It will be difficult to be persuaded to your way of thinking if in one post (#50) you state that real estate developers are producers and in another (#82) you (seem to) say that they are not. So which is it?

My questions to you have been skeptical but sincere. I am sorry that you think your system is so obvious that questions about whether a singer is a producer is “silly.”

So I will post this final set of remarks and anyone who wants to take it further can reach me through my website.

When it comes to the big topics like the end of the age of petroleum, it is obvious that there are essentially two real responses.

1) There is a business-as-usual response which says we are not actually running out of crude, that higher prices will cause more drilling and exploration, so eventually the markets will work as usually described.

2) There is the “crude is finite on finite planet” response which says that it matters little how many holes are drilled into an oil field, it doesn’t change how much crude is available. Therefore, if crude is running out, it makes sense to design and build a new infrastructure that will run on something else (the something else is usually described as hydrogen.)

Let’s call number (1) the Mad Max strategy because it is highly irresponsible gibberish. Let us call (2) the Invent, Design, and Build strategy (IDB). Further, let us assume that ethical humans with large frontal lobes are likely to flock to this second strategy.

It is obvious that an IDB strategy relies on the successful work of highly skilled producers. The question is, How can such a strategy be implemented if the society’s super-producers are lacking training, resources, and political / cultural support? The answer is, it cannot.

For example, this country decided that we wanted to clean up toxic waste sites before the toxins polluted drinking water. We passed a law called Superfund. 20 years later, we discover that virtually none of the Superfund sites have been fixed. Looking closely, we can see why. 93% of all Superfund money was spent on lawyers. Whatever social value lawyers may have, it is obvious they cannot solve IDB problems and even worse, they get in the way by diverting money that MUST go to IDB types into their own pockets.

We live in a society where lawyers have more status than engineers—to the point where lawyers actually get the money that should go to engineers. Why this is so is an interesting question.

It even shows up on this comment thread. Instead of discussing what sorts of problems can be addressed with an IDB strategy, I had to answer some really silly questions such as whether a singer was a “producer.” I was accused of catering to the “vanity” of the producer elites. Etc.

I am absolutely certain that it will be impossible to solve the big problems facing humanity if otherwise intelligent people waste time asking if singers are producers. It doesn’t matter. We can call singers producers of that will make you happy but it is clear that singers (or lawyers, financiers, or real estate developers) will not produce the nuts and bolts necessary to convert to a hydrogen economy.

I don’t see how this “long run real rate of return” is relevant here. Suppose I lend you a shovel that’s worth a million bucks and then take 80% of what you earned digging. Then my rate of return will be low, so what?

Is this arragement – that I own the shovel and hire you to dig – is this beneficial for both of us or not? Is it essential? Is there a better way? I think there is, namely: we could be both digging and earning 100% of what we produced. I may be wrong, but you haven’t demonstrated it so far.

If you don’t understand the concpet of rate of return, I suggest a quick Corporate Finance 101 might be helpful before you attempt to debate the pros and cons of capitalism.

Risk taking is not a rare virtue, thank goodness -otherwise there would have been no human progress.
But no-one is going to take a financial risk without a financial return. So you can lend money to the government on a more or less risk free basis at, say, a real interest rate of 3%.
Or you can invest in a riskier business, but of course you will require an addtional return over and above the 3% – an amount called a “risk premium.” Historically that total rate of return (risk free rate plus risk premium) has turned out to be around 6%.

You can think of that as being the return you receive on your capital once all the expenses of your business – including wages – have been met.
Very roughly speaking it is your level of profits divided by the amount of money you have invested to generate those profits.

Hardly a huge number, is it?

You and I and the rest of us will decide, like with everything else.

I won’t be digging the ditch on that basis

Of course you will, because you have to eat. It’s better than starving.

I have no idea what “the long run real rate of return” represents, how it relates to wages and what it has to do with any “risk taking”. If risk taking is such a rare virtue, why wouldn’t they give me a few billions and I’ll take all the risk for them. And they can take my low-risk job, I don’t mind.

“I lend you a shovel to dig a ditch and take 80% of what you earned digging – is this a good arrangement for both of us?”
Well I won’t be digging the ditch on that basis, and nor will anyone else.

The long run rate of real rate of return on capital in the 20th century in both the US and UK is around 6%.
Is that an unreasonable rate of return for risk taking?

I said before – I have nothing against markets, I agree that market is an efficient mechanism in many cases. ‘Market’ and ‘capitalism’ are different animals.

Also I have nothing against inequality. If JK Rowling is so much more talented and/or more lucky than other writers, she should be able to reap the benefits, up to a reasonable limit. ‘Inequality’ and ‘capitalism’ are not the same thing.

The problem with capitalism is different. Suppose I lend you a shovel to dig a ditch and take 80% of what you earned digging – is this a good arrangement for both of us? I this the best arrangement? Maybe it was in the past, maybe it still is, and maybe it always will be – this is the concept you should be defending, not JK Rowling’s billion.

Certainly not. But there are hundreds if not thousands wannabe Rowlings competing for our business. She happens to have had the right combination of luck and skill to have become extraordinarily successful. There are a similar numbers of wannabe golfers, and you could say the same of Tiger.

I fail to see how this is in any way a problem (perhaps you wish to regulate the earnings of authors or sportsmen) or a reflection on market efficiency. Indeed Rowling, and the “billionaire” example, is a perfect instance of the exception proving the rule.

To say that markets are on average highly efficient – and a far more successful way of allocating scarce resources than any other so far (I await the new ideas which the original post correctly identifies as missing) – is not to say that every single market is efficient at every point in time. But their is a strong tendency towards efficiency. Most firms earn no more than their cost of capital for most of their life. But many firms do earn high returns early in their life – that fact is both the incentive and reward for innovation – until their particular advantage is competed away or overtaken. A very small number of firms manage to earn abnormal returns for a longer period of time, and in general it is these which create the (exceptional) billionaires, and grab a lot of attention.

In any natural process there is a distribution of outcomes. The very small number of billionaires represent the extreme tail of a distribution of outcomes the mean of which is far more pedestrian.

It’s the amount that about 40,000 average people earn in a year, a town full of people.

And you are saying that for one person to accomulate this kind of money is as unremarkable as being a French citizen or have a second career?

Did you have any citizens of Alpha Centauri in that firm, by chance?

And yet they are not billionaires… Puzzling, isn’t it?

Let us examine a real firm, one that I have worked at (but don’t now). Some people there had PhDs, some people left school at the mimimum age. Some people worked part-time, others regularly clocked in over 60 hour weeks. One person had a second career as an Improv Player. Some people had children, some people at age 50 still hadn’t had children. Some people owned houses, some people didn’t. Some people had major health problems, others were running marathons. Only one person was a French citizen, but there were multiple Indian citizens. … Puzzling, isn’t it?

As for your definition of exploitation – most of the links on the first place didn’t define it. (I’m not sure about the article in what I think is French, the Indian Znet articles appear to be using the Marxian sense I used). And this link (linked by Google from your page) gives a wide range of different meanings for expoitation.

And yet they are not billionaires… Puzzling, isn’t it?

I don’t know that exploitation has an ordinary sense

Really?

Engels – and you know that the capitalist has inherently exploited someone, while the janitor never has, because?

I don’t know that exploitation has an ordinary sense, it seems to be a very loaded word that is that the users so seldom feel obliged to define. That’s why I reverted to my understanding of the Marxian context.