Monday, January 26, 2009

Labor theory of value

You might think, more than three-quarters of a century after Mises published Socialism, that everyone would understand that the labor theory of value is bogus. You would be wrong:
One of the basic tenets of Marxism is that labor has intrinsic value that precedes and is separate from the value of management and investing. Most leftists, even those who are not Marxist, have absorbed this concept of the value of labor.
In reality, the circumstances are the exact opposite. It is the skill and judgment of managers and investors that creates the value of labor. If you don’t own your own company or freelance, you rely on someone else to choose what work you do and how you do it. Their decisions create the value of the products and services you make. When they make mistakes, the value of your labor decreases and you should charge less for it.

(Via Instapundit.) Without capital to invest in production, nothing can be produced. If no one wants to own Ford stock, then Ford has no capital. If Ford can't make a profit, no one will want to own Ford stock. No profit, no capital, ergo no research-and-development, no new machinery, no marketing, no competitive advantage, no business -- and it doesn't matter how "fair" the terms of your employment are, if your employer is bankrupt.

The guy driving the forklift on the loading dock has no right to gripe about the gap between his wages and the salaries of the executives. If you're making $15 an hour on the loading dock and the VP of marketing is making $300,000 a year . . . so freaking what?

If you can get somebody to hire you at $18 an hour, go get it and quit your bitching. And if you have some skill that somebody's willing to pay $300,000 a year for, congratulations. It's your labor, and you owe it to yourself to sell it for the best price you can get. But the fact that people are willing to pay more for a VP-marketing than for a forklift driver is not the fault of the VP-marketing, and your senseless whining about "fairness" doesn't change the value.

Nothing is more idiotic than talk of "worker's rights." If you don't like the pay or working conditions where you're working, quit and go find another job. Otherwise, STFU. Try to think of yourself not as a "worker," but as an entrepreur, seeking maximum value for your labor in a free market. How can I enhance my value to my current employer? What new skill can I acquire? How can I become more efficient, more effective, more valuable?

Sitting around grumbling because you imagine that your employer is being "unfair" to you is just ignorant and childish. This is the idiocy of the labor-union mentality, which supposes that workers can combine to extort from an employer what he would not be willing to pay in a free market. That strategy might appear to work for a few years, or a few decades, but ultimately, you cannot fool the market. Overpriced labor -- that is to say, where wages and benefits are artificially inflated by union coercion -- is non-competitive labor. And eventually, non-competitive labor will be out of work.



  1. Locke also had a labor theory of value. It was different than Marx's, but it is also different than yours, most likely as managers were fewer then and investors were fewer, but it goes something like if I take something, like a piece of Iron and created something out of it, lets say a knife, my labor has value, which is based on what the market demands or more at what price I can sell it.

    If I make a Katana instead of a shovel, may be I will get more for my labor in the right market, but a shovel is easier to make and more people need them, so while cheaper, I could sell more of them. Does that make sense? May be you can clarify it for me.

    In your definition, second handers are at the mercy of the skill, judgement and fortunes of their employers. If they don't like it, they always can start their own business...and be first handers or producers.

    Life isn't always fair, and in most times it is not, but we are lucky enough in this country, at least up until now, that we all can get in the race. No guaranteed outcomes, but we all can get to the starting line.

  2. Typical top-down mentality.
    I guess this is what the Con talking heads mean by 'the most productive members of society', meaning those jagoffs who don't actually produce anything--they just pay someone to produce it for them.
    RS, I recall not too long ago that you were griping about the RNC's top-down approach to politics.
    Funny that Republicans tend to approach everything from the top-down , no? And if that isn't the essence of elitism...
    Any talk of the un-importance of "Labor", or however you want to spin it, is absolute ignorance of the real and now. Therein lies the danger in ideology/dogma. Republicans and Cons seem to take an ideological stance to it's absolute most abstract point.
    But with the labor force hemorrhaging the way it is( ironically those that represent the other 90% of the consumer class), I look forward to seeing how productivity will be affected. It'll be a hoot to see all those execs and small business owners pull up their sleeves and help bring the economy back on
    its feet...
    PS- Smitty, I wasn't aware that this is the only country in which you can "get in the race".

  3. 4 eyes:
    You can get in the race in other countries, but most have more impediments, usually due to their socialistic government with more rules than hoyle. There are a couple that stand out, Hong Kong and Estonia. It's very easy to get a business started in Hong Kong, much easier than the US, but I am not sure I'd like to live somewhere under Chinese control. Estonia has a lower corporate and individual tax rate than here and they do a lot of banking. From what I understand the women aren't bad either. What is difficult to find are countries that respect the same liberties we have here (although that seems to be changing). When I find somewhere better, and the climate is tolerable, I may find myself there.