Abstracting labor

Let me introduce Steve^* the worker. Steve is a typical human being who will take a role in the center of all of our abstractions. This is a person-centric view in accord with our Energy Cocoon. Here we see Steve as having a job for which he is paid a wage, some means of turning around and purchasing things he needs and wants for himself and his family. That is, he is paid if he does a good job.

Steve's job entails operating a machine that transforms inputs of energy and raw materials into a finished product with embodied energy value. Steve is skilled in that he needs to observe how the machine is performing and issuing commands to the machine to make sure it is producing an optimal product. This is important because the Boss is monitoring the product quality in order to make sure the customer is getting a good product. The customer will pay for a good product, which is income to the company (as represented by the Boss). In turn, the Boss pays Steve a wage that he, in turn, can use to purchase necessaries like food. Steve needs food to be able to perform his duties (which entails living at home and supporting a family). Both machine and Steve give off waste heat and waste materials. We won't pursue that notion any further.

Note Steve's boss. Don't make too much out of the fact that the boss is frowning. Bosses always seem to frown. His job is to monitor the quality of Steve's work, sell the product to a customer, and receive an income (payment) from the customer. He keeps some for running the rest of the operation, some for himself, and pays Steve a wage along with giving him 'directions' or commands regarding any quality or rate of work issues. Like Steve the worker, the boss needs to eat and eliminate wastes too.

This diagram represents a more modern view of labor. The machine could be anything from a mill, a press, to a computer. It could even be a whole department of a more complex company. The central issues are:

• the machine accounts for a larger percentage of energy/material throughput than does Steve
• even so, Steve has an energy/matter flow through his subsystem
• Steve's role is to manage the machine according to some preordained quality attributes
• the machine acts as a work amplifier with Steve providing the control current

In olden times, before machines that took significant external energy flows to operate, a worker in Steve's place supplied the majority of energy and his efforts went to applying one or more hand tools (machine) to the production process. And he still needed skill to make sure it was done correctly. The situation is captured very well by the story of the weaving loom (see: Wikipedia article). Before water mills were employed to provide the working power to looms, women (generally) had to operate a foot peddle to move the arms of the loom separating the threads. I suspect it was hard work. Later, water wheels provided motive power and the machine age using external energy was being born (same story for windmills in Holland, and even earlier uses of animals to walk around a central hub creating radial force to mill grains, etc.) Things really got going when Frenchman Basile Bouchon invented a paper roll control device that was used to manipulate the threads without human intervention, which led eventually to the Jaccard loom, controlled by punched cards using essentially the same principle but with more reliability. Incidentally, the Jaccard cards were the predecessors of the IBM punch cards used in the earliest computers!

If you read my blog post, "What is value?" you may recall the labor theory of value, which supposes the value added to a product comes from the efforts of the laborer. In olden times that was the case. Now, what are we to make of Steve's situation when the means of production are more largely represented by the machine and its ability to use external energy, like electricity, to do the heavy lifting? [Note the similarity to of the above figure to Figure 1 in the prior post. One of these days I will consolidate the different views!]

Suppose, for a moment, that the product being produced by Steve (with machine) is essentially what it was when Steve's long-ago predecessor made it by hand. Then it is clear that the addition of the machine and its energy input is what we mean by improvement in technology and productivity. Basically Steve can make many more widgets per unit of time than even a small army of workers could have done in the olden days. Steve needs a different set of skills to control the machine than was needed to pound the hammer to form the widget. But it is possible that the skill level and complexity is about comparable to what his predecessor needed. What we have done is to substitute a machine and new skills in operating it for that small army of workers producing by hand. If we hold the volume of production constant, i.e.., same number of widgets per unit of time as in olden times, have we merely substituted one form of input energy (external to the machine) for an equivalent amount of input to the workers in the form of food? It is an interesting question. [Another interesting question is what happens when the skills needed to operate a machine are significantly less than in olden times? Bosses still lay claim to the worker's time, but the effects on workers can be demoralizing and sometimes dehumanizing. I'm reminded of Charlie Chaplin in Modern Times.]

One of the things that has motivated bosses to invest in machines that effect this kind of substitution is the perception, right or wrong, that the productivity of a machine is preferable to having a small army of workers. According to financial analysis, it is cheaper and therefore better for profits (I'll ignore some other very valid arguments such as the fact that an automatic machine often improves quality while increasing the rate of production). Investment in a machine can be shown to payback at a better rate than if the boss continued paying out wages to the displaced workers. Yet I wonder if this analysis only works in the case of a growing business and economy. Isn't it the case that the best justification for automating processes is that you can produce more per unit time and thereby increase your sales? Buying another machine is certainly preferable to hiring many more workers who might or might not be adequately trained. It seems the whole growth orientation is a stronger incentive for bosses to lay out the investment in capital equipment of this sort.

Back to Steve. What should the Boss pay Steve? Surely he cannot earn the same wage as was earned by the small army of his predecessors even though he is producing the same number of units per unit of time. There would be no incentive for the Boss to invest in the machine if he ended up paying out that much money still. So Steve will make something considerably less than the sum of what his predecessors made, the difference being accounted for in the investment in (and maintenance of) the machine plus, more than likely, a nice increase in profits, a point that has always stuck in the craw of Marxists.

What Steve makes is largely a function of what Steve needs to earn for himself and his family. But, obviously, there will be a lot of room for interpretation of need here. This is actually one of the areas where market mechanisms have worked rather well historically, except when Bosses, or employees like Steve, get greedy! Steve may have had to invest some of his time and energy in learning the skills needed to run the machine. He will tend to put a, perhaps, higher premium on the value of that investment in his salary calculus. At the same time he will be competing with many other potential workers who could try to under bid him to get his job. But if he is highly skilled the Boss is going to think twice about firing Steve and hiring someone else whose skills are unproven. Uninterrupted quality production is generally worth more than the differential between what Steve is making and what someone else would make. Generally, through the jostlings of the labor market a 'fair' wage is struck between Steve and the Boss and both are satisfied with the arrangement.

Unless, of course, one or the other, or both do get greedy, which is not uncommon. Human nature, being what it is, is easily tempted to try to eek out that little extra. The Boss may want to replace Steve with cheaper labor or Steve might demand more wages regardless of any actual increase in his contribution to value added (there is always the cost of living/inflation argument; but what most people don't give much thought to is the fact that when workers get raises, to supposedly cover the cost of living increase, they are simply contributing to inflation!) We can think of all kinds of fly's that get into the ointment here. The system is already sufficiently complex that information might not be available to all parties. And there is that human nature element to contend with. The only worker not causing trouble is the machine. That is another reason Bosses like them.

Somehow, through the magic of accounting (both financial and managerial) these issues get sorted out. The Boss won't stay in business if his wage costs exceed their fair proportion of total costs. Unfortunately, cutting costs by eliminating workers is the easiest way to get control of costs. If the company goes out of business, no one wins. The accountants keep careful track of costs and income to make sure the arrangements all work out. Unless they get creative like the guys at Enron and Arthur Anderson!

But let's, for the moment, say that generally everything tends to work and Steve gets paid something reasonable, the Boss makes a reasonable profit, and the customer is happy with the widget. A remaining, very important question is: "What is the value added by this whole arrangement?" In other words, how shall we establish the price of the product? This is where the market isn't always our friend. In a barter system, in days of yore, everyone had a pretty good idea of what things were worth to them relative to the value of what they produced for trade. One cow should equal two goats. The value of the products were transparent and while it was still human nature to dicker over details and try to fudge a bit of profit, in general both parties came away relatively happy with the trade. Even when comparing apples with oranges, or rather arrow heads with beaver skins, people could gauge their own efforts, and their need for the other product and come to a sufficiently equitable agreement.

But the situation gets more clouded when external energy, machine work, and machine operation skills come into play. Machine skills necessitate specialization and thereby preclude a general understanding of effort expended by the laborer in making a product. On top of that, as soon as bosses came into the picture, ostensibly to organize the company and coordinate the activities, the value added to create more complicated products became increasingly hard to judge. [Incidentally a very similar argument can be made about modern public education. Teachers aren't exactly using ordinary machines so much as new complex organizations (schools) to produce their 'products'. It is even more complicated to determine what the quality of the product is (standardized tests, in spite of everything people want to believe, tell you nothing about the value of the education received) and what is fair compensation to teachers for their efforts. I, of course, have my biased opinion on the matter!]

Today, how do you know how much you should pay for an iPod^TM? All you really know is that you perceive that you have some discretionary income to throw at entertainment valued products and services. And there is the market. Somehow, magically-seeming, a price is set and people flock to buy at that price. The bosses attempt to keep prices reasonable so as to optimize sales volume and profits. If competitors come into the market that is supposed to drive prices down (but what about quality issues? Bosses still like the same profit margins, so something has to give.) But the reality is that no one has a real clue what anything is worth any more. Its all a big game we play and there are some real winners (windfall profiteers) and many losers (also known as consumers).

Where is Steve in all of this? Well the boss has to figure out how to fight off competition and lowering prices is a handy tool. Unfortunately that means margins are going to be cut. One solution is to grow the capacity by adding another machine and one additional laborer (of course it isn't at all that simple, but this is an abstraction after all). The increased volume at a slightly lower margin can compensate for the profit losses per unit. This is the growth strategy. Another strategy is to convince Steve that he is paid too much for the current market conditions and for the good of the company as a whole (these days meaning the bosses bonuses) he needs to take a pay cut. More often than not that is a crock. And Steve generally knows it.

Where does all this leave us? What I have tried to do is give a small demonstration of how our modern complex, machine-based production of goods and services has blurred the image of value, costs, and trade. Economists recognize this blur and seem to be satisfied with letting markets tell us what things are worth — a very lazy approach in my view. We need a tool to help us do the hard work of understanding. If we harken back to a simpler time and construct an abstraction of workers and bosses that captures the relevant relations between energy, work, skills, materials, tools, wastes, and products, and then use that abstraction to study modern work processes, especially incomes in terms of needs, wants, and fairness, we might stand a chance of grasping our current situation much better.

That's the idea anyway. We are not much different beings than we were thousands of years ago, before the agricultural and industrial revolutions. Our needs are the same even if our opportunities for enjoying the benefits of the machine age have grown immensely. So our psychological proclivities today are about what they were then, but with, perhaps, some new temptations and certainly new challenges for understanding. But in the end, the energy and material flow budgets have to balance out. What someone gets from the pool of assets our economy creates probably should be based on their contribution to the work processes they control. The boss probably does have a more complicated job than does Steve. So it doesn't seem untoward that he make some more income than Steve. But it is unlikely that the bosses value added to the whole operation is hundreds of times greater than is Steve's. What the abstract Worker Steve (and his boss) can do is show us what we need to look at in analyzing work flow and compensation flow. It also gives us a handle on valuing products from the standpoint of external energy inputs through machine labor. In a future post I will take a closer look at the role of worker skills and investment in training a bit more closely as we try to figure out what it means to be paid fairly for one's work.

Our current economic views have over abstracted to the point where we have no clear insights into costs, prices, values, and what information flows would provide those insights. And that over abstraction has gotten us into a lot of trouble, both socially and ecologically. This simple abstraction takes us back to fundamental relations that have never changed over history. It is another example of a systems approach to understanding our world.

Next, I will examine Steve using some of his income for purchases, finding out he doesn't have enough saved from prior earnings, and goes to a banker because he really wants a boat.

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^* No particular significance to the name Steve. It just popped into my head and sounded good. Of course who knows what devious thoughts are going on subconsiously?

Comments

[Robert]

I expect you have found HT and EC Odum's "Modelling for All Scales".

A shame this is not adapted for high school use. The fundamental ideas you are working on are not beyond the reach of intelligent adolescents, and they are the ones who offer some hope of saving what can be saved of our deteriorating world.

Odum's Environmental Accounting offers a policy framework which is grounded in both the built and natural worlds. Unlike market driven economics.

The EPA has published emergy analyses of West Virginia and Minnesota, two of eight states (including Caligfornia)they analysed using Odum's methodology.

The very brief summary comments on Minnesota's carrying capacity are neutral, but very sobering.

I am glad I live in Tasmania, but remoteness is no guarantee of a future when resources are being squandered so rapidly

Keep at it - You are at the barricades, right now.

Kind regards,

[Florifulgurator]

(The "Energy Cocoon" link doesn't work. Delete the 2nd ".html".)

[George Mobus]

Flor,

Thanks for the heads up. I've fixed it. Typepad has a new interface that inserts the extra .html onto old urls for some reason when I cut and paste. It has caught me a few times.

George

[Dave]

This post, more than past ones, really starts to feel like you've just watched an episode of James Burke's Connections ( http://en.wikipedia.org/wiki/Connections_(TV_series) ), especially with the mention of the jacquard loom.

[George Mobus]

Dave,

Indeed I have (not too recently but I have the DVD set at home). Burke is one of my all-time favorite historians. I have his various books as well. The Connections series is something every thinking human being should see!

George