Human Action Comics #3: Marginal Theory of Value

Comments

# h4x5k8 said:

I have been trying to explain to my Marxist acquaintance the theory of subjective value and diminishing marginal utility. I was excited to see it so simply put forth in your fine rendition, for my attempts proved to be utter failures. Here is the reply I got after sending him the link to your comics, perhaps this will interest you:

"The Robinson Crusoe thought experiment begins with the assumption of an uninhabited island, that is a wilderness in which no one owns the natural resources. There is currently nowhere on Earth where this is true; all resources are owned by individuals, corporations or governments. Humans are social, not Robinson Crusoes, so, like it or not, economies are embedded in societies and economic power equates to political power.

From an anarchist perspective, this presentation still avoids the key question I keep asking, "How can anyone be free when everything they need to simply survive is owned by someone else?" If you are forced to do the bidding of owners just to live, this seems a perverted definition of freedom. Even with a gun to your head, you still have a choice, don't you?

From Marx's point of view, the Austrians confuse use value and exchange value and focus almost exclusively on the former. If you do this, it conceals the source of profit, which is, I think, their intent. Marx doesn't focus much on use value; he takes it as a given. Probably because if something has no use, it is unlikely that significant social resources will be devoted to its production. However, it does mean that he looks fairly exclusively at the "supply side" of the equation, and spends little time on demand... e.g. on such concepts as marginal utility. You might look at all of Marx's analysis as prefixed by the phrase, "Assuming commodities do sell...," and he then proceeds to analyze the source of profit, the concentration of wealth (as capital) and its social consequences.

The Austrians concentrate on use value - i.e. under what conditions people buy goods and in what quantity; the goods satisfy a consumer's need and once the need is satisfied, additional goods have decreasing marginal utility for that consumer. The labor theory of value still creeps in, however, because if I can produce something myself with much less effort than it takes for me to produce the goods I have to exchange for it, then no exchange occurs... I just make it myself.

I think the demand side of the economic equation is not irrelevant when looking at the overall dynamics of the economy, and it my be one reason why communist economies sometimes did a poor job of matching supply to demand. On the other hand, the communist/socialist economies have done a vastly better job of meeting basic human needs, given available resources. Hence, a poor country like Cuba can do a far better job of feeding, clothing, housing, and educating its citizens than the United States. For medical care, it is at least 20 times as efficient as the US ($251 per capita, vs $6000 for US for the same quality of care), and we've just demonstrated that this problem cannot be fixed by tweaking the capitalist economy. Were it not for "socialist" Medicare, the figures for the US would look much worse."

Wednesday, October 14, 2009 6:40 PM