Subject: Re: Conservation of wealth (was:Re: Assets taxes) Date: Fri, 12 Feb 1999 08:13:01 -0800 From: jim blair To: Matthew Devney Newsgroups: alt.politics.economics, alt.politics, talk.politics jim blair: And I don't think the term "objective value" has any meaning. "Objective" in whose opinion? Matthew Devney wrote: > "Objective" is, by definition, not in anyone's opinion. That's what > makes it different from "subjective." Hi, Give me an example of what you mean by this. For "subjective value" and "price", consider a tomato on a stand in front of the farm where it was grown. The price is marked at 20 cents. I am interested, and buy it. It is worth more (of greater value) to me than the 20 cents. To the farmer (who has many tomatoes) is is worth less than 20 cents. The price can change tomorrow. Or even now, if I offer 15 cents, or offer to buy 2 of them for 30 cents. But what is the "objective value" of a tomato? > Any time someone starts talking about "creating wealth," I think, "This > person hasn't thought it through." When demand increases for a given > product the price goes up. But that doesn't mean wealth has been > created -- it just means that more wealth will be exchanged for the > product. Would you say that the wealth of the guy who had a Grant Wood painting in his attic went up when Wood was "discovered" by the art critics? Grant Wood lived in Cedar Rapids Iowa during the 1920-30's, taught there in the public schools, and gave his painting to his landlord as rent. They were not considered to be worth much until he was "discovered". You have probably seen his most famous "American Gothic" (or "Iowa Stubborn" as they call it in Iowa), one of the most parodied of paintings besides the Mona Lisa. http://www.ia.net/~kwradio/gothic.html .... Matthew Devney: > Wealth is not created when sand becomes computer chips. It's a simple > reaction: you put in raw materials (sand) and labor, and you get out a > chip. My entire thesis here which nobody else seems able to grasp is > that the value of the sand plus the value of the labor is equal to the > value of the computer chip. Nothing has been added or subtracted, > simply changed form. > -- > "Simply" changed form? I would say that "information" or "organization" has been added, and that this results in the value ("subjective" value) and thus the price to increase. Since the value has increased, wealth has been created. Information has value. When some trees are cut and milled into lumber, copper and iron deposits are mined and smelted into the metals and then made into nails and electrical wire, sand melted into glass and made into windows, the (subjective) value of the matter is increased. When all of these products are then assembled into a house, the value of the matter is increased even more. All the result of the change in the organization of the matter. If the house burns in a fire, its value is reduced. Because of another change in the organization of the matter. During all of these changes, matter is conserved, but "value" is not. The tomato above has greater value than the carbon, oxygen, hydrogen and other elements that it is composed of. These elements were organized into a tomato by the action of the tomato plant: enzymes created (organized!) by the action of the genes in the tomato plant. The farmer played a role in the growth of the tomato plant when he planted the seed and watered and fertilized it. The energy needed for the re-organization of the matter (atoms) into a tomato came from the sun. And human labor is not a necessary ingredient. The heat and pressure of the deep layers of the earth transform carbon to graphite to diamond. As this happens, the value of the carbon increases, and wealth is created. Out of "thin air" so to speak, and without human labor. (But work is being done!!) -- ,,,,,,, _______________ooo___(_O O_)___ooo_______________ (_) "Burkhard C. Schipper" : > There are certainly other "objective" definitions of value found by > Aristoteles, Marx, Adam Smith and others. Hi, The only "objective" theory of value that I have seen is the Labor Theory of Marx. I have not read what Adam Smith had so say about any value other than market value, which is really just price. Does ANYONE read Smith, or like me, just read about Smith? Anyway, the labor theory of value is just a definition thing: the "value" based on labor does not correlate to any other parameter, and so cannot be determined except by the theory. It is a circular logic that is meaningless. It clearly does not correlate with either price or with utility. Consider as but one example a flint stone clipped by a caveman to have a sharp edge. It took a certain number of hours of human labor to shape, and it is very useful to the caveman for cutting meat and other things. It is therefore rather valuable to him and to other cavemen. If you did not know better, you might imagine that its value was proportional to (and derived from) the labor that its creator put into chipping it from the original stone. But some centuries later, with the invention of bronze and later iron tools, the exact same stone edge is discarded as being of no value. It is just as useful as it ever was, but bronze and iron knives are now available, and they are much better at doing everything that the flint edge can do. In much the same way that a 1950 Remmington typewriter (or a 286 computer, or an 8 track player) may be just as functional as ever (and contain the same amount of human labor as when new). But they are now of little value to anyone, and are sold for junk or given away if anyone will take them. However many thousands of years after it was discarded in the trash as useless, that flint with the sharp edge is found and put into a museum where it is now a valuable display and might even be sold for a good price as a genuine artifact. The exact same object with a fixed input of human labor has gone from high to low and back to high value, all without changing in any objective way. The changes have all been in the minds of people. > The problem is that economics doesn't say anything about subjective > perceptions of goods. No, but it describes and predicts how people act as a result of their perceptions. -- AND: Subject: Re: Price, value and the creation of wealth Date: Wed, 26 May 1999 12:10:43 -0500 From: Jim Blair To: "Burkhard C. Schipper" Newsgroups: sci.econ References: 1 , 2 , 3 , 4 "Burkhard C. Schipper" wrote: >Smith defines the value of a good as the natural value if it equals the > costs e.g. cost of labour, cost of use of land, costs if captial etc. > The market price usually differs from the natural value. Competition > should let these prices converge. Hi, By this, would the "natural value" of an 8 track player, or of a 286 PC be the same now as it was in 1980? I wonder if people in Adam Smith's time discarded perfectly functional items because they were no longer useful, having been superceded by better technology. JEB: > > Anyway, the labor theory of value is just a definition thing: the > > "value" based on labor does not correlate to any other parameter, > > and so cannot be determined except by the theory. It is a > > circular logic that is meaningless. It clearly does not > > correlate with either price or with utility. BCS: > Circular logic is not meaningless. Most of today's obseverd phenomena > are not linear. So, how can be always linear logic applied in order to > find explantions? Hi, I did not mean "circular" as opposed to "linear", but rather to mean a tautology. It might be an interesting way to look at reality. But it has no predictive value, and does not correlate to any other factor that could be measured or observed. It is "meaningless" in that sense. BCS: > > The problem is that economics doesn't say anything about subjective > > perceptions of goods. JEB: > > No, but it describes and predicts how people act as a result of their > > perceptions. BCS: > Pls note that these describtions and predictions either by application > of utility theory or other reaction functions are also based on a > tautology which is in your opinion "meaningless". Of course this is not > my opinion. Microeconomic analysis of economic behavior is quite > successful. That's why many biologists are using it too. A theory which makes predictions which can be tested is not "meaningless". Especially if it is successful in its predictions. But a mere tautology (like I claim the labor theory of value is) is meaningless. Example: if you read some recent posts, I claimed that "mature" economies grow at a slower percentage rate than "immature" ones. A perceptive reader asked if I decide which economies are "mature" by considering the growth rate. If I did, my claim would be a mere meaningless tautology. But if there are independent criteria for deciding which are mature economies, and if there is an inverse correlation between maturity and percent growth, then my claim is a profound insight. -- ,,,,,,, _______________ooo___(_O O_)___ooo_______________ (_) jim blair (jeblair@facstaff.wisc.edu) For a good time call http://www.geocities.com/capitolhill/4834 AND, on the Labor Theory of Value: From my FAQ on the Labor Theory of Value at Robert Vienneau (Karl Marx?): >A country prospers not by increasing the labor value of a given output, but >by increasing the use values that can be produced by the labor force. The >"necessaries and conveniences of life," as Adam Smith has it, are increased >by decreasing the labor values of commodities. Hi, We agree on this. .... >Finally, Marx explicitly denied the premise of this question: >Some people might think that if the value of a commodity is determined >by the quantity of labour spent on it, the more idle and unskillful >the labourer, the more valuable would his commodity be, because more >time would be required in its production. The labour, however, that >forms the substance of value, is homogeneous human labour, >expenditure of one uniform labour-power. .... I don't understand the "homogeneous human labour" bit. Sounds like all human labor hours are not equal. Some workers are more skilled than others, and some have use of better tools. Even if Marx means some kind of "average" for a particular country at a particular time, there is still a wide range of variation within that group. He refers to "one homogeneous mass of human labour-power". I wonder what he thinks the word "homogeneous" means? >4.10 How can the capitalists increase absolute surplus value? >The surplus-value produced by prolongation of the working day, Of course the "working day" has been getting shorter since Marx. >4.11 How can the capitalists increase relative surplus value? > o Decreasing the wage And wages have been increasing. Especially in terms of what they buy. > o Increasing the intensity with which laborers work Not clear what this means. But we now have coffee breaks and vacations that were not common when Marx wrote that. > o Reducing wasted output and output that cannot be sold because of inadequate quality Yes. > o Reducing the use of material inputs per unit output, for example, by reducing wasted inputs Yes > o Adopting more productive machines and using existing machines more efficiently Yes!! Now back to my other question: >..Anwar Shaik found that the ratio of the standard deviation > of the capital-labor ratios to the mean capital-labor ratio (the coefficient > of variation) is 1.14. The coefficient of variation for capital-labor ratios > of vertically integrated sectors is 0.60. I am completely mystified as to what the difference in scatter in labor-to-capital ratio between vertically and non-vertically integrated industries in 1947 has to do with the labor theory of value. I mean I would expect that in a vertically integrated company, there would be an advantage in moving individual workers around to different sectors of production so as to maximize their effort as market conditions changed. This would result in a reduction in the variation in the capital-labor ratio. By contrast, in a set of independent companies, changes in the market would result in labor shortages in some sectors of production while there was a surplus of workers in other sectors. But workers would be reluctant to quit their current job and transfer to another company because of what might prove to be a temporary fluxuation in product demand. This result is just from conventional considerations, and does not validate the labor theory of value. >Perhaps Marx is more clear on this point in The Poverty of Philosophy: >Does labour time, as the measure of value, suppose at least that the >days are equivalent, and that one man's day is worth as much as >another's? No. > Let us suppose for a moment that a jeweller's day is equivalent to > three days of a weaver; the fact remains that any change in the value > of jewels relative to that of woven materials, unless it be the > transitory result of the fluctuation of demand and supply, must have > as its cause a reduction or an increase in the labour time expended > in the production of one or the other. If three working days of > different workers be related to one another in the ratio 1:2:3, then > a change in the relative value of their products will be a change in > the same proportion of 1:2:3. Thus values can be measured by labour > time, in spite of the inequality of value of different working days; > but to apply such a measure we must have a comparative scale of the > different working days: it is competition that sets up this scale. Hi, So: The actual number of hours of human labor that went into making an item is not what is important since the labor of some people is worth more than the labor of others. And the "labor value" in an item does not correspond to the price or utility. And the more labor put into an item, likely the less its value; or at least the goal is to put ever less human labor into items so they will be more valuable. And the only "empirical data" to support the LTV is also explained without reference to the LTV. Where does this leave the Labor Theory of Value?? -- ,,,,,,, _______________ooo___(_O O_)___ooo_______________ (_) j From: Thant Tessman Organization: XMission http://www.xmission.com/ Newsgroups: sci.econ References: 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 Jim Blair wrote: > Where does this leave the Labor Theory of Value?? The labor theory of value isn't an attempt to understand economic phenomena--it's an attempt to intellectually justify a particular world view. (But I suspect you knew that already.) In the case of Adam Smith, it's a reflection of his Calvinist background. In the case of Marxists, it gives voice to what they consider to be an inherent 'unfairness' in society in general and property rights regarding capital in particular. -thant AND FINALLY: Jim Blair: (on the labor theory of value) I don't know what the word "correct" can mean in this context. A theory can be neither "correct" or "incorrect", unless it can make some sort of prediction that can be either verified or demonstrated to be false. MK wrote: > I rather meant lack of internal contradictions, it would take quite a > lot of work ensuring that before one could even consider verifying > the theory (obviously). Hi, I suppose a mathematician could consider a theory to be "correct" just because it does not contain internal contradictions. But to a physical scientist (and to any one with common sense), it needs to be better than that: it must also be able to make connections to the real world that can be verified. And my idea of the real world, aka " reality" is given in your signature by an SF author . > -------------------------------------------------- > Reality is something that does not disappear after > you cease believing in it - VALIS, Philip K. Dick > -------------------------------------------------- > > Would the labor theory of value contunue to exist if no one believed it? Did I tell you about my charm theory of value? Everything has value in proportion to the amount of charm that people put into it. But (as we all know), some people radiate more charm than others, so a calculation of the total charm in a object requires adding the time imput from each person who contributed, each multiplied by their individual charm factor. And of course the charm content is independent of either the price or the utility of the object. But we also know that charm has value, and often buy things because they are "charming" (or at least my wife does). -- ,,,,,,, _______________ooo___(_O O_)___ooo_______________ (_) jim blair (jeblair@facstaff.wisc.edu) For a good time call http://www.geocities.com/capitolhill/4834 AND, March 2002 on resources and GDP "tonyp" wrote: >My original premise was in fact that GDP can grow _without_ more and more >material resources, provided the goods and services of tomorrow are more >valuable than those of today thanks to improvements in technique. This >seems trite, not controversial...... >One assumption is "per-capita GDP keeps growing", and we agree that this >growth had better not demand proportionate growth in material resources. .... >I suppose it's possible that the real world is evolving toward an economy >where material stuff (food, fuels, minerals, etc.) becomes less and less >significant compared to services (entertainment, psychotherapy, >accounting, etc.) since that's what has been happening for centuries. Hi, Another way to look at it: the things we call "resources" today (coal, oil, iron, copper, etc.) play an ever smaller role in creating GDP. They are being replaced with material that was not previously considered to be "resources" (sand used to make microchips and optical fiber, oxygen & nitrogen used to make Nylon, etc.) When hydrogen fusion is a practical energy source, water will be an energy "resource" of greater value (calories per gram) than petroleum or coal are today. "tonyp" wrote: > > >Jim, I agree with you: "resources" is not the same as "materials", and >anyway the materials we consider resources keep changing over time. > Hi, And I should have included aluminum from bauxite to replace many less common metals. Remember the "Limits to Growth"? We were projected to have "run out" of copper before now. But the price of copper is lower now than then, and known deposits are not being mined. In part because other materials now do what copper did then. jeb: > >> When hydrogen fusion is a practical energy source, water will be an >energy >> "resource" of greater value (calories per gram) than petroleum or coal >are >> today. > >Nah. Give me fusion power, and I can desalinate the Gulf of Mexico. Free >water for everybody in the world! What "free" water would do to GDP as we >define GDP, is a good question. Energy is a real "resource", and maybe the limiting one (other than imagination and intellect). With unlimited energy avaliable, the problem will become disposing of the "extra" or "used" energy. Perhaps a new "global warming" issue?? > >As long as we're fantasizing about living beyond our years and warping our >way through the cosmos, I ask you to contemplate a different way in which >"GDP" can grow indefinitely without being limited by material resources: > >Imagine a world which has evolved to a point where the "value" people >produce is almost entirely "intellectual". Where things like music, >light-sculptures, and essays on political economy are what people spend >most of their money buying, and most of their time creating. Negligible >material input, ever-increasing "output". It might not be such a bad >world :-) > >What "GDP", "government deficits", and "interest rates" would _mean_, in >such a world, is not clear to me. > > >-- Tony Prentakis That IS the world the US is rapidly approaching. Top pay now goes to entertainers: movie, TV, rock and sports stars. Then lawyers, CEO's, computer geeks. People who actually produce anything material are near the bottom of the income distribution. ,,,,,,, _______________ooo___(_O O_)___ooo_______________ (_) jim blair (jeblair@facstaff.wisc.edu) Madison Wisconsin USA. This message was brought to you using biodegradable binary bits, and 100% recycled bandwidth. For a good time call: http://www.geocities.com/capitolhill/4834