"The aggregate of all the values being produced simply is always bigger then the aggregate of all wages being paid. Simple as that.
Now, this is (within Marxist theory) labelled as the problem of overproduction."
How do you aggregate values?
If I value both chocolate and strawberry ice cream, what is the sum of those values?
“Of course, the missing value didn’t dissappear, it went to the capaitlists owners of the production who do not (and as a pratical matter, cannot) consume all the excess production that workers are unable to. If they could and did, this key flaw in capitalism wouldn’t exist.”
Well they along with people spending previously saved money. Do indirectly consume the excess. Therefore this key flaw in capitalism doesn’t exist?
If they are not wealthy they consume it directly if they are wealthy, they consume it indirectly. Say for example a wealthy clothing manufacturer employs the tailor while most people buy factory produced clothing. Mass production is production for the masses. as mentioned in that human action chapter.
Also not all capitalists are wealthy. Many people own stocks, many people’s retirement savings is invested in capital.
Profits are not a huge part of the surplus value, as other entrepreneurs will emulate profitable activity, reducing the profitability of said activity. So in true capitalism, unlike the mixed economy we have now where “regulations”/controls are used as a means to secure profits. Profit is payment for innovation and the entrepreneur must continue to innovate to get what is called short term profits. The other part of profit is kind of like an interest payment for waiting.
Capital is a more significant part but that reduces itself to land and labor as you move up the structure of production.
Read this Rob. You’re basically saying workers everywhere are being ripped off, having the fruits of their labor stolen from them. But you’re ignoring the fact that it’s a voluntary relationship. The worker can leave anytime. If the entrepreneur really adds nothing to the business, then the worker can, and in self-interest certainly would, leave and work by himself or with other workers in a new scheme. That he does not, speaks a lot.
Your argument is reduced to a claim over the entrepreneur’s capital by the worker, which he didn’t produce, but want to claim it’s his just because he’s using it or something. I’m guessing at this point of course, but I think that’s the only way the marxist argument makes sense. Deplorable, with lots of economical unseen consequences, but consistent.
My bad. Anyway:
What about babies who produce less than they consume. Should they not be allowed to consume since, after all, their consumption means that the producers won’t be able to consume what they produce?
Also, given that the aggregate of producers can’t aggregately consume what they produce, if they do so voluntarily, so what?
Furthermore, what about the machine repairman; he doesn’t produce anything, thus, should he be allowed to consume?
Are communists still going to be complaining that capital owners gain surplus when they create value when we’re all immortal cyborgs? What about when a company loses money? Should the owner still be forced to give his employees the surplus (which is now negative)?
Shhhhhh! You are spoiling the scam. It’s like Keynesian policy, whereas spending is supposed to be cut at times. But we will conveniently forget that part when the time comes.
Nonfederal Nonreserve wrote:
<<< How do you “expand credit” without increasing production or reducing consumption? >>>
Creating it out of thin air!
That is the heart of the problem, they expand the available money that floods the market, but there is no backup for this money.
Daniel Muffinburg wrote:
<<< What about babies who produce less than they consume. Should they not be allowed to consume since, after all, their consumption means that the producers won’t be able to consume what they produce?
Also, given that the aggregate of producers can’t aggregately consume what they produce, if they do so voluntarily, so what?
Furthermore, what about the machine repairman; he doesn’t produce anything, thus, should he be allowed to consume?>>>
What do you think yourself?
The costs of sustaining babies is already understood as the cost of living (which also includes the costs of reproduction), since otherwise, no new generation of labourers are being raised. Now that would be a catastrophe to capitalism, don’t you think?
And what about the repair man, the nurse, the teacher, the unemployed, the politician, the shareholder.
You could extend the issue much further, and the general question then is: what is productive labour?
Repairing stuff and even the transport of stuff is indeed productive, cause what can you produce with a broken machine, or a machine that is not at the location of production?
How can labour produce without healht treatment when ill or education?
yuberries wrote:
<<< Read this Rob. You’re basically saying workers everywhere are being ripped off, having the fruits of their labor stolen from them. But you’re ignoring the fact that it’s a voluntary relationship. The worker can leave anytime. If the entrepreneur really adds nothing to the business, then the worker can, and in self-interest certainly would, leave and work by himself or with other workers in a new scheme. That he does not, speaks a lot.
Your argument is reduced to a claim over the entrepreneur’s capital by the worker, which he didn’t produce, but want to claim it’s his just because he’s using it or something. I’m guessing at this point of course, but I think that’s the only way the marxist argument makes sense. Deplorable, with lots of economical unseen consequences, but consistent.>>>
You suggest that for both the worker and the employer, the positions are equal. But that is not true, certainly not at the early phase of capitalism, without social benefits. The worker could not choose not to sell his labour, even when the wages were too low, for the simple reason he bettter had some job then none, else he would starve to death.
So, in general, this is not true. The employer is not dependent on any worker, he can hire others. And at the basis of his capital, he can even choose not to produce anything for a while. The worker is in no such position.
In this highly unlikely case, where the ‘worker’ must accept a job because all other alternatives will cause death by starvation to the worker, it is safe to say that the ‘‘worker’’ owes his life to the capitalist. Without the capitalist the worker would face a certain death. Because the capitalist values the labor of the worker, the worker is now able to exist.
In reality, people were able to live before capitalism and an evolved division of labor. Farmers, hunter/gatherers all were able to be so productive to provide a living to themselves and their family.
When a more capitalist society evolved, these people choose freely to strat working in the industry. During the industrial revolution in the UK, poeple form the land moved voluntarily to the cities, where better job-opportunuties where available. Even though the circumstances in which they lived where terrible when compared to todays standard, the fact that they choose freely to move to these places indicates that these people were better off in the city and capitalist factories, than they were on the land.
And how can labor produce without capitalists? I suppose the workers could collectively own the means of production but, then, the workers would have to replace the capitalists with themselves as capitalists to exploit themselves, unless they plan to go about the remainder of their lives without ever accumulating capital.
If Milton Friedman actually held this position, then he would have never supported an all powerful bank that centrally plans the monetary system. He would have realized that money constitutes one half of all exchanges, determines the relative prices of all economic goods, and directly influences market interest rates, all of which determine the allocation of scarce resources towards economic activities. Therefore, one cannot support “free markets” and monetary interventionism at the same time and in the same sense.
In fact, this has been refuted many times over. The validity of the exploitation theory of interest is contingent upon the validity of the the labor theory of value, which states that all value is “created” by labor and then translates into prices via “SNLT.” This theory, though, cannot explain the formation of market prices in anyway whatever (the transformation problem) and it confuses two very different phenomena.
First, the labor theory of value cannot explain why capital intensive goods (which require less labor for production) usually, if not always, demand higher market prices relative to labor intensive goods. It cannot explain why fiat paper currency, say a $500 bill, is freely exchanged for plasma screen TVs. It’s obvious that the degree of labor required to produce the former (the $500 bill) is infinitesimal when compared to the latter. Furthermore, the LTV refuses to acknowledge that the factors of production are all co-dependent, that is, that they are independently barren: labor produces nothing without capital and nature, and capital and nature produce nothing without labor. Marx’s exaltation of labor is entirely arbitrary and ideological. He may as well have said that value stems from the fruitfulness of nature, or the productivity of human ingenuity; It simply has no theoretical support.
Next, the LTV, and in fact all cost-of-production theories of value, simply confuse causality. Too say that a bottle of fine French champagne demands a high market price because the factors required to produce it also demand high market prices is pure confusion. Champagne grown in the fields of France demands a high market price because its quality is the finest in the world. And since that region creates such fine champagne (fertile soil, perfect climate, ect), the rent for that land is high. The causal chain runs from consumers => economic system => nature, and not the other way around.
Furthermore, socialists cite the tendency of prices to fall towards their cost of production as proof of their theory, but they are conflating two very different, but connected phenomena, namely value and the market mechanism. The reason why prices tend to fall towards their cost-of-production is because of the price mechanism, competition (the profit/loss constraint), and the subjectivity of value. Excess demand leads to a profit rate above the interest rate (profit rate, or rate of time-preference) which draws resources away from other sectors towards that sector. Those who cannot satiate consumer desires lose access to their capitals, which are redirected towards more capable entrepreneurs.
Once we carry out Marx’s framework to its logical conclusions, we see that it simply does not explain the real world in anyway whatever, and has zero theoretical support. We must, therefore, dismiss it. Profit, to put it simply, is the result of transforming future goods (labor is a future good) into present goods, and because individuals place a value premium on present goods relative to future goods, there is surplus value. Labor is paid incrementally throughout the entire period of production, that is, it does not wait to receive its remuneration at the end of the productive endeavor.
The belief that there is some objective mystical value, which exists independently of human action, is absurd and has been empirically invalidated. Two things to remember:
First, this is not Marx; this is Hyman Minsky, and this statement has been entirely refuted by David Ricardo and JP Say in the 19th centry.
Next (related to point #2) it entirely ignores the complementarity and heterogeneity of capital goods and places all attention of the total demand for final goods and services. But the consumer goods industry makes up only one relatively tiny portion of the entire economic apparatus. In other words, it ignores the structural rigidity and imbalances in the organization of various capital goods at the macro level, all of which are sensitive to changes in the interest rate.
‘The worker could not choose not to sell his labour, even when the wages were too low, for the simple reason he bettter had some job then none, else he would starve to death.’
So you deduce that a human cannot survive without being a worker for someone else? By chance how do subsistence farmers live?
‘So, in general, this is not true. The employer is not dependent on any worker, he can hire others. And at the basis of his capital, he can even choose not to produce anything for a while. The worker is in no such position.’
Untrue. Consumption is a basic feature of a human being. We must consume in order to survive. No human whether capitalist or worker can cut off that consumption. Therefore an employer is just as much a consumer as a worker and therefore it follows that workers are needed to meet the wants of the employer through another employer. Your statement implies that an employer can live in a static state for an extended period of time without the need of others production in order to sustain their lifestyle while workers are in a constantly dynamic state of necessity. There is no separation. Both are in an environment which requires daily economic interaction in order to survive and prosper. Like all trade, there is a reverse inequality. The employer does not want to be a ‘worker’ but requires workers and the worker does not want to take the risk of being an ‘employer’ but requires one. If neither is the case then the person is self-employed and thus a worker and an employer.
Excellent post, Esuric!
ut you’re ignoring the fact that it’s a voluntary relationship. The worker can leave anytime. If the entrepreneur really adds nothing to the business, then the worker can, and in self-interest certainly would, leave and work by himself or with other workers in a new scheme. That he does not, speaks a lot.
I do not fall into a camp that says “entrepreneurs add nothig to businesses.” In fact they add the most; the original idea. And the capitalists supply the funding, the workers build the things.
But the idea that “you can work for me, or one of my friends. Take what you get and like it, or starve” is entirely a “voluntary” relationship, I don’t think holds entirely true. It is voluntary in that he “can” leave, but he in effect cannot leave as all his ability to feed, shelter, and clothe himself and his family is tied up in working for the so-called “exploiter.”
Now, the worker could become an entrepreneur himself. But perhaps he has not the knowledge, or thriftiness to engage in such activities. It is my opinion that the reason capitalist ideals have such a hard time gaining acceptance with the common man is in its supporters willingness to mistake ignorance for laziness or malice.
I would say for the vast majority of the time that homo sapiens have existed, humans did not have wage earning jobs in the way we think of them today.
I encounter this sort of idea all the time when talking with socialist types. They love talking about how everybody NEEDS a job, and because of that owners can exploit workers. They also equate a boss saying ‘do x or you’re fired’ to ‘pay taxes or get out’ and say that I am the one being inconsistent.
I would say for the vast majority of the time that homo sapiens have existed, humans did not have wage earning jobs in the way we think of them today
Yes, this is true. But where in the world can I go, set up a tent, and start farming the land? I am at the behest of the power structure (the rich, the politicians, the special interests, and in a small way the poor themselves) as all the land is owned by someone at this present moment; either private or public.
So without the “exploiter” he’d be dead? If the capitalist had not built the factory, the worker would have simply sat on the street and died (out of sheer ignorance and inability to survive in the world/nature)? Personally, if someone’s very existence affected me at such an existential level, the last thing I’d call him would be an “exploiter”. What a low level of self-esteem one must have in order to hold such a view.
So without the “exploiter” he’d be dead? If the capitalist had not built the factory, the worker would have simply sat on the street and died (out of sheer ignorance and inability to survive in the world/nature)? Personally, if someone’s very existence affected me at such an existential level, the last thing I’d call him would be an “exploiter”. What a low level of self-esteem one must have in order to hold such a view.
That is why I said the “so-called exploiter.” I didn’t want to go into a long diatribe about how exploitation involves intent. So I just said he was called an exploiter, rather than that he is an exploiter.
And do people not just sit on street corners and die out of ignorance? I think we call these people homeless lol.
I don’t think you can call “I AM WORTH MORE THAN YOU THINK” low self-esteem.
How about “Please hire me and pay me a living wage, or I’ll die”?