Advertising encourages people to spend, even in some times to do it by going into debt. This in turn leads to more economic activity, more widgets ordered, which in theory should mean we can reap benefits of economies of scale, we can better amortize costs, etc. Which leads to R&D and innovation, which helps technological change, which leads to a more efficient economy, which leads to more surplus, which means more wealth created, etc.
Now, of course we could do this probably without spending so much on ads, but just saying ads are zero-sum is incorrect, because there's a bigger picture.
Social status is again not so simple. Because after a certain group size there will be value in being different. See also the classic equilibrium between strategies in any game (as in game theory).
> which helps technological change, which leads to a more efficient economy
You made a leap of logic here. The technological innovations in finance directly contributed to a more volatile economy that crashed and inflicted massive losses on huge swaths of the global population, many of whom never recovered.
Singling out one causal chain in one period while ignoring the rest is not a good way to weigh "progress".
Yes the lack of oversight led to a crash, the lack of social safety net prolonged it, and the lack of effective adult education keeps people chasing low-income jobs and in poverty.
And lo and behold Basel III was signed, now systemic risk analysis is regular part of the financial sector checks, even if the current US administration tries to (and succeeded in) roll back some of these protections. That's the rent seeking regression. (And many people are happy for it, for they don't understand these processes, but they also don't trust "technological change" and economics, because it took their jobs - which is an understandable sentiment, even if incorrect.)
Not too mention, at least in America, the vast majority of American lives are far worst off than they were in the 70s, 80s, or 90s. Making smart phones and personal computers just made rich people richer.
Smart phones and PCs both coincide with big shifts in global politics, the post 2001 War on Terror, Operation Iraqi/Afghan Freedom, etc. Trillions spent on insurgency control, that could have been spent a lot more effectively.
All the while the middle class shrinks. (David Autor's 'Why there are still jobs?' paper is open access and has striking graphs that show just how much happened/happening.)
Globalisation lifted hundreds of millions out of poverty, while the financial benefits of this economic optimization were not distributed back to those who lost their old socioeconomic status. (They only got the lower prices, but that's not much considering most of those people affected were not living in a distortion-free "free market", they had no idea what to do, they were not used to chasing new skills-in-demand, not prepared to relocate, etc.)
That said comparing healthcare outcomes, civil rights to the 70s is worthwhile, and if you think it was better then, that is mighty strange.
> Making smart phones and personal computers just made rich people richer.
With some positive sides also. Having a free encyclopedia, cheap universal access to educative videos or detailed satellite photos of the whole planet in 70s would have been mind blowing. Being poor today is more frustrating, but the DIY part is much easier, as making connections, and this has also an economic value.
Knowledge is not protected in semi-secretive guilds anymore. The counterpart effect is the disparition of entire sets of steps in the social stair. You can not make a living anymore selling printed maps for example. Poor people could climb, a little, but there is no so many stairs to grasp.
The harsh truth is that your largest effects will always be local. What you do for your immediate family and friends will always dwarf anything you can do for society.
To expect your day to day to serve a larger social purpose is to subordinate either your lifestyle or your cognitive integrity to something you’ll never be able to completely convince yourself isn’t a lie you’re telling yourself.
If you can put your kids through college well-adjusted, you’re already doing better than most on that front. Beyond that, maybe maintain a few open source libraries for awhile?
The big ideological divide in families (usually between generations) is a serious symptom of our inability to really communicate and compromise. In large part these ideological groupings are meaningless and inconsequential. Mostly because it doesn't really matter, for most of the people the feedback is very much lost in the noise. (There's institutional inertia, states are big, changes are slow, Congress doesn't change that fast anyway, the Senate is entrenched; and similar situations exist in other countries too.)
And thus it's hard to reconcile how trivial it is that people don't see what's going on, yet they are the problem themselves.
"The big ideological divide in families (usually between generations) is a serious symptom of our inability to really communicate and compromise. In large part these ideological groupings are meaningless and inconsequential."
I think this is only true in very specific circumstances. Ideological divide can also mean disowning your child for being gay, which is why among homeless youth there's a disproportionate amount of LGBTQ children and why the concept of "found families" is very relevant to the LGBTQ community. Certain families also will disown or withdraw from any member who doesn't follow religious teachings.
Often times ideological differences is quite meaningful when it results in the abuse/neglect of vulnerable family members.
But it is different. You ( like the russians and the english ) live in a gerontocracy which I would guess is a effect of your personal power base focus with individuals driving political campaings for them self, instead of being pawns that are whipped if they step out of the party line on issues ( an effect based off having multiple small parties ).
Swedens demographic among the MPs.
18-29 år 10,6 %
30-49 år 49,0 %
50-64 år 37,8 %
65+ år 2,6 %
USA
Congress Representatives
Newly Elected
Representatives Senators
Newly Elected
Senators
115th 57.8 years 50.8 years 61.8 years 54.8 years
Not OP, but my personal belief is that all work is valuable, otherwise it wouldn't be desired. I don't think it's a good exercise to decide how much it is worth, except to say that work that requires X unit of time should provide at a minimum an amount of compensation that allows a person to obtain a standard of living above the poverty line.
In my book, work has negative utility. It is something you tolerate to get the fruits of it, which may have positive utility. Being paid in exchange for work is the sign that otherwise the work won't be worth doing for you.
The less work you do to achieve a desired result, the better. This is why technical improvements are valuable: they allow you do less work.
There are activities that are rewarding by themselves, like playing games, watching the sunset, or otherwise having leisure. You are not paid for that, you sometimes pay for it yourself, and still it remains worth doing.
I fundamentally disagree with the separation of life into toil and leisure. That mentality debases both acts. It implies that the more miserable our job is, the greater the moral reward we have earned. And, conversely, our leisure must be maximally hedonistic and selfish to make that suffering worthwhile.
All of our waking day is a mixture of good and bad experiences, intertwined with all manner of internal and external rewards and punishments. A hobby is just a job that pays you more in fun than cash, and a job is a weird club you go to more than you want but that pays you dues in return.
Trying to separate them into strict binary options makes it hard to build a complete, balanced life that has all of the various kinds of rewards that are meaningful to you as an individual.
You're describing the utility of work for the worker, and I agree with your description.
But work also has utility for the person who pays the worker, and this is extremely different from what you've described.
This difference in the utility functions for each party (one wants to maximise the return on work and minimize the work; the other wants to minimize the work and the cost on it) is what sets up most of the "classical" marxist class tension. This is despite their agreement that the less paid work that needs to be done, the better.
No, the work done by worker still has a negative utility — it's time spent and salary paid, a clear loss for the employer.
The fruit of the work done is what's valuable, thus is what the employer buys from the worker by paying wages, or a slave owner forcibly takes from a slave. This is why an employer is interested in technical improvements: they reduce the required amount of work per unit of the resulting valuables.
The tension between the worker and the employer is about the price paid for the fruits of the work. Definitely, with standardized industrial manufacturing, it's about the amount of time and work conditions, because a worker can't significantly influence the performance of the machines he's using, or could not at Marx's times. As the Japanese (e.g. Toyota) have shown, workers with right motivation and right education can influence performance of industrial manufacturing quite significantly, e.g. by spotting inefficiencies and by lowering the defect rate.
The way you are doing the accounting here, it's like the supplies used in manufacturing have negative utility -- they are a cost paid, "a clear loss for the manufacturer".
Work has positive utility when it creates something of value. Considering the money paid for it as coextensive with the work is a mistake because people can work to create value without getting paid, as sometimes happens to unfortunate people. It is no more reasonable to treat the work inputs into a good as having negative utility as it is to treat the money paid for it as having negative value.
I'm not making a distinction of how valuable a particular piece of work is, just that work in general is valuable and should be valued such that whoever is employed by it should be able to be sustained by it.
If a person desires work but doesn't value it high enough to sustain a person whose time is wholly consumed by it, I would question the necessity of that piece of work. If it's not critical to your business maybe it shouldn't be done. If it is critical then it sounds like it's worth the compensation.
Sometimes someone's valuation of work is questionable. It may have had value to them, i.e. they paid someone to waste time out of pity, or their valuation could be wrong. They could pay someone to pray their stock prices increase not realizing it's useless.
There are much more obscure ways in which work can be entirely useless without anyone noticing, and plenty of ways people can end up with jobs that are pretty obviously a waste of time.
It's not about which specific categories of work are valuable, it's about treating labor in general as more valuable than capital. Currently in the US, income from capital is taxed at far lower rates than income from labor. Why?
I invent (at the cost of $500) a programming tool that improves your output by 50%. This enables you to earn $5000 more per year than previously. You purchase that software for $1000, providing me a profit of $500.
It's a company which makes the profit. If you started a company and sold the tool for $500 and the company paid you $500 then there is no more profit for the company. If the company paid you $250, only then can they claim to have made $250 profit.
Hence, profits are nothing more than unpaid wages.
A goes and buys flour for 100$ from farmer B. Then A goes and pay independent baker C 100$ to make bread from the flour. Then A goes and pay independent retailer D 100$ to sell the bread for $500.
Each cycle A makes $200 in profit, nobody loses out as everyone agreed to the terms.
This is enough margin for A to pay an independent manager $100 each time he repeats the process, ultimately netting A $100 without A doing anything. Is A taking advantage of everyone here? No, of course not, everyone still agreed to all the terms, A was just aware of a business opportunity the others were not, risked his own money paying for goods and labor he wasn't sure he could sell and now everyone is richer as a result.
This is how businesses works. Of course in practice sometimes businesses does scummy things, but that is why we have laws which are meant to ensure that all businesses are net positive for society. If a business is not net positive then we send the police to them and shut them down. That doesn't work when businesses have politicians in their pockets, but it works in parts of the world where workers have more political influence.
In reality most people are not sole traders and the market does not operate under conditions of perfect competition. Over-simplification is not helpful; I could describe a similar virtuous circle based on entirely different economic arrangements, and it would be just as facile.
There's a word for this in economics. The 'normal profit' is the 'wages' of the entrepreneur and risk-taker -> the return on the money invested or put at risk, and the time and effort of the entrepreneur to build the business. Nothing immoral about that.
I don't entirely agree either. I was just expanding on the idea. However, when there is no employee, such as in the example you gave, there is also no profit. What you have called profit is actually your wage. Do I make a profit when I go to work for a company? No, I earn a wage.
It's never positive as your life is worth far more than those wages in all cases. That's why no one can be considered overpaid, or we would limit payment to CEOs. Thus wages can only be considered at best, a trade.
That's why I asserted that profits are nothing more than unpaid wages. Since it's objectively a trade of your life for wages, paying others less than the value you produced is simply not valuing human life. The worst sort of theft.
For your example, it doesn't hold up because most people only make enough to live, there's nothing to optimize other than going "full ramen". While others have far more than necessary for basic food, shelter and medical care. Those who are just-surviving aren't doing anything wrong, when an economic ponzi scheme simply doesn't value their life by paying them less than the value they produce.
> That's why I asserted that profits are nothing more than unpaid wages. Since it's objectively a trade of your life for wages, paying others less than the value you produced is simply not valuing human life. The worst sort of theft.
This is ridiculous. As someone who has, in the past, run their own business, and now works for a living, the fact of the matter is that my employer does a lot of work I am unwilling / uninterested in doing, such as making sure there is money to pay me and advertising the product to others, as well as figuring out how to accept payments, get the requisite insurance etc.
The profit retained by the company is the share agreed upon in advance paid to those who, through their own labor, at some point made the company possible, whether it be by direct action, or by stored labor output from a previous position (i.e. capital).
That’s extremely loaded, and not true. I’ll unpack it all if someone is curious but in short your statement is only true if you define wealth in terms of faith-based fiat currency or define wealth as central bank issued scrip. There’s a reason credit is readily available. It’s a scheme that only works until it doesn’t, which is objective evidence that it makes for a very hollow definition of wealth.
It should be worth noting that this is a pretty strong (and I don't think defensible in the case given) claim to make - you're echoing the Marxist/socialist objection to profits (one which I may agree with) but Marx (nor anyone else) ever claimed that this happens without employing wage labour. For profits to be nothing more than unpaid wages, we need to be talking about at least one waged worker who applies labour, and his product is appropriated by his employer.
For what it's worth, the principle objection I have to the Marxist position on wage and profit is the redefinition of the term "exploitation".
It muddies the argument because it enables a circular argument whereby the transaction of employment can be labelled as exploitative, where it's easy to defend against the claim of exploitation if the original definition of the word is preserved.
In other words, profit generation as it comes from an employer/employee relationship is Exploitative but not exploitative.
The definition of "exploitation" is a technical one; even those who argue against the Marxist claim actually take this in stride, for instance, there is an objection to the Marxist idea of exploitation that Marx's selection of labour-power as the exploited commodity is arbitrary, thus we can say that any commodity (such as steel, peanuts or shoes) is "exploited" - the Marxist reply to this isn't to say "well, exploitation doesn't mean that, exploitation is evil and you can't be evil toward inanimate objects".
In other words, I think the definiton used by Marxists is somewhere between the two. It not only means to use something up (to exploit resources) but also the Marxist idea that exploitation relates to workers being forced (by man-made historically arisen structures, that is) to sell their labour-power.
Nevertheless, newer schools of Marxism (such as the ones from the 80s which attempted to use neoclassical economic models) have axiomatic definitions of exploitation. For some simplified models of a commodity economy, researchers such as Veneziani and Yoshihara (and Roemer on different grounds) prove that the axiomatic definition of exploitation is satisfied. Defined axiomatically, we can escape the talk about morality. But you can easily rephrase Marx without the word "exploitation" - the claim is, rather simply, that there is some amount of labour that is unpaid, this labour forms the substance of surplus value, which is appropriated. No judgement, no morality, no right or wrong - that's just the fact, and of course it may well be a good thing(!) that workers are "exploited" - Marx certainly said as much, when writing that the capitalist's point of view, his idea of "fairness" is just as worhless as anyone else's.
I could agree with almost everything in your last paragraph, but you're still using loaded words. "Appropriated", for instance. Even "unpaid" carries (perhaps just to me?) the implication that it should be paid.
I would describe the same thing like this: The workers plus tools (capital) create value. The workers don't get all the value produced; capital also gets a cut.
You can say that this is morally right. Or you can say that this is necessary, because the capital isn't invested out of the goodness of the capitalist's heart. We have to give them some payback if we want them to buy the tools. The alternative is to have only the tools that our in-house workers create, which is usually a sub-optimal situation.
Now, any given situation can still be exploitation of the workers (in the common rather than axiomatic sense), and still be morally wrong.
The question is incomplete without knowing how the $15 and the $10 breaks down - if you paid, say $3 for the materials (C) and $10 for the labour (V), you'd sell at a $2 profit, Marx would say that assuming equivalent exchange of values on the market, neglecting the role of advertising and such, and assuming the chair is freely reproducible (i.e unencumbered by patents and trademarks, and not a one-of-a-kind item like a piece of artwork), the $2 is the monetary value of the surplus labour (S), also known as "unpaid" labour. This provides a rate of profit (or "rate of exploitation") r = S/(C+V) = 2/(3+10) = 0.153, the final product of course having a value of S+V+C, expressed, i.e 2+10+3 = $15.
> the $2 is the monetary value of the surplus labour (S), also known as "unpaid" labour
What about risks and decision making, investing in the future products and potential failures? How much is "paid risk" and "unpaid labor", how to objectively evaluate that?
I would argue that $2 is paid risk, not unpaid labor, how to prove that that's not the case?
Also, if I paid you a salary, and than the product failed in the market, is it just according to marxists to ask your salary back, or, if the product was net loss, to ask you to pay for it as an employee?
The proof follows from the labour theory of value (the proof of which is, I believe, more controversial, especially as Marx does the "proof"), which states that the magnitude of value of a commodity is objectively determined by labour-time, not by "risk", and I think that's shown in cases where many busniesses, no matter how risky (and it seems here you're only talking about the capitalist's risk, not that of the waged labourer), realize different rates of profit which don't align with what we consider to be the risk of production. More risky businesses, in general, simply don't generate more profit than non-risky ones. If it were the reward for decision making, the rate of profit would diminish the more you sell something the same way and in the same place, since there are fewer decisions to be made for each subsequent commodity. Investing in future products and protecting against potential failures are uses of the $2 profit, not explanations as to its origin.
Let's say that it is risk. The capitalist labours the monetary equivalent of $1, i.e he spends $1 on his labour power, producing a total of $2 worth of labour. When the product is sold he is still given $2, but not all of that is profit, only $1 is, since the $1 paid is now a cost, he only gets $1 "for free", not $2. Therefore it's clearly in the interest of every capitalist to minimize the amount of work he does himself and instead "exploit" a waged worker for it.
Marxists have never argued that the worker has a "right" to the surplus value, only that it would be, in the most non-moral sense possible, in the interests of labourers who have this surplus appropriated due to the structure of production to ensure it is no longer appropriated in this way - i.e. a socialist or communist society.
> The proof follows from the labour theory of value
But I'm asking you about the proof of the labor theory of value in fact. I didn't thought that there exist people who take it seriously after marginal revolution.
> and I think that's shown in cases where many busniesses, no matter how risky
Business shows exactly the opposite, the most risky (volatile) domains have the highest gains and highest losses: pharma, construction, fintech.
> value of a commodity is objectively determined by labour-time, not by "risk"
So when the value of a bottle of wine inflates with time, somebody is working on it?
> no matter how risky
Did you ever run a business? When you pay for a snack, you pay not only for a snack, but also for a stolen snack. When you pay for a Intel x86 processor, you also pay for failed Intel iAPX 432 which never appeared in the market.
Risks are pretty material, and should be payed for. When you are starting a project, you never know in advance whether it would be successful or not. If it fails, the only way to pay the salaries and costs is through revenues of other projects.
> If it were the reward for decision making, the rate of profit would diminish the more you sell something the same way and in the same place, since there are fewer decisions to be made for each subsequent commodity.
Strange inference. Not the number of decisions matter but their impact. If you sell something many time, it means that the first one decision was very clever and rewarding. Not to mention that revenues are falling with time and it requires new strategies and decisions to make your company competitive and profitable again.
> The capitalist labours the monetary equivalent of $1, i.e he spends $1 on his labour power, producing a total of $2 worth of labour
Again, I see no evidence that labor creates any objective value on its own. Goods have value, labor has value as a good evaluated by an employer, but it does not "create value". If you make a chair, you apply labor, but if nobody values it and nobody buys it, it has no value, hence your labor has no value.
How did you evaluate that capitalist labors $1? Maybe his decisions and ability to take risks cost $100, and his workers are just freeriding him? How exactly did you infer that he spends exactly $1 of labor power? What is a labor power, how could you measure it objectively?
Forget about capitalists, here is a simple though experiment: there are two workers living in a commune and owning the means of production. They do chairs and sell it to the outer capitalist world. One worker is a carpenter who does the woodwork. Another one make nails. They sell chairs for $1, which share of this $1 each of than created? How to measure that objectively?
After that add a capitalist who start the business, takes risks, credits, make decisions and devise strategy. How to evaluate the "value" of his activity?
>But I'm asking you about the proof of the labor theory of value in fact. I didn't thought that there exist people who take it seriously after marginal revolution.
The proof is "in the pudding" as it were; there are a few theorists (either heterodox economists or philosophers of economics) who argue that Marx himself did enough to "prove" the theory, either logical-deductively, or otherwise; see Elena Lange[0], Patrick Murray[1], Guido Starosta[2], Andrew Kliman[3], Chris Arthur[4] and a few others - though they approach the matter from different angles. Martha Campbell defends the objectivity of value in capitalist society as opposed to marginalist accounts and Veblen's "habitual action" account[5]. In general, those that hold to Marx's exposition with the "third thing" argument argue that the theory cannot apply to each commodity individually, though it would apply to an aliquot as taken as a sample of the lot of them.
>Business shows exactly the opposite, the most risky (volatile) domains have the highest gains and highest losses: pharma, construction, fintech.
These are not businesses, but fields of businesses, within them it is possible to find the greatest variation in risk. It is also not clear whether the risk is taken by the owner of the capital, or by the labourers themselves - in construction, a major risk falls on the safety of the workers. To say that they have the highest gains and the highest losses implies risk is a mere tautology (of course! that's what risk means, you win big or you lose big), but it says nothing about profitability.
>When you pay for a Intel x86 processor, you also pay for failed Intel iAPX 432 which never appeared in the market.
Again, offsetting the effects of failed developments and theft is what capitalists do with profit, it is not an explanation as to the origin of profit.
>Goods have value, labor has value as a good evaluated by an employer, but it does not "create value".
What you're saying is absolutely true, but it's an equivocation on "value". When you speak of the value to someone, from someone's perspective, that's not what Marx means by "value". Marginalist accounts of value are semi-compatible with the labour theory of value, so long as we're talking about different things when we say "value"; for example, it's clear that what the LTV means by "value" is not "artistic value" or "moral value" or any of a huge range of values. In the same way, it does not mean value as a subjective preference for one thing over another. That concept gets a look-in with the Marxist concept of use-value - but not exchange-value.
>If you make a chair, you apply labor, but if nobody values it and nobody buys it, it has no value, hence your labor has no value.
Only use-values count as values, because according to Marx, a commodity is a complex of a use-value and value (expressed in a given magnitude of exchange-value). Therefore it's meaningless to talk of something usunable and undesirable as having value. Even Ricardo knew this was the case. Wine is a more interesting matter; depending on how one looks at it, either the very act of storage is (objectively) highly valued, or the good is not entirely freely reproducible (i.e my wine aged for ten years will never sell as well as a brand name aged for five years), or along with Murray, the theory does not apply to this individual commodity, but if you were to take a sample of all capitalist commodities, you'd find that the identity of total value = total price holds in aggregate.
> They sell chairs for $1, which share of this $1 each of than created? How to measure that objectively?
There is no way to determine that; it is just as impossible as quantitatively determining "utility". Value is not sensible, it is a socially-determined supersensible aspect of commodities. In other words, the essence behind the appearance. See Murray on the neoclassical focus on capital's shadow forms[6]. In the same way, measuring skilled versus unskilled labour may not be possible quantitatively, but it clearly happens qualitatively - what the market rewards in wages on average to two groups of people with different skill sets means the abstraction and calculation is already quantitatively done for us in the real world. This is exactly the same with the neoclassical concept of utility, in which we can actually see prices, but not a drop of utility, no matter how we twist and turn an object.
> Again, offsetting the effects of failed developments and theft is what capitalists do with profit
Wait, what? I'm asking, how would you subsidize failed developments if you consider 100% of profitable development as wage.
If you consider net income as wage, should the net loss be paid by the workers?
> in construction, a major risk falls on the safety of the workers
Which is also payed by the employer in the form of insurance. And the investment risks also totally lie on the employer here, workers just get wages. If the construction is failed/not being profitable, workers get wages and insurance, employer and investors are paying bills and credits.
> what the market rewards in wages on average to two groups of people with different skill sets means the abstraction and calculation is already quantitatively done
But again, market rewards have nothing to do with created values, but rather the utility of labor. If your labor could be substituted with the machinery for the smaller price. It's based solely on marginal utility of labor.
No calculations based on value creation is done whatsoever, the wage is a result of a bargaining process.
> measuring skilled versus unskilled labour may not be possible quantitatively
> it is just as impossible as quantitatively determining "utility"
But you don't need to, that's why labor theory of value is dead and Marginalism has conquered the world. You don't need to quantify utility to evaluate wages, just let people bargain based on their subjective notion of utility, ability to find substitutions etc. Marginalism is suitable for modeling and planning here, all you need is gather statistical data other how the preferences and desires for the good change with the appearance of substitutes or changes in quantity.
You can't, however, evaluate wages based on labor theory of value, you can't measure the value one has added to the value of raw materials, if it's even the case.
You can't even solve a simple problem of two worker's shares of surplus value with the labor theory, it's totally useless for anything but being a justification for exploitation theory.
There are neither empirical nor deductive evidence that the value of commodity is proportional to the wages. Even if you exclude luxury goods (which is already a clear intellectual dishonesty, because the notion of luxury is vague, and differences between luxury and basic are impossible to be quantified of defined), you would still have a huge difference in prices of buckwheat and wheat, or water simply in different contexts (even if no labor is applied to extract it, as in the case of oasis, oasis water in the middle of desert would be evaluated more than the water being extracted from a deep shaft in a less severe conditions).
Value is inherently subjective, it stems in scarcity, utility, ease of finding a substitute etc. Even labor is such a good, evaluated subjectively.
Profits are the "wages of capital". No one pays companies wages. The owner or owners of a restaurant doesn't have anyone to pay them -- they have to arrange for their to be more in gross receipts than there are expenses or taxes; otherwise, they go under.
How do you decide which work is valuable and which work isn’t?