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Comment by alexasmyths | Hacker News Reader

"The value of a product is equivalent to the amount of labour exerceted in its production"

This is one of the most problematic statements ever made in Econ.

The 'value' of a product is different for everyone, and it's what you (or anyone else) will pay for it.

The idea that 'work = value' is one of the most distortionary ideas in business, even today.

Just had a discussion today about pricing a product, and it was derived from component prices. Trying to convince a room of people that 'price is not a function of cost' ... in 2017.

Yes - when things are commodities, often, price is a function of cost, because competitive pricing means just a small margin above cost, which will roughly be the same for most.

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Exactly, which is why Marx uses the concept of a labor value, use value, and exchange value.

Labor is what's gone in, use is the inherent/intrinsic value in the object, and exchange value is what people will trade in exchange for it. That's a bad summary, and there's a lot more to the dialectic examination of them.

Reading Capital (along with David Harvey's lectures) is worth it if you find these things interesting, it's a deep analysis of markets and capital.

It still ignores scarcity and arbitrarily picks one specific limiting resource in the production process as essential. Labor theory of value might be interesting from a philosophical standpoint but really has no practical application when it comes to understanding the market. And it introduces a major can of worms when it presumes stuff like intrinsic value.

It doesn't ignore scarcity, scarce goods are inherently more labor intensive. And it doesn't presume intrinsic value, the labor necessary is a subjective concept so the value must be as well.

You're probably right about it's use in understanding a capitalist market, Marx spends no shortage of time on how capitalists warp that basic idea.

How are scarce goods more labour intensive ? It doesn't take any more labour to make a good wine than a bad one.

Then why are bad wines made? Making better wine requires more training, more time, better tools, and/or better grapes. All four require more labor.

That has little to do with 'scacity'.

Also - it's entirely possible that you make spectacular wine with the same effort I make bad wine.

They are somehow 'equal' in value?

It's just ridiculous. Labour theory of value just doesn't have a lot of meaning.

If your example isn't scarcity I don't know what to tell you, if better wine is "scarce" those labors are what is needed to make better wine.

Explain how it is possible, and how the situation does not immediately solve itself with you stopping doing something you hate and are bad at.

As many have pointed out, "value" is subjective. Your terrible wine may be loved by someone. Or you may really enjoy making wine. As wine has zero intrinsic value, it is a luxury good, it's very possible for both wines to be just as valuable.

It has plenty of meaning, it just doesn't explain "profit."

One wine being generally better than another, is not about 'scarcity'.

Yes - of course people will have differing opinions - but aggregate market demand can be different for something made with the same amount of labour - that is not an issue of scarcity.

i.e. 'most people' can view one wine as better than the other with equal amounts of labour.

Again - surely you can, if you want get into issues of 'scarcity' i.e. you can talk about production volumes etc. but that's kind of a second order issue.

I also found the wine example peculiar, as good wine and scarce wine aren't often the same, but I kept with it as it was brought up. Mistakenly I thought you had brought it up, sorry.

"Aggregate market demands" are capitalism, where wine is a status symbol and "good" wine generally refers to price. You are continuing to view this only in the eyes of capitalism and considering "value" to include "profit."

""Aggregate market demands" are capitalism, where wine is a status symbol and "good" wine generally refers to price"

No - what I meant by 'aggregate market demand' was really just 'average price / perception of value' - and 'good' does not refer to 'price' - good wine literally is better.

I am not equating value and profit. I am equating value and price.

Some goods are generally better than others (i.e. most people will think one is better than the other) and require the same labour - this is my point - and it's unrelated to scarcity.

Like I said, someone else brought up the wine example and I just continued it despite finding it clumsy.

Price is value plus profit, thats the only reason to distinguish between the two.

I think my original point about wine was misunderstood. Good wine is not good because it is scarce, it is good because it is good, but it is more expensive because it is scarce.

If you could produce infinite quantities of Chateau-Petrus, it would be extremely cheap. But since it depends on being produced at a specific location, with a specific know-how, the quantities are limited. In this case, the amount of labour involved has little effect on the price of the wine.

First, and this isn't really relevant, price and scarcity play a much bigger role in what is considered "good wine" than you're saying.

Back on topic, "expensive" and "price" again add the concept of profit to the value produced. The only value of wine is enjoyment, so even Petrus wine has little more value than similar wines.

That increase in value is largely labor from learning the trade and long running slow maintenance. The only part that is scarce is the soil composition, something that could be recreated with a large amount of labor. Similarly, discovering that that area produced quality wine was labor intensive as well.

" Good wine is not good because it is scarce, it is good because it is good, but it is more expensive because it is scarce."

No - not at all.

Good wine can be 'more expensive' simply because it is better!

There's more willingness to pay, i.e. better demand curve!

Doesn't need to be less supply!

Point being: not all labour is equal, ergo, the idea of something being valued upon the 'amount of labour' put into it is really not useful.

I am not doing a strong job explaining this subject, but you are dismissing it out of hand without an understanding of it. I recommend taking codemac's advice and reading some of Marx's work. Even if you disagree with him it provides a greater understanding of how the economy works.

I did read it (a long time ago) and I don't agree with him.

I just don't believe the labour theory of value is a useful concept.

I don't think Marx provides any understanding of how the economy works - other than to hint strongly that prices are really a function of power - i.e. when one group has a monopoly on some critical thing, i.e. land or capital, then they can use that to leverage over another group, and then you have basically class struggle.

I mean, it's useful rhetoric, I'm not sure if it's useful theory.

In my opinion, you don't even need Marx for this. Even Jeff Bezos reportedly said "your margin is my opportunity". So if some product is expensive without being scarce, it is probably being "protected" by likely unethical means (like copyright?) or an oligopoly (unions?) that keeps prices artificially high.

Sorry if this missed the mark completely. Would love to learn.

I don't think the 'labour' concept of value has any meaning at all.

Given how much our labour is amplified by machines, energy, machine intelligence, parts, equipment, R&D, support - it's not a very helpful way to think about anything.

It's also very unhelpful when considering prices of IP related things.

You study your whole life to become a great actor, you make a film - it only takes a month. Is it only a 'one month film'? Equivalent to the quality of a newby actor?

Almost everything requires at least some skill ...

It depends -- how would we price things when everything takes 0 labor from humans?

Because I bet the price changes drastically, and that's the labor-value represented in object.

> The 'value' of a product is different for everyone, and it's what you (or anyone else) will pay for it.

Marx did not dispute that. His point, rather, was that workers are paid significantly less than the actual value of the work that they do (because said value is directly measured by how much their product sold for, minus all the non-labor expenses).

And from there he concluded that the difference is the economic rent that the owner of the means of production is effectively extracting from those workers, by virtue of his ownership giving him the monopoly on them (or rather, by virtue of the capitalist class collectively having a monopoly on the means of production).

And that, being pure rent, it does not serve any useful purpose in the economy, except for the one collecting it - i.e. things would be more efficient if people couldn't collect rent like that, which he proposed to achieve by rejecting the notion that means of production can be privately owned in a way that also bestows ownership of whatever is produced by them.

The part he missed was there was value in risk taking, innovation, experimentation. The profits aren’t always completely a rent (though they can be in an uncompetitive market). Profit often covers real costs in a dynamic economy.

“Profit motive” was bunk psychology created by 19th century economists to explain away this discrepancy.

This isn't a problematic statement in economics, its a problematic statement in capitalism where the equation is "value=labor+profit." Subjective value isn't a problem as finding someone who values it a certain amount takes more labor.

The product you seem to be talking about is not part of 'the market'. Otherwise competition would drive the price down to intrinsic cost + small profit (remember the 'invisible hand'?)

10 years and 1000's of lawyers to find out whether Microsoft is a monopoly? Give me a break! Just look at their income statement! Profit margins of 30% and more for 30 or more years? Do you seriously believe nobody would or could do the same for 20% profits?

A real market economy would tax away most of the excess profits after a certain number of years (depending on industry?). But then you would not have Apple and Microsoft and all your other beloved monopolists.

Ps: I'm a bit undecided but maybe it's OK for luxury products to not be part of the market. If you want to pay $200 more for an additional 1 GB on your iPhone when the price for 1 GB is $20, then it's no skin of my nose. But please make sure Apple pays their taxes.

"tax away most of the excess profits"

How do you define 'excess profits'.

And BTW - yes - I really do believe 'nobody can compete with Microsoft'.

Do you realize how sophisticated those products are?

And for every MS product, there are tons of competitors.

MS doesn't just make a 'widget' - they depend upon the talent (and ability to evolve that), deep value chain integration, R&D - it's a constantly moving team.

Taxing excess profits should be somewhat analogous to patents. (Well, except for the huge mess that patents these days are, but I am more talking about the conceptual reasoning behind them).

The creator gets a time limited monopoly to pay for his efforts. Nobody ever thought having an unlimited monopoly was good for society (well except for the guys actually having the monopoly, cuz you know it trickles down somehow).

Regarding the quality of MS products, why it's obvious that they used some of their monopoly rents to hire smart people to work on it.

But the point still stands that they were and still are a monopoly. Otherwise someone equally smart would have broken into their market and pushed profit margins down.

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