| This question <45|41> overall <48|50> Hans: <45|55>. |
| Question 73: Marx argues that commodities are exchangeable only because they contain some common substance. Bailey denies this. He compares the exchange-value of commodities with the distance between points, which is not based on a commonality between the two points but is purely relative: “As we cannot speak of the distance of any object without implying some other object between which and the former this relation exists, so we cannot speak of the value of a commodity but in reference to another commodity compared with it. A thing cannot be valuable in itself without reference to another thing any more than a thing can be distant in itself without reference to another thing.” . Comment. |
| [49] Hans: Cost is not value -- more details. I wrote in [45]: |
| Higher wages would therefore not lead to inflation but to lower profits for the capitalists. |
| In response to this, Chapeye emailed me the following question: |
| Could you explain this one please? I don't remember this in any of the text I read so far. |
| Intuitively, it would seem that higher wages for everybody would mean higher prices, at least in the society where a classical law of supply and demand works. |
| I agree, this was not in the assigned text so far. It was an anticipation of certain results from later in the book in order to drive home the point that cost and value are not the same. |
| I also agree that modern mainstream economics comes to the conclusion that wages are determined by the marginal productivity of labor. I.e., the wage level is determined by technology, and the efforts of the workers to raise their wages are futile. |
| However there is also a branch in economics, called Neo-Ricardian economics (Piero Sraffa), which can be thought of as a general equilibrium mathematical modeling of the labor theory of value. Their mathematical models say: prices are higher than cost due to a macro-economic effect, namely, due to the fact that the technology in the overall economy is productive. If the economy is able to produce more outputs than inputs and therefore is able to grow, then this also means that prices must be higher than costs. If you raise wages, you are giving more of the newly produced value in the economy to the laborers, and therefore less of it stays in the economy at large, and the markup of prices over costs decreases. In these economic models, wages are not determined by technology, but they are decided by extra-economic forces, namely, the distributional struggles between workers and capitalists. Lower wages give higher rates of profit, and higher wages lower rates of profit, up to a maximum wage which would correspond to a zero rate of profit. This would be the situation where the entire net product goes to the workers, and nothing is left for the capitalists. |
| According to this theory, the best strategy for workers is to organize and to force the capitalists to give them a greater share of the pie. |
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