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Sandpit

January 7th, 2013

A new sandpit for long side discussions, idees fixes and so on.

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  1. Chris Warren
    January 11th, 2013 at 14:56 | #1

    @J-D

    It might be worthwhile browsing the annual reports of some of the larger co-op Annual Reports and see whether they have problems generating investment.

    However, generating investment, is best done from savings. In principle I cannot see any issue here, particularly if co-ops are encouraged to expand into having a larger share of national economies.

    It is also possible that in the long-run, that some forms of modern investment are wound back, and I assume a co-operative structure could manage this better than a capitalist enterprise having to placate remote major shareholders.

  2. Jim Rose
    January 11th, 2013 at 18:06 | #2

    On 20% unemployment, the main example of that is Spain’s dual labour market

    One-third of EU unemployed are now in Spain: Cahuc et al 2012 estimated that Spanish unemployment would be 40% lower if Spain adopted the less strict French laws! In France, competitors on their version of the survivor TV show managed to sue the tribal council for wrongful dismissal and severance pay.

    Spanish employment laws date from the time of Franco.

    Spanish housing laws are so screwed up that most young people must live with their mother and they cannot move to other regions of lower unemployment because a short-term employment contract does not make it worth the risk.

    Make up your mind whether co-ops are more efficient or more democratic and inclusive.

  3. Chris Warren
    January 11th, 2013 at 21:32 | #3

    @Jim Rose

    I suppose you would have to look at a Spanish cooperative to make that judgement.

  4. J-D
    January 12th, 2013 at 08:10 | #4

    @Chris Warren
    The question I posed was why it is in fact the case that the cooperative sector accounts for so much less economic production (as measured by GDP) than does the for-profit private corporate sector. I don’t see how any amount of examination of annual reports of existing cooperatives would answer that question.

    As I said before, I don’t say that it would be impossible for cooperatives to generate economic activity on the same aggregate scale as the for-profit private corporate sector actually does, in the hypothetical scenario where the for-profit private corporate sector isn’t there. I don’t know the answer to that question. It just seems to me that it’s an important question to ask if you want to discuss abolishing the for-profit private corporate sector, and that therefore it’s also important to ask why the one sector is currently so much smaller than the other, another question I don’t have the answer to.

  5. Jim Rose
    January 12th, 2013 at 09:54 | #5

    See http://www.telegraph.co.uk/finance/economics/8329355/Spains-astonishing-co-op-takes-on-the-world.html

    The membership rule is that all new workers must put up €13,400 in share capital.

    That is no different from any other professional partnership such as of doctors, lawyers and accountants. They buy their job with a loan from existing partners.

    The Economist feature says that Mondragón has two employees for every co-op member!!

    when a recession bites, non-member employees suffer most as their temporary contracts are not renewed!!! An important detail. Mondragón has second class workers.

    The co-op is run by a managing committee elected by the member-employees just like any other professional partnership.

    The co-op is made up of 256 co-ops so it sounds like a franchise hub?

    Irizar, the maker of luxury coaches, split off last year because it no longer wanted to support loss making co-ops elsewhere in the group.

    Mitre 10 is a retail cooperative in Australia and New Zealand as is foodstuffs. United Airlines was once mainly owned by workers from competing trade unions.

  6. Chris Warren
    January 12th, 2013 at 11:49 | #6

    @Jim Rose

    I am not sure what point you are trying to make. Different entities will always have different shares.

    We just need to increase the share of cooperatives. No-one has said they are dominant now? so what are you querying or pursuing?

    Within a capitalist society – non-profits will not have the same attraction for capitalist investment funds. But when these capitalists obviously end-up in a GFC, and threaten worse, we need to look for an alternative.

    The key problem is capitalism, and co-ops are the most feasible means to address this.

  7. J-D
    January 12th, 2013 at 18:10 | #7

    Here’s another question I don’t know the answer to.

    The source I quoted before reports that in OECD economies the cooperative sector ranges from 0.5% of GDP in Australia to 16.1% in Finland. 16.1% is still a minority share, but it seems to me that anybody who is interested in expanding the cooperative sector in Australia could do worse than ask why it has so much larger a share in Finland (and every other OECD economy, for that matter) than it has here.

  8. J-D
    January 12th, 2013 at 18:14 | #8

    @Chris Warren
    I think (subject to correction) that Jim Rose is trying to make more than one point, and that one of those points is that there are limits to the egalitarianism of cooperatives, which if true (as I think it is) would be a fatal objection to any suggestion that they’re perfect, but not so much fatal to a suggestion that they’re a good idea worth encouraging.

  9. Chris Warren
    January 12th, 2013 at 18:59 | #9

    @J-D

    As no-one has said cooperatives are perfect, does this mean that Jim Rose is barking up the wrong tree.

  10. Jim Rose
    January 13th, 2013 at 09:50 | #10

    The point of co-ops is workers’ democracy. Correct?

    The Spanish coops that were drawn to mt attention are not workers’ democracies because not all workers vote. They are labour-managed firms similar to professional partnerships of doctors, lawyers etc.

    Israeli Kibbutzim are a better example. they are communities whose aim is equal-sharing. They were expected to unravel because of moral hazard and adverse selection. Other organisations subject to adverse selection and moral hazard are professional partnerships, co-operatives, and labour-managed firms because they are based on revenue sharing.

    Kibbutzim have persisted for most of the twentieth century and are one of the largest communal movements in history. 40% are still run on communist principles.

    The founders of kibbutzim were socialist idealists wanting to create a new human being.

    Ran Abramitzky is writing a book The Mystery of the Kibbutz: How Socialism Succeeded

    See http://www.stanford.edu/~ranabr/Abramitzky_book_presentation.pdf

    He found that high-ability individuals are more likely to leave. The brain drain would be worse if kibbutzim didn’t make it so costly to exit. A familiar theme of socialism? Kibbutzim also put prospective members through lengthy trial periods.

  11. Chris Warren
    January 13th, 2013 at 12:42 | #11

    Jim Rose

    The point of co-ops is not workers democracy. This is hippie-talk.

    The point of co-ops is that provide the necessary social control over elitist, exploitative and self-contradictory economics.

    Co-ops also open up huge possibilities for better humane social relationships such as, less wealth maldistribution, greater participation and control, greater security and enhanced fraternity. Possibly also a better psychological environment for citizens less able to be scared into fake Cold Wars and jingoisms.

    Co-ops can determine their own level of democracy.

  12. Chris Warren
    January 13th, 2013 at 16:09 | #12

    Correction:

    The point of co-ops is that they provide the necessary social control over elitist, exploitative and self-contradictory economics.

  13. Jordan
    January 13th, 2013 at 19:10 | #13

    @Chris Warren
    I am a bit late to discussion, but would like to say that capitalism evolves too.
    There is many ways capitalist can accumulate capital besides taking away surplus value from work. In an environment with strong competition, there is no surplus value from work being taken away.
    Capital accumulation comes also from ineficiency in pricing market;
    a) sell low quality product or service at the price of standard quality which can be done for some time;
    b) rump up the price by marketing, increasing a desire to own a product (iPhone);
    c) differences in interest rates on debt for operating expenses;
    d) moving to cheaper labor country;
    e) using subcontractors as lower cost;
    f) relying on government offering higher prices then private market;
    g) start up on cash vs. debt that carried interest costs;
    h) IPO or continuing to sell shares after IPO;
    i) bankrupcy/bailouts as a debt forgivness;
    j) other pricing ineficiensies between sectors;
    k) taxing prefference;
    …….

    Only monopoly, cartels and owning desire rely on surplus from labor for profits, also size and financialisation reduces ineficiencies in pricing mechanisms.

    Fiat money changes the structure of capitalism from surplus labor to nominal surplus as means for capital accumulation.

  14. Jordan
    January 13th, 2013 at 19:21 | #14

    Differences in co-op vs. capitalist productions come from purposes of existence. Co-ops are created in a desperate need to provide basic sustinence to members and further desires are not a preffered, while capitalist production is created for purpose of creating bigger and bigger wealth.
    Capitalist operation have a undestinguishable desire for more wealth and growth of owners while co-ops are there to provide satisfaction in real terms, they do not need more then they can consume at marginal cost. Co-ops usually have less working hours per member then in capitalist organizations and are described as satisfing occupation and lives without constant pursuit for more at higher and and higher marginal cost.

  15. Jordan
    January 13th, 2013 at 19:42 | #15

    More perfect competition reduces profits which forces to look for profits in other ways. Competition forces financialisation which forced fiat money into practice.

    To predict further evolution would be interesting.
    Fiat money forces equality with good helping from recourse restraints? Widespread knowledge trough internet of benefits of fiat money and true nature of production and possibilities of collective cooperation on decision making and organizing for benefits of humanity with added developement of robotization and computing making production almost free with good organization.

  16. Chris Warren
    January 13th, 2013 at 21:47 | #16

    @Jordan

    I have a different view.

    All your a) to k) can occur without capitalism. They can all occur under feudalism, or any form of exploitative economy.

    Even workers cooperatives can engage in such commercial malpractices (but have far less initiative to do so and probably some inherent counters within their membership).

    Capitalism, is firstly, accumulating wealth just like a feudal lord, but then, reinvesting the whole amount in the expectation of receiving more accumulation at the same rate of profit as before.

    If wealth is accumulated, even into obscene mountains, while the rest live in penury, this wealth is not capital – provided this wealth is only used for final consumption. The State can do this through military expenditures. Luxury goods are another aspect. The State can also do the same by building housing, public transport and hospitals.

    Wealth is not necessary capital.

    I do not understand your point about marginal cost. Why wouldn’t a cooperative just look at last years data, and price close to total average costs? with some provision for contingency.

    Cooperatives can still make profits – but these will fluctuate according to luck, skill, windfall, drought, disease, flood etc.

  17. Jarrah
    January 13th, 2013 at 22:33 | #17

    @Chris Warren
    “in the expectation of receiving more accumulation at the same rate of profit as before.”

    No, at the best rate of profit he or she can find. Which more often than not tends to be in the places where capital is needed most or can be put to the best use (so far as can be expressed through market prices).

  18. Jordan
    January 14th, 2013 at 00:39 | #18

    @Chris Warren

    Even workers cooperatives can engage in such commercial malpractices (but have far less initiative to do so and probably some inherent counters within their membership).

    There you give understanding of some of marginal costs.
    Other marginal cost is in term of leisure time. In Europe and in Australia there is understanding that leisure time is important to life satisfaction. In USA, some people enjoy at work more then at home and have friends all from work due to career advance pressure.
    Co-op members, as i used to live in a country with co-op system only so i get the philosophy and state of mind, would prefer leisure time over work time and treat more work as cost to leisure (pleasure) time.
    Hence more wealth comes at marginal cost to leisure (pleasure) time in a fixed equitable income. Less incentives to work more in co-op then in capitalist organisation, but that makes workers more productive and satisfied with their life.
    There are also other collective and organisational incentives not to spend more time at work then everyone else.

  19. Chris Warren
    January 14th, 2013 at 07:42 | #19

    @Jarrah

    yes, the expectation as to a stable rate is an average and long-run. This is after they have chased the best rate they can and have achieved successes, failures, and losses.

    The minimum rate is usually understood as the government bond rate, but capitalists laugh at businesses that just manage this. Small family businesses (eg corner shops in country towns) survive fine with zero profits.

    But in either case – the actual form of capitalist profit is the same.

    Co-operatives change the form of profit and thereby eliminate its anti-social behaviour and intrinsic crisis tendency.

  20. Fran Barlow
    January 14th, 2013 at 08:19 | #20

    Last night, I tweeted as follows:

    What a surprise — New reconstruction confirms Surface Temperature record is accurate http://www.skepticalscience.com/nature-confirms-global-warming.html … #AGW #Climatechange #IPCC #SKS

    15 people retweeted. One of the people who responded to me was Fox & Fools and all round filth merchant shill Steven Milloy:

    Steve Milloy ‏@JunkScience
    @fran_b__ LOL. Warming since 1730… before Watts’ (James not Anthony) steam engines!

    What can one do but laugh? How embarrassment! {/effie}

  21. Chris Warren
    January 14th, 2013 at 09:02 | #21

    @Jordan

    Once there is a surplus producers can decide what then happens – improve production by paying wages to researchers and machinery makers, obtain more leisure (ie forego the same level of surplus in the future) or subsidise the needy, or produce public services.

    They just have to make sure that they do not capitalise it.

  22. Fran Barlow
    January 14th, 2013 at 09:05 | #22

    Back in the days of Mark Bahnisch’s LarvatuProdeo I proposed that one way in which the trade in rhino horn could be reduced would be for governments to set up counterfeit rhino horn manufacturing, marketing the product largely through the channels the traffickers use. Fairly obviously, if the market were to become saturated with counterfeit rhino horn, the price would fall sharply and poaching would become far less commercially viable.

    Rhino horn is essentially keratin — a common and non pharmacologically active substance which is also a constituent in human finger and toe nails and hair. It would be pretty simple and cheap to manufacture.

    Of course, that would be technically dishonest. Criminals would be being deceived.

    Given our recent discussion of Moylan, I began reflecting on examples of public benefit defences of deception. BBB at Cat cited an obvious example — Schindler — and I can also recall another fellow — a Hutu man (whose name eludes me now, regrettably) — who, during the Rwandan genocide hid Tutsis on his farm and fed them while deflecting would be genocidalists with systematic and shameless lying.

    Those are excellent cases of public benefit defences, if a little obvious, but I wonder how this one on rhino horn (and perhaps ivory or other CITES listed species) might fit.

  23. Ernestine Gross
    January 14th, 2013 at 10:54 | #23

    @BilB
    @48, p 2

    You remind the topic of the (last) week is: “Is macroeconomics relevant and effective”. IMHO, contemporary macroeconomics is not helpful for several reasons, the most important ones being the treatment of financial markets and the structure of the global economy, including wealth distribution. You proposed control methods, used in industry (electrical and electronic engineering), could be fruitfully applied in economics. I agreed there is some cross-fertilisation between engineering and economics which works in the short fun but not as a macroeconomic management method per se. Furthermore, I proposed it is the application of new mathematics that advances science and economics (IMHO, it is useful to reserve the word science for natural science and the word applied science for engineering and medicine. IMHO, economics can use scientific methods up to a point but, at least for the foreseeable future, attempts to manage economics into an applied science is not a good idea – democracy is a delicate but valuable idea, more valuable than the notion of GDP.)

    I thank you for your link, although for different reasons than you might have expected. I still don’t agree with you. In reply:

    1. You write: “So if people displayed their qualification, age, marital status, income level, lack of income level, interests, etc, as colours, shapes, proportion, position, etc (and think about that, the fact is that largely people do) then it would be possible to extract every economic thing about a demographic with one single aerial image shot.”

    Colour coded mapping is useful (see application of the mathematics of fractals in economics). Sure, demographic information is useful for marketing purposes in the short run. I am not convinced this can be generalised to economics. What about technological development plans of the existing enterprises, planned enterprises, preferences, resource constraints, including environmental resource constraints, financial securities, business management fads, changes in institutional environment – legal and regulatory framework – new philosophical ideas, new mathematics? Think about it. In many of your posts you provided useful information on technological developments in electricity generation. This information is lost in macro-economic models. Consequently, one can have the outcome that everybody’s standard of living improved while people argue for printing money to fill a hypothetical ‘output’ gap (I assume some background knowledge here and no literal reading).

    2. You link to a paper which applies fuzzy set theory to Keynes’ notion of uncertainty. ( https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=CEF2010&paper_id=141).

    It seems to me you are bringing water to my mills, namely, it is the application of new mathematics rather than copying methods from other fields that is interesting.

    Efforts to make Keynes’ notion of uncertainty precise is not the same thing as an answer to the question:”Is macro economics relevent and effective”. I suspect you agree with me on this one.

    We did travel along way in our discussion. For me your reference is useful because it gives me a clue as to how one could approach the problem of translating the legal language of financial contracts into machine readable language. While I was sort of aware of fuzzy sets (1 book on my shelfs), it was only after I read your reference that ‘it clicked’. Thanks.

  24. Fran Barlow
    January 14th, 2013 at 12:33 | #24

    Who owns corporate Australia

    Turns out, it’s largely HSBC, J P Morgan and Citibank.

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