Re: Wealth (Off Topic)

2008-4-15 18:52:00

Referencing the quotation from John Locke that JJ used in a previous message, Larry wrote:

"'All wealth is a product of labor.'"

Larry then quotes himself:

"All labor does not produce wealth, nor produce it equally."

Larry then quotes JJ:

"That is correct, but it does not disagree with Locke's statement."

In reply to the above exchange, Larry then continued with the following:

"Consider that a person may spot something shiny in a creek bed and bend over and pick up a raw diamond worth over a million dollars (even before any work is done on it to cut or polish it) and the amount of labor is nothing more than bending over and picking it up. Think of it as winning nature's Lottery ticket.

"On the other hand a person may labor all their life and not produce a million dollars worth of value (or even a fraction of that). Some people, thinking here perhaps of government bureaucrats, may labor an entire lifetime to actually reduce the total wealth available to society.

"While it is true that some amount of labor is almost always involved in the creation of wealth, labor is not the primary cause of the value of the end product. The actual value of any product of labor is not the labor per se, but the result of supply and demand. Has the labor produced something that has high demand? If so then its value is most likely increased. Has the labor produced something of low demand? Then no matter how excruciating or difficult the labor, little wealth has been created.

"Labor is the primary cause of the existence of things. Desire and demand is the primary principle of the value of the products of labor. In many respects it was the failure to understand this principle that led both Smith and Marx to espouse theories of value that focused primarily on labor.

"Labor is not the principle of value or wealth. It is a factor, but not the principle. The principle of value is purely a reflection of demand or desire. Those who wish to be rich should attempt to produce that which is in the highest demand."

JJ:

I think you are picking at straws in a continual attempt to prove me wrong.

Yes supply and demand determine the price of things but there would be no supply available without labor nor would there be the power to meet the demand.

Even if you find a diamond in your back yard it will have no value unless you go through the labor of picking it up, taking it to an expert to assess and then looking for a buyer.

Without labor there would be no supply and demand.

"Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration."
  -- Abraham Lincoln

In a separate follow-on message, Larry continues the discussion with:

"Consider a loaf of bread. Without the labor of a baker there would be no bread to meet the demand. So obviously labor is a factor in the production of bread. But without wheat there also would be no loaf of bread. Wheat is also a factor in the production of bread. Wheat, water, ovens, labor are all factors or requirements for producing a loaf of bread.

"If we are looking at the factors that go into the production of a loaf of bread then logically it would seem that wheat is more of a primary factor than labor. After all, without wheat there would be no bread. Therefore if we are looking into the factors required to create values then raw materials precede labor.

"Once a loaf of bread is produced it has a value, but that value is dependent on other factors than just the labor that went into it. If I am trying to sell loaves of bread then the value of a loaf of bread, that is, its price, is dependent on several factors the primary of which is supply and demand."

JJ:

Why are you telling me this? There is no disagreement that supply and demand greatly influence value.

Larry:

"A person considering whether to buy my loaf of bread will take into account several factors. They will consider how hard would it be for them to make their own loaf of bread. They will consider if they have the requirements, skill, and time to do so and how much that will cost in comparison to buying the loaf I have for sale. They will consider whether or not making a loaf of bread for themselves is the best use of their time (perhaps they can make a lot more money doing something else and easily afford buying my bread from the profit of that labor).

"They will also consider whether they think my bread is the best value for the money. Perhaps a baker down the street makes more tasty or less expensive bread.

"In short a lot of calculations are made by potential buyers of my bread and the sum of their calculations represent the demand for my bread and that sets the economic value or price of my bread. If I as a producer of bread set my prices higher than what the market deems correct then at the end of the day I may have a lot of bread on the shelves of my store going stale.

"Obviously the value of just about anything that humans trade among themselves is purely a function of supply and demand. A lot of factors go into determining the demand any product will command including labor, skill, reputation, usefulness, and scarcity. But the final and ultimate principle determining what a thing is worth in the market is supply and demand.

"The important thing to distinguish is that there are factors or requirements for the production of most goods; e.g., raw materials and labor, but the economic value of a thing once it is produced is entirely dependent on the principle of supply and demand.

"The economic value is not primarily dependent on the factors of production (including labor). Obviously these factors of production do play a part in the equation of supply and demand. The products of superior skill or labor, all other things being equal, are more valuable than the products of mediocre or inept labor."

JJ:

The fact that you are going into all this basic stuff tells me that you are not understanding what I am saying about labor. I have never, NEVER said that all labor is of equal value or that labor alone is the only thing that gives a thing value. I have never said that supply and demand does not influence value. Of course it does. There is no disagreement here. I'm not sure we even have a disagreement at all if you were to understand what I have said about labor which is basically this.

Without labour nothing of value is produced and gets put in circulation to fill the demand.

The value of an average hour's labor would be a good standard to use as a basis of the value of the dollar.

Larry:

"What you fail to distinguish is that there is not just one principle or factor involved."

JJ:

I never said there is only one principle involved. Again if you want to pick a fight argue with what I do say -- not with what I do not say.

Larry:

"There is a hierarchy of principles involved. If there is a hierarchy then there is a primary principle and then secondary (or ever tertiary) factors or principles."

JJ:

I have already said there was a hierarchy of principles, or aspects as I called them. Why are we covering this again?

Larry:

"At the top of the hierarchy in determining the value of a product is the principle or law of supply and demand. In the final analysis that is what determines the value of any product that is offered for sale. Secondary to that principle are factors of the amount of labor or raw materials required to create the product, the skill of the labor involved, etc."

JJ:

I have never said that labor determines the amount of value. Instead I have said that there is no value without labor. Nothing happens -- there is no supply without work being involved. How you can take issue with this is baffling.

Larry:

"Therefore labor is most certainly not the primary principle involved."

JJ:

You are talking about a different subject than me so your argument is a moot point. There is a difference between the amount of value and value itself. The amount or variance of value is largely determined by supply and demand, but to create anything of value or to get it to the marketplace takes labor. You can apply labor to the creation of a product before a supply or demand even exist; therefore, you are creating value when there is no supply or demand as Edison did with the phonograph. If you understand what I am saying here you will see you are not arguing with the real point I have been putting across. Instead our dialog has been more matter of semantics and presenting an aspect of the whole.

I think we would both agree that without labor there would be no economy and without supply and demand there would be no economy either. Which one is furtherest up the hierarchy depends on whether you are looking at value fluctuations or value itself. Exploring the nuances of differences here only distracts from the original point I attempted to make with the principle of labor. I see it in a similar light to Adam Smith, Benjamin Franklin and Abraham Lincoln who I have quoted on the subject and they certainly were not Marxist in their thinking and they were smart enough to understand supply and demand.