Friday, July 26, 2019

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 8th, 12th, 20th, and 40th 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 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.

Friday, July 12, 2019


The United States is the first country in the history of the world to have been founded on the principle that men are endowed with unalienable individual rights and that the purpose of government is to secure those rights.

Today, the socialist enemies of the US, in advocating socialism, advocate the establishment of a universal monopoly employer for whom everyone is compelled to work by law, i.e., they advocate the reintroduction of slavery—but this time for all, black or white.

Nevertheless, they have the temerity to attack the United States and its founding documents on the grounds that some of the Founders owned slaves and prior to the 14th Amendment slavery was sanctioned in the US Constitution.

Such behavior is typical of socialists: it is a manifestation of their desire for the unearned. They think they have a right not only to everything, but to everything in a state of perfection.

Thus, they spit on the magnificent creation of the first government in all of history to be based on morally right principles. They reject it because it was less than perfect and required additional work to be made better. And meanwhile, they work to destroy it altogether.   

So, let me state some relevant points: 1) Thought precedes action. 2) Principles precede policies. 3) Acceptance of the Lockean/Jeffersonian principle of individual rights precedes the establishment of freedom.

In other words, acceptance of the principles embodied in the Declaration of Independence and the United States Constitution and Bill of Rights was the essential foundation for the abolition of slavery in the US and is that foundation everywhere.

If you’re a socialist and thus advocate slavery today, you have no right to criticize any aspect of American history. If the day ever comes when you do condemn slavery, start by abandoning socialism and do so in the name of individual rights and their embodiment in the USA.

If there are aspects of the US today that you don’t like, know that any legitimate complaint you may have should be directed at violations of this country’s founding principles and never at those principles themselves.

So stand when you hear the National Anthem and salute the American flag. Or else go to the Gulag, to which, in your miseducated state, you are trying to drag us all.


On July 6, I tweeted,
Socialists do not realize that capitalism’s privately owned means of production benefit everyone who buys the products of those means of production. Thus privately owned auto plants, steel mills, and iron mines benefit the buyers of automobiles. Likewise for all other products.”

One of the replies I got to this tweet was this:
You are wrong, Mr. Reisman. This is exactly what socialists realize. They do not seek the betterment of all people. They seek total control over other people’s lives. This is what you economics focused types do not grasp.” (

The writer and several others seem to believe that the socialists know what I accuse them of not knowing, i.e., that the capitalists’ means of production serve everyone.

They allegedly know this despite the fact that they demonstrate their ignorance of it every time they discuss such things as taxes or economic inequality.

I think it’s less likely that socialist leaders know this than Democratic voters, and none of them seems to know it.

In any case, it’s apparently supposed to be an error on my part to name this ignorance because what the socialists are after is power, as though I would ever deny that.

There is a simple reconciliation. Socialists can be both ignorant to the point of exhibiting mental retardation and be sadistic power lusters, deriving pleasure from others’ suffering.

If they had any intelligence, they would know that being able to exercise despotic power over their fellow citizens is economically worthless. Most of the rulers of socialism are poorer than the lower middle class of capitalism, as Soviet Russia and its satellites showed.

Ultimately, as socialism ended up in a reversion to feudalism, even its supreme leaders would live at a level below that of the average worker of capitalism today, just as kings and emperors of past ages did.

Not only are the rulers of socialism relatively poor and grow poorer as time passes, they have to live in a state of chronic terror for fear of being killed as the result of the sheer hatred they generate in their victims.

Socialism is a philosophy for sociopaths, which is why I titled my essay on Marxism/Socialism as I did.

Something to keep in mind about the mentality of socialists:
Just because they’re ignorant and stupid doesn’t mean they can’t be vicious.

Sunday, July 07, 2019


Please click on the following link and then read the material that comes up in the socialist tweet. Stop when you finish the text in the photograph.

Socialists do not realize that capitalism’s privately owned means of production benefit everyone who buys the products of those means of production. Thus privately owned auto plants, steel mills, and iron mines benefit the buyers of automobiles. Likewise for all other products.

The socialists’ mentality is trapped in the Dark Ages, when production was not yet for the market but for the personal use of the producers, an arrangement that the socialists seem to think was superior, since it was “production for use” rather than “production for profit.”

Under capitalism, the private owners of means of production see profitable opportunities and on their own initiative use their means of production to produce things that others, often millions and tens of millions of others, want to buy.

Socialists apparently believe that under socialism there will be some kind of global town meeting where everyone will decide everything, and everyone will then live happily ever after.

I welcome evidence to prove that socialists are not severely retarded.

Thursday, July 04, 2019


On this day of the celebration of individual rights, let us remember that while America and capitalism represent freedom, socialism is a system of slavery. Under socialism, the government is a universal monopoly employer. Competition with it for labor is against the law.

So, under socialism, you are forced to work for the government. You are a slave.

The Democratic Party of the past was the party of slavery and racism. It is still the party of slavery and racism. The only difference is that today it seeks to enslave whites instead of blacks.

“Reparations” for the slavery of blacks are involuntary servitude for whites. They are imposed for no other reason than because many whites in the past treated blacks unjustly. The democrats think reparations are just because they think whites are interchangeable. That’s racism.

A company under the intellectual influence of someone who shows contempt for our national anthem. A company that has been led to regard the American flag as not worthy of its support. A company that  shows itself to be unworthy of being in America.


The first thing you need to know about Buttigieg’s position on Slavery is that when it's wrapped in the label “National Service,” he’s for it. The second thing is that he’s duplicitous. It’s only going to be the “norm,” “expected,” but not “required.” See 

Wednesday, July 03, 2019


The beliefs about the alleged horrors of capitalism are disastrous errors. They confuse the terrible conditions inherited by capitalism from feudalism, and which capitalism overcame, with capitalism itself, leading people to believe capitalism created the conditions it overcame.
Capitalism represents the release of unfettered individual human intelligence into the process of production and exchange, which intelligence is propelled by self-interest and the profit motive.
Under capitalism, these driving forces operate within a framework of individual freedom.
Freedom means the absence of the initiation of physical force. It requires that you deal with others to their advantage as well as your own, because that’s the only way to get them to buy from you or sell to you, since you are prohibited from using force against them.
To gain workers, a capitalist employer must offer them better terms than they could obtain working on their own or from any other employer. Similarly, to gain customers, he must offer them the best use available to them for the money he asks from them.
In this way, even today’s billionaires work for the average person. If they want a sum of money he possesses, they have to offer him goods or services that represent a better use for that money than any of the alternatives on which he might spend it.
If you want to make money under capitalism, the way to do it is not like a gangster robbing gas stations, but to ask yourself what can you do, or what could you learn to do, that other people want and are willing to pay for, and then do it. You gain, and your customers gain.
Exceptionally intelligent and hard-working individuals come up with ideas, and arrange to put them into practice, that make possible important improvements in products or more efficient ways of producing existing products. In doing so they raise the productivity of labor.
These individuals are businessmen and capitalists.
A rising productivity of labor, brought about by these businessmen and capitalists, serves steadily to increase the supply of products relative to the supply of labor and thus to reduce prices relative to wages, which means a growing buying power of wages—higher “real wages.”
As this process continues, and the real earnings of people rise, they can afford to accept the comparatively lower wages of jobs with shorter hours.
For example, if in 1775, people were working 80 hours a week just to survive, and 50-75 years later, they can make 3-4 times subsistence in 80 hours, many of them will choose to work 60 hours, say, and still earn vastly more than they did initially.
In just the same way, as the productivity of labor and real wages rise, thanks to the efforts of the businessmen and capitalists, workers can afford to accept the lower take-home wages that accompany jobs with improved working conditions that don’t pay for themselves.
This same process of rising real wages enables parents to afford to keep their children home longer, with the result that child labor begins at a later and later age and finally disappears.
The process of businessmen and capitalists achieving a rising productivity of labor and real wages has by now increased real wages to the point that the average worker in an industrial country enjoys a higher standard of living than kings and emperors of the past.
In addition, the work week is now 35-40 hours, working conditions have enormously improved, and child labor has been reduced to the point where it now often begins only in the mid-twenties of the children.
The socialist Bernie Sanders keeps saying that he wants a system that “works for all of us.” Capitalism is that system. The capital of the capitalists is accumulated out of profits earned by the introduction of new and improved products and more efficient methods of production.
Those profits are then typically saved and reinvested in the production of those very same products, to the point of providing them for virtually all.
The capital of the capitalists not only produces the cornucopia of products that everyone is able to buy but also pays the wages that enable them to buy it.
The fact that Sen. Sanders has shoes, indoor plumbing, a car, a TV, a house or apartment, and much, much more, is how capitalism works for him and for everyone else.
The greater wealth of a rich capitalist compared with that of the average person, does not mean that the capitalist’s consumption is anywhere near to being correspondingly higher. The manufacturer of a million TV sets, for example, does not have a million TV sets in his home.
He may have 5 or 6. His greater wealth is in the capital—the factories, machinery, materials and components, and the funds required to pay wages—required to produce a million TV sets, 6 of which go to him and 999, 994 to other people, the great majority of whom are wage earners.
For more, buy and read CAPITALISM: A TREATISE ON ECONOMICS. Available at  in hardcover and Kindle formats.

Tuesday, July 02, 2019


Does the person believe that in the absence of minimum-wage and pro-union legislation, the greed of businessmen and capitalists would drive wages to or below the point of minimum subsistence?
Does the person believe that in the absence of maximum-hours laws, the greed of businessmen and capitalists would increase the length of the working day to an unendurable length, e.g., 18 hours?

Does the person believe that in the absence of laws regulating working conditions, the greed of businessmen and capitalists would make working conditions unendurable as well?
Does the person believe that in the absence of laws preventing it, the greed of businessmen and capitalists would force even 3-year-old children to work in mines? 

Again, does the person believe that all that stands in the way of this nightmare-world, allegedly ready to be unleashed by the unrestricted operation of capitalism and the profit motive, is legislation?
“Yes” answers to these five questions clearly show that the person holds Marx’s view of capitalism. This view of capitalism appears to be held¸ and to have been held for well over a century, by virtually all Democrats and perhaps half or more of the Republicans.

It is only the smallest of steps to go from Marx’s view of capitalism to advocacy of socialism. Marx’s view of capitalism implies that it is inherently evil, and thus must be abandoned. Socialism and its alleged love of humanity then appear to be the logical replacement.

IMMEDIATE THERAPY FOR MSTD (MARXISM/SOCIALISM THOUGHT DISORDER): Buy and read the essay below. Available for 99¢ at



Monday, July 01, 2019



Marxists hate capitalism and want to replace it with socialism because they believe that profits are stolen from wages. They begin with the idea that originally there were workers but no capitalists and that the value of the products the workers produced and sold was all wages.

But then allegedly came the capitalists, who proceeded to deduct a part of wages and claim it as profits. Adam Smith expresses this idea in paragraphs 1,2,&5-8 of his chapter on wages in Bk. I of The Wealth of Nations. They’re online at Please read them.

Marx took over Smith’s view of profits and went on to claim that the alleged deduction of profits from wages would be so great as to leave the wage earner with nothing more than minimum subsistence, for which he would have to work unbearable hours in unbearable conditions.

I will now show that PROFIT, not wages, is the original and primary form of labor income and that this follows both from the actual nature of Smith’s “original state of things” and from Marx’s version of it that he called “simple circulation.” (, pt. 2, ch. 4)

In simple circulation, “C-M-C,” workers produce commodities, “C,” sell them for money, “M,” and use the money they receive, to buy other commodities, “C.” I say that the money the workers receive in exchange for the sale of their commodities is not wages but SALES REVENUES.

(To my knowledge, I am the first economist to identify this, and its implications. I was inspired by reading Henry Hazlitt's discussion of John Stuart Mill's proposition "demand for commodities is not demand for labor.")

Wages are money paid in exchange for the performance of labor. Here, money is paid not in exchange for the performance of the workers’ labor but for the workers’ COMMODITIES. Thus, the workers have sales revenues, not wages.

However, because this is simple circulation, not “capitalistic circulation,” there are NO COSTS to deduct from these sales revenues. Costs appear only in capitalistic circulation, “M-C-M,” where they are the reflection of the first “M.”

(Costs in business are the prior expenditures of money for the purpose of bringing in the sales revenues. If there are no such expenditures, there are no costs to deduct.  Simple circulation is characterized precisely by the fact that there are no such expenditures.)

(For the benefit of those unfamiliar with Marx, capitalistic circulation means the outlay of money, “M,” for the purpose of producing commodities, “C,” which are to be sold for a further sum of money, “M,” [or “M’,” to indicate a larger sum of money].)

As I say, given the absence of capitalistic circulation and its first “M,” there are no costs to deduct from the sales revenues and thus THE ENTIRE AMOUNT OF THE SALES REVENUES IS PROFIT. In addition, because there is no first “M,” there is no monetary capital.

The workers of simple circulation have not spent anything for tools or materials, let alone the labor of other workers. Thus, the amount of capital on their books is zero.

It follows that in simple circulation profits are both 100% of sales and an infinite percentage of capital invested, which capital is zero.

As I’ve shown, the workers of simple circulation are not wage earners. Because they sell their commodities rather than their labor, they are more correctly described as small businessmen. They are small businessmen without costs and without capital.

Simple circulation morphs into capitalistic circulation as and when some of these worker/businessmen begin to save and productively expend a portion of their sales revenues and profits rather than consume them all. These worker/businessmen are now worker/businessmen/capitalists.

Their productive expenditure (i.e., their expenditure for the purpose of making subsequent sales) is the first “M” in capitalistic circulation. It buys capital goods and labor and has the following further major consequences:

IT BRINGS INTO EXISTENCE COSTS OF PRODUCTION IN THE INCOME STATEMENTS OF BUSINESSES, AND CAPITAL WITH A MONETARY VALUE ON THEIR BALANCE SHEETS. Thus, it reduces both the percentage of sales revenues that is profit and, doubly, the percentage that profit bears to capital invested.

I say that the rate of profit on capital is doubly reduced because, per dollar of sales revenue, not only is the amount of profit reduced but also the amount of capital on the books is increased.

Marx’s sequence for capitalistic circulation can be used to provide a simple formula for measuring the economic degree of capitalism, namely, the higher is the ratio of “M” to “M’,” the more economically capitalistic is the economic system.

Using this formula, “simple circulation” represents a zero economic degree of capitalism. As the economic degree of capitalism rises, not only do profit margins and the rate of profit fall, but wage payments come into being and then rise both absolutely and relative to profits.

Thus, so far are capitalists from stealing wages as the source of their profits, that the truth is the exact opposite. The starting point is not 100% wages and zero profits, but 100% profits and zero wages. Capitalists then raise wages and reduce profits!

The higher is the economic degree of capitalism, the more is this the case. The fall in profits does not imply a loss to capitalists. It’s far more than offset by the increase in production and consequent rise in buying power that accompanies it (and also raises real wages).  

For an introductory elaboration of this analysis, read my essay whose title appears immediately below. It’s available at
in Kindle format for 99¢ and also in paperback.

For full elaboration, read my Capitalism: A Treatise on Economics, available in  hardcover and Kindle formats at Also available at both in  hardcover and as a free pdf replica capable of download. (Read chapters 11 and 14 in particular.)