We Built It (Part II–Factors of Production)

“We built it.”  So runs the mantra of the GOP.   To which there is only one possible response: Well, actually no you didn’t.   And let me explain why since it’s not addressed in my last post on this subject.

First, let’s imagine who “you” are and why you might reasonably think you did build it.   So let’s imagine that you own a small business. You started small.  You worked hard.  You took risks.   You leased space.  You got loans.  You did all sorts of stuff.    Some of it was damned hard.   And now, you have… let’s say a successful 10-year old Italian restaurant.   And it pretty much feels like you really did build it.   And the best proof that you built it (as you see the matter) is that without you–this business would not exist.   Voila and Q.E.D.  You built it.


The easy way to put it goes like this:

First, let’s concede arguendo that certain things about the restaurant are attributable to your personal touch.  Say, the Abruzzo tomato sauce, the painting of Perugia on the wall, the… etc.  These things (now, of course, they’re not all yours) would not be there without you.  And the charm—the personal touches you bring to the business—also would not be there without you.  Or at least, the particular combination of personal touches you bring is unlikely to be reproducible by anyone else.  So let’s say this is yours (even though, of course, it really isn’t entirely, but….)

How then does your view of the matter go wrong?  It goes wrong because these “personal touches” are not synonymous or coterminous with “it”—the business you supposedly built.  In fact, and with all due respect, they are only a small part of “it”—the business you supposedly built.  The main contributions are the capital equipment, the physical plant, the labor force you employ, the infrastructures you depend upon, the infrastructures your suppliers depend upon and all sorts of other stuff, knowledge, capacities, competencies you did not build even if—and this is not nothing—you brought them all together.

What “you” (another term that will soon come under fire) need to recognize is that there are all sorts of things that have contributed to the building of this small business.  Among them:  A few millennia of human history bringing all sorts of knowledges, human management, capital equipment, and an available labor force up to speed; years of training in public school provided by taxpayers; all sorts of infrastructure enabling you to purchase foodstuffs, equipment, and to hire competent employees, etc. etc. etc.

These are all called factors of production.  And the thing that allows you to say that you “built it” is that you discount all those factors of production.  You take the roads, the schools, the laws, the employees, the culture as a given—as the background or normal state of affairs, as a baseline.   And so, taking these things as the baseline, you naturally think that if this small Italian restaurant exists, it is because you built it.

But this is wrong.  Way wrong.  “You,” relative to all these other factors of production, have actually added very (very) little.  We would have a hard time substituting a few millennia of history, an advanced post-industrial economic infrastructure, twentieth century schooling and knowledge.   Replacing you, however, would be very (very) easy.  In fact, it is a sure bet, that were it not for you, there would be somebody else (probably slightly less efficient, with slightly fewer comparative advantages) who could and in fact would take your place.  This person is, if we hew to Chicago School economics, marginally less efficient than you—but that’s about it.  So in terms of marginal productivity, you, relative to the other factors of production, are almost trivial—eminently replaceable.  Viewed in terms of marginal substitutability of a factor of production, you (again with all due respect) are pretty insignificant.  So if we were to ask in a realistic way, did you build it?—the answer would have to be that among all the factors of production contributing to the establishment of your small business, you come in (once again with all due respect) probably… very (very) far down the list.

Now, exactly where down the list is not entirely clear.  Among other things the answer would depend on how we carve up—what taxonomy we use—to describe our factors of production.   This brings in a certain degree of arbitrariness….

…and a kind of unnerving postmodern problem.   We are now going to turn from talking about “it” the thing that you supposedly built (but did not) to a more perplexing postmodern concern—namely, “you.”   “You” too is in trouble.

The fact of the matter is that—and this causes me a slight embarrassment—economically speaking, you (or in your case, “I”) is not really a category we can deal with very well.  You just don’t register very well or very deeply, economically speaking.  You are too abstract (we really don’t know who or what you are economically.)  And you are too concrete (you are too diversified internally for us to aggregate in a single economic category with any real content.)  In a phrase, you are, economically speaking, a thin category (more on that in a later post).  You’re not really labor or capital or any one such thing.   And though it is true you own a small business, it would be wrong to say that you are the small business itself (and besides small business is a legal not an economic category.)

All of this helps explain why—see the last post—you might feel somewhat anxious about it all.   There’s reason to be.  But in this regard, you are not alone.  Everybody feels more anxious.   Why?  Because the social bonds that you have so ardently disdained, rejected, and abused in the name of unbridled individualism (does this mean cheaper prices at Walmart?) have in large measure already largely melted away–so that the “you” that remains is, well, getting rather thin, somewhat indistinct, not quite in focus.    It’s no fun.   No fun at all.  Again, if only you could realize that you are not alone in all this….

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