4 ms·

The reason you did not hear about it in economics classes is because money being human time is an old and rather out modeded understanding of money.

solotronics 7y ago
I'm not sure we can say it is out moded yet, the recent paradigm of fiat currency backed by nothing has only existed since 1971 when the US got off the gold standard. For all of human history before that time money was tied to something solid and therefore a direct measure of a persons time/production/deferred future value.
benj111 7y ago
Is this a disagreement over semantics? How do you add value to something? Either through human labour, or raw material inputs, and I would guess many raw materials gain their value entirely from the human labour put in to extracting them. If you buy an iphone, you are paying someone to mine the raw material, refine it, make it in to chips, make it into a phone, box it, ship it, then paying some marketers to tell you why you need it. Yes the tiny amounts of gold, and rare earth elements have value, 99% of an iPhones value comes from people's time.
- Danieru 7y ago
  The term for this understanding of money is "Labour Theory of Money": https://en.wikipedia.org/wiki/Labor_theory_of_value https://en.wikipedia.org/wiki/Labor_theory_of_value Of course I agree with the intuitive appeal in the understanding, hence why I called it outmoded. There are better understandings which explain more of the nature of money. Namely the Labour Theory of Money ignores the vast importance of assets (capital). You'll notice the similarities to our system of economy "Capitalism". This makes sense when you consider it was Karl Marc, proponent of Labour Theory of Value, who coined the term "Capitalism". Thus the Labour Theory of Value breaks down when introducing the idea that things (capital) can also contribute value. We buy tractors for our farms and in fact look for ways to reduce the labour costs of making this! Now in 2019 it is easy to imagine a robotic machine which mines the resources it requires and produces a widget. Yet none of us would be surprised if the robot demanded more than 0$ despite the lack of human time invested in each widget.
  - benj111 7y ago
    I didn't ignore capital, it just circles back round to "Money is deferred human labor". If I work for you for an hour and get paid, I can either use that to pay for something else, or save it. If I save it, that's capital. I can use that capital to pay someone to build a machine, that machine multiplies my productivity, lowering costs for you, whilst I still get higher pay. You seem to implicitly accept this "We buy tractors for our farms and in fact look for ways to reduce the labour costs of making this!" Now, as a model, it becomes less useful as you become more and more divorced from that original labour, so I'm not surprised that economists and central banks are moving away from it, but in the context of whether to buy an Atari emulator, or build one, it's more than adequate.
- NortySpock 7y ago
  A machine running and converting raw material into finished product (say, injection-molded plastic, or a part-picker-placer organizing or soldering on a PCB) rapidly turns less-valuable-stuff into more-valuable-stuff. Value added. Yes, there is some human labor in assembling and maintaining the machine, but I consider it largely divorced from human labor. A computer server turns data into more-useful data, either by aggregating it, storing it in a convenient way, or routing it. Once set up, the computer can run for years without human intervention. Very little human labor there after initial setup, but value was added.
  - benj111 7y ago
    To return to your computer server example though, these things require so little labour add so little value[1], that they're very nearly / actually are free. A google search is free, posting a message to HN is free. I agree that as you add layers of machines, you get more divorced from the original labour, I was going to say that labour provides the lower bound, maybe my prior paragraph shows that isn't true, of course there are costs to those 2 activities, they just aren't borne directly by us. As I put in a sibling comment, it's a model, not suited to everything, but suited to evaluating buying v building an Atari emulator. [1] I suppose you could argue that computers add lots of value, but competition has reduced the price down to approximately the labour cost. I'm probably not using strictly economics terms here.

solotronics 7y ago

I'm not sure we can say it is out moded yet, the recent paradigm of fiat currency backed by nothing has only existed since 1971 when the US got off the gold standard. For all of human history before that time money was tied to something solid and therefore a direct measure of a persons time/production/deferred future value.

benj111 7y ago

Is this a disagreement over semantics? How do you add value to something? Either through human labour, or raw material inputs, and I would guess many raw materials gain their value entirely from the human labour put in to extracting them. If you buy an iphone, you are paying someone to mine the raw material, refine it, make it in to chips, make it into a phone, box it, ship it, then paying some marketers to tell you why you need it. Yes the tiny amounts of gold, and rare earth elements have value, 99% of an iPhones value comes from people's time.

Danieru 7y ago
The term for this understanding of money is "Labour Theory of Money": https://en.wikipedia.org/wiki/Labor_theory_of_value https://en.wikipedia.org/wiki/Labor_theory_of_value Of course I agree with the intuitive appeal in the understanding, hence why I called it outmoded. There are better understandings which explain more of the nature of money. Namely the Labour Theory of Money ignores the vast importance of assets (capital). You'll notice the similarities to our system of economy "Capitalism". This makes sense when you consider it was Karl Marc, proponent of Labour Theory of Value, who coined the term "Capitalism". Thus the Labour Theory of Value breaks down when introducing the idea that things (capital) can also contribute value. We buy tractors for our farms and in fact look for ways to reduce the labour costs of making this! Now in 2019 it is easy to imagine a robotic machine which mines the resources it requires and produces a widget. Yet none of us would be surprised if the robot demanded more than 0$ despite the lack of human time invested in each widget.
- benj111 7y ago
  I didn't ignore capital, it just circles back round to "Money is deferred human labor". If I work for you for an hour and get paid, I can either use that to pay for something else, or save it. If I save it, that's capital. I can use that capital to pay someone to build a machine, that machine multiplies my productivity, lowering costs for you, whilst I still get higher pay. You seem to implicitly accept this "We buy tractors for our farms and in fact look for ways to reduce the labour costs of making this!" Now, as a model, it becomes less useful as you become more and more divorced from that original labour, so I'm not surprised that economists and central banks are moving away from it, but in the context of whether to buy an Atari emulator, or build one, it's more than adequate.
NortySpock 7y ago
A machine running and converting raw material into finished product (say, injection-molded plastic, or a part-picker-placer organizing or soldering on a PCB) rapidly turns less-valuable-stuff into more-valuable-stuff. Value added. Yes, there is some human labor in assembling and maintaining the machine, but I consider it largely divorced from human labor. A computer server turns data into more-useful data, either by aggregating it, storing it in a convenient way, or routing it. Once set up, the computer can run for years without human intervention. Very little human labor there after initial setup, but value was added.
- benj111 7y ago
  To return to your computer server example though, these things require so little labour add so little value[1], that they're very nearly / actually are free. A google search is free, posting a message to HN is free. I agree that as you add layers of machines, you get more divorced from the original labour, I was going to say that labour provides the lower bound, maybe my prior paragraph shows that isn't true, of course there are costs to those 2 activities, they just aren't borne directly by us. As I put in a sibling comment, it's a model, not suited to everything, but suited to evaluating buying v building an Atari emulator. [1] I suppose you could argue that computers add lots of value, but competition has reduced the price down to approximately the labour cost. I'm probably not using strictly economics terms here.