Left-Libertarian Economics: Response to Carson

Kevin Carson was good enough to drop by and comment on my posts about his book, Studies in Mutualist Political Economy (here and here). I copy the comments below with my responses:

(Kevin) Thanks again, Jason. In general, I don’t think any paradigms are falsifiable; you can add epicycles to anything. And I think a revived LTV contributes analytical insights that are obscured by vanilla-flavored marginalism (like the normal relationship between cost and price for reproducible goods, and the intersection of the Tuckerite theory of artificial property rents with the Ricardian theory of rents as a subtraction from wages).

I see the subjective mechanism for the LTV not so much as moral as — believe it or not — praxeological.

My response:

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Left-Libertarian Economics’ Critique of Capitalism: Part Three

In my last look at left-libertarian economics, I argued that Kevin Carson’s resurrection of the Labor Theory of Value adds no new information to standard, neoclassical price theory. Carson wishes to disapprove morally of profits but does not show that capitalists add nothing to the value of production. In particular, Carson acknowledges that capitalists contribute “time preference,” providing saved or borrowed funds to production in exchange for higher consumption at a later date. Carson relabels this investment as a kind of labor.

In this installment in the series, I examine Carson’s argument in Studies in Mutualist Political Economy that “really existing capitalism” depends crucially on exploitation and coercion, and that if coercion were to abolished and markets truly freed, “capitalism” would disappear. Carson’s argument that free markets abolish economic profit is not altogether without support in standard economic theory. In introductory microeconomics classes, the model of “perfect competition” is taught. Under perfect competition, firms in each industry sell an identical product, and entry is costless. Therefore, if firms charge more than the cost of production, including the interest rate on investment, new entrants would undercut their price. The equilibrium price therefore yields zero “economic profit.” “Accounting profit” will be all that remains, representing the natural interest rate on investment, which in turn is determined by the opportunity costs of investment (forgone consumption).

Carson does seem to be relying on the perfect competition model to make the case that economic profit will not exist in a free market (116-7). But of course, really existing markets do not conform to the perfect competition model. Why not? Standard microeconomic theory points to product differentiation, imperfect information, and costs of entry as frictions that generate market power and, accordingly, economic profit. For Carson, however, the explanation of economic profit lies in coercion, the exploitation of workers and enrichment of capitalists by the state:

Without state intervention in the marketplace, the natural wage of labor would be its product. It is statism that is at the root of all the exploitative features of capitalism. Capitalism, indeed, only exists to the extent that the principles of free exchange are violated. “Free market capitalism” is an oxymoron. (129)

How plausible is this claim?

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Left-Libertarian Economics as a Degenerative Paradigm: Part Two

In this post, I continue my series on left-libertarian economics by examining Kevin Carson’s arguments for the labor theory of value (LTV) in Studies in Mutualist Political Economy. I argue that this is one area in which left-libertarian economics does represent a degenerative research program, that is, a body of scientific theories that protects itself from refutation by redefining itself in such a way as to render itself nonfalsifiable. The problem is not that the LTV as Carson formulates it is false, but that it is simply a relabeling of the Marshallian synthesis with scientifically irrelevant normative claims added on.

Carson begins his book with a discussion of classical political economists’ understanding of the LTV. He persuasively demonstrates that the LTV of the classical political economists was not as naive as the later marginalists made it out to be. Both Ricardo and Marx recognized that demand played a role in determining prices, and that labor effort could not cause a good to become valuable. The classical political economists held a “correlational” LTV, that is, that in most markets the price of a good would correlate strongly with the amount of labor used to make it – and the “amount” of labor had to be understood as its opportunity cost. Expending labor on making a mud pie would not make it valuable, because no one would be willing to pay for it. Alfred Marshall synthesized the marginalist-utility and labor theories of value by modeling the way in which the interaction of supply (determined by cost of production) and demand (marginal utility) determines prices. In the short run, Marshall argued,

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Is Left-Libertarian Economics a Degenerative Paradigm? Part One

“Left-libertarianism” can be defined in one of at least three ways. It can refer to “liberaltarianism,” a tactical stance and set of policy positions combining a substantially libertarian thrust with a preference for making alliances with the modern center-left. It can refer to a revisionist philosophical movement that differs from Robert Nozick’s entitlement theory of property rights in a more or less egalitarian direction, without going all the way to a Rawlsian social-ownership theory (Michael Otsuka, Peter Vallentyne, Philippe van Parijs, etc.). Finally, it can refer to anarcho-socialism, the original “libertarianism.” In what will probably be a fitfully updated series of posts, I am going to investigate the last of these, insofar as it has attempted to create a new school of positive economics.

I am going to focus, at least initially, on Kevin Carson’s Studies in Mutualist Political Economy, which seems to be one of the most influential recent works in this area. Carson’s theories have, for instance, had some influence on Auburn philosopher Roderick Long and a number of other libertarian public intellectuals such as Sheldon Richman, Gary Chartier, and others associated with the “agorist” and “voluntaryist” movements and with organizations such as the Center for a Stateless Society. And of course, influence has gone back the other way as well. Many left-libertarians, such as Fred Foldvary, have also been influenced by late 19th century economist Henry George, but I will not be focusing on their theories, which are relatively close to the neoclassical mainstream, compared to Carson’s mutualism.

Mutualism itself is situated to the right of

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