Saturday, December 3, 2011

Capital accumulation - a thought experiment 3

Part 1
Part 2

So how does labor result in capital accumulation?

You are a hunter-gatherer living in the forest 10,000 years ago. When you wake up in the morning, you have approximately 16 hours before you go to sleep again, which is your available time per day to do things, to labor. The amount of work you put into anything can be thought of as a product of the amount of time you spend on it and the amount of effort you put into it. LABOR = TIME * EFFORT. For simplicity, let's say that effort is simply the energy, in calories, that you expend doing the work.

(Preview of coming attractions: PRODUCTIVITY = LABOR * CAPITAL... a product of how hard you work and your training, available tools, etc.)

Only once you have done everything you need to do to ensure your survival until the next day can you move on to other things. Your labor is first and foremost dedicated to your immediate survival, after which you move on to ensuring your ongoing survival to the best of your ability. Immediate needs include not starving, not freezing, not being eaten by a tiger, and so on. These tend to be reactive. Ensuring your ongoing survival means expending additional effort to proactively plan for ensuring these needs are met in the future. This might mean laying (or making) a trap line, gathering storable tubers, building a hut, or tanning a hide.

Let's consider this in terms of stocks and flows. Your basic needs are a stock that needs to be kept at a certain level to ensure your immediate survival, and your labor is the inflow which maintains this basic level of stock. Labor is also an outflow, in that work takes energy--you get energy from the food you work to procure, and spend some of that energy procuring food. Generally it more than pays for itself, which results in surplus. The difference between how much energy it takes you to procure food and how much energy the food gives you is the first labor surplus, a surplus of energy.


If you're below the line here, you're in trouble, and aren't going to live for very long. If you're above the line, however, you have your first bit of extra energy which can be used for another activity. What are you going to do with it?

Option A: Build a better spear
Option B: Build a hut
Option C: Learn a cool dance move to impress a potential mate

Which you decide to do depends on which option you think is most useful and how secure you feel in your current predicament. If you're just barely coming out ahead, and your main problem is that you're sleeping outside and burning a lot of calories trying to stay warm, you might want to build a hut. If your main problem is that it took you ten throws before your spear pierced a deer, you might want to build a better spear. Either way, unless you're feeling pretty secure in your ability to consistently procure more calories than you expend procuring them, you're not likely to be focusing on cool dance moves.

Now, consider the scenario in which you decide to build a better spear. You now have two spears. If you don't want to be carrying both of them, you might decide to give the old one to your hunting buddy, who broke his last week. Two things just happened here:
1. your surplus of energy resulted in net capital accumulation for your little hunting society, which benefits both of you by (a) getting your buddy back in the game quicker, (b) getting your buddy back in the game quicker...the first for his sake and the second for yours

2. your buddy now owes you one. He may use some of his surplus energy sometime down the line to teach you a cool dance move.
This is net social capital accumulation. It occurs when your society captures the surplus value from work. The spear is the product of the energy of your labor and the materials used in its construction. Your surplus energy resulted in an extra tool. How valuable it is depends on not just on the time you spent making it but on how well it's made (skill, or human capital). Once brought into existence by your flow of labor, this tool increases your stock slightly above the level needed for bare survival, and frees up a bit of time for something other than spearmaking to occur. It also provides a buffer against disaster, in that if your new spear breaks, your buddy still has one (or if you kept it, you have an extra), and this can be all the difference in tiding you over till you get a new one.

To be continued...

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