1. Wages will rise with capital-induced productivity increases

• the existence of a gum factory allowed one worker-plus-factory to generate 200 dolorios where one worker-without-factory could previously generate only 100 dolorios
• in the Ocandida case no additional skill was required on the part of the worker -- all the increased productivity came from the investment of capital (the construction of the gum factory)
• but should all the productivity increment accrue to the investors as profit? -- clearly this was considered unacceptable and indeed in real life capital-induced productivity increases lead to higher wage levels, even at the same skill levels (though, of course, in real life the picture is usually complicated by changing skill levels as well)
• I take this proposition to be fairly self-evident -- sometimes for short periods the capitalists may scoop off all the productivity gains (as indeed happened in Era A in Ocandida), but in the long run the benefits trickle down -- whether they trickle down enough or quickly is another issue -- I merely observe that productivity increases produced solely by capital investment will ultimately lead to wage levels rising (absent other changes such as depression, high unemployment, etc.)

2. The amount of the wage-rise from capital-induced productivity will be influenced by the value of the opportunity available to the capitalist

• in the Ocandida case, the opportunity arose from the gum-chewing proclivities of the MerryGlanders and the availability of the special trees as a free resource in Ocandida
• these particular conditions enabled a one-person gum factory to produce 200 dolorios of revenue a year -- another situation might have yielded the opportunity for 400 dolorios a year or, alternatively, only 150 dolorios a year
• my point is simply that the amount of the wage-rise will be influenced by the value of the opportunity (less in the case of 150-dolorio revenue, more in the case of 400-dolorio revenu)
• for the moment I am not addressing where the equilibrium point will or should be -- but merely observing that more valuable opportunities will ultimately generate larger wage rises

3. The values of the opportunities available are not under the control of either the capitalists or the workers

• the fact that a gum factory could yield 200 dolorios of annual revenue was an external 'given' -- the potential (well known to everyone in Ocandida, and not requiring any innovative genius or entrepreneurial risk-taking) simply was what it was
• thus, the appropriate level of wages in a country cannot be defined in the abstract but depends on the value of openly exploitable opportunities available to anyone -- which in turn depend on exogenous factors such as the MerryGlanders' chewing appetites

4. The equitable carving up of a capital-induced productivity increase between capital and labour is really a question of defining what return on capital is fair (there is no other just division)

• I was hoping the case would develop some logical model for how productivity increases could be fairly apportioned between the two classes -- but in the Ocandida case, the early attempts at apportionment proved spurious -- the final question was simply: what rate of return is a capitalist entitled to?
• at one extreme the capitalist could argue that his capital was entirely responsible for the productivity increase (in this hypothetical case) and so the entire incremental benefit should flow to him -- but clearly this position cannot be sustained -- each productivity enhancement raises the hurdle, as it were (proposition #1), by redefining what an average worker's daily output is worth (this being a function of opportunity, capital, technology, and so on)
• at the other extreme, the worker could argue that all productivity is a result of human effort and that all rewards should be allocated to the workers and not to the capital -- a factory owner would be entitled to be repaid for his labour in constructing the factory (191 dolorios in Era G) but no more -- but certainly this position cannot be sustained -- it would remove any incentive to assemble capital (that is, labour-in-advance) and so no gum factories would ever be built
• so the proper solution lies somewhere between these two extremes
• but in the end, the compromise was not arrived at by 'meeting half-way' -- rather it arose by reducing the return on capital to the minimum level that would still induce capital formation
• in the real world such questions get complicated by risk taking, innovative initiative, etc. -- but in this simple Ocandida case we are merely talking about the return on risk-free capital in a venture well known to be available to anyone who wants to put in the additional hours to construct a gum factory

5. The fair return on risk-free capital is the minimum return that will induce capital formation (but how is that determined?)

• if one concludes (as the populists in Ocandida concluded) that rewarding capital at a higher rate than this minimum-return-to-induce-capital-formation is immoral, then the question is: what is this minimum level and how is it determined?
• the quick answer is of course that the market determines it by supply and demand -- but markets can be imperfect in the short run and sometimes unduly reward people who have temporarily cornered certain economic levers -- what is the long-run 'just' equilibrium which one would hope that a perfectly running free market system would approach?
• there is no a priori answer arising out of abstract principles of justice
• if all the inhabitants of Ocandida are extremely lazy, or if the culture of Ocandida favours the preservation of leisure time, it may take a higher rate of return to induce capital formation than in a country where everyone is a workaholic and there's nothing much to do in leisure time anyway (the arts having been dismantled in the last deficit-cutting rounds)
• and, of course, it also depends on the amount of capital the country requires
• from a social justice point of view, these are not very satisfactory answers -- why should capital in a nation of lazy capitalists be rewarded more highly than in a nation of workaholic capitalists? -- or if there are both lazy and industrious capitalists in the same country, why should the industrious ones be rewarded at a higher level than would have induced them to save (merely because they have some lazy fellow-citizens)?
• why should capital be more highly rewarded in a country that needs a lot of capital than one that doesn't? -- should a capitalist be rewarded for having been born into a capital-needy country? -- but such questions are the same as asking: should someone be rewarded for having chosen wealthy parents?
• final tentative answer on this question: apparently it has to be a market test of need vs propensity to supply -- not much social justice, but there it is

6. Social justice requires that there be some mechanism that will reduce the return on risk-free capital to the foregoing minimum (but what is it?)

• however unsatisfactory the result of proposition #5, the worse (and probably more prevalent) situation is that market inefficiency can lead to significant deviations from the level of return that would theoretically just be sufficient to induce capital formation in the required amounts
• the market inefficiency can take many forms -- profits can be reinvested by corporate management in corporations who would never be able to attract capital from their own shareholders were they to have to face the competition from other, more rewarding opportunities (this is really a failure, though an almost universal one, in corporate democracy) -- capital returns can be maintained at artificially high levels by large corporate bodies that (at least temporarily) may have the clout to repress demands for wage increases -- governmental policies can support, or contribute to, the continuation of such inequities when the government is beholden to the campaign funders who represent the capitalist viewpoint
• of course, the pendulum can swing unfairly to the other side at times as well -- powerful unions forcing wages up to levels higher than productivity increases justify
• the answer to proposition 6 seems to be simply: a theoretically perfect system of competition between capital providers and labour providers
• in real life, market competition is far from perfect -- and the imperfections may be aggravated in a time of large multi-nationals (players who are big enough to beat up on the referees)
• even perfect competition would not prevent some of the excesses of the capitalistic system -- child labour can occur voluntarily in a perfectly competitive free market system -- it has to be curbed by civil society and democratic government, not by the free market system
• to what extent does the answer to proposition #6 also involve civil society and democratic government as opposed to the blind hand of the free market system? -- I don't really know, but I presume that some involvement is needed in an ideal society (despite the unpopularity of such involvement in today's swing to the right)

7. Excessive inequality in the distribution of wealth and income is socially unjust

• it is common place to argue that the free market system is sacrosanct and if it occasionally produces multi-billionaires like Bill Gates, then so be it; that's simply the price of motivating entrepreneurship and capital formation
• the Ocandida case has not been about entrepreneurship but simply about capital formation
• if we accept the implications of proposition #5 (that the return on risk-free capital should be restricted to the minimum that will induce capital formation) it would follow, somewhat analogously, that income and wealth inequalities should be restricted to such ranges as properly reward differing levels of effort or skill or are required as a necessary inducement for capital formation and entrepreneurship needed for the public good
• clearly providing an inducement to capital formation will inevitably (I think) lead to some range in the distribution of incomes and wealth -- witness Eras A to D in Ocandida -- but by Era E this had settled down to a pretty small range
• but some excesses can arise, indeed seem to arise very naturally under the free market system -- with the rise of the mega-capitalists in Era F significant inequality begins to occur -- by the time of the bankers (Era G) the inequality was fairly extreme (the bankers earning 40 times the income of anyone else while not having to do any work) -- was this inequality excessive (as the populists thought)? -- it can be argued that gum factories were still being built in Era E (which had only minimal income inequality); capital formation was still being induced -- so why permit greater income inequality beyond that?
• a counter argument is that the greater inequality was accompanied by even faster capital formation -- GoneMad Braque assembled his nest egg which started him down the road to being a mega-capitalist by working 16-hour days for 10 years -- this did increase the number of gum factories, of course
• but the increase was not gigantic -- already in Era E there were about 33,000 gum factories in Ocandida (owned by close to 17,000 factory owners -- it's true that by Era G (the era of bankers and managers) the number of gum factories had risen to 50,000 but this was not a huge effect in comparison with the income growth of the most affluent (from 10% above the national average wage to 40 times the national average wage)
• furthermore, it can be pointed out that the growing inequality during the age of the bankers and managers did not lead to any further increase in the standard of living of the average citizen in Ocandida -- that had already risen to 191 dolorios by Era A and the concentration of more and more wealth into fewer and fewer hands did not lead to any further rise in national prosperity
• so it can be argued that the extremes of income and wealth inequality found in Era E are unnecessary for the nation's economic well-being (which would be their only excuse from a social justice point of view) and hence, not having that purpose, are socially unjust

8. Some reactions against inequality can throw out the baby with the bathwater

• certainly the populists during their final revolt were convinced that the existence of the banking class was socially unjust
• the problem is that by expelling the bankers and putting the managers back to work they dismantled the mechanism of capital formation entirely and the country eventually reverted to an agrarian community at a much lower standard of living
• it would have been sufficient had the populists returned the country to the state of Era E -- they did not have to go back to the very starting point, which retrogression was ultimately damaging to all the citizens of Ocandida

9. Today's ruling right-wing paradigm rejects the social justice arguments of propositions 5, 6, and 7 but the Ocandida case seems to support the propositions

• under the ruling paradigm, the greatest good for the greatest number (i.e. everything being for the best in the best of all possible worlds) is achieved through permitting the unrestricted operation of the free market system and any tampering with this system will harm the efficiency of the engine of growth in the economy and thus ultimately harm all citizens
• in the admittedly simplistic example of Ocandida I do not believe this naive right-wing belief in the efficacy of the unrestrained free market system is borne out
• motivation for capital formation did indeed lead to increases in the average citizen's standard of living (at least by Era E, after the excesses of the early 'robber baron' days had been tempered by civil society) -- but the further growth of mega-capitalists did not enhance the standard of living in any way -- it could be argued (though such arguments are certainly not popular today) that social justice requires that inequalities in excess of those needed to induce capital formation be restrained (whether by regulation, progressive taxation, inheritance taxes, or whatever)

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