There is no such thing as unearned income

[Kulindahr]

4. I think this follows from both my original premise and your argument. I've seen it called synergy, the sort of intangible result of us all working together, income for which doesn't come to us but accrues to the providers of capital, not due to any effort of theirs but just because that's how the system is structured.
To me this is just a question of distribution. In my mind it is clear to me that there are social goods to which we are all entitled. And we are entitled to a dividend from them.

My thoughts are above.

The key question here would be what the bass of that entitlement is. I can go with the synergy idea -- which, BTW, is espoused by Elizabeth Warren albeit a bit sloppily -- because it recognizes that the whole is more than the sum of its parts, i.e. there is wealth produced by the fact that we all work together that doesn't accrue to any of those workers individually. That wealth has to appear somewhere, and the way our system is set up, it appears in the returns on capital.

From that point I think argument could be made that, for example, the Waltons of Walmart are actually stealing from their workers, since they live in luxury while performing no actual labor while their workers tend to be destitute, but also that a tax on purely financial transactions to provide for basic needs for everyone is legitimate, because it takes the wealth produced by synergy and delivers it back to everyone. It serves also as a benefit to the production of wealth, because those with secure housing and good health are more productive.

 

[Benvolio]

A government decides a certain business -- let's say, one lifting passengers into orbit to a space station -- needs to exist. They vote money to get such a company established, and lo! it succeeds.

Are you claiming that because government is involved, there's no return on capital?

No, the point is that some element of unearned income from invested capital is an unavoidable contribution to employment and production, and cannot be equated with theft, which was your original point.

 

[Kulindahr]

Well, I'd not lose sight of the ideal as we consider the reality. And I do not think the scale really changes anything. I hang a fair bit of my analysis and my goals for society on this part:



I think our societies are vast, wealthy, and that they contain assets (physical, legal, intellectual) that contribute incredibly to the individual prosperity of those within it, and to the accumulation of even more of those social assets, and that the whole thing is owned by anyone born into that society.

I also think that we underestimate the value of those assets, and we give their advantages far too freely to private individuals without exacting a sufficient return. I think that improved equality will come from two things:
1) valuing those Assets of the Commons much higher and extracting a higher dividend on behalf of every individual whenever a private company uses them to generate profits of its own, and
2) valuing our own labour much higher when we participate in the private economy by negotiating for higher wages or joining unions that will. There is every reason for some people to earn more than others in a free economy. But there is no reason for most people to undervalue the work they do by probably an order of magnitude.

When you begin talking about the Assets of the Commons, a whole new issue arises, namely the concept of private property -- but let's not go there in this thread.

 

[Kulindahr]

No, the point is that some element of unearned income from invested capital is an unavoidable contribution to employment and production, and cannot be equated with theft, which was your original point.

Now you're totally moved away from your claim about government. You haven't made any effort to show that you didn't engage in a false dichotomy.

 

[Benvolio]

Now you're totally moved away from your claim about government. You haven't made any effort to show that you didn't engage in a false dichotomy.

You have not shown any false dichotomy, but have only made the assertion.

 

[xbuzzerx]

You have not shown any false dichotomy, but have only made the assertion.

Since you have forgotten your own statement:

No, any privately owned business with emploees will involve some element of return on capital. The alternative is government ownership.

This clearly indicates your belief that only fully private business returns on capital, and the alternative is government ownership.

 

[Benvolio]

Since you have forgotten your own statement:



This clearly indicates your belief that only fully private business returns on capital, and the alternative is government ownership.

.?? You have omitted some words.

 

[xbuzzerx]

.?? You have omitted some words.

I did not alter your quote if that is what you are saying.

 

[Benvolio]

Since you have forgotten your own statement:



This clearly indicates your belief that only fully private business returns on capital, and the alternative is government ownership.

I do not understand the last sentence.
Mine would only be a false dichotomy if a meaningful third alternative were shown between private and government ownership, and it would only be meaningful if it did not involve some element of " unearned income".

 

[Kulindahr]

Since you have forgotten your own statement:



This clearly indicates your belief that only fully private business returns on capital, and the alternative is government ownership.

It also shows the false dichotomy that things can only be owned by private business or by government.

 

[Kulindahr]

I do not understand the last sentence.
Mine would only be a false dichotomy if a meaningful third alternative were shown between private and government ownership, and it would only be meaningful if it did not involve some element of " unearned income".

My insurance comes through a "meaningful third alternative": it is not a capitalist business, and it is not government. It is a fraternal benefit insurance company for church members and their families.

I also used to shop at a store that wasn't capitalistic and wasn't government, it was a true co-op.

 

[Benvolio]

My insurance comes through a "meaningful third alternative": it is not a capitalist business, and it is not government. It is a fraternal benefit insurance company for church members and their families.

I also used to shop at a store that wasn't capitalistic and wasn't government, it was a true co-op.

I have been a member of a fraternal benefit insurance company for many years and my brother was a VP until retirement. They are exempt from federal taxes, but they invest premium income in bonds, mortgages, etc and own an building and rent office space. They pay dividends in the form of additional paid up insurance. So yes, they are a capitalist company and are deeply involved in investing for and collecting unearned income. If they could not invest in collect interest, they could not provide the insurance they do, since operating expenses would eat into the premiums collected.
Co-ops are corporations which sell stock to members and pay premiums in the form of credits on purchases. Part of the credits come from sales to non members.
More importantly, nothing is stopping anyone from using these forms for other businesses. But there is no incentive for anyone to start such a business. Without the unearned income you decry, there is little incentive for anyone to do anything other than a 9 to 5 job.

 

[opinterph]

Proposition: any time wealth is created, it was created by someone's effort; wealth cannot come into existence without such effort.

Perhaps it may be helpful to further explore the idea of wealth …

I think wealth involves the possession of something that other people consider valuable. If I own a field and leave it idle long enough, trees will eventually take root and grow to a sufficient size that the wood of which they are primarily composed becomes useful for making or building things.

I imagine the field itself also has an intrinsic value that can be associated with its usefulness, but the wood becomes an added value that came about without the addition of someone’s effort. Because the trees are part of the field and because I own the field, my wealth has effectively increased.


(Note: The concept of private property is not essential to this illustration, though ownership (or possession, or control) may well be significant to a discussion of wealth.)

 

[Benvolio]

Perhaps it may be helpful to further explore the idea of wealth …

I think wealth involves the possession of something that other people consider valuable. If I own a field and leave it idle long enough, trees will eventually take root and grow to a sufficient size that the wood of which they are primarily composed becomes useful for making or building things.

I imagine the field itself also has an intrinsic value that can be associated with its usefulness, but the wood becomes an added value that came about without the addition of someone’s effort. Because the trees are part of the field and because I own the field, my wealth has effectively increased.


(Note: The concept of private property is not essential to this illustration, though ownership (or possession, or control) may well be significant to a discussion of wealth.)

I think Marx's answer would be that others would work to get the wood, or more likely, pay money which, in turn
resulted from someone's labor.

 

[opinterph]

I think Marx's answer would be that others would work to get the wood, or more likely, pay money which, in turn resulted from someone's labor.

The point I'm attempting to make is that wealth creation does not necessarily involve labor. In my example, harvesting the resources of the field would certainly require labor/effort, but the added value represented by the wood came about without an element of labor and constitutes wealth – whether consumed or held in reserve.

 

[Benvolio]

I agree that not all wealth is created.

 

[opinterph]

I agree that not all wealth is created.

Cool. Maybe we are making progress. (I will be interested to learn if Kulindahr will concede that same point.)


Now let’s revisit Return On Investment.

Operating a business involves labor by the person(s) doing the operating, which by most definitions is a source of earned income.

Yes, but part of the profit is a return on invested capital.

How much ROI will I derive by investing in a widget-producing machine if I store it idle in my garage?

What is the most important influence on ROI between using the machine (capital investment) in a business enterprise and holding it in reserve?

And more importantly, is it reasonable to regard the widget-producing machine itself (e.g. resource) as a form of wealth?

Howard Roark laughed.

He stood naked at the edge of a cliff …

He looked at the granite. To be cut, he thought, and made into walls. He looked at a tree. To be split and made into rafters. He looked at a streak of rust on the stone and thought of iron ore under the ground. To be melted and to emerge as girders against the sky.

These rocks, he thought, are here for me; waiting for the drill, the dynamite and my voice; waiting to be split, ripped, pounded, reborn; waiting for the shape my hands will give them.

[Ayn Rand Institute]

 

[Benvolio]

Cool. Maybe we are making progress. (I will be interested to learn if Kulindahr will concede that same point.)


Now let’s revisit Return On Investment.



How much ROI will I derive by investing in a widget-producing machine if I store it idle in my garage?

What is the most important influence on ROI between using the machine (capital investment) in a business enterprise and holding it in reserve?

And more importantly, is it reasonable to regard the widget-producing machine itself (e.g. resource) as a form of wealth?

1. No return on the investment in the machine.
2. Using it will raise the total return on total investment in the business assuming the machine is not the total. But letting it sit idle eliminates that portion of the return and reduces the percentage of return of investment of the entire firm. So the biggest difference in percentage of return results from it being idle.
3. Yes the machine is wealth.

 

[Kulindahr]

Perhaps it may be helpful to further explore the idea of wealth …

I think wealth involves the possession of something that other people consider valuable. If I own a field and leave it idle long enough, trees will eventually take root and grow to a sufficient size that the wood of which they are primarily composed becomes useful for making or building things.

I imagine the field itself also has an intrinsic value that can be associated with its usefulness, but the wood becomes an added value that came about without the addition of someone’s effort. Because the trees are part of the field and because I own the field, my wealth has effectively increased.


(Note: The concept of private property is not essential to this illustration, though ownership (or possession, or control) may well be significant to a discussion of wealth.)

Under some systems of private property, by leaving the land sitting unused you lose ownership, so I think the concept of private property is core to this illustration -- or at least the concept of private real estate.

Even so, it's an interesting proposition. The same concept would hold if I had an office building with a natural roof, and trees began growing on it. The building is unquestionably mine, so the trees would be unquestionably mine. There may be a reasonable comparison to investment there; I'm going to have to ponder it.

 

[Kulindahr]

I think Marx's answer would be that others would work to get the wood, or more likely, pay money which, in turn
resulted from someone's labor.

But that labor isn't necessary to the change in wealth -- the mere presence of the trees has changed the value of the land parcel. As I said, it's an interesting proposition.