that the expanded employment of labor helped accomplish. This expansion of employment has helped (or is helping) create an high rate of value-exchange: when high-consumption wages (lower class wages go primarily to consumption) are a large percent of income and total value('currency'), a greater sum of money returns to the consumer to augment aggregate demand.

Libyan Oil and Consumer Demand

Auerback makes a few critical points in his recent article,The Economic Policy Behind Intervention in Libya Chases Its Own Tail (HT: Naked Capitalism). Forgive the banal usage of "we" to associate oneself with the ruling clique, and we have a viable polemic against US fiscal and foreign policy:

"We seem to have developed a very basic rule of thumb when it comes to these wars of choice: if an insurgency threatens oil supplies directly or indirectly, we move. If it doesn’t, we don’t. Hence Syria can kill thousands of insurgents (as they did in the early 1980s) and we do nothing. Yemen doesn’t have oil facilities; so we do nothing. In Bahrain we have a huge base and unrest has repercussions for the Shiite part of Saudi Arabia where the oil is. We move via the Saudis. In Libya there is oil. Again, we moved.

Why Marx Was Right - and Terry Eagleton was wrong

 Update: It turns out my criticism of Eagleton was too rash - read Joseph Rebello for a vindication of Eagleton's quotes - with the context this time.

Marginal Revolution has a blurb criticizing Eagleton, and his new book, Why Marx Was Right. Cowen quotes a few unfortunate quotes, without condescending to analyze them (that's left to the reader, of course). But the quotes are wrong in their own right, and merely vindicate Marx, if not Eagleton:

"But the so-called socialist system had its achievements, too.  China and the Soviet Union dragged their citizens out of economic backwardness into the modern industrial world, at however horrific a human cost; and the cost was so steep partly because of the hostility of the capitalist West."

...

"Revolution is generally thought to be the opposite of democracy, as the work of sinister underground minorities out to subvert the will of the majority.  In fact, as a process by which men and women assume power over their own existence through popular councils and assemblies, it is a great deal more democratic than anything on offer at the moment.  The Bolsheviks had an impressive record of open controversy within their ranks, and the idea that they should rule the country as the only political party was no part of their original programme."

Perhaps better context may help Eagleton, but its deplorable inaccuracy stands on its own right.