January, 2009

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Finding joy in perspicuity through tedium.

Tuesday, January 27th, 2009

Heather

Karl Marx developed a labor theory of value stating that the value of an object is solely a result of the labor expended to produce it.  More specifically, he claims that any price charged above production cost (excluding labor) is value added specifically by the laborer and is therefore rightfull property of whoever created the object.  His conclusion, therefore, is for workers to eliminate profits, sieze factories and overthrow the ‘tyranny of capitalism’.

Adam Smith, better known for openly exploring capitalism, the free market, and the ‘invisible hand’ theory seems to mirror directly what Marx is also claiming when he states, “The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it (pg 47).”

Almost identical to Marx, Smith states, “Labour, therefore, it appears evidently, is the only universal, as well as the only accurate measure of value, or the only standard by which we can compare the values of different commodities at all times and at all places (pg 54).”  These two men, who are so well known for being the fathers of such opposite thoughts of economics, agree in theory on the origins of value.  Together they agree that the value of labor is the driving force behind value found in all products and services in the market.

And although the origins of both theories seem to be derived from the value of labor on product production in the market, I think that the similarities don’t continue on much past the point of origin.  In order to adequately compare the two philosphers, I think we have to look at how they percieved the motivation or driving force behind the market–and consequently how that affects the value of labor.

Karl Marx believed in the inherant evil of the free market.  To him, the bourgeoisie were sitting on top controlling everything going on below, including prices, wages and value of individual laborers.  Intuition tells me that in this case it isn’t actually labor that is driving value behind products in the market, but rather the upper class throwing out numbers in order to take advantage of everyone else.  If this were the case labor isn’t owned by individual laborers, but rather by the factory owners under who they work.  And value isn’t placed on an item by the amount of labor that is put into it, but rather by a boss who decides how much he would like to make in the transaction.

In contrast, Adam Smith talks about the value that is added in a free market system by labor.  In his description, the owners of labor are the people providing it.  Those people may rent out their skill/labor/knowledge at any price they choose.  It is through this free exchange of labor that is driving the cost of value of products and services.  In other words, a trained philosopher (adam smith?) would never rent out his knowledge of the world to a factory owner requiring him to make pins and nothing else unless there were no other options for wealth creation in the world.

And Smith recognizes the importance of money for the exchange of goods and services anyway…even if labor is the driving force behind it.  “As it is the nominal or money price of goods, therefore, which finally determines the prudence or imprudence of all purchases and sales, and thereby regulates almost the whole business of common life in which price is concerned, we cannot wonder that it should have been so much more attended to than the real price.”

They could, after all, both be wrong for all I know.  All Adam Smith wants is to be perspicious.

Smith and the Wealth of Nations

Tuesday, January 27th, 2009

Price is a function of labor. To paraphrase Smith, the real price of an item is the labor (effort, time, or combination of both) in order to acquire that item. The free market is dependent upon goods being attainable, but also upon being worked for. The producer of a certain good, if he gives his goods away for free, gains no specific labor in return for his production. If a man can get something for free rather than work for it, he will almost always do so, thus reducing the labor in society by one person. If this same sentiment extends to several people or to a large segment of society, then a large part of the labor force has been reduced. Those who labor to give some people something for free are made slaves by those who live upon their labor without producing anything of value. If nothing is worked for, then nothing is produced, and as a result, the society suffering from this malady does not produce so much as other societies not suffering from this problem, and will fall behind because of the lack of relative wealth. When the society falls behind the other societies that are more productive, they are at the mercies of the productive societies because “Wealth…is power” (Smith, p. 48).

An item will not be sold unless a person (or really, a group of people, in order for the producer of the item to be viable in the long-term) is willing to engage in a certain amount of labor which will enable him to acquire the item. Thus, if people are unwilling to labor the requisite amount in order to gain the item, then the price will drop in order for the item’s manufacturer/producer/grower/inventor to recoup at least some of their investment, or possibly they will still gain, but at not so great a rate that they had once desired.

However, there are certain items which we appear to be dependent upon for survival. These items include basic food supplies and often, energy sources such as oil. (The only reason some areas are habitable by large groups of people is because of food shipped to them using oil and oil used for heating or cooling. If heating or cooling were not available in harsh climates, then these climates would not be viable areas of living, because a great deal of energy would be spent in attempting to obtain relief from the conditions rather than in production of goods).

Thus, in times of distress or famine, suppliers of necessary goods can command a high price for their commodities and actually receive it. However, there is a price point at which no labor will can satisfy or no man will be willing to labor to reach that point. If this happens, then the purveyor of the item does not receive any compensation for his investment no goods for his subsistence and he will be forced to lower the price in order to gain income for both his subsistence and future living.

When labor is divided, it is even more important that goods are offered at fair prices, as each group of people is reliant upon each other and would be in a bad position if either suppliers or purchasers were to fail. Take the example of the farmer, miller, baker, and store owner. The farmer produces corn, which is sold to the miller, who produces flour to be sold to the baker, who produces bread to sell to the store owner, who collects a large variety of goods for convenience of the customer and sells the bread to the farmer. All have an interest in ensuring that fair prices go throughout the system. If the famer charges too much for his corn then the miller must also charge more for the flour in order to maintain his original profit margin. In turn, the baker must charge more for his bread, the store must charge more the bread as well, and the famer’s initial high profit is used to purchase the now more expensive bread, thus diminishing the benefit of greater profits. In many cases, the grocer, the baker, and the miller, anticipating further price increases, will raise their prices in greater proportion than the famer initially did, thus further diminishing the farmer’s originally high profits.
Thus we can see the interest in making fair prices, unless we do not believe we’ll ever trade with the person we’re taking advantage of again.

-Rick Kelly

Locke is to Rousseau as Smith is to …

Tuesday, January 27th, 2009

Chris Martin

In the readings we discussed last week, Rousseau quoted Locke:  “Where there is no property there is no sense of injury.”  They agree on something, but Rousseau takes a statement from Locke and incorporates it into his model of government.  Marx’s work has a similar relationship to Smith’s – they may share a common point, but they’re heading in very different directions; therefore, contextually, the point that labor was (perhaps) the first medium of common exchange for goods is very different in Smith’s view than Marx’s.

Smith takes his idea of pricing and labor in the direction of laissez-faire, as clearly evidenced in Book I Ch. X part II:  Inequalities occasioned by the Policy of Europe.  Ricardo tweaked Smith’s idea of labor to make it fit the model better.  It’s not necessarily labor that determines the price, but the opportunity costs of the time spent in that labor and preparing for the occupation, and the opportunity costs of the stock and land tied up in the product.  It’s the freedom to move our labor and capital into occupations that will return better dividends that promotes progress in a free-market society.  In the long run, due to competition, all investments will return at the same rate.  Smith understood this and the importance of allowing goods and labor to flow where there’s the highest effectual demand, but the basis is not a labor theory of value.

So maybe Smith was wrong about something.  Maybe the labor theory of value and quotes like the one in question don’t belong in his laissez-faire model, and maybe he did plant the seeds of communism because of the inconsistency.  Chalk up another point for the Scots for the invention of the modern world.

The Reason Engineers Exist

Tuesday, January 27th, 2009

Jamie Wilson- There is good reason why some of Adam Smith’s ideas seem to echo those made by Karl Marx almost 75 years. Marx used some of Smith’s theories in his works, most notably Das Kapital. It would appear that this idea of labor driving prices is an example of this. Indeed, Smith highlights the struggle between the “masters” and the “laborers” in Book 1, Chapter 8, which Marx would use to great effect as he later described the struggle between the bourgeois and the proletariat. The main difference between the two thinkers is that Smith described the price of labor as one of the great forces driving prices, and thus the market economy. To Smith, there are three components of any price: rent, profit, and wages. Wages, the price of labor, includes all the work piled into a product. It isn’t just the workmen who produced a product, it is the workers who made the parts to the product, the amazing engineers who designed the product, the managers who oversee production, etc. The cost of all this is built into the price we pay for any item.

The price of labor helps drive the economy because when laborers reap the benefits of their hard work, they are apt to produce more. When this happens the economy grows quicker, and that is the true creator of a nation’s wealth. It is the time rate of change in the economy, not the the actual size, that really matters. The laborer in the American colonies was much better off than the laborer in England because production in America was growing, leading to greater demand for laborers, and thus greater wages for the laborer. As market forces kick in to raise the standard of living, society as a whole benefits. The free market economy lives and dies by this principle. Without the price of labor, we could never achieve anywhere near the same level of technological development and financial well-being as we enjoy today.

Question for Smith

Monday, January 26th, 2009

“The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people. What is bought with money or with goods is purchased by labour, as much as what we acquire by the toil of our own body. That money or those goods indeed save us this toil. They contain the value of a certain quantity of labour which we exchange for what is supposed at the time to contain the value of an equal quantity. Labour was the first price, the original purchase-money that was paid for all things. It was not by gold or by silver, but by labour, that all the wealth of the world was originally purchased; and its value, to those who possess it, and who want to exchange it for some new productions, is precisely equal to the quantity of labour which it can enable them to purchase or command.”  WN, Book I, Chapter 5, Paragraph 195.   

Some have suggested that statements such as these imply that Smith agreed to a labor theory of value not unlike that of Karl Marx.  Discuss what Smith means by the relationship between price and labor and how that forms the basis of a free market theory of economics.

The law of nature

Wednesday, January 21st, 2009

Both Locke and Rousseau esteem the theory of the natural man and natural freedom coming from this state of nature.  Locke says, “The state of nature has a law of nature to govern it,” explaining that if there is a natural order within man there will be a natural governing process.  Having many people by the nature of beings will lead to a society and with a group uniting as a society there will become a natural rising of a government of sorts.  The purpose of this government Locke claims is to protect people’s natural rights to property and protection thereof.  It is the role of government to establish societal absolutes whereby every man will abide within the society to protect those absolutes as they protect individual’s property.  Where both Locke and Rousseau seemed to agree on the nature of man being the core of government Rousseau portrayed government as more of an institutionalized force than a completely natural instinctive order.  The role of state in society according to the readings I believe is limited.  The state is responsible for the protection of property how the society has, as uniformly as possible, defined such.  If nature is the determiner of what is property, how it should be protected, and what measures should be taken in violation of this natural order then the government’s role is simply to enforce what the public defines as this natural order.  This should not be complicated if the government is a true reflection of its governed body and the rules the society holds as absolutes are natural and thus uniform. 

This loose idea of what government and society ought to be is difficult to apply to “modern and diverse society” because of this diversity which makes the determination of societal absolutes or laws difficult to concur upon.  In Laurry’s situation it’s “the vibe” of the law that his property should be protected because of the way he defines his property however the law defines and values his property differently.  There must be some accord in the way the citizen and government define and value property in order for it to be protected in both cases and interests. 

Jayme

Utilitarianism an excuse

Wednesday, January 21st, 2009

Andrew Bjork

I believe Locke understood the intrinsic greediness that men can acquire within society.  He states plainly, “God hath certainly appointed government to restrain the partiality and violence of men.”  This should be one of the greatest goals of government.  There is a need for a strong central government that strives to protect the rights of the individual, but which also leaves its citizens in a state where they can act for themselves, in accordance with their own self-interest.  Property in the hands of people is a more efficient use of land and a way to help those people serve others without coersion.

 

Rousseau also sees government as a way to give to citizens a sort of freedom.  However, he sees this freedom as something that comes close to, but never reaches, the freedom achieved in the “state of nature.”  In fact, property would have no basis in Rousseau’s optimal “state of nature.”  As a direct consequence of this belief, he commands the idea of utilitarianism.  For “the common good,” people take upon themselves a social contract that serves the needs and desires of the nation collectively.  Unfortunately, this can sometimes override the fundamental and indispensable rights of the one, or the few.

 

In such times as ours, there are times when we must understand that the benefits of “compulsorily acquired” land sometimes far outweigh the negative consequences.  In such times when land is set aside for roads, utilities, or green spaces, compulsory acquisition can occasionally be a neccessary act.  However, these situations should be few and far between.  Recent actions by such groups as developers, who compulsorily acquire homes and lands to build housing complexes or oversized malls, step beyond the bounds of what Laurry or even Locke would consider “just terms.”

Shotgun!

Wednesday, January 21st, 2009

 

Many a time, as a child, my sister and I would rush to the car and scream, “shotgun!”  The one to blurt it first was automatically given the right to sit in the front seat of the car.  There, they would relish in their victory and acquisition of the cushy, leather property with a heated seat.  

This childish example is not too far off of the history of property acquisition and rights.  According to Rosseau, the first man to “dibs” a piece of property and have other people believe him, was the first founder of civil society.  Rosseau condemns personal property, while another political philosopher, John Locke, applauds it.

Locke believes that to turn land into property, a man must make it useful; or work with it.  This automatically makes it his land.  Once it is his land, the government (made from a social contract) will protect his property rights.  The “dibsing” principle works for Locke, as long as a man is efficient.  Who is right, or is there something in between?

Rosseau seems to want a consecrated society, where no one owns anything.  In the history of the world, this has hardly ever worked.  Locke says that all a man must do is work on a piece of land, and it is his.  This is what has led to the “extralegal” portion of the world’s population, the favelas, barrios, and ghettos of the world.  In all truth, “the vibe” states that a man’s “pursuit of happiness” of right to property, is an inalienable right that he deserves.  With the right to property, comes the need for legality.  When property is legally “bestowed” upon a man, woman, or family, it is theirs and cannot be taken away by compulsory means.  

Laurry hit it right on the head, “the vibe” is the bottom and base of the entirety of our protection.  

Jake Peterson

 

Private Property

Wednesday, January 21st, 2009

Locke’s and Rousseau views of property are for the most part similar in that it is labor that started the separation of common property from private property. Locke explains how by adding value to property through one’s “private labor” (which according to Locke accounts for the most value in any good) gives common property the nature of private as long as that good is used beneficially. Similarly, Rousseau considered that “it is impossible to conceive of the idea of property arising from anything except manual labor”.

Also,  Locke justifies the accumulation of property by explaining how the invention of money, silver, and gold as valued goods (as agreed upon by society) with durable life could be exchanged for other goods like crops, apples, etc. without having their property being soon perishable and not able to benefit any individual. On the other hand, Rousseau’s considers that the evils that came after property are “the inseparable consequence of nascent inequality”.

 

With respect to the movie, the attempt compulsory acquisition of Laurry’s house goes against Rousseau’s reasons for the creation of regulations of justice and peace “which compensate in some way for the caprices of fortunate by equally subjecting the powerful and the weak to mutual duties

 

Locke and Rousseau agree… Small government for me

Wednesday, January 21st, 2009

Andrew Barnard

In regards to the origin of property both Locke and Rousseau agree that ultimately it is the action (labour in Lockean terms) upon a given object, usually a piece of land, which marks off something as someone’s possesion.   This where the similiarities in ideologies end.  Locke sees the idea of property, and more specifically its labourious nature, as the great egalitiarian demoneator between humanity.  Any person, he argues, has the ability or opportunity to go out and claim, work, and make industrious, thereby creating property to himself.  He sees an equality in opprotunity while with the invention of money he admits an equality of result will surely not come to pass.

Rousseau on the other hand sees property as the means by which the powerful can make a legitimate claim in subjugating and oppressing the weak.  He takes Locke’s claim of property as the vehicle to liberty and drives it into a plantation. The quest for property overcomes and drives people into an insatiable hunger for fortune; a hunger that is praised by the masses and shortly both engulfs and enslaves the population.

The role of the state in the respective Lockean and Rousseaue(n?) worlds seem to be, despite there differences, both very limited.  Rousseau it seems finds society itself as a step below the freedom of the natural man and surely cannot find anything too complimentary about a large government. While Locke on the other hand wants the State to only watch over and ensure the property rights of its citizen.  Either way it appears “Big Government” loses.

So to tie the optimist Locke and the more cynical Rousseau together with Daryl and Laurry in their quest, I feel that they could use the arguments of either Locke or Rousseau as showing violation of the “Just Terms.”

There is a catch though. Locke makes very clear his views in Chapter 5 on the value of labour in determining property.  He repeteadly uses the American inlands as land to which the Indains have to legitimate claim as they have made, in his mind, no use of it.  He states that an acre in Devonshire is worth 10 times more than an acre in, say, present-day Iowa.  By this logic of maximizing utility as the determination of ownership surely the Kennigans have no claim in the face of an airport.

When all is said and done however, whether it be our bodies, land, or liberty we as humans do have an innate or at least innate to our stage in human evolution, sense of ownership.  It is for this reason, Locke argues, that society came to be, and continues to define the legitimacy of governments today.  We seem to have come to a majority consenus earlier that due to the difficulty in defining virtue, the government should not concern itself with the effort of instilling morality into its citizenry.  That leaves only the preservation of property and liberty as the legitimate duties of conentual government.