Marx's theory on value- a contradiction?

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Karl Marx replied on Tue, Aug 14 2012 5:28 AM

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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.”

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Karl Marx replied on Tue, Aug 14 2012 5:59 AM

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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.

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Karl Marx replied on Tue, Aug 14 2012 6:31 AM

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“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. 

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David B replied on Tue, Aug 14 2012 10:15 AM

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Karl Marx:

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.

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.

Karl Marx:

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.

Of course he does, that's called saving and investment.  IT's always been called saving.

Karl Marx:

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.

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.

Karl Marx:

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. 

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.

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Karl Marx replied on Tue, Aug 14 2012 5:54 PM

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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? 

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Jon Irenicus replied on Tue, Aug 14 2012 6:04 PM

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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.

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Karl Marx replied on Wed, Aug 15 2012 4:09 AM

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Jon Irenicus says... “...evolution...”

Thank you Jon Irenicus, social evolution is just what we are discussing.

Please join in. 

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Karl Marx replied on Wed, Aug 15 2012 8:00 AM

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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

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Fool on the Hill replied on Thu, Aug 16 2012 8:58 PM

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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.

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.

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David B replied on Fri, Aug 17 2012 11:40 AM

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Cortes:

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.

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Fool on the Hill replied on Fri, Aug 17 2012 7:17 PM

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I admit that isn't a perfect critique of Austrian economics. Luckily, there is a better one.

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David B replied on Sat, Aug 18 2012 1:59 AM

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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.

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vive la insurrection replied on Sat, Aug 18 2012 2:27 AM

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delete

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LibertarianMarxist replied on Tue, Aug 21 2012 12:11 PM

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Aayu:

I am going through capital, volume 1- and I have a problem. Marx states that the value of a commodity is equal to the socially acceptable labour time necessary to produce that commodity. And that the exchange value, or relative value is the menifestation of that particular value in the use- value terms of the equivalent commodities. INow that we have money, I think that we have a common equivalent commodity, with a particular use vale attached to it (However, there is a chapter on Money following the chapter I am on, so about that I'm not too sure. that's not relevant to the point in hand). My question is - How would Marx explain the heterogeous price of the same commodity? The same commodity at Archies, for example, is 10 times the price of the commodity if it were at a roadside vendor. One could say that the price increases because Archies guarantees a good quality product, but that does not increase the socially acceptable labour time required to produce the good, does it? Is this a contradiction to his theory on value?

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.

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cab21 replied on Sun, Aug 26 2012 7:36 AM

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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?

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David B replied on Sun, Aug 26 2012 9:05 AM

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LibertarianMarxist : Value is created in the production process.

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.  

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LibertarianMarxist replied on Sun, Aug 26 2012 9:07 AM

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cab21:

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.

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.

cab21:

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.

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.

cab21:

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.

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?

cab21:

at what price is "the average socially necessary labor time to produce " set at and how is it set?

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.

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gotlucky replied on Sun, Aug 26 2012 9:26 AM

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David B:

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.

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.

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Autolykos replied on Sun, Aug 26 2012 12:08 PM

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Libertarian Marxist:

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.)

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".

Libertarian Marxist:

"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.

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.

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David B replied on Sun, Aug 26 2012 1:51 PM

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gotlucky:

David B:

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.

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.

Amen, I think the issue Marx and modern socialists have is seeing the phenomena and interpreting it as a necessary existent in and of itself.  Instead of understanding it as an emergent phenomena explained by another mechanism.  Prices emerge from social action and all action assumes preference for one thing over another.  Prices are not value.  Prices emerge because of valuation and evaluation.  

If I were to divide those terms and understand them as slightly different it would look like this.  Valuation might be the consideration I perform as a mental activity of how I might use some "thing" in reality as a means to an end.  The value of the thing would be in some way (not quantifiable in scientific terms) related to my desire for that specific end which I'm considering it for.  Evaluation would be the comparison of two valuation results.

So, with money prices within the context of a business or a family budget, or any other "accounting/budgeting" process.  We would perform valuation and evaluation processes by using prices as a means of comparing the relative costs of differnt goods, services, etc.   However, the pure numbers in the accounting unit aren't sufficient to produce a decision on action. 

Just because it might be cheaper to go on one vacation experience than another isn't a reason to forego the trip to Aruba, in favor of the trip to the local campground with a tent.  The budget might inform me of how much money, I've chosen to set aside for such an activity.  I can arrange for the trip to Aruba, but I have to decide how to pay for it, and in looking for additional money to pay for it, I have to decide if my desire for the trip to Aruba is sufficiently high to warrant giving up other activities I've budgeted : dinners, movies, fast food, saving for college, the new car, etc.

It's not money to money.  It's money to money in the pursuit of end vs. end.

Even the profit made by a specific business is not an end in and of itself.  The goal of a business is to make money.  But not to make money as an ultimate end.  A human being (or multiple human beings) wants the money to some other personal end. 

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Consumariat replied on Sun, Aug 26 2012 2:19 PM

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Even the profit made by a specific business is not an end in and of itself.  The goal of a business is to make money.  But not to make money as an ultimate end.  A human being (or multiple human beings) wants the money to some other personal end.

I disagree with this. There are a vast number of people for whom the purpose of business is to make money for it's own sake. That may not be 'rational' from your perspective, but you cannot deny that often people subjectively value the process of earning profit above all else.

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David B replied on Sun, Aug 26 2012 2:52 PM

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Consumariat:

Even the profit made by a specific business is not an end in and of itself.  The goal of a business is to make money.  But not to make money as an ultimate end.  A human being (or multiple human beings) wants the money to some other personal end.

I disagree with this. There are a vast number of people for whom the purpose of business is to make money for it's own sake. That may not be 'rational' from your perspective, but you cannot deny that often people subjectively value the process of earning profit above all else.

Disagreeing doesn't make you right.  Show me such a person, and I'll show you a person that uses the money he makes to do things other than make money.  It may be true that at specific times and places, every person on earth has pursued profit as the primary focus of a specific action.  Meaning that he wasn't actually thinking about how to use the money that he earned.   It may even be true that this happens for most men for most of their labors for wages or in running a business.  I'll be surprised, in fact would argue it's not possible, for there to exist a human being whose ultimate end, the one beyond which we cannot look is actually and only the making of money.  There's not a human being on earth that doesn't consume.  A person cannot actually value the process of earning profit above all else.  If a man ever eats, he has chosen eating food OVER earning profit through a direct action in reality.  To eat he must necessarily be converting productive effort into a consumer good and he must then consume it.

The seeking of profit is a necessary consequence of running a business.  One must have accumulated wealth to invest in the materials used in production.  One must at some point either generate a profit, or run out of wealth to invest.  By necessity unprofitable efforts will disappear.

But this explains why profit is a necessary consequence of running a successful business.  It is not a logical conclusion that therefore the man's desire to generate a profit is in fact the ultimate end of his effort.  In fact, in direct opposition to that logically fallacious inference is the evidence that every man not only works to generate a profit, but also engages in behaviors that consume wealth.   So, I can in fact say that no man can value generating a profit above all other ends. 

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Fool on the Hill replied on Sun, Aug 26 2012 2:53 PM

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I disagree with this. There are a vast number of people for whom the purpose of business is to make money for it's own sake. That may not be 'rational' from your perspective, but you cannot deny that often people subjectively value the process of earning profit above all else.

Agreed. As I've argued in my thread, the idea of an "ultimate end" doesn't make much sense when applied in this context. I was told that "ultimate end" refers to the satisfaction (the removal of "uneasiness") brought by action. Mises also says provisioning for the future is itself satisfying. Thus, consumption isn't anymore of an ultimate end than making profits.

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cab21 replied on Sun, Aug 26 2012 4:55 PM

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so under marxism, surplus value is not allowed and value is a random arbitrary number with no logic to it?

a person cant's pay 100 dollars for something they would sell at 100 dollars or less for the long term.

workers can own the means of production under capitalism, many own the means. we have stocks where the workers can choose to own part of the company, people can be paid in stocks. the mcdonalds worker is not going to be able to personaly take the icecream machine home with him, but he can still be a partial owner of the company.

pay as willing tells everything about the determination of value. what does marxism have? it says value is a arbitrary number without logic to is as well with melt. supply and demand in capitalsim, verse a arbitrary central planner that decided what will be produced and what will be consumed, and oh well if there is a surplus or deficit in production that causes food to spoil or people to starve. oh well for choice of what people purchase and what people eat.

how is it the average time if the slower time values are dropped and only the time of the most efficiant worker counts? would that mean people would be charged less for products made by people that made them slower , the same, or more? would the worker be paid per widget and profit off of the time it takes, so the people that make more in less time profit more?

so does melt keep the same purchasing power no matter what the monitary exchange rate is so prices and wages rise and fall in real time? how on earth is that done? prices can change from the time a person gets paid to the time a person purchases the products they need.

people are not paid in labor hours, yet melt is a rate of money per time? how are those different?

since hot dog vendors take different times to deliver each hot dog, does the production time of each hotdog get recorded and the price change according the the time it took to produce the hotdog?does that mean the worker must apply the condiments or are people allowed to produce their own condiments, and they have to pay for the time and amount of condiments they use?

does the doctor receive the same melt as the food distributer? does the central planning dictator receive the same melt as the janiter?

so far in marxism i have seen rich central planners starve the people and kill millions of them while the people don't get paid near what the central planners get.

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LibertarianMarxist replied on Mon, Aug 27 2012 8:31 AM

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cab21:

so under marxism, surplus value is not allowed and value is a random arbitrary number with no logic to it?

First, I am writing about capitalism. In communism there is no value by definition.

Second, according to Austrian "economics" - not Marxian Theory - value seems to be quite arbitrary, which completely contradicts even the most basic experience when one visits a store. The Austrians explain nothing, neither prices nor values. They can't explain why some goods are more expensive than others. Marx's theory can.

Third, the MELT is arbitrary set as evidenced by the foreign exchange rates. Only an uneducated person thinks if she changes her $ to Yen (at a rate of 79 Yen/1 $), that she is 79 times as rich as before the change. (In fact, many people (the majority?) are that economically illiterate. When the Euro was introduced, millions of people thought all their money would shrink just because they did not understand that one Euro is worth more than one unit of their national currency. Those are the same people who think they get rich in an inflation.)

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David B replied on Mon, Aug 27 2012 10:01 AM

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LM : First, I am writing about capitalism. In communism there is no value by definition.

I don't think you realize just how funny this is as a statement.  Theory that doesn't match reality can be good theory, and useless.  As soon as you say "there is no value by definition" the rest of your conclusions, statements, theorems, etc. are irrelevant to the real world.  People do in fact value things.

LM : Second, according to Austrian "economics" - not Marxian Theory - value seems to be quite arbitrary, which completely contradicts even the most basic experience when one visits a store. The Austrians explain nothing, neither prices nor values. They can't explain why some goods are more expensive than others. Marx's theory can.

Ummm, I don't think "seems to be arbitrary" is grounds for rejecting it.  Subjective values are not actually arbitrary, they simply cannot be quantified.  There is regularity to the actions of people, which indicates there is some level of regularity to the valuation of the individual exhibiting the actions.  Instead the actions of people are chaotic but not arbitrary.  Meaning that while I can know you will eat today, I cannot with certainty know where you will eat or what you will eat.   Our behaviors are regulated to an extent by certain conditions of reality and by certain physical needs, and certain emotional needs.  The variety of ways in which we can satisfy these different ends is the "arbitrariness" of which you speak.  The capacity of the human mind to order hierarchically these needs in ways that vary form person to person is another source of this "arbitrariness".  The true word however is chaotic, not arbitrary.

Processes in reality that are chaotic, can produce results that are extremely ordered even if the inputs seem to be arbitrary.  If any of the input conditions are ordered (including the fundamental laws that govern the system), then it is not only possible, but likely for an ordered phenomena to arise.  The only type of systems that don't achieve some type of stability or exhibit ordered regular phenomena are systems with positive feedback loops that don't have a negative feedback loop regulating them (an explosion is an example of that type of dynamical system).  An example of a chaotic system that generates an ordered outcome is: give me a tray with a mesh bottom for sifting.  Dump in a bunch of varied sized rocks.  I can guarantee you that I can shake it in a very arbitrary manner for a period of time and a very high percentage of particles smaller than the mesh holes will be gone from the tray.  I can also guarantee you that NO particles larger than the holes will be on the other side.  All of reality works this way, where the conditions of the environment, the "rules" so to speak, dictate that ordered results appear out of chaotic inputs.  

Austraian economics explains something, both prices and values.  They do explain why some goods are more expensive than others.  Labor is in fact a significant aspect, but it's not the causal source of value.  It is not labor that is spent that determines the value of a good, it's the value of a good that dictates where labor is spent.    The problem is all misallocated labor gets rapidly removed from the system.  People stop putting labor in places where it's not meeting demand (the source of value).  This is really quite frustrating, it's so clear and so obvious, I don't see how Marxists/Socialists continue to spout this crap in the face of the real world evidence that they must be wrong.

LM : Third, the MELT is arbitrary set as evidenced by the foreign exchange rates. Only an uneducated person thinks if she changes her $ to Yen (at a rate of 79 Yen/1 $), that she is 79 times as rich as before the change. (In fact, many people (the majority?) are that economically illiterate. When the Euro was introduced, millions of people thought all their money would shrink just because they did not understand that one Euro is worth more than one unit of their national currency. Those are the same people who think they get rich in an inflation.)

This isn't interesting... or relevant.  People's stupidity doesn't have anything to do with the correctness of an economic theory.

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Autolykos replied on Mon, Aug 27 2012 10:16 AM

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LibertarianMarxist:

First, I am writing about capitalism. In communism there is no value by definition.

That completely contradicts Marx's definition of "value", which is "the average socially necessary labor time to produce something". What wouldn't exist in communism is market exchange, and since Marx's definition of "commodity" is "something produced for market exchange", commodities wouldn't exist in communism either. But the absence of market exchange in no way means that there's no longer any average socially necessary labor times to produce things (i.e. values).

LibertarianMarxist:

Second, according to Austrian "economics" - not Marxian Theory - value seems to be quite arbitrary, which completely contradicts even the most basic experience when one visits a store. The Austrians explain nothing, neither prices nor values. They can't explain why some goods are more expensive than others. Marx's theory can.

Austrian-school economics certainly can and does explain why some goods are more expensive than others. The Austrian-school economics definition of "value" is simply different from Marx's. Here's the definition used by Austrian-school economics: "what one is willing to do in order to gain and/or keep something". Notice that this definition is wholly different from "the average socially necessary labor time to produce something". Also notice the implication with the Austrian-school economics definition of "value" that value is necessarily subjective. If one person's willing to give three chickens for a bushel of wheat, and another's willing to give five chickens for the same bushel, who's correct? Austrian-school economics' answer is that neither is correct and the question itself is malformed.

According to Austrian-school economics, an exchange occurs when there's a meeting of the minds between the transactors about what each of them is willing to do to gain what the other has. The price of that exchange simply represents the monetary side of the exchange (if there is one). Now some people may be willing to do more to gain what the other person has than others are willing to do. Generally speaking, the interplay of people's subjective valuations of things is what gives rise to prices.

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cab21 replied on Mon, Aug 27 2012 4:48 PM

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so marx has a definition for value, yet also defines his theory by saying there is no such thing as value?

how is it decided how food, water, and shelter will be produced and distributed? if none of that has value, are each equivalent? how do different types of food, water, and shelter get compared as to what will be produced and consumed?

so in marxism is seems value is in labor, or there is no value, and in capitalism value is in demand and what consumers are willing. in capitalism, people have to pay a profit to labor before they even can sell a product, and they may have to sell the product for a value less than they paid the labor. labor gets to pick the profit labor gets by deciding on a contract that pays labor a profit before a product goes to the market. labor gets the choice of all kinds of ways to make the profit, they can get salary, wage, commission, stock, ownership, barter, some self feeling. but the labor must see their labor as profitable to even begin working.

higher costs to produce will create higher selling costs, what people are willing to pay and willing to be paid determines prices and which items will sell higher.

does marx value two art peices that took the same time to produce at the same value no matter how skilled each artist was, what the art piece was about, and how people even valued the art in capitalism?

if two orchrestras play the same song, are they to be paid the same no matter what the quality of the performance, how many people say them, and what people thought of the performance?

what do foreign exchange rates have to do with melt and people within the melt system , currency itself can be free market, although we do have communist countries and Keynesian countries  the manipulate currency and don't allow for a free market for currency. purchasing power is what matters, not the number attached. do the doctor and janitor get the same purchasing power under melt? with to each according to needs, is everyone supposed to need the same, or does the doctor need more than the janitor? if everyone needs the same, why do the communist dictators receive and spend the most on lavish material items and reward themselves with riches the people not in the dictatorship class don't receive?

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David B replied on Mon, Aug 27 2012 5:16 PM

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cab21:

so marx has a definition for value, yet also defines his theory by saying there is no such thing as value?

Amen, I'd reply, thus: Ok, I accept the rejection of the term value, instead can you give me a generic term for the drive within a man to do.  The motive of action, the desire which must exist for a man to do a thing, to this thing in a man, what word will you let me have?

That word that you give me is what I will point to as the source of all action and therefore all social action, and therefore all economic action. If I cannot trace a price in some causal way to the motive to act, I don't know how to think about prices as a real and not completely arbitrary phenomena in reality.

If you point at labor, I say it's action and ask what the motive to act is, at which point you must give me a  term.  I used the word value. and that it's source is in the man, that he has "a motive to act" and that the action is the proof.  That motive is for me a black box, and unquantifiable.  I don't know how to measure it's strength, I only know when it's strong enough to override any other motivation to do any other thing.  How do I know? Because I see you doing a specific thing.

Anyway, I can go on and on.

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cab21 replied on Mon, Aug 27 2012 6:34 PM

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so still wondering about the exploitation factor here.

all sorts of situations in capitalism have the worker own the means of production and supply the capital in the business, is the owner/worker exploiting himself in capitalism?

capitalism can pay workers in ownership, the workers would then own means of production, is that still exploitation?

100 factory owners also work in the factory, they make products for 100 and sell products for 150 and each of the 100 owners takes 100.5 from the sale. this is a possible situation in capitalism, is this exploitation of labor?

i don't understand this thing that says labor gets less compensation than the amount of work done, as work done does not have set compensation. compensation for labor can happen before there is even a sale or compensation for the owner, and the owner can be a worker. if the worker is paid after the sale, then how is it determined how much work should have been done? if a machine does 95% of the labor, and 5 workers each do 1% of the labor, does the machine get 95% of the sale price and each worker get's 1%?

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Cortes replied on Mon, Aug 27 2012 10:42 PM

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"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."

 

How do Marxists objectively quantify how much necessary nutrition and sleep is optimal for each individual, every day?