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Labor Theory of Value

Discussion in 'Political Opinions & Beliefs' started by oldjar07, Jan 10, 2014.

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  1. Frank Grimes

    Frank Grimes New Member Past Donor

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    A market price is nothing more than what the last buyer and seller perceived as the best price, you hit it right on the head, you can't use such perceptions since they change constantly and are whimsical. You must use something other than a market to determine an instrinsic property independent of the whims of humans. But there you have a problem, value only has meaning to humans.... think about it



    Usefulness is relative, subjective, and ever changing concept. Check out any market price chart, price is not fixed. The whole point of a market is to let price vary.

    the value (price) of the dollar is not fixed relative to anything, it cannot be a reference point

    whatever that is



    nonsensical
     
    Frank Grimes, Jan 12, 2014
    #51
  2. geofree

    geofree Active Member

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    Considering this quote:

    "Price is what you pay. Value is what you get." - Warren Buffett

    So, what type of value is Warren Buffet speaking of here?
     
    geofree, Jan 12, 2014
    #52
  3. Frank Grimes

    Frank Grimes New Member Past Donor

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    Warren's perception of what future returns he will receive, or when he cashes in, the actual total return on investment. All Warren cares about is turning a few dollars into a lot of dollars, that is his value yardstick.
     
    Frank Grimes, Jan 12, 2014
    #53
  4. Burz

    Burz New Member

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    You are excused.
     
    Burz, Jan 12, 2014
    #54
  5. geofree

    geofree Active Member

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    Could you be any more vague in your answer. IMO, Warren Buffet is clearly speaking about the difference between exchange value and intrinsic value.

    Sometimes market players will form an attack against opposing players, such as happened when the Hunt Brothers tried to corner the silver market. The Hunt brothers were buying silver to make it more scarce, while the opposing side was buying silver just to fulfill paper contracts. None of them really wanted the silver for its utility, it was just a high stakes game to see who could push the other side into bankruptcy. People who understand the concept of intrinsic value can make a fortune off of these speculative games … if their timing is right.
     
    geofree, Jan 12, 2014
    #55
    Meta777 and (deleted member) like this.
  6. Meta777

    Meta777 Moderator Staff Member

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    Don't tell me you're in agreement with the OP?
    As many others have already pointed out to the OP and the other liberals in this thread, market prices (Exchange Value)
    are not random and they are not based merely on whims as you put, rather they come about as a result of the laws of supply and demand.

    Yes there are some items based on purely emotional valuations who's usefulness to any particular individual cannot accurately be assessed by markets,
    but for the vast majority of goods and services this is not the case.

    Furthermore, the main difference between you and I appears to be that I believe that in the majority of the time the majoraty of humans are rational actors.
    This is precisely why a "free market" works in the first place.

    Also, I've stated this before, please note that Exchange Value does not necessarily equal Intrinsic Value.

    1. I'm sure you've got an example which illustrates that "fact", right? Well when you post it I'm standing-by and ready to post the counter-example.

    2. From your response, can I take it then that you now agree that the usefulness of something affects its price in the markets?

    Exchange Value! Just because it changes does not mean the good or service is any more or less useful than it was before.
    It is merely an indicator of fluctuating supply and demand.

    You and I seem to have different ideas of what a reference point is.
    Here is the definition I use: http://www.ask.com/wiki/Reference

    Nothing in there about a reference point needing to be fixed relative to some other reference point (*wink* *wink*).
    Now, having said that, a "fixed" reference point is certainly more useful in general, however, it is not as though the price of a dollar can't be fixed,
    and even in its current state I do not believe it to be so unstable as to be unusable for this purpose
    as if it were, it wouldn't be useful to us as an exchange currency.

    I defined exactly what it was a few posts back. You need me to link you to it?

    non sequitur

    -Meta
     
    Meta777, Jan 12, 2014
    #56
  7. Meta777

    Meta777 Moderator Staff Member

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    Like you said, he's talking Exchange Value versus Intrinsic Value.

    Warren Buffet may be a greedy liberal...
    ...but he's definitely one of the smart ones.
     
    Meta777, Jan 12, 2014
    #57
  8. Frank Grimes

    Frank Grimes New Member Past Donor

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    how does warren calculate intrinsic value? and no hand waving, details please
     
    Frank Grimes, Jan 12, 2014
    #58
  9. Meta777

    Meta777 Moderator Staff Member

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    My guess is that he probably doesn't ever use an exact value such as what you seem to be asking for,
    but instead looks at the market trends for supply and demand, buys up useful investments when the market price is low (supply exceeds demand)
    and sells them when the price inevitably goes back up.
     
    Meta777, Jan 12, 2014
    #59
  10. Frank Grimes

    Frank Grimes New Member Past Donor

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    There is a high degree of randomness in market prices, very high. I am a trader and boy do I know about that. Look up random walk theory and stock markets.

    Do you not understand that market prices reflect future expectations as well? and since that is the case, and the future is unknown, there is a high degree of speculation in markets? Do you understand that supply and demand equilibrium is a myth and therefore there is no law?

    let's take you supply/demand at face value however. Since supply and demand are not fixed in time, and can have highly volatile and whimsical components to them such as speculative demand, then they cannot be used as any basis for some sort of instrinsic property of a good.

    emotional demand is still simply demand, period. There is no artificial distinction like that, and you dead dog wrong by saying 'vast majority', in fact I would say the opposite.

    there is no operational definition of rational, in fact markets are often described as highly irrational. the free market works simply because there is nothing better.



    intrinsic value is a useless idea

    useful is always in the eye of the beholder, that's it, it is not a fixed absolute



    market value changes, usefulness is irrelevant


    in order to define something intrinsic, it must be independent of the value of the dollar which varies by the minute. The price of the dollar really can't be fixed, it is free floating on a market.
     
    Frank Grimes, Jan 12, 2014
    #60
  11. Frank Grimes

    Frank Grimes New Member Past Donor

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    of course he doesn't have an exact value, it's impossible. He's a speculator, you what that means? he's simply betting that his investment makes money. Warren has been hammered on some of his bets, how could that happen if he had 'intrinsic value'?
     
    Frank Grimes, Jan 12, 2014
    #61
  12. Meta777

    Meta777 Moderator Staff Member

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    A high degree of randomness and speculation in the markets, but no, overall they are not random. They are based on supply and demand.

    Future predictions are most often based off of past experiences and historical data where possible.
    If you're a trader, you should know that one does not pick investments simply by flipping a coin or rolling a die.
    At least none of the smart investors do that.

    What do you mean by that? If you're saying such an equilibrium does not exist today in the market for labor, I agree.

    You misunderstand its use in valuation. It is only when supply and demand are equal that an exact valuation can be made using the market value.
    At any other time, what can be determined is whether market value is higher or lower than the intrinsic value.
    Sure there can be periodic fluctuations in supply and demand but ultimately that is little more than statistical noise.
    If you look at the aggregate data and see a consistent trend of surplus supply, you can be sure that it is being undervalued by the market.

    You have any data to back that up?

    Wow....talk about hand waiving..."the free market works simply because there is nothing better"??.....Really??
    Look, the free market works because people tend to buy and sell things in such a way as to try to maximize their available utility,
    or in the case of items of Subjective Value, to satisfy some mental/emotional need or want.

    When it comes specifically to utility though, we humans are for the most part not unique to one another;
    We all need shelter, we all need food, we all need water, and given similar circumstances we can all use the same tools to help us achieve those goals.
    And yes, we tend to act rationally in ways that would lead us to meeting those needs more often than not.

    On the contrary. Simply understanding the concept can help us to answer many questions about why our society is the way it is.

    1. Don't just hand waive and say its not fixed. Prove it with an example. You should be able to do that right?
    Show that two similarly situated people who have different perceptions of a tool cannot both still use the tool to the same economic effect.
    Go ahead, pick any tool you like, or a material, or something else of utility provided its value is not dependent upon an emotional factor such as enjoyment.
    Do it,...I've been meaning to explain some things regarding potential value, so challenge me, perhaps I will then get the chance.

    2. Do you or do you not agree that how useful something is to humans will affect its price in the market?

    Are you honestly telling me that how useful something is doesn't matter? Please tell me you're joking.
    Seriously,....tell me that you made a typo or something, because I simply cannot believe that anyone actually believes such a thing......

    Intrinsic Value (ie: usefulness) is independent of the dollar. You are conflating the subject of measurement with the method of measurement.

    This counter is extreme, but it proves my point nonetheless:
    If I have a Fahrenheit thermometer and observe the temperature at 32 degrees and then swap out that thermometer for a Celsius thermometer and subsequently observe the temperature to be 0 degrees, has the temperature changed?

    Just for good measure, a less extreme example:
    Suppose I measure a penny on a scale and observe its weight to be 2.5 grams, if I were to then shave off a bit of one of the scale's counter balances and then observed the balanced scale to read 2.56 grams, has the weight of the penny actually changed?

    I meant that in the sense that it could be fixed to some other item or commodity, such as gold or wheat, or to some foreign currency.
    That said, as I so subtly implied in my last post, even those things are not "fixed" in absolute terms, but in relation to one another they could be.

    Either way, none of that changes the fact that a "fixed" status is not required for something to be used as a reference point.
    If you still need more convincing of this, let me know and I will prove it to you with an example.

    And again if the instability of the dollar were to such an extent that it could not be used as a measurement, it wouldn't be useful to us as currency!

    -Meta
     
    Meta777, Jan 13, 2014
    #62
  13. Frank Grimes

    Frank Grimes New Member Past Donor

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    The random component, and the ever changing supply and demand picture make market prices useless for setting some sort of fixed empirical economic property of an entity.

    It is possible to actually build a trading system off a coin flip, the problem is commissions and slippage destroy the profits. Who are these smart investors that can predict the future? data shows most managers fail to beat the market.


    There is no market for anything where all the bids and offers vanish, and all trades execute at one fixed price over time, never happens. Markets are always in a state of disequilibrium.


    they are never equal, nor are they ever constant in time, see my comment immediately above


    there is no such thing as intrinsic value for a market. Produce the empirical definition, until then please quit insisting it exists.

    No you can't, you don't know if people are actually selling all the supply, and if they were that doesn't mean they have to lower their ask. In many cases you can't even know the real supply.


    I didn't invent the concept of emotional demand, it is you that must show some data. I can't prove the negative.


    Needs and wants are not satisfied by utility? There is no empirical definition of emotional need/want, now produce it or stop talking about it.
    Secondly, speculators are simply making a buck. If you think the housing market bubble was all about people 'maximizing utility' or material needs and wants beyond cash, I have a bridge for you.


    who are you to tell me what my needs are?


    I cannot prove the negative. You must supply the empirical definition of useful. It must be empirical to be of use for a calculation of value, so go ahead and settle this by producing the equation.


    useful is a psychological concept, it cannot be quantified


    neither analogy is relevant, in physics weight and temperature have fixed measurement mechanisms. You have produced no such measurement technique for intrinsic vale. It is time to show it.


    none of them are fixed with respect to each other, they all vary in time, there is no fixed point of reference


    oh yes it is, any measurement standard must be fixed

    The dollar is kept within inflation/deflation ranges targeted by the fed, it may not be someday, and the currency cross rates are not controlled at all meaning all imports are subject to even greater fluctuations. All you are saying is that the fluctuations are small enough for your taste, that simply isn't good enough as some sort of absolute reference point.

    You can settle this whole thing by simply producing the empirical definitions you claim exist.
     
    Frank Grimes, Jan 13, 2014
    #63
  14. Meta777

    Meta777 Moderator Staff Member

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    Lol, if you think its a good idea to base investments on a coin flip, then WTF do you need a commission for?

    See people like Jack Bogle, David Dreman, Philip Fisher, and as I mentioned earlier in the topic, Warren Buffett.
    And no, I'm not suggesting they get it right 100% of the time, but then the point is not necessarily that you do get it right 100% of the time,
    but rather that you simply get it right more often than you get it wrong. Any investor ought to know this.

    http://en.wikipedia.org/wiki/Equilibrium_price
    If I can show you a product/service for which demand consistently exceeds supply or vice-verse,
    will you at least concede that markets can consistently exist on one side of that equilibrium point?

    You should not go around claiming things of which you know are impossible to prove.

    http://philosophy.lander.edu/logic/ignorance.html
    http://en.wikipedia.org/wiki/Argument_from_ignorance


    1. One dose not "fix" Intrinsic Value; it merely is. You must be thinking of Exchange Value.
    Intrinsic value for labor (I) is greater than Exchange value (E) when labor Supply (S) exceeds Demand (D) and is less than E when D>S.
    I = E + (S - D)x; where "x" is a positive non-zero value representing the rate at which an excess of demand or supply affects market price.

    2. http://www.thefreedictionary.com/useful , http://en.wikipedia.org/wiki/Utility
    Do you or do you not agree that how useful something is to humans will affect its price in the market relative to other things?

    3. Today you can buy a head of lettuce for under $1. If our loony government were to legislate a price floor for lettuce such that no one could sell it for less than $20, would you say that lettuce is now worth more than it was before? Has it become anymore useful?

    -Meta
     
    Meta777, Jan 15, 2014
    #64
  15. Meta777

    Meta777 Moderator Staff Member

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    You say that as if this is not the first time you are asking for this information...
    A few posts back I told you to make sure all your questions were clear and specific.
    Because this topic is so complex and since it covers such a wide range of concepts and information,
    if you don't ask me a specific question directly and in clear terms, I am going with the assumption that you don't require the answer;
    that you understand it already and need no further clarification. This is to cut down the size of the posts by not explaining things we already agree on.

    Now, I already posted the definition for Intrinsic Value way back in this post, and I explained how it could be measured.

    And BTW, I'm pretty sure I never suggested needs and wants weren't satisfied by utility. The opposite is true in fact.
    As for emotional needs and wants, the concept of an empirical definition does not make much sense to me,
    and I have already said that such things are purely subjective in the true sense. Here are the basic definitions though:
    http://dictionary.reference.com/browse/emotional
    http://dictionary.reference.com/browse/emotion

    Can money not be exchanged for utility? Is that not in fact its only purpose?
    I believe that speculators (and people in general) like to accumulate money in order to store/secure a guarantee of future utility.

    A Scientist, not too much unlike the scientists who came up with this list:
    http://www.brighthub.com/environment/science-environmental/articles/123273.aspx
    How many humans do you know of who live their lives without meeting the 5 basic needs in that list?

    -Meta
     
    Meta777, Jan 15, 2014
    #65
  16. Meta777

    Meta777 Moderator Staff Member

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    Just answer the question...

    Do you not know what the word could means?

    1. As you yourself were so eager to point out, the value of a dollar is not fixed, and yet we still use it as a standard measurement for value.

    2. Suppose a person measures how fast he can run from one end of an 800ft (244m) cruise ship to the other end using a stopwatch.
    Now let's say he does it in just over a minute (61 seconds). Suppose the ship is cruising at 21 knots.
    Would it then be incorrect for the runner to say his average speed was 4m/s relative to the ship?

    Not just my tastes. Any person or company that accepts dollars as payment is recognizing the dollar as a standard store of exchange value.
    Are you suggesting that you yourself do not accept payment in dollars (or other U.S. fiat currency)?
    Also, you're response sounded like an admission...

    Again, you need to make your questions more specific. What definitions do you want?
    I have already posted a number of definitions; Intrinsic Value, Exchange Value, Subjective Value, Utility,....
    and now I've posted equations for intrinsic value, utility, and equilibrium value...you need to be a bit more descriptive about what's lacking.

    -Meta
     
    Meta777, Jan 15, 2014
    #66
  17. RedRepublic

    RedRepublic Banned at Members Request

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    I found this on Wikipedia.

    A simple model illustrating the concepts and workings of LTV could go as follows:
    In a village in Somewhereia, everyone shares a set of skills and their produce is derived from local natural resources. Through custom or inclination each person pursues a particular trade, but is capable of pursuing any other in the village.
    These people exchange their products on a regular basis. Each would know how long it took their fellow to produce their good, and how long it would take them to make it themselves. They would also know how much of their own product they would produce in the same amount of time and how much they would be able to exchange for that product.
    If anyone tried to overcharge for a good, people would stop buying and make it themselves (or a competitor could enter the market and undercut them). Each person would thus be able to calculate whether it would be better for them to buy a good or make it themselves.
    In this scenario prices and values would be equal.

    I think most supporters of LTV do not consider this to be completely correct. They would acknowledge complicating factors but assume that LTV is a good general explanation for prices. To be honest I do not fully understand LTV and it is a controversial theory amongst Socialists. I think it would make some kind of sense that consumer goods aimed at the common man would be priced to fit into the budget of an average consumer, thus in a general sense value is tied to labour. Is this what LTV is trying to explain?


    And on a side note people are trying to inject politics into LTV. But LTV is just a theory used to explain part of capitalism, arguing in support of LTV does not mean you are against capitalism. Economists and labour market analysts use Marxist theories to explain capitalism as Marx was one of the first and best funded theorists to try to tackle capitalism.
     
    RedRepublic, Jan 15, 2014
    #67
  18. Steady Pie

    Steady Pie Well-Known Member Past Donor

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    What he's saying is that there's nothing objective about value - value judgments require subjective human input. You can't get an ought from an is.
     
    Steady Pie, Jan 15, 2014
    #68
  19. Frank Grimes

    Frank Grimes New Member Past Donor

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    Where did I say it was a good idea and where did I say I receive commissions? I only said it is possible, and it is. The Wall street journal did a running series on picking stocks with a dart once, it beat many folks, but it wasn't the best.

    . If Warren picks based on an intrinsic value you claim is there, then he should never lose.

    I just said markets are always in disequilibrium, now you want me to concede my own point? OK, I concede that I am right. That supply-demand curve thing in econ textbooks is nonsense, that isn't reality.


    you should at least show the entities you claim exist.

    One calculates intrinsic value, and in order to calculate one must have empirical definitions.

    Why do I have to do your work ******itt?

    Intrinsic value has definitions in philosophy, economics, and physics. You are confusing the philosophical with the economic. My claim is that the philosophical and economic only exist in our minds as a psychological concept. It is quite clear in philosophy since an intrinsic property of something cannot be dependent on another object, and since money has value only when there is a human around to value it, then obviously money cannot have intrinsic value in the philosophical sense. In economics intrinsic value is all about perception, so it isn't absolute nor is it a property of the economic entity. Value only resides in the mind of a human as a concept describing a thought process, and therefore it cannot be calculated since we don't have a mathematical model.

    For stocks Intrinsic value is a concept, like so many others, that people have tried to quantify. I don't understand why you can't just show it instead of endlessly ratting on....

    http://seekingalpha.com/article/170...-intrinsic-value-of-your-common-stocks-part-1

    g = perception of future growth.
    I have news for you, you can't calculate the future and an entity cannot posses your perception of the future. QED. Intrinsic value has no existence outside of perception, that is it really doesn't exist, it is only a state of mind. It is the exactly the same as the age old question: can you prove love exists?
     
    Frank Grimes, Jan 15, 2014
    #69
  20. Frank Grimes

    Frank Grimes New Member Past Donor

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    That was a qualitative definition followed by a guess. That was not a measurement, nor was that an empirical definition.

    No medical care? which foods, how many square feet of shelter will satisfy my emotional needs? how about love, don't I need that?

    generally yes, but that is not guaranteed, ask the confederates in 1865
     
    Frank Grimes, Jan 15, 2014
    #70
  21. Frank Grimes

    Frank Grimes New Member Past Donor

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    it was an ill posed question, why answer it?

    And the runners speed is about 300 MPH relative to the center of the earth, so what? galileean realtivity is a red herring. Using physics analogies are useless, econ is not physics. We use the dollar because there is nothing else, but everyone knows value is just what humans say it is. Read the front of a dollar, it is 'legal tender', in other words it's just a promise.

    do I have a choice?


    I got tired of asking, so I did one example for you above with stocks. You posted nothing that answers the question, your equations are not useful.

    You also seem to think I am a lefty, I am not. You fail to understand that if value can be calculated ab initio without markets, then Marx was right. You in fact are Marxian.
     
    Frank Grimes, Jan 15, 2014
    #71
  22. RedRepublic

    RedRepublic Banned at Members Request

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    Actually something like half of the loans investment bankers give are not repaid in full. They just make so much from extorting money through the drawn out repayment process involving intrest that it offsets losses. The banking system is absolutely predatory. I would not be shocked if stock market investing worked the same way.
     
    RedRepublic, Jan 15, 2014
    #72
  23. Meta777

    Meta777 Moderator Staff Member

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    Of course it wasn't!...

    http://philosophy.lander.edu/logic/ignorance.html
    http://en.wikipedia.org/wiki/Argument_from_ignorance
    You seem to be having a lot of trouble with this concept.

    And now you're bashing the econ textbooks too? You view some evidence or an argument, claim the subject of discussion doesn't exist,
    then when asked to prove your assertions proclaim that it is impossible for you to do so...which may be true, but if you know that then you
    should not then continue to go on making the unprovable claims as if they were absolute fact. To make that mistake once is to commit a fallacy.
    To continue to make the claims after your mistake has been pointed out too you makes it look like you're intentionally being deceitful.

    That said, I'm not asking you to concede that a market can consistently exist at the equilibrium point.
    I'm asking you if you'd be willing to concede that a market can consistently exist on one side of the equilibrium, (which btw is still disequilibrium),
    and not unconditionally either,
    I'm asking you to concede that only if I am able to produce evidence of a market for which supply consistently exceeds demand (or vice-verse)

    So suppose I can show such a market...what reason would you then have for not conceding the point at that time? It's basically a truism you-know...
    if the condition is true, it obviously follows that a market can consistently exist on one side of equilibrium, wouldn't you agree?

    Lol, I'm not asking you to do my work.
    I'm asking you to explain what it is that's causing you not to understand my explanations, to explain what is missing from the definitions and equations;
    I am attempting to understand your contentions, by asking you what should be simple to answer questions, to try and find the root of disagreement.
    Questions of which I cannot answer for you of course. I may know what your basic human needs are but that does not make me a mind reader.
    I can know how I'd answer them, but only you can know how you would answer those questions. That is your job.

    ....so again,

    2. http://www.thefreedictionary.com/useful , http://en.wikipedia.org/wiki/Utility
    Do you or do you not agree that how useful something is to humans will affect its price in the market relative to other things?

    3. If our government were to legislate a price floor such that letuce price went from $1 to $20, would you say that lettuce is now worth more than it was before? Has it become anymore useful?

    As has already been stated. It cannot have it, because an individual dollar (by virtue of being a dollar) does not have any utility.
    In other words, it cannot be used for anything in the practical sense, it can only be exchanged, so therefore it only has Exchange Value.

    1. You're describing Subjective Value as opposed to Intrinsic Value
    2. I just gave you a mathematical model

    Unlike love, utility, the source of Intrinsic Value, actually has physical properties.
    Would every single human on the planet need to eat food if the utility of food did not exist? I don't think so...

    -Meta
     
    Meta777, Jan 16, 2014
    #73
  24. Meta777

    Meta777 Moderator Staff Member

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    You said I needed an empirical definition before I could make a measurement.
    What specifically is missing from the definition and equation I posted that you are not seeing, and why are you requiring it?

    Medical care and shelter are not emotional needs. They are physiological. Of the base human needs that I was referring to before.
    As for love, that does fit the definition, and in fact the second link specifically calls it out.

    -Meta
     
    Meta777, Jan 16, 2014
    #74
  25. Meta777

    Meta777 Moderator Staff Member

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    Answering the question PROVES my point that a changing measurement standard does not mean the thing being measured is changing.
    Do you now agree with this?

    Its not a red herring as it PROVES my point that a "fixed" status is not required for something to be used as a reference point.
    Do you now agree with this?

    The concept of a reference point is the same in Physics as it is for Economics. It is merely used in different ways.
    The fact that we are discussing economics does not somehow change its definition.

    Technically, yes. Practically speaking, no.

    Now you're just being vague again. What specifically about the equation do you find makes it useless?
    What particular use are you expecting of it for which it is not satisfying???

    1. I don't think you're a lefty,
    though you do seem to share many of their faulty views as well as having the same trouble understanding the concepts surrounding Intrinsic Value.

    2. To claim I'm a Marxist is ridiculous. First of all I never said anything about him being right,
    he is a supporter of socialism and wants to bring about a major societal change.
    Second, I have not said anything about value being calculated without the use of markets. You seem to be constructing a straw-man.

    -Meta
     
    Meta777, Jan 16, 2014
    #75
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