Karl Marx and Labor Theory of Value -- applied

by **BigBallinStalin** on Sat May 03, 2014 6:22 am

(pretty much sums it up).

by **Dukasaur** on Sat May 03, 2014 9:35 am

If you could manage to spend six hours doing it, I suspect most women would build cathedrals in your honour.

by **patches70** on Sat May 03, 2014 9:45 am

Dukasaur wrote:If you could manage to spend six hours doing it, I suspect most women would build cathedrals in your honour.

Not if it's like throwing a hotdog down a hallway!

by **BigBallinStalin** on Sat May 03, 2014 10:14 am

Dukasaur wrote:If you could manage to spend six hours doing it, I suspect most women would build cathedrals in your honour.

Ha! Maybe. It depends on the price at which they value your service. That's what Marx's labor theory of value overlooks. E.g. if you spent 10 hours a day busting big rocks into small rocks, but no one wants to buy your bags of small rocks, it doesn't follow that you must be paid in accordance with how much effort you exerted.

The opaque (economic) way of saying this is that wages are determined by one's discounted marginal revenue product of labor.

marginal product of labor: e.g. for every hour you work, you produce 10 small rocks.
marginal revenue: e.g. for each rock sold, the firm gets $5.00.
discounted: e.g. most workers don't wait to get paid until the company's product is sold. They want income now (or every two weeks). So, the expected future income earned by the firm is discounted into the present.

by **AndyDufresne** on Sat May 03, 2014 5:15 pm

"We're all in this together."

--Andy

by **Lootifer** on Tue May 06, 2014 4:51 pm

BigBallinStalin wrote:
Dukasaur wrote:If you could manage to spend six hours doing it, I suspect most women would build cathedrals in your honour.

Ha! Maybe. It depends on the price at which they value your service. That's what Marx's labor theory of value overlooks. E.g. if you spent 10 hours a day busting big rocks into small rocks, but no one wants to buy your bags of small rocks, it doesn't follow that you must be paid in accordance with how much effort you exerted.

The opaque (economic) way of saying this is that wages are determined by one's discounted marginal revenue product of labor.

marginal product of labor: e.g. for every hour you work, you produce 10 small rocks.
marginal revenue: e.g. for each rock sold, the firm gets $5.00.
discounted: e.g. most workers don't wait to get paid until the company's product is sold. They want income now (or every two weeks). So, the expected future income earned by the firm is discounted into the present.

What if those rocks are not rocks but in fact wheelchairs for tetraplegics? (easy one)

What if those rocks are not rocks but in fact education for children whos parents marginal value of labor is such that (in a free-market) is only capable of supporting an education in rock breaking (and nothing more advanced)? (more complicated)

edit: sorry this is slightly tangential but I am pretty sure most people understand that Marxs' labor theory is at least partially flawed or contextually not black and white (i.e. you cartoon is perfectly accurate).

by **BigBallinStalin** on Tue May 06, 2014 6:03 pm

Lootifer wrote:
BigBallinStalin wrote:
Dukasaur wrote:If you could manage to spend six hours doing it, I suspect most women would build cathedrals in your honour.

Ha! Maybe. It depends on the price at which they value your service. That's what Marx's labor theory of value overlooks. E.g. if you spent 10 hours a day busting big rocks into small rocks, but no one wants to buy your bags of small rocks, it doesn't follow that you must be paid in accordance with how much effort you exerted.

The opaque (economic) way of saying this is that wages are determined by one's discounted marginal revenue product of labor.

marginal product of labor: e.g. for every hour you work, you produce 10 small rocks.
marginal revenue: e.g. for each rock sold, the firm gets $5.00.
discounted: e.g. most workers don't wait to get paid until the company's product is sold. They want income now (or every two weeks). So, the expected future income earned by the firm is discounted into the present.

What if those rocks are not rocks but in fact wheelchairs for tetraplegics? (easy one)

What if those rocks are not rocks but in fact education for children whos parents marginal value of labor is such that (in a free-market) is only capable of supporting an education in rock breaking (and nothing more advanced)? (more complicated)
.

Then, on average, the market for rock-breaking clears--assuming nominal wage rigidities don't exist (but they do, so you'll probably have some permanent unemployment in the rock-breaking industry).

Other questions: why can't the parents borrow? Why can't they save? Why can't the kid do so? Why can't philanthropists provide the education? Why are there somehow zero free-market-provided subsidies? (etc.) And most importantly what really is the return to education?