If I can produce an apple for $1 and I sell it for 1.50, did I just "steal" .50 from the buyer? The buyer must value the apple at more at more then $1.50. Say he values the apple at $2.00 and I still have 1 in costs, did the buyer just "steal" .50 from me? Or are we both .50 better off and where did that .50 come from? Did we “create” $.50?
You, the producer, “created” $.50 worth of wealth by cultivating and picking the apple from the tree and giving it to the consumer. The consumer could have done it himself, buying his own seeds and waiting for the tree to bear fruit, but he/she would rather just pay the $1.50 and have you do it. Of course, once he/she eats the apple, its effective value drops to zero, and hence it all balances out.
In the most fundamental sense, we create wealth when we take this muddy, disorganized planet or ours and make something useful out of it. Exactly how much wealth we create depends entirely on how much people want to pay for our hard work, but usually something is better than nothing. Even products sold in their natural state like coal have to be dug out of the ground. That wealth is erodes as a product is consumed or decays. It’s a bit more compicated than that in practice, with currency velocities, depreciation and such, but that’s the gist.
So in the case of employment, if I work for someone and create $100 of value to my employer and he pays me $80 he gets the $20. Has he exploited me? How do I as a worker determine what my work is worth?
If I am willing to work the job for $60 but I am paid at $80, am I overpaid? If the employer is willing to pay $90 but I only make the $80, am I underpaid and exploiting my employer? Could I be both underpaid $10 and overpaid $20 at the same time? Can we both be exploited at the same time?
Not unless you pointed a gun to his head and forced the transaction. But if he’s of sound mind and bought the apple with a whole heart, then presumably he values it at $1.50 or more.
You’re better off by $.50. The buyer is down $1.50, but is compensated by a shiny delicious apple, for which he was willing to part with said amount. He must believe the trade to have been worth it, if he participated voluntarily.
I suppose we can say the buyer is “better off” by $.50 in a tangential way, if he believes the apple was really worth 2 — and therefore believes that he could resell it for a .50 profit, or believes that he has just saved himself $.50 by buying an apple that he was definitely going to buy anyway, but which he’s found ultra-cheap at your store. (That is, all the other stores he knows of are selling apples for $2 or more.) But this tangential way of looking at it seems like fuzzy thinking to me.
Basically, a purchase can occur if there’s a non-empty intersection of the price ranges that each party is willing to settle for. If buyer and seller are agreeable and they both enter into the purchase voluntarily, then I don’t see how any kind of “stealing” can ever be said to have happened.
No money has been created in this purchase. It has merely been redistributed. Only the government and the banks can (legally) create new money.
Both you and the buyer created $0.50 worth of utility for yourselves; no one created any actual money (since this is illegal). The apple was worth $1.00 to you (land, seed, fertilizer, labor, etc…) and it was worth $2.00 to the buyer (it’s tasty, the buyer was really hungry, etc…). The $0.50 worth of utility each of you gained came about simply because the two of you personally value the apple differently, not because anybody is robbing anyone else. The apple itself has no set intrinsic value; it’s the people involved in the transaction that assign their own values to it.
Again, the benefit arises because you and your employer value your work differently. You feel your labor is worth $60. Your employer feels that his labor (coming up with the business idea for the company, managing the business, etc…) is worth $10, at least when it comes to your specific job position. So by paying your $80, both you and your employer are profiting. Again, your work does not have any inherent worth. It is not inherently worth $60, or $80, $100, or any other number. Your work is worth whatever can be agreed upon, a value that is greater than your perceived value (>$60) but less that the employers valuation of your work (<$90). $61, $70, $80, $89? That’s what salary negotiations are for.
It might be very hard to compute an exact figure for your value to the company, even if you produce a simple tangible good, like apples. I’m sure the company’s accountants have a good handle on such amounts, but they also have access to internal information about expenses that you probably don’t have.
Anyway, I would keep these things in mind before you go about computing whether you’re being exploited:[ol]
[li]Companies must be profitable in order to live. If they operate at a loss for too long, they cease to exist. Therefore, when you cast your eyes about the world, you will tend to find companies operating in such a way as to maximize revenue and minimize costs. Employee salaries are one of the costs to be minimized. The managers don’t have to be greedy pigs to have chosen such a strategy. It is forced on nearly everybody by the basic nature of the free market.[/li]
[li]The market forces that operate on ordinary goods like apples also operate on salaries. In general, employers will try to pay as little as the market will bear, and employees will seek as high a salary as the market will bear. Somewhere in the middle they meet (most of the time). Only by an astounding coincidence will your salary perfectly match the value of what you produce.[/li]
[li]Another reason you wouldn’t expect these two numbers — your salary, and your portion of the value of whatever it is you help make — to match is that there are probably a lot of different people working with you. These people will vary in their experience, degrees, job skills, and scopes of responsibility, and therefore will vary in their salaries as well. Whatever the value of your product, the incoming revenue it brings in is not going to be evenly divided among all the employees who worked on that product. Therefore whatever the “fair salary” really is, most people aren’t going to be getting that salary. Probably none of them in fact.[/li][/ol]
All this can be happy news as well. If times are good, and the company is confident of its profits, then you might actually be getting more money than you really deserve, compared to the value of your work as computed precisely.
Here’s what I don’t get. If employee costs are to be minimized, which is to say employee salaries, then that lowers their buying power because they don’t make as much money. Which means they have less money to buy things, and either demands lower prices, or simply doesn’t buy at all. What I can’t figure is what stops this from spiralling away.
IANA economist, but I think this is one of many things that happened in The Great Depression. There was over 30% unemployment at one point, so there was very little buying power among people. Businesses died left and right.
In fact, many small and medium businesses do fail in this situation because they do not have as diverse sources of revenue as large and mega-companies do. These massive corporations tend to be global, and so can simply choose other resources to maximize revenue. And even in a depression, these big companies can and do struggle, as much as a mega-corp. does. They still have lots of money. Sometimes they do fail.
We need an expert to explain this.
This is an example of voluntary exchange. The purchaser concluded that he would be better off if he exchanged $1.50 for the apple, instead of buying something else or saving his $1.50. The seller voluntarily decided he would rather have the $1.50 instead of the apple.
That’s one way to look at it.
After all, your labor would be worth nothing without a workplace, office supplies, machinery, tools, a human resources department. It would be worth nothing without a management structure willing to sell the fruits of your labor to other customers.
Better to look at it in terms of everyone benefiting, rather than everyone being exploited. You know, accentuate the positive.
If you own an apple, you can estimate it’s value. You can look at what your costs were, you can do a market comparison, and you can throw in your personal values. Perhaps it’s worth $1, perhaps $2, but you as an individual set that value, because that value takes into account your preferences. Once you sell something, the value becomes fixed (for that moment at least). Sorta like quantum mechanics where looking at the particle changes it (for the moment) from a probability into an actuality.
If an employer pays you $80 for your labor, that is by definition the value of your labor. Perhaps your personal prerences set the value somewhat higher, in which case you should look for another job. Or perhaps your personel preferences set it lower, in which case you should smile alot as you work.
When the employer takes your labor (well, HIS labor really, as he’s now paid for it, or at least contracted to pay for it), and adds his own value, he can sell it for more, say $100. You weren’t ripped off; there was value added beyond your own labor. Even if your labor is directly transferred to your employers customer, your employer has still added value, much as the apple salesman adds value by buying apples from the farmer and pushing them down the street in his cart.
In some cases, I can see that technological progress, increasing efficiency and output without really increasing the amount of labor, could help offset this. But that can’t be the only thing which keeps us from winding down. 
Value can be neither created nor destroyed, just moved around. Remember: TNSTAAFL (There’s No Such Thing As A Free Lunch). This works sort of like conservation of energy does in physics. The major difference is that there’s no “Noether currency current”, since the conservation of value is a global phenomenon rather than a local one. This leads to my friends and I at catered geometry conferences noting that there’s no such thing as a globally free lunch (leaving unsaid that we are eating a locally free lunch).
I hear Ed Witten’s trying to quantize economics, though, so maybe value can be created or destroyed, subject to constraints on the change in quality based on Heisenberg’s Uncertainty Principle, quality being the conjugate variable to value in the Lagrangian of classical economic theory. In a nutshell, the act of paying a definite amount for, say, an apple makes you less sure that you wouldn’t rather have had the orange. The only reason we percieve ourselves as satisfied at all is that our monetary systems are really pretty coarse-grained.
Absolute nonsense. Economic value most certainly can be created. If you find a gold deposit in your backyard and mine it, your effort and keen eyesight have just created value. If you take the tree in your backyard and weave baskets out of its bark, you have created economic value that did not previously exist.
The fact the economic value can be created is rather easily proven by simply observing the course of human history. During the time of Christ the world’s population was about 300 million people, and almost all of them were dirt poor. Today it’s over six thousand million people, and while most are still dirt poor, a lot are much richer than they were 2,000 years ago. The aggregate amount of economic value owned by humans has unquestionably increased, unless you’re gonna make the highly dubious argument that people 2,000 years ago were twenty times richer than people today.
At the combined cost of (a) the effort and expense involved in mining and (b) not doing something else.
You’re equating value and money. That’s the problem, and the same conflation that leads to thoughts like the OP.
How valuable was uranium two thousand years ago? Oil? How valuable was iron ten thousand years ago?
The word you’re looking for is “valued”.
Well, you might say so, or you might say I’m wondering how you determine “value”.
So if I sit on my ass and never do any work at all and starve to death, that’s an equivalent amount of value to producing something? I would die if I did nothing productive, so I obviously generate considerable value for myself by doing something productive. Surely you don’t think the opportunity cost of working exceeds the value?
No, actually; I never once mentioned money on my post. Didn’t even say the word - go back and read it if you don’t believe me. I referred to value and, more correctly, UTILITY.
By any reasonable measurement to total amount of economic value - utility - is higher than it used to be, even if you count on non-monetary goods. There is absolutely no reasonable method of measuring utility by which you could argue that the 300 million people in the Year 0 were not poorer than the six billion people today. They had less food, inferior clothing, inferior medical goods, inferior housing, inferior everything. (On the average.)
And to answer your questions:
2000 years ago uranium was of no value whatsoever. Human ingenuity and hard work caused it to become valuable.
Ten thousand years ago, some thing for iron.
You don’t ‘determine’ value. You negotiate it.