I am writing regarding your view on the labor theory of value. You stated in Principle of Economics that the amount of labor used to produce a good is irrelevant for inclusion in its value; however, I believe that the average amount of labor is figured in to the value of a good.
You state that there is “No necessary and direct connection between the value of a good and whether, or in what quantities, labor and other goods of higher order were applied to its production.” Mr. Menger, I believe your theory is erroneous. The average value of labor necessary to produce a good is incorporated in the value of the good. To further your point, you use the example of a diamond - “Whether a diamond was found accidentally or was obtained from a diamond pit with the employment of a thousand days of labor is completely irrelevant for its value.” I, however, disagree and propose that the average amount of labor is incorporated in a good, in this example the diamond.
To elaborate on the diamond example, there may be 100 diamonds on the market, but 99 of those diamonds were found in a mine. For argument’s sake, let us say most of these diamonds take 100 labor hours while others may take 90 labor hours to mine. If we were to incorporate your scenario of accidently finding a diamond, we can assume it took zero hours of labor. On average, the amount of labor it took to discover the diamond, which are on the market was approximately 94 hours. The 94 hours of labor are incorporated into the value of diamonds. You can assume mining is most efficient because of up to date technology and industrial equipment used to most efficiently dig the earth and process the diamonds discovered in the mine. The one person who accidently discovers the diamo...
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...costs which integrate in to the good. Each good produced would subsequently take less time, thereby putting a lesser amount of labor into each individual good produced.
Ultimately the supplier, not the consumer, determines the value of a good. The supplier is familiar with the average amount of labor incorporated into a good and, therefore, the market adjusts value accordingly, including the probability of outliers. Even though a consumer may associate a higher value to a good than the actual market price due to the consumer’s perceived usefulness, this is not factored into the price. The producer considers all factors of production and labor and prices the good accordingly.
I believe I have set forth a sufficient rebuttal to the labor theory of value described in your text, Principles of Economics. I welcome a response to my rebuttal as I enjoy the discourse.
(3) Adam, Elga (2007) “Reflection and Disagreement” Princeton University Copyright the Authors Journal compilation, Blackwell Publishing, Inc. Pg. 478 – 502.
As a precursor to the challenge, Glaucon presents the three types of good. The first being it is valued for its own sake, but not its results, relating to harmless pleasure (357b). The second is it is valued for its own sake and its results, like thinking (357c). The final is that which we value for only its results, comparable to physical exercise (357c). Socrates then places justice in the second category, “valued for anyone who wants to be happy, both for itself and for its consequences” (358a). It is this belief that Glaucon attempts to dissuade throughout his challenge (358a).
Overtime, philosophers believed in three types of goods. According to Glaucon, all goods can be divided into three types: the first one is things that we desire only for their consequences, such as exercising and medical treatments. The second is things that we desire only for their own sake such as going to an amusement park; it delights us for awhile, but it does not last a long time. and, the third group are things we desire both for their own sake and for what we get from them, such as knowledge, sight, and health.
Although, it is now known that capitalists don’t make profits by exploitation, but rather from taking risks and organizing consumption. He says that it is not unfair but that this exploitation is why there is a class struggle, and an economic crisis. Developing the labor theory of value even further, Karl Marx says that workers have no other choice but to be exploited, because they have no other means of production. The labor theory of value, further explained by Karl Marx’s viewpoint, says that the laboring of the proletariat, working class, is what creates new value which then translates into profit. Due to the fact that capitalists do not make profits by exploitation, the labor theory had some problems. These problems were fixed by the subjective value theory. This theory said that exchange value is not absolute and is based on individual evaluations. The subjective value theory also says that value comes from a human perception of what he views as useful. The discovery of this theory changed the relationship between input costs and market
Karl Marx, Max Weber, and Emile Durkheim all offered differing perspectives on the division of labor. Marx claims that the division of labor is motivated by the market. Weber claims that it developed through the industrious essence of the Protestant ethic. Durkheim claims it developed due to an increase in dynamic density. Each theorist argues that the division of labor impacts society using differing methods. The challenge is the management of attaching different values without causation of detriment to the system. All of the theorists explain how differing values inherently offer intrinsic values to individuals within the division of labor. The division of labor is the cause of evolving societies because it influences individualism and perpetuates
This video can also be used to teach and distinguish among Marx's notions of use-value and exchange-value, as well as his concept of surplus-value, which is the surplus or profit earned by the capitalist, above and beyond the use-value (labour power) required to produce the
According to classical Marxism, capitalism introduces a complimentary and contradictory relationship between wage labor and capital. This relationship is established through linking the ...
These are things that we enjoy, but they do not lead to any result. Glaucon says that the feeling of joy falls under this category. The next classifications of goods are goods that are welcomed for their consequences. They are not directly good, but what happens because of these things is good. An example of this would be medical care and medicine. The medicine itself is not the good thing; it is the healing power of the medicine that comes from taking it properly that makes people happy. The final type of good, what Glaucon calls the highest type of goods are goods that are goods that bring satisfaction for their own sake and also the result of them. Glaucon gives the example of sight for this grouping. We use sight to be able to view things in life, but also to guide us. Socrates believes that justice should belong in this group of goods. Socrates believes that people want justice, and it also brings about good consequences. Glaucon, however, states that most people do not agree with Socrates thinking. He says, “This is not the opinion of the many, he said; they would put it in the wearisome class, to be pursued for the rewards and popularity which come from a
Producing goods or services are dictated not by employees but by their employers. If profits exist, employers are the ones that benefit more so than the regular worker. “Even when working people experience absolute gains in their standard of living, their position, relative to that of capitalists, deteriorates.” (Rinehart, Pg. 14). The rich get richer and the poor get poorer. Hard work wears down the employee leaving them frustrated in their spare time. Workers are estranged from the products they produce. At the end of the day, they get paid for a day’s work but they have no control over the final product that was produced or sold. To them, productivity does not equal satisfaction. The products are left behind for the employer to sell and make a profit. In discussions with many relatives and friends that have worked on an assembly line, they knew they would not be ...
· Labor: In order to produce the things, a human resource must be used. human resources consist of the productive aid of labor made by individuals who work—for instance, miners, artists, and professional baseball players. The contribution of labor to the production process can be amplified. Whenever potential workers obtain schooling and training and whenever actual workers acquire new skills, labor’s contribution to productive output will raise. In other words it is human effort, mental or physical. The reward to labor is label wages.
With supply solely, factors involved with regulation of the supply also control some aspects of demand. Things such as production costs and desired net profit can determine whether a business succeeds or not. Having a balance between quantity and price is the greatest control any business can have. Pricing is obviously one of the most beneficial, or destructive, parts of a business. Pricing is the first and most valuable thing an individual will look at, which will overrule most other judgments based off of quality and detail. Balancing the price, however, helps to create a pristine product, with just the right amount of detail that will fuel the market, while still generating a steady net income.
According to Locke’s theory, a commodity becomes the private possession of an individual who labors for it. Thus it is no longer a direct gift of nature: [A man] “that so employed his pains about any of the spontaneous products of nature, as any way to alter them from the state which nature put them in, by placing any of his labour on them, did thereby acquire a propriety in them” ( 360).
The division of labour described by Adam Smith in The Wealth of Nations is a product of individual self-interest. This is representative of Smith’s methodological individualist interpretations of human nature. Adam Smith deduces that the division of labour is beneficial to the individual, as it is in one’s own interest to work less whilst still engaging in tasks that are to their own specialities. Highly specialized work is beneficial for nations to grow economically whilst allowing individuals to further pursue their own rational self-interest. To further explain the concepts that Smith proposes I will first explain what rational self-interest in regards to human nature and how the division of labour emerges from self-interest. Secondly, I
This paper discusses Adam Smith's and David Ricardo's view on the labor theory of value. It includes a discussion of the validity of the arguments they present in relation to social and Economic contexts. To the pursuance of this objective, the paper has explored five published articles available both in the internet and as hand copies.
Every consumer has a unique way of measuring benefits versus costs and will sometimes pay for higher quality items and other times buy the low costs items, depending on which has the highest value to them.