6 ms·

The labor theory of value has some relevance in dealing with intrinsic goods. Your mother knitting you a scarf with her own hands for your birthday instead of

• Locke1689 12y ago
  Modern economic theory assumes all human beings are rational. Citation needed.
  • CWuestefeld 12y ago
    This doesn't deserve a downvote. While rationality is generally assumed, that's not universal. For example, Mises, in Human Action, explicitly discusses the problem, structuring his argument such that people must be considered black boxes that do what they do. Even any given person himself may not actually understand why he's doing something, or even what his actual preferences are.
    • stolio 12y ago
      Mises is also an Austrian which, as a school, is often at odds with mainstream economics.
    • meric 12y ago
      Modern mainstream economic theory
• tbrake 12y ago
  Yeah but what use is a model where you assume irrational actors? I'm not a huge fan of it but I understand the concessions that have to be made.
  • zem 12y ago
    on the contrary, what use is a model where you assume perfectly rational actors? it will clearly bear no relation to reality! actually, i object to the term "irrational", it's only irrational if you assign zero value to the "feel good" incentives driven by basic human psychology. one interesting thought experiment, for instance, is that most people would neither pay someone else to do their housework, or do someone else's equivalent housework for the same amount of money. from a "purely rational" economic standpoint, that makes no sense - either you think the money is worth less than the cost of doing the housework, in which case you would pay someone to do yours, or it is worth more, in which case you would do yours and then take the money to do someone else's as well. but add in the psychological difference between doing your own work and doing someone else's, and the whole thing is perfectly rational in the understood, if not the technical economic sense of the word.
  • cmyr 12y ago
    what's the use of assuming rational actors if it means your model is fundamentally flawed? Take the assumption that labour will migrate rationally to suit a changing job market. I.E. if your state doesn't have any jobs, but there are lots of jobs across the country, you'll go there. When I was last studying economics, this was treated as a rule. In what I've seen of the world, it's completely ungrounded. For certain people, facing certain classes of hardships, this might hold true, but it doesn't even begin to account for things like family or for a sense of home and/or community, or for being in love, or for being comfortable, or scared of change, or any of the other massive number of "irrational" things that influence people's behaviour. Any model that just ignores these fundamental things isn't just useless, it actually leads to conclusions and policies that do not relate to the reality of peoples' lives. This is a really really big problem.
  • dragonwriter 12y ago
    > Yeah but what use is a model where you assume irrational actors? For one thing, its likely to be more useful in modeling a system where actors are, in fact, not rational. Like, for instance, the world we live in. I mean, sure, it gets more complex, just like mechanics does when you can't assume everything is frictionless. But a simpler model that doesn't reflect reality has limited utility.
• eastbayjake 12y ago
  But that's not really a labor theory of value, it's just acknowledgement that subjective value varies from person to person, and we can both agree that's irrational. This student protester thinks your mother's sauce should actually be valued more than Ragu on the store shelf. And while you might value your mother's sauce more highly, few other people would share that same valuation. Her labor has no impact on its objective value -- the averaging together of all the subjective valuations of people who want to buy sauce.
  • dllthomas 12y ago
    "subjective value varies from person to person, and we can both agree that's irrational." I dispute that it's irrational, on two counts: First, rationality is a question of how you pursue your terminal goals; it can't tell you what terminal goals to have. Second, perfectly rational agents with identical utility functions might disagree on the amount they're willing to pay for a thing if their circumstances differ. I think the above example is an example of both differing goals and circumstances.
  • dragonwriter 12y ago
    > it's just acknowledgement that subjective value varies from person to person, and we can both agree that's irrational. Under what definition of rationality? I mean, the subjectivity of utility is part of the foundation of the rational actor model (and its one of the few parts that isn't a simplification, at best, or contradiction of reality, at worst.)
• Crito 12y ago
  This year, in lieu of a gift, my parents gave me a giftcard to an online retailer. The system used by that company to create/distribute/sell/accept giftcards likely took many man-years to implement. I doubt anybody would claim that this gift has more value that a hand-made sweater that might have taken a few dozen hours to knit. The value of such hand-made gifts is not coming from the time spend preparing them.
  • meric 12y ago
    Now imagine, your father was the lead architect of the gift card system he worked on for five years, and he gave you the very first issued gift card as a gift instead. Completely different again. What the students are protesting is how mainstream economics aren't capable of even noticing this value, and what I'm trying to say is they have a point. For certain cases, labor has value for its own sake.
    • Crito 12y ago
      > "Now imagine, your father was the lead architect of the gift card system he worked on for five years, and he gave you the very first issued gift card as a gift instead" Because this (supposedly) time-originating value is present when it was my father that put it in, but completely absent when it wasn't, it is incorrect to ascribe this value to time. Mainstream economics isn't missing anything, these students are just mistaken. Coincidentally, I also received a book this year which was written by my grandfather in the 60s. Folded up inside of it was a letter to him, from Thomas Watson Jr (who was the president of IBM at the time) congratulating him for his contributions to the field and having the book published. In one of the first sections of the book, my grandfather lists various people that helped him write the book and in doing so, reveals that the book was written over the course of several years. This gift is meaningful to me, but not because of the time my grandfather spent on it. If it were meaningful because of the amount of time spent on it, then it would be meaningful to anybody. Obviously that is not the case. In your giftcard situation where the first giftcard is gifted to the child of one of the lead architects, would the gift be less valuable if it wasn't the very first card issued? Presumably you specified that it was the very first card issued for a reason, but any value that first card has which subsequent cards do not is obviously not attributable to the time needed to create that system. Whether you have the first card, or the 5,000,001st card, the same amount of time was spent producing that system. Value added by exclusivity (having the first of something off a production line for example) is well accounted for in modern economics.
• dragonwriter 12y ago
  > Modern economic theory assumes all human beings are rational. No, it doesn't. Its true that most of the stuff that's taught in introductory undergraduate economics classes does, but outside of that there is quite a lot of work -- even within the broad segment of the economics community that still views the rational actor model as a useful baseline -- exploring how actual behavior in real situations differs from the expectations derived from the rational actor model.