# On the Many Failings of Capitalism **URL:** \ **Category:** Great Debates\ **Created:** [January 15, 2015, 5:51pm UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911 "2015-01-15T17:51:38Z")\ **Posts on this page:** 20\ **Page:** 8
**Author:** ![Budget\_Player\_Cadet](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/budget_player_cadet/32/205_2.png) [@Budget\_Player\_Cadet](https://boards.straightdope.com/u/Budget_Player_Cadet)\ **Post date:** [January 18, 2015, 1:38am UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/141 "2015-01-18T01:38:43Z")
> [@Sam\_Stone](#): > > i disagree with you. A better way to look at it is that all those used goods sitting in basements and storage lockers are like resources in the ground - eBay found a way to allow us to dig them up. > > So I guess you could say they have value in the sense that there is value out there somewhere in undiscovered oil fields, but until someone goes out and gives out a way to find it and extract it and deliver it to market, its value is unavailable to us. Bingo. And unavailable value may just as well not exist at all. I mean, if I own a plot of land with a massive treasure I cannot access, does that treasure affect its value? What if I bought it for 10k, then sold it to someone who could access the treasure for 30k - who, exactly, lost something here? The market is not a zero-sum game. This is such a basic thing in economics that I’m pretty shocked someone could get it wrong. Then again, we still have people who don’t get that 0.99\_ = 1. ---
**Author:** ![Stringbean](https://avatars.discourse-cdn.com/v4/letter/s/d6d6ee/32.png) [@Stringbean](https://boards.straightdope.com/u/Stringbean)\ **Post date:** [January 18, 2015, 1:50am UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/142 "2015-01-18T01:50:17Z")
You can buy a plot of land on Mars, but no one can access it…yet. Does that land have value? ---
**Author:** ![Budget\_Player\_Cadet](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/budget_player_cadet/32/205_2.png) [@Budget\_Player\_Cadet](https://boards.straightdope.com/u/Budget_Player_Cadet)\ **Post date:** [January 18, 2015, 2:04am UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/143 "2015-01-18T02:04:37Z")
> [@Stringbean](#): > > You can buy a plot of land on Mars, but no one can access it…yet. > > Does that land have value? Well, why did you buy it? If you thought that it was because of later colonization, then you made an investment - a really shitty, poorly-thought-out investment, but an investment all the same. I’d say you lost pretty much all of that value, and someone else gained it. ---
**Author:** ![ITR\_champion](https://avatars.discourse-cdn.com/v4/letter/i/c67d28/32.png) [@ITR\_champion](https://boards.straightdope.com/u/ITR_champion)\ **Post date:** [January 18, 2015, 4:56am UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/144 "2015-01-18T04:56:08Z")
> [@Enterprise](#): > > See the link I provided on South Korea. The same, actually, goes for Japan: Japan’s vaunted “capitalist” economy also heavily involved state organization and control, as does Singapore’s. (Hong Kong’s not a country anymore). I’d say something about Taiwan, but I know nothing about Taiwan. Incidentally, you’re having it all kinds of ways right now. Vietnam has experienced [positive growth](http://www.tradingeconomics.com/vietnam/gdp-growth) for a decade and more, even in the global recession; [Japan hasn’t](http://ieconomics.com/japan). Communism outperforming capitalism by capitalism’s very own standards? This line of debate started when someone pointed out the obvious side-by-side cases where we can compare capitalist and communist economies, such as Japan and China, or the two Koreas. But earlier, in post 71, your first paragraph suggests that the large number of working poor in four Asian countries (China, India, Bangladesh, and Vietnam) demonstrate a point about the poor under capitalism. Now you’re crediting the success of Japan and South Korea to “state organization and control”. Japan and South Korea are much more capitalistic in their economic makeup than China, India, Bangladesh, and Vietnam. Japan and South Korea are not 100% capitalist, certainly, but the large majority of economic activity in those countries is in privately owned businesses. Those businesses employ workers, make profits, and do all the things which you’ve described by negative terms such as “exploitation”. Thus you can’t just dismiss the economies of those two countries as not capitalist, especially while trying to use India & co. as examples of the poverty that result from capitalism. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [January 18, 2015, 6:28am UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/145 "2015-01-18T06:28:46Z")
It semi like 4 pages of posts could have been saved by linking to the wiki page for comparative advantage. ---
**Author:** ![PlaceboTarget](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/placebotarget/32/1073_2.png) [@PlaceboTarget](https://boards.straightdope.com/u/PlaceboTarget)\ **Post date:** [January 18, 2015, 8:45am UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/146 "2015-01-18T08:45:41Z")
Even though capitalism were the best conceivable economic system, this should not prevent critics from noting capitalism acts tyrannically toward individuals. Above all, the corporate society appears to judge human beings solely by their ability to consume goods. Moreover, the global financial system and the “cult of money” do not enable people to pursue their happiness – on the contrary, they tend to make humans miserable. Thus, capitalism turns out to be the source of many of the citizens’ insatisfactions and an insidious form of dictatorship. Everywhere one looks nowadays there are wasteful and unstable economic mechanisms that can only end in malfunction. (The counter argument that certain capitalist countries fail to fare well only becaue they’re not capitalist enough is no different from the communits’ argument that socialist systems fail to fare well because they’re not marxist enough.) Market failure is a term used by economists to describe the condition where the allocation of resources is inefficient. Large corporations constantly create false needs in consumers and render objects obsolete so that new products will be purchased. It is a profit driven system based on selling as many products as possible. This trend has led to a growing garbage problem in which trash is generated at an increasing rate every year. But - since big corporations answer only to important shareholders - human rights issues, social justice issues, and environmental issues are completely ignored. By creating large concentrations of wealth at the hands of a small minority, capitalism results in a loss of power for the vast majority of people. Not only are large corporations legally required to pursue profit without concern for the social welfare, but they also influence political campaigns and government policy, including the policies of regulatory agencies. They are directly involved in modern imperialist, colonial and counter-revolutionary actions around the world. Therefore, the key agents of capitalism turn out to erode human rights or civil rights and to unscrupulously circumvent the principles of democracy. ---
**Author:** ![Enterprise](https://avatars.discourse-cdn.com/v4/letter/e/76d3ee/32.png) [@Enterprise](https://boards.straightdope.com/u/Enterprise)\ **Post date:** [January 18, 2015, 8:58am UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/147 "2015-01-18T08:58:04Z")
> [@John\_Mace](#): > > Does anyone, outside of Marxist theory, use this idea of “exchange value” today? I don’t know. Does it matter? Why? > [@](#): > > Labor is great, and it definitely has value. But the real wealth generator is intellect. Doing things better than before through brainpower, not muscle power. It’s quite clear that the main problem here is that you (and **Will Farnaby** , and **Sam Stone** ) still don’t understand what’s meant by labor, while you are continously skipping steps in the process of determining what value is. Intellectual labor is labor. Manual labor is labor. And whatever it is you’re investing when you say “suppose I invest in a breeding program,” at some point in time human labor of some sort went into producing the value of your investment. > [@](#): > > Emphasis added. Not just people, but most economists. A) cite. B) so? Last I checked, the correctness of a proposition was not determined by the number of people who hold it to be correct. Is there anything in particular that you can point to that’s wrong about the theory–may it’s incomplete (that’s a debate Marxists have had), but where do you think it’s wrong on its own terms? > [@](#): > > And I have to say that for someone who isn’t proposing an alternative system, everything you’re posting screams of Marxism. True! Like when I said: [QUOTE=Enterprise] My alternative, as I said, would be something like socialism or communism… [/QUOTE] ---
**Author:** ![Enterprise](https://avatars.discourse-cdn.com/v4/letter/e/76d3ee/32.png) [@Enterprise](https://boards.straightdope.com/u/Enterprise)\ **Post date:** [January 18, 2015, 9:23am UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/148 "2015-01-18T09:23:21Z")
> [@WillFarnaby](#): > > I have taken the inputs of the chair and made them less valuable. If I took _The Card Players_ by Paul Cezanne valued at $259 million and cut it up into 10 $2 placemats using $20 labor, I have impoverished society. I have taken something someone valued at $259 milion and something someone valued at $20 and created something someone valued at $20 instead. Destruction is not labor, quite simply. > [@](#): > > No you have taken $200 worth of wood and $200 in labor, exhausted them so that they no longer exist and replaced them with a chair. The chair did not exist, but the labor (time) and wood existed. Now they don’t. (of course the wood exists, but not in its original $200 dollar form) Both exists: the wood remains, all its original 200 now incorporated in the chair; and my labor exists, all of its value likewise incorporated in the chair. It has a value of 400–what its price may be is a different issue. > [@](#): > > This is your key stumbling block. Value is subjective. It does not come from labor. It comes from the valuations of individuals. Digging a whole and filling it in is valuable from your perspective. Destroying crops is valuable in your perspective. Something is wrong here, right? Yes: your understanding of what labor is. No, it’s not valuable from my perspective, and repeating it won’t make it any truer. Notice the circularity of your value theory: value is what you value something at. > [@](#): > > No actual value? My profit first is a signal that I am doing something right by society. Secondly it could be described as the value of my forethought, and entrepreneurial expertise. > > In a free market, yes. If you are making the most profit that means you are creating value for all of your customers. Without you, your customers would have the inputs, but lack the time, expertise, and/or forethought to create the outputs, which are the things they desire. The only thing that making profit is a sign for is that you’re making profit. I’m wavering between the puzzled and the horrified by your and **Sam Stone** ’s contention that entrepreneurial profit=doing something right by society. I’m not even sure where a discussion would go from here, to be honest. How can anybody look at the contemporary market place and claim that everybody who’s making a profit in it is thereby benefitting society? Sorry, I’m really not capable of wrapping my head around this right now. I’ll get back to you when I have. ---
**Author:** ![Enterprise](https://avatars.discourse-cdn.com/v4/letter/e/76d3ee/32.png) [@Enterprise](https://boards.straightdope.com/u/Enterprise)\ **Post date:** [January 18, 2015, 10:23am UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/149 "2015-01-18T10:23:50Z")
> [@Sam\_Stone](#): > > Capitalism doesn’t ‘need’ growth. Japan has a collapsing population, and it’s hard to see how they will be able to maintain economic growth in the face of that. But capitalism will still allow them to manage the situation better than any other system. But here’s the thing: Japan isn’t capitalism. Capitalism is a global economic system. Japan may cope without growth (I doubt it, because, unlike claimed, it’s quite clear that economic growth is _not_ a function or a consequence or a requirement that develops from population growth–otherwise, why not keep economic growth in line with population growth?), but capitalism will not and cannot. I though you had agreed? Or did you mean that economic growth is really solely required to keep up with population growth? The link I provided explains the (Marxist) interpretation of which capitalism requires constant growth (in simple terms: each capitalist needs to retain his comparative position in an evolving system of greater production and greater rates of profit, both of which require outlets). You actually point this out below, so I suppose you agree that capitalism (the system) requires constant growth. > [@](#): > > And if you think your system doesn’t need growth, you might like to ask the former Soviet Union about that. So long as your population is growing, you need economic growth. As your population ages or your social benefits increase you need economic growth to handle the additional costs. As the other countries of the world grow and their technology improves, you have to grow and improve your own to keep up, or you will start losing exports. Countries that do not grow economically do not survive. **Sam** , please, do me the credit (as I do you) of at least trying to understand what I’m saying. In the very post you’re quoting, I say: “I’m not even disputing that socialism will need production growth if population growth persists: socialism does not, however, require it for its own perpetuation, but only to the extend actual human beings need it.” We’re fully agreed on everything else you’re writing here. > [@](#): > > Peak oil is a laugh. It’s hard to maintain that we’ve already hit it when oil reserves are increasing, major new discoveries are still happening, and the price of oil is lower than it’s been for decades. > > The helium issue is a result of government mismanagement of a resource, not the market’s. I’m not sure how helpful that argument will be when we run out–my point, again, again, again, is not that governments manage everything great, but that eternal growth is already now visibly reaching the end of its tether–for whatever reasons. Rare earths are a possibly other example; or clean water resources (did you check the link?), or copper, unless I’m mistaken. At any rate: we can boil this down to a simple set of questions: Do you believe capitalism requires economic growth? Do you believe resources are finite? If you answer yes to both (and I’d really like to see how you couldn’t, so if you say no, an explanation, or a link to an explanation, would be great), then you admit that the system has a fundamental problem. > [@](#): > > You need to look up the difference between microeconomics and macroeconomics. Yes, planning happens all the time - I plan for my retirement, I plan to go to the movies tomorrow, I plan to do lots of things. Those are micro decisions. When we are talking about planning at the national level, we’re talking macroeconomics, a completely different thing. You’re acting like central planning is functionally the same as the aggregate result of millions of micro decisions. That’s the core of the debate, and I have given you many reasons why this is not the case which you have failed to respond to. I’m really, really, getting tired of having to say the same things over and over. I come to this in good faith, but I see little of it in return. I have said, over, and over, and over, that I don’t advocate central planning, and I’m not thinking in national dimensions. Should I put it in bold? At the same time, I have _also_ pointed out, as in the example of South Korea and Japan, that \*some forms \*of planning work _even at the national level_. I don’t draw from this the conclusion that all forms of central planning work. I merely point out that it’s not correct to disclaim the possibility wholesale. > [@](#): > > And how much energy is used to make the paper? How many energy and labor was expended making the factory that made the paper? How much effort, capital, and energy is required to ship the paper to stores and warehouse it? How much energy does it take to recycle the paper? > > There is no scenario in which you can reasonably claim that a digital representation of a document represents more resources than a paper document. You’re doing yourself and me a disservice by saying (without a shred of evidence) that there is “no scenario” where I can say that. I said “it’s debatable” (because I don’t have the numbers); you say “you’re wrong”. I may yet be wrong, but I won’t be wrong by fiat… > [@](#): > > But sometimes you can’t do that, and there is an honest role for government in that case. I don’t think I’ve seen a single person in this thread deny that. Yet you keep going back to this as if it’s some crucial difference. Only because you keep going to back to the idea that the market manages well through supply and demand, and then blithely accept “well, not _in every_ case, of course.” > [@](#): > > Except you seem to do exactly that when you think it’s convenient to your argument (as you thought you did when bringing up South Korea). So really, you’re just cherry-picking what you want to respond to, aren’t you? If you have a concrete question that you think I have missed, or a major point, tell me, and I’ll tackle it. I brought up the example of South Korea because somebody suggest South Korea’s relative advantage over North Korea was because of free market capitalism, and I said well, there’s a bit of debate here about the nature of government planning in South Korea (at least); in other words, I’m doing the opposite of contrasting, namely pointing out that there’s really less contrast than people apparently think. > [@](#): > > You don’t know what you’re talking about. Hedge funds protect people from risk. Speculation and futures markets communicate information about the future value of goods, so that we can take steps to find alternatives or adjust business and consumption gradually instead of in a crisis. > > [Snipped the example.] > > That’s how futures markets give us information that allows us to conserve resources that will be more rare or valuable in the future. It’s a damned good thing we have those speculators working hard to suss out that information. **Sam** , it’s hard to take this argument seriously when you don’t qualify it anywhere with an “ideally” or a “can” or a “that’s the role they are supposed to play” (at any rate, cite?). Where were you in [2008](http://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%9308), when (among many other market failures) a failure to correctly predict the future price of housing caused a massive economic failure? Check out also the quote at the bottom of [this article](http://en.wikipedia.org/wiki/Exchange_value) for an economist evaluating what goes on in market prognostications. It’s not that the guy’s necessarily correct–it’s that there’s affirmatively room for doubt about this blessed role of the hedge fund. > [@](#): > > I don’t agree in general, but I will agree that the playing field isn’t level, and that the companies that have bought special access to information, or twisted financial laws to their benefit, or who have otherwise managed to game the system are a bad thing. But these are also the kinds of people who have the most access to the corridors of government, so it’s pretty hard to stop it. Just ask President Goldman Sachs - the last four of them. True, that. > [@](#): > > I’m tired of having to debate using discredited Marxist terms. Value has nothing to do with labor. I can labor for a year on a painting, and it won’t be worth anything to anyone. I’ll actually destroy value by getting my paint on a perfectly good canvas. Cite that they are discredited (an no, “the Soviet Union collapsed” isn’t a cite)? I might as well say I’m tired of having to debate people who deem terms discredited which they evidently don’t even understand. Labor isn’t just “doing stuff;” it’s only labor when you’re making a commodity. A commodity becomes a commodity only in the act of exchange. > [@](#): > > Tell me - if I hire you to make that $400 chair, and then I hire someone else to chop it into kindling, where is the value? Is the kindling worth more than the chair? After all, it took labor to turn that chair into kindling. But what if there’s an additional pile of kindling right beside it in the form of the raw wood that could be used to make an identical chair? Which pile of wood has more value? One has a lot of labor behind it, the other none. But they are identical. So where did the value go? Are you going to exchange the kindling? If so, the value of the two piles of kindling are exactly the same, and you’re a chump for hiring somebody to smash a chair, as that’s bound to have been a waste of labor. Value is determined by socially necessary labor time. Which is why, given two guys building chairs, the guy who builds four chairs in eight hours has produced more value than the guy who builds one chair in eight hours: apparently two hours is the socially necessary labor time to build that chair, and the other six hours are (sad to say) wasted (in as far as value creation is concerned). > [@](#): > > ‘Value’ is meaningless outside of the context of an individual. Your chair has a lot more value to a person with none than with someone with more chairs than he needs. How much more? > [@](#): > > Consider ebay. Ebay creates tremendous value just by allowing people to trade goods that already exist. I have a TV I no longer use, and it has zero value to me. So I sell it on ebay for $50. The person who bought it values it more than $50, and I value the $50 more than the TV. My total value went up by $50 since the TV was worthless to me, and the other person’s total value went up by whatever he values the TV at minus the $50 he paid. Let’s say it was worth $100 to him. So he gained $50 in value, I gained $50 in value, and neither of us created a thing. We just engaged in a transaction that moved a good from a low-value purpose to a higher-value one. What do you mean when you say “it’s worth $100” to him. That he would have paid 100, too? Well, then you just lost 50, didn’t you, because you’re a bad salesman? What if it’s worth $20 billion to him? Has he just gained $20 billion (-$50)? Is there a possible upper limit to what I can value things at? What are the consequences to the overall wealth of society that stem from this transaction? > [@](#): > > See my discussion of hedge funds above. And yes success at selling goods means you’re helping many people. Do you think all those people who have iPhones and iPads feel their lives are better for having them? If so, do you fault Steve Jobs for making billions by selling them? Do you not think he benefited society? As I noted to **Will** , I’m just not capable of wrapping my head around your thoughts on this matter. It baffles me. I can’t see how selling people stuff is benefitting society, or “helping” people–at the very least, I find it vaguely offensive to those who (without making a profit) really help people. ---
**Author:** ![Alessan](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alessan/32/465_2.png) [@Alessan](https://boards.straightdope.com/u/Alessan)\ **Post date:** [January 18, 2015, 12:09pm UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/150 "2015-01-18T12:09:51Z")
Well, the supermarket definitely benefited me by selling me these eggs I’m eating right now; if they hadn’t sold them, I’d be hungry. ---
**Author:** ![PlaceboTarget](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/placebotarget/32/1073_2.png) [@PlaceboTarget](https://boards.straightdope.com/u/PlaceboTarget)\ **Post date:** [January 18, 2015, 4:05pm UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/151 "2015-01-18T16:05:36Z")
> [@Alessan](#): > > Well, the supermarket definitely benefited me by selling me these eggs I’m eating right now; if they hadn’t sold them, I’d be hungry. Isn’t this a statement that can be equally made by, say, a Cuban or a Welsh? ---
**Author:** ![WillFarnaby](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/willfarnaby/32/514_2.png) [@WillFarnaby](https://boards.straightdope.com/u/WillFarnaby)\ **Post date:** [January 18, 2015, 7:15pm UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/152 "2015-01-18T19:15:25Z")
If value is a product of labor: - land would have no value - natural resources would have no value - digging and filling in holes would be valuable - the value of items wouldn’t change Goods are only valuable in that they are useful for individuals achieving a desired end. The value of something depends on the priority an individual places on achieving the end the good is intended for. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [January 18, 2015, 8:34pm UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/153 "2015-01-18T20:34:50Z")
A little while ago I had to take a perfectly good 20" tube TV to be recycled, because I couldn’t find anyone who wanted it. Goodwill wouldn’t even take it. The recycling center had a giant mountain of perfectly usable tv’s - even some giant 37" Trinitrons that were worth over $1,000 just a few years ago. Now people are paying to have them destroyed. I wonder what happened to all that labor value? ---
**Author:** ![Hellestal](https://avatars.discourse-cdn.com/v4/letter/h/3ab097/32.png) [@Hellestal](https://boards.straightdope.com/u/Hellestal)\ **Post date:** [January 18, 2015, 9:59pm UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/154 "2015-01-18T21:59:26Z")
The labor theory of value, huh? Golly gee. > [@Enterprise](#): > > A) cite. This is like asking for a cite that chemists no longer take the phlogiston theory of fire seriously. The major graduate textbooks for economic theory don’t mention the labor theory of value. You can’t cite a page number, because it literally does not show up. It’s a dead idea. It was dissected nearly a century and a half ago and it’s simply not worth mentioning. You won’t find it in Mas-Collel, or Varian, or any other advanced text in front of me. Not in the index, not anywhere. A long while back, I used to teach intro microeconomics and if you’d suggested that I mention the labor theory of value, I might’ve laughed in your face. The only purpose of mentioning it at all would be to point out why it’s wrong, and there’s little reason to waste valuable class time on that because the chances that any individual student is working with a theory more than a century out of date are very slim. In an intro textbook where you can provide historical context without wasting class time, you can spend some time on it. I don’t have quite the same set of frosh books in front of me that I used to have, but I can see that Landsburg mentions it in _Price Theory and Applications_ (I’m looking at the 8th edition). His treatment is fairly perfunctory but it’s in there. > [@Landsburg](#): > > The labor theory of value is an error that deceived such diverse economists as Adam Smith and Karl Marx. In its simplest form it says that the price of an item is determined by the amount of labor used in its production. His subsequent rebuttal is essentially the same that economists have been giving since the 1860s. It’s one of my deep historical disappointments that Marx wasn’t aware of the work being done almost simultaneously by the three big marginalists of the time, all working independently. I have to wonder how _Das Kapital_ might have been different if he’d been aware of marginalism. The labor theory of value is by far the biggest flaw in his book. Nothing else comes close. Most of his wrong predictions have as their foundation an inconsistent and illogical theory of value. Modern mainstream economics is entirely marginalist and has been for more than a century. > [@Enterprise](#): > > B) so? Last I checked, the correctness of a proposition was not determined by the number of people who hold it to be correct. When an entire profession drops an idea in the 19th century, and in the intervening time not a single person of any renown seeks to resurrect the corpse, then that might be an indication of the general quality of said idea. More broadly than that: for those who want to criticize “capitalism”, then the best course is to do so from a position of knowledge instead of ignorance. The lack of awareness of ideas from a century and a half ago – which are still current in modern economics today – is an inauspicious foundation for a thread of this kind. One of the obvious failures of the labor theory of value is that value of already existing equipment can change overnight with new knowledge or new market circumstances. People think of “technology” as something tangible: newer, shinier gizmos with a physical presence in which inheres the blood and sweat of previous workers. But a helluva lot of what goes into real-world production is more subtle: better processes. “If you put the same machines in this formation, instead of that formation, people won’t bump into each other as often!” Though unrealistic, an extreme example makes the point. Imagine an assembly line where the workers follow the pieces instead of staying at their posts. They walk with the line instead of staying where they are. Then somebody has the bright idea: “Why not keep the workers where they are?” What you see is exactly the same pieces of equipment, with the same amount of labor inhering in that equipment, but automatically the equipment is much more valuable than it was a moment before. It can produce more quickly when it’s used in a smarter way. Demand for this kind of equipment increases, not because it takes more labor to make it – it’s the same amount of labor – but because _people realize a better way of using stuff that already existed_. This happens all the time in small ways that practically no one notices. Another twist on this idea is a factory that relies on scarce inputs. The Ford F-series trucks are the best selling of their kind on the planet. Ford is switching to aluminum bodies. But what if we learned tomorrow that current aluminum mining and refining techniques cause cancer? Aluminum production slows, and Ford’s new equipment that builds aluminum bodies out of the metal is suddenly idle and worthless. Same amount of labor, but different value. Ford’s in trouble until safer aluminum techniques are devised. The few Ford trucks that exist on the roads increase in price out of novelty, though the labor that went into them is constant. We could get into yet more problems with the idea, but there’s not really any point to that here. For an more sophisticated criticism of the labor theory of value, you can see Steve Keen’s _Debunking Economics_. Keen has major problems with marginalism in economics. The difference is that he’s actually educated himself. He has the chops to make a real argument because he’s a real economist. I strongly disagree with huge sections of the book, not to mention the boast in the title, but his arguments actually merit a response because they’re informed. They’re not based in 19th century fallacies. ---
**Author:** ![Dr.Love](https://avatars.discourse-cdn.com/v4/letter/d/e8c25b/32.png) [@Dr.Love](https://boards.straightdope.com/u/Dr.Love)\ **Post date:** [January 18, 2015, 10:16pm UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/155 "2015-01-18T22:16:22Z")
> [@Enterprise](#): > > > [@WillFarnaby](#): > > > > I have taken the inputs of the chair and made them less valuable. If I took _The Card Players_ by Paul Cezanne valued at $259 million and cut it up into 10 $2 placemats using $20 labor, I have impoverished society. I have taken something someone valued at $259 milion and something someone valued at $20 and created something someone valued at $20 instead. > > **Destruction is not labor** , quite simply. > > > [@](#): > > > > No you have taken $200 worth of wood and $200 in labor, exhausted them so that they no longer exist and replaced them with a chair. The chair did not exist, but the labor (time) and wood existed. Now they don’t. (of course the wood exists, but not in its original $200 dollar form) > > Both exists: the wood remains, all its original 200 now incorporated in the chair; and my labor exists, all of its value likewise incorporated in the chair. It has a value of 400–what its price may be is a different issue. > > > [@](#): > > > > This is your key stumbling block. Value is subjective. It does not come from labor. It comes from the valuations of individuals. Digging a whole and filling it in is valuable from your perspective. Destroying crops is valuable in your perspective. Something is wrong here, right? > > Yes: your **understanding of what labor is**. No, it’s not valuable from my perspective, and repeating it won’t make it any truer. Notice the circularity of your value theory: value is what you value something at. > [My emphasis] I’ve only started reading this thread today, but too have no idea what exactly you mean by labor. Let me present three scenarios related to the above, please answer the following questions: [ol] [li]Which portions are labor, which are distruction, which are neither?[/li][li]In which cases does value increase, or decrease?[/li][/ol] **Scenario 1** _Part A_: I take a tree, felled by someone else, and chop it into 100 pieces. _Part B_: I join these 100 pieces together to make 10 chairs. **Scenario 2** _Part A_: I take a blank piece of canvas, manufactured by someone else, and cut it into 100 pieces. _Part B_: I sew these 100 pieces together to make 10 placemats. **Scenario 3** _Part A_: I take _The Card Players_, canvas manufactured by someone else and then painted by Paul Cezanne (i.e., someone else), and cut it into 100 pieces. _Part B_: I sew these 100 pieces together to make 10 placemats. I’m fairly confident that you will say that 3A is destruction and not labor (after all, it can’t be both), I’m not sure about 1A or 2A. Is it the fact that _The Card Players_ is art the differentiating factor between labor and destruction? Or is it the fact that you’re taking apart the result of some else’s labor, and thus all of 1A, 2A and 3A are destruction? Likewise, does 3B count as labor, or does the earlier act of destruction in 3A also nullify the labor in 3B? Would the labor still be nullified if 3A and 3B were done by different people? ---
**Author:** ![Der\_Trihs](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/der_trihs/32/233_2.png) [@Der\_Trihs](https://boards.straightdope.com/u/Der_Trihs)\ **Post date:** [January 18, 2015, 10:27pm UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/156 "2015-01-18T22:27:28Z")
> [@WillFarnaby](#): > > Perhaps you have familiarized yourself with the basic fundamentals of libertarianism and heard about the non-aggression principle. The “non-aggression principle” is a pretty way of saying that the slaves should not revolt against their masters. Libertarianism is about stripping away all legal rights and protections from the common people, denying them all non-violent forms of protecting themselves or effecting change, and then forbidding them violence when that’s all that’s left. “Libertarians are anarchists who want police protection from their slaves”, to paraphrase an old quote. > [@WillFarnaby](#): > > Hm, seems to me laissez faire capitalism brought about unprecedented peace and prosperity to 19th century America. It was a hellish existence for most of the population, not “peace and prosperity”. > [@septimus](#): > > Indeed, since a given worker might have little value to a potential employer _unless_ he commits to many years of service, one would think hyperlibertarians should _endorse_ voluntary servitude. They often do in my experience; usually involving fantasies about using debt to force women into sexual slavery. ---
**Author:** ![ITR\_champion](https://avatars.discourse-cdn.com/v4/letter/i/c67d28/32.png) [@ITR\_champion](https://boards.straightdope.com/u/ITR_champion)\ **Post date:** [January 19, 2015, 6:05am UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/157 "2015-01-19T06:05:00Z")
> [@Enterprise](#): > > **ITR champion** , I’ll admit I was (mentally) doing you a disservice for assuming that you’d be up in arms about any talk about re-distributing wealth. You are quite right that ultimately, I would have to defend my notion of socialism-communism; but it’s been my experience that the necessary first step is to convince people that there’s something wrong with capitalism in the first place, and that it is okay and possible to imagine alternatives to it. This is my sole reason for going this route. You want to argue that capitalism has flaws. It seems to me self-evident that a fact about a particular social system is a flaw only if there exists an alternative system where that fact is different. We are all born into this universe and must live in it until we die. We create social systems within the parameters that the universe has, whether we like them or not. For instance, all human beings must eat, drink, and breath. If a social system takes it for granted that people will eat, drink, and breath, that’s not a flaw of that particular system. Let me give a particular example. In the OP, you said that capitalism required some people to be poor. This was supposedly a flaw of capitalism. But all available evidence suggests that Jesus was right when he said that the poor would always be around. If the existence of poor people is an unavoidable facet of the human condition, then the existence of poor people in capitalist countries is not a flaw of capitalism. You’ve argued that in capitalist economies there’s a structural requirement for some people to be poor, while in socialism there could theoretically be a society without poverty. (I don’t agree, but I won’t debate the point in this post.) Unfortunately we have to live in reality rather than in theory. Theoretical arguments about how socialism could end poverty are cold comfort to the billions who lived and still live in abject poverty, without adequate food or medicine or other necessities, because of communist or socialist-leaning governments. Every advocate of communism I know is unwilling to own up to the enormous human suffering that communism has caused, hiding behind theoretical arguments to avoid facing the ugly reality. ---
**Author:** ![Enterprise](https://avatars.discourse-cdn.com/v4/letter/e/76d3ee/32.png) [@Enterprise](https://boards.straightdope.com/u/Enterprise)\ **Post date:** [January 19, 2015, 8:29am UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/158 "2015-01-19T08:29:33Z")
Just to begin with: work might keep me from quickly posting replies during the week, but so long as this thread lives, I’ll come back to it. > [@Hellestal](#): > > The labor theory of value, huh? Golly gee.This is like asking for a cite that chemists no longer take the phlogiston theory of fire seriously. With the non-trivial exception that chemistry is a natural science, while economics is a social science, and does not produce truths. Aside from that, **Hellestal** , as I noted to some other posters already, I would appreciate some common courtesy with regard to the language of debate. I’m fine with you claiming the labor theory of value is wrong; I’m less fine with you insinuating that I’m uneducated and ignorant simply because I do not share in your valuations. Thank you. I appreciate the “cite” such as it is, since I really don’t know much about how economics is taught, and this helps me understand. > [@](#): > > In an intro textbook where you can provide historical context without wasting class time, you can spend some time on it. I don’t have quite the same set of frosh books in front of me that I used to have, but I can see that Landsburg mentions it in _Price Theory and Applications_ (I’m looking at the 8th edition). His treatment is fairly perfunctory but it’s in there. His subsequent rebuttal is essentially the same that economists have been giving since the 1860s. > > [QUOTE=Landsburg] > > The labor theory of value is an error that deceived such diverse economists as Adam Smith and Karl Marx. In its simplest form it says that the price of an item is determined by the amount of labor used in its production. [/QUOTE] I don’t suppose that that’s the rebuttal, is it? Because it just says “no, it’s wrong”? I’m not sure what specific rebuttal Landsburg offers (there have been many objections over the years, as I’m well aware), but you can color me unimpressed when his “simplest form” is _already wrong_. Adam Smith may have said it (I’m not sure, and in no mood to look it up), but Marx clearly, unambiguously did not say that “the price of an item is determined by the amount of labor used in its production”. Marx said the value of a commodity is determined by socially necessary labor time (and even this is serious shorthand). > [@](#): > > It’s one of my deep historical disappointments that Marx wasn’t aware of the work being done almost simultaneously by the three big marginalists of the time, all working independently. I have to wonder how _Das Kapital_ might have been different if he’d been aware of marginalism. The labor theory of value is by far the biggest flaw in his book. Nothing else comes close. Most of his wrong predictions have as their foundation an inconsistent and illogical theory of value. What is your understanding of the labor theory of value? Because it’s analogous to Landsburg’s, quite simply, it’s one of those glass houses-stones-conundrums when you say “a position of knowledge is required for critique”. > [@](#): > > When an entire profession drops an idea in the 19th century, and in the intervening time not a single person of any renown seeks to resurrect the corpse, then that might be an indication of the general quality of said idea. It might, yes. Or it might not. And of course, it’s a bit circular anyhow, with lots of claims and qualifiers about “the profession” and “no person of renown”. I’d be willing to concede marginalism’s ascendancy to an orthodoxy by, say, the 1950s or so, but any earlier, I’m really not so sure. > [@](#): > > Though unrealistic, an extreme example makes the point. Imagine an assembly line where the workers follow the pieces instead of staying at their posts. They walk with the line instead of staying where they are. Then somebody has the bright idea: “Why not keep the workers where they are?” What you see is exactly the same pieces of equipment, with the same amount of labor inhering in that equipment, but automatically the equipment is much more valuable than it was a moment before. It can produce more quickly when it’s used in a smarter way. Demand for this kind of equipment increases, not because it takes more labor to make it – it’s the same amount of labor – but because _people realize a better way of using stuff that already existed_. Sorry, but your example is simply wrong; like so many others in this thread, you are assuming something about value that just isn’t what Marx argues. I’d be happy to deconstruct the example, if you like, and if you’re willing to listen with an open mind–just let me know (I’ll wait for the request simply because I’ve been re-iterating some of the issues that would go into such an analysis QUITE often above, such as that value=socially necessary labor time, which you’re simply ignoring, and that really doesn’t bode well for your willingness to debate, rather than lecture). ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [January 19, 2015, 9:15am UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/159 "2015-01-19T09:15:47Z")
I’m inclined to believe that the labor theory of value is outdated and it is unfortunate that Marx apparently never encountered marginal analysis. Let me throw some citations into the mix. Donald Fusfeld’s textbook, _Economics: Principles of Political Economy_ (1985) contained the following footnote: “Marx recognized that market prices are not proportional to labor values, but could be derived from them. Partly because of the huge debate over this “transformation problem” as it has been called, some Marxist writers do not use the labor theory of value, arguing that it is not essential to the rest of the analysis.” It’s my understanding that some Marxist economists have basically set aside the whole labor theory of value: as I understand it, the framework has a lot of theoretic machinery devoted to basically making a philosophical or moral point, as opposed to an empirical or observational one. The introductory chapter of Nicholson’s intermediate textbook, “Microeconomics: Basic Principles and Extensions”, devotes 3 pages to various historical theories of value that pre-dated Marshall’s 1890 presentation of supply and demand curves. It covers Thomas Aquinas’ just price theory, Adam Smith’s contrast of “Value in Use” with “Value in Exchange” and Ricardo’s pure labor theory of value. Marx apparently built upon Ricardo, reasoning that if all value is ultimately traceable back to labor, then so should all proceeds of the production process accrue to labor. Ricardo’s conception seemed to ignore resources as an input into the production process, though that can be fixed by assuming that they are ultimately owned by the public in some moral sense. But what’s really missing is a decent notion of demand, as well as the idea that while the use value of water greatly exceeds that of diamonds, the value of the last drop of water is very low due to its great abundance: in order to understand markets, you have to think about that last unit of output created on the one hand and demanded on the other. For that’s what determines the price. Smith grasped that use value and exchange value could be very different. But it would be over 100 years before supply and demand curves would demonstrate marginal analysis in a graphical manner. ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [January 19, 2015, 9:43am UTC](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911/160 "2015-01-19T09:43:44Z")
> [@In the Face of the Blue Wall, The 2016 Presidential Election IS the Democratic Primary](https://boards.straightdope.com/t/in-the-face-of-the-blue-wall-the-2016-presidential-election-is-the-democratic-primary/708446/212): > > Every regulation, zoning law and license requirement makes that harder. The legal requirements may seem ‘reasonable’ to an ivy-league grad, but to someone with nothing but a college diploma and no money to hire a lawyer, it’s daunting. it was the biggest hurdle for me to get past all that, and I live in the most economically free region in North America. I can’t imagine what it would be like to try to open a small store in Berkeley or in Chicago. Alberta is the most economically free region in North America?? 😕 😕 It’s my impression that Canada has a rather more sturdy safety net than the US. It certainly did 15 years ago. I have some purely anecdotal knowledge about Berkeley and Chicago. A friend of mine was an employee of a small Chicago business that failed last year. Municipal red tape was the least of their problems. Bad management decisions _and procedures_ were more of a culprit. Berkeley is another matter though. Navigating the barriers set up by city hall is indeed daunting. But there are alternatives. You can save yourself the aggravation and locate to one of 4+ nearby cities with less regulation: these include Albany, Richmond, Oakland and Emeryville: the latter city is _really_ friendly. But there’s also lots of opportunity in Berkeley: you just need intensive knowledge of and contact with city hall. An Ivy League degree won’t help you: think of their regulation as barrier to entry, one that can be surmounted with extensive research or hiring a local gun. But once you’ve cleared that hurdle, there’s plenty of opportunity. Hey, it’s tough to enter the jumbo jet market as well. [Previous page](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911.md?page=7) [Next page](https://boards.straightdope.com/t/on-the-many-failings-of-capitalism/709911.md?page=9)