{"id":198,"date":"2015-07-10T23:30:26","date_gmt":"2015-07-11T03:30:26","guid":{"rendered":"http:\/\/commoncents.blogwyrm.com\/?p=198"},"modified":"2023-05-06T18:57:23","modified_gmt":"2023-05-06T22:57:23","slug":"value-and-trade","status":"publish","type":"post","link":"https:\/\/commoncents.blogwyrm.com\/?p=198","title":{"rendered":"Value and Trade"},"content":{"rendered":"

I suppose the origin of this particular column came from a rather comical conversation held over dinner.\u00a0 My wife mentioned that her father used to tease a cook he knew about her efforts in the kitchen. Her father contended that cook\u2019s efforts were proof that Marxism was wrong about the value of a thing made in the economy.\u00a0 According to Marxism, the value of any object is determined by the total amount of labor required to make it<\/a>.<\/p>\n

The cook would select a great recipe for the main course, would purchase the finest ingredients, and would labor long and diligently over the preparation.\u00a0 Of course, the meal would often be a great disappointment and, sometimes nearly inedible.\u00a0 Any restaurant serving such a dish would soon go out of business.<\/p>\n

The inverse situation also occurs.\u00a0 There seems to be many instances were by accident, an entrepreneur just happens to \u2018catch lightning in a bottle\u2019.\u00a0 A simple idea brought to market with minimal effort makes a fortune for its owner.\u00a0 If you are thinking about the pet rock then you are reading my mind.<\/p>\n

A very comic example of this latter situation occurs in the original movie version of the Producers, where Max Bialystock moans:<\/p>\n

\nhttps:\/\/commoncents.blogwyrm.com\/wp-content\/uploads\/2015\/07\/Where-did-I-Go-Right.mp4<\/a><\/video><\/div><\/center><\/p>\n

So what to make of this Marxist idea?\u00a0 How much truth is there in the idea that if it took twice the amount of effort to grow one type of crop, say a bushel of wheat, as it did to grow another, say a bushel of corn, then the bushel of wheat holds twice the value as the bushel of corn.<\/p>\n

Oddly enough the idea originated well before Marx, with roots being traced back to the philosophical works of the Middle Ages.\u00a0 Thomas Aquinas is credited for noting in his Summa Theologica<\/a> that:<\/p>\n

\n... value can, does and should increase in relation to the amount of labor which has been expended in the improvement of commodities.<\/p>\n
Thomas Aquinas<\/div>\n<\/div>\n

This concept also shows up in the classical school of economics.\u00a0 It was touched on by Adam Smith in his Wealth of Nations<\/em> but it doesn\u2019t seem that Smith actually embraced the idea as being applicable for anything more than the most primitive of societies (or rude societies as he put it).<\/p>\n

Other classical economists, for example Ricardo, held more broadly to this concept making it part of their structure for economics.\u00a0 Although even then, there were doubts about the universality of this idea. The labor theory of value was embraced by Marx as an important and operative principle but it seems clear that the notion, with no additional provisos, is untenable.\u00a0 The notion that the buyer in the transaction has no place in determining the value of the thing being purchased is short-sighted and laughable.<\/p>\n

Perhaps the best illustration of how much of value lies in the eyes of the customer is the following passage from Chesterton\u2019s The Queer Feet:<\/p>\n

\nThe Vernon Hotel at which The Twelve True Fishermen held their annual dinners was an institution such as can only exist in an oligarchical society which has almost gone mad on good manners. It was that topsy-turvy product--an \"exclusive\" commercial enterprise. That is, it was a thing which paid not by attracting people, but actually by turning people away. In the heart of a plutocracy tradesmen become cunning enough to be more fastidious than their customers. They positively create difficulties so that their wealthy and weary clients may spend money and diplomacy in overcoming them. If there were a fashionable hotel in London which no man could enter who was under six foot, society would meekly make up parties of six-foot men to dine in it. If there were an expensive restaurant which by a mere caprice of its proprietor was only open on Thursday afternoon, it would be crowded on Thursday afternoon.<\/p>\n
G.K. Chesterton<\/div>\n<\/div>\n

If the labor theory of value is not a viable approach for determining value, what is?\u00a0 That is a question that occupies a great deal of economic discussion even until today and there is no universally held belief.\u00a0 Mainstream economists do lean toward the idea that free trade best uncovers the value of a good or service because in the free market the value of the thing will be determined best by the currency that will be offered to purchase it.<\/p>\n

As a result, trade is actually seen as the mechanism by which value is created or imparted to a good or service<\/a>.\u00a0 Free trading allows for the assessment of value by letting lots of people \u2018vote\u2019 on the value.\u00a0 To paraphrase Churchill, this economic democracy is the worst form of finding value except all the others that have been tried.<\/p>\n

Please pass me the pet rock.<\/p>\n","protected":false},"excerpt":{"rendered":"

I suppose the origin of this particular column came from a rather comical conversation held over dinner.\u00a0 My wife mentioned that her father used to tease a cook he knew... Read more ><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-198","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=\/wp\/v2\/posts\/198","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=198"}],"version-history":[{"count":5,"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=\/wp\/v2\/posts\/198\/revisions"}],"predecessor-version":[{"id":1205,"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=\/wp\/v2\/posts\/198\/revisions\/1205"}],"wp:attachment":[{"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=198"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=198"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commoncents.blogwyrm.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=198"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}