Well, and Marx would say the value of your house is $219,000. However, people may pay you more than that. That amount over $219,000 you sell the house for is profit, not value.
I give up.
Isn’t that operating under a fallacy, though, Captain Amazing?
My house is 134 years old. Using the approach you indicated that total value of the house would be the cost of all building, repairs, improvements etc over that 140 years. I’ve seen the deeds, the place was built for less than $1000 in 1868. I don’t believe that the sum total of all work put into the house was the equivalent (even adjusting for inflation) of $202,000 as of 1997.
Really, I don’t understand the way you’re contrasting ‘value’ and ‘profit’.
An example (and a question). I bought the place for $203,000. I put in $16,000. Marx value: $219,000. Some sucker comes along and offers me $450,000.
By what you’re saying (feel free to correct me) the value of the house is now $450,000. Therefore, without the addition of labor the value of the item has increased $231,000.
I base this on our assumption that the initial value of the house ($203,000) was somehow intrinsic in nature instead of simply being the price (so as not to introduce a new ue of the word ‘value’ here) at which the prior owner and I agreed to make the sale.
Therefore why should the $450,000 I could get now being any less of ‘value’ and more ‘profit’?
Um. We’re not going to go there here.
Does there remain a factual General Question here?
In all honesty, Manhattan…
I’d say we left that behind ages ago. Somewhere WAY up there.
Someone needs to learn the theory of comparative advantage.
Even if someone wants to charge me more for something than it would cost me to make myself, it might make sense for me to buy it from him anyway because even though I could make that item for cheaper, I can make another item for even less. Or perhaps I value my leisure time even higher than that.
As an example, let’s say that I’m a decent carpenter, but an excellent computer programmer. Let’s say that in 8 hours I can make a chair, and that carpenters make $20/hr. So I could make the chair for an equivalent cost of $160. But you’re a slow carpenter, and you want to sell the chair for $200. Should I buy it from you?
Probably not, because even though I can make chairs cheaper than you can, I also make $50/hr programming. So my time is worth $400 as a programmer. So I’ll buy the chair from you for $200, and we both profit from the exchange. That’s the law of comparative advantage, and it’s one reason why free trade is a good thing.
It’s also yet another reason why the labor theory of value is wrong.
I meant, “I should probably buy it from you”, not, “Probably NOT buy it from you.”
I’m saying, according to Marx, the value of the house is $219,000. What someone is willing to pay for the house (the $450,000) has no bearing on the intrinsic value of the house. For Marx, the only things that affect value are costs of labor or materials.
Basically, he’d say your house is worth however much it would cost if you were to build another copy of your house. Does that make sense?
No it doesn’t. How about if I spend a year digging a big hole in the ground, and another year filling it back in again? Where did all that glorious value go?
The value of something is nothing more than what someone is willing to pay for it. I can spend ten years of my life making an exact replica of the local dump, but where is the value?
And how do you factor in the value of automation or assembly lines? The reason auto workers can make so much money isn’t because their labor is intrinsically that valuable - it’s because their labor is magnified by the millions of dollars in equipment that capitalists provide for them.
Let’s say I’m a carpenter, and each chair I make requires 10 hours of labor in sanding. But now someone comes along with an automatic sanding machine and offers me a deal - he’ll provide the sanding machine, which will cut my 10 hours of labor down to one. In return, he’ll buy the chairs from me at $160 instead of the $200 I normally charge. That’s okay with me, because now I can make twice as many chairs. So now, instead of making 5 chairs a week and making $1000, I can make 10 chairs and make $1600. The capitalist sells my chairs for $200, and makes a profit of $40 each, which represents his return on investment for buying or inventing the sanding machine. We both benefit.
Marx would consider that $40 a ‘social surplus’, and a result of exploiting the worker. The labor theory of value is used to say that the worker did $200 worth of labor, but only got paid $160.
But now let’s say that the capitalist takes those chairs to a country in which they are in high demand, and sells them for $250. Where did the extra value come from? The labor didn’t change. And is the worker being exploited even more? After all, now the capitalist is making even more money. But the laborer is still better off than he would be without the capitalist.
manathan : I think we’re ready to move to ‘great debate’ ( After all my question has been answered 
)
Jonathan Chance, The value of your house is the cost it would take to build an exact copy of it. All money over this price is caused by high demand. I pretty much convice about this way of seeing value ( As I read along ‘Das Kapital’ it make a lot of sense ).
Sam Stone : Your filled big hole has no use. In marx eye’s it can not be exchanged and is worth nothing as one would expect of a filled hole. For the ‘social surplus’, well, i’m not there yet in the book. I hope Captain Amazing, can explain this point in more detail.
I have no idea. You’d have to ask somebody who knows more about Marxism (or a gravedigger). 
I think the trick there is that you haven’t really created a transactional product. I mean, Marx is talking about the creation of objects that can be used…which brings up another kind of value he identifies…use-value. An object has use-value if it fufills a human need or want.
I think that part of the misunderstanding is that you and Marx are defining “value” differently. You seem to be using it to mean something like, “The amount of money or goods someone is willing to pay for a good or service”, and that meaning of value, of course, doesn’t have any meaning outside of supply and demand. Marx is using the term to mean “the cost to manufacture a product when all expenses are factored in (raw materials, human labor, depreciation of machinery, etc.)” Since he’s defining the term “value” differently than you are, you’re sort of talking past each other, so to speak.
We’ve left the realm of debate and entered the realm of dogmata where any discussion is pointless because everybody has his POV and doesn’t retreat.
To respond to your examples, I’d say the labor theory doesn’t mean how much labor actually was necessary to create this particular specimen; it’s how much labor is necessary to create something of equal quality, no matter who’s doing it. That’s why Sailor doesn’t insist on Claudia Schiffer per se, he’s content with any woman who’s doing the job the same quality; if it were different, CS would have a monopoly, in which case the situation becomes fluid anyway.
If you enjoy digging holes for hours and filling them up again, that’s fine, but I don’t buy that product from you because I can have the same thing for less (i.e. $0) elsewhere.
In the end, labor theory and supply/demand theory are two aspects of the same thing. S/D can be accounted for temporary fluctuations, but on the long run the price can’t be too far away from production costs (because if price > value, competitors will arise; if price < value, the manufacturer will break). I’ve said that a hundred times now, you have contradicted a hundred times, and we’re just as clever as before. So let’s close this GQ, OK?
How do you handle the case when the value (in the sense of what someone will pay) is much less than the cost of building the house? It’s easy to find places where this is true.
I don’t know much of Marx. But if you claim that Marx is saying that value = cost-to-make, then it seems you’re saying he’s a brainless fool. Counter-examples are ridiculously easy to find.
Well, I would say in common English usage Sam Stone has the right definition. Value is a measure of worth, desireability, not a measure of cost because to measure cost we use the word cost, not value. Value is totally unrelated to cost. I can value something which cost me little or nothing. When we are expressing value in monetary terms we are expressing the relative worth of a product or service to the general public, we are not expressing how much it cost to produce. Having worked for some years in cost and budget accounting I know what cost is and it ain’t value. And I also know value ain’t cost. Cost and value are completely different things.
Since the title refers to the “value” and not to the “cost” of a product, Sam is right. And if Marx said (and I am not saying he did, but if he said) value equals production cost, then he hadn’t a clue about human nature or about the world I know.
To further illustrate the point: I have a whole row of books here with the words “cost accounting” in their titles and they all deal with calculating how much it costs to produce products or services. None uses the word “value” in such context.
Now, let’s look at Value Added Tax (VAT). It is a Tax on value added. If my manufacturing cost was $100 and I sell the product for $150 then I have added $50 worth of “value”. I bought goods and services which the market valued at $100 (regardless of their cost) and now I am selling the product for $150 so I have added value and that value I have added is what is taxed. I will pay the rated tax on $50 which is the added value.
Common usage, technical usage and legal usage distinguish clearly between cost and value and they all back Sam Stone.
Exactly…Marx is defining the word “value” differently than most people. It’s not stupidity so much as just a different definition (and he defines the word in “Capital”, and uses it consistantly). He’s not saying “The cost to produce a product is equal to the amount people will pay for a product.” He’s saying “The cost to produce a product is equal to the cost of the materials used to make the product and the labor used to make the product.” In fact, the entire book is about the difference in cost of production and the amount people will pay for a product, why that difference exists, and what the implications of that difference are.
Captain-
Wouldn’t that, obviously, mean that the Marxian value (Mv, from this point on) vary over time?
Say there’s a huge new cache of lumber found (just go with it) and the cost to create a house identical to mine suddenly dropped in half. Wouldn’t then, the Mv of my place suddenly plummet? I suspect so, if one accepts Mv.
But I really do think that’s a short-sighted approach, not unlike how I see hardcore libertarianism (of which I’m a voter) is short-sighted. Any system that requires human beings to act rationally and make decisions based upon proper data has a built-in contradiction. Human’s just don’t act that way (regardless of what we might wish).
And a small response to Schnitte:
Speaking as a businessman I’ve never set a price based upon simply what it cost to produce a product. Instead I set it based upon what the market will bear. That figure, for successful products, is ALWAYS cost+whatever profit I wish to make per unit. If I had a profit line in which the price point at which people would purchase was tending towards cost-of-production I would discontinue that product and launch a new product in which my profit margin would be greater.
To come back to my housing example: if the cost I get get for building a house was at (or very near) (say cost+1%) the Mv then I wouldn’t bother to do so. Instead I’d go manufacture, say, Clausia Schiffer hands or something that generated cost+10%.
No one is required to produce a product. Without the belief in a reasonable return why would anyone bother?
I accept that, but you can’t get too far away from the production costs. If you do, people will stop buying from your company because you overprice your products; so you have to take the costs into account. That’s where labor and S/D match - the market will bear the production costs.
>> Exactly…Marx is defining the word “value” differently than most people
Well, that is fine as long as you are consistent and everybody is using the same definition but we have some people here who are now saying the value of things equals the cost to produce them. Now if they are using a different deffinition of value they should say so. In the common usage of the word that assertion is obviously wrong. And saying "the value of something equals the cost to produce it (in the preceding sentence the word “value” is meant to mean the cost of producing something) " well, that’s kind of silly. By that token any phrase is correct: Sheep are triangular (triangular being defined here as “sheep”)
I have no opinion on what Marx might have said but I very much doubt he said what some posters in this thread are saying, i.e. that value equals production cost. That is just plain silly and I doubt Marx was or could be that ignorant. Since he was German maybe something got lost in the translation?
Well, I don’t think I agree with that either. Certainly the ‘optimal’ price point (the point I which I will maximize my return-on-investment regardless of number of units sold) doesn’t have to be anywhere near the cost.
An example: for some of the books we sell our selling price is more than 500% of the cost of production. Or for our online products the price is literally thousands of times the cost to produce.
So I don’t think there’s an overwhelmingforce that makes prices tend towards the cost-of-production. I see it as a floor, you’re right in that. But the ceiling is really the point at which one maximizes the return.