Friday, December 10, 2004
Labor Theory of Value
I've never been a big fan of Marx's labor theory of value - the value of a good or service is the the amount of labor that goes into making it. While the theory is flawed as it consciously ignores capital contributions, it also ignores other important factors such as the knowledge and talent required to manufacture a product (or service).
That's the point of the story that coyote relates in this post. (h/t Carnival of the Capitalists as hosted by the Entrepreneurial Mind). In the story, coyote offers a socialist friend of his all the sand she could want if she could make a computer. When she balks because she lacks the capital, he then offers her all the capital she could need, but again she balks because she doesn't know how. This allows coyote to demonstrate that the value of the mind is not being included in Marx's labor theory of value.
However, I have a different example that I like to bring up whenever I encounter a person who subscribes to the labor theory of value. I propose to them that the person perform an hour's worth of work (a service) of my choosing (perhaps yard work, perhaps cooking). In exchange I will give them a good that would take me an hour to create. According to the labor theory of value, that's a fair trade.
I then inform that person that I've been constipated for days and it's been taking me about an hour to crap. The result of this hour's worth of hard labor would be the good that I am willing to exchange. For some reason, the other person has always immediately abandoned the labor theory of value.
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That's the point of the story that coyote relates in this post. (h/t Carnival of the Capitalists as hosted by the Entrepreneurial Mind). In the story, coyote offers a socialist friend of his all the sand she could want if she could make a computer. When she balks because she lacks the capital, he then offers her all the capital she could need, but again she balks because she doesn't know how. This allows coyote to demonstrate that the value of the mind is not being included in Marx's labor theory of value.
However, I have a different example that I like to bring up whenever I encounter a person who subscribes to the labor theory of value. I propose to them that the person perform an hour's worth of work (a service) of my choosing (perhaps yard work, perhaps cooking). In exchange I will give them a good that would take me an hour to create. According to the labor theory of value, that's a fair trade.
I then inform that person that I've been constipated for days and it's been taking me about an hour to crap. The result of this hour's worth of hard labor would be the good that I am willing to exchange. For some reason, the other person has always immediately abandoned the labor theory of value.
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