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Development in time of WOE model of economics

Dear professor Wolff, Please allow me to approach you in this way with a question. Being hit badly by the past economic downturn in the Netherlands, I couldn't resist spending a great part of my time studying the unpleasant results coming out of that downturn, several of them leading to an enormously skewed wealth distribution. Your program is one of my favored sources of insight and information, for which I want to express my gratitude to you. Another person I met in my pursuit is the Australian mathematician and Steve Keen. I have seen him developing models for simulating the time evolution of several economic models, one of them the, his words, Islamic Economy, which replaces the money creation by debt with one that originates from the purchasing of shares, and where the role of interest is being played by dividends. That one also leads, starting with particular parameters, mirroring a typical capitalistic behavior, to a downturn of production and shared wealth. My question to you is: Could it be that an economy based on WOE's, when modeled, would have a different outcome? Could for instance the ownership of the employees play the role of shares and the promise of labor by those owners as a promise of dividend, or might there be perhaps another mapping of paramaters onto this model, that leads to a more pleasant development. I would be more then grateful if you could find the time to expand on the mathematics or description behind an economy, based on WOE's, and especially on an estimated prediction of the development of such a model. Yours sincerely, Gerard Veltman, Groningen, The Netherlands

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Illegal Immigrants

Hi Prof. Wolff, In one of your podcasts, you'd mentioned that the poorest 1% of our nation are undocumented immigrants. Is there a source you could refer me to, so I may investigate further?

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Amazon Report published by Institute for Local Self-Reliance

https://ilsr.org/wp-content/uploads/2016/11/ILSR_AmazonReport_final.pdf

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Server Wages - Tip Ethics

I was wondering what your opinion is of tipping in restaurants. Many servers make as little as $2.13 an hour and consider patrons that do not tip extremely rude. How has capitalism contributed to this phenomenon? I've read that restaurant owners claim that it allows them to charge less for food on the menu, etc. It seems to me that the restaurant industry has managed to exploit a social norm (adding gratuity to a check) to absolve from themselves any complaints concerning wage by their employees. What do you think?

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Land Reform

Professor Wolff, I enjoyed your discussion of the real estate business. I would be interested to hear you discuss the radical concept of a government granting a Right of landholding to each citizen or family. There could be different categories for rural and urban land, and all the parcels could be relatively small. Is this or something like it being done anywhere, or has it? Also, I'm interested in the concept of limiting land ownership. If you could only cut down trees and drill oil on the lands you have to live on, then you're less likely to cut those trees and dump that oil in the river, no? What if we put limits on land ownership of individuals, and companies? Have any approaches like this been tried?

posted an official response

All of these measures have been tried in history. The European transition from feudalism to capitalism entailed all sorts of government-enforced entitlements to land for individuals/families varying from place to place and time to time. In the Soviet revolution of 1917, Lenin et al distributed land to the Russian peasants in small individual lots which even Stalin later had to enable to endure inside collective and state farms. Land reforms of all sorts in modern Asia, Latin America and Africa have entitled citizens to own land often in small individual holdings. Political struggles determined whether, how, and for how long original land grants survived; likewise "modern capitalist market forces" also shaped those outcomes.

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I would like to hear about automation in any of your talks

Automation is displacing more jobs each day. This tendency will increase as we approach singularity. Some people, such as Ray Kurzweil, think this will happen as early as 2035. My personal fear is a disruption in the circular flow of economy : households provide labour, and corporations provide goods and services. Profesor Ha Joon Chang believes such a quandary can be solved through a social arrangement and that in the long run such thing will be solved ( see link ) , I have my qualms. Even if a social arrangement can be made, but then the problem becomes how to force the government into enact such changes, for it is not uncommon to see the government act on its own benefit while leaving a large sector of the society marginalized. Reference Ha-Joon Chang: "Economics: The User's Guide" | Talks at Google https://www.youtube.com/watch?v=n5j5EW933Kw Minute 44:30 to 47:45

posted an official response

The only reason thinkers work hard to show that social problems can be solved is because defenders of the status quo - that has failed to solve the problem - insist that the failure is because the problem cannot be solved. Automation is an easily and readily "solved" problem. Throughout history, societies have achieved and incorporated technical change that replaced human labor with various kinds of tools and machines. Capitalism is noteworthy because it has achieved a high rate of technical change if and when it was profitable to do so; it has failed to achieve technical progress when and where profits were not high enough to induce them.

Think of it this way. Imagine a technical change that enables 50 workers to do in a day what before required 100 workers. For simplicity assume further that all wages and non-labor costs were the same and that the output quantity and price were likewise the same (i.e. unchanged). Two alternative possibilities present themselves in this example. For profit, the employer will typically fire 50 workers and install the technical change; his profit rises because he has cut his labor costs in half. The alternative that serves the workers instead of profit would be for all 100 workers to keep their jobs but work exactly half the hours per day that they did before. Their wages would not change, nor would the employer's profit. The technical change would have delivered leisure to the workers without reducing their incomes. If automation were managed for the workers - ie. a socialist approach one might say - it would be welcomed (not resisted) by them and would benefit more and more needy people than what raised profits do. But capitalism controls, directs, and limits technical change/automation to serve its needs while claiming that the resulting unemployment, suffering, etc is somehow intrinsic to technology/automation per se rather than how it is installed and for whose benefit.

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An observation for review

I have made an observation that i would like to be reviewed by Richard. In one comedy show, from Croatia, called "Our little clinic", there was a scene: Guy says: "I have a problem. I need three maids but only for one I have enough money." Other guy responds: "Make a competition for three maids. Reward the best one by paying it salary. Other get nothing. You get work of free maids by the price of one." Competition is main component of capitalism. The competition is dependent on reward witch means that there higher performing workers should be paid more then lower performing workers. There are two ways archive that: First: by increasing the paycheck of higher performing workers. Second: by lowering the paycheck of lower performing workers. If they look for decreasing cost of production they would be tempted to choose the second one. In that case the main character of competition is just an excuse by employer to lower the paychecks of his employees, and also an mask for doing so. Do you want competition in economics? Do you want higher quality work to be rewarded? In that kind of system the difference between higher and lower performers might be difference whether you can earn enough to survive. In other words workers are not working as much for earning money then for hope that they might earn money. There is an psychological experiment: use food to train an dove to pick an button. That is classical conditioning. Then lower the rate by witch reward, food, is given to the dove for picking the button. The dove starts picking button even more than it use to. Why would lowering the reward for doing something increase the need to that same thing? Could it be anxiety? I don`t know but that psychological effect reminds me on capitalism. Why is that?

posted an official response

Defenders of capitalism have always praised competition as if the way capitalism organizes competition is either (a) the only way to do so or (b) the socially "best" way to do so. But both (a) and (b) are false. Competition among work performers, for example, can be recognized and rewarded in many different ways. Raising or lowering their wages or hiring or firing them is only the capitalist way of organizing competition. An alternative economic system might, for example, disconnect wages and living standards from work performance. The worker with lower productivity would then be required to take a remedial course, get counselling, move to a different job where productivity would be higher, get more skills training etc. The more productive worker might be recognized for his/her contribution to output, social welfare, etc...or be entitled to more vacation days...or be promoted to a preferred job, etc. There is much empirical research suggesting that other ways of rewarding/punishing greater/lesser work performance have better social results than the capitalist way.

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American Chartered Bank

American Chartered Bank was recently purchased and merged into MB Financial bank. I have read that MB screwed the CEO, and the CEO screwed his bankers, who were equity shareholders at American Chartered Bank. I would love to hear more on this topic.

posted an official response

Based on public records, ACB was hurt in the 2008 global crisis and turned to several private equity groups for the capital to survive and recoup. To satisfy those investors, the sale to MB Financial made sense. Private profit of small groups once again determined an economic event with social consequences. Chicago had one of the nations most competitive urban banking industries: lost of competition among banks. MB's several acquisitions (and others' as well) are fast turning Chicago into a highly concentrated banking industry with all the consequences of consolidated economic but also political power in ever fewer hands.

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Demonetization of currency in India

Would you comment on the recent demonetization of currency in India? Also, on a somewhat related note, what's your opinion of fiat currencies like bitcoin?

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The Next Crash: Causes & Effects? USA debt, Personal debt

Thank You for all you do!

posted an official response

Thank you for the generous communication. Might we ask in return that you let other possibly interested people know about our websites and activities? Many thanks.

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Thoughts on the Future of our Economy

What are your thoughts on the ever increasing automation of our workforce?

posted an official response

The way capitalism works, the higher the wages workers' efficiency and struggles achieve, the greater the incentive for employers to replace them with machines. While improved technology could work (as its defenders have often promised) to reduce drudgery of labor and worktime, capitalists prefer to use technology to fir employees, automate, and enhance profits. Because employers call the shorts in capitalism, technology aims for profits, workers come to fear and block it, social irrationality deepens. The increasing automation of modern capitalism functions as a process producing the antipathy to capitalism now visible from left and right.

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Universal Basic Income

Dr. Wolff and the whole Democracy @ Work team, I'd like to thank you for the work you do and material you release. I find it to be very valuable, and it had caused me to start reading some of Marx's writing. My Question is about basic income, or universal basic income. In multiple countries there are basic income experiments going on currently, others are planning to initiate BI experiments. The research sounds promising http://basicincome.org/research/. Do you think that BI is a viable strategy to help provide economic justice? Is there just a lack of political will and understanding on BI in the United States, or you think that the idea is flawed?

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Benjamin Rodriguez

Hello Prof. Wolff. Just want to start by thanking all the work you and your team do. Spreading the concept of Co-Ops and the even thought it may not be a panacea, it will solve a lot of the ailment afflicting the failure of capitalism. Not sure if you have in your many updates address the specifics of the sham of the debt-to-GDP ratio. Being that we're not under a "War Economy" experts keep talking about the need to lower the deficit. Below I have added the article from "Business Insider- America Is Not Drowning In Debt: These 5 Charts Destroy The Biggest Myth About The US Economy" that provide a very good explanation in my opinion that the assets to liabilities ratio of us companies outweigh the worry that "our national deficit" cannot be repaid in a prudent manner, a combination of higher taxes and higher capital investment (cascading into decent productivity growth) under a Co-op socialist system could fix in a few years. If could please address this manner when possible, I would gladly appreciated. link, http://www.businessinsider.com/america-is-not-drowning-in-debt-2013-4 Thank You. PS. Hoping to get a group of people inspired to listen to the podcast so we can have you over in Denver, Colorado.

posted an official response

The Business Insider type article works with assets and liabilities as if the social effects of debt were captured by comparing them alone, but that is a mistake. Rising debts have consequences independent of assets just like creditors react to rising debts of debtors and dont simply accept debts when assets are larger in value. Whether and how valuations are made matters. Whether and how assets can be converted into cash to settle debts matters. And so do many other aspects of debt and its social effects. This kind of sensationalist article implies that all who study debt and debt-related social problems across the centuries are all wrong; they should have measured assets in relation to debts and GDP.

I am currently planning a trip in 2017 to Denver and Boulder, Colorado. Keep watching our events page on our websites to find out exact times and places for the Denver area visit.

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Cooperation Jackson and the Community Production Initiative

Greetings to the whole team. I can not remember if you have talked about Cooperation Jackson on your programs. It is an organization in Jackson MS focused on the development of economic democracy by building a solidarity economy anchored by a network of cooperatives and other types of worker owned and democratically self-managed enterprises. While they run many important programs, I would like to draw your attention to the Community Production Initiative. This project is working on building a Fabrication Laboratory (Fab Lab), a center for computer coding and 3D printing. What I love about this idea is their singular focus on the creation of economic democracy while wrestling commodity production away from the capitalist mode of production, and not just 'job training' or creative development. I urge you to talk about this important development for the African American Community on your show, they are currently fundraising for the Fab Lab and they need a total of $600K before the middle of January. My hope is that likeminded listeners may visit their website and help build this important development in one of the poorest states in the nation.

posted an official response

Excellent suggestion, will pursue. I would also appreciate inviting someone from Cooperation Jackson to do an interview with me on my radio show. That requires being in Manhattan. If you know of anyone from there who might do this effectively, please let us know via email to the website.

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Small Businesses

I have heard that Marxism itself is not opposed to small business ownership, but when I see marxist speak they appear to attack all enterprise. Can you clarify?

posted an official response

The major thrust of Marx's critique of capitalism concerned the relationship between employer and employee. Capitalism makes that relationship exploitative: the worker produces more value by his/her labor than is returned to the worker as payment for his/her work effort. That "more value" is the origin of profit and belongs instantaneously to the employer. This critique of capitalism applies equally whether the employer has 5 or 5000 employees. However, Marx was a nuanced thinker and also well understood the struggles and contradictions between small and large businesses. He was also a careful political strategist quite willing to see the alliance possibilities for an aroused working class that could confront and defeat big business if it could construct an effective alliance with small businesses. Such an alliance wold entail compromises all around; what the worker side might then offer is to leave small capitalists free to maintain their businesses as a "capitalist sector" alongside a socialist sector where enterprises would be run democratically - one worker one vote - by all employees.

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