David says… “…In the meantime, an economic system of thought based on an assumption of a zero-sum exchange of value, must explain how societies that accumulate capital and then invest it in more advanced and longer processes of production have produced a constantly improving state of existence (lifespan, food availability, health, comfort, leisure time, etc.) for members of the society REGARDLESS OF THEIR CLASS OR STATION.”
David says… “…In the meantime, an economic system of thought based on an assumption of a zero-sum exchange of value, must explain how societies that accumulate capital and then invest it in more advanced and longer processes of production have produced a constantly improving state of existence (lifespan, food availability, health, comfort, leisure time, etc.) for members of the society REGARDLESS OF THEIR CLASS OR STATION.”
The worker fights hard for improvement. According to the BBC if you catch a train at Westminster going East then for each station just knock one year off and that is the lifespan for the people who live thereabouts. More people who live in Westminster own land and the means to work. Most Londoners are just workers. The worker must make himself the owner.
“I hope you see that property is not just some whimsical phenomena that arises because of some desire to exploit, and in fact I admire Marx’s observations in acknowledging that people have to use matter, but one can’t attack private property simply because some cases of a societal implementation of property rights results in situations that seem unfair or regretable or any other negative term, one can’t attack use. Not being able to establish a legitimate use claim peacably respected by his peers would result in the very thing that all mankind fears which is the “anarchist” boogeyman of every man fighting and striving violently to wrest the means necessary to his own survival from his fellow man, and even that condition might be considered a mechanism (de facto) of establishing property rights. All discussions about property are discussions about how a social group defines the boundaries around claims the group decides are “legitimate claims”.
Of course “Capital” the book, and the labour theory of value, aims to explain stages. You have for instance 1) Ownership - of production and of the product - by the worker on a small scale. 2) Ownership by the small capitalist. 3) Ownership by the big capitalist. 4) Ownership by the worker – this time on a big scale.
Each way to own, if it is to be a way forward, is also a way to save labour hours. A man gains when he can make himself owner of the ways and means to save labour hours. When we grow food, make clothes and build homes with less labour hours then we make more wealth, and so we add more new needs and ways to meet them. We change the ways in which we must distribute wealth and much else as well.
The worker needs to own because it is the next way forward. It is the way to save labour hours.
So the logical constuction is 1. Ownership by [person], 2. Ownership by [person], 3) Ownership by [person], 4 Ownership by [person].
For example, what’s the dividing line betwee an small capitalist and a big capitalist? How much property? In addition, what’s the difference between a small scale worker who owns his product and a small scale capitalist who owns his production means and product? Is it that he hires some one?
What substantive or real difference exists between these states of affairs. Even moreso, what do the “legitimate propery claims” look like in each of these 4 instances? In otherwords give me a law that differentiates between them, but establishes a means for evaluating within a dispute in an unbiased way which of two claims is the valid one. Or give me a definition of property rights that would prevent 2 and 3 from happening.
In other words you’ve created words on a page, you haven’t described how the real economic behaviors of man lead to some altered reality.
I don’t have to explain how normal economic behaviors of man lead to capitalism. But you have to explain how the normal economic behaviors of man lead to capitalism and socialism. Just like in the political realm anarcho-capitalists can’t just argue for some imagined perfect political reality, we have to explain how it would work, and design technology to get there.
Of course he does, that’s called saving and investment. IT’s always been called saving.
Of course it makes more wealth. The way however that you create more wealth with fewer labor hours is through more efficient production methods. Sometimes, it requires investment in expensive capital and takes years and years to earn back in some magical way (profits) the return from that capital. In other words if a foundry costs millions of dollars to build, which of the workers puts up the money to build it? If one of them doesn’t put up the money for the foundry, who builds the foundry?
You can’t answer, all ideas of collective group ownership, show up after the capital has been created. Well guess what I’d predict that the lifetime of an industrial economy (not a subsistence one) based on socialist concepts of ownership will survive just long enough to use up all of the capital investment that existed before the socialist regime took power. There will be no savings, because there’s no money, there can be no accumulation of wealth which will be put at risk, in the hopes of generating a profit.
But saying these things over and over doesn’t make them true. That’s the sad reality. It’s invention of new production methods, whether it’s a new tool for yardwork or for the kitchen, or a new robot that can build cars, that saves labor hours. It can be a new process or technique developed by a single worker on an assembly line, that the time taken by his station by 20%. That’s what saves labor hours.
David says… “…what’s the dividing line…?”
Thank you David, I think that this is useful. Yes I assume that you are on the right track. You say that you want dividing lines between?
Obviously the worker he works. He is too honest to steal. He is not so rich that he can live and not work. So he works. He works for what he eats. That is why we call him worker.
The need to work is one line.
The capitalist does not need to work. There are three kinds of capital. But you David ask of the industrial capitalist. You ask… “…Is it that he hires some one?” Yes he does. He buys materials and hires someone to work. That is he hires the worker.
He hires some more. And so on. Depending on the time and place, and the conditions, he can cross your dividing line where he becomes an industrial capitalist. That is the line at which profit from this business is enough to free this owner from his need to work. He may instead go and count his cash as he wishes.
I haven’t forgotten your other questions. I am more than pleased to answer you as you wish.
But at this point please just answer me this one. I am thinking of the very early industrial capitalist production in England in the 16th century. How did it save labour hours?
Obviously the worker he works. He is too honest to steal. He is not so rich that he can live and not work. So he works. He works for what he eats. That is why we call him worker.
These are anecdotal, very vague generalisations imbued with personal moral judgements. It isn’t economics.
Jon Irenicus says… “…evolution…”
Thank you Jon Irenicus, social evolution is just what we are discussing.
Please join in.
David says… “…Well guess what I’d predict that the lifetime of an industrial economy (not a subsistence one) based on socialist concepts of ownership will survive just long enough to use up all of the capital investment that existed before the socialist regime took power. There will be no savings, because there’s no money…”
No David. Let’s say that Crusoe grows coffee beans. Yes if Crusoe then roasts, grinds and drinks the last bean then it is true that he has no more beans to plant or grow. But then that is not what Crusoe does. You will recall what I said to you just over the page. Here it is.
“…As with Crusoe we take the total product and split it to make two parts: one we use as fresh means of production, the other part we must share for the upkeep of the different individuals…”
I said that it’s all here In Capital Volume One Chapter One. http://tinyurl.com/cytj5dq
David: “There would be no reason to trade”, is not necessarily true. Meaning even IF they’re both on the same island, there may still be a reason for them to decide to divide up the work, and exchange the results of that labor. For example, Ludwig for some reason may be better at catching fish. We don’t have to know why he was better, or why he preferred to spend his labor on fishing. It’s only necessary to understand that IF this disparity in the way they choose to employ their productive efforts exists, AND IF they both desire to exchange the products of their labor in exchange for the products of the other person, THEN barter will occur, and nothing other than subjective value is necessary to explain the exchange ratios.
But it’s precisely this disparity in the ability to work (whether as a result of physiological differences or territorial differences) that necessitates the labor theory of value.
In his theoretical island scenario, the two parties lived in environment separate from each other with different available resources, but when they travelled to meet each other they exchanged the fruits of their labor. That’s perfectly reasonable. If you have date trees and a stream with lots of tasty fish on your island and I have banannas and coconuts on my island. Even without assuming that you should have equal access to the resources on the island I live on, it would still be reasonable for me to collect those products from my island, travel to your island and exchange those products for your products…But that’s not what he says here, barter isn’t an issue. It’s the property relation. But I’ve made what I believe is logical argument for the existence of some version of property rights in every social group, no matter what it calls its political organization. EVEN UNDER SOCIALISM, there will be some mechanism for establishing property relations.
I don’t think he’s using this example to say that barter shouldn’t occur or anything like that. He’s just pointing out how economists ignore important facts about reality in their theories.
Some workers are less efficient than their fellows at different tasks in any production process. All persons that show up to mow my lawn are not equally substitutable at satisfactorily producing a mowed lawn that satisfies me. Think carefully about any service that you personally purchase. Are there McDonalds that you prefer, simply because they tend to not be as clean, or not as friendly, or the food is frequently stale? Does this indicate some significant difference in the input labor? Meaning that even if the cooking of my burger required the same amount of raw labor, the decision to make a ton of burgers at 3pm, and then let them sit for sale until 5pm, might be a significant difference in the quality of the burger.
Well, that’s my point. Most workers can produce x, but they aren’t equal at their jobs. I see that you excluded the consideration of laborers taking a different amount of time for the task–which is one of the primary differences among laborers. Of course these differences in ability to produce x is what Marx says determines value.
I’d like to beg my leave here however. I’ve got another primary focus, which is my Praxeological Theory of Property, Conflict and Politics, and I’m not actually an Economist, or a Scientist of any type. I’m just a lowly Computer Programmer… So there may be others here who are better able to argue (in the “self-edification” sense, not in the “combative” sense) these issues with you.
That’s good, actually. There are too many threads that I am engaged in now anyway.
The video on Subject/Object addresses Austrianism directly.
they’re trying too hard
I think it’s worse than that. They aren’t trying to disprove the statement, they make fun of the mental constructions used, because the models while accurately reflecting and predicting the behavior, are in and of themselves, not observable and therefore not accurate.
An internal “preference spreadsheet” cannot exist in a directly manipulable form, it’s a logical device that explains and interprets the result. “Maximizing value…” is a means of describing the logical implication of an action chosen. It is not the way the person thinks directly.
They’re not arguing about the deeper implications of the behaviors, and trying to form logical categories and theorems that would explain how to interpret and predict the side effects of different changes in the environment. They are instead making fun of edge conditions, the silliness of certain mind experiments if one forgets that they are mental devices. The evenly rotating economy is taken as literal instead of as a static thought experiment; it’s a mental device with time removed, and one factor changed. They instead point it at a dynamic reality and point at the watermelon seed behavior of equilibrium, and then make fun of those who could be so stupid as to use this silly concept. Well Mises explains clearly, that it cannot apply to reality as we know it, it’s only use is in understanding necessary side effects in the abstract.
When the behavior predicted doesn’t occur, it’s becausing something else changed in the same system.
Like falling prices when production increases, it’s a necessary outcome…, but only IF nothing else changes. Because we’re in the real world, other things can change, therefore something else is wrong, not the law of supply and demand. But our but if someone’s increasing the money supply at the same time… That’s the necessary part of these logical models. It’s less about telling you what IS happening, but it tells you why what you see is happening, and where to look when something doesn’t appear to match up with the praxeological laws of economics.
I admit that isn’t a perfect critique of Austrian economics. Luckily, there is a better one.
FOTH - I’m going to beg off replying in this thread anymore. I have a specific post in the Polylogism thread, that I’d love to see a response to.
I’ll throw Mises passages at Marx passages from Das Kapital, all day long, if you’d like. And even do my best to eloquently and articulately defend them.
But like I said in that thread, I had not historically read Marx directly, until a few days ago. I’m impressed by his acumen, his ability to articulate himself. He was in fact a bright man. I give him the benefit of the doubt, in that he had not yet had the chance to read and interact with the work of a man like Mises.
My comparison would be like Aristotle commenting on how the fetus is struggling to become a man, and the woman is simply a fetus who wasn’t strong enough… Aristotle was absolutely brilliant, but that didn’t make the things he said true. What was amazing about Aristotle ended up being his approach to logic and systematic analysis of the phenomena of the world.
Marx too had some very important things to say, and insights into the nature of the world, specifically economic and political life. But, god help me, he was just plain wrong. Not because I think so, but because his system is infinitely inferior when it comes to explaining economic phenomena when placed in comparison with the superior science of Praxeology.
delete
You got here many things wrong. I try to clarify and show what an elegant and explanatory powerful theory the labor theory of value is.
“Marx states that the value of a commodity is equal to the socially acceptable labour time necessary to produce that commodity.”
No, he does not state this. The value of a commodity is equal to the average socially necessary labor time to produce it. (I have no idea what you may mean by “acceptable”.) This is the exchange value. It has nothing to do with the use value. Use value is not even quantifiable! Money is the universal commodity for exchange (in the case of gold) or the universal bearer of exchange value (in the case of some numbers in a computer, i.e. electronic money, e.g., which is no commodity). (Today, I would consider gold only marginally as money because it is not widely accepted nor convenient.)
“How would Marx explain the heterogeous price of the same commodity? … Is this a contradiction to his theory on value?”
There is no contradiction since the labor theory of value deals – as the name suggests – with values, not prices. The value of the same commodity is the same, no matter who sells it, no matter at what price. Value is created in the production process. Price, however, sometimes goes in Marxian Theory by the name of “value received” in contrast to the exchange value, the “value produced”. Of course, Marx saw this difference and incorporated it in his theory.
The basis of the price of a commodity is its value. But, as Marx notes, commodities seldom sell at their value. There are many factors which influence the price. For example, a capitalist may decide to sell under value to compete against other capitalists if his profit is big enough. So he sacrifices a part of his profit in order to draw more sales. Then there is a sharing of surplus value among the industrial and the commercial capital. The industrial capitalist sells under value to wholesalers. They sell to other wholesalers or to the retailers. The profit, made up from the surplus value exploited from the workers, is shared among this chain of traders. That is another explanation for differing prices. Another factor is how a capitalist decides to distribute prices over his products. He may choose to sell the same product with different packaging or at different locations at different prices to maximize his sales. He tries to cater for customers with different incomes. Another very important determinant of price is the current value, this is the value of the commodity at the time of the sale, not the value at production time. For example, if a drought destroys 50% of the corn on the fields, the value of corn (the average socially necessary labor time to produce corn) increases by 100%. This increase of value is reflected in the current value of all products which contain corn, no matter when or how this corn ingredients were produced.
so does a marxist trade at 1/1 value?
i’m still confused over what this value is?
value is subjective to the seller and the buyer of a product. if labor feels they are not receiving the value they should receive, then they simply don’t contract with the owner to work at a price they see and undervaluing their service.
the same commody sold at different places is a different commody that took different labor times to produce. it takes time to ship a product from one factory to another, so that is in the production time. a product shipped houndreds of miles in the middle of nowhere would take more labor than the same product delivered to a nearby store. so i don’t see the same commody really as being the same, when there were separate production methods.
The value of a commodity is equal to the average socially necessary labor time to produce it
what does that even mean?
the value of a commodity is worth whatever people are willing to pay for it in capitalism, makes more sense to me . labor gets the profit they want in the contract they sign, or it;s the fault of the labor for agreeing to something the labor feels as unfair. people can’t be exploited into signing voluntary contracts of their own free will.
The value of the same commodity is the same, no matter who sells it, no matter at what price. Value is created in the production process. Price, however, sometimes goes in Marxian Theory by the name of “value received” in contrast to the exchange value, the “value produced”. Of course, Marx saw this difference and incorporated it in his theory.
what on earth is value here? with capitalism value is as subjective as anything. people value completly diferent things and each value and trade is supposed to have value received greater than value produced for each participant in the trade.
is there some set objective value supposed to be put in the productions process? is is 11 dollars an hour for everything? is the time of a heart sergion worth the same 11 dollars in value as that of a bean counter?. is it one hour is worth 11 beans or half a heart?
at what price is "the average socially necessary labor time to produce " set at and how is it set? is it set by a master central planner dictator?
is skilled labor the same value as unskilled labor?
what if the workers are lazy and drag a 5 minute process out to 10 hours dragging out the hours of labor put into production and add many mistakes creating faulty products? does the difference in quality not matter as each product took the same time to produce?
LibertarianMarxist :
Ok, here we have to be clear on what we mean by value. All definitions or uses of the term vaue can be classified as one of two uses. One is quantifiable and external. Value in this case refers to the quantity of a thing when counted, measured, etc. The other is a subjectively arising phenomena that is not quantifiable, but has it’s source in the human mind and is demonstrated through action. What a man does shows us what he values.
When a person asks about the value of a good in the market, they are asking about a quantitative measurement the market provides. What price can I sell or buy this good for in the market right now. That is a quantitative use of the word value. But now the person must decide whether to buy or sell the good at that price. This involves the other meaning for the word value. Now the person must compare the two goods and decide which one he prefers, which one he values more.
The market price is an emergent phenomena. It’s source is in the iternal value that man imputes to things in reality. With the emergence of money we increase the frequency of “double co-incidence of wants”. Money normalizes prices, but one can’t forget that the price is a fluctuating emergenet phenomena that has it’s roots in the desire of the human mind.
“Value is created in the production process.” Value arises in the human mind. The production process produces goods. They only have value if people want them. They might be quantifiable even if no one wants them, but that’s a different use of the term.
Workers don’t have this option because the capitalists own the means of production. They will let workers use them only if they produce surplus value. Exploitation is inevitable under capitalism.
You are right about the value. Shipping and storage, provided they are necessary, add value to products. But prices of the same product with the same value can and do differ at different locations.
Marx would agree. People pay what they are willing to pay. This sentence is so devoid of insight and meaning that it is embarrassing that those Austrian self-proclaimed “economists” even dare to state it. Yes, indeed, people have a free will and decide to buy and sell or not to. But that tells us nothing about the determination of value, what it is, or its quantity. People eat if they are hungry, and sleep if they are tired. Does this exhaustively explain nutrition and sleep? Hardly so. But the Austrians claim that their few sentences about free will explain the economy. That is laughable.
Besides, a blackmailed person like a worker in capitalism has no free will. If someone threatens you and demands of you to work or else you get killed, would you say it is a free choice to decide to work?
A market is a process of information exchange. It will be decided at the market what labor time is socially necessary. For example, if one producer needs 2 hours to make a good and another producer needs 1 hour to produce the same good, 1 hour is socially necessary. A producer does not get rewarded for being lazy or less productive.
But we don’t pay in labor hours. Money is the means of exchange. How a hour of socially necessary labor is evaluated is determined by the monetary expression of labor time (MELT), a rate of money per time. Roughly, if the MELT rises there is inflation, if it falls, there is deflation. The MELT is arbitrary set when a currency is established and the particular number does not matter at all.
QFT.
The price system is a mechanism that allows for a quick comparison of values. The price tells you how much the seller values his own product and how much he anticipates buyers might value it. Buyers can either purchase it or not. If they do, then they necessarily valued having the product at that price more than not having it.
It’s really easy for people to look at prices and think they are objective facts of reality, but what prices really show are the cumulative knowlegde of people’s values regarding goods and services.
My understanding is that the average socially necessary labor time to produce a commodity is not the same as the commodity’s exchange value. As Marx wrote, “… exchange value is the only form in which the value of commodities can manifest itself or be expressed” (Capital, Vol. I, Ch. 1, Sec. 1). In other words, exchange value is just a form in which value can be expressed. The average socially necessary labor time to produce a commodity is actually the same as the commodity’s value. Indeed, the labor theory of value is, at heart, just a particular definition of the word “value”, namely “the average socially necessary labor time to produce something”.
From what I understand, the labor theory of value deals with both values and prices. It attempts to explain how the prices of commodities relate to their values. Indeed, that’s the whole point behind Marx’s law of value. But the law of value isn’t a mechanistic law like Newton’s law of universal gravitation is. Marx makes clear that a commodity’s value only serves as the “center of gravity” for its price.
It follows then that exchange value is not necessarily an expression of only value and nothing more. Wheat can be more expensive than corn, for example, even if it takes less socially necessary labor time to produce on average.