Topic: Is labor theory of value a tautology? (Read 9733 times)

A good observation! Actually most of the enterprise investment got wasted and the the company goes bankrupt (check how many companies going bankrupt every year).  That's the reason that Keynes said that we'd rather say it is the enterprise enthusiasm drive most of the business, not the actual profit they expected. When the business is driven, it create jobs, it creates consumption, which make the economy looks much better

Geez, why so many words?

If I work 2 hours on a bowl movement and 2 hours on a sonnet are they worth the same amount? No, so you can't tell value from labor reliably.

In an efficient market it might tend to be true I don't even know, but that doesn't really exist anyway.

I'm in the economics board of an experimental currency forum.

How can you call me troll this way? You're kidding again like when you said I called you marxist, right?

I thought that the fact that my economic theories are not generally accepted was implied in my signature and therefore my conclusions are based in the "jtimon school of economics" that you like so much to mention despite it doesn't exists. Yet .

Very informative.

Yes. In your example, apparently a single guy selling a bottle of water for $5 no matter what.

The sum of all people's needs, wants and preferences. The demand.

That was the proposition I made that you wanted to prove wrong with your example. I'll put it in other words:
If the demand is not sufficient, the selling price of a product can become lower than the costs temporally.
Then the supply will shrink and the price will rise again to meet the costs of production OR the costs of production drop to meet the price OR a combination of both.
In fact I think the point you're trying to prove wrong is widely accepted. You know, the supply curve goes down and also the price.


You mean my assumption "what people value is what creates demand" or my proposition "if value causes demand and demand (with supply) causes price, value comes before price"?

Are these your 3 lines?

I don't think that you proved there with logic and assumptions that I can accept. My job would be now to point out the assumptions you're making that I don't accept and the errors in logic (fallacies) I think you're making.
I'll translate it to a more formal logic to analyze it better.


Completely empty.


(Supply, demand) cause price


not ( ( (Supply, demand) cause price ) and (value before price) )


demand -> value


if (price <= value_for_consumer), consumer wants to buy
if (price >= value_for_producer), producer wants to sell


Included in the last propositions.
Sorry, I don't see any proof.
But how can we be discussing what comes first, if value or price?
Value comes before price, before money and even before barter.

I can tell.

I'm sorry for you. Some people call it praxeology.

Yes, and some people have spent many years devoted to the study of chess or weiki/baduk/go, but that doesn't prevent me from knowing the rules of those games.


Maybe you should try to understand me, teach me (make me understand you) and arrive to conclusions and agreements, because that's what forums are about.
Not about trying to mock at people.

Look JT, if you want to talk about what you think economic theory is, go find a board to talk about economic theory. If you are going to go around saying what you think economic theory is without saying it is your opinion, and in fact telling other people their interpretations based on accepted economic theory are wrong, you are a troll. Nobody cares what you think unless your name is Eugen von Böhm-Bawerk or John Maynard Keynes.


And if we're talking accepted economic theory, which you imply by not prefacing your post with "this is from the jtimon school of economics", this is wrong. Not only is it wrong, it is really wrong. For one thing, have you heard of supply? How "all people value" sounds a lot like Marxism, you might want to work on that if you think Marxism is bad.


Who said there is no demand for water at $5? Why do we need to add a condition to my simple statement of (il)logic?


lol didn't I just deny your assumption with a 3 line logic statement? Look bro, I'm not a teacher and I'm certainly not an economist. The resources are out there for you to study, I cannot reduce them to simple logic deductions because the economy is very complex. People spend many years in college devoted to the study of this stuff. Maybe you should read the links and try to understand them instead of repeating why you think it works this or that way.

I've recognized that I was misinterpreting you several times, but I'm still not sure that I'm misinterpreting the labor theory of value. I've even admitted that a point I made was a fallacy.
I've said "this is how it works" meaning "this is how I think it works". If I think something works in certain way but it doesn't, then is not clear for me.
Your copious links haven't helped much, in fact they've mislead me into getting your actual position on this.
Please, let's just use logic because that's what I understand.
If I explain my point with a simple set of propositions the best you can do to show me my error is pointing it out in a simple fashion rather than using plenty of links and interpretations. "A doesn't imply B, if so a1 would cause b1" or just "Your assumption A is not always true".
When I cite economic theories, that doesn't back my position, only explains it. And to helps others know more about it.


Not an expert in austrian economics but I've read and watched a lot of videos during the last year. I just think that my views can be interesting because most Austrians completely ignore Gesell's ideas (if you know an austrian critique to Gesell, please let me know) and I think most freeconomists also ignore most of the austrian theory.
But I know I cannot write a serious book (at least at this stage) because I would need to read a lot more about economics firsts.
I've put a lot of effort into understanding other schools (mainly the austrian), but if you detect I'm making a mistake "you don't know what you're talking about" doesn't help at all, just point out where my logic fails.
And, yes, I take pedant as an insult so please stop it. As said it doesn't contribute to arrive to a conclusion and if it's the way I show myself, is not my intent.
I'm not providing real data and the only evidence I know in economics is logic and assumptions that cannot be denied. Usually the disagreements comes from those assumptions, so let's find what I assume is true that you don't.   

By the way, what makes a person "a real economist"? I guess studying all the previous attempts to explain interest like Gesell did doesn't qualify you to start a new theory on interest.


I didn't understood your example before. Now I see that the example was reduction to absurd of my proposition.
Peter doesn't buy the water at $4 just because it values it that much. But if everybody values water at $4, if there's no demand for water at $5, the producer will eventually drop the price to $4 to sell it and get rid of his stock, no matter how much did cost him to produce.
My point is that how all the people value (not just one individual) a product is what determines its demand. And only after you have demand you can have a price.

Disclaimer: all things I said in this post are things that I think, not necessarily universal truths or economic laws. But I think that all I've said it's true, so if anyone detects a flaw in my reasoning or my assumptions, please let me know so that I can correct my mental economic model.

Here is what might actually happen:

A) Water costs $5
B) Peter values water at $4
C) Peter doesn't buy water 
D) Price of water stays the same

jtimon is thinking that if there is less demand for something the price goes down. This doesn't really happen. The price never goes down lower than the cost of labor needed to make it. If it is valued less than that it just doesn't get made. But the price stays the same.

All things being equal, the price of the item (the number on the price tag) is always going to be around the cost of the labor.

I don't take it as a personal attack, but you repeatedly use poor economic theory to back up whatever it is you're saying, then never actually touch on any point I make even when I include copious links and interpretations, and merely respond by saying "this is what I think it is" even though you're wrong. Whatever theory it is that you like, be it heterodox or whatever is fine, but do not argue that "this is how it is" when it is clearly not. If you want to make your own book on economic theory based on how you think the economy works, have at it and cite your book. But stop misinterpreting every school of economics and using it as your backing. That is what I have a problem with, and the fact that you won't concede or even address any points I make showing that your interpretation is incorrect. You just brush it off and repeat the same misinterpretation over and over again.

This probably comes from knowing Gesell and little else, and since Gesell isn't a real economist your points come from musings rather than evidence or real data. I don't know what else to tell you other than you don't know what you're talking about. Sorry if that comes off as an insult. You can be as sure as you want that you're right; that does not make it so. If you want to preface every economic post with "this is from the jtimon school of economics" be my guest, but don't call something LTV when it is not. Stick to your school if you don't want to understand the others.


Yes, but the point is he doesn't buy it because it costs $5. The price does not magically drop to $4 because that is how peter values it. Price does not follow value, they interact on supply and demand curves and all of the other details of marginalism.

Peter only buys water if he values it more than parting with $4.

I agree, we're wasting our time.
I don't think we can arrive to any conclusion if we haven't done it yet. You seem to be more concerned with my manners than with my ideas.
Also I'm not comfortable with being explicitly insulted every post while being accused of insulting others.
I won't read your proposal for a decentralized elastic supply when I have the time because I don't think I can discuss its flaws (disclaimer: I'm not implying that it has flaws, it's just my guess) in a rational way with you.
Good luck with that aggressive attitude. You will need it if you take every criticism as a personal attack and an insult to your intelligence.

And again, you keep assuming that anyone trying to figure out a price is not accounting for this because they don't explicitly state it. You're basically implying each time to the person you are responding to that they have no concept of supply and demand. Considering supply and demand is the economic equivalent of a "law", to assume that someone isn't aware of it is rather insulting.


I'm a bit rusty on my logic 101:

A) Water costs $5
B) Peter values water at $4
C) Peter buys water for $4

This is what you are arguing. There is no logical conclusion that "price comes after the value." You said yourself price is caused by the interaction of supply and demand. That is in conflict with "price comes after value." Demand implies value, price determines whether or not the value given up (in money) is marginally useful enough to warrant a trade. The higher the price, the less likely an individual will think it is marginally useful. The price and the value are not tidally locked.


I was kidding about the communist part. And I am no longer responding to anything about costs of production or supply and demand. Your arguments remain pedantic, so I won't continue wasting my time.

1) The fact that costs of production are useful for price discovery doesn't mean that the costs of production cause the price. The price is caused by the interaction between supply and demand.

2) What people value is what represent and cause demand. Therefore, the price comes after the value.

3) I haven't said anyone is a communist nor a classical economist. All I've said is that you cannot expect something to be valued at a certain price just because its costs of production: you need supply and demand to explain a given price.

As long as price is decided by supply and demand, there will be huge waves of economy boom and bust, that's the reason Marx forecast that if the human productivity rise to enough high level, the structure of the society will change, a planned economy will take over

Up until now, what he said is still valid, we are seeing that the market based economy can not cope with super high productivity today: Super corporations have tons of cash reserve and keep firing employee, while many people are jobless

Imaging that one single corporation produced everything required in the world, then in a market based economy, they will go bankrupt, since they are not able to sell their products: All the other people have no job (thus no income) because this corporation already took everyone else's job

In such a situation, to keep the society in balance, either this corporation give their products to others for free, or share their production technology with others so that others can be self-sustainable, both case are not market/profit driven behavior

Marx just think centuries ahead

That is part of it; as I said, saying someone is using the LTV when they're not is the other part.


I meant "value" in the broad sense of an individual buyer's willingness to give something up in exchange.

How do you not understand that value is determined after the price? Buyers don't set the price, they set the amount of value they are willing to give up for the product. If the supply is low but the demand is high, the value is higher. If there is a competing similar (but not the same) product, the marginal rate of substitution is an effect on the value. Marginal utility determines how marginally useful the product is a given price point for the consumer; if the utility does not exceed the value they must give up, they will not buy it--it isn't valuable enough.

http://en.wikipedia.org/wiki/Marginal_theory_of_value

http://en.wikipedia.org/wiki/Supply_and_demand

Producers will move the price as a function of supply and demand. This is not some known figure in advance. The value will be determined by the buyer based on price, not the other way around. You seem to keep wanting to apply some magic function to arrive at a price, but this is not how a market works. This seemingly stems from the misguided notion you have of the LTV where it somehow claims an absolute value for something, when it most certainly does not. You've overcompensated for that by saying anyone who attempts to add up costs to reveal a price is a communist.

Marx was trying to set the price as a function of the value for society as a whole. But he was attempting to do this in an unnatural way (by setting the price based on the labor to produce it), whereas a competitive market will do it naturally.

I see. So I'm opposed to the marxian version of the labor theory of value or the "past labor theory of value" but what I say is the same that the regular version of the labor theory of value or the "future labor theory of value". And, Etlase2, what upsets you is that I lump together the two.
Did I get it this time?
I thought there was only one labor theory of value and that the classical economists were also wrong, mislead by their concept of absolute value.
There's still something that I don't understand:


What you mean here by value?
I don't understand how the value is determined after the price.
I think that price is determined as a function of the value (for the buyer).

I think Etlase is dividing "labor" into two separate types: "past labor" and "future labor."

If I am selling you a house I tell you I want $200,000 for it because it cost me $200,000 in labor to build. But you say, "forget it, I can get one built now for $100,000 in labor." The "value" and "cost" and "price" of the house now is the current or future labor, not the labor in the past that it took to make it.

So he is saying there are two labor theories of value: the "past labor theory of value" (apparently from Marx) and the "future labor theory of value" which maybe basically the same as the marginal theory of value.

The labor theory of value (not the Marx version which is an attack on capitalism) says that "price = labor" not "labor = price". Marxism is much closer to "labor = price" because of what he thought was capitalism taking advantage of laborers. "Labor" is not defined as a cost to produce, but the amount of labor that can be commanded or saved in trade. This is the basis for the idea of marginal utility which is more well-defined in modern economic theory that Gesell, austrians, and keynesians all agree upon. This is not heterodox economics.


Aside from the fact that you have been essentially calling people Marxists, yes. A price has to start from somewhere, so when you say someone is using the LTV when they are really showing pricing, you are putting the cart before the horse. After pricing, market forces such as supply and demand, competition, marginal utility, and so on determine the value.

I've told you my position in the simpler way I can. I repeat it:


Can you stop beating around the bush and just tell me what's wrong with my reasoning?
Or is it all about me using the term "labor theory of value"?
If so, what term should I use to express that concept?


I've not the degree yet. I should probably be working on the final project to get it once and for all. I said I was computer scientist precisely to note that I have no academical economic background, only from my spare time.
But I've read some heterogeneous thoughts and I maybe I have a rare knowledge or just an original point that is worth to analyze.
Yes, I'm a pretentious smart ass and/or ridicule. I got your point there a while ago. I try to hide it trying to be nice to people, but you're not the first one who tells me something similar.
You want to show that I'm wrong, but it doesn't seem that you care on what point anymore. I'm not very interested in proving that I'm not the douche you have in mind.
All I want to do is learn from you and teach you. If you're not interest in teaching me nor in learning from me, we should stop this discussion.

And pretty much all these theories agree to use the aggregate value in exchange, not cite specific circumstances.

Any notion of objective value should be apparently nonsensical.

None of these theories explain how people value things, they explain how people should value things. They are ideas for central planning.

And pretty terrible ideas at that, if I am forced to value my last glass water in the desert at the same weight as the 2 seconds it took someone to scoop it out of a river it would no longer make sense for me to ration it and I would die...

How can you deny both when you don't even know the difference? You refuse to actually learn or understand it, and yet your opinion on it is somehow irrefutable fact.

Good luck with that attitude in economics.


Nobody gains from your self-important pompous attitude either. That we should somehow take your word for anything, when you fail at understanding basic concepts. We should take your word that you are the authority on economic theories with the strong backing of a computer science degree and Silvio Gesell, who, like Mises, backs economic theory with nothing but words and wishful thinking.

So when's that book coming out again, dr. jtimon?