More Conflationism in the News


by Kevin Carson
http://c4ss.org/?p=9665

In a recent column, I referred to Auburn University Professor Roderick Long’s concept of “conflationism”:

“Left-conflationism is the error of treating the evils of existing corporatist capitalism as though they constituted an objection to a freed market. Right-conflationism is the error of treating the virtues of a freed market as though they constituted a justification of the evils of existing corporatist capitalism.”

In a recent interview on Reason.tv, Veronique de Rugy of George Mason University’s Mercatus Center, committed the latter fallacy of right-conflationism. She criticized the Occupy movement for focusing its outrage on the 1% richest Americans, whose wealth (she said) is not gained at the expense of the 99% — but rather from providing goods and services that people want to consume.

This is a fundamental non-sequitur. By definition, any economic transaction — no matter how monopolistic — must provide a good or service that someone wants to consume. A man who sells glasses of water in the middle of the desert for a quit-claim on your life savings is, obviously, providing something someone wants — and wants quite desperately. When a robber points a gun at me and says ‘Your money or your life,’ I’m paying for something of immense value to me.

So what? That by no means rules out the possibility that one person is also, at the same time, benefiting at someone else’s expense. Consider how monopoly pricing works:

In a free market, the value of goods is determined by the marginal utility of the last unit produced; with no entry barriers, new entrants will compete to supply needs until the marginal utility of the last unit produced to the buyer equals the marginal cost of production. To translate it from the language of marginalist economics to that of Ricardo, a competitive marketplace normally drives the price of reproducible goods toward the cost of production.

A monopoly short-circuits this process: Absent competition, the seller can target the price so that the utility is just barely worth it to the buyer after paying the price, with the seller pocketing the difference between a sales price targeted to the buyer’s ability to pay and the marginal cost of production.

And for reproducible goods, the latter state of affairs only holds true when there are barriers to entry enforced by the state. Such entry barriers include absentee ownership of vacant and unimproved land, by which the landlord is able to extract rents from the rightful first owner and thus leave the occupant barely enough utility from living or working on the land to make the transaction worthwhile. They include ‘intellectual property,’ by which Microsoft can price at $200 a software CD that cost $5 to make, or Pfizer can mark up a patented drug by 2000%.

Like the robber in the example above, the landlord, Microsoft and Pfizer, with the help of the state, points a gun at you and says “Pay up, and I’ll let you keep — not your life — but some portion of the utility from your land, your software, your medicine. You will either work twice as hard to feed me in addition to yourself, or you will not eat at all.”

In our economy, in fact, the largest concentrations of wealth are earned through entry barriers of this kind. The super-rich have, indeed, gotten rich at the expense of the 99%. They have no more earned their wealth through an uncoerced exchange of value for value with equals, than did the medieval lord of 700 years ago who compelled the peasants to work half the week on his manorial domain as a condition of working their own lands during the other half.

De Rugy’s claim is really an enthymeme — an incomplete syllogism in which one of the premises is unstated. The enthymeme is usually a rhetorical device in which the speaker appeals to the unstated prejudices of the audience. The unstated premise is an unexamined cultural assumption shared by the audience, which is left unstated because to state it might invite critical examination. Her enthymeme is as follows:

Major premise: In a free market, wealth comes from providing useful goods and services, and not at other people’s expense. Minor premise (unstated): The system we live in now is a free market. Conclusion: The people who got rich under our present system did not do so at anyone else’s expense.

The unstated minor premise, that the present system of corporate capitalism is a free market, takes us back to right-conflationism. De Rugy is defending actually existing corporate capitalism, and the wealth obtained under it, as if it were a free market.

That’s a premise that, if it were explicitly stated and held up for critical examination, would not bear much scrutiny.

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11 responses to “More Conflationism in the News

  1. So, Microsoft, in creating a software operating system and then charging for it and Pfizer, in developing medicines and then charging for them are the same as ‘the medieval lord of 700 years ago’

    To repeat your analogy is to show how false it is.

  2. Microsoft did not “create an operating system” (MS-DOS).

    They annexed Gary Kildall’s CP/M via Seattle Computer Products.

    Tony

  3. Unforunately, Carson makes his usual error of (a) first identifying that the economy is not entirely free and then (b) assuming that none of it is.

    Look Kevin, everyone in libertarianism agrees that the market is not currently free. The point is, it is partially free. The impossible bit is figuring out just how deviant from a free market it is. You can’t just presume that everyone who has ever made so much as a penny has done so unjustly. It simply isn’t true.

    Oh, and you’re doing that objective value fallacy again. The “costs of production” aren’t the objective value Kevin. Get into the right century, for God’s sake man. Look at this rubbish-

    They include ‘intellectual property,’ by which Microsoft can price at $200 a software CD that cost $5 to make, or Pfizer can mark up a patented drug by 2000%.

    The Labour Theory Of Value has been dead since the mid 19th century. Get over it.

  4. “The Labour Theory Of Value has been dead since the mid 19th century. Get over it.”

    The assertion to which you are responding has nothing whatsoever to do with the Labor Theory of Value.

    Carson’s claim is that the reason Microsoft can mark up a $5 CD by $195, or a $1 pill by $19, is that they receive a state-granted monopoly on the sale of those CDs and those pills. Otherwise, they’d have to compete with other makers who offer the CDs for $6.99 and the pills for $1.49.

  5. Kevin is presuming that the “just price” of a CD is its production costs (and as with most such theorists forgetting capital costs, marketing costs, blah blah but that’s another issue). Thomas, I’ve read his writings, it’s not like I’m just going on this article. He’s got value theory back to front. We’ve been over this enough times haven’t we?

    The just price of a product is its costs of production, which in turn are the labour costs, in Carson’s philosophy.

    Separately, on the point you make; sure, without property rights, other manufacturers could manufacture cheaper CDs, because they haven’t paid the capital costs of writing the software. Which is why as a society we choose to have intellectual property rights, so that software developers and other brainworkers can get paid for their work.

    • IanB,

      Yes, I know that Kevin is a Labor Theory of Value advocate. I’m not arguing that.

      I’m arguing that the discrete claim in question doesn’t stand or fall with the Labor Theory of Value.

      Nor does the claim stand or fall with the question of whether “intellectual property” is or is not a justifiable concept with respect to property rights.

      It’s a simple factual claim: If anyone could produce and sell Windows CDs, Microsoft couldn’t charge $200 for Windows CDs and expect to turn a profit. If anyone could produce this or that chemical compound, Pfizer couldn’t charge $20 per pill for that compound.

  6. Yes Thomas, you can drive the price of anything down to zero by abolishing property rights. We are all agreed on that. If there were no right for a man to monopolise his own labour, nobody could earn a wage. Somebody else could simply take his labour. We call this system, “slavery”. Likewise, if there were no land property rights, anyone could enter my house and live here rent free, and I could not stop them. Your point is effectively a tautology.

    The whole problem with the anti-IP rhetoric, is that it only (deliberately?) looks at part of the effects of the proposed abolition of rights. Of course it would make things cheaper. If they existed at all, that is. And that’s the problem. If you can’t sell your labour or the fruits thereof, there is no point in labouring. So everyone gets unrestricted access to… nothing. Zip. Zilch. Nada.

    I think I’ve mentioned, I am a comic artist. I can afford to draw comics because I can sell comics. If I can’t sell comics, I can’t draw comics. This is basic market economics 101. No income==no production. The only alternative to it is some form of communism, with the State providing me with a subsistence (and telling me what to draw).

    You and your pals can call for the abolition of markets if you like. But do be clear that that is what you are calling for.

    • IanB,

      Let me try this one more time: I was arguing neither for or against rights in “intellectual property.”

      I was simply pointing out that Carson’s specific statement is true, and that its truth is not contingent upon the validity of the Labor Theory of Value.

      It’s also not contingent upon whether or not “intellectual property” is a valid concept. Monopolies on specific “intellectual properties” increase the prices which can be charged for those properties, and the absence of said monopolies bring that price down, regardless of whether or not said monopolies should exist.

  7. Thomas, let’s go round the mulberry bush again.

    Firstly, Kevin’s arguing that the price of CD’s is supposed to be their production cost, which is an LTV argument. The second point is that IP “monopolies” are only a monopoly in the sense that any property right is a monopoly. So it’s tautological that prices would fall- to zero- without property rights in anything. Because if you have no property right, you cannot buy or sell anything.

    The word “monopoly” was devised to describe schemes in which governments made sectorial cartels. Guilds, and the like. “You cannot be a brewer unless you get a licence from the local brewer’s guild” or “you cannot trade with India because we have awarded that monopoly to the East India Company”. The word is simply wrong and useless when applied to the particular fruits of a particular labour. Or come to that, to land, which Georgists (and Carson) insist is a “monopoly” too, because a homeowner has exclusive rights to his property. It’s simply wrong to use the word this way.

    If Microsoft (and perhaps some few other companies) were licensed by the government to produce software, and nobody else was allowed to produce software, that would be a monopoly. But that is not the case. They are simply granted property rights over what they have themselves created, as with any market property right. Anyone is legally entitled to write and distribute an operating system- you, me, the Linux creators, anyone.

    IP is not monopoly. It is a property right. There is a fundamental difference.

    • “Thomas, let’s go round the mulberry bush again.”

      I don’t see the point in doing so. If London Bridge falls down tomorrow, you’ll blame the Labor Theory of Value; and while over time I’ve become an “intellectual property” atheist, I’m not really so militant about it that I feel any compulsion to burst the bubble of your favored superstition.

  8. Isn’t London Bridge now at Lake Havasu?

    Tony