Yesterday we looked at the strange case of the man who wouldn’t take yes for an answer, and who kept insisting we didn’t know the difference between speculation and investment because many people today confuse speculation and investment. Today we go one step further and look at a second case in the examples of the dishonest way to argue.
|One the one hand you have labor, on the other, capital. You don't have three hands.|
As we might expect, case number two also involved a question of definition. This time, however, the trick was a double error: 1) the commentator changed the definition of capital from what capital is, 2) to what a capitalist does. It can sometimes (not always) make sense to change the definition of capital from what it is (in the Kelsonian — as in "developed by Louis O. Kelso" — system the non-human factor of production; labor is the human factor), to what it does (a thing that produces a marketable good or service) — both often end up the same place, even though the definitions aren’t exactly the same — but it makes no sense at all to declare that Kelso’s definition of capital is wrong because of what a capitalist does with capital, or what a capitalist may erroneously call capital.
Come to think of it, that’s four errors all in one. Anyway, what the commentator said was (and this is an exact quote),
Doesn’t anyone see what’s wrong about Kelso calling land “capital.” A so-called capitalist could claim ownership of part of the earth, ocean, atmosphere, or even the sun, and then claim no one has rights to share in the unearned income derived from them, except himself and maybe those working for his corporation.
Do you see how the commentator shifted the question of Kelso’s definition of capital (which he carefully refrained from giving), to his own definition of capitalist? He then mixed the labor theory of value — “unearned income” is a laboristic concept that denies the legitimacy of income derived from capital — into a system based on the principle that both labor and capital produce. As a presumed clincher, he then threw in a ludicrous reductio ad absurdum by positing a capitalist who claims ownership of the sun, and denies others the right to any income the capitalist derives from their use.
|What this country doesn't need is another two-bit economist.|
We’re guessing that this commentator is a follower of Henry George who doesn’t understand even George’s flawed system. George never denied the legitimacy of income derived from the use of “the earth, ocean, atmosphere, or even the sun.” What George claimed is that any income derived from the non-use of such things was illegitimate because they did not — in his theory — contribute to production. (George modified David Ricardo’s muddled classification of land from a “cost-free” factor of production/not a factor of production at all — Ricardo’s baffling “detour” that allowed him to have his cake and eat it, too — to “not a factor of production” because no labor was involved in its creation.)
Thus — according to George — if you till the land, fish in the ocean, pump air into a blast furnace, or collect sunlight to power solar cells, you are fully entitled to any and all income that activity generates, having mixed your labor with “the gratuitous offerings of nature.” What you are not entitled to (again according to George) is to take a fee (rent) for the use of that land, ocean, atmosphere, or sunlight by somebody else, unless you are the State, because these things belong to everyone in common. You can exclude others from the use of these things and derive just income from that exclusive use, but you cannot take a fee for their use by somebody else.
|Ricardo: "Land is a cost-free factor of production, except when it isn't."|
The commentator’s comments, however, avoided the issue that he himself raised: Why did Kelso classify land as capital? We gave the fellow a link to the Just Third Way Glossary, in which “capital” is defined as follows:
Capital. In binary economics, all non-human factors of production, including land, plant and equipment, advanced technological tools, rentable space, physical infrastructure, and intangibles, such as patents, copyrights and advanced management systems.
In the Kelsonian system, there are two factors of production: the human (labor) and the non-human (capital). Anything that is not human labor is, ipso facto, capital.
The real question here, then, is not why Kelso grouped land and natural resources under capital, but whether land and natural resources are a factor of production. It is impossible to determine from the commentator’s remarks whether he objected to 1) land being counted as a factor of production, 2) integrating land with (other) capital instead of separating it into the “land, labor, and capital” of the classical economists, or 3) that because human labor is presumably not mixed with “the gratuitous offerings of nature” everything produced by the use of such things is “unearned.”
|Well, that just made everything perfectly clear, didn't it?|
Adding insult to injury, the commentator responded to the link to the definition of capital by declaring,
Clear, concise and unambiguous definitions are very important. Often a legal conflict can be resolved simply by clearly defining terms, asking each party, “What exactly do you mean by that?”. On the other hand, so much anger and frustration results when people are trying to communicate, using the same or similar words, but each intends something different by using the word or phrase.
We’re not entirely clear on how much more clear we could be in defining capital as the non-human factor of production and — since land is not human — classifying land as capital. The commentator’s stunningly ambiguous remarks did not even clarify his own question, much less tell us where he stood so we could answer him with any hope of being understood.
Essentially, the commentator used a common rhetorical trick by claiming that we’re not being clear — not because we were not clear, but because he didn’t accept it — then shifted the ground to his set of principles, vaguely criticizing Kelso’s system in terms of a different, unrelated (and unspecified) system. He then shifted the definition from substance (what capital is) to form (what a capitalist does), in the process changing both the definition and the thing defined.
We’ll finish off this topic tomorrow. We hope.