Marx

A tale of two corporations

PNRJ core principles, critique of neoclassical economics, ethics, inequality , , , , , , , , , , , , , , , , , , ,

May 10 JDN 246171

Consider two corporations.

Corporation A has net income equal to 2.9% of its total revenue, and pretax income equal to 4.1% of its total revenue. The cost of its goods sold accounts for 77% of its revenue, with most of the remainder going to wages.

This seems reasonable, right? It doesn’t seem like this corporation is being especially exploitative.

Corporation B has 2.1 million employees, and made net income of $21.8 billion, meaning that it could afford to pay every single employee an additional $10,000 and still be profitable. The median employee at this corporation makes approximately $16 per hour, meaning that this would an income increase of over 30%—an absolutely huge jump in income that would make a big difference in millions of lives. Yet instead they have chosen to buy back $30 billion in shares to raise their stock price even higher.

Corporation B seems like they are obviously exploiting their workers and favoring their shareholders, and directly contributing to the extreme inequality in our society.

But I have a bit of a surprise for you.

They are the same corporation. All of these facts are true of Walmart: Here is their income statement, here is their announced stock buyback, and here are estimates of their number of employees and median pay.

Walmart is not a particularly exceptional case. Similar stories hold for most major corporations: the profit margin doesn’t sound that high as a proportion of revenue, but it still amounts to an enormous sum of money that is being hoarded by shareholders instead of paid to workers.

Amazon’s net income of $90 billion on $742 billion in revenue gives it a profit margin of 12%, but would be enough to give all 1.6 million employees an additional $56,000—in many cases doubling their incomes.

United Health Group made $12 billion in profit on $447 billion in revenue, which is only 2.7%; and yet with 400,000 employees, they could still afford to give each one an extra $30,000. How many nurses would be very happy to see another $30,000?

Exxon Mobil’s $28 billion profit was made on $324 billion in revenue, a reasonable-sounding margin of 8.6%. Yet with only 58,000 employees, that’s $480,000 each.

McDonald’s made $8.5 billion on $26 billion in revenue, a margin of 33% (which is actually pretty high). Yet more than 1.8 million people work at McDonald’s including all its franchises, so it could really only afford to give each one an extra $4,700—which sounds small compared to these other figures, but for a minimum-wage employee ($7.25 per hour is about $14,500 per year), that’s still an extra 32%.

This is something I think we have failed to reckon with as a society.

Once a corporation becomes sufficiently large, it doesn’t need to have a big-sounding profit margin to nonetheless control staggering amounts of wealth and funnel it away from employees into the hands of shareholders. Especially with regard to Walmart and United Health Group, those margins honestly sound small as a proportion of revenue—and yet, they still amount to incredibly vast sums of wealth that are being hoarded away from thousands or millions of workers that desperately need help.

I don’t know exactly what to do about this. More progressive taxes, especially on capital income, might help, and would certainly raise much-needed revenue; but they don’t seem like enough on their own. I think we may need something more radical, like requiring employee ownership of a certain proportion of shares—essentially turning corporations into co-ops.

Another option would be simply not allowing corporations to ever get this big, and splitting them up if they already are. Perhaps being CEO of a corporation with billions of dollars in revenue really is just too much power for one person to have. But I am genuinely concerned that this could reduce economic efficiency and thereby lower the standard of living of everyone.

Some corporations actually seem to behave more fairly.

Car companies, for instance, don’t seem to hoard huge amounts.

Ford actually lost money last year, losing $6 billion on $189 billion in revenue (3.1%). With 168,000 employees, that’s $35,000 each—essentially they gave each employee a free car. And Ford employees do fine: Median annual compensation is $126,000.

General Motors made $2.4 billion in profit on $184 billion in revenue, a margin of only 1.3%. With 150,000 employees, it could give each one an extra $16,000. Given that most of its employees are well-paid (median employee salary is $99,000), I actually don’t begrudge them this. Accounting for the risk of bad years like Ford had, I think GM is being reasonable by not simply plowing that $2.4 billion back into their own employees.

Even Tesla isn’t really an exception to this pattern. Tesla made $3.8 billion on $98 billion in revenue, which is 3.9%. With 135,000 employees, this is $28,000 each—more than GM, but still not completely crazy. Median employee pay at Tesla is over $160,000, so these workers are doing well. What’s weird about Tesla, however, is that its revenue is half that of Ford or GM, yet its market capitalization is a staggering $1.5 trillionwhile Ford’s is only $46 billion and GM’s is only $71 billion. A P/E ratio of 20 is considered reasonable. Tesla’s is 365.)

But there are some corporations that don’t even sound reasonable.

Tech companies in particular tend to have very high profit margins.

Consider Apple; its net income of $122 billion on $451 billion in revenue gives it a net profit margin of 27%. It could give all 550,000 of the employees of not only Apple itself but also all its foreign suppliers a raise of $221,000. Some of these employees are sweatshop workers in China—they would be set for life on a sum like that.

Alphabet’s profit margins are even higher than that; its net income of $160 billion was on $422 billion in revenue, for a net profit margin of 37%. With 190,000 employees, that would be $840,000 each.

Yet Microsoft’s margins are even higher; its $125 billion net income was on only $318 billion in revenue, giving it a net profit margin of 39%. It has 228,000 employees, so it could give every single one an additional $540,000.

SpaceX isn’t publicly-traded, so they don’t have to disclose everything; but it is estimated that they made about $8 billion in profit on $16 billion in revenue—a staggering margin of 50%—and with only about 12,000 employees, it could give every single one an extra $660,000. In fact, Elon Musk himself owns enough stock that he could personally give every single SpaceX employee some $60 million in shares and still be a billionaire. That’s a life-changing sum for anyone who works for a living—neurosurgeons would be awed, and even NBA players would consider that a successful career unto itself. But Elon must see number go up!

This is why I’m still somewhat sympathetic to Marxism, despite not being a Marxist.

There really is something terrible going on here, with capital owners making absolutely obscene sums of money and using it to wield enormous power over our society, leaving their own workers to struggle even though they could easily give those employees enough additional pay to significantly change their lives—and if they all did so, even the capital owners wouldn’t be meaningfully worse off, because they already have more wealth than any human being could possibly need and the overall boost to the economy might even compensate them in the long run.

And turning corporations into co-ops (which is, arguably, seizing the means of production) could actually make a very big difference here, and both theory and empirical data suggests that it would greatly reduce inequality without greatly reducing economic efficiency.

But the labor theory of value is still garbage.

On labor theories of value

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May 3 JDN 246164

I got into an argument a little while ago with an acquaintance of mine who is an avowed Marxist. He posted something that’s been going around Marxist social media about the “irony” that Marx’s labor theory of value is based on Smith and Ricardo’s labor theories of value (plural; they’re not the same), and thus when defenders of capitalism criticize the labor theory of value, they are in effect betraying their founding figures.

The first point I made in response to this was basically, “Yeah. So?” I think one thing that Marxists—at least this flavor of Marxist; I am prepared to exempt more serious Marxian economists—don’t really understand is that mainstream economists don’t have a founding figure that they worship and consider infallible. There is no inerrant text. I am fully prepared to acknowledge—and did, in fact, in that conversation, acknowledge—that Adam Smith made errors and his labor theory of value was one of them. And quite frankly, any defender of capitalism who worships Milton Friedman or Ayn Rand isn’t a mainstream economist, or is at best a very bad one.

My interlocutor then challenged me to describe these different labor theories of value, and I was foolish enough to take the bait, and then the whole conversation devolved into him playing this smug game of “That’s not what Marx really meant” and “clearly you haven’t read Das Kapital” (even though I have, but I admit it was several years ago; I did call up a PDF copy to refresh my memory during the conversation).

But it got me thinking about labor theories of value, and trying to understand why so many people find them seductive when it really doesn’t take much thought to show that they can’t possibly be right. (This post turned out to be a bit long, but I promise I won’t be as long-winded as Marx.)

So what’s wrong with labor theories of value?

If objects are valued based on the labor put into them, the following four propositions should hold:

  1. A project you spend 100 hours on which ultimately failed and produced nothing useful was extremely valuable.
  2. Everything in the Garden of Eden is worthless, because it doesn’t require labor to access.
  3. If you come up with a cure for cancer in a random stroke of insight, it’s worthless because you didn’t put any labor into it, even though both its utility (the lives it will save) and its price (the money you could make off of it) are surely astronomical.
  4. Increased productivity is worthless, because all it does is make our goods worthless as we get better at making them.

All four of these propositions are clearly preposterous, and yet they all seem to follow directly from the basic concept of valuing things by the labor that goes into them. Mainstream economists eventually realized this, and gave up on labor theories of value in favor of the now-consensus utility theory of value.

To be fair, Marx was no idiot, and he did try to address concerns like these in Das Kapital. (Well, the first three he does; I’ll talk about the fourth one in a moment.) But the way he does so is by continually re-defining his terms in contradictory ways, so that by the time you get through the book, you realize he doesn’t even have a labor theory of value. He has many labor theories of value, and he substitutes them ad hoc whenever they seem to yield the conclusions he’s looking for.

For example: Sometimes he says that it’s the actual labor that goes in which matters. Other times that it’s the “usual” or “socially necessary” amount of labor. Other times that it’s the average amount of labor that would be required for this production across the whole economy. These are not the same thing! They yield radically different results in many cases!

Marx tries to distinguish use-value (approximately utility) from exchange-value (approximately price), which is good; those two things are different. It’s very important to distinguish price from value.

But then he doesn’t even use these concepts consistently! At one point, he gives us this absolute howler:

The use-value of the money-commodity becomes two-fold. In addition to its special use-value as

a commodity (gold, for instance, serving to stop teeth, to form the raw material of articles of

luxury, &c.), it acquires a formal use-value, originating in its specific social function.

– Das Kapital, Volume 1, Chapter 2, p. 63

No, dude. That is exchange-value. That is paradigmatic exchange-value. People mainly want gold because they can sell it at a high price to buy stuff that’s actually useful. If this is use-value, then the distinction between use-value and exchange-value collapses to, well, useless.

I think what Marx is doing here is that he wants use-value to always be higher than exchange-value, so that surplus-value can be the difference between them and always be positive. But gold is a very clear example of a good for which the price greatly exceeds the marginal utility, which I think you can convince yourself by imagining being stranded alone on a desert island with a crate full of gold. If that crate had contained non-perishable food, or water purification equipment, or tools and materials for building shelter, or best of all, a satellite phone and some solar panels, you’d be overjoyed to have it. Even a crate full of books, plushies, or underwear would have some use to you. (Plushies make better friends even than Wilson!) But gold? You have nothing to do but laugh—or cry—at the cruel irony. (And cash would be the same way, though maybe you could use the linen for something.)

But we actually do have a good explanation for how assets such as gold (and Bitcoin) can have prices far exceeding their marginal utility; expectations. If you expect that you’ll be able to sell an asset for more than you paid for it, you have reason to buy that asset, even if it’s useless to you. And for gold, that’s actually been a pretty smart gamble most of the time (Bitcoin, it very much depends on when you bought it). This could be a non-stationary equilibrium in rational expectations, or it could just be an ever-replenishing array of Greater Fools; but one way or another, the reason gold has a high price is that people expect it to have an even higher price in the future.

In fact, this seems like a deep flaw in capitalism! Marx could have spent a whole chapter on why gold is stupid and financial markets are basically a casino—he would have beaten out Keynes on that by decades. (If I were going to worship an economist, it would be Keynes. But again, I still don’t think his work is inerrant. Just very, very good.) But instead, Marx accepted that gold is priced the way it should be, and contorted his already-tortured theory of value into accommodating that.

I really don’t know why Marx was so insistent that all goods had to be valued based on labor. Marx actually had a lot of good insights about capitalism, and he wasn’t entirely wrong that capitalism as we know it breeds exploitation and ever-growing inequality. I believe that relatively simple reforms (like antitrust enforcement, co-ops, and progressive taxation) can solve, or at least mitigate, these problems, and allow us to enjoy the fruits of higher productivity that capitalism provides. But I recognize that I could be wrong about that; maybe some more radical change is genuinely needed. Yet this in no way vindicates Marx’s theory of value, which was simply wrongheaded from the start.

Indeed, why was he so insistent about it?

Why not simply give up on it, and adopt a new theory, or state it as an unsolved problem?

I have a hypothesis about that. Let me reprise proposition 4:

  1. Increased productivity is worthless, because all it does is make our goods worthless as we get better at making them.

This proposition is preposterous, as I’ve already said: A technology that allows you to make 100 cars with the same labor previously required to make 1 car does not make cars less useful. It simply makes them available to more people at lower prices, and this is generally a good thing.

But I think that Marx did not regard it as preposterous; in fact, I think he regarded it as true.

Consider this paragraph:

In proportion as capitalist production is developed in a country, in the same proportion do the

national intensity and productivity of labour there rise above the international level.2 The

different quantities of commodities of the same kind, produced in different countries in the same

working-time, have, therefore, unequal international values, which are expressed in different

prices, i.e., in sums of money varying according to international values. The relative value of

money will, therefore, be less in the nation with more developed capitalist mode of production

than in the nation with less developed. It follows, then, that the nominal wages, the equivalent of

labour-power expressed in money, will also be higher in the first nation than in the second; which

does not at all prove that this holds also for the real wages, i.e., for the means of subsistence

placed at the disposal of the labourer

– Das Kapital, Volume 1, chapter 22, p. 394

So he does get one qualitative fact right here: Nominal prices are higher in rich countries, for goods and services that are not traded across international borders. This is why we use purchasing power parity.

But he then goes on to say that real wages aren’t higher in rich countries. This… is just clearly false. By any reasonable measure, real wages are higher in the United States or France than they are in Congo or Haiti.

One can quibble with the particular measure used; I in fact happen to believe that we do overestimate real wages in the US by using the CPI instead of an index that better reflects the price of necessities. But there’s just no plausible way to say that a laborer in Malawi who makes $600 a year is at the same standard of living as a laborer in the US who makes $20,000. They might both be legitimately considered poor; but saying that real wages aren’t better here just isn’t plausible.

And Marx’s views on wages get weirder from there:

But hand-in-hand with the increasing productivity of labour, goes, as we have seen, the cheapening of the labourer, therefore a higher rate of surplus-value, even when the real wages are rising. The latter never rise proportionally to the productive power of labour. The same value in variable capital therefore sets in movement more labour-power, and, therefore, more labour.

Das Kapital, Volume 1, Chapter 24, p. 421

I’d in particular like to draw your attention to these two clauses: “the cheapening of the labourer, […] even when the real wages are rising.” What in the world does that mean? How can labor simultaneously get cheaper and more expensive? How can I be “cheapened” even as I am better off?

A bit later, he gets close to acknowledging that higher productivity increases value, but he characterizes it in a very strange way:

Labour transmits to its product the value of the means of production consumed by it. On the other

hand, the value and mass of the means of production set in motion by a given quantity of labour

increase as the labour becomes more productive. Though the same quantity of labour adds always

to its products only the same sum of new value, still the old capital value, transmitted by the

labour to the products, increases with the growing productivity of labour.

– Das Kapital, Volume 1, Chapter 24, p. 422

So what he seems to be saying here is that the value added from capital is itself denominated in terms of the labor that was used to create that capital. Yet this is a very strange accounting indeed, as I think a simple model will help you see.

Consider a productivity-enhancing technology.

Suppose that, initially, one can make 1 widget per person-hour. So, Marx says, the value of 1 widget is precisely 1 person-hour.

And suppose there are enough laborers to do 20 person-hours of work. Then we make 20 widgets, and we get value equal to 20 person-hours. Okay, seems reasonable so far.

Then, an engineer comes along, spending 100 hours to invent a machine that costs 10 person-hours to build, and can produce 1000 widgets using 10 person-hours of labor.

So the value of that machine, according to Marx as I understand him, is 10+X person-hours, where X is some amortized fraction of the 100 person-hours involved in inventing it. It’s unclear how to do this amortization; what time frame should be using? Once invented, the machine can be built many times. But I guess we could maybe make sense of it as the patent duration—the price of the machine will surely be higher during the time the patent is still valid, and I guess we could say that is somehow reflected in its value. (Notice how this is already getting pretty weird.)

Now, let’s go ahead and make 1000 widgets with the machine.

We have spent 10 person-hours of labor running the machine, another 10 building it, and we’re supposed to count in X from inventing it in the first place. X ranges somewhere between 0 and 100.

So at the low end, when X=0, these 1000 widgets have only cost us 20 person-hours to make, increasing productivity 50-fold. This is sort of where we expect to end up after the machine goes out of patent and becomes commonplace.

But at the high end, when X=100, these 1000 widgets have cost us 120 person-hours to make, increasing productivity a lesser, but still substantial, 8-fold. This might be where we find ourselves when the very first machine comes online and it’s still an experimental prototype.

Under the utility theory of value (which, again, virtually all mainstream economists, including both neoclassical, behavioral, and even Marxian economists, accept), the value of widgets has increased from U(20) to U(1000); exactly what this value is depends on how many consumers there are and what their utility functions are, but two things we can say for sure:

  • This is definitely much higher than before. (Probably more than 10 but less than 50 times higher.)
  • The value is the same regardless of how we account for the person-hours that went into inventing the machine.
  • The cost gets lower over time, as the technology becomes established.
  • Thus the value added should increase over time. (Whether or not profit does depends upon additional factors we haven’t modeled.)

But as Marx seems to be saying here (again, he may say differently elsewhere, but that’s kind of my point; he doesn’t have a coherent theory), we are to value these 1000 widgets as follows:

When the technology is new, X=100, and so the value of the 1000 widgets is 120 person-hours, the labor that went into inventing, producing, and using the machine. So this productivity enhancement has increased value somewhat—a 6-fold increase—but not all that much. And the value of each widget has been radically reduced: It is now only 0.12 person-hours, or about 7 person-minutes.

Yet once the technology becomes established, X=0, and so the value of the 1000 widgets is 20 person-hours, the labor that went into producing and using the machine. So now this productivity enhancement has not increased value at all. The value of each widget has fallen even further: It is now a mere 0.02 person-hours, or just over 1 person-minute.

This weird dynamic, where technology increases value temporarily, then brings it back down to exactly what it was before, is clearly not how technology actually works. The value added from new technologies—in terms of utility, what really matters—is permanent and increasing over time.

Yet upon re-reading Marx and reflecting some more on his labor theories of value, I think Marx believed that this is actually what happens.

I think that Marx’s whole account of why the rate of profit must fall (even though it absolutely hasn’t, empirically, and even Marxian economists today recognize there’s no particular theoretical reason it should) is based on this misconception.

I think because he believed that labor is the correct measure of value, the fact that human beings can only do so much labor (which hasn’t really changed much over the millennia) means that standard of living can never really increase, because higher productivity simply translates into stuff becoming more and more worthless.

And I think part of where the confusion comes from is that price does sort of behave this way, at least qualitatively; no doubt in a world where widgets can be produced with only 1 minute of labor instead of 60 is one in which widgets are much cheaper to buy. But that doesn’t mean that their value has been correspondingly reduced; they are still just as useful (for whatever widgets do) as they were before, and any decline in marginal value merely comes from diminishing marginal utility as people get more and more of them.

Yet I think Marx didn’t want that result, because it seemed to imply that capitalism could actually make life better, even for workers. (As, empirically, it absolutely did.) He wanted to be able to prove that, despite all appearances, workers have gained absolutely nothing from capitalism and technology, and live just as poorly today as they did in the Middle Ages. And a labor theory of value was just the way to do that, for we only work slightly more hours today than most people did in the Middle Ages (and given the state of Medieval scholarship at the time, Marx may have even thought it was the same). Yet I for one am really a fan of vaccines and flush toilets; I don’t know about you.

He quickly realized many of the problems with this theory, and so he added more and more epicycles to try to correct these problems; but the result was a theory that wasn’t even coherent. Yet in part because of Marx’s incredibly dense and verbose writing style (please note; there are 547 pages in Volume I of Das Kapital, and it has three volumes.)it remained plausible enough to non-experts to catch on, and due to its very complexity, it becomes genuinely hard for anyone to understand. So then we can have the argument I had, where even as I clearly demonstrated the deep flaws in the theory, my interlocutor could always insist I hadn’t really understood what Marx was saying, and it was all my failing, not anything wrong with the theory, which is of course inerrant and handed down from On High.

For some people (not all, but some), Marxism really does seem more like a religion than a scientific theory: “I don’t know exactly what it means, but dammit, I know it’s true and you’ll never convince me otherwise.”

Is there a way to make a labor theory of value work?

I’m pretty well convinced that Marx’s labor theory of value is either wrong, or so incoherent as to be not even wrong. (Adam Smith’s and David Ricardo’s theories were coherent, so they were definitely just wrong.)

But could there, somewhere buried in all those hundreds of pages of mind-numbingly dense and self-contradictory text, be a theory worth salvaging?

Can I steelman the labor theory of value?

I’m going to give it a try.

Okay, so clearly it’s not the actual amount of labor used, as that runs afoul of proposition 1 immediately:

  1. A project you spend 100 hours on which ultimately failed and produced nothing useful was extremely valuable.

That’s nonsense, so we’ll rule that theory out.

Okay, maybe we can patch it up by saying it’s the socially necessary amount of labor required; the amount of labor that the most-efficient worker would require. Clearly, if you are spending 100 hours on something useless, you’re not being the most-efficient worker.

This seems to be closer to Marx’s account, but it still runs afoul of propositions 2, 3, and 4:

  1. Everything in the Garden of Eden is worthless, because it doesn’t require labor to access.
  2. If you come up with a cure for cancer in a random stroke of insight, it’s worthless because you didn’t put any labor into it, even though both its utility (the lives it will save) and its price (the money you could make off of it) are surely astronomical.
  3. Increased productivity is worthless, because all it does is make our goods worthless as we get better at making them.

Marx actually seemed to like proposition 4, but we can see that it’s wrong. So this is a problem.

Also, while propositions 2 and 3 may seem like extreme thought experiments, consider the following:

First, “The Garden of Eden” is very much what a Star Trek-style fully automated luxury communism would feel like. Many leftists say that they really would like to see such a world, and I agree with them on this. But on this theory of value, it’s all worthless, because nobody has to work to get anything.

Second, a sudden insight into a miracle cure that ends up becoming cheap and plentiful is pretty much what happened with penicillin and vaccines. Yes, there was some labor involved in making them (and still is), but it was clearly far less than the utility gained from all the improvements in health and lifespan that we have received from these inventions. Valuing these technologies in terms of their labor cost seems to completely miss the point of why they were such miracles.

So is there some other way to make a labor theory of value work?

The best I can come up with is this:

The value of a product is the amount of labor it would take to make that product by hand with pre-historic technology.

This is my attempt at steelmanning the labor theory of value. It does solve propositions 2, 3, and 4:

For 2, the fact that everything is handed to you (perhaps by robots) doesn’t change the fact that making it yourself would be really, really hard.

For 3, it’s much harder to make penicillin by hand than in a factory (though it can be done!), so improved penicillin technology is a gain in value. And every new vial of penicillin is worth the many hours that would have gone into making it by hand.

And for 4, any improvement in labor productivity works exactly how you’d expect: A machine that can do the work of 100 people produces 100 times as much value in goods. (In some ways, this is even more intuitive to most people than the utility theory of value, which predicts an increase, but not a one-to-one increase.)

So, okay, this theory is not preposterous, unlike everything we’ve considered so far.

But it really can’t be Marx’s theory, because he contradicts it very heavily in multiple places, and this theory, unlike his, does not predict that the rate of profit must fall. (Which, again, is good, because it doesn’t.)

Yet even this theory is ultimately unsatisfying, for the following reasons:

  1. Some products literally cannot be made by hand using pre-historic technology. Consider a graphics card or a strong-force microscope. In order to make these things, we had to make tools to make better tools to make even better tools to make still better tools to make yet even better tools to make staggeringly near-flawless tools to make them. Even if you had the complete schematics for all the necessary tools and machines, all the raw materials you needed, and an unlimited supply of labor, I’m not sure you could build a graphics card from scratch within a single lifetime.
  2. While it can account for the value of increased efficiency in producing a given good, it doesn’t seem to be able to account for the value of inventing whole new classes of goods. (Yes, penicillin can be made by hand using pre-historic tools, but nobody did as far as we know, and the value of that invention was absolutely enormous in a way that even this labor theory of value cannot account for.)

These two problems are related: The new products you can make now that you couldn’t before are made possible by a mix of new ideas and an accumulation of better and better tools.

As far as proposition 5, I think we might be able to shore up the theory by counting the value of capital accumulation in terms of the labor that would be needed at each level of technology: however many person-hours to make the optical microscope, and then however many person-hours to make lasers, and however many person-hours to make sulfuric acid, and so on and so forth, until you’ve finally added up all the labor that went into producing the things that produced the things that produced the things that produced the things that produced graphics cards.

But as for proposition 6? I think this is just fatal. I don’t think there’s any way for a labor theory of value to not systematically and catastrophically undervalue new discoveries and new inventions.

The whole point of new inventions is that they make new things possible or allow us to do things with far less effort or cost than before. The value they create is in the labor they save. But if they are things we theoretically could have done, just didn’t know how (like penicillin), then there is no value added by the discovery (though at least there can be a lot of value added by the actual production). And if they are things we couldn’t have done until we reached a certain level of technology and capital, the value added seems to all be captured by the production of each new tier of technology, with nothing left to go to the discovery itself.

Maybe there’s still a way to save this theory. But at some point, we have to stop and ask ourselves:

Why?

Why do we even want a labor theory of value, when we already have a utility theory of value?

Maybe it’s the fact that utility is hard to measure precisely, and so the idea of basing our value system on it is uncomfortable? Yet I think this is just a fact of life: The things that really matter are hard to measure precisely.

And it’s not as if we have absolutely no idea: We can tell the difference between happiness and suffering, and we can see how various products and technologies can contribute to happiness and alleviate suffering. (We can also see how some products and technologies can reduce happiness and contribute to suffering! Not all new technologies are good, and some products that are good for their users are bad for other people!)

Indeed, we even have a unit of measurement: The QALY. And for some particular technologies—such as penicillin and vaccines—we actually have a pretty good idea of the number of QALY they’ve added to the world, and it’s enormous.

I’m not even saying Marx was wrong about everything. He had some good ideas, actually. And Marxian economists today do sometimes come up with useful findings that can be integrated into a deeper understanding of political economy.

But he was wrong about some things, and the labor theory of value is one of them.

Taylor Swift and the means of production

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Oct 5 JDN 2460954

This post is one I’ve been meaning to write for awhile, but current events keep taking precedence.

In 2023, Taylor Swift did something very interesting from an economic perspective, which turns out to have profound implications for our economic future.

She re-recorded an entire album and released it through a different record company.

The album was called 1989 (Taylor’s Version), and she created it because for the last four years she had been fighting with Big Machine Records over the rights to her previous work, including the original album 1989.

A Marxist might well say she seized the means of production! (How rich does she have to get before she becomes bourgeoisie, I wonder? Is she already there, even though she’s one of a handful of billionaires who can truly say they were self-made?)

But really she did something even more interesting than that. It was more like she said:

“Seize the means of production? I am the means of production.”

Singing and songwriting are what is known as a human-capital-intensive industry. That is, the most important factor of production is not land, or natural resources, or physical capital (yes, you need musical instruments, amplifiers, recording equipment and the like—but these are a small fraction of what it costs to get Talor Swift for a concert), or even labor in the ordinary sense. It’s one where so-called (honestly poorly named) “human capital” is the most important factor of production.

A labor-intensive industry is one where you just need a lot of work to be done, but you can get essentially anyone to do it: Cleaning floors is labor-intensive. A lot of construction work is labor-intensive (though excavators and the like also make it capital-intensive).

No, for a human-capital-intensive industry, what you need is expertise or talent. You don’t need a lot of people doing back-breaking work; you need a few people who are very good at doing the specific thing you need to get done.

Taylor Swift was able to re-record and re-release her songs because the one factor of production that couldn’t be easily substituted was herself. Big Machine Records overplayed their hand; they thought they could control her because they owned the rights to her recordings. But she didn’t need her recordings; she could just sing the songs again.

But now I’m sure you’re wondering: So what?

Well, Taylor Swift’s story is, in large part, the story of us all.

For most of the 18th, 19th, and 20th centuries, human beings in developed countries saw a rapid increase in their standard of living.

Yes, a lot of countries got left behind until quite recently.

Yes, this process seems to have stalled in the 21st century, with “real GDP” continuing to rise but inequality and cost of living rising fast enough that most people don’t feel any richer (and I’ll get to why that may be the case in a moment).

But for millions of people, the gains were real, and substantial. What was it that brought about this change?

The story we are usually told is that it was capital; that as industries transitioned from labor-intensive to capital-intensive, worker productivity greatly increased, and this allowed us to increase our standard of living.

That’s part of the story. But it can’t be the whole thing.

Why not, you ask?

Because very few people actually own the capital.

When capital ownership is so heavily concentrated, any increases in productivity due to capital-intensive production can simply be captured by the rich people who own the capital. Competition was supposed to fix this, compelling them to raise wages to match productivity, but we often haven’t actually had competitive markets; we’ve had oligopolies that consolidate market power in a handful of corporations. We had Standard Oil before, and we have Microsoft now. (Did you know that Microsoft not only owns more than half the consumer operating system industry, but after acquiring Activision Blizzard, is now the largest video game company in the world?) In the presence of an oligopoly, the owners of the capital will reap the gains from capital-intensive productivity.

But standards of living did rise. So what happened?

The answer is that production didn’t just become capital-intensive. It became human-capital-intensive.

More and more jobs required skills that an average person didn’t have. This created incentives for expanding public education, making workers not just more productive, but also more aware of how things work and in a stronger bargaining position.

Today, it’s very clear that the jobs which are most human-capital-intensive—like doctors, lawyers, researchers, and software developers—are the ones with the highest pay and the greatest social esteem. (I’m still not 100% sure why stock traders are so well-paid; it really isn’t that hard to be a stock trader. I could write you an algorithm in 50 lines of Python that would beat the average trader (mostly by buying ETFs). But they pretend to be human-capital-intensive by hiring Harvard grads, and they certainly pay as if they are.)

The most capital-intensive industries—like factory work—are reasonably well-paid, but not that well-paid, and actually seem to be rapidly disappearing as the capital simply replaces the workers. Factory worker productivity is now staggeringly high thanks to all this automation, but the workers themselves have gained only a small fraction of this increase in higher wages; by far the bigger effect has been increased profits for the capital owners and reduced employment in manufacturing.

And of course the real money is all in capital ownership. Elon Musk doesn’t have $400 billion because he’s a great engineer who works very hard. He has $400 billion because he owns a corporation that is extremely highly valued (indeed, clearly overvalued) in the stock market. Maybe being a great engineer or working very hard helped him get there, but it was neither necessary nor sufficient (and I’m sure that his dad’s emerald mine also helped).

Indeed, this is why I’m so worried about artificial intelligence.

Most forms of automation replace labor, in the conventional labor-intensive sense: Because you have factory robots, you need fewer factory workers; because you have mountaintop removal, you need fewer coal miners. It takes fewer people to do the same amount of work. But you still need people to plan and direct the process, and in fact those people need to be skilled experts in order to be effective—so there’s a complementarity between automation and human capital.

But AI doesn’t work like that. AI substitutes for human capital. It doesn’t just replace labor; it replaces expertise.

So far, AI is currently too unreliable to replace any but entry-level workers in human-capital-intensive industries (though there is some evidence it’s already doing that). But it will most likely get more reliable over time, if not via the current LLM paradigm, than through the next one that comes after. At some point, AI will come to replace experienced software developers, and then veteran doctors—and I don’t think we’ll be ready.

The long-term pattern here seems to be transitioning away from human-capital-intensive production to purely capital-intensive production. And if we don’t change the fact that capital ownership is heavily concentrated and so many of our markets are oligopolies—which we absolutely do not seem poised to do anything about; Democrats do next to nothing and Republicans actively and purposefully make it worse—then this transition will be a recipe for even more staggering inequality than before, where the rich will get even more spectacularly mind-bogglingly rich while the rest of us stagnate or even see our real standard of living fall.

The tech bros promise us that AI will bring about a utopian future, but that would only work if capital ownership were equally shared. If they continue to own all the AIs, they may get a utopia—but we sure won’t.

We can’t all be Taylor Swift. (And if AI music catches on, she may not be able to much longer either.)

Moral progress and moral authority

PNRJ core principles, ethics, Logic of Kindness, tribal paradigm , , , , , , , , , , , , , , , , , , ,

Dec 8 JDN 2460653

In previous posts I’ve written about why religion is a poor source of morality. But it’s worse than that. Religion actually holds us back morally. It is because of religion that our society grants the greatest moral authority to precisely the people and ideas which have most resisted moral progress. Most religious people are good, well-intentioned people—but religious authorities are typically selfish, manipulative, Machiavellian leaders who will say or do just about anything to maintain power. They have trained us to respect and obey them without question; they even call themselves “shepherds” and us the “flock”, as if we were not autonomous humans but obedient ungulates.

I’m sure that most of my readers are shocked that I would assert such a thing; surely priests and imams are great, holy men who deserve our honor and respect? The evidence against such claims is obvious. We only believe such things because the psychopaths have told us to believe them.

I am not saying that these evil practices are inherent to religion—they aren’t. Other zealous, authoritarian ideologies, like Communism and fascism, have been just as harmful for many of the same reasons. Rather, I am saying that religion gives authority and respect to people who would otherwise not have it, people who have long histories of evil, selfish, and exploitative behavior. For a particularly striking example, Catholicism as an idea is false and harmful, but not nearly as harmful as the Catholic Church as an institution, which has harbored some of the worst criminals in history.

The Catholic Church hierarchy is quite literally composed of a cadre of men who use tradition and rhetoric to extort billions of dollars from the poor and who have gone to great lengths to defend men who rape children—a category of human being that normally is so morally reviled that even thieves and murderers consider them beyond the pale of human society. Pope Ratzinger himself, formerly the most powerful religious leader in the world, has been connected with the coverup based on a letter he wrote in 1985. The Catholic Church was also closely tied to Nazi Germany and publicly celebrated Hitler’s birthday for many years; there is evidence that the Vatican actively assisted in the exodus of Nazi leaders along “ratlines” to South America. More recently the Church once again abetted genocide, when in Rwanda it turned away refugees and refused to allow prosecution against any of the perpetrators who were affiliated with the Catholic Church. Yes, that’s right; the Vatican has quite literally been complicit in the worst moral crimes human beings have ever committed. Embezzlement of donations and banning of life-saving condoms seem rather beside the point once we realize that these men and their institutions have harbored genocidaires and child rapists. I can scarcely imagine a more terrible source of moral authority.

Most people respect evangelical preachers, like Jerry Falwell who blamed 9/11 and Hurricane Katrina on feminists, gays, and secularists, then retracted the statement about 9/11 when he realized how much it had offended people. These people have concepts of morality that were antiquated in the 19th century; they base their ethical norms on books that were written by ignorant and cultish nomads thousands of years ago. Leviticus 18:22 and 20:13 indeed condemn homosexuality, but Leviticus 19:27 condemns shaving and Leviticus 11:9-12 says that eating fish is fine but eating shrimp is evil. By the way, Leviticus 11:21-22 seems to say that locusts have only four legs, when they very definitely have six and you can see this by looking at one. (I cannot emphasize this enough: Don’t listen to what people say about the book, read the book.)

But we plainly don’t respect scientists or philosophers to make moral and political decisions. If we did, we would have enacted equal rights for LGBT people sometime around 1898 when the Scientific-Humanitarian Committee was founded or at least by 1948 when Alfred Kinsey showed how common, normal, and healthy homosexuality is. Democracy and universal suffrage (for men at least) would have been the norm shortly after 1689 when Locke wrote his Two Treatises of Government. Women would have been granted the right to vote in 1792 upon the publication of Mary Woolstonecraft’s A Vindication of the Rights of Woman, instead of in 1920 after a long and painful political battle. Animal rights would have become law in 1789 with the publication of Bentham’s Introduction to the Principles of Morals and Legislation. We should have been suspicious of slavery since at least Kant if not Socrates, but instead it took until the 19th century for slavery to finally be banned. We owe the free world to moral science; but nonetheless we rarely listen to the arguments of moral scientists. As a species we fight for our old traditions even in the face of obvious and compelling evidence to the contrary, and this holds us back—far back. If they haven’t sunk in yet, read these dates again: Society is literally about 200 years behind the cutting edge of moral science. Imagine being 200 years behind in technology; you would be riding horses instead of flying in jet airliners and writing letters with quills instead of texting on your iPhone. Imagine being 200 years behind in ecology; you would be considering the environmental impact of not photovoltaic panels or ethanol but whale oil. This is how far behind we are in moral science.

One subfield of moral science has done somewhat better: The economics of theory and the economics of practice differ by only about 100 years. Capitalism really was instituted on a large scale only a few decades after Adam Smith argued for it, and socialism (while horrifyingly abused in the Communism of Lenin and Stalin) has nonetheless been implemented on a wide scale only a century after Marx. Keynesian stimulus was international policy (despite its numerous detractors) in 2008 and 2020, and Keynes himself died in only 1946. This process is still slower than it probably should be, but at least we aren’t completely ignoring new advances the way we do in ethics. 100 years behind in technology we would have cars and electricity at least.

Except perhaps in economics, in general we entrust our moral claims to the authority of men in tall hats and ornate robes who merely assert their superiority and ties to higher knowledge, while ignoring the thousands of others who actually apply their reason and demonstrate knowledge and expertise. A criminal in pretty robes who calls himself a moral leader might as well be a moral leader, as far as we’re concerned; a genuinely wise teacher of morality who isn’t arrogant enough to assert special revelation from the divine is instead ignored. Why do we do this? Religion. Religion is holding us back.

We need to move beyond religion in order to make real and lasting moral progress.

No, the system is not working as designed

PNRJ core principles, inequality, public policy , , , , , , , , , , , , ,

You say you’ve got a real solution…

Well, you know,

We’d all love to see the plan.

“Revolution”, the Beatles


Jun 16 JDN 2460478


There are several different versions of the meme, but they all follow the same basic format: Rejecting the statement “the system is broken and must be fixed”, they endorse the statement “the system is working exactly as intended and must be destroyed”.


This view is not just utterly wrong; it’s also incredibly dangerous.

First of all, it should be apparent to anyone who has ever worked in any large, complex organization—a corporation, a university, even a large nonprofit org—that no human system works exactly as intended. Some obviously function better than others, and most function reasonably well most of the time (probably because those that don’t fail and disappear, so there is a sort of natural selection process at work); but even with apparently simple goals and extensive resources, no complex organization will ever be able to coordinate its actions perfectly toward those goals.

But when we’re talking about “the system”, well, first of all:

What exactly is “the system”?

Is it government? Society as a whole? The whole culture, or some subculture? Is it local, national, or international? Are we talking about democracy, or maybe capitalism? The world isn’t just one system; it’s a complex network of interacting systems. So to be quite honest with you, I don’t even know what people are complaining about when they complain about “the system”. All I know is that there is some large institution that they don’t like.

Let’s suppose we can pin that down—say we’re talking about capitalism, for instance, or the US government. Then, there is still the obvious fact that any real-world implementation of a system is going to have failures. Particularly when millions of people are involved, no system is ever going to coordinate exactly toward achieving its goals as efficiently as possible. At best it’s going to coordinate reasonably well and achieve its goals most of the time.

But okay, let’s try to be as charitable as possible here.

What are people trying to say when they say this?

I think that fundamentally this is meant as an expression of Conflict Theory over Mistake Theory: The problems with the world aren’t due to well-intentioned people making honest mistakes, they are due to people being evil. The response isn’t to try to correct their mistakes; it’s to fight them (kill them?), because they are evil.

Well, it is certainly true that evil people exist. There are mass murderers and tyrants, rapists and serial killers. And though they may be less extreme, it is genuinely true that billionaires are disproportionately likely to be psychopaths and that those who aren’t typically share a lot of psychopathic traits.

But does this really look like the sort of system that was designed to optimize payoffs for a handful of psychopaths? Really? You can’t imagine any way that the world could be more optimized for that goal?

How about, say… feudalism?

Not that long ago, historically—less than a millennium—the world was literally ruled by those same sorts of uber-rich psychopaths, and they wielded absolute power over their subjects. In medieval times, your king could confiscate your wealth whenever he chose, or even have you executed on a whim. That system genuinely looks like it’s optimized for the power of a handful of evil people.

Democracy, on the other hand, actually looks like it’s trying to be better. Maybe sometimes it isn’t better—or at least isn’t enough better. But why would they even bother letting us vote, if they were building a system to optimize their own power over us? Why would we have these free speech protections—that allow you to post those memes without going to prison?

In fact, there are places today where near-absolute power really is concentrated in a handful of psychopaths, where authoritarian dictators still act very much like kings of yore. In North Korea or Russia or China, there really is a system in place that’s very well optimized to maximize the power of a few individuals over everyone else.

But in the United States, we don’t have that. Not yet, anyway. Our democracy is flawed and imperilled, but so far, it stands. It needs our constant vigilance to defend it, but so far, it stands.

This is precisely why these ideas are so dangerous.

If you tell people that the system is already as bad as it’s ever going to get, that the only hope now is to burn it all down and build something new, then those people aren’t going to stand up and defend what we still have. They aren’t going to fight to keep authoritarians out of office, because they don’t believe that their votes or donations or protests actually do anything to control who ends up in office.

In other words, they are acting exactly as the authoritarians want them to.

Short of your actual support, the best gift you can give your enemy is apathy.

If all the good people give up on democracy, then it will fail, and we will see something worse in its place. Your belief that the world can’t get any worse can make the world much, much worse.

I’m not saying our system of government couldn’t be radically improved. It absolutely could, even by relatively simple reforms, such as range voting and a universal basic income. But there are people who want to tear it all down, and if they succeed, what they put in its place is almost certainly going to be worse, not better.

That’s what happened in Communist countries, after all: They started with bad systems, they tore them down in the name of making something better—and then they didn’t make something better. They made something worse.

And I don’t think it’s an accident that Marxists are so often Conflict Theorists; Marx himself certainly was. Marx seemed convinced that all we needed to do was tear down the old system, and a new, better system would spontaneously emerge. But that isn’t how any of this works.

Good governance is actually really hard.

Life isn’t simple. People aren’t easy to coordinate. Conflicts of interest aren’t easy to resolve. Coordination failures are everywhere. If you tear down the best systems we have for solving these problems, with no vision at all of what you would replace them with, you’re not going to get something better.

Different people want different things. We have to resolve those disagreements somehow. There are lots of ways we could go about doing that. But so far, some variation on voting seems to be the best method we have for resolving disagreements fairly.

It’s true; some people out there are really just bad people. Some of what even good people want is ultimately not reasonable, or based on false presumptions. (Like people who want to “cut” foreign aid to 5% of the budget—when it is in fact about 1%.) Maybe there is some alternative system out there that could solve these problems better, ensure that only the reasonable voices with correct facts actually get heard.

If so, well, you know:

We’d all love to see the plan.

It’s not enough to recognize that our current system is flawed and posit that something better could exist. You need to actually have a clear vision of what that better system looks like. For if you go tearing down the current system without any idea of what to replace it with, you’re going to end up with something much worse.

Indeed, if you had a detailed plan of how to improve things, it’s quite possible you could convince enough people to get that plan implemented, without tearing down the whole system first.

We’ve done it before, after all:

We ended slavery, then racial segregation. We gave women the right to vote, then integrated them into the workforce. We removed the ban of homosexuality, and then legalized same-sex marriage.


We have a very clear track record of reform working. Things are getting better, on a lot of different fronts. (Maybe not all fronts, I admit.) When the moral case becomes overwhelming, we really can convince people to change their minds and then vote to change our policies.

We do not have such a track record when it comes to revolutions.

Yes, some revolutions have worked out well, such as the one that founded the United States. (But I really cannot emphasize this: they had a plan!) But plenty more have worked out very badly. Even France, which turned out okay in the end, had to go through a Napoleon phase first.

Overall, it seems like our odds are better when we treat the system as broken and try to fix it, than when we treat it as evil and try to tear it down.

The world could be a lot better than it is. But never forget: It could also be a lot worse.

The alienation of labor

PNRJ core principles, critique of neoclassical economics, development economics, ethics, futurism, inequality, public policy, science and academia , , , , , , , ,

Apr 10 JDN 2459680

Marx famously wrote that capitalism “alienates labor”. Much ink has been spilled over interpreting exactly what he meant by that, but I think the most useful and charitable reading goes something like the following:

When you make something for yourself, it feels fully yours. The effort you put into it feels valuable and meaningful. Whether you’re building a house to live in it or just cooking an omelet to eat it, your labor is directly reflected in your rewards, and you have a clear sense of purpose and value in what you are doing.

But when you make something for an employer, it feels like theirs, not yours. You have been instructed by your superiors to make a certain thing a certain way, for reasons you may or may not understand (and may or may not even agree with). Once you deliver the product—which may be as concrete as a carburetor or as abstract as an accounting report—you will likely never see it again; it will be used or not by someone else somewhere else whom you may not even ever get the chance to meet. Such labor feels tedious, effortful, exhausting—and also often empty, pointless, and meaningless.

On that reading, Marx isn’t wrong. There really is something to this. (I don’t know if this is really Marx’s intended meaning or not, and really I don’t much care—this is a valid thing and we should be addressing it, whether Marx meant to or not.)

There is a little parable about this, which I can’t quite remember where I heard:

Three men are moving heavy stones from one place to another. A traveler passes by and asks them, “What are you doing?”

The first man sighs and says, “We do whatever the boss tells us to do.”

The second man shrugs and says, “We pick up the rocks here, we move them over there.”

The third man smiles and says, “We’re building a cathedral.”

The three answers are quite different—yet all three men may be telling the truth as they see it.

The first man is fully alienated from his labor: he does whatever the boss says, following instructions that he considers arbitrary and mechanical. The second man is partially alienated: he knows the mechanics of what he is trying to accomplish, which may allow him to improve efficiency in some way (e.g. devise better ways to transport the rocks faster or with less effort), but he doesn’t understand the purpose behind it all, so ultimately his work still feels meaningless. But the third man is not alienated: he understands the purpose of his work, and he values that purpose. He sees that what he is doing is contributing to a greater whole that he considers worthwhile. It’s not hard to imagine that the third man will be the happiest, and the first will be the unhappiest.

There really is something about the capitalist wage-labor structure that can easily feed into this sort of alienation. You get a job because you need money to live, not because you necessarily value whatever the job does. You do as you are told so that you can keep your job and continue to get paid.

Some jobs are much more alienating than others. Most teachers and nurses see their work as a vocation, even a calling—their work has deep meaning for them and they value its purpose. At the other extreme there are corporate lawyers and derivatives traders, who must on some level understand that their work contributes almost nothing to the world (may in fact actively cause harm), but they continue to do the work because it pays them very well.

But there are many jobs in between which can be experienced both ways. Working in retail can be an agonizing grind where you must face a grueling gauntlet of ungrateful customers day in and day out—or it can be a way to participate in your local community and help your neighbors get the things they need. Working in manufacturing can be a mechanical process of inserting tab A into slot B and screwing it into place over, and over, and over again—or it can be a chance to create something, convert raw materials into something useful and valuable that other people can cherish.

And while individual perspective and framing surely matter here—those three men were all working in the same quarry, building the same cathedral—there is also an important objective component as well. Working as an artisan is not as alienating as working on an assembly line. Hosting a tent at a farmer’s market is not as alienating as working the register at Walmart. Tutoring an individual student is more purposeful than recording video lectures for a MOOC. Running a quirky local book store is more fulfilling than stocking shelves at Barnes & Noble.

Moreover, capitalism really does seem to push us more toward the alienating side of the spectrum. Assembly lines are far more efficient than artisans, so we make most of our products on assembly lines. Buying food at Walmart is cheaper and more convenient than at farmer’s markets, so more people shop there. Hiring one video lecturer for 10,000 students is a lot cheaper than paying 100 in-person lecturers, let alone 1,000 private tutors. And Barnes & Noble doesn’t drive out local book stores by some nefarious means: It just provides better service at lower prices. If you want a specific book for a good price right now, you’re much more likely to find it at Barnes & Noble. (And even more likely to find it on Amazon.)

Finding meaning in your work is very important for human happiness. Indeed, along with health and social relationships, it’s one of the biggest determinants of happiness. For most people in First World countries, it seems to be more important than income (though income certainly does matter).

Yet the increased efficiency and productivity upon which our modern standard of living depends seems to be based upon a system of production—in a word, capitalism—that systematically alienates us from meaning in our work.

This puts us in a dilemma: Do we keep things as they are, accepting that we will feel an increasing sense of alienation and ennui as our wealth continues to grow and we get ever-fancier toys to occupy our meaningless lives? Or do we turn back the clock, returning to a world where work once again has meaning, but at the cost of making everyone poorer—and some people desperately so?

Well, first of all, to some extent this is a false dichotomy. There are jobs that are highly meaningful but also highly productive, such as teaching and engineering. (Even recording a video lecture is a lot more fulfilling than plenty of jobs out there.) We could try to direct more people into jobs like these. There are jobs that are neither particularly fulfilling nor especially productive, like driving trucks, washing floors and waiting tables. We could redouble our efforts into automating such jobs out of existence. There are meaningless jobs that are lucrative only by rent-seeking, producing little or no genuine value, like the aforementioned corporate lawyers and derivatives traders. These, quite frankly, could simply be banned—or if there is some need for them in particular circumstances (I guess someone should defend corporations when they get sued; but they far more often go unjustly unpunished than unjustly punished!), strictly regulated and their numbers and pay rates curtailed.

Nevertheless, we still have decisions to make, as a society, about what we value most. Do we want a world of cheap, mostly adequate education, that feels alienating even to the people producing it? Then MOOCs are clearly the way to go; pennies on the dollar for education that could well be half as good! Or do we want a world of high-quality, personalized teaching, by highly-qualified academics, that will help students learn better and feel more fulfilling for the teachers? More pointedly—are we willing to pay for that higher-quality education, knowing it will be more expensive?

Moreover, in the First World at least, our standard of living is… pretty high already? Like seriously, what do we really need that we don’t already have? We could always imagine more, of course—a bigger house, a nicer car, dining at fancier restaurants, and so on. But most of us have roofs over our heads, clothes on our backs, and food on our tables.

Economic growth has done amazing things for us—but maybe we’re kind of… done? Maybe we don’t need to keep growing like this, and should start redirecting our efforts away from greater efficiency and toward greater fulfillment. Maybe there are economic possibilities we haven’t been considering.

Note that I specifically mean First World countries here. In Third World countries it’s totally different—they need growth, lots of it, as fast as possible. Fulfillment at work ends up being a pretty low priority when your children are starving and dying of malaria.

But then, you may wonder: If we stop buying cheap plastic toys to fill the emptiness in our hearts, won’t that throw all those Chinese factory workers back into poverty?

In the system as it stands? Yes, that’s a real concern. A sudden drop in consumption spending in general, or even imports in particular, in First World countries could be economically devastating for millions of people in Third World countries.

But there’s nothing inherent about this arrangement. There are less-alienating ways of working that can still provide a decent standard of living, and there’s no fundamental reason why people around the world couldn’t all be doing them. If they aren’t, it’s in the short run because they don’t have the education or the physical machinery—and in the long run it’s usually because their government is corrupt and authoritarian. A functional democratic government can get you capital and education remarkably fast—it certainly did in South Korea, Taiwan, and Japan.

Automation is clearly a big part of the answer here. Many people in the First World seem to suspect that our way of life depends upon the exploited labor of impoverished people in Third World countries, but this is largely untrue. Most of that work could be done by robots and highly-skilled technicians and engineers; it just isn’t because that would cost more. Yes, that higher cost would mean some reduction in standard of living—but it wouldn’t be nearly as dramatic as many people seem to think. We would have slightly smaller houses and slightly older cars and slightly slower laptops, but we’d still have houses and cars and laptops.

So I don’t think we should all cast off our worldly possessions just yet. Whether or not it would make us better off, it would cause great harm to countries that depend on their exports to us. But in the long run, I do think we should be working to achieve a future for humanity that isn’t so obsessed with efficiency and growth, and instead tries to provide both a decent standard of living and a life of meaning and purpose.