Tuesday, September 17, 2013

Adam Smith On Unproductive Labour

A Comment I sent to Robert Vienneu’s Blog: “Thoughts on Economics”: ‘Capital as a Social Relationship’, 29 August 2013 is posted below. HERE 
Robert writes a most interesting Blog, though familiarity with some basic maths is required, but there is also much else posted that general readers can enjoy and learn from. 
While I hold different views as a soft Libertarian to Robert Vienneu’s - he is more in the David Ricardo, Karl Marx, Piero Sraffa (“Production of Commodities by Means of Commodities”) intellectual lineage - I find his thoughtful pieces stimulating. He also exemplifies how to conduct debate by intellectual argument, absent abuse and with integrity.
Thus when I read Robert’s ‘Capital as a Social Relationship’ last month I posted a comment with I hope some interesting thoughts on Adam Smith’s sensible thoughts on productive and unproductive labour, which are misunderstood today by neoclassical economists.  Smith’s predominant interest was in economic growth and what caused and sustained it; he was less interested in equilibrium in markets of the economy.
My comments on Smith's Productive-Unproductive Labour in “Thoughts on Economics” (29 August)”
“I am in difficulty with the common interpretation of the ‘productive v unproductive’ distinction as one of “goods v services” (an error of Kaldor’s on the Selective Employment Tax). In Smith’s treatment there is, typically, some vagueness.
Take the case of defence expenditures, which are regarded as ‘unproductive’ because defence forces do not raise revenue from their activities. Clear enough. But businesses selling products and services to the defence sector are productive because the earn revenues that generate profits for the suppliers, normally amounting to serious revenues for the owners and for the skilled employees. The bulk of defence expenditures do require productive labour and capital on Smith’s definition.  So do professional singers, dancers, waiters, dealers managing card or dice games, other games of chance, and owners of the associated buildings (theatres, concert halls, opera houses, casino’s, brothels, opium dens and taxis drivers). They work as providers of services generating profits on the invested capital for the owners of the establishments and other purchasers of their inputs (all their supplies are from productive firms and employees). Their customers who pay the revenues they earn, which for them certainly are unproductive activities, but are not so for the suppliers of the necessary inputs for the services who are productive, including the lowly puppeteer performer charging pennies for the public’s enjoyment of “Punch and Judy” shows. If he makes a living out of his staged efforts in his booth he earns revenue to cover his own consumption plus the costs of his puppets and their effects and in booth, he is engaged in productive work.
 Much the same is true of employees working in legal services, such as barristers, lawyers, clerks and their suppliers of the inputs they utilize in their productive activities on behalf of clients (paper, books, quill pens, court clothes and wigs, etc.,). Even Marx noted these distinctions in his otherwise misguided criticism of Smith.
 It is true that hiring “a multitude of menial servants’ may make a “rich man” poorer because he consumes what productive suppliers of such “menial servants” from other “rich men” who grow richer upon on the basis that the hiring costs cover produce costs and marked-up wines and groceries, plus profits.
 For these reasons I am wary of classifying the productive v unproductive distinction simply as one of goods v services.”


Blogger airth10 said...

Thought you would be interested in this, "The Coase Theorem".

10:09 am  

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