From: gts (gts@optexinc.com)
Date: Mon Sep 16 2002 - 01:33:22 MDT
Dan Fabulich wrote:
>>> For example, you can't eat a hammer, either. But a hammer gives
>>> you a capacity that would wouldn't have without it; you can make
>>> money with a hammer without selling it. There is a value
>>> in *owning* the hammer, even though it's not a utility value.
>> I'm sorry but that's not correct. The "capacity" of earning
>> money from a hammer cannot be separated from its utility as a hammer,
>> as you do above.
> By "cannot be separated", I should presume you mean "ought not be
> separated"
I mean that you cannot logically separate the property of a hammer that
allows its owner to earn a living from the property of a hammer known as
its "utility." The carpenter buys the hammer for its utility. It helps
him drive nails. People then pay for the utility of the products of his
labor.
however these types of economic transactions are in a category entirely
separate from those we are considering here involving the stockmarket.
We are concerned here with transactions that occur in the market for
financial assets, which have no utility.
>... it's trivial to draw a distinction between buying
> goods that give a person happiness (utility, as the utilitarians call
it)
> and buying goods that, by owning them, give a person access to other
goods
> (like a hammer gives me access to the products of carpentry).
Your mistake here is in equating the simple *ownership* of a hammer to
the *use* of a hammer. It is only through the *use* (utility) of a
hammer that a carpenter earns his living. The passive ownership of a
hammer does not give one access to the products of carpentry. The
carpenter might just as well borrow his neighbor's hammer to do his
work. His income would be the same.
Again I want to emphasize that these types of economic transactions are
in a category entirely separate from those we are considering here. The
concept of utility has no bearing on the markets for financial assets
(stocks, bonds, etc). Stock certificates have no utility. Dividends have
no utility. Proceeds from the sale of shares have no utility. Cold
currency has no utility. (These things could of course be converted into
assets with utility at the discretion of their owners, at which point
our discussion would then move away from the market for financial assets
that interests us.)
Regarding your reference to utilitarians above, it should be noted that
utilitarianism is a philosophy or principle of ethics. The definition of
utility from that philosophy does not necessarily coincide with that
used by economists.
> [I'll charge that even the economists call the latter
> "capital"
To the carpenter, the hammer is "capital equipment," which should not be
confused with "investment capital." The word "capital" means only that
the item appears on the "assets" side of the balance sheet.
> But I don't care if you disagree with me about what "capital"
> means. It's purely semantic; the argument would have no substance.
Excuse me, but "capital" is the entire substance of the stockmarket.
This thread is about the very machinery of "capital"-ism. If you don't
care about the meaning of the word then I must wonder why you've had so
much to say here. :-)
You must begin to make an important distinction between capital
equipment and investment capital if you hope to speak sensibly about the
economics of the stock market:
1) Capital equipment (e.g., hammers) have utility value but lack
investment value.
2) Conversely, financial assets (e.g., stocks) have investment value but
lack utility value.
Business owners, including carpenters, do not "invest" in hammers or in
other forms of capital equipment. Capital equipment is depreciated each
year on the books until it is worn out and amounts to nothing.
People with poor understanding of economics sometimes speak of
"investing in new machinery," (e.g., "Honey, I think it's time we invest
in a new dishwasher.", or "Hey boss, I think it's time we invest in a
new computer network.") However in the science of economics such
expenditures are not categorized as investments. Even business-owners
sometimes make this mistake; fortunately for them their accountants know
better than to categorize such capital expenditures as investments on
the balance sheet.
> Stocks have this characteristic X of allowing you to acquire
> more goods if you own them, that is also had by hammers
No. Again, owning a hammer does not give you the ability to acquire more
goods. To access more goods you must *act* with a hammer to perform some
work or action. To be paid for that use you must also find another
person willing to compensate you for the products of your hammer-use.
There is no requirement that you should actually own the hammer. You
need only have use of it.
Contrast the above with stocks, where passive ownership results in
dividends or interest or capital gains which can be traded directly for
real goods and services. No work or action is required. The benefits
come entirely through ownership.
As you can see, to compare capital equipment to financial assets, as you
do, is to compare apples to oranges.
> Let's show why your language is obfuscatory...
This is not my language, Dan. It is the language of the science of
economics.
Here is the answer to your question as it appears in the subject header:
In the long run, the stockmarket supplies each shareholder with her fair
share of corporate profits. These profits are received as dividends, as
capital gains, or as a combination of dividends and capital gains.
-gts
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