Hence, profits are nothing more than unpaid wages.
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.
Further, your definition doesn't include situations in which there is no employee (such as the one I gave).
It is more correct to say that the profit is the gains made to some agent in a market transaction.
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.
And yet, both the planet and individual people are far wealthier today than when they were producing and receiving "full value" for their labour.
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).
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.
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.
What is unpaid labor? If I employ a carpenter, and pay him $10 for a chair I later sell for $15, is this labor paid?
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?
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.
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?
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.
[0] http://www.consecutio.org/2018/11/the-proof-is-in-the-puddin...
[1] https://philpapers.org/rec/PATIDO-2
[2] https://cicpint.org/wp-content/uploads/2017/03/2008_Starosta...
[3] Kliman, A. 2008. The Fourth Thing on the Third Thing: A response to James Furner and Patrick Murray.
[4] Arthur, Christopher J Source: Capital & Class 15-39 no. 73 (Spring 2001): p. 15-39 https://libcom.org/library/value-labour-negativity-christoph...
[5] Campbell M. (2004) The Objectivity of Value versus the Idea of Habitual Action. In: Bellofiore R., Taylor N. (eds) The Constitution of Capital.
[6] http://crisiscritique.org/political11/Dennis%20Badeen%20and%...
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.
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.