The Labor Theory of Value and Diamonds (And other such oddities)

[Papa_Roja]

So I'm new-ish to a lot of the heavier theory-work involved with Marx and socialist literature. I still can't figure why, using the LTV, diamonds are worth more than silver. Sure diamonds are still expensive to produce but silver is MUCH harder to mine and arguably has more use-value than diamonds. (great for drills but what else?) So why do diamonds have a much higher exchange-value when they also arguably have less labor time? Does Marxist theory or rather the LTV account for intense propaganda stunts (the manufactured "need" for everyday consumer to buy diamonds for engagement/wedding rings) and monopolies?

(Re-posted from the Learning Board as it seemed more appropriate here)

[ckaihatsu]

Just offhand I'd guess / estimate that diamonds -- like gold -- are seen as a reliable safe-haven for storing exchange value due to the relative difficulty of producing more (thus forestalling monetary inflation). This favors the 'savers' (hoarders) side of the economy, compared to the more-progressive *equity*-needing side of the economy which would *want* cheap government money (as through 'quantitative easing') for the sake of easier investing and potential returns in the form of capital gains.

I don't know how exchange values would be directly compared to use values in any systematic way, except with simple indexing of one to the other on a per-item basis, and even then how would one determine an objective standard for 'use values', over all items across-the-board -- ?

And how would diamonds or whatever be indexed to exchange values, except through market pricing -- ? Could one really determine and correlate objective 'use values' for diamonds or silver or whatever, per unit of weight, without going through market pricing -- ?

Also you're not really using labor theory value because you haven't mentioned labor even once, as in the effort it takes to release these precious gemstones or metals from the natural or engineered environment (synthetic diamonds).

I don't think Marxism delves into an examination of the effects of commercial marketing, except as being a form of social hegemony, as is the case with monopolies as well.

[AltRightNeoNazi]

There is a monopoly of Diamonds. The De Beers family owns all the diamonds mines. By controlling the supply of diamonds, they are able to drive up the value of diamonds.

It's not about how hard one works that determines the value of something in this case. It's about the value of something. Which is to say how much people value it(demand), and how much of it there is(supply).

[ckaihatsu]

There is a monopoly of Diamonds. The De Beers family owns all the diamonds mines. By controlling the supply of diamonds, they are able to drive up the value of diamonds.

It's not about how hard one works that determines the value of something in this case. It's about the value of something. Which is to say how much people value it(demand), and how much of it there is(supply).

Your username is 100% inappropriate for this board and you may want to change it immediately.

Regarding the content, you're apologizing for the presumed merits of the capitalist market system, which you've just described yourself -- the monopolization of an industry certainly requires the use of force, violence, and repression against people (workers), which are all social dynamics that are *outside* of plain economic transactions like 'supply' and 'demand'.

[Jimmie Higgins]

The LTV doesn't set out to explain specific pricing of objects. Luxury goods are a pretty standard counter-argument because it's hard to explain something like "high art" for example through a mechanical view. A photo that took 4 hours to shoot and photoshop from a prized artist might be worth more than a sculpture by an unknown artist that took 50 hours to produce. LTV doesn't explain all sorts of speculation or relative market forces. But it does explain the underlying source of value and why a raw diamond is worth more after being cut and worth more as part of a piece of jewelry than it was worth as a cut diamond and some silver or gold.


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[RedMaterialist]

The LTV doesn't set out to explain specific pricing of objects. Luxury goods are a pretty standard counter-argument because it's hard to explain something like "high art" for example through a mechanical view. A photo that took 4 hours to shoot and photoshop from a prized artist might be worth more than a sculpture by an unknown artist that took 50 hours to produce. LTV doesn't explain all sorts of speculation or relative market forces. But it does explain the underlying source of value and why a raw diamond is worth more after being cut and worth more as part of a piece of jewelry than it was worth as a cut diamond and some silver or gold.


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I would also say that it explains Adam Smith's so-called diamond-water paradox which the marginalists love to cite as proof that only demand is the source of value even though a bucket of water has far more use value than a bucket of diamonds.

The bucket of diamonds represent far more socially necessary labor than the bucket of water, and therefore has more value, and thus, all things being equal (i.e., the water is not the last bucket in the desert) the diamonds will have a huge price compared to the water.

I recently saw a youtube video in which a new company, Evergreen, I think, was offering on their site, a "price transparency" feature which showed the actual costs of their products. For instance, a shirt made in Vietnam showed labor costs as 4.00, raw materials, 2.00, transportation 1.00, govt fees, 1.00 (numbers are my estimates), and the selling price is 25.00 for evergreen and 50.00 for most other retailers. None of the figures showed the value added by the workers.

If you assume that workers doubled the value of their wages then I think it would be reasonable to say that the cost of $8.00 might be doubled to $16, thus coming close to the 25 selling price (give or take a few dollars.) this , of course, would not apply to any particular shirt, but rather to the average of thousands of shirts. the daily price of the shirt would vary over time, but would gravitate to the central value of the shirt.

The difference between the costs paid by the capitalists and unpaid costs of the workers (their unpaid wages) would be the marxist profit.

Do you, or any other readers, know of any marxist economics textbooks which analyze price, profit and wages in this manner?

[ckaihatsu]

I would also say that it explains Adam Smith's so-called diamond-water paradox which the marginalists love to cite as proof that only demand is the source of value even though a bucket of water has far more use value than a bucket of diamonds.

The bucket of diamonds represent far more socially necessary labor than the bucket of water, and therefore has more value, and thus, all things being equal (i.e., the water is not the last bucket in the desert) the diamonds will have a huge price compared to the water.

I recently saw a youtube video in which a new company, Evergreen, I think, was offering on their site, a "price transparency" feature which showed the actual costs of their products. For instance, a shirt made in Vietnam showed labor costs as 4.00, raw materials, 2.00, transportation 1.00, govt fees, 1.00 (numbers are my estimates), and the selling price is 25.00 for evergreen and 50.00 for most other retailers. None of the figures showed the value added by the workers.

If you assume that workers doubled the value of their wages then I think it would be reasonable to say that the cost of $8.00 might be doubled to $16, thus coming close to the 25 selling price (give or take a few dollars.) this , of course, would not apply to any particular shirt, but rather to the average of thousands of shirts. the daily price of the shirt would vary over time, but would gravitate to the central value of the shirt.

The difference between the costs paid by the capitalists and unpaid costs of the workers (their unpaid wages) would be the marxist profit.

Do you, or any other readers, know of any marxist economics textbooks which analyze price, profit and wages in this manner?

Um, sorry, RM, but you're facilely combining the realms of labor value and exchange values -- I say 'realms' because I really don't see any possibility for the measurements of labor value, of exchange values (prices), and of use-values to *correlate* in any kind of neat, orderly way.

Okay, one exception -- capitalist-economic 'wages' *are* synonymous with Marxian 'necessary labor value' (for sustaining human labor going-forward, and its reproduction through future generations), but I think *that's it* as far as I can tell.

In your example if the 'necessary labor value' ($8 in wages per hour), *plus* $9 in 'constant capital' costs (non-labor costs of doing business) leveraged a selling price of $8 x 2 + $9 = $25 per shirt, this would mean that only *1* shirt would be produced *per hour* on average for this formulation of labor-value-to-exchange-value to be valid.

And this, of course, is ignoring inherent market *fluctuations* that would affect the pricing of costs for material inputs, and the resulting pricing for the shirts.

I'll note that Marxian labor value theory doesn't even *require* the actual selling / monetization of the final product -- it tracks 'value' as embodied / traceable back to labor inputs, ultimately, and sustained going-forward as the payments of wages per hour. This means that (labor) 'value' isn't dependent on pricing / revenue, so there's definitely no correlation to be made there, as would be expected in the realm of exchange-values alone, as on a balance sheet.

I've also *never* heard the term 'Marxist profit' before, so I think that's most-likely an invention of *yours*, and invalid.


[23] A Business Perspective on the Declining Rate of Profit

[RedMaterialist]

Um, sorry, RM, but you're facilely combining the realms of labor value and exchange values -- I say 'realms' because I really don't see any possibility for the measurements of labor value, of exchange values (prices), and of use-values to *correlate* in any kind of neat, orderly way.

Marx was quite clear that exchange value is the socially necessary labor, expressed in price, contained in a commodity. So there is a direct correlation between labor value and exchange value. It is true, obviously, that the day to day fluctuations of price don't reflect a change in value; that only happens when the commodity can be produced more cheaply, with less labor, than before. When the fluctuations in price can no longer be "balanced" then the system crashes.

Okay, one exception -- capitalist-economic 'wages' *are* synonymous with Marxian 'necessary labor value' (for sustaining human labor going-forward, and its reproduction through future generations), but I think *that's it* as far as I can tell.

Big exception. Wages are labor power expressed in price. Labor value is the surplus value added by the worker during the production process.

In your example if the 'necessary labor value' ($8 in wages per hour), *plus* $9 in 'constant capital' costs (non-labor costs of doing business) leveraged a selling price of $8 x 2 + $9 = $25 per shirt, this would mean that only *1* shirt would be produced *per hour* on average for this formulation of labor-value-to-exchange-value to be valid.

Not true. The wages in the example are $4.00, not $8.00. The additional four dollars is the value added by the worker and which is expressed as part of the price of the shirt. It's the surplus value (Marx's explanation of profit) added by the worker for which he/she is not paid but which the capitalist sells for a of $4.00 (assuming that is the only exploitation.)

It's not that one shirt is produced per hour, but the value of one shirt that is produced per hour or minute or even second. Thousands of shirts can be produced per hour, that doesn't change the value appropriated by the capitalist. The capitalist pays 4.00 in wages, the worker produces an additional value of 4.00 which the capitalist appropriates, per shirt. The worker might produce 50 shirts and get paid $4.00, the capitalist appropriates $200 per hour of work, not necessarily from that particular worker, but from the entire social system of production.

I'll note that Marxian labor value theory doesn't even *require* the actual selling / monetization of the final product

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If the shirts are not sold, if labor value is not converted into money, then the whole system breaks down, usually every ten years.

- it tracks 'value' as embodied / traceable back to labor inputs, ultimately, and sustained going-forward as the payments of wages per hour. This means that (labor) 'value' isn't dependent on pricing / revenue, so there's definitely no correlation to be made there, as would be expected in the realm of exchange-values alone, as on a balance sheet.

Marx said that he explained the commodity economy by accepting all the rules of bourgeois commodity production. He then went on to explain how labor produces profit/surplus value. If you cannot accept the use of the bourgeois rules of a balance sheet, of modern accounting, then how is it possible ever to explain the fundamental problems of capitalism and socialism?

Value is "traceable" (down to the last penny) to labor inputs, and only part of which labor input is paid to the worker. It is true that labor value is not dependent on pricing/revenue; it is just the opposite, pricing/revenue is dependent on labor value. Wages are only the price of labor, the actual value of labor is the education, upkeep, etc. of the worker.

I've also *never* heard the term 'Marxist profit' before, so I think that's most-likely an invention of *yours*, and invalid.

It's merely another way of saying profit as explained by Marx.

Why have modern Marxists economists failed to prove that labor is the source of value? If value is not determined by labor then you have to admit that the bourgeois economists are right: that value is determined by buying and selling, by the "free market." In other words the price of this car I am selling you is $25K, therefore its value is $25K and its value comes from the fact that I am selling it to you for $25K. If you believe that then why bother with Marx? There is no exploitation, no crises caused by the contradictions in capitalism, no need for violent revolution, no socialism, no communism, just permanent capitalism, forever.

[23] A Business Perspective on the Declining Rate of Profit

It's hard to read your graph, but I presume you at least agree with Marx that the capitalist rate of profit is declining. The reason it is declining is that the use of human labor (the source of value and profit) is declining and being replaced by robots, computers, etc. You can't make a profit off a machine. You only get back what you actually paid into it. Humans can be exploited, they used to do it with slaves and serfs. This doesn't mean that the mass of profit is decreasing, only that the rate of profit is declining which is why only gigantic corps can compete for long in a late capitalist economy. Only they are able to sustain a profit margin of 5% and declining.

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[RedMaterialist]

It seems to me that price is no longer really tied to cost anyway. In a monopolistic economy the price is whatever the market will bear. In econo speak the price of a commodity is whatever marginal utility the commodity provides to an individual customer. In other words, price is subjectively determined by the customer.

If that is true, then even under the terms of bourgeois economists, cost no longer matters, price can be arbitrarily set by anyone, including a workers' committee. As long as a customer has enough money to buy the thing then it doesn't matter how the price is determined. Instead of being set by a monopolistic corporation, it will be set by the state or a workers' committee, which is what Stalin tried. He couldn't get price fixing to work but the modern corp uses it all the time.

As far as the Vietnamese manufactured shirt, I think you could say that 10 shirts, on average, in one hour can be produced by one worker. Or, you could say one shirt could be produced in 1/10 an hr, or 100 shirts produced by ten workers in one hour.

The wage remains, say, $4 per hour. The ten shirts are sold for $25 apiece. If other costs are $5 per shirt, then that leaves $16. The only source possible for that extra $16 is labor, unless you argue that the market creates the value. How the shirt company can get away with selling the shirt for $25 is probably an unrelated question.

Isn't the real issue whether it can be shown what the value the shirt is when it goes on the seller's retail shelf? It has value because you can be arrested if you take it without paying for it. Most state laws in the US define theft as the taking of anything of value, no matter how slight the value. So, where does the value come from?

at least, i think so.

[RedMaterialist]

So I'm new-ish to a lot of the heavier theory-work involved with Marx and socialist literature. I still can't figure why, using the LTV, diamonds are worth more than silver. Sure diamonds are still expensive to produce but silver is MUCH harder to mine and arguably has more use-value than diamonds. (great for drills but what else?) So why do diamonds have a much higher exchange-value when they also arguably have less labor time? Does Marxist theory or rather the LTV account for intense propaganda stunts (the manufactured "need" for everyday consumer to buy diamonds for engagement/wedding rings) and monopolies?

(Re-posted from the Learning Board as it seemed more appropriate here)

Silver is harder to mine? First, there is much more silver in the earth than diamonds and it is probably much closer to the surface. And they don't have "blood" silver. I think it is safe to say that the labor costs of diamond mining is much higher than silver. But, as Marx pointed out 150 yrs ago, if diamonds could be artificially produced, then the price of diamonds might be reduced to the level of bricks. Silver, on the other hand, can never (except may in a nuclear fusion device) be produced by man.

The exchange value of a commodity can be based not only on physical use (like diamond drills) but also on what Marx called fancy:

The nature of such wants, whether, for instance, they spring from the stomach or from fancy, makes no difference

page one of Capital.

Diamonds, as they say, are a girl's best friend.

Labor determines value, but not necessarily price, I would say.

[ckaihatsu]

Marx was quite clear that exchange value is the socially necessary labor, expressed in price, contained in a commodity.

Could you provide a reference here -- ? Offhand, you're incorrect about 'exchange value = socially necessary labor [value]'.

Exchange value and price according to Marx[edit]

Strictly speaking, the exchange value of a commodity is for Marx not identical to its price, but represents rather what (quantity of) other commodities it will exchange for, if traded.

Exchange-value does not need to be expressed in money-prices necessarily (for example, in countertrade where x amount of goods p are worth y amounts of goods q). Karl Marx makes this abundantly clear in his dialectical derivation of the forms of value in the first chapters of Das Kapital (see value-form).

https://en.wikipedia.org/wiki/Exchange_value

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So there is a direct correlation between labor value and exchange value.

Okay -- on page 1 of the graphic illustration I provided at post #7, 'necessary labor value' is returned to the worker through payment of wages (capitalist exchange-value to the worker), while 'surplus labor value' and any returns on 'dead labor value' ('constant capital') are retained by the capitalist, which, together ('dead labor value' + 'surplus labor value'), could be thought-of as the potential exchange-value (roughly 'price') of the produced commodity -- and so *would* correlate linearly to the supplied labor value.

It is true, obviously, that the day to day fluctuations of price don't reflect a change in value; that only happens when the commodity can be produced more cheaply, with less labor, than before. When the fluctuations in price can no longer be "balanced" then the system crashes.

Yes.

Big exception. Wages are labor power expressed in price. Labor value is the surplus value added by the worker during the production process.

Yes -- no disagreement.

Not true. The wages in the example are $4.00, not $8.00. The additional four dollars is the value added by the worker and which is expressed as part of the price of the shirt. It's the surplus value (Marx's explanation of profit) added by the worker for which he/she is not paid but which the capitalist sells for a of $4.00 (assuming that is the only exploitation.)

But initially you said:

If you assume that workers doubled the value of their wages then I think it would be reasonable to say that the cost of $8.00 might be doubled to $16

So it's not $4 in wages per shirt, but *$8* per shirt to the worker in wages, with the surplus labor value being 100%, or $8.

It's not that one shirt is produced per hour, but the value of one shirt that is produced per hour or minute or even second. Thousands of shirts can be produced per hour, that doesn't change the value appropriated by the capitalist. The capitalist pays 4.00 in wages, the worker produces an additional value of 4.00 which the capitalist appropriates, per shirt.

So you're saying this is a *piecework* scenario -- ?

Usually workers get paid by the *hour*, which means far greater exploitation of their labor value if many more shirts (up to 100%) are being sold for revenue than just twice the dollar amount (plus other business costs being passed-on) being paid to the worker in wages, per hour.

If it *is* being done on a piecework basis, then that's basically *revenue-sharing* to the worker (they would have a material interest in being more efficient with their labor efforts, and in seeing more shirts sold), which would be irregular for this t-shirt-type scenario.

The worker might produce 50 shirts and get paid $4.00,

This *contradicts* what you just said -- if it's *per-piece* then the wages would be 50 pieces times wage-per-shirt (either $8 or $4, depending on the specifics you choose for this scenario), for either $400 in wages per 50 shirts, or $200 in wages per 50 shirts.

the capitalist appropriates $200 per hour of work,

You're indicating that the worker would be producing at a steady rate of 50 t-shirts per hour.

not necessarily from that particular worker, but from the entire social system of production.

BUt you've been giving specifics for *one worker*, at 50 t-shirts per hour, for $200 (or $400) in wages per hour (highly unlikely).

If the shirts are not sold, if labor value is not converted into money, then the whole system breaks down, usually every ten years.

Yes on the latter part, but on the initial part wages are usually paid *per hour*, so that's a 'variable capital' cost to the owner, regardless of actual sales figures / revenue -- typically payroll must be made every week.


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I'll note that Marxian labor value theory doesn't even *require* the actual selling / monetization of the final product -- it tracks 'value' as embodied / traceable back to labor inputs, ultimately, and sustained going-forward as the payments of wages per hour. This means that (labor) 'value' isn't dependent on pricing / revenue, so there's definitely no correlation to be made there, as would be expected in the realm of exchange-values alone, as on a balance sheet.

Marx said that he explained the commodity economy by accepting all the rules of bourgeois commodity production. He then went on to explain how labor produces profit/surplus value. If you cannot accept the use of the bourgeois rules of a balance sheet, of modern accounting, then how is it possible ever to explain the fundamental problems of capitalism and socialism?

You're being ambiguous, though, on the fundamental unit of material measurement -- if it's units-of-product (piecework), then the framework of proportions you've described *will* hold up, per unit of product. In *reality*, though, this would be quite irregular for this type of product, and for blue-collar-type labor in general. Most typically wages would be paid *per hour*, irrespective of the number of units of product produced per hour, thereby detaching wage payments from actual sales performance / revenue.

Value is "traceable" (down to the last penny) to labor inputs, and only part of which labor input is paid to the worker. It is true that labor value is not dependent on pricing/revenue; it is just the opposite, pricing/revenue is dependent on labor value. Wages are only the price of labor, the actual value of labor is the education, upkeep, etc. of the worker.

Yes, and see -- you're confirming this practice yourself by noting that labor value is not dependent on revenue / sales figures. Labor value ('*necessary* labor value') is an *investment* / cost for the capitalist, typically measured and paid per *hour*, and not per-piece.

It's merely another way of saying profit as explained by Marx.

Oh, okay.

Why have modern Marxists economists failed to prove that labor is the source of value? If value is not determined by labor then you have to admit that the bourgeois economists are right: that value is determined by buying and selling, by the "free market." In other words the price of this car I am selling you is $25K, therefore its value is $25K and its value comes from the fact that I am selling it to you for $25K. If you believe that then why bother with Marx? There is no exploitation, no crises caused by the contradictions in capitalism, no need for violent revolution, no socialism, no communism, just permanent capitalism, forever.

You're preaching-to-the-choir -- of course the results of labor-efforts are *material* inputs to the production process, and thus imbue goods and/or services with *value*.

It's hard to read your graph,

Please let me know what difficulties you yourself are having with it -- I'll be glad to explain any aspects of it in detail.

but I presume you at least agree with Marx that the capitalist rate of profit is declining.

Yes, that's on page 2 of the graphic.

The reason it is declining is that the use of human labor (the source of value and profit) is declining and being replaced by robots, computers, etc. You can't make a profit off a machine. You only get back what you actually paid into it. Humans can be exploited, they used to do it with slaves and serfs. This doesn't mean that the mass of profit is decreasing, only that the rate of profit is declining which is why only gigantic corps can compete for long in a late capitalist economy. Only they are able to sustain a profit margin of 5% and declining.

Yes -- if you had said this 13 years ago, when I made that diagram, I would have included your words on the graphic itself.

It seems to me that price is no longer really tied to cost anyway.

Right -- this was my thesis from my previous post:

(labor) 'value' isn't dependent on pricing / revenue, so there's definitely no correlation to be made there

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In a monopolistic economy the price is whatever the market will bear. In econo speak the price of a commodity is whatever marginal utility the commodity provides to an individual customer. In other words, price is subjectively determined by the customer.

Yes, so the received revenue (and profits) could be *several times* the labor-cost paid out in wages.

(On a finer note we could see the consumer market as being empirically 'objective' to a large extent, and not so much individual-customer 'subjective' -- as with new technology that initially can command higher pricing due to its uniqueness and relative scarcity.)


Worldview Diagram

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If that is true, then even under the terms of bourgeois economists, cost no longer matters, price can be arbitrarily set by anyone, including a workers' committee. As long as a customer has enough money to buy the thing then it doesn't matter how the price is determined. Instead of being set by a monopolistic corporation, it will be set by the state or a workers' committee, which is what Stalin tried. He couldn't get price fixing to work

I'm *very* critical of Marx-type 'labor vouchers', for reasons of having to have the various material-economic 'realms' ('goods & services produced', 'world material / assets-and-resources', 'liberated human labor', 'labor vouchers earned', and 'consumption') all positively *correlate*, as a matter of material ('accounting') necessity:


Pies Must Line Up

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but the modern corp uses it all the time.

The political-economy contexts are *different* -- planned-socialized-economy vs. current-corporate-capitalist-economy.

As far as the Vietnamese manufactured shirt, I think you could say that 10 shirts, on average, in one hour can be produced by one worker. Or, you could say one shirt could be produced in 1/10 an hr, or 100 shirts produced by ten workers in one hour.

The wage remains, say, $4 per hour. The ten shirts are sold for $25 apiece. If other costs are $5 per shirt, then that leaves $16. The only source possible for that extra $16 is labor, unless you argue that the market creates the value. How the shirt company can get away with selling the shirt for $25 is probably an unrelated question.

But you just said that the wage is $4 *per hour*, per worker -- you would need to adjust your *scenario* to account for the remaining "$16" (per-shirt) (probably 'constant capital' / dead-labor value), and also decide on what the fundamental unit is, per-piece or per-hour.

Isn't the real issue whether it can be shown what the value the shirt is when it goes on the seller's retail shelf? It has value because you can be arrested if you take it without paying for it. Most state laws in the US define theft as the taking of anything of value, no matter how slight the value. So, where does the value come from?

at least, i think so.

Yeah, I hear you -- *of course* ('necessary' and 'surplus') labor value is passed along into the ('exchange') value, for pricing and selling, for any given commodity.

[RedMaterialist]

I will need more time to respond. Thank you for the post.

[ckaihatsu]

I will need more time to respond. Thank you for the post.

No prob. Likewise. No rush.

[RedMaterialist]

Could you provide a reference here -- ? Offhand, you're incorrect about 'exchange value = socially necessary labor [value]'.

The following quote is from ch one of Capital. I think it basically says that a commodity is a complex of two things: use value and exchange value. Both are produced by labor, the use value is real, concrete; the exchange value is unreal, invisible, etc. [[I need to change this. The exchange value is the expression, the form of value.]]The original exchange value of a commodity is expressed in what it can be exchanged for, one coat for 10 yds of linen, one oz of gold for one ton of iron, etc. However, once an economy develops into full blown capitalism the exchange value becomes fully abstract value [[also, not strictly accurate. exchange value can be expressed in the form of money]], not simply the expression of another commodity, because it is based on abstract, social labor. So, in my view, exchange value and value are both based on socially necessary labor. [[again, value is the SNL, while exchange value is the expression of value. One is the form the other is the substance. Which I think is still basically the same as saying that price = value. For commodity exchange, all commodities are assumed to be sold, or exchanged, at their real value anyway; although that price may change from day to day. ]]

Marx says at the beginning of section three of Capital that exchange value is the form of value.

....In the same way the exchange values of commodities must be capable of being expressed in terms of something common to them all, of which thing they represent a greater or less quantity.

...This common “something”... [I]f then we leave out of consideration the use value of commodities, they have only one common property left, that of being products of labour.

[...] there is nothing left but what is common to them all; all are reduced to one and the same sort of labour, human labour in the abstract.... All that these things now tell us is, that human labour power has been expended in their production, that human labour is embodied in them. When looked at as crystals of this social substance, common to them all, they are – Values.

i.e., commodities are crystals of the social substance, labor, value. And later Marx explains not just any labor but socially necessary labor.

[[later added: value is the labor, exchange value is the "price." The price includes the added value which the capitalist did not pay for.

I think this is consistent with saying the vietnamese workers produce more value than the price of their own labor, their wages, which is proved by the "transparent pricing" of the example I gave.

I don't think this is anything new; Marx showed all this in Capital. This is what I meant by "Marxist" profit. I would like to add that for me the real issue is why haven't Marxist economists been able to prove Marx's labor theory of value (it was also Adam Smith's and David Ricardo's theory) and profit.]]








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[RedMaterialist]

Yes, and see -- you're confirming this practice yourself by noting that labor value is not dependent on revenue / sales figures. Labor value ('*necessary* labor value') is an *investment* / cost for the capitalist, typically measured and paid per *hour*, and not per-piece.

I can't disagree with most of what you say. However, on this point I don't think the capitalist invests anything in the labor value. It is specifically because the capitalist does not pay for or invest in the full value of the labor that he/she is able to make a profit. The capitalist does invest in and pay for the wages of the worker but not for the value of the labor added by the worker.

That added value later shows up in the full price/exchange value of the shirt as the full expression of the value of the shirt.

Also, the value of labor is not dependent on revenue , rather it is the source of revenue/profit.

BTW, the graph is too large for my screen; maybe it's just my screen.





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[ckaihatsu]

The following quote is from ch one of Capital. I think it basically says that a commodity is a complex of two things: use value and exchange value. Both are produced by labor, the use value is real, concrete; the exchange value is unreal, invisible, etc. [[I need to change this. The exchange value is the expression, the form of value.]]The original exchange value of a commodity is expressed in what it can be exchanged for, one coat for 10 yds of linen, one oz of gold for one ton of iron, etc. However, once an economy develops into full blown capitalism the exchange value becomes fully abstract value [[also, not strictly accurate. exchange value can be expressed in the form of money]], not simply the expression of another commodity, because it is based on abstract, social labor. So, in my view, exchange value and value are both based on socially necessary labor. [[again, value is the SNL, while exchange value is the expression of value. One is the form the other is the substance. Which I think is still basically the same as saying that price = value. For commodity exchange, all commodities are assumed to be sold, or exchanged, at their real value anyway; although that price may change from day to day. ]]

Marx says at the beginning of section three of Capital that exchange value is the form of value.

....In the same way the exchange values of commodities must be capable of being expressed in terms of something common to them all, of which thing they represent a greater or less quantity.

...This common “something”... [I]f then we leave out of consideration the use value of commodities, they have only one common property left, that of being products of labour.

[...] there is nothing left but what is common to them all; all are reduced to one and the same sort of labour, human labour in the abstract.... All that these things now tell us is, that human labour power has been expended in their production, that human labour is embodied in them. When looked at as crystals of this social substance, common to them all, they are – Values.

Okay, yeah, I have no differences with any of this.

i.e., commodities are crystals of the social substance, labor, value. And later Marx explains not just any labor but socially necessary labor.

[[later added: value is the labor, exchange value is the "price." The price includes the added value which the capitalist did not pay for.

I think this is consistent with saying the vietnamese workers produce more value than the price of their own labor, their wages, which is proved by the "transparent pricing" of the example I gave.

I don't think this is anything new; Marx showed all this in Capital. This is what I meant by "Marxist" profit.

Okay.

I would like to add that for me the real issue is why haven't Marxist economists been able to prove Marx's labor theory of value (it was also Adam Smith's and David Ricardo's theory) and profit.]]

Hmmmm, I'm surprised to hear this -- I don't think the labor theory of value is *unproven*, it's more that (to me, anyway) it's a different *approach*, or 'paradigm' regarding material quantities, premised on the material necessity for labor to sustain and reproduce itself going-forward.

A *bourgeois* economist would take the valuation of supply-meets-demand (price) as a valid fundamental premise of value -- which is immediately problematic, of course, since not all dollars (or whatever currency) are going to immediately, universally adjust themselves dollar-for-dollar around a new price point for lemonade (or whatever commodity), meaning that dollars for lemonade are never going to perfectly equate to each and every other dollar in circulation, as perhaps used for the buying of petroleum.

Moreover the *monetary supply* of currency itself fluctuates but I don't think everyone takes out their calculators to 'price-in' that new data every time (or for new interest rates, etc.). This means that the purported 'value' of a single dollar fluctuates all the time due to new, ongoing market valuations of supply-vs.-demand, monetary supply, interest rates, and other factors, yet there's no real *universality* to it: One person could pay twice as much, or more, for a new kitchen appliance as someone else for the same appliance on the same day.

I can't disagree with most of what you say. However, on this point I don't think the capitalist invests anything in the labor value. It is specifically because the capitalist does not pay for or invest in the full value of the labor that he/she is able to make a profit. The capitalist does invest in and pay for the wages of the worker but not for the value of the labor added by the worker.

True.

That added value later shows up in the full price/exchange value of the shirt as the full expression of the value of the shirt.

Yes.

Also, the value of labor is not dependent on revenue , rather it is the source of revenue/profit.

Yes, correct.

BTW, the graph is too large for my screen; maybe it's just my screen.

Oh, sorry to hear it -- I'd say first click on it to bring up the image in your browser, and then right-click to save it out to a file. You can then use any image-viewing application to pull up the image file and pan and zoom around on it as needed.


Also:


[11] Labor & Capital, Wages & Dividends

[Fellow_Human]

BTW, the graph is too large for my screen; maybe it's just my screen.

Right click on image, "Copy image address," paste URL in another tab and hit Enter.

[RedMaterialist]

[11] Labor & Capital, Wages & Dividends

This is an interesting graph (which I hope is appearing corrrectly.) It looks like it shows what is taught in economics courses. I once saw a blog by Harvard economics chairman, prof Mankiw, which made the argument displayed in the graph which is essentially that both labor and capital create value.

As I understand the graph, labor provides the work which produces the value of goods and services; capital also produces a portion (how much?) of the same value of goods and services, which are then sold on the market and the company receives revenue. This revenue is then split (according to the employment contract) between labor and capital (the shareholders.)

Simplified, labor + capital creates value. This value is then sold and the resulting revenue is split between labor and capital. Labor is paid in wages for the value it produces and capital is paid in profit for the value it produces. These graphs and the complicated circular graphs in economics textbooks (invariably titled Principles of Economics) never show where profit appears. You think they would at least give a passing reference to the most fundamental love of the capitalist.

Labor works and produces $100 in value, stockholders invest $100 in value. Total costs are $200. The revenue is $200. The numbers are purely arbitrary.

The workers are paid $100; the stockholders are paid $100. The stockholders, the capitalists, are paid exactly what they invested. They only received what they paid in. This is not how capitalism works. A stockholder sitting at home expects return, a profit on his/her investment. If there is no profit a capitalist will not invest. You say the profit cannot be guaranteed? Well it is your graph, you (the capitalist, or his well paid sycophant and apologist, Dr. Mankiw) need to amend the graph.

What Marx showed is that the worker produces the value of his wages, $100, reproduces the value of the invested capital (raw materials, machines, etc.), $100, and then adds additional value to create a new product with his labor which labor is not paid for by the capitalist. The product sells for, say, $220, making a nice profit of 20% for the capitalist who did nothing. The capitalist believes that he/she is responsible for the extra $20 because it does not appear except when the product is sold. He gets the money from the sale, so he thinks he produced it from his expertise in the operations of the free market. Truly the magic of the market. The profit appears from thin air.

Thus, the labor theory of value. The delusion of the capitalist is that he believes his profit originates after production. The modern economist has to admit that all value, including profit, originates prior to the completion of production. The graph shows this. Costs go in and an equal value comes out. According to the graph no new value is created after production.

[ckaihatsu]

This is an interesting graph (which I hope is appearing corrrectly.) It looks like it shows what is taught in economics courses. I once saw a blog by Harvard economics chairman, prof Mankiw, which made the argument displayed in the graph which is essentially that both labor and capital create value.

As I understand the graph, labor provides the work which produces the value of goods and services; capital also produces a portion (how much?) of the same value of goods and services, which are then sold on the market and the company receives revenue. This revenue is then split (according to the employment contract) between labor and capital (the shareholders.)

Simplified, labor + capital creates value. This value is then sold and the resulting revenue is split between labor and capital. Labor is paid in wages for the value it produces and capital is paid in profit for the value it produces. These graphs and the complicated circular graphs in economics textbooks (invariably titled Principles of Economics) never show where profit appears. You think they would at least give a passing reference to the most fundamental love of the capitalist.

Labor works and produces $100 in value, stockholders invest $100 in value. Total costs are $200. The revenue is $200. The numbers are purely arbitrary.

The workers are paid $100; the stockholders are paid $100. The stockholders, the capitalists, are paid exactly what they invested. They only received what they paid in. This is not how capitalism works. A stockholder sitting at home expects return, a profit on his/her investment. If there is no profit a capitalist will not invest. You say the profit cannot be guaranteed? Well it is your graph, you (the capitalist, or his well paid sycophant and apologist, Dr. Mankiw) need to amend the graph.

I think you're misviewing and misinterpreting the graphic -- please note that the end of 'step 1' is 'GOODS and/or SERVICES for sale', immediately followed by the beginning of 'step 2', which is 'MONEY' [sales revenue].

The quantities of value that *you're* ascribing to these two variables are *arbitrary*, as you've just said yourself. You've advanced an arbitrary scenario of monetary quantities that is a non-starter because this venture is only breaking-even. (You may want to try with some value quantities that *don't* break-even or incur a loss, as with your initial 't-shirt' scenario.)

On the basis of this bad-case scenario of your own formulation you're then attempting to paint me as a capitalist apologist -- this is the equivalent of putting words in my mouth, which is unwarranted and unwelcome.

What Marx showed is that the worker produces the value of his wages, $100, reproduces the value of the invested capital (raw materials, machines, etc.), $100, and then adds additional value to create a new product with his labor which labor is not paid for by the capitalist. The product sells for, say, $220, making a nice profit of 20% for the capitalist who did nothing.

Okay, this is a better example.

The capitalist believes that he/she is responsible for the extra $20 because it does not appear except when the product is sold. He gets the money from the sale, so he thinks he produced it from his expertise in the operations of the free market. Truly the magic of the market. The profit appears from thin air.

Thus, the labor theory of value. The delusion of the capitalist is that he believes his profit originates after production. The modern economist has to admit that all value, including profit, originates prior to the completion of production. The graph shows this.

Yes.

Costs go in and an equal value comes out.

This isn't generally true -- it's the particular arbitrary figures in your first example that make the scenario that way. Your second example is better.

According to the graph no new value is created after production.

No, that's incorrect, as your second example shows.

Also you've missed the detail of initial labor-vs.-capital investments, compared to *returns* on those investments, of wages-vs.-dividends, respectively. Note how I've indicated that these pay-in and rewards-out components do *not* correlate equally / proportionately.

[RedMaterialist]

No, that's incorrect, as your second example shows.

Also you've missed the detail of initial labor-vs.-capital investments, compared to *returns* on those investments, of wages-vs.-dividends, respectively. Note how I've indicated that these pay-in and rewards-out components do *not* correlate equally / proportionately.

Well then, where is value created? In production or in the market?