Posted on 12/30/2006 6:06:12 PM PST by G. Stolyarov II
digging a large hole and filling it in both require extensive manual labor—yet the net result of the procedure benefits nobody and improves nothing.
A perfect description of the Big Dig in Boston.
What in the world? I just woke up from a nap. Am I in the 19th century or something?
This was a debate among the classical economists including Marx. This was solved long ago by Jevons, Marshall etal. Particularly Marshall with his discussion of which blade of a scissor does the cutting analogy showed us that value depends on costs and demand.
Not entirely. The Big Dig does benefit some, democrat crooks who fill their pockets with kick backs they get from awarding contracts to their pals.
"The Value of a Thing
Is What That Thing Will Bring."
An apt and well-worded illustration of the utility theory. Thank you.
I am
G. Stolyarov II
http://rationalargumentator.com
Mark
"Thank you. A nice brief description that is very useful (hence, bring utility) when we debate liberals (this brings disutility, but sometimes it is a necessity)."
You are most welcome. Thank you for your readership and kind comment.
I am
G. Stolyarov II
http://rationalargumentator.com
I think your arguments might help persuade a dedicated Marxist, if he had any rationality, which is somewhat in doubt.
I first ran into the Labor Theory of Value in my freshman year in college, and I must confess I could instantly see that it was ridiculous on its face. I couldn't see how an intelligent person could credit it even for a minute, and I still can't.
Like it or not, it's the market that determines value. That is, what people are willing to pay for something.
Workers should earn an honest day's wages for an honest day's work, but it's futile to imagine that that means any kind of work, no matter how misguided.
There are exceptions, but only those freely agreed to. Thus I have sometimes paid people by the hour and for materials when they do work around the house. But we have to agree on the rate, and agree that the work is being done in reasonable fashion. But you can't price an automobile on what it cost for overstuffed union workers to build it. You have to sell it for what people are willing to pay for it. Or you will eventually go broke. Or suck in the whole state, and drive it broke, too.
"This was a debate among the classical economists including Marx. This was solved long ago by Jevons, Marshall etal. Particularly Marshall with his discussion of which blade of a scissor does the cutting analogy showed us that value depends on costs and demand."
While the labor theory of value has long ago been refuted in many different and interesting ways by a variety of schools of economic thought (including the Austrians, the Marshallians (neoclassicals), and other exponents of the marginal revolution), the fact remains that said erroneous theory is the principal theoretical foundation of contemporary socialism-- a view very much alive today and a view that we need the proper intellectual ammunition to combat. Many well-intentioned people without economic training still hold some version of the labor theory and the corresponding view that every good has a "just price" corresponding to costs of production. The purpose of this article is to communicate not only with economists but also with the public at large-- to persuade individuals that the utility theory is a better view and to enable them to argue against the labor theory more effectively.
I am
G. Stolyarov II
http://rationalargumentator.com
Thank you very much for your insightful comments and examples. I agree entirely and appreciate your readership.
I am
G. Stolyarov II
http://rationalargumentator.com
bump it for later
Even the Marxists don't really believe that crap anymore.
Solved long ago, sure, but a few days ago while homeschooling, I was innocently reading from a history book...a passage on the Industrial Revolution, that referred to its consequences with an offhanded mention of how the cotton gin caused unemployment. Nothing else, mind you, just that a lot of folks were thrown out of the only jobs they knew how to do.
To some people, labor-saving inventions aren't valuable. They're anti-valuable.
Economics isn't always taught in college. Sometimes it just splashes on you as you seek education, and spreads by unhygienic contact with others.
Which is not to say there aren't a lot of Marxists teaching it deliberately, as well.
It is a curiosity that Marx himself refused to use the term "Labor Theory of Value," preferring "Labor Definition of Value" for reasons that aren't obvious. I have long suspected it's because he knew it was indefensible as a theory. Whether he knew it or not, it was, as your post details. Many thanks again.
A man of my acquantance, who worked for a bank in Boston, had an office window, as it happened, that overlooked a portion of the Big Dig. One day he noticed that they were commencing a new lane right next to one that they had just completed.
During a break he went out and approached a supervisor, a large man with a cigar in his mouth, visibly (dare we say it) of Irish descent. He asked the man why they had not just built two lanes to begin with. The supervisor took his cigar out of his mouth and looked at my friend in amazement. "I don't think you understand," he said, "this is a whole 'nother project!"
There you have the American Labor theory of value.
I really hate to rain on your parade here, because the ideas are, in essence, solid, but these are not very good refutations. Now, I don't support the labour theory of value, nor would I defend it - but these are just going to get eaten alive by Marxists, or so-called "heterodox" economics:
Refutation 1 is correct, but misapplied - "value" is only related to socially necessary labor; that is, a kind of "average" labor that society uses to produce a good. This is not a situation in which we are talking about a good, on the whole, and it does not apply here. What is extremely vexing about the LTV is that is hideously muddles micro and macroeconomic explanations for terms. This is one area where the traditional micro/macro distinction leads you to the wrong conclusions.
Refutations 2 and 3 is simply incorrect, once again because of the "socially necessary" caveat. If it takes "society", on average, one hour to, say, weave a bolt of cloth then that is the value of a bolt of cloth. If it takes ME two hours to weave that same bolt, that means nothing. Likewise, if I spend hours doing pointless work, that does not give the work value - since it is not socially necessary work.
Refutation 4 is also good - but, again, it misses the "socially necessary" aspect. Tied up in the concept is that of zero arbitrage; social necessity is a matter of classical equillibrium, and in equilibrium there can be no arbitrage.
Refutation 5 is incorrect for the same reasons 2 and 3 are - in addition the "value" of a product produced need not be tied to the wages paid. For instance, it is perfectly consistent with the LTV to have wage-differentiated workplaces.
Refutation 6 is good, but both ignores the fact that it could be applied equally to classical treatments, and that it ignores the marginality of work. For instance, we are only talking about value - this allows a kind of "equation" of goods based on value. For instance, lets talk about that bolt again. Say, because I am skilled, I can produced one bolt in a half hour. Thus, in an hour, I produce two units of value - and can then exchange them for other goods I desire. If I had to go make those goods myself, I would not be able to - or it would take much, much more time. The LTV is consistent with specialization, and the marginality of labor.
Refutation 7 and 8 try to use two different concepts of "value" in the same notion. You either get utility, or value - you can't have both.
Perhaps a better way to put it is that "value" is a kind of definition - like one foot, or one meter. What people like Smith, Ricardo, or Marx were saying is that goods have this property which they called "value" that was equal to the amount of socially necessary labor embodied in them. They weren't making an observation, or stating a theory - rather, they were saying that value IS that embodied labor, and then used it to try and explain the economy. The problem is that "value" has connotations, and means different things in different contexts. For instance, many of your criticisms implicitly assumed that you could use utility as another measure of value - well, you can't, because value is a definition. Maybe it was a bad thing to call it - say, call it "praxis" or "puisse" or something.
In the end, however, it's really just a different definition they've tried to apply, in order to explain how the economy works. We all know how their project turned out, but trying to refute it in such a way is not productive.
Now, if you'll excuse me, I need to go wash my hands. I feel dirty for having to say that.
Isn't there a difference between cost and value? Value has nothing to do with cost. Value is subjective. Something that is valuable to one person is worthless to another. But cost is related to labor whether it creates value or not.
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