4. The Capitalist Function
Socialist theory
(predicated on the labor theory of value) concludes that profits are
necessarily value stolen from workers by capitalists. This conclusion is mistaken. The function of the capitalist is as useful as is the
function of the worker; profits are as warranted as wages.
The two functions the
capitalist performs in the economy are the waiting function and the
risk-bearing function. The waiting
function occurs because all productive processes require time to complete. It is the capitalist who forgoes
consumption by investing in the productive enterprise. While the worker is paid his wages as
he works, the capitalist bears the burden of receiving payment only once the
completed product has been sold.
The risk-bearing
function is the entrepreneurial function of bearing the burden that a
productive process may turn out to be counterproductive--that is, the value of
the good produced may be less than the value of resources used to produce
it. While the worker is paid his
wages for his work, the capitalist bears the burden of receiving payment only
if the completed product is a success.
Can either the
waiting or the risk bearing function be abolished? No. Even in a
socialist economy these two functions must take place. They are inherent in the nature of the
productive process. The closest a
socialist economy could come to abolishing the capitalist function would be to
force upon the workers themselves the waiting and the risking. Notice that most workers are not too
terribly interested in this option.
They freely choose to enjoy current consumption rather than holding out
for the prospect of greater payment in the future and prefer to be paid for
their work, specifically, rather than being paid only if the product succeeds.
In stark contrast to
the mistaken socialist theory, the relation between workers and capitalists is
harmonious. A division of labor
occurs wherein each party specializes in a self-chosen manner, each reaping the
benefits of the efforts of the other.
-
Block, Walter
Defending the Undefendable,
(New York: Fleet Press Corporation, 1976)
pp. 186 - 202.
-
Lefevre, Robert
Lift Her Up, Tenderly,
(Orange, California: Pinetree Press, n.d.)
pp. 97 - 104.
-
Mises, Ludwig von
"The Economic Role of Saving and Capital Goods" in Free Market Economics: A Basic Reader edited by Bettina Bien Greaves,
(Irvington-on-Hudson, New York: Foundation for Economic Education, Inc., 1975)
pp. 74 - 76.
-
Mises, Ludwig von
Human Action,
(Chicago: Henry Regnery Press, 1966)
pp. 300 - 301.
-
Rothbard, Murray N.
The Essential Ludwig von Mises,
(Auburn, Alabama: The Ludwig von Mises Institute, 1983)
pp. 12 -13.
-
The Morality of Capitalism,
(Irvington-on-Hudson, New York: Foundation for Economic Education, Inc., 1992)
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