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But it has no economic significance. People thought the earth was flat a long time ago, and that theory has the same amount of scientific basis. Seriously, ec

by lzw 16y ago

But it has no economic significance. People thought the earth was flat a long time ago, and that theory has the same amount of scientific basis. Seriously, economics is a science and it is easy to demonstrate that a unit of labor time, like and hour worked, does not create the same amount of value. Specifically, ignoring the power of capital, the labor theory of value would say a carpenter can create as many cars in an hour as a laborer working with a factory of robots. The reality is, the capital to build the factory changes the value of the labor, thus disproving the labor theory of value.

jfager 16y ago
the labor theory of value would say a carpenter can create as many cars in an hour as a laborer working with a factory of robots No, it wouldn't, at all, not even kind of. Depending on the version you took, it would either say that the "real" price of the car coming off the factory floor would be set by the value of all the labor put into producing it (including the cost of the labor of building the factory itself, all the way on back), or that the price would simply be the value of the labor it would save the purchaser.
philwelch 16y ago
The labor theory of value has always struck me as self-refuting--if a given good is only worth the labor used to produce it, why not conserve the labor? Profit happens if you produce something worth more than the labor you put into it. This is true whether you're producing profit for yourself (a sandwich is worth more to you than conserving the effort it would take to make the sandwich) or whether you're selling your labor to someone else, who in turn uses that labor to produce profit. (As you point out, this might produce more wealth, since manufacturing labor is more productive in a robotic factory than in a back yard.) It may be more economically sound for socialists to make a moral argument that profit morally belongs to laborers more than it belongs to the capitalists (in the sense of "people who provide capital"). The economic argument seems to fall down.
- Gormo 16y ago
  The same reasoning refutes the moral argument as well. If the new wealth created is the difference between the value of the inputs and the value of the outputs, then the key factors that determine whether or not wealth is created are the definition of the output, the definition of process by which the inputs are transformed into outputs, and the allocation of resources (including the assumption of risk) necessary to initiate that process. These functions are undertaken by "capitalists" rather than "laborers". Labor is an essential input, but in your model, it is not at all responsible for the creation of wealth.

by lzw 16y ago

jfager 16y ago

the labor theory of value would say a carpenter can create as many cars in an hour as a laborer working with a factory of robots No, it wouldn't, at all, not even kind of. Depending on the version you took, it would either say that the "real" price of the car coming off the factory floor would be set by the value of all the labor put into producing it (including the cost of the labor of building the factory itself, all the way on back), or that the price would simply be the value of the labor it would save the purchaser.

philwelch 16y ago

The labor theory of value has always struck me as self-refuting--if a given good is only worth the labor used to produce it, why not conserve the labor? Profit happens if you produce something worth more than the labor you put into it. This is true whether you're producing profit for yourself (a sandwich is worth more to you than conserving the effort it would take to make the sandwich) or whether you're selling your labor to someone else, who in turn uses that labor to produce profit. (As you point out, this might produce more wealth, since manufacturing labor is more productive in a robotic factory than in a back yard.) It may be more economically sound for socialists to make a moral argument that profit morally belongs to laborers more than it belongs to the capitalists (in the sense of "people who provide capital"). The economic argument seems to fall down.

Gormo 16y ago
The same reasoning refutes the moral argument as well. If the new wealth created is the difference between the value of the inputs and the value of the outputs, then the key factors that determine whether or not wealth is created are the definition of the output, the definition of process by which the inputs are transformed into outputs, and the allocation of resources (including the assumption of risk) necessary to initiate that process. These functions are undertaken by "capitalists" rather than "laborers". Labor is an essential input, but in your model, it is not at all responsible for the creation of wealth.