Because discovering the highest amount I would pay for a burger is likely going to take more inputs than is received by the increased sale price. This is why people will haggle for longer depending on how expensive an item is.
A) it is deduced logically
B) Human beings will not exchange if they value two things equally. That would make no sense whatsoever. Therefore we know there is a difference in ordinal rankings of value when an exchange does take place. I do not understand how this could be misunderstood as a circular argument.
We know humans act in order to achieve desired ends with minimal input. One aspect of that action is the event of exchange. If you think this argument is “circular” is it because you deny the initial presumption that humans act in this way?
Event happens —> we make claims based on the event
Different event happens----> we make different claims based on the event
Perhaps you could answer the concrete question as to why the central part of your theory is something that cannot be quantified and doesn’t explain anything. Or perhaps not.
It isn’t an appeal to faith, it is an observable event. A person could watch me walk into Dave’s Hamburger Shack, lie down $5 on the counter and walk out with a hamburger. Nobody forced me to do that, or held a gun to my head. I could have put the $5 in the bank or bought a pack of smokes with it. The one indisputable conclusion that can be drawn from that is that I personally valued that hamburger more than keeping the $5 in my pocket or spending it elsewhere.
Likewise, we could watch Dave, cooking and selling hamburgers all day and handing those out in exchange for $5. Again, nobody has enslaved Dave, or is forcing these exchanges. We can again make the conclusion that Dave would rather have my $5 than the hamburger he previously held in his possession.
I think those two observations are so clear that they do not need disputed.
Suppose I had just escaped from captivity and was so hungry (and Dave’s was the only close place) I would have paid $100 for that particular hamburger. Dave still sells the burger for $5. Alternatively, Dave is about to get the electric shut off because his business is in bad shape and he is $1 short. I walk in and he would gladly sell me ten hamburgers if I would hand over a measly dollar. I still pay $5.
The last paragraph demonstrates imperfect information in individual exchanges and a variety of other economic factors, some mentioned above (the value of not haggling over individual, small transactions, etc.).
To overall society, the fact that hundreds or thousands (or even millions) of people are exchanging $5 for a hamburger illustrates that the value of a hamburger is $5. No formulas or theories needed.
This is in stark contrast to Marx’s formula which seems to have no utility at all, even when combined with other things. If anything, his theory only confuses things because the result is meaningless while pretending to explain a macroeconomic event.
Of course there is. There is just no SINGLE value as there are too many variables that are dependent on circumstances and the individuals involved and they change over time. That’s why we have markets. To consolidate all that information into something usable.
You said so yourself that your time has value. You are probably not going to flip burgers for free. But you might if someone paid you. And the person paying you isn’t going to be selling them long if he can’t sell them for more than the cumulative cost of making them.
Saying something has a value that fluctuates based on market conditions over time is not the same thing as saying something has no intrinsic value.
The question is whether you value the burger more than Dave values $5 (or vice versus). Ignoring for the moment that restaurants typically don’t negotiate the price of food on a customer by customer basis, it would seem that your both get what you want out of the transaction and feel the value of the items being transacted is roughly equal.
If you’re using equitable as a stand in for “fair”, I have no problem. Where I have a problem was in Enterprise’s original claim where he wrote out a formula like $5=burger. If this is actually someone’s value ranking, an exchange would not take place. It may seem like a nitpick but it’s actually important if you want to make deductions based on human action.
It has intrinsic value. It does not have a specific intrinsic value in units other than it’s own. A banana has no intrinsic value expressed in dollars. You can exchange a banana for dollars but no one can accurately tell you what the value should be because that value does not exist. Only trade establishes a value and only at that moment and for that trade.
If I have, for example, 5000 tons of gold and I sold a pound for $10,000 does that mean I have 5000tons x 2000lb/ton * 10,0000 worth of gold? No. It means I have ~5000 tons of gold. I won't know the value till each ounce is sold.
This thread has reminded me of something I saw in passing a while back, which is apparently more noteworthy than I first thought: empirical evidence for the Labour Theory of Value.
As pretty much everyone in this thread, including Enterprise, is united in saying that such evidence does not - or even *cannot *- exist, I went back for another look.
As best I can follow them, these purport to show that data from various National Statistics supports the theory that both prices and profit rate can be predicted from labour input. However, I lack the training to fully follow, let alone criticise, the statistical/mathematical approaches used.
The critical points appear to be:
Cockshott and Cottrell has no easily quotable summary; it seems to me that the key points are: a) Across 47 US industry sectors, labour values correlate highly (0.983) with observed prices; b) across these sectors, higher capital:labour input ratios are negatively correlated with profit rates. Both a) and b) are in line with Marx’s predictions. Cockshott, Cottrell and Michaelson has a neater summary, which I shall quote in full:
Zachariah has a lengthier summary, which I shall excerpt:
Note that Figure 3 and Figure 2 of Cockshott and Cottrell apply the same analysis (capital/labour ratios vs profit rate) to different data and derive similar results, suggesting an element of replicability.
Anyhow, as I say I don’t have the background to really analyse these papers so I would be very grateful to anyone, (particularly Hellestal!) who can explain/criticise them.
Sometimes it’s hard to get data. We have to live with that, and imagine the sort of tests that we would do in a world of where gathering evidence was easier. That’s okay.
But any idea that cannot be tested, even in theory, is just a form of theology. It’s unconnected with reality. Marx wasn’t trying to build a theology. He thought his framework had genuine predictive power.
I believe this strikes at what Dr. Love was saying in post 10. If there is a new manufacturing technique that is so advanced, it requires fewer hours of work from the same workforce to produce the same amount of output, then we should expect the price of that good to fall relative to other goods that require more labor. This is exactly what an LTV would predict.
In that particular context, someone might claim that the LTV “works”. Any fudge factor between relative amounts of “socially-necessary” labor and relative prices can be attributed to wishy-washy things like measurement problems. The papers you posted take this general approach: using an arbitrary choice of relative amounts of labor input, they measure relative prices, and what ho!, they find a strong relationship.
This isn’t particularly surprising.
In that particular task, in the limited context of “commodities” produced by mass-manufacturing processes with employees, it does a good job. This is essentially what the papers you cited are saying. (But see below.) Now here’s the issue: modern value theory can accomplish exactly the same job. Using a standard economic theory of value, there are plenty of contexts where we should expect relative prices to correlate very strongly with relative amounts of labor input.
So what’s the problem?
I talked about this above. We want the best possible language.
The LTV works to an extent in describing relative prices within a particular context of “commodities”. Modern subjective value theory works on the same context, and it works on all other objects that are traded. Already we should be leaning one way instead of another.
But let’s narrow our range of inquiry.
Let’s restrict ourselves to “commodities”, the same context that Marx explicitly delineated. And we can go even further and narrow the discussion to mass-manufactured carpets produced in factories that have nearly identical set-ups. These factories produce roughly the same quality of carpets with roughly the same amount of labor time. But then one day, a very clever designer within one of the factories plays with the already-existing machinery, reshuffles what’s already there and makes it work better, and the result is a factory that produces higher quality carpets using identical amounts of labor. From the workers’ perspective, nothing has changed. They’re engaged in the same operations, taking the same amount of time, producing in their own view the same amount of output.
But from the buyers’ perspective, the carpets are noticeably superior. Now we have two different qualities of commodity, but each is made is with the same amount of labor. The interesting question at this point is how much the factory with the clever engineer can sell their carpets that use the same amount of labor.
This is the kind of question that breaks reality apart at the seams.
It’s an extreme example, yes. Sometimes sending an electron through a particle accelerator to bash into a wall is what you have to do. A real event of this happening might be nearly impossible to observe – the most likely analogous case is that some floorplan person notices that the physical placement of the machines could be improved to decrease internal damage to the output as it’s being passed from station to station. We’re not likely to see a pure event ever happening. But still, the event is clearly defined and easy to understand. It’s been broken down into its most basic pieces, and the pieces are each intuitively obvious. We know what would happen to the price of gold in the unlikely event that we invented a simple alchemy machine, and we have a good idea here, too.
What would we expect about the relative prices of these two different kinds of carpets? They require identical amounts of labor, but one carpet is of a higher quality than the other. So what are their relative prices? Which carpet will sell at a higher price?
The basic LTV is going to claim that the two carpets will sell at the same price. They have the same amount of socially-necessary labor, after all. Does that seem right to anyone? A modern theory of value is going to say that the higher-quality carpet will sell at a higher price – and not only that, but that the introduction of the newer, better carpet will cause the price of the original carpet to fall. Even when we restrict ourselves to “commodities”, the modern theory has potentially more to say about a wider variety of situations. It has more to say about “commodities”, and it can also help explain prices in other industry contexts, as well.
Now about those papers.
Cockshott and Cottrell are clearly sophisticated thinkers. They’ve thought deeply about the scientific issues involved. They know that prediction is important. They’re aware of the potential of simplifying assumptions (although there’s often potential for more tension here in the social sciences than in the something like physics, which is a topic they don’t really get into). And frankly, they provide very good evidence that relative amounts of labor, defined in various ways, provide a good way to predict relative price levels. But in the end, this result is not surprising.
The Zachariah (2006) paper is less sophisticated. This paper also does a comparison between relative amounts of labor and relative prices, and again (unsurprisingly) it finds a strong correlation. Then the paper tries to “test” another idea, and does it in ham-fisted fashion. I can appreciate that the ideal test, with the ideal data, would be extremely difficult. But I want an author to show at least some minimal awareness of what the ideal data would look like in a perfect world, then make some effort to find a proxy for it, however shitty, or explain the possible failures of the results given the lack of this ideal data. Unfortunately, Zachariah does not show any awareness of the potential problems with the test. No discussion at all.
Enterprise, my explanation for my problem “I am not making this up” is already in the OP, both before and after the section. I explain the importance of a clarifying language before that section, and then I point out the more problems with it in the paragraphs immediately following.
That does not seem to have been clear to you. My OP does not communicate that to you.
If you ever have time to work through these issues in step-by-step fashion yourself, at some length, then I respond to your own explanations. But at this point, it doesn’t seem worthwhile to write another long explanation to supplement the OP because if I can’t see how you would explain these ideas at some length, then I can’t fashion my own explanations in a different language that might make more sense to you.
Thanks Hellestal, that was really clear and helpful.
So, the LTV works - e.g., gives us a reasonably good model for pricing - in a lot of contexts, but falls down in other, more subtle ones. You mentioned the difficulty of relating social sciences to physics, but as an analogy what springs to mind is the relationship between Newtonian and Einsteinian physics. That is, Newtonian physics will give you a good handle on most problems, most of the time - but let you down badly in certain circumstances, such as producing accurate GPS results. Is that a fair analogy, or is it more akin to say, Lamarckism - superficially seems to match up with reality, but so off the mark that it’s utterly misleading from the get-go and just leads you down a blind alley from which you can’t get to the right answers?
I don’t want to pre-empt Hellestal (fantastic post Helelstal) but to me it’s not closely akin to either. It doens’t break down under subtle contexts, it breaks down under most coarse circumstances. It only ever works in a very broad correlative sense using measurement techniques that are coarser than the actual subject being observed.
In terms of physics it lacks the utility or sophistication of either Newtonian or Einsteinian physics. The best comparison in physics would be the theory that heavier objects fall faster. That’s not something that is predicted by any “real” physics theory.
As with the LTV, the theory that heavy objects fall faster gives some predictability in some real world situations, but only in circumstances where other factors are totally irrelevant. It predicts that a feather will fall faster than a hammer, because in that one case air resistance is totally irrelevant. But as the object with the greater weight becomes relatively more resistant it breaks down, until we start predicting that a sheet of tin foil will fall faster than a fishing sinker. And it also breaks down when in circumstances where wind resistance isn’t a factor, such as in a vacuum.
The theory only works because in many cases “heaviness” (ie mass) is *one *of the major factors in rate of fall. So in circumstances where it is *the *major factor the theory works quite well. But as it becomes less and less important the theory becomes less and less useful. It works in a very limited set of circumstances because there is an *underlying *correlation between mass and rate of fall: that is gravity. But mass doesn’t directly determine rate of fall in any way at all.
The LTV is the same. It only works because in many industries labor is one of the major
factors in cost (ie value). So in circumstances where it is the major factor the theory works quite well. But as it becomes less and less important the theory becomes less and less useful. It works in a very limited set of circumstances because there is an underlying correlation between labor and value: that is relative economic inputs. But labour doesn’t directly determine value in any way at all.
IOW, LTV isn’t even at Newtonian levels. It’s below even Cartesian level physics. It’s a first-pass, intuitive, medieval level understanding of economics. It happens to often work for the same basic reason that “heavy objects fall faster” often works: it concentrates on what is often a major factor in determining a phenomenon. Where that factor overwhelms all else the theory works fine. As other factors become increasingly important, it becomes increasingly inaccurate. And once other factors overwhelm the one factor being considered, its predictions become completely incorrect.
In contrast, Newtonian physics is a good model that fails in some very specific circumstances and gives highly accurate predictions, not merely correlations, under most real world conditions. Both Newtonian Physics and Relativity predict that heavier objects will not fall faster except where mass overwhelms all other factors and both predict accurately the rate of fall of various objects under various circumstances. The same is true of modern value theory. It predicts value in circumstances where labour is the overwhelming cost, but it also works where labour is insignificant.
However the “heavier objects” theory and the LTV are both beguiling and widely believed misconceptions. And both misconceptions have led a lot of people astray and been an impediment to understanding the way the real world works.
It “works” in the sense that in companies that survive and we can assume make a profit or at least break even that there is a positive correlation between the cost of a commodity that takes a significant amount of labor and the cost of labor. But a positive correlation doesn’t tell you much you didn’t already know does it?
Tastes change and what was once socially necessary can become socially unnecessary in retrospect. That’s why it’s circular. It’s only socially necessary if there is demand. Demand can fluctuate rapidly. There is no economic purpose of treating labor as a special input in production.
Agreed. It is not that the LTV is wrong, it is just a complex, professorial way of coming to a conclusion that can be far more easily reached by other rather obvious and mundane common knowledge. It’s application imparts no knowledge that is not more completely understood by simple supply and demand.
The “socially necessary” qualifier turns the whole theory into a subjective judgment about what the public demands. Buggy whips? Not socially necessary. Gold? Socially necessary. Burning priceless works of art. Not socially necessary. The entire theory pretends to be something it is not…
I know I’m running my head against a very, *very *thick wall here, but one more time: it is “socially necessary labor time”, with “socially necessary” modifying “labor time”, **not **the commodity whose value is equal to the socially necessary labor time for producing it. The word “commodity” automatically includes the “socially necessary” you’re critiquing here, which is in Marx’s terms (and everybody else’s, I think) “utility”. As in: if nobody wants to trade you for it, you’ve not made a commodity.
Please, DO see my reply to UltraVires: “socially necessary” does not mean what you think it means. Marx is entirely in agreement with you: It’s only socially necessary labor if there is demand, because only where there is demand have you produced a commodity. I’ve been saying this for three pages now. It’s not so hard to grasp, is it?
Hellestal, I appreciate your perusing fo the interesting papers provided, but you know, do you not, that the bolded thing above, is almost literally the only thing that Marx at the point where he introduces the LTV is trying to do? That’s it. He started with commodities; he says something about how the value of commodities comes from labor.
I agree that modern value theory appears to grasp the constitution of value of different things tradeable, from land to equities to futures to what have you. The issue with this is that in claiming this is “better” (which I think you are implicitly doing, yes?), you are simply going to a different idea of what constitutes value (one which you’ve defended before and we can agree to disagree on); the problem with this, to pick up your formulation, is that the term “value” here designates something different from Marx’s designation. That’s fine, as long as we can agree that either of these values cannot be validated as the “true”, or “real” form of value. That will always be determined ideologically: if you like to think that value is something that can fluctuate with every whim of the market (or, like one presidential candidate does, with one’s own personal estimation), then you will come to different conclusions about political economy than if you prefer to think that the only things that hold actual value are labor-produced commodities. The problem arises when one side wishes to naturalize its conception of value.
It’s a clever idea, but it’s perfectly easy to counter: two things of different quality are two different commodities to Marx. Yes, he never says “high quality coal” and “low quality coal,” but rather “coal and shirts,” but it’s crystal clear that these items would be simply, different commodities.
Hellestal, I appreciate the polite phrasing! I’m not sure what you mean by “step-by-step” fashion, and I’m not sure how far above and below the paragraphs I’m supposed to take in expand. But let me run you down my problems with this:
[QUOTE=Hellestal’s OP]
There were hand-looms. Using a hand-loom, it took a certain amount of time in order to create woven fabric. Then BOOM. The power-loom is invented. SHAZAM. Half the effort is required. KAPOW. The old hand-loom people are doing exactly what they did before but can’t produce as efficiently as workers using the new equipment. With the assistance of the power-loom, workers can produce the same output in half the time. So after the invention of this new splendiferous device, if there are any people still out there in the world using the old hand-loom instead of the new power-loom to create their goods, what happens to the value of their produced goods?
The value of the labor crystallized in the output of their hand-looms drops in half automatically. By definition. This is how he has defined the word “value”! They put in the same amount of effort, using the same techniques they always used, but given that other people in the world are now working with a new machine, the “socially necessary labor-time” required for their output is half as much.
[/QUOTE]
In fact, the SNLT would be (LT of hand-looms+LT of power looms)/(output of hand-looms+output of power-looms), since SNLT is the average of the existing production systems, not that of the fastest, unless, of course, the fastest can supply all market demand. This is a nitpick, of course.
What do you mean “get credit”? They get paid the same as yesterday, presumably, for a long while until their employer discovers his commodities don’t sell, and then he either modernizes or collapses. But do you actually disagree that the product which the hand-loom factory owner will bring to market will be only worth as much on the market as the product of the power-loom factory? And if this is now half-price, then the hand-loom woven fabric is now “half as valuable” (for a more loose use of the term) than it was the day before, when it sold for twice the price? Does this market-price have anything to do with the wages that the hand-loom factory pays? Can it ask for more on the market just because it took it longer to make fabric? If not, then how are you not essentially conceding the point?
Yes. So? What is your issue with this? Would you like the value to remain constant no matter that everybody else is making to with less labor?
Subsistence lifestyles is not, of course, what Marx is talking about. Marx is talking about capitalism, and the production of commodities through wage labor. Do you mean that an economy where all workers get paid only subsistence wages (for given definitions of “subsistence”, a simple truth of capitalism)? Then you should probably say so clearly.
Do you mean to say that ALL commodity production, everywhere, all at once, is suddenly so much quicker?
Wait, and are they selling their output somewhere, on the market, as commodities? Who to? It seems like you’re talking about “a (single!) economy”, which, to Marx, would essentially mean “the world”–since he realizes that all commodity production takes place in what is essentially a global economic system now. But then you really run into trouble with value, which is, of course, a transactional, relative thing, which really comes to the fore only in market exchanges.
Let me make this crystal clear: you’re positing a situation in which *all *commodities in a capitalist economy suddenly can be produced with 1/6 the outlay of socially necessary labor time? Because, just to reiterate, the labor theory of value pertains only to value of commodities produced under the conditions of capitalist wage labor. If that’s the situation you’re positing: I doubt Marx has given a single moment’s thought to this utterly, utterly unlikely event; but logically, since value is something that becomes pertinent only in exchange, and since *everything *is now 1/6 as much labor intensive to produce, the LTV of value would find values constant in this (somewhat unlikely) hypothetical.
This, again, is what I’m saying. Your hypotheticals and ostensibly simplifying rephrasings and re-argumentations do not, in fact, elucidate the LTV in simpler words: they make a hash of it. There’s plenty of room to find fault with the idea, to be sure, and plenty of people have felt they’ve done so, but this isn’t it. Nor is this:
[QUOTE=Hellestal’s OP]
I’m going to define a new notion of value called WHOO!-value. There is, by definition, 100 units of WHOO!-value every day. These units are an abstraction. No matter how much effort goes into the production of each good in an economy, I define that all finished goods are to have WHOO!-values distributed among all of them weighted by their final sales prices. For example, in an economy where the total production is 100 hats a day for one dollar apiece, then each hat represents a single unit of WHOO!-value.
Let’s suppose now that technology changes, and the economy can produce not only a hundred hats at a hundred dollars apiece per day, but also 50 shirts sold at two dollars apiece.
The nominal economy is twice as big. 200 dollars daily are changing hands instead of 100. Each person can enjoy not only wearing hats but also wearing shirts. By definition, each hat now contains half as much WHOO!-value as it did before. This is because the 100 daily units of WHOO!-value must be distributed among both hats and shirts now, meaning that the hats are no longer as WHOO!-valuable as once they were.
Conclusion: The hats contain only half as much value, now that shirts are being produced. This seems a bit problematic, to say the least, but let’s ask a slightly different question.
Is WHOO!-value “factually” wrong?
Obviously no. It is what it is. It is as it has been defined to be.
[/QUOTE]
Your WHOO!-value is; Marx’s labor value, by contrast, has not been defined to be, but rather argued to be, on the grounds that labor (unlike WHOO!s) are the common substrate of all commodity production, a common substrate which does NOT in fact depend on a set arbitrary and unshifting number, but rather on the really existing labor power in a capitalist economy, labor power which may easily shift (given deaths and births and shifting age patterns and so on). Your WHOO!s have none of this fluidity, and therefore give an entirely faulty picture of what labor is, to Marx (and, it should be said, in real life, such as it is).
Which, somewhat unsurprisingly, is why Marx did not go with WHOO!-value!
Hellestal, I’m assuming you genuinely believe that you are correctly re-writing Marx’s theory for the benefit of elucidating its problems. But as it turns out, you are not: you are oversimplifying it to a degree that what ends up on the digital page must appear ridiculous–and I agree, your paraphrasings show a ridiculous theory. But it’s not Marx’s theory. You are probably aware of the so-called “Corn Law of Value” critique, its acceptance by some Marxists economists, and its refusal by some. You’re clearly restating it in your WHOO!-value above (except corn has the benefit of actually existing, like labor); it would seem to me that if you meant to elucidate Marx’s theory with all its faults, you should have the honesty of pointing out why, in the system of Marx’s thought, labor has a thoroughly unique role, and why it has that role.
I’m not sure there’s a way to convince you that you are doing the theory of value a disservice; all I’m really holding out for is that you might be willing to say that reasonable people might, given different political predilections and ideologies, come to prefer different conceptions of value, none of which have any claim to what’s often rather blithely called “truth.”
[I’m really sorry about all these posts, but it DOES seem easier to all concerned this way.]
A). It’s not my theory.
B). You’ve never actually asked me what it explains, I don’t think, and YET I’ve answered this question already: to Marx, it explains where surplus value comes from, how exploitation works, how capitalist economies come to find themselves in an ever increasing need to lower labor costs (through innovation or exploitation), and various other things that it takes Marx three volumes to describe. If you think it’s a gotcha if I don’t paraphrase these for you, be my guest. Some critics, as others have pointed out, actually think it explains where value in an economy comes from!
C). If you think it’s a gotcha to complain about a theory’s inability to offer quantifiable data when that theory is not meant to offer quantifiable data…then…have that gotcha, too?! I’m honestly baffled how you cannot understand that that is not what the LTV does. Like a helicopter that doesn’t make ice cream.
Do they? It’s an honest question. I’d like to know if there’s evidence for this–it seems to me more logical that people will haggle longer depending on how expensive an item is relative to their own wealth?
Well, I do not understand how this could be taken for an argument, period! *Why *would you not exchange two things valued equally? Deduce it logically for me, because I can’t deduce it logically. It seems like a failing on my part…
So here is what your theory of hamburger value looks like to me, bolding my problems: You say that I will buy a $5 hamburger because I value the hamburger more than $5 dollars, but how much more, per your cite, it is even fallacious to ask, because [??]. But it’s in fact this **[??] **that’s crucial, because unless I valued the hamburger more, I would not exchange my money for it, because **[??]. **Price is therefore NOT value but value remains entirely elusive? And this is not an equitable exchange because we each got something more out of the exchange than we put in, though neither of us, in fact, knows how much more, because it’s fallacious to think this way? But it’s STILL wrong to say it’s equitable, because [??]. Is there in fact ever a price where I will say “hey, this price is EXACTLY how much I value my money,”? If so, why can’t I decide that, all things being equal, I wouldn’t mind passing my money over for your hamburger?
Or, in the simpler terms that explain how this seems circular: This reads like we exchanged money for hamburgers because each of us valued the other thing more, and we know we each valued the other thing more because we exchanged them. It’s, at this point, an article of faith that the second half of the sentence is true.
It’s almost definitional. Nobody will give up X to a stranger to obtain X. It makes no sense.
But perhaps a more concrete and provable way to understand it is to accept that it takes time and effort to trade an item. It also incurs a risk: item could be defective, could be a scam etc. If you truly value Item X exactly as much as currently-owned item Y, you would never make the trade. There has to be some sort of compensation for the effort and risk of the trade.
Imagine you have just purchased a shirt in a shop. Someone else walks out of the shop with the exact same shirt, same size, colour etc. They offer to swap you their shirt for yours. Would you trade? The two items are apparently of exactly the same value, of course, which is why you would never trade. It’s not worth the effort and risk. You can play out the same scenario with any item you like. A five dollar bill. A McDonald’s hamburger. A car. A ticket to a concert. If you are normal and honest, you will admit that you will never make the trade if it appears that the trade is perfectly equitable. You will reject the trade because it will take an effort to trade, and you incur a risk by trading a known for an unknown.
People will only trade items if they value the new item higher than the old. They’ll trade their last blue shirt for a stranger’s last green one if they prefer green, even if both are the same price on the shelf, because the marginal value of the colour compensates the risk and effort of the exchange.
In the real world, any trade involves risk, time and effort. People won’t spend the time, make the effort or take the risk if the best they can hope for is to end up with goods of exactly the same value as they started with. That makes no sense.
Some people might agree to some of the trades I posted above if they think they are doing someone a favour by making the trade, but that is value in itself. Plenty of people will *give *a stranger a five dollar bill if they are asked, no trade, out of generosity. But that’s not what we are discussing. We are discussing situations where the all value is equitable, emotional as well as financial.
Blake, I appreciate the effort you’re taking to explain this.
While that may be so (or may not be…I don’t really see why I would not swap, except of course that there’s no point in such a trade), the problem with this analogy is that it’s not the way market exchanges work. X is not swapped for X on a market, because I obviously already have X. I swap X for Y.
Are you seriously willing to prejudice your argument by saying I *must *accept it “if I am normal and honest”? And if I don’t, I’m an abnormal liar?
I think you mean, above, that any “perfectly equitable” trade must be one of identical items for one another, which, of course, is not what the market does, as noted above. But aside from that, the argument that I incur a risk by trading a known for an unknown always holds true, no matter what; and it appears that you suggest this risk figures in exchange by virtue of the fact that I don’t really value my hamburger at $5, but at something bigger, which is why I am prepared to part with $5 and still make a gain in value. Only that value is magical: it can’t be quantified, it can’t be measured, it need not be symetrical between me and you, it can in fact magically increase if I’m really satisfied with the quality of the burger or really hungry, and magically decrese if it’s crap–all based on my subjective impression of it?
Yeah, well…says you. But you’ve not really logically derived this yet. Nor is it entirely clear how this is a useful way of thinking about value.
Why? I’ve $5 and want a burger valued $5. So I buy a burger. I’ve traded items of the same value. I can eat my burger. You can use my $5 to pay parts of your rent. None of this requires a magical and unquantifiable increase in the value of the burger, or the $5, to happen.
Now, to be sure: in some ways this argument of yours and Marx’s argument are actually the same. Value, for Marx, is (as I have said) use value and exchange value embodied in a commodity. For Marx, use value is not quantifiable: it’s simply a commodity’s utility, and of course I only exchange for commodities that have utility for me. Marx cancels out utility in the exchange equation, realizing that it’s a given, a necessity, and entirely unexciting as a proposition. Your argument seems to have a simultaneous desire to figure utility directly into exchange value (by saying that any trade must produce more value than the merely nominal values of the exchange) while at the same time not saying anything about how to figure the concrete value apparently necessarily embodied.
Simpler, perhaps: I am suggesting (via Marx) that we exchange goods at an equilibrium in value in order to increase our utility–in my version, my utility is not part of the value of the commodity: in other words, at least for this simplified version, the thing’s price is its value. In your version, my utility IS part of the value of the commodity: but this means that it’s price is *not *its value, and in fact its value remains entirely subjective. In other words, we use different meanings of the word “value.” My version, derived from Marx, looks rather materialistic; yours, begging your pardon, fairly magical.