Basically it is nonsense.
Is this statement true?
We value shoe shiners because we value shiny shoes. We don't value shiny shoes because we value shoe shiners.
The fact that somebody spends a lot of time on something does not give it value. Society as a whole, through the individual choices made on the market, decides what has value and what does not. The price of something is not identical to its value (or is only rarely and, as it were, by accident), but value limits the fluctuations of price.
To sum this up, Marx claims that "price" fluctuates around equilibirium based around labor. The problem here is that he ignores time, and how goods and labor are affected by it. It's not only labor that factors into the costs of items (that determine this alleged equilibrium), but time preference.
This is on of Bohm-Bawerk's criticisms. Imagine that it takes an average of five years for a man to produce a steam engine from scratch. That is, mine the ore, construct a forge, smelt the steel, etc. All the labor contributed to turn raw nature into a steam engine, from top-to-bottom. If the man labors for five years and comes up with a steam engine, he and only he is entitled to the revenue from its sale. There's no boss, no capital to be paid for, etc.
Now lets say instead that someone comes up to him and says "Hey, I know you're building this steam engine, and I'd like to buy it from you when you're done, how about I pay you in one-year increments, and I get a discount?" That way, the laborer doesn't have to wait five years to get any return on his work, and the "capitalist" (in this case) gets a cheaper steam engine down the line, at the expense of enjoying his own money in the interm. Lets say then, that after a year, the laborer, for whatever reason, decides to stop building the engine after the first year, and transfers whatever materials he has generated to the capitalist in exchange for the first year's pay.
Now, what is the laborer transferring to the capitalist, and what "should" he be paid. With a pure labor theory of value, he should be compensated for 1/5 of a steam engine. However, that's not what the laborer is transferring to the capitalist. He's not giving him "1/5th of a steam engine", ready for sale at market. He's giving him 1/5 of a steam engine that will be ready for sale in four years. This is exactly why you can't use current sale prices to calculate how much a worker "should" be paid for their time. It really must come down to individuals negotiating.
Actually, Marx allows for the fact that things appreciate and depreciate in value over time. If new technologies are developed within the 5-year period that make manufacturing a steam engine cheaper and/or quicker, the 1/5 of a steam engine will only be worth 1/5th of a steam engine's current value (at the time when it is finished), regardless of the amount of labor it took to make it. So there isn't really a difference if the laborer sells after a year or keeps working--in either case there is the danger that the value of steam engines will drop and the laborer will not be compensated adequately for his first year's labor (or, if he sells to the "capitalist," the latter is just assuming the same risk).
bzfgt:In order to have value, an item must be "valued" by someone, in other words someone must be willing to by it. Again, there are two senses of the word 'value' here--if nobody will buy something, it has no value.
That is literally the exact opposite of what you said earlier. You said what you're willing to pay for something "has nothing to do with how much you 'value' the item" In other words, it doesn't matter weather you will buy it or not...it's value is "(partially) determined by the cost of producing each item."
I always wondered how people could rationalize something so nonsensical. Now I know. Doublethink.
The problem:
No one only old school Communists view the labor theory of value as anything that can be useful in the sense of economic calculation, and they're incredibly wrong. Most modern proponents view it as a sociological or ethical theory rather than a concrete tool for economic predicition. If you're trying to make economic predictions with LTV, you're going to be quite lost.
What I said was that the reason a car costs 1,000 times more than a pair of shoes has nothing to do with how much I subjectively "value" it, in other words if I could make and sell a car for 30 dollars and still make money I would do so and undercut the competition. But somebody must find a car important enough to pay 30,000 dollars for it, there are plenty of things I could make that I'd have to sell for 100,000 dollars in order to make money but nobody would buy them, so nobody makes them. The fact that a car costs 30,000 is not determined by how much I, as a buyer, subjectively "value" a car, but by the fact that I couldn't sell it for drastically less and still make money. If the subjective "value" of a car to the average buyer was 30 cents, cars wouldn't sell for 30 cents, they wouldn't sell at all. That is the distinction I am making.
Wheylous's post disappeared, as did my response...
bzfgt:The fact that a car costs 30,000 is not determined by how much I, as a buyer, subjectively "value" a car, but by the fact that I couldn't sell it for drastically less and still make money.
But if no one wanted to spend 30k on it, you wouldn't be able to sell it either. Demand is certainly a determining factor in the price of an item. Again, it doesn't matter if it cost you 100k to produce the car. What matters is how many of them there are, and how many of them are wanted (and how badly). That's it. Supply and demand.
Just because you spent a certain amount making the item and have a desire to make a certain amount of profit, so you set your sale price at a certain amount...that means absolutely nothing to the market value of the item. Just because you set a price doesn't mean anyone will pay it. Supply and demand determine price...and prices are the objective result of the subjective valuations of individuals in the market. Input labor has absolutely nothing to do with it.
See here.
The sooner you let go of "the horizon is flat, and the sun disappears as if going around a corner...therefore the Earth is flat", the better off you'll be.
Humor me for a moment, and forget about new technologies decreasing the labor time, that's a dodge to my point. My point is that 1/5 of a finished widget that is useable today is not the same product as a 1/5 completed widget useable 4 years from now, even though they both have use-value, and the same amount of labor-time invested.
"But if no one wanted to spend 30k on it, you wouldn't be able to sell it either."
Yes, I've said that myself several times above. And Marx nowhere denies that demand is a determining factor in price. The point of the LTV is that supply and demand cause price to fluctuate around value. But if supply and demand are in equilibrium, they cease to explain anything about price. The point is that a car cannot sell for 3 dollars, no matter how much the market is glutted with them, because that would drive car makers out of business. Supply and demand are not sufficient to explain the difference in price between different types of products, which would otherwise all sell for the same price given the same level of demand.
"Just because you set a price doesn't mean anyone will pay it."
Of course it doesn't. Nobody has suggested otherwise. There has to be a demand for something in order for it to have value at all. But what that value is is not adequately explained by demand.
Logistic,
Actually, I just brought up technological innovation as a possible reason why the widget depreciated. The simple answer is that anyone buying a widget in 2011 buys it at 2011 value, regardless of what the value of that same widget will be by the time it gets used. That's just a risk of investment. Actual invested labor time does not determine value, average socially necessary labor time does, so the value of an unsold or unused widget changes when the conditions for producing widgets changes.
bzfgt:But if supply and demand are in equilibrium, they cease to explain anything about price.
Wrong. You just don't understand how they do explain it, and you've adopted an "well the Earth must be flat" solution to fill that void.
The point is that a car cannot sell for 3 dollars, no matter how much the market is glutted with them, because that would drive car makers out of business.
I guarantee you I could find you a car that was "sold" for less than 3 dollars. I guess that debunks your theory right there?
Supply and demand are not sufficient to explain the difference in price between different types of products, which would otherwise all sell for the same price given the same level of demand.
False. Demand is not the only factor in determining price. Supply is just as important. Did you forget the part where I said "supply and demand"?
False. This is where it is made blatently obvious you have no understanding of what you're saying. If the physical resources existed to make such a glut of cars in the first place, they would sell at that price. You readily conceded earlier that prices go down as production efficiency increases. Cars sell at the price they do because that is the point at which the supply and demand curves intersect. It has nothing to do with how the car was made.
If there were a planet where cars were sold for 3 dollars, and someone took one of those cars and transported it to Earth...They would still have a $3 car. The car cost less than $3 dollars to make, it wouldn't sell for any more than that on its home planet. But it cost a trillion dollars to be transported to Earth. I guarantee that car (when sold as just a car, not an alien product) would sell for just as much as all the other cars like it. The fact that it cost less than $3 to make makes no difference. And the fact that a trillion dollars went into it's transportation cost make no difference. The price is determined by supply and demand.
"Just because you set a price doesn't mean anyone will pay it." Of course it doesn't. Nobody has suggested otherwise.
Of course it doesn't. Nobody has suggested otherwise.
Um, yes. You did. In the very post I quoted before: "The fact that a car costs 30,000 is not determined by how much I, as a buyer, subjectively "value" a car, but by the fact that I couldn't sell it for drastically less and still make money."
You're suggesting that the only reason people pay 30k is because that's the price you set. Which is completely false. I guarantee the buyer could not care less how much you need to sell the car for to turn a profit. The only thing that determines the buyer's price (i.e. how much he will spend) is the value he places on the utility of the car.
what that value is is not adequately explained by demand.
Right. It is explained by supply and demand, like I said. Are you just not reading the posts? Did you miss the first day of economics 101?
Your answer is absurd. There is no scarcity of cars, and thus that has nothing to do with the price. There is no shortage of materials to make cars. In 2008 there were 255,917,664 registered passenger vehicles in the US, according to Wikipedia. If I want to buy a car, or a television set, or a computer, I can choose between hundreds of options. Demand does not in any way outstrip supply in these cases, and yet these are all relatively (and differently priced) expensive items. If they were sold at less than the cost of producing them, their manufacturers would go out of business fairly quickly. The only way an item can be sold for less than cost is if it's somehow subsidized.
Your contention that you can find a car that sold for three dollars is completely besides the point. Of course I don't contend that there cannot be an individual case where this has happened. Value is not the same as individual prices, which I have already explained above. I have also already explained the necessity of somebody finding an item personally valuable in order for it to sell numerous times above. I also explained above that just because I set a price doesn't mean anyone will pay it. This is getting tiresome. You are quick with sarcastic comments about my intelligence and comprehension but I have to explain things over and over. Try to understand what you're arguing against before replying next time. Usually when someone is insulting in a debate it's because they lack the skills to argue cleanly.
bzfgt:Your answer is absurd. There is no scarcity of cars, and thus that has nothing to do with the price. There is no shortage of materials to make cars. In 2008 there were 255,917,664 registered passenger vehicles in the US, according to Wikipedia.
Sigh. I almost feel bad that you actually took the time to look up the number of registered vehicles as a way to try and "prove" resources aren't scarce.
Anyone else care to deal with this?
There is no scarcity of air on earth, that's why it is free. I want a rare Ferrari but dont have the extra $1.2 million for it.
Value is subjective. One man's noise is another's music.
We are the soldiers for righteousnessAnd we are not sent here by the politicians you drink with - L. Dube, rip
bbnet: There is no scarcity of air on earth, that's why it is free. I want a rare Ferrari but dont have the extra $1.2 million for it. Value is subjective. One man's noise is another's music.
But, but, Marx's LTV calculates that, when supply and demand are at an equilibrium, an average person would value an average rare Ferrari EXACTLY at the value of the socially neccesary labor performed by an average Ferrari worker that made it. Marx clarifies matters greatly. LTV calculates a parameter ("value") by introducing four to six new parameters that are infinitely less calculable than it. Q.E.D. /sarcasm