Below are the 20 most recent journal entries recorded in skzbrust's LiveJournal:

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Friday, December 4th, 2009
12:58 am	I have something important to tell you To all writers, and especially TV writers, just thought you should know that the riff where someone says, “I have something important to tell you,” and then gets interrupted before being able to tell it, is now played out.  In fact, it was played out the first time it was used.  If your goal is to make me think, I guess it works; but what I think is, “Geez, what a lousy writer.” Maybe you can come up with some clever twist on it, where that is what happens, but it doesn’t seem to be what happens, so that the audience doesn’t realize that you’re pulling that stunt until the reveal.  If you can do that, fine.  If not, I think you ought to take that gimmick and put it into the bag next to woman-who-kicks-ass-because-her-kid-is-threatened and drop it into Lake Michigan; with all the pollution already there it’ll hardly be noticed. Thank you.  That is all. Originally published at Words Words Words. Please leave any comments there.
Thursday, December 3rd, 2009
8:39 pm	Crossposting works again Thanks to Adam Israel for fixing the problem that was preventing me from crossposting to LJ.  As I was holding off Wealth Of Nations posts until that worked again, you can blame him for their reappearance. Originally published at Words Words Words. Please leave any comments there.
Wednesday, December 2nd, 2009
7:58 pm	TWoN Book 4 Chapter 2 Here we begin what seems to be Smith’s major campaign: to prove that anything that restrains trade (with a very few exceptions) is bad for society as a whole.  The difficulty with this proposition appears in the very formulation: society “as a whole” consists of divisions whose interests are opposed to each other; thus to prove that something is bad for society “as a whole” is, to say the least, ambitious.  Let’s see how he does. This chapter focuses on laws that restrict the importation into a country of goods that can be produced in that country.  He makes the point, on page 349, that “The general industry of the society never can exceed what the capital of the society can employ.”  This is obviously true, though it is worth bearing in mind that this amount of capital is constantly changing–to be precise, it is generally growing–so we ought not to treat it as a fixed sum.  Further down the page, he observes that anyone with capital to invest is always looking for the most profitable way to invest it.  “But the study of his own advantage, naturally, or rather necessarily leads him to prefer that employment which is most advantageous to the society.”  He then goes on state that home-trade is more profitable than foreign trade of consumption, and that the latter is more profitable than the carrying trade (ie, investing in ships, rather than in their cargo). On page 350 he observes that those in the carrying trade, in order to have greater control over the goods they transport, tend to establish markets in their home ports.  “…and it is in this manner that every country which has any considerable share of the carrying trade, becomes always the emporium, or general market, for the goods of all the different countries whose trade it carries on.”  This makes sense; I wonder to what extent it is still true. Page 351: “But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value.”  And so each person attempts to maximize the profit of his capital.  “…he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of  his intention.”  And here we find the famous “invisible hand” which, I have no doubt, Mr. Smith would have preferred to amputate if he knew the use to which it would later be put. How true is it?  I think there is certainly an element of truth here–human beings are forced by their own self-interest to move in certain directions that will have a profound effect on the nature of their society; this is part of what Marx meant when he said, “Men make history, but not just as they please.”  I think Smith’s confusion comes, in part, from failing to understand the nature of the State as the servant of a definite class.  When he objects to government passing laws in the interest of manufacturers at the expense of  “society as a whole” he is not seeing that this government is, in fact, the representative of the manufacturers, and thus the laws in the interest of manufacturers are in fact a very part of that same “invisible hand” that he opposes to them. Page 353: “The industry of the society can augment only in proportion as its capital augments, and its capital can augment only in proportion to what can be gradually saved out of its revenue.”  Unless I’m missing something, he is observing that the development of capital comes from a portion of the surplus value created by production.  If so, it seems hard to argue with. My argument above, about Smith failing to understand the nature of the State(which, really, he couldn’t given that he lived in a period where the State was in the process of transition), is bolstered by a comment on 358, comparing the country gentlemen to the manufacturers: “Country gentlemen and farmers, dispersed in different parts of the country, cannot so easily combine as merchants and manufacturers, who being collected into towns, and accustomed to that exclusive corporation spirit which prevails in them, naturally endeavor to obtain against all their countrymen, the same exclusive privilege which they generally possess against the inhabitants of their respective towns.  They accordingly seem to have been the original inventors of those restraints upon the importation of foreign good which secure to them the monopoly of the home-market.”  The point is, after cutting off the head of Charles I and politically emasculating Charles  II (in spite of promises to the contrary), the bourgeoisie had gone a long way toward taking power from the landed aristocracy.  To be sure, not fully: the corn-laws weren’t settled for most of another century, and the House of Lords retained some power even later than that; but the balance had been tipped. On page 361-62 he contends that taxes on the necessities of life, by raising the cost of labor, raise the cost of all commodities.  He is correct, I think, in objecting to taxes upon necessities of life because they hurt the most those who can least afford them; but they do not raise the cost of labor; at least, not in the direct manner he implies.  The cost of labor is determined socially, in the constant struggle between employer and employee for how much of the surplus value each will get; it doesn’t simply rise (unfortunately!) as the cost of living rises. I rather enjoyed seeing M. Colbert discussed on page 364, as he’s in important character in The Vicomte de Bragalonne by Dumas. Also delightful and interesting is this comment on 364-365: “To judge whether such retaliations are likely to produce such an effect, does not, perhaps, belong so much to the science of the legislator, whose deliberations ought to be governed by general principles which are always the same, as to the skill of that insidious and crafty animal, vulgarly called a stateman or politician, whose councils are directed by the momentary fluctuations of affairs.”  Now there is a distinction I’ve never come across before.  I wonder if, at one time, there was truth in it. On page 367 he compares the habits of the soldier with those of the manufacturer (by which I believe he means laborer in this context), which ties in nicely to some of my own theories about peace-time or professional soldiers, but I don’t think has anything to do with this investigation. Going back to my earlier criticism of Smith, I have to mitigate it at least somewhat because he, himself, clearly recognizes it to at least some degree.  On page 368: “To expect, indeed, that freedom of trade should ever be entirely restored in Great Britain, is as absurd as to expect that an Oceana or Utopia should ever be established in it.  Not only the prejudices of the public, but what is much more unconquerable, the private interests of many individuals, irresistibly oppose it.”  True; and it also goes a long way toward undermining the latter-day beliefs (not Smith’s) about the “invisible hand.”   It leaves open the question of whether that mythical beast, completely free trade, is even something to strive for.  In my opinion, it is silly to even address the question before defining what “completely free trade” even means.  It would seem to mean free from interference–but doesn’t every individual “interfere” with free trade according to his own needs and to the extent of his influence?  If what is being traded is private property, then this implies a State controlled by the property owners (there can be no private property without a State to define and defend it), and how can there by a State controlled by property owners without it exerting it’s influence in their behalf; it is as absurd as to suggest that a fish, in order to preserve it’s body of water, refrain from swimming. Originally published at Words Words Words. Please leave any comments there.
Friday, November 27th, 2009
3:47 pm	Tiassa Update It’s been pointed out to me that I’ve been slacking off on giving progress reports. Tiassa is being difficult.  Between conversations with Reesa and with Neil, I’ve been convinced to try something a bit challenging.  I think it’s going to be really cool if it works, but at the moment I’m beating my head against it about halfway through.  Judging by past experience, I imagine in a week or so things will fall into place and I’ll be moving forward. Originally published at Words Words Words. Please leave any comments there.
Tuesday, November 24th, 2009
9:29 pm	TWoN Book 4 Chapter 1 Page 326: “That wealth consists in money, or in gold and silver, is a popular notion which naturally arises from the double function of money, as the instrument of commerce, as well as the measure of value.”  In fact, according to Smith, wealth of the individual consists in what can be purchased for money, and for a nation in the total commodity production of that country. On page 327 he discusses how the Tartars, wealth consisted of cattle as among the Spaniards it consisted of gold and silver.  “Of the two, the Tartar notion, perhaps, was the nearest to the truth.” He then spends a fair bit of time on reasons why it is counterproductive for a nation to prohibit the exportation of specie.  He does this, mostly, by dismantling the arguments in favor of such prohibitions.  Then he goes into foreign trade, and how it is obvious that such trade enriches the country, but says this is only true insofar as the country is producing more of a given commodity than it can consume, which again seems reasonable, and once again hammers at the need of capitalism in general and the market of any nation in particular to constantly expand. Page 332: “The quantity of every commodity which human industry can either purchase or produce, naturally regulates itself in every country according to the effectual demand, or according to the demand of those who are willing to pay the whole rent, labor and profits which must be paid in order to prepare and bring it to market.”  Note that, here, transportation is not included as part of the price, which in my opinion is correct. Page 334:  “If the materials of manufacture are wanted, industry must stop.  If provisions are wanted, the people must starve.  But if money is wanted, barter will supply its place, though with a good deal of inconveniency…Upon every account, therefore, the attention of government never was unnecessarily employed, as when directed to watch over the preservation or increase of the quantity of money in any country….Money, like wine, must always be scarce with those who have neither wherewithal to buy it, nor credit to borrow it.” Page 335: “When the profits of trade happen to be greater than ordinary, over-trading becomes a general error both among great and small dealers.”  And, “Money, no doubt, makes always a part of the national capital; but it has already been shown that it generally makes but a small part, and always the most unprofitable part of it.” Page 336: “And though goods do not always draw money so readily as money draws goods, in the long-run they draw it more necessarily than even it draws them…The man who buys, does not always mean to sell again, but frequently to use or to consume; whereas he who sells, always means to buy again.”  A country needs no more gold and silver than is required to circulate commodities, plus the small amount used for decorative purposes.  “…to attempt to increase the wealth of any country, either by introducing or by detaining it an unnecessary quantity of gold and silver, is as absurd as it would be to attempt to increase the good cheer of private families, but obliging them to keep an unnecessary number of kitchen utensils.” Page 341: “The transportation of commodities, when properly suited to the market, is always attended with a considerable profit; whereas that of gold and silver is scarce ever attended with any.” Further down, speaking of international trade, we find the interesting remark: “This bullion, as it circulates among different commercial countries in the same manner as the national coin circulates in every particular country, may be considered as the money of the great mercantile republic.”  True in some sense, but it is worth noting that this bullion is, at all times, privately owned; thus a fundamental contradiction of capitalism, between private ownership and social  use, even applies within the field of trade. Page 342: “[Foreign trade] carries out that surplus part of the produce of their land and labor for which there is no demand among them, and brings back in return for it something else for which there is a demand.” Page 343-4: “It is not by importation of gold and silver that the discovery of America has enriched Europe” but by the opening of new markets, and the expansion of the amount of raw produce.  “By opening a new and inexhaustible (!) market to all the commodities of Europe, it gave occasion to new divisions of labor and improvement of art, which, in the narrow circle of the ancient commerce, could never have taken place for want of a market to take off the greater part of their produce.  The productive powers of labor were improved…” Page 344: Just want to note in passing: “But rich and civilized nations can always exchange to a much greater value with one another, than with savages and barbarians.” Originally published at Words Words Words. Please leave any comments there.
Friday, November 13th, 2009
2:28 pm	New blog post So, it's starting to look as if the automatic cross-posting from my blog to LJ is never going to be fixed. For now, I've decided to use a BFMI approach. New blog post here. Any discussion should take place there. (7 Comments |Comment on this)
Tuesday, August 11th, 2009
6:32 pm	Wordpress Help?       I'm still not having any luck getting my blog entries to show up here on LJ.  sleary had a suggestion for changing the crossposting plugin, which we tried, but no good.  I'm still getting the message "Something went wrong - -32300 : transport error - HTTP status code was not 200." Anyone know wordpress? (14 Comments |Comment on this)
Wednesday, July 22nd, 2009
10:28 am	Texas Wisdom #7 “When I said you was s’posed to become one with the duck before you pull the trigger, I didn’t mean you was s’posed to shoot yourself.” – Billy-Bob Gautama Originally published at Words Words Words. Please leave any comments there.
Friday, July 17th, 2009
10:49 pm	Words Feed problem Apparently, my last several posts from my blog, Words Words Words, have not been appearing here--getting some sort of weird transport error.  Until we get this figured out, the RSS feed is still working at least. (9 Comments |Comment on this)
Sunday, July 5th, 2009
11:13 am	TWoN Book 2 Chapter 3 This chapter deals with the accumulation of capital.  The second half of the chapter isn’t especially interesting to me, as it concerns itself with the way an individual might spend his capital (luxeries or production, and the kind of luxeries) and the effect this has on the capital of the nation.  Today, the issue is much more the degree of concentration of wealth in a few hands, and much less whether those with wealth spend it on feasts or expensive trinkets. The first half of the chapter is more interesting in terms of the economic laws.  On page 270 he writes: “There is one sort of labor which adds to the value of the subject upon which it is bestowed: there is another which has no such effect.”  In the first category he includes farmers and manufacturers; in the second servants.  Later, he implies this also includes opera-singers, opera-dancers, lawyers, churchmen, &c. “A man grows rich by employing a multitude of manufacturers: he grows poor by maintaining a multitude of servants.”  In Marxist terms, the latter are not performing labor because they are not adding value to a commodity; but I think Smith’s distinctions make sense; in any case, both Marx and Smith arrived at the same place in terms of use of capital to create value.  It is interesting that Smith ignores the profit made by, for example, the owner of the opera company by employing singers and dancers; apparently to him this does not constitute value, though clearly it does increase capital. Further down on 270 he speaks of labor invested in machinery as labor stocked up and stored against later use.  This is profound, and helps to understand why machinery cannot, itself, increase the value of a commoodity, but only transfer it.  “That subject, or what is the same thing, the price of that subject, can afterwards, if necessary, put into motion a quantity of labor equal to that which had originally produced it.”  This is well known in physics, and seems to also apply to economics: machines can store, transfer, or alter the form of energy (or work, or labor), but cannot create it.  Where we depart from physics is that machinery can multiply the effect of labor by increasing its efficiency, but this is still qualitatively different from creating it. Speaking again of lawyers, clergymen, prostitutes, and similar laborours: “Like the declamation of the actor, the harrangue of the orator, or the tune of the musician, the work of all of them perishes in the very instant of production.”  This has changed because of the improvement in technology to preserve information: now, a singer is able to add value to a commodity: a CD or DVD.  But even if the case has changed, his method is spot on.  (Sidenote: One might consider that pornographic film and video has changed some forms of prostitution from unproductive to productive labor; I wonder what Smith would say?) Page 273: “The proportion, therefore, between the productive and unproductive hands, depends very much in every country upon the proportion between that part of the annual produce which, as soon as it becomes either from the ground or from the hands of the productive laborers, is destined for constituting a revenue, either as rent, or as profit.  This proportion is very different in rich from what it is in poor countries.” This is very important in a couple of ways.  First, the difference between rich and poor countries consists in several things, but most importantly on the cultural level–by which I mean, specifically, the technological level: how productive is labor in that country?  To what extent can labor be multiplied?  The other interesting thing that came to mind is that it struck me, when he spoke of rent and profit, that is often treating those two things in the same way.  It is not so big a leap after all from Smith’s saying that ground-rent is a division of value (along with wages and profit) to saying that ground-rent and profit are among the ways that suprlus value is divided. Page 281: “The value of consumable goods annually circulated within the society being greater, will require a greater quantity of money to circulate them.” Page 283: “Such people, as they themselves producing nothing, are all maintained by the produce of other men’s labor.”  He is not speaking here of capitalists, but, notwithstandind their useful (and, in a market economy, necessary) role in production, he could be. Page 284: “The productive powers of the same number of laborers cannot be increased, but in consequence either of some addition and improvement to those machiens and instruments which facilitate and abridge labor; or of a more proper division and distribution of employment.  In either case, addtional capital is almost always required.  It is by means of an additional capital only, that the undertaker of any work can either provide his workmen with better machinery, or make a more proper distribution of employment among them.”  Very nice!  That is, indeed, how a market economy works.  That’s why it is called capitalism. Originally published at Words Words Words. Please leave any comments there.
Saturday, July 4th, 2009
7:51 pm	Food discovery I got to have dinner with The Amazing Mris and her Merry Band, and she cooked, and I discovered that one can make something with paprika and saffron and it is very, very good.  I had never even thought of combining paprika and saffron. Yum. Originally published at Words Words Words. Please leave any comments there.
Friday, July 3rd, 2009
1:17 pm	Dark fantasy recommendations, please A friend just asked me to recommend some dark fantasy, and I realized that, with the exception of anything by Tim Powers, I don’t know much about it.  You can argue about what “Dark Fantasy” means, if you wish*, but also throw in some reading suggestions.  Thanks! *One friend recently explained, “If I like it, it’s dark fantasy, if I don’t like it, it’s horror.” Originally published at Words Words Words. Please leave any comments there.
Monday, June 29th, 2009
10:14 pm	…but I’m his biggest fan! So, I just joined my fan club on Facebook.  Is that, um, weird? Originally published at Words Words Words. Please leave any comments there.
10:39 am	TWoN Book 2 Chapter 2 Part 5 On page 251 he discusses what happens when a bank tries to circulate more currency than what the country can employ, and how the excess is almost immediately returned.  I suspect this is another area that is no longer applicable; at least directly. Similarly, on page 254: “What a bank can with propriety advance to a merchant or undertaker of any kind, is not either the whole capital with which he trades, or even any considerable part of that capital; but that part of it only, which he would otherwise be obliged to keep by him unemployed, and in ready money for answering occasional demands.”  Not so much any more–banks have become completely intertwined in every branch of every industry.  Indeed, Lenin defined Imperialism as that stage of capitalism which is dominated by finance capital, with industrial capital taking a back seat. He goes on in this vein for some time, cautioning banks against making loans which cannot be returned for many years.  Page 258: “It is not by augmenting the capital of the country, but by rendering a greater part of that capital active and productive than would otherwise be so, that the most judicious operations of banking can increase the industry of the country.”  I may be brushing over this too lightly, but it just seems to me to no longer apply.  Perhaps there would be value in tracing exactly when and how it stopped applying, and what the consequences are, but there’s no way I could pull that off.  A man’s got to know his limitations. Page 259, quoted mostly because I like it: “The commerce and industry of the country, however, it must be acknowledged, though they may be somewhat augmented, cannot be altogether so secure, when they are thus, as it were, suspended upon the Daedalian wings of paper money, as when they travel upon the solid ground of gold and silver.” He then goes on to discuss the reglulation of banks by government, arguing that small denominations of paper should be avoided, and admitting that some people may see such regulations as infringement upon personal liberty.  Page 263: “But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments; of the most free, as well as of the most despotic.  The obligation of bulding party walls, in order to prevent the communication of fire, is a violation of natural liberty, excactly of the same kind, with the regulations of the banking trade which are here proposed.” He then asserts that paper money is exactly the same as gold and silver, under certain conditions: “issued by people of undoubted credit, payable upon demand without any condition, and in fact always readily paid as soon as presented.” He discusses errors in the banking trade which no longer, I think, apply.  He talks about the North American colonies (most of which would no longer be colonies within a decade), and how these colonies attempted, by law, to declare certain paper currencies to be above their actual value, with Smith condems as, in essence, debtors attempting to steal from their creditors.  Page 266: “No law, therefore, could be more equitable than the act of parliament, so unjustly complained of in the colonies, which declared that no paper currency to be emitted there in time coming should be a legal tender of payment.” Page 268: The proportion between the value of gold and silver and that of goods of any other kind, depends in all cases , not upon the nature or quantity of any particular paper money, which may be current in any particular country, but upon the richness of poverty of the mines, which happen at any particular time to supply the great market of the commercial world with those metals.” Which brings us, at least, to the end of the this chapter.  I only hope that my confusion over much of what was covered here won’t interfere with my understanding further chapters, because if it does, I’ll have to go back to this one and try again, and I may jump off the Mendota Bridge instead. Originally published at Words Words Words. Please leave any comments there.
Sunday, June 28th, 2009
6:46 pm	TWoN Book 2 Chapter 2 Part 4 On page 244, Smith reiterates what he said before about not counting money when reckoning wealth.  This–both his reasoning and my problems with it–are covered in my earlier posts, so there’s no point my restating them. On page 245 he talks about the substitution of paper for gold and silver, and from there discusses the proportion of money (gold, silver, and paper) that is in circulation at any given time to the total value of the produce of a nation.  He speaks in particular of the money destined for maintainance of industry.  What is interesting here is that he seems to be implying that money is often the limiting factor in production, on a national level, whereas earlier I thought he was saying that labor was the limiting factor.  I think I’m just confused here. NB: Page 247: The phrase “discounting bills of exchange,” which is used a lot, means “advancing money upon them before they are due.”  Now, if I just knew what “bills of exchange” were, I think I’d have it. On page 249 he gives an example, referring to “cash accounts” as practiced at the time in Edinburgh–basically automatic short-term loans, presumably for relatively small amounts.  He talks of how merchants without access to this cash account must keep funds on hand to pay bills as they become due.  Suppose the amount this merchant must keep in hand for lack of this account is five hundred pounds.  Then, “His annual profits must be less by all that he could have made by the sale of five hundred pounds worth more goods; and the number of people employed in preparing his goods for the market, must be less by all those that five hundred pounds more stock could have employed.”  Well yes, except that he is ignoring the interest the merchant must pay on that cash account as he uses it.  He is assuming that the interest he pays must be less than what 500 pounds invested in his business would bring in; I’m not sure that is always the case. Further down.  “The whole paper money of every kind which can easily circulate in any country never can exceed the value of the gold and silver, of which it supplies the place, or which (the commerce being supposed the same) would circulate there, if there was no paper money.”  Here he is warning against putting into circulation more paper within a country than the amount of gold and silver that would circulate there.  This says nothing about circulation (of gold and silver) outside of the country, which, added to the paper circulating within, will be a significantly greater total than the amount of gold and silver.  His objection, then, is to excess currency within a country; not to producing currency in excess of that which is backed by precious metal. On page 250 he mentions two expenses unique to bankers.  “First, in the expence of keeping at all times in its coffers, for answering the occasional demands of the holders of its notes, a large sum of money, of which it loses the interest; And, secondly, in the expence of replenishing those coffers as fast as they are emptied by answering such occasional demands.”  I’m having trouble seeing how those two things aren’t just two ways of saying the same thing.  Moreover, it seems that, in some sense, every business must have money on hand to meet occasional expenses, barring access to a “cash account” as discussed above (in which case, there is the replacement cost of the interest on the cash account). Originally published at Words Words Words. Please leave any comments there.
Thursday, June 25th, 2009
8:27 am	Vlad novels - Spoilers - Part 2 Topic started by request.  I’m about a third of the way through the first draft of Tiassa.  Or, as I affectionately call it, Hadassah. – Hadizsákmányapa Originally published at Words Words Words. Please leave any comments there.
Wednesday, June 24th, 2009
2:12 pm	A Walking Tour of the Shambles by Neil Gaiman & Gene Wolfe I hope you’ve read Invisible Cities by Italo Calvino.  If not, go read it.  If you have, imagine stopping at one of those cities and finding the weirdest, darkest little area in it.  Then imagine a description of that area by Gaiman and Wolfe.  That the city in this case happens to be Chicago is besides the point.  It is a perfect little gem of delightful madness and charming evil.  Go read it. Originally published at Words Words Words. Please leave any comments there.
10:37 am	TWoN: Sidebar–Confusion and hidden mechanisms One of the reasons the study of capitalism is so difficult (and, in some ways, so much fun) is that so many of the processes are hidden.  In, for example, a feudal economy, things are pretty straightforward: peasant grows crops, gives some to landlord, eats the rest and makes most of his goods at home and uses them himself.  Exchanges at the market are subsidiary to the basic flow of the economy, and not all that hard to understand (need iron to make a plow?   Give me ten bushels of corn.  Thanks.  Cheers). A market economy by it’s nature hides a lot of its activity.  For example, the exchange value of a commodity is not realized until it reaches the market; therefore, it looks as if the value is created at the market, which leads to no end of confusion.  Lord Kyenes, for example, never was able to shake the notion that the market created value, and the economists who followed him are still stuck there.  The explosive power of TNT is created when the compound is formed, but not realized until it is detonated; to say that value is created at the market would be like saying that the explosive power of TNT is created by the explosion. Smith’s ability to lay bare many of the processes of a market economy (the creation of value by labor, the effect of infrastructure on the realization of profit, money as a circulating commodity that eases production) may not have resulted in a full understanding of these processes, but showed that they could be understood, and pointed the way to understanding them. The role of money–a commodity used for universal exchange–in a market economy is inherently difficult to understand.  I don’t blame myself terribly for having so much trouble with it in spite of lots of smart people trying to explain it to me; I think it is just the nature of the beast.  I started this project in order to understand rent, because I need to for a book I’m working on.  I may never understand rent, and I may never understand money; but the struggle to do so is amazingly gripping, and I want to thank all of you who have been helping me with it for your patience. Originally published at Words Words Words. Please leave any comments there.
Tuesday, June 23rd, 2009
9:54 pm	TWoN Book 2 Chapter 2 Part 3 On page 239 we find: “As the same guinea which pays the weekly pension of one man to-day, may pay that of another to-morrow, and that of a third the day thereafter, the amount of the metal pieces which annually circulate in any country, must alwys be of much less value than the whole money pensions annually paid with them.”  The point appears at first glance to be reasonable: we cannot count the metal coins because we are already counting the, if I may, virtual coins as part of each person’s income.  The trouble is, we also have the actual metal coins which are, at any given time, somewhere.  These coins have value (for the metal they contain, if no other way).  It seems to me that there is something unresolved here.  In spite of several excellent remarks in previous posts, I do not believe that a mere agreement among a set of people that a certain commodity will be used to trade for any other commodity, to mediate among them, removes all value from that commodity.  Among societies (mentioned, I believe, by Smith in Book 1) where pigs are a medium of exchange, pigs could still be, and were, eaten. Well, let’s move on.  Page 240: “The whole capital of the undertaker of every work is necessarily divided between his fixed and his circulating capital.  While his whole capital remains the same, the smaller the one part, the greater must necessarily be the other.  It is the circulating capital which furnishes the materials and wages of labor, and puts industry into motion.  Every saving, therefore, in the expence of maintaining the fixed capital, which does not diminish the productive powers of labor, must increase the fund which puts industry into motion, and consequently the annual produce of land and labor, the real revenue of every society.” Okay, there are a couple of problems here.  First, yes, it is certainly the case that, by cutting the costs of machinery, more capital is available for production.  But any reduction in wages and material that doesn’t reduce production (ie, cutting wages, or finding cheaper material), also provides more capital for putting into production: If you are paying 10 workers $100 a day, and cut their wages to $90 a day, you can hire another worker, and even have $10 to invest in material.  The more significant problem, however, is that, in point of fact, that is not how capitalism works: the tendency is for more and more capital to be invested in machinery.  As technology improves, the capitalist is forced, by competition and the need to maintain market share, to upgrade his machinery, in many cases, before the old machinery has been paid for.  Of course, this was probably not as true in the 1760s, and I can’t think that Smith is culpable for not knowing it. On page 241, he talks about the importance of confidence in a banker issuing notes.  Today, this is the pervue of a government, but his point is no less valid.  Notes have value insofar as it is believed that there is a commodity with actual value backing them.  Further down, he speaks of a banker with one hundred thousand pounds worth of notes in circulation, but requiring only twenty thousand pounds of actual metal to have available for demands of payment.  He says, “Eighty thousand pounds of gold and silver, therefore, can, in this manner, be spared from the circulation of the country; and if different operations of the same kind should, at the same time, be carried on by many different banks and bankers,, the whole circulation may thus be conducted with a fifth part only of the gold and silver which would otherwise have been requisite.”  Okay, am I missing something, or is this not a recipe for inflation? **Edited later, because I was muddled the first time** He goes on to speak of notes circulating within a country leaving the actual metal for circulation out of the country.  While I can see where this would bring additional profit to the banker, it also points out yet another reason for imperialism–that is, for capitalism to necessarily expand.  Markets, not only for products, but for metals must always be available.  He speaks of a “channel” within a nation being full, and therefore money being sent outside of the nation.  In other words, a given nation can only, because of the amount of available labor and material, make use of a given amount of currency.  However, he says, bank notes may be circulated within the country sufficient to fill the channel, leaving the actual coinage available to send (ie, invest) in other channels–that is, in other countries.  This is only one, but a very important reason why capitalism becomes international.  The trouble is, it seems to me,   that nation to which we send the coins has it’s own “channel.”  This was probably not a problem in his time (there were colonies galore, after all), but looking forward a hundred years or so, we start to see where conflicts over who gets to use what channel might eventually need to be backed up by armed might. Originally published at Words Words Words. Please leave any comments there.
4:43 pm	Carolyn is married The bride was beautiful.  Tons and tons of cool people were there.  It was pretty nifty. Fourth Street was good, too.  I suck at reports, so I won’t give one, but I’m pleased with how hard everyone worked to make it come off. I don’t have working email yet, but I hope to by tomorrow. Originally published at Words Words Words. Please leave any comments there.