yes, you pay someone because you derive value from their work. How much you pay them is a question of marginal cost/benefit, not total value.
If I make a fixed $100 from some labor, that number is an upper bound for how much I would ever pay, but doesnt determine how much I actually do pay. That is set by supply and demand for someone that can do the job. Maybe it is $1, maybe it is $99.
For jobs with variable productivity, pay is set by marginal benefit. If paying $1 more nets $10 more profit, you pay more. Repeat until you dont get more profit from raising wages.
Wages are set by the derivative of profit, not profit itself.
> a question of marginal cost/benefit, not total value.
Uh... yes it is? Are "benefit" and "value" not synonyms here? I think you're confusing "value" with "profit" maybe? They may not be equal, but the denominator in "cost/benefit" is exactly what I'm talking about.
Yes, value and benefit are synonymous, but in reference to different objects/choices. There is the financial benefit that doing the work provides, and the financial benefit of paying more.
The pre-cost benefit of having any worker might be $100. If you can get a worker for $10, the marginal benefit or paying $20 is negative $10.
If I make a fixed $100 from some labor, that number is an upper bound for how much I would ever pay, but doesnt determine how much I actually do pay. That is set by supply and demand for someone that can do the job. Maybe it is $1, maybe it is $99.
For jobs with variable productivity, pay is set by marginal benefit. If paying $1 more nets $10 more profit, you pay more. Repeat until you dont get more profit from raising wages.
Wages are set by the derivative of profit, not profit itself.