Economic Theory

[Resha Caner]

Is all economic value rooted in labor?

I don't remember anything from my college economics course, and I've never studied economic theory, so I don't even know where to begin looking for opinions on this topic (other than a Google search).

When young I was a tech-geek and had no interest in such things. I'm still pretty ambivalent when it comes to many material things, but recently I have had a growing interest in business. Last night I saw an interview with Jill Stein where she was going to fix all working class problems (uh-huh) by cutting this and cutting that. I don't get it, though. If, for example, we drastically cut military spending doesn't that just unemploy all the military contractors, the support staff for their businesses, the places they shop, etc. I understand someone might be opposed to military spending because they're a pacifist, but I don't see the economic argument. Wouldn't it just shift labor from this bucket to that bucket? It seems employing the working class should be about growth, which should be about value creation, not cutting things.

 

[Oafman]

If, for example, we drastically cut military spending doesn't that just unemploy all the military contractors, the support staff for their businesses, the places they shop, etc. I understand someone might be opposed to military spending because they're a pacifist, but I don't see the economic argument. Wouldn't it just shift labor from this bucket to that bucket?

Yes, some industries would take a hard hit. It would need to be done gradually, not in one fell swoope. The idea is that the government then has a bunch of cash to spend elsewhere (infrastructure, healthcare, whatever - all would generate jobs). They could also choose to give some of it back to the people as tax cuts, giving the public more disposable income, and generating economic growth that way.

 

[Resha Caner]

Yes, some industries would take a hard hit. It would need to be done gradually, not in one fell swoope. The idea is that the government then has a bunch of cash to spend elsewhere (infrastructure, healthcare, whatever - all would generate jobs). They could also choose to give some of it back to the people as tax cuts, giving the public more disposable income, and generating economic growth that way.

But how does it generate more growth for me to spend a dollar than for the government to spend a dollar? That's the part I don't get. It seems to me more an agenda for directing dollars to the things a particular group likes than for generating growth.

 

[Oafman]

But how does it generate more growth for me to spend a dollar than for the government to spend a dollar?

It doesn't. It might even work the other way around, because if you give the people tax cuts, some of them will save the money rather than spend it, taking that cash out of the economy. This is particularly true of tax cuts for the rich, who - unlike the poor - don't need to spend every penny they get their hands on. However, you can rely on the government not to save it!

That's the part I don't get. It seems to me more an agenda for directing dollars to the things a particular group likes than for generating growth.

It is exactly that. Cutting military spending won't have a short term posititve economic impact. But if the government make the right choices for how to spend the money, they can do things which help the economy in the long term (skills/training, infrastructure etc)

 

[Resha Caner]

It doesn't. It might even work the other way around, because if you give the people tax cuts, some of them will save the money rather than spend it, taking that cash out of the economy. This is particularly true of tax cuts for the rich, who - unlike the poor - don't need to spend every penny they get their hands on. However, you can rely on the government not to save it!

OK.

It is exactly that. Cutting military spending won't have a short term posititve economic impact. But if the government make the right choices for how to spend the money, they can do things which help the economy in the long term (skills/training, infrastructure etc)

Sure, I can think of some ways to spend that would support value creation, but it wouldn't necessarily fit the required political agenda. For example, Stein also talked about supporting energy independence. One way to do that is to fund research into clean coal technologies. Maybe a green solution could be found, but the Green Party would never support it. Likewise, the idea that we can grow wind, solar, fuel cells, etc. is kinda funny. There is a DOE report warning that China is locking up the market on the specialized materials needed for those technologies. Part of the problem is China's willingness to pollute in ways the EPA won't allow. I wouldn't advocate for making it easier to pollute, but again investing in clean technology would remove the barrier.

 

[juvenissun]

Is all economic value rooted in labor?

I don't remember anything from my college economics course, and I've never studied economic theory, so I don't even know where to begin looking for opinions on this topic (other than a Google search).

When young I was a tech-geek and had no interest in such things. I'm still pretty ambivalent when it comes to many material things, but recently I have had a growing interest in business. Last night I saw an interview with Jill Stein where she was going to fix all working class problems (uh-huh) by cutting this and cutting that. I don't get it, though. If, for example, we drastically cut military spending doesn't that just unemploy all the military contractors, the support staff for their businesses, the places they shop, etc. I understand someone might be opposed to military spending because they're a pacifist, but I don't see the economic argument. Wouldn't it just shift labor from this bucket to that bucket? It seems employing the working class should be about growth, which should be about value creation, not cutting things.

This is my simple understanding:
Cut those that produce less, and give resources to those that produce more. The total will increase.

Will it truly increase or not is a different question. Nothing is that simple. But that could be the basic idea.

 

[quatona]

Is all economic value rooted in labor?

I don't remember anything from my college economics course, and I've never studied economic theory, so I don't even know where to begin looking for opinions on this topic (other than a Google search).

When young I was a tech-geek and had no interest in such things. I'm still pretty ambivalent when it comes to many material things, but recently I have had a growing interest in business. Last night I saw an interview with Jill Stein where she was going to fix all working class problems (uh-huh) by cutting this and cutting that. I don't get it, though. If, for example, we drastically cut military spending doesn't that just unemploy all the military contractors, the support staff for their businesses, the places they shop, etc. I understand someone might be opposed to military spending because they're a pacifist, but I don't see the economic argument.

Ask yourself: If military spending would be the simple way to create value - why don´t we simply solve every economic crisis by just spending more money on the military?

It seems employing the working class should be about growth, which should be about value creation, not cutting things.

I think the question is: Which ways of spending money actually create value (or help creating value)?

 

[Ana the Ist]

Is all economic value rooted in labor?

I don't remember anything from my college economics course, and I've never studied economic theory, so I don't even know where to begin looking for opinions on this topic (other than a Google search).

When young I was a tech-geek and had no interest in such things. I'm still pretty ambivalent when it comes to many material things, but recently I have had a growing interest in business. Last night I saw an interview with Jill Stein where she was going to fix all working class problems (uh-huh) by cutting this and cutting that. I don't get it, though. If, for example, we drastically cut military spending doesn't that just unemploy all the military contractors, the support staff for their businesses, the places they shop, etc. I understand someone might be opposed to military spending because they're a pacifist, but I don't see the economic argument. Wouldn't it just shift labor from this bucket to that bucket? It seems employing the working class should be about growth, which should be about value creation, not cutting things.

Value is rooted in demand.

If there's no demand for the labor, what value would it have?

 

[greenguzzi]

Check out Modern Monetary Theory. I think you will find it interesting.

Read about it on this blog: http://bilbo.economicoutlook.net/blog/

Or if you prefer to watch, you'll find more on this YouTube channel:
https://www.youtube.com/channel/UCt3B5PX86GE_IXgZtar8xXw

Or if you are the academic type with a very long attention span you might prefer this:

 

[DogmaHunter]

If, for example, we drastically cut military spending doesn't that just unemploy all the military contractors, the support staff for their businesses, the places they shop, etc. I understand someone might be opposed to military spending because they're a pacifist, but I don't see the economic argument. Wouldn't it just shift labor from this bucket to that bucket?

In the short term, that would be correct.

However, you can also look at what the "end product" of that cycle is.

For military, consider the budget of the thousands of nuclear bombs that need to be maintained that just "sit there". It's not like they will ever be used. "they are a deterrent!", sure and I get that... But 100 bombs accomplish the same deterrent effect as 10.000 do.

In any case, the main point for me is that the end product "just sits there".
Whereas, if that labor/money shifts to another bucket, to end up in a product that doesn't "just sit there", then the product itself generates more business / opportunity.

Sometimes in subtle and simple ways.
Take the end product "TV" for example. A TV doesn't just "sit there". It plays. What does it play? Tv shows, movies, commercials,... Each of those things are business oportunities by themselves.

And I think you can stretch this into the seemingly absurd even.
Even after the TV is broken - it still generates additional business: recycling, garbage handling, extracting metals from the electronics on the inside, refurbishing, etc etc.

In that sense, I look at the "consumption society" as a motor that keeps itself going. But that motor needs manual reboots, if the end products are the "end of the road" or don't "reïntegrate" into this economical ecosystem.


I'm not an expert on this by any means however, and I'm fairly positive that there are holes in my "theory", which I basically invented as I was typing.

 

[Resha Caner]

I think the question is: Which ways of spending money actually create value (or help creating value)?

Sure, though I might generalize from "spending money" to "spending resources".

 

[Resha Caner]

If there's no demand for the labor, what value would it have?

Sure, there are other interconnected factors. Labor can become more efficient, and thereby we need less of it. As such, I can flip your rhetorical question around: If there is demand, and no labor to meet the demand ...

 

[Resha Caner]

In that sense, I look at the "consumption society" as a motor that keeps itself going. But that motor needs manual reboots, if the end products are the "end of the road" or don't "reïntegrate" into this economical ecosystem.

I'm not an expert on this by any means however, and I'm fairly positive that there are holes in my "theory", which I basically invented as I was typing.

No, it's a reasonable idea. But the military is not just bombs. A book I read recently is called Crossing the Chasm, and it makes some very interesting points - specifically about moving from the early market to a mass market. Buyers in the early market aren't motivated by the typical things: best price, low risk staples. They're tech geeks, thrill seekers, status symbol buyers.

In the case of the military, they're trying to reduce the risk to their troops and increase their strike power. It means they take a lot of risks on new technology. Take a look at the DARPA site sometime. The result is that a lot of the technology you use now was sponsored by the military in its early stages decades or more ago.

 

[DogmaHunter]

No, it's a reasonable idea. But the military is not just bombs. A book I read recently is called Crossing the Chasm, and it makes some very interesting points - specifically about moving from the early market to a mass market. Buyers in the early market aren't motivated by the typical things: best price, low risk staples. They're tech geeks, thrill seekers, status symbol buyers.

In the case of the military, they're trying to reduce the risk to their troops and increase their strike power. It means they take a lot of risks on new technology. Take a look at the DARPA site sometime. The result is that a lot of the technology you use now was sponsored by the military in its early stages decades or more ago.

Ow yes, off course. Indeed, a lot of technology today is a direct result of army "experiments".

Neil deGrasse Tyson likes to rant about that... There's this clip on youtube called "the storytelling of science", where he goes a bit beserk about how advanced science budgets are cut during peace time while the opposite is true at wartime.

That the motivation for the Apollo missions for example, wasn't scientific curiosity, but rather fear. Fear of the soviets putting a man on the moon before the US. Fear of the soviets "conquering space", before the US. Fear of the soviets developing technologies that the US didn't have.

Even the entire nuclear age, with all its peacefull and scientific applications, only (or primarily) exists because of the efforts during the second world war to build monster bombs.

Indeed. In that sense, I guess we owe a lot of our current technology to military projects.

 

[Resha Caner]

Check out Modern Monetary Theory. I think you will find it interesting.

Thanks. I found the blog hard to follow. It seemed more a commentary for people already familiar with the issues than an explanation for beginners. I did look up the wiki entry on MMT, and it seems more about structures for common agreement on value (does money represent value or does it have value in itself) than the actual value itself.

 

[ananda]

Is all economic value rooted in labor?

First off, how do you define "economic value"?

 

[Resha Caner]

First off, how do you define "economic value"?

I'm learning, so I don't have any rigorous definitions for you - just colloquial ones. Economic value in terms of making stuff that is useful for people's sustenance.

 

[ananda]

I'm learning, so I don't have any rigorous definitions for you - just colloquial ones. Economic value in terms of making stuff that is useful for people's sustenance.

I think values such as true community, love, compassion, harmony and balance with nature, etc. are far more important than the #1 value in Western society today (economic), so in that sense, I decry economic artifices (like corporate fictions) used to elevate economic value above other values, at the latter's expense.

 

[Resha Caner]

I think values such as true community, love, compassion, harmony and balance with nature, etc. are far more important than the #1 value in Western society today (economic), so in that sense, I decry economic artifices (like corporate fictions) used to elevate economic value above other values, at the latter's expense.

I'm not disagreeing with you, but that's not the point of this thread. Everyone has to eat.

 

[quatona]

Sure, though I might generalize from "spending money" to "spending resources".

I think the case could be made that spending resources on military doesn´t create or help creating value (in the way that e.g. building or improving infrastructure can).