Economic Theory

[brainstormer]

I have an ax. Another man has a field of wheat. I can't eat without his wheat. He can't bake it into bread without my ax to cut wood. The wood and the wheat have no value to either of us. But we agree on an exchange of wood for bread. Now they both have value ... a value we created through our cooperative labor.

If you don't agree we have created value in that sense ... Shrug. OK.

This sounds like the definition of a work collective or a worker owned corporation. YouTube has some good videos on them.

 

[Received]

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.

It's not all just about jobs; we have to balance jobs with the fields that enable them. And whatever amount we slash in military spending we can make up for many times over by actually investing in infrastructure, which would have significant ripple effects on the rest of the economy: the government pays or contracts for this labor, leading to more jobs, meaning more cash for consumers, yielding higher aggregate demand, or how much demand there is overall in the economy.

And no, unfortunately economic value is only loosely correlated with labor. In an ideal world a person would be paid according to the cumulative effort (labor) he put into something. You should get paid according to how much actual work you do. Our market, however, has widely diverged from this as reflected in massive income inequality, where people at the very top are paid ridiculous amounts of money for hugely disproportionately small labor. The market by definition is about consequences, about creating commodities or services (even if they're useless and dangerous to the economy as a whole, as with a portion of the financial sector) and capitalizing on these commodities or services. It doesn't care how much labor is involved in creating these commodities or services.

The people who do care about how much labor is involved in these services pay attention to people who bust their backs for negligible pay. The moral justification for progressive taxation, where people with more money are taxed more, is based in the idea that generally speaking the more money you make the less actual work and risk you're doing relative to the money you make. The billionaire who sits in an air conditioned room can't possibly be putting two thousand times as much labor into his product than those who make fifty grand a year.

So you have the market, which cares only about consequences, and a voluntary regulation of this market based on a higher standard of fairness. If a person were paid according to his labor (what he put into his product rather than the consequence of his product), there would be no need at all to regulate the market.

 

[Received]

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?

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

And we always have to ask the question, value for whom? In the American economy, at least, this usually means value for those who own the means of production -- those at the top. Driblets roll down to the underpaid worker who actually creates the value by his labor. This reflects the backwardness of corporate structure.

 

[LOVEthroughINTELLECT]

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.

If you really want to understand economic phenomena then I strongly suggest expanding your perspective beyond neoclassical economics.

Read the work of economic anthropologists and you will encounter problems like, "Is culture embedded in the economy or is the economy embedded in culture?". Applying that question to neoclassical economics: is, say, American culture embedded in neoclassical economics or is neoclassical economics embedded in American culture? If you do not understand the question, think of it this way: is the system of interstate highways in the U.S. the result of the U.S. economy or is the U.S. economy the result of the system of interstate highways? Does the type of economy you have determine your culture or does your culture determine the type of economy you have? A different question is this: if you are an ethnographer observing a previously unknown preliterate society that does not have currency, prices, exchange rates, interest rates, taxes, etc. then what do you record as that culture's "economy"? A good book is Economies and Cultures: Foundations of Economic Anthropology, by Richard Wilk. There is a newer edition (2007) than the one that I read. If the newer edition is like the one that I read you will find observations like how, unlike in capitalist societies where economic actors are socialized to profit from transactions, there are cultures where every economic transaction is an even exchange.

Economics is simply the way that people marshal resources to meet their wants and needs. Neoclassical economics is only one way of doing it. Other cultures do or have done it through rituals like giving gifts. It does not take a lot of imagination to think of other ways that it could be done. Everything could be rationed through a lottery, for example.

 

[timewerx]

Is all economic value rooted in labor?

Perhaps. Certainly, labor is a very important piece of the economy in both running the economy and as a major source of consumers.

They make the world go around as well as buy the products people sell which in turn, becomes a major source of profit for all businesses.

This is why economic growth is closely affected by unemployment rate figures. High unemployment rates could lead to negative economic growth because the more unemployed people, less are buying products which leads to less sale, less income. Long periods of negative growth can lead to a recession/depression because reduced spending will cause many companies to lay off many workers which further increases unemployment which then affects spending, sales suffer further, some companies fold.

The importance of labor is so much that the advent of automating labor with robots is causing major concern for the economy because robots don't spend anything at all other than procurement and maintenance. Robots don't buy property, don't need cars (they can stay at work permanently), don't buy starbucks.... you get the idea.. So if robots/automation replace significant % of the human workforce, it will actually lead to a negative economic growth and worse.


There are some pretty radical reforms to address this issue because it's either that or ban the use of robots/automation which is absurd.

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

Today, the most sought-after IT people are those with business qualifications.

 

[OldWiseGuy]

Economics is simply the way that people marshal resources to meet their wants and needs.

. But I would say societies rather than people.

 

[brainstormer]

Labor, time and resources are all limited. That's why when you have a "cult of billionaries" in the world, you have the bottom losing out on opportunities. Also, the entrepreneurial understanding is something that is not very common, much less common than assumed. It's interesting how many in the corporate world and "utility fields" (doctors, lawyers, teachers, etc.) have a distrust of it, which is an ungodly attitude. Those of us who can, have to become "rainmakers" -- that is, people who can create jobs for those around us. And, those who can't create jobs have to encourage these new job makers.