Karl Marx and his less revolutionary contemporaries struggled to answer a basic question of political economy: where does value come from? In markets where equivalence exchanges for equivalence, and things of equal value are swapped for one another, how is profit possible? Marx had his answers. Here's mine: https://en.wikipedia.org/wiki/Pyramid_of_Capitalist_System What about you?
"The basic message of the image is the critique of the capitalist system, with its hierarchy of power and wealth. It also illustrates that the working class is supporting all others, and if it would withdraw their support from the system it could, literally, topple the existing social order.[3] This type of criticism of capitalism is attributed to the French socialist Louis Blanc.[6]" https://en.wikipedia.org/wiki/Pyramid_of_Capitalist_System
I suppose profit isn't possible in a barter system. But in a system that uses money as the means of exchange then profit can be made. If you sell something for more than it cost you to produce it then you make a profit.
Value is derived as a result of need/want and willingness to pay or trade in order to acquire something. With the exception of two identical items what two items have equal value to everyone?
Speaking just logically, never was a fan of philosophers, it seems that profit comes from two sources. First there's the time and energy you put into something to create or provide a service that others are willing to put their own time forth in order to utilize. There's diminishing returns for your own specialized skills. If you're a swordsmith and you make 3 swords a day, yet you only need 1 sword a decade for your own purposes, every sword after the first one is worth less to you and more to other people. The baker down the street can't eat all of the pies he can produce, but needs to defend himself, so you make a mutually beneficial trade. Contrast this to a self-sufficient system, where you need to be a jack of all trades but master of none. Specialization leads to higher quality or more efficient production of goods and services, provided there is a way for them to be exchanged and currency makes this more efficient. Thus profit can occur on both sides at the same time, it's not a zero sum game but a matter of the efficiency of specialization provided there can be efficient exchange and transport of goods and services. The other source of profit is a matter of ownership, and this is where capitalism and socialism collide. People tend to choose one or the other as if it were some kind of secular religion, rather than think about what is most efficient for each sector. The prospect of ownership means people can make more profit with less long-term effort, using people with fewer skills or resources to produce that profit and allowing these employees to make a living without fronting the risk, resources, and expertise required to establish a successful enterprise. Profit by ownership is helpful in that it can motivate people to establish infrastructure or develop innovative ideas. Profit by ownership on the other hand can be detrimental given that the goal becomes profit while other ideals come second. We see this most noticeably in healthcare, where what's best for patients or the country can come second to the profits of a corporation that provides something needed for healthcare. In terms of policy, I think it ought to be approached pragmatically. What system produces the most desirable outcome. Profit by private ownership absolutely can play a productive role in society, but it's not a panacea.
Time has value and we have a constant supply of that. Employment is generally exchange of time, used to create or improve resources, in return for a share of those resources. Different resources also have different value to different people at different times. If I have water but no food and you have food but no water, a simple exchange would give us both food and water, which has more fundamental value to us that either resource alone. The creation of money (especially fiat money) expands this, where “pure value” can be held indefinitely and exchanged for resources when they’re most valuable to you and least valuable to the seller. Specialist skills and economies of scale mean resources can be created for less cost. Three people each growing their own wheat then grinding their own flour before baking their own bread can only produce so much. If the each specialise in one of the three roles, they should be able to produce more (and/or better) bread than they would individually. I don’t think Marxism is asking where value comes from but addressing the issue of resource-rich individuals being able to make more efficient use of these principles than resource-poor individuals, meaning the rich get richer and the poor get poorer. The idea is to find ways for the increased value, all largely boiling down to time, to be more evenly shared.
Are you supplying all of the human labor required to produce whatever it is you are selling? Marx's labor theory of value was a technical explanation of how prices behave in a competitive market economy. If human work, rather than trade or land, determines the price that's paid for exchangeable goods in a market economy, there may be a capitalistic tendency to exploit the labor of other humans to produce or enhance personal profit?
Are you talking about the item's "use value" (its utility) or the item's "exchange value" (its price)? Two identical items may sell for the identical price without providing equal utility. I'm trying to understand how the worth of a good or service is determined, and the role "exploitation" plays in making that determination.
Depends on what you call profit. If you continually barter for something of higher value, then profit has been made. How to Turn a Paper Clip Into a House
Ever heard the phrase "beauty is in the eye of the beholder" ? Value is very much like that. The more you produce what you don't need, the less you value it. When you trade your surplus for what you do need, you give up a non value for a value... and that's what profiting is really about.
This is where Marx saw profit originating in the 19th century: "The worker is thus a commodity like any other for Marx. His value is determined by the costs of producing him. There is, however, a unique feature of labor-power that explains the source of profit on Marx’s account. "This he explained by reference to the labor theory of surplus value. "A conundrum the classical economists had faced was: How could there be profits in a market economy if equivalents always exchange for equivalents? "Marx’s answer was that equivalents do indeed exchange for equivalents, measured in terms of socially necessary labor time, but that labor-power is a unique commodity because its consumption as a use-value leads to the creation of fresh exchange-value." Shapiro, Ian (2003-02-0. The Moral Foundations of Politics (The Institution for Social and Policy St) (p. 89). Yale University Press. Kindle Edition. Imagine you have a choice concerning how to spend $1000. The first option is to take all your friends to dinner. The second is to pay all your friends to paint your house. If you select option 1 you have a good time but that is all the value you get for your $1000. Option 2 uses your friends' labor to produce additional exchange value should you decide to sell your freshly painted home
It seems obviously false that equivalents are exchanged, because something is more valuable to one person than the other. Again, it will take the experienced baker less additional time and resources to bake one additional pie over his usual 20, than it would take the person buying the pie to make 1 pie themselves. The baker doesn't need 21 pies for his own consumption. Thus the exchange can be valuable for both. Value is a matter of people getting what they want or need requiring less effort on their part to get it. Less effort, again, comes from efficiency. Efficiency is achieved by trading your specialized goods and services for another. Profit is just a storage form of value like glycogen is to glucose, making exchange more efficient. So yes, specialized labor is a foundation of generating profit/value just like soldiers are the foundation of an army. Ownership is analogous to who the general directing the army should be, and if you know much about war, the quality of the general can make a big difference in how effective an army is. But this doesn't answer the question of what's fair or optimal in terms of the distribution of the fruits of this joint enterprise. For pure capitalism this is defined by whether somebody is willing and able to do the job as well as you for less money than you, which will tend to concentrate wealth towards the owners if they can implement an efficient design. On the other hand, if they fail to get their part right, they can end up losing money while the workers still get their paychecks, at least as long as the enterprise is running. Ford said: "There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible." This statement seems ironic and self-contradictory, but all it's really saying is you need to be efficient. The $1000 dollar example, I'm not sure what point it's supposed to make. Either way somebody else is getting 1000 from you to spend, but one example is a matter of how much entertainment you get out of it (can't imagine spending that much for a dinner) and the other is how much value is added to the house. It's like comparing making an investment to going on vacation. They're two different purposes entirely. Consuming vacations/dinner absolutely does contribute to "fresh exchange value" for the people you're paying. It just doesn't return the money to yourself, and that's fine because it wasn't the purpose of that spending.
While labor power is a commodity just like other commodities, it does possess one unique feature: It's consumption as a use value, i.e., the material satisfaction you experience from a $1000 meal, from its power to create the fresh exchange value you would reap when selling a freshly painted house "Use-Value vs. Exchange-Value: "The usefulness of a commodity vs. the exchange equivalent by which the commodity is compared to other objects on the market. "Marx distinguishes between the use-value and the exchange value of the commodity. "Use-value is inextricably tied to 'the physical properties of the commodity' (126); that is, the material uses to which the object can actually be put, the human needs it fulfills. "In the exchange of goods on the capitalist market, however, exchange-value dominates: two commodities can be exchanged on the open market because they are always being compared to a third term that functions as their 'universal equivalent,' a function that is eventually taken over by money. "Exchange-value must always be distinguished from use-value, because 'the exchange relation of commodities is characterized precisely by its abstraction from their use-values' (127). "In capital, money takes the form of that equivalence; however, money in fact hides the real equivalent behind the exchange: labor. "The more labor it takes to produce a product, the greater its value. "Marx therefore concludes that 'as exchange-values, all commodities are merely definite quantities of congealed labour-time'" https://www.cla.purdue.edu/english/theory/marxism/terms/termsmainframe.html#usevaluehttps://www.cla.purdue.edu/english/theory/marxism/terms/termsmainframe.html#usevalue
This is actually an important question. The answer is that economic wealth comes about through the "efficient" combination of resources (both natural resources and human skill/labor). Money simply helps facilitate the exchange between individuals in a more efficient manner. The question of why is there poverty is a more complicated one. Generally, businesses get profit by combining resources in a way that are easier for others with resources to use. Usually the economy of scale plays a role. It might make sense for 1 person to simultaneously cook meals for 10 different people than for each of those people to individually cook a meal for themselves.
The question of why someone spends $2000 on a pair of new shoes that cost less than $10 to produce is a good one IMO. But if were getting into economics the problem is more about all the products the first world undervalues than it is otherwise. When a service or product is undervalued the race to the absolute lowest price can have devastating effects on the individuals dependent on those industries. The blind faith of the markets in future growth baffles me too... but I'm mixing things up a little there aren't I?
Marx had a conception of efficiency that is a paradigm of simplicity: "'From each according to their ability, to each according to their need.' "This is actually an elegant statement of economic efficiency. "It is just centered on the key fundamentals rather than some contingent approach. "Economic efficiency is about the best allocation of resources. "And that is a function of both supply and demand: the value of something is not only how easy it is to get, but also how much we want it. "And surely the primary, or most interesting, resource is what people do. From each ... is saying: where resources are abundant we should use more of them. "And to each ... is saying: where resources are wanted we should use more of them. "That is, we should use resources according to their supply and demand. "This expresses the basic quasi-proportional relation of each component, and their optimal combination as being the overall aim." http://www.hxa.name/notes/note-hxa7241-20120624T1124Z.html
If those shoes really are worth 2000 to some individual out there, maybe the business really has created wealth. Sometimes wealth can be created by moving a resource from one individual who does not highly value it to someone else who does. Of course, how wealth is actually measured is another matter, because money cannot always accurately capture wealth.
At least it might keep corporations and retailers from pressuring the factories where the shoes are produced into lowering their production cost. Which means that the workers in those factories have a chance of really improving their lives. Unlike many workers who face higher hours, lower pay, dangerous working conditions and a credit card offer in the mail. Yay globalism!!! I'm a little outside the PF box. But if we're talking about the economy and most consumer goods, then we aren't talking about US workers anymore. The reduction of world poverty due to global production and trade is hopeful, but I sense there may be some unintended consequences that no one is thinking about.
I think the idea related to goods produced rather than things such as land. Work transforms or produces goods. Those goods are then sold. If they can be sold for a price above the costs involved in production that's profit. Anyway that's my understanding of it. I'm happy to be educated more on this.
I'm still fumbling with the subject myself. I began this thread to help me understand some of the material found in this free MOOC on the Moral Foundations of Politics. One week of the course is spent on Marx and his theories with roughly equal time spent on what Marx got right and what he got wrong. https://www.coursera.org/learn/moral-politics
I think it's the case that Marx's theory of surplus value wasn't original but he took it from someone else and analysed it using his eponymous method of analysis. That's about all I can offer you unfortunately.
I think that was a common conception at the beginning of industrialization: https://en.wikipedia.org/wiki/Labor_theory_of_value#Adam_Smith_and_David_Ricardo https://en.wikipedia.org/wiki/Workmanship
