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.

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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.

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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.