October 7 - October 26

Q1: Does Microsoft do the same thing as Rockefeller's South Improvement Company did?

R: Not overtly. Competition is still thwarted in ways that may cross the line established by our anti-trust laws but courts have interpreted the laws with more leniency over the last fifteen years. Microsoft makes computer manufacturers an offer they can't refuse -- a free operating system. The result is that competing software companies are at a disadvantage (not to mention other operating systems of which there is really only one) because their software products don't operate as well on Windows as Microsoft's products do. The reason is that they don't know all the programming code used by Windows. The European Union courts have determined that Microsoft is a monopoly and that they must give up all of that code. Microsoft is fighting that decision. Rockefeller's South Improvement Company conspired to fix prices to drive out its competitors from the market -- that was overt.

Q2: How do you determine how much a product is worth? Is it simply how much it cost to produce plus a set sum which allows for profit? Because you don't really know how much consumers will pay until the product is on the market. So, I guess I am wondering how, in the marginal product theory, you determine how much (in money) the worker produced, thus, how much they will be paid.

Great Question!

R: This is the fundamental question that has been asked ever since the emergence of economics as a social science. Marx argued that labor is the sole source of value. That is a commodity's worth is determined by the amount of labor required to produce it. But, he admitted, value could diverge from price. The trick for Marx to prove his theory was to demonstrate a correspondence between price and value, i.e., if it takes twice as much labor time (including the labor time required to produce the capital equipment used up in production) to produce commodity A as that required to produce commodity B, then Commodity A should sell at a price twice as high as that of B. Neither Marx nor any one since Marx has solved this so-called Transformation Problem, hence Marx's theory of value has not been proven. When Frederick Marshall came along in the 1890s he developed a theory of price determination that has been adopted and held by mainstream economics ever since. In the Marshallian theory prices are determined in the market place when an equilibrium has been reached at which the quantity demanded by consumers and the quantity supplied by suppliers is the same at one and only one price. The system tends to gravitate to this position. In a way, it is like an invisible auction -- sellers offer goods at a price, buyers respond and if the result is a shortage or surplus, price is adjusted until the equilibrium is finally reached.  The second part of the question -- how much is paid to workers -- again is answered differently by Marx and by mainstream economics. Marx argued that workers are paid according to the value of subsistence required to just reproduce a worker's labor power (bare minimum of food, clothing, shelter etc) then they produce more value at work, leaving a profit (surplus value for the capitalist). Mainstream economics (beginning really with Marshallian economics) again answered by reference to the exchange market -- workers offered their services and after negotiating with employers an equilibrium wage rate was settled upon, then workers entered the workplace.  If too many workers offered their services at a given wage (a surplus of workers) then wages would fall -- and so on, until an equilibrium was reached. The marginal product theory was simply an add-on to this approach. It just offered an explanation as to the reasoning of the employer. The employer would not add another worker unless that worker was capable of adding  product value equal to or greater than the wage rate. 

Q3: What country has the most equality between the sexes? Why that particular country?

R: The Scandinavian countries have the greatest equality in wages, working conditions and job opportunities. Israel is also a relatively high-ranking country in terms of equitable economic opportunity for women. Some of the differences are due to greater availability of child-care services, educational opportunities, maternity leave provisions and the like. Here is a link to more information from the OECD: http://www.oecd.org/dataoecd/53/52/31457987.pdf.

Q4: They say that this past hurricane season, a record season as far as the # and the devastation of hurricanes, was caused by an ocean temperature increase of 1 degree, which is a lot for such a large area. Therefore pointing at global warming, which is caused from CO² emissions. The current government is very pro-fossil fuel use as they are looking out for the economy and their own financial well-being. So, the government should be something to rely on to keep private business from making dangerous (as far as safety, health, and the environment) decisions just for the businesses financial well-being. However government can be, and currently is, unreliable in overseeing the nation's and the world's well-being.

R: I agree. Free market ideologists tend to hold firmly to the belief that if we simply handed all resource management over to private business it would be a better world -- not more equitable, but better, because it is in the interest of the private entrepreneur to look carefully after their investment. They see no contradiction in the fact that private business is absolutely dependent on government to protect their ownership of the means of production. Democracy is dangerous from this point of view, because if the resulting distribution of income and wealth is extremely unequal, the dispossessed may want a new, more egalitarian government. So, money must be allowed to triumph over the interests of the vast majority of a nation's citizens. 

Q5: Nancy Folbre has an interesting view on life and how the economy is affected by what is happening in the household. I like reading her views.

R: Me too. The title, The Invisible Heart is, of course, a reference to Adam Smith's invisible hand concept. The comparison is meant as a comment on the cold, calculating character of a market economy and the absence of a focus on the contribution of care-givers (of both sexes) to the well-being of society.

Q6: How old is Ralph Nader? For how long has he been running for President? Do you think he'll ever win? What does he stand for?

R: He is about 72 years old. He has run for president four or five times. He will never win. Some of his positions and policy prescriptions are: a) pull out of Iraq in six months b) eliminate taxes on the first $50,000 of income c) add a penny tax on every stock market transaction (raising a predicted $150 b.) d) put a national health care system in place (we are the only industrialized country without one) an e) eliminate all corporate welfare particularly tax breaks for firms that export jobs. 

Q7: I've heard that there are six big companies that run the U.S. market and how we all live. I think GM was one of them. Do you know the other five?

R: I started to list the ones I thought were in the top ten and got to Exxon-Mobil and the Ford Motor Co., then began wondering about the remaining. Forgoing that, I just went to the Fortune 500 list. WalMart is the biggest company in America. Notice that seven of the top nine (I believe) are either auto or oil companies. Does that surprise you? http://www.usatoday.com/money/companies/2004-03-22-fortune-500-list_x.htm

Q8: Do you believe the FCC has been taken over or not? Is Clear Channel a monopoly?

R: Michael Powell is the head of the FCC. Guess whose son he is? He was attempting to make a regulatory change that would have virtually eliminated the ownership restrictions in the broadcast industry. As it is, they are less restrictive than they use to be, but it is still the law that no single company can own more than a certain number of radio or television stations in the same market. So, Clear Channel is not a monopoly but it has a large share of the national radio market. In television, the networks of ABC, CBS, NBC and FOX are all owned by very powerful companies that are believed by many to determine how they cover the news.

Q: I did not like the game we played on Friday (double oral auction). I did not really get it. If I bought what they were selling then I would lose money because you did not know what you were buying.

R: It was an exercise in which each buyer was given a set of preferences (based upon the reservation prices for each unit -- so you were suppose to accept that the next unit was worth say $5 to you and bid according to that constraint). Sure it wasn't realistic in that regard, but the process and its outcome were a fair representation of what happens in a market place when millions of consumers and sellers make decisions based upon their preferences and costs, respectively. The key was to accept the constraints.

I still have a long way to go. Many questions are sitting here on my desk. I'll whittle away at them when I can. 10.26.04