AN OPEN LETTER TO JAMIE DIMON AND THE MEMBERS OF THE BUSINESS ROUNDTABLE CONCERNING THEIR REPORTED DECISION TO ABANDON THE PRIMACY OF SHAREHOLDERS’ INTERESTS

Dear Mr. Dimon et al.:

You, Gentlemen, are being portrayed in the press as virtual thieves, acting on the presumption that the property of the corporations you lead is your personal property and that you are at liberty to decide the purposes for which that property is used.

See for example, Bloomberg News of Aug. 19, 2019, which reported (at https://bloom.bg/2zmJF0E):

“Jamie Dimon and other leaders at some of the world’s largest companies said they plan to abandon the long-held view that shareholders’ interests should come first amid growing public discontent over income inequality and the burgeoning cost of health care and higher education.

“The purpose of a corporation is to serve all of its constituents, including employees, customers, investors and society at large, the Business Roundtable said Monday in a statement. Dimon, the chief executive officer of JPMorgan Chase & Co., heads the group.” (See https://bloom.bg/2zmJF0E.)

As I stated elsewhere (http://bit.ly/2KTW2aJ), “It’s difficult to believe that so many CEOs know so little about economics that they don’t know that in a free market producing for the profit of their shareholders in and of itself implies producing for the benefit of everyone.”

What needs to be stressed here, however, is not the apparent ignorance of the Business Roundtable as it relates to economics but to MORALITY.

As a shareholder myself, both directly and through a variable annuity, I totally condemn the behavior reported on the part of you and your colleagues. I, and my fellow shareholders, are the owners of the property that we have turned over to you to manage for our benefit.

You are employed by us to serve our financial self-interests, not your personal pleasures, irrespective of the nature of those pleasures, whether loose women or such things as the furtherance of your concept of “social justice.” 

For the sake of preserving your reputation as honest businessmen, rather than financial usurpers and outright thieves, I urge you all immediately to reaffirm your commitment to  the fact that your job is to improve OUR financial well-being and nothing else.

And to pledge that not a dime of corporate funds will be spent in the pursuit of any personal value you may have that is not at the same time a clear means subservient to the enhancement of our financial well-being.

We very much desire that you directly share our financial self-interests by becoming shareowners yourselves, and we strive to make that possible by such things as providing you with generous stock options. In other words, we want you to be rich and welcome your becoming rich.

What we do not welcome and will not tolerate is your seizing our property to serve purposes other than the one you are employed to achieve, namely, our greater financial well-being.

Yours truly,

George Reisman, Ph.D.

Pepperdine University Professor Emeritus of Economics.
Author: Capitalism: A Treatise on Economics and other titles (https://amzn.to/2NLvVVZ).
Website: www.capitalism.net.
Blog: http://georgereismansblog.blogspot.com.
On Twitter @GGReisman

SHAREHOLDERS NOT “STAKEHOLDERS”

In a world in which there are men and women who do not know to which sex they belong, it should not be surprising that there are corporate CEOs who do not know for whom they work.

Just last week (08/19/19), the CEOs of 181 major corporations agreed that they no longer work simply for their stockholders but also for their “stakeholders,” i.e., for everyone affected by their companies. (See  http://bit.ly/2ZaaSD6.)

It’s difficult to believe that so many CEOs know so little about economics that they don’t know that in a free market producing for the profit of their stockholders in and of itself implies producing for the benefit of everyone.

To have customers, you have to produce for their benefit. In fact, you have to give them more benefit for every dollar they spend on your products than they can find anywhere else for those dollars. If you don’t, then they spend them somewhere else.

To have workers, you have to give them more benefit than they can find working anywhere else. If you don’t, they leave you.

Prosperous businesses employing large numbers of workers at competitive wages is the foundation of prosperous towns and cities.

Economic competition in quest of profits operates to the benefit of everyone. It’s actually the mechanism for organizing the process of voluntary social cooperation that is at the heart of the economic system.

(For a full explanation of the benefit of competition, allowing for the fact that people can lose their jobs because of it, see chap. 9 of my book Capitalism: A Treatise on Economics.)

What is so significant about the statement of the CEOs is that it shows to what extent America’s intellectual heritage of the right to the pursuit of happiness (which includes the pursuit of profit) has rotted away and been replaced by a mentality ripe for socialism.

We must keep in mind that as the arbitrary power of the state has grown, businessmen have been put in a position more and more resembling that of hostages held by terrorists.

They are at the point where they attempt to anticipate the wishes of their masters and seek to gratify their masters without being ordered. This also helps to explain their agreement to the document concerning “stakeholders.”

I think it also helps to explain the preference of several major auto companies for the more stringent mileage regulations of California over those proposed by the Trump Administration.

They expect that California’s regulations will ultimately prevail and are afraid to be remembered as “obstructionists” when that time comes.

Finally, we are living in a reign of fear not only with respect to the government itself but also with respect to any private group that can create enough of a social commotion as to threaten possible government action against one, irrespective of the matter.

In this category falls the destruction of careers based on mere accusations, often anonymous and sometimes dating from the last century. The victims of such accusations are regarded as “hot potatoes,” that cannot be touched without danger of getting burned oneself.

It will take a very long time to change this environment. To start changing it, it’s necessary to read and study the works of Mises, Rand, and Reisman. People need to understand how and why socialism is evil and capitalism is good. That essential is what these works demonstrate.

THE WEALTH OF THE WEALTHY: A RESONSE TO BERNIE SANDERS' RETWEET AT http://bit.ly/31VsjnQ

The Walton family (the owners of Walmart) is currently worth about $190 billion. The Koch Brothers and Mars families (candy bars) are both worth over $100 billion. Such facts are intolerable to socialists, communists, “progressives,” and, sad to say, today’s Democrats.

Bernie [Senator Bernie Sanders] wants a tax of 77% on estates over $1 billion. He relishes the prospect of the Waltons having to pay $147 billion in estate taxes.

Bernie and his followers simply don’t know that the wealth of capitalists is not in their refrigerators, pantries, and wardrobe closets, and not even in their automobiles or homes. IT’S IN THE MEANS OF PRODUCTION.

The means of production are the foundation of the supply of goods that everyone buys and of the demand for the labor that wage earners sell. The greater this wealth, the more abundant and lower priced is the supply of goods and the higher is the demand for labor and thus wages.

For example, the Walmart family’s fortune is invested in 11,000+ stores, each one of which is full of vast amounts of merchandise and requires a large building and plot of land. $191 billion are easily accounted for by an average investment of less than $17.4 million per store.

In addition, these stores employ a total of 2.1 million workers, more than two-thirds of them in the US. If their average wage, including benefits, was just $400 per week, this would imply a weekly payroll of $840 million and an annual payroll of $42 billion.

Walmart’s main contribution to wages, however, is not through its payrolls, but through its low prices. Its low prices increase the buying power of wages throughout the economic system.

It thus raises the real wages of the tens of millions of workers who are its customers or who are the customers of other retailers who charge lower prices because of the competition that Walmart gives them.

Bernie and his gang want to take away the equivalent of more than three-fourths of these stores and correspondingly reduce Walmart’s contribution to the supply of goods and demand for labor. Thus, they want to largely undo the lower prices and higher real wages that Walmart is responsible for.

To whatever extent the wages that Walmart pays its workers may be low, those wages will be lower still if Bernie and his gang can seize three-fourths of them to spend on their cockamamie schemes. Walmart (every business) makes wages higher than they would have been without its payrolls.

Bernie’s spokesman refers to Walmart’s workers’ wages being so low that the government has to subsidize their housing, food, and healthcare. (See http://bit.ly/31VsjnQ.) In reality, of course, the government doesn’t have to do any of these things.

The fact that it does so and largely pays for it with funds that otherwise would have been spent on means of production and wage payments, thereby keeping prices up and wages down, is exactly the sort of thing that keeps workers poor.

Workers are kept poor because ignorant politicians like Bernie are constantly preventing them from being better off. They enact laws, such as minimum wage and pro-union legislation, that prevent employers from employing workers they otherwise would have employed.

In particular, these laws prevent less capable workers from successfully competing with more capable workers. For example, a half-as-productive worker can outcompete an average worker if his wage is less than half, but not if it’s compelled to be more than half, let alone equal.

Compelling employers to provide benefits or improvements in working conditions that don’t pay for themselves reduces workers’ take-home pay. Instead of being paid a wage equal to the employer’s cost of employing them, they’re paid a wage that is less by these extra costs.

Bernie and his gang believe that because the Walton family is rich, Walmart can afford to do whatever Bernie et al. would like it to do, such as raise wages to $15 per hour.

Actually, apart from a relatively small cash reserve, Walmart has already spent all of its money and doesn’t have the means of substantially increasing its expenditures until additional sales revenues come in. It’s spent its money in building and stocking its stores.

Walmart could borrow. The Walton family could sell some of its shares and make a gift of the proceeds to Walmart. The effect of that would be to deprive other firms of the use of the funds involved, i.e., to reduce their demand for means of production and labor.

Bernie wants us to fear billionaires. Actually, the billionaires work for us—for the great mass of average people. They want to acquire money from us. Unlike the government, they cannot simply come and seize our money.

We have to want to give it to them, because we value what we receive more than the money. They have to make their product such that we will value it more than the money they ask. One of the best examples is a delicious Snickers or Milky Way bar for a mere dollar.

Any force in connection with such a voluntary transaction would be force to prevent it, not to compel it. Bernie and his gang know only the gun and the club. They want to destroy the free market and replace it with the brute force of socialism.

For an introduction to what’s wrong with socialism and right with capitalism, read my essay whose title appears directly below. It’s available for 99¢ at https://amzn.to/2N44uTu.

For an in-depth, comprehensive explanation of the workings of capitalism and critique of Marxism/Socialism, read my Capitalism: A Treatise on Economics.

It’s available at http://amzn.to/2PM19ut in both Kindle and hardcover formats and at www.capitalism.net in both hardcover and as a free non-printable, non-copyable pdf replica capable of download.

ADDENDUM: Bernie’s spokesman kept stressing how rapidly the Walton’s et al. gained financially. The most important part of these gains was the result of the saving and reinvestment of profits made on the basis of lower costs and better products, and doing this on a growing base.

But a substantial part was also the result of a flood of new and additional money and credit manufactured by the Federal Reserve System and pouring into the stock market and driving up stock prices.

This process is a government racket. It causes both financial gains and higher prices. The financial gains are taxed. The after-tax gains are then insufficient to buy as much at the higher prices as the original capital could buy at the original prices.

This principle applies within the operations of business firms and is a major reason for the economic stagnation of the last two generations. Alongside large paper profits has been a reduced ability to buy capital goods and labor at prices that rise more than do after-tax funds.

Greenland Ice Melt

The enviro-socialist “climate emergency” crowd was busy earlier this month trying to launch the human equivalent of a cattle stampede by getting people to plunge into socialism to avoid bad weather.

There were headlines such as “Greenland is on track to lose most ice on record this year and has already shed 250 billion tons.” (https://wapo.st/2Z1ECgl)

It turns out that this amount of water is equal to slightly more than 60 cubic miles. (http://bit.ly/33tnVhf) The total volume of water in the world’s oceans is approximately 320 million cubic miles. (http://bit.ly/2N2yl1x)

If we divide the 60 cubic miles of water added by the ice melt in Greenland by the 320 million cubic miles of water already in the oceans, the result is 0.0000001875. This is the relative increase in the volume of water in the oceans.

The absolute increase is the relative increase times the pre-existing average depth of the oceans, which is approximately 12,100 feet (idem), or equivalently, in terms of inches, 145,200 inches. The results of these multiplications are .0023 feet and .027 inches. That’s 23 ten-thousandths of a foot and 27 one-thousandths of an inch.

To put these numbers in proper perspective, recall that a quarter of an inch is 250 one-thousandths of an inch. So what the fake media were trying to frighten us with is a rise in the sea level of little more than a tenth of a quarter of an inch (i.e., .027/.250).

And let us not forget that much or most of the 60 cubic miles of melted ice from Greenland will refreeze come Winter.

Today’s press and other media simply cannot be trusted. They themselves are ignorant and fully at home with taking advantage of the ignorance of their audiences. One of their favorite tricks is claiming that one “large” thing explains another, simply because both are “large.”

So, get ready for 250 billion tons of melting ice (wow, that’s large) to explain the Atlantic Ocean wiping out New York City and New Jersey. It never occurs to these numbskulls to check just how much water is actually involved and what difference it actually makes.

This kind of fake news has been going on for generations. It was especially prominent in the days of the Arab Oil Embargo, when the press claimed practically every day that the rise in the profits of the oil companies was responsible for the rise in the price of oil. (See pp. 231-234 of Capitalism, at www.capitalism.net.)

Despite the utter triviality of the Greenland ice melt, we’d better hurry up and sacrifice Industrial Civilization, according to the enviro-socialists, because centuries more of such increases may amount to something more significant. (Of course, if it does, we’ll be helpless to deal with it because we’ll have destroyed our industrial base if we listen to these enemies of the human race.)

I say, if global warming is coming, let it come. If it does come, it will come as an act of nature, because no individual human being or voluntary association of human beings is responsible for it.

At most, it’s the unintended by-product of the separate, independent actions of billions of human beings across a period of almost ten generations.

Something for which no actual acting human being is responsible is an act of nature.

We can cope with global warming. What we can’t cope with is global central planning, which seeks to manipulate the world’s climate by prohibiting the self-interested actions of billions of people—of everyone but a handful of alleged government experts, such as Al Gore and AOC.

Turning our world into one in which practically the entire human race is prohibited from acting for its self-interest, on the basis of everyone’s independent intelligence, is a formula for mass extinction. Al Gore and AOC are not a substitute for billions of independent human minds.

In fighting for the preservation of Industrial Civilization, our first demand should be NO GOVERNMENT CLIMATE MANIPULATION! Government officials are typically not smart enough to run their own lives very well. That’s why they’re working for the government in the first place.

They should not have the audacity to try to seize control of the planet and force billions of people to sacrifice their well-being in service to the fantasies and delusions of the enviro-socialists.

Environmentalism and socialism are a match made in hell. Socialism (government ownership/control of the means of production) to prevent global warming will certainly achieve its inevitable result of a massive decline in living standards.

But thanks to environmentalism, that will be considered success! Environmentalism sets a standard of “success” that socialism can meet. Poverty is the goal of environmentalism. Socialism is certainly the means of achieving that goal.

To Hell with environmentalism and socialism! Let us achieve a world of full, unhampered capitalism and resume the economic progress and rising living standards of the Industrial Revolution.

For more, see my essay “The Toxicity of Environmentalism,” available in Kindle format at http://amzn.to/1HZ4a0c for 99¢.

For still more, see Chapter 3 “Natural Resources and the Environment” in my Capitalism: A Treatise on Economics. This book is available both in Kindle and hardcopy formats at http://amzn.to/2PM19ut.

The book is also available as a free non-printable, non-copyable pdf download at www.capitalism.net.

My Blurb Review of the Carol Burnett Show

This show enables me to fall asleep with a smile on my face and laughter in my heart. Carol Burnett is not only one of the greatest comedians in the history of the world, but also, even if unrecognized for this, a truly great actress. In the same show, she can go from a skit in which she's an upper-class English woman contemplating an affair with Roddy McDowall to another skit in which she's "Eunice" (the main character in the world's most dysfunctional family), first as a virtual demon and then within minutes as "Eunice" projecting child-like innocence and joy. Her takeoffs on well-known movies were incredible, e.g., "Gone with the Wind," "Mildred Pierce," and "The African Queen," to name just a few.
Her supporting cast, especially Harvey Korman and Tim Conway, was also fantastic. This was a show of three comedic giants.
Nothing, before or since, surpasses it. Reruns of half-hour segments of the show currently appear on "MeTV."

Answers to a Pair of Marxists on Twitter

The irony of accusing socialists of wanting "free stuff" is that capitalism lives on free stuff: labor, nature, the work of social reproduction. Capital exists because something is unpaid: if capital ever paid a worker the whole value of their work, it would cease to exist—Ben Tarnoff @bentqarnoff https://twitter.com/bentarnoff/status/1156598698907971585?s=12

Labor is not free, except one’s own. To get other people’s labor, you have to pay them wages greater than the profits they could earn on their own and greater than the wages any other employer would pay them. Previously unowned land is free, which is how it should be. "Social reproduction" is the same as production. And the labor, capital goods, and land owned by others all have to be bought and paid for.

The original and primary form of labor income is PROFIT, not wages. Without capitalists, workers producing and selling commodities earn SALES REVENUES, not wages. Without capitalists, there are no wage payments or expenditures for capital goods. Hence, NO COSTS to deduct from sales.

Thus, in the absence of capitalists, 100% of sales revenue is profit. And because without capitalists, accumulated capital in money terms is zero, the rate of profit on capital is infinite.

Capitalists create wage payments and expenditure for capital goods, hence costs to deduct from sales revenues. They also accumulate capital on the balance sheets of their firms. Their activity thus reduces profit both as a percentage of sales and of capital and raises wages.

Capitalists are the primary producers. Wage earners are the capitalists’ HELPERS in producing the CAPITALISTS’ products. Just as we credit Columbus with the discovery of America, and not his crew members, we should credit Ford, Rockefeller, et al. with the products of their firms

It is they who supply the guiding, directing intelligence at the highest level, who set the goals and assemble the means to achieve them. Thus, it is they who are responsible for what is accomplished. The wage earners are fully paid for their help when they receive their wages.

For additional antivenom treatments for Marxism/Socialism go to https://amzn.to/2N44uTu and for 99¢ buy and read the title immediately below.

*****

The labor theory of value generates predictions about long-term trends in the evolution of capitalist economies.—Jack Angstreich @Angstreich2 https://twitter.com/angstreich2/status/1158918239054905344?s=12

Unfortunately for Marxists and fortunately for everyone else, the predictions are FALSE, such as the claims about a falling rate of profit and the progressive impoverishment of the masses.

The labor theory of value has almost zero explanatory value. For proof, see my tweet-thread turned blog post “What's Wrong with the Labor Theory Value…” at http://bit.ly/2GwqB3Q.

A quasi-legitimate application of it, which the Marxists would certainly reject, is that to the extent that the capitalists reduce the quantity of labor required to produce goods, they enable the same quantity of labor to produce more.

This increases the supply of products relative to the supply of labor and thus reduces prices relative to wages, thereby increasing the buying power of wages, i.e., real wages.

This, in turn, enables workers to afford to accept lower paying jobs that offer shorter hours and better conditions of the kind that don’t pay for themselves, and to keep their children home longer.

But don’t expect Marxists ever to acknowledge that capitalism raises real wages, shortens hours, improves working conditions, and abolishes child labor. Hell will freeze over first.

Meanwhile, here’s some more points concerning the inapplicability of the labor theory of value: futures prices, different grades of land and mines, countries with different degrees of economic development, the value of paper money, and land prices.

COMMODITY FUTURES PRICES

Anyone who takes the trouble to look at the prices of commodity futures can observe that a new crop of any agricultural commodity sells at varying prices depending on when delivery is to be made. Thus, e.g., there are different prices for Sept., Dec. and succeeding months’ wheat or cotton.

This is despite the fact that coming from one and the same harvest, the quantity of labor required to produce wheat or cotton for delivery in the various future months is the same for all of the months.

(Granted, there are extra storage costs for later delivery, but the differences in price substantially exceed the extra storage costs.)

Like that of aged whiskey, this is a case of equal quantities of labor used to produce products but the products’ values permanently differing from one another based on the role of time and the rate of profit in determining value.

LAND AND MINES OF DIFFERENT QUALITY

The belief that goods are valuable in proportion to the labor expended to produce them implies the obvious absurdity that goods will be the more valuable the more wasteful and inefficient is their production.

The Marxists believe they have an answer to this objection. No, no, they say. It’s not just any labor expended in their production that determines the value of goods. It’s only the “SOCIALLY NECESSARY” labor.

Unfortunately for the Marxists, there can be more than one “socially necessary” labor time required to produce one and the same good—as many as there are different grades of land or mineral deposits necessary to produce a desired quantity of output.

As Ricardo explained in his classic chapter "On Rent,” people first bring into production the most productive land and mineral deposits. If their output is insufficient to meet the demand, people resort to land and mineral deposits of the second quality, and so on.

Each succeeding quality of land and mineral deposits requires more labor per unit of output. That’s what makes them land and mineral deposits of inferior qualities.

Thus, there is no one quantity of labor required to produce a bushel of wheat or pound of cotton, but a range of quantities. And yet all the bushels of wheat or pounds of cotton in a given market at a given time sell for the same price. The different quantities of labor do not result in different prices.

COUNTRIES WITH DIFFERENT DEGREES OF ECONOMIC DEVELOPMENT

One and the same good is often produced in different countries with different degrees of economic development. In the more advanced countries, less labor per unit of output is required than in the less advanced countries. Yet the price of the product tends to be the same in both.

The cost of production of the product also tends to be the same in both countries, with differences in the quantity of labor required accompanied by opposite differences in wage rates. Thus, half the quantity of labor tends to go with double the wage rate and vice versa.

Please note: insofar as the prices of products are determined by their cost of production, differences in wage rates are fully as important as differences in the quantity of labor in determining the products’ relative value, irrespective of the labor theory of value.

THE VALUE OF PAPER MONEY

According to Marx, “Commodities, therefore, in which equal quantities of labour are embodied, or which can be produced in the same time, have the same value.” (Capital, vol. 1, pt. 1, chap. 1; [reprinted, New York: Random House, The Modern Library, p. 45.])

A logical implication of this is that since a one-dollar bill and a one-hundred-dollar bill require the same amount of paper and ink and the same printing press time, etc., etc., and are thus products of the same amount of labor, they should exchange one for one.

The labor theory of value cannot explain the exchange of irredeemable paper money, which requires hardly any labor to produce, for commodities that require more labor, usually vastly more labor, to produce.

For example, it cannot explain how a $100 bill, which requires all in all perhaps just one or two minutes to produce, is able to exchange for real goods requiring hours of labor to produce.

The labor theory of value might appear to have some explanatory value in a hyperinflation, in which the quantity of paper money that had to be given in exchange for a roll of toilet paper at least contained an equal amount of paper and thus, to that extent, perhaps an equal amount of labor.

THE VALUE OF LAND

Not long ago an acre of unimproved real estate in midtown Manhattan sold for $90 million, a huge sum not only in terms of paper money but also terms of the actual exchange value of that money, e.g., 1,800 new $50,000 automobiles or the labor of 900 men at $100,000 per year each.

Nevertheless, according to Marxism, that land was VALUELESS. Why, how? It wasn’t the product of human labor. According to Marx, “As values, all commodities are only definite masses of congealed labour-time.” So, no labor, no value.

Of course, what’s actually valueless is not the land but Marx and Marxism.

Indeed, Marxism is much worse than valueless. It’s been responsible for well over a hundred million deaths in Soviet Russia and Communist China alone. It’s served as the equivalent of a massive plague, or series of plagues.

Its destructiveness has been fueled by its delusional belief that capitalists steal their profits from wage earners. For a refutation of this claim see my recent tweet-thread turned blog post “TURNING MARX AND THE EXPLOITATION THEORY UPSIDE DOWN” at http://bit.ly/2XmBGir.

To go to the next level, buy and read my essay whose title appears immediately below, on the image of its cover. It’s available for 99¢ at https://amzn.to/2N44uTu.

For the ultimate critique, go to http://amzn.to/2PM19ut and buy and read my magnum opus Capitalism: A Treatise on Economics, especially chapters 11 and 14. This book is also available as a free non-printable, non-copyable pdf download at www.capitalism.net.

[

A Final Note: The Marxist to whom I am responding here appears to be a follower of Saul Alinsky. That means he deliberately uses the tactic of ridicule in place of logical argument and is totally unrestrained by considerations of fact.

For example, while calling the great Böhm-Bawerk an “ignoramus” in an earlier exchange, he claimed that vol. III of Marx’s Das Kapital was written before vol. I. The fact is, of course, that vol. III was put together by Engels from Marx’s notes, following Marx's death.

What's Wrong with the Labor Theory Value: An Answer for College Graduates Who Don't Know

A Twitter user named Jack Angstreich (@angstreich2) recently asked, “What argument establishes that Marx’s labor theory of value is false?” Essentially the same question was recently asked by at least two other Twitter users. Here’s my answer to Mr. Angstreich:

Presumably you and Ms. Attlee are college grasduates and possibly even possess graduate degrees. Yet your and her question betrays a shocking lack of education, comparable to someone asking where's the error in Ptolemaic astronomy.

I will first quote Marx on what the labor theory of value is and then offer two sets of refutations of it. (BTW, I use value and price as equivalent terms.)

WHAT MARX SAID: “The value of one commodity is to the value of any other, as the labour-time necessary for the production of the one is to that necessary for the production of the other.” [Google this to confirm it.]

FIRST CATEGORY OF OBJECTION: TIME AND THE RATE OF PROFIT. Prices (values) vary with the amount of time elapsing between the payment of wages and the sale of the resulting product. This implies that relative prices vary with the general rate of profit as well. Example:

A worker is paid $100 a day for working in a distillery. His job is loading raw whiskey into vats for ageing. He devotes equal time to loading vats that will age the whiskey for 8, 12, 20, and 40 years respectively. All four of the whiskeys will thus be products of equal labor.

Nevertheless, the price or value of these whiskeys will be very different. As far as it reflects this worker’s labor, at a rate of profit of 10%, the price of the whiskeys will be $25 x 1.1 to the 8^th, 12^th, 20^th, and 40^th powers respectively. [$25 is the $100 wage/4.]

At a rate of profit of 5%, there would be a different set of relative prices. All this implies that the rate of profit and the period of time over which production extends are factors determining the relative prices of commodities. These factors are present everywhere.

SECOND CATEGORY OF OBJECTION: PRICES DETERMINED BY SUPPLY AND DEMAND. The price of a Rembrandt painting, or anything else that exists in a given supply, is determined by supply and demand, not the quantity of labor required to produce it.

This category includes not only goods no longer capable of being produced, such as paintings by old masters and rare stamps and coins, but also agricultural commodities between harvests and everything traded on futures markets, such as petroleum and non-ferrous metals.

Even more importantly, it includes land and labor. Raw land is not the product of any labor at all, but often sells for huge sums of money, e.g., about $2K per sq. ft. in midtown Manhattan. Its value is determined by supply and demand (as is the value of improved land).

The value of LABOR is also determined by supply and demand. This is what explains why the wages of skilled labor are higher than those of unskilled labor and why those of the professions are higher than those of skilled labor.

Practically everyone is capable of doing unskilled work. Far fewer are willing and able to learn what is required to do skilled work. And far fewer still are willing and able to learn what is required to do such work as that of a doctor or lawyer.  

Marx admitted that skilled and professional-level workers earn more than unskilled workers. But he thought he could sidestep this fact by treating all labor above unskilled labor as multiplied unskilled labor and then never mentioning it again.

If one admits that the wages of doctors and lawyers, and plumbers and carpenters, are determined by supply and demand, then there is no basis for not applying the same principle to the wages of all labor. But Marx could not do this without abandoning his exploitation theory.

It’s absolutely vital for Marx’s exploitation theory that the value of at least all goods currently being produced be determined only by the quantity of labor required to produce them and the value of labor itself be determined by the quantity of labor required to produce it.

That way the value added at any stage of production is allegedly the result of nothing but the addition of fresh labor and the value of the fresh labor itself is that of the labor required to produce it. [Labor required to produce labor? What does Marx mean by this?]

“_… the labour-time requisite for the production of labour-power reduces itself to that necessary for the production of those means of subsistence; in other words, the value of labour-power is the value of the means of subsistence necessary for the maintenance of the labourer.”

This is how Marx claims that to maximize profit, the capitalist extorts from the worker the maximum number of hours of labor possible, while paying him wages representing the number of hours of labor required to produce his minimum necessities.

The truth is that wages are determined by supply and demand and that capitalists are continuously increasing the supply of products relative to the supply of labor, thereby reducing prices relative to wages, and raising real wages.

The capitalists' success in raising real wages is what enables wage earners to be able to afford to take lower-paying jobs that offer shorter hours and improved working conditions that don’t pay for themselves, and to keep their children home longer and longer.

Be sure to read my thread at http://bit.ly/2ZdYT32 for a refutation of the idea that profits are stolen from wages. Learn how the original income of labor is profit not wages and how capitalists create the phenomena of wages and costs and thus reduce profits relative to sales.