The Neoclassical Synthesis -- which is known as “Mainstream Economics” nowadays -- doesn't have a concept of profit, as their fundamental principle is that capitalism is a natural system, therefore always in equilibrium or tending to equilibrium. Therefore, no wonder their confusion with Adam Smith, who was a classical economist.

The concept of labor is very simple and easy to understand. Labor is everything that produces value, directly or indirectly.

Long story short, there are two types of labor: productive and unproductive. Productive is every labor that indeed produces value, fits the aforementioned definition of labor. Unproductive is every labor from commerce, i.e. commercial capital.

The reason commerce is the exception to the rule is that they deal exclusively with the circulation of commodities, not its production: conceptually, they are nothing more, nothing less than the specialization of the warehouses of industrial capital. They're merely an extension, a long arm, of industry.

To identify unproductive labor is very simple: one just has to prolong the unproductive worker's journey of labor. If such extension increases value in the same proportion as the old journey, it is productive labor; if not, it is unproductive. For example: a worker in a given industry produces 1,000 pieces per 8-hour journey; if you extend his journey to a 16-hour one, he will produce 2,000 -- he is a productive worker, he produces value.

Now take a balcony vendor from a gas station store: if you extend his journey to a 16-hour one, that won't imply double the clients will magically appear, let alone that they will spend exactly the same amount of money than the first half did. He is an unproductive worker, merely a conduit of the circuit of the industrial capital that produced the totality of the commodities present in that store.

Note that it doesn't mean unproductive labor is unnecessary, let alone parasitic: Marx was very clear it was absolutely necessary, since, without circulation, production would not result in the reproduction of capital. Circulation is a conditio sine qua non for the very existence of capital, in whatever imaginable form. Unproductive workers can, indirectly, rise the profit rate by reducing the time of circulation: the faster the circulation, the more a capital can rotate in a single given period of time, and lesser the waste (destruction of commodity capital, destruction of value).

Besides the workers (laborers, productive and unproductive) there are the capitalists and the managers (middle class). They are not workers in any sense of the word.

Capitalists are the personification of capital. Their only function is to represent capital, i.e. the means of production applied to capital reproduction. If a capitalist dies, his capital will go on, through some kind of inheritance. Wealth has an existence, a life on its own in capitalism, because of fetishism of the commodity and alienation of labor: the capitalist is merely the human representative of capital in the human world, its agent in human society.

If a capitalist has a capital so small he himself has to work in some daily functions -- the petty bourgeoisie, the so-called “small and middle business owners” -- then Marx has a very simple and elegant solution: he works for himself, he is, at the same time, capitalist and worker; but his dominant societal function is that of a capitalist because he will benefit from the accumulation of wealth of his own work. He is a capitalist who has as one of his employees himself (usually in a very comfortable role, such as accountant or cashier). Such work is, nowadays, paid under the cute term “pro labore”, i.e. the self-congratulation of the petty bourgeois for being a big boy.

From the concept of petty bourgeois it is easy to understand the role of the managerial class/middle class. When a capital is too big, its organizational structure becomes so large and so complex that it transcends the intellectual and physical capacity of the capitalist, he has to hire “long arms” to do the administration and supervision for him. These are the “bosses”, the “executive class”. They are not workers, but merely the eyes of the capitalist: their function are exclusively coercive, and they are strictly parasitic in nature, their “wages” are literally a subtraction of the surplus value extracted. That means their payment are directly related to the results of their capitals (companies, corporations, the denomination doesn't matter), so it is very easy to identify them: if their payment is related to the end of the year result of their capitals, and/or if their payment are directly tied to “company goals”, then he is a middle class/manager.

Another easy metaphor that can be used to identify a middle class member/manager is the guy who whipped the slaves in the South of the USA. The manager/middle class member is the whip of the capitalist, the enforcer of capitalist discipline over the worker.

From the middle class concept we can add the element of financial capital, which, in Marx's scientific denomination, is called fictitious capital (capital that is only capital by determination of Law, Law in the sense of the will of the State as the Leviathan; capital as a purely juridical entity; capital that emanates from the Free Market as an institution, i.e. from the institutionalization of the Free Market).

Well, the element of fictitious capital only prolongs, but does not change, the process of capital. If a financial institution lends money to some productive capitalist (“real economy” in modern terminology), then, in fact, this productive capitalist is the employee or vassal of the financial capitalist. The financial capitalist expects from the productive capitalist a return of that amount of money + a profit rate which is historically called interest or interest rate. The productive capitalist then has to subtract from his profit rate the interest rate. The remaining amount of profit is called profit of enterprise by Marx.

From the profit of enterprise, we can deduce the existence of the managerial class/middle class again: if all of the productive capital becomes dependent on the fictitious capital to do their business, then, on a social level, the productive sector capitalists are the de facto employees of the fictitious sector capitalists: the former are the “impresarios” of the latter, their de facto “CEOs”, their “long arms”. The difference here is that fictitious capital, at the end of the day, is just that: fictitious; so the absolute subjugation of the former by the latter will never happen: they are both from the capitalist class and will remain so until the end of capitalism (which may or may not be the end of time for humanity -- but that's another theoretical problem).

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"This has led to the introduction of the misleading term “investor” that nowadays masquerades as an occupation."

I am so glad to read this. I always thought that it is wrong to call buying stocks (and the like) "investment", exactly for the reason you are describing. But what word would you suggest? Speculation sounds right to me, but I fear would be considered not acceptable in todays world.

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If I buy stocks, I am investing, but I am not investor. Owning stocks of the good business is not speculation.

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Jan 29, 2023·edited Jan 29, 2023

I would call your example "investing" in double quotes and would want to reserve investing properly to denote things like starting a business, something that makes the economy grow. That would include buying newly issued stocks, but not stocks that are already in circulation. I know that this distinction is not usually made, but I think it would be good to have two different words for this.

Btw, I am not sure why you object to call buying stocks speculation. Is that only because speculation has a negative connotation, or because you see an actual difference? What definitions of speculating and investing you have that would help you make the distinction?

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Thank you for you answer and additional clarification.

I object it because stocks are the game that can be played in different ways. You can compare how André Kostolany (speculation) and Warren Buffet (investing) did it. Yes, some are speculating, but that's not enough to call the whole thing speculation.

And I do some research before I invest, check PE ratio, see the debt and cash flow... I don't chose random stock and hope it would make me rich or follow GME or Dogecoin fashion. Can I lose money? Of course, but it doesn't mean I am speculating :)

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So the distinction between speculation and investing for you is not about the different contribution to the economy (that is what I am aiming at) but about how much effort, seriousness and preparation it takes to make the decision?

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Yes, because without proper effort, seriousness and preparation - everything is a speculation.

For example, I have an MA in the medieval studies. I need to invest a real effort to write a proper article. Yet I might be completely wrong in the end (something is discovered later that makes my thesis wrong). On the other hand, someone can simply speculate about the past and make a conclusion. That conclusion might be right.

By the way, about your remark:

"...want to reserve investing properly to denote things like starting a business, something that makes the economy grow. That would include buying newly issued stocks, but not stocks that are already in circulation."

That's even more speculative, because the rate of the new business that fail is very big. So VC funds and angel investor are betting on a bunch of the new business, hoping that one will pay off what others lost. Investing in new business is more speculative then dollar cost averaging Coca Cola for 10 years and compounding with they 2% dividend yield.

In the end, we are just discussing semantics and the virtue we assign to the words.

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«In the second case, the trader is a hired worker and his income is entirely the result of his labor. Marx would have said that such a trader is no different from our Amazon warehouse worker. Both are working within companies they do not own, both are producing surplus value for the owners (Amazon and the wealth find) and both are hired workers.»

Ahem, not quite, because the CEO, the trader, and even a dentist don't derive the entirety of their income from their labor, but a large part of it, probably most, also from capital: the "goodwill" (career reputation, Ivy League degree or MBA, etc.) that got them the job, or the professional license that enables a dentist to practice. Random people can be Amazon warehouse workers because all that matters is their labour, but random people cannot be CEOs, traders, dentists, they need some kind of enabling capital.

That applies to most all professional-managerial class people, who therefore are "petty bourgeoisie" as much as the shop owners who work in their own shop, maybe as the only employee, and members of both the capitalist class and of the worker class, in different degrees.

This is also a case of joint production, where it may not be clear whether it is their capital or their work that produces most of their income, but professionals and managers, like shop owners who work in their own shop, usually practice politics and vote as capitalists, not as workers, showing how much more important to them is their capital than their labor, and this is really important politically.

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"Investor" = good old rentier. For some unfathomable reason that term went completely out of fashion

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We Baby Boomers have been dragooned into becoming investors by the replacement of defined benefit pensions with 401K and IRA investment accounts. This, along with home ownership sustains an electorate that is majority property owning.

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"19th century variety of industrial capitalism to the 21st century version where we often think of capitalism as financial..."

But finance is now the "finance industry" and we have "financial engineers"

Ideas are objects. All that is solid melts into air and all that is ephemeral becomes material.

The rule of bankers and philosophers. The victory of scholasticism

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