where does profit come from?

[Hannah Bell]

Imagine you are money. In the morning you start out as a wad of bills in a capitalist’s wallet (or, more realistically, a bunch of numbers in a bank account.) The capitalist uses you to pay rent for factories, pay wages to workers and to buy raw materials. Now you are no longer money. You are factories, wages and raw materials. You are productive capital. Workers hammer on you, smoke comes out of your smokestacks. Your conveyor belts rattle with the magic of creation and…. abracadabra: you are commodities.

As commodities you sit around on shelves. Eventually workers come along and buy you. They pay for you with money. Now you are money again. But this time you are MORE money!

We call this circle the “circuit of capital”. Have you ever seen the movie “The Blob”? It’s a corny 50’s horror movie about this alien monster that looks mysteriously like a large wad of bread dough. It gets bigger and bigger until it takes over the whole town. This is kind of like capital.

Capitalists have two choices: either continually reinvest their profits into this circuit of capital, or be destroyed by other capitalists who do. Let’s say you decided you were tired of constantly competing for more profit, constantly searching out ways to lower production costs. Let’s say you decided just to keep your production at the level it is. What would happen? Pretty soon other capitalists would have found cheaper inputs, and more efficient ways to produce commodities and they would be outselling you in the marketplace. And pretty soon nobody would want to buy your commodities and you would be out of business.

So capitalists may be greedy. They may be immoral. They may be scum. But capitalism is not greedy, immoral or scummy because of greedy, immoral scumbags. Capitalism is greedy, immoral and scummy because it compels people to be greedy, immoral and scummy...to compete against each other in a constant quest for more profit, for cheaper production costs. It compels capitalists to stop at nothing to turn their money into more money...

But where does this profit come from…? Money goes into the production process and comes out as commodities which exchange for a greater amount of money...Is it magic?

Labor is the one thing that can produce more value than it costs.

It is therefore the source not only of all value but also of all profit...

http://kapitalism101.wordpress.com/2008/06/17/where-does-profit-come-from/#comment-1414

[Skink]

1. Bernake?

[Hippo_Tron]

2. Your analysis assumes competitive markets

Bill Gates doesn't have to find ways to lower production costs for Windows because there is no serious competitor. Secondly, you talk about lowered production costs as though they are inherently a bad thing. Lower production costs mean that we can afford more with less. Under regulated capitalism, at least in theory, we pass laws that require firms to find ways to decrease production costs by finding new technologies rather than exploiting workers.

[Hannah Bell]

5. it's not *my* analysis. but present your alternative answer to the question.

and explain why gates is using extensive h1b & contract labor when he doesn't have to care about reducing labor costs.

[Hippo_Tron]

9. Because he wants to or possibly because the shareholders demand it

Monopolistic corporations make profits well beyond the cost of their products via markups and barriers to entry in the market make it basically impossible for competitors to arise. Microsoft could opt not to use H1B & Contract labor and would not be going the way of the dinosaurs anytime soon because nobody is going to create a product that can seriously cut into Windows' share of the market.

[Hannah Bell]

15. because he "wants" to? why does he want to? why do his shareholders "demand" it,

if not to realize more profits on their "investment"?

[Hippo_Tron]

19. I would suspect that is the reason

But my point was that capitalism doesn't force them to do this in order to survive under non-competitive circumstances. They make a choice to do so.

[Hannah Bell]

21. they make a choice to make higher profits -- you're saying they have the option of choosing

to make low profits? or no profits? because they have no competitors?

why do you think gates has no competitors?

[Hippo_Tron]

27. Because he doesn't

Windows is 90% of the market share. People have tried to create a viable competitor and failed miserably. The barriers to entry are simply too great.

If I'm Bill Gates and I sleep better at night knowing that the people who program my operating system can afford to send their kids to college and the guy who cleans my office has decent health care I can make these things happen without fear of Microsoft going under. To suggest otherwise is mathematically absurd.

[Hannah Bell]

32. why do you think that capitalist competition is confined to capitalists selling the same product?

if i have a 99% share of record album sales, it's not so helpful when mp3s come along. 100% share of vacuum tubes doesn't save me from being outcompeted by transistors & semiconductors.

the field of play is constantly evolving, & the capitalist with the most profits to invest in new areas - typically wins.

the goal isn't to conquer your discrete market, but to make the most profits, period, & reinvest to make more. if you want to stay in the game, that is.

[TxRider]

46. Depends

For example, I worked an auto repair garage that has been in business for 60 years.

It's clearly not the only one in town, but one of many. Why does it still survive, without expanding and without "reinvesting to make more"? Many other shops have come and gone in that time both larger and smaller, cheaper and more expensive.

There has been reinvestment, on newer diagnostic equipment when cars went to computerized ignition systems for example, but it wouldn't seem you description fits.

[Hannah Bell]

because it never generated enough surplus capital.

[TxRider]

64. Or because the owner simply didn't want to

One shop was enough.

[Hannah Bell]

66. you're mistaken. if the shop had generated any significant amount of

surplus value, the owner would have been forced to put it into something; real estate, other businesses, stocks, etc.

Otherwise, it would lose value.

Even a passbook savings account = a loan of his capital to others to invest.

The fact is, a local auto shop where the owner & his family contribute a significant fraction of the labor doesn't typically generate a lot of surplus capital. I know of know "auto magnates" who started this way.

[TxRider]

71. It did generate

Enough to open another shop, several people tried to get the owner to do that.

He didn't want to.

He bought toys, huge house, nice cars, boats etc. and had fun.

He did not have to grow, and was not run out of business by competitors.



All beside the point though. Your question was where does profit come from.

"Labor is the one thing that can produce more value than it costs.

It is therefore the source not only of all value but also of all profit..."

Knowledge cannot produce more value than it costs? Interesting...


Profit in an economic sense, a monetary sense, is exchange of something for more money than it cost to produce.

It requires capital, knowledge, and labor. Proper combination of those produce a profit.

[Hannah Bell]

75. you've already said, he has modern diagnostic equipment -- so he reinvested

enough to keep up with the competition in his market.

you say he spent the rest on toys. i'd guess before doing that he insured a comfortable retirement for himself & an inheritance for his children.

"knowledge" is the product of labor.

[TxRider]

94. But can knowledge produce more value than it costs?

[Hannah Bell]

98. I'm not sure what you're calling "knowledge" re buying diagnostic equipment.

But yes, as labor, knowledge can produce more value than its own cost.

[TxRider]

101. Knowledge.. as labor.. elaborate please.

[Hannah Bell]

110. Knowledge is the product of labor.

I'll not discuss the historical process of the accumulation of knowledge, but you can figure it out for yourself -- from the discovery of fire by "cavemen".

The process of knowledge production in modern individuals begins in the womb, when the mother & father work to produce an adequate diet capable of producing a healthy baby with a functioning brain capable of learning normally. The parents labor to raise a child who accumulates the knowledge of a "modern" human being - e.g. that cars exist, that computer games exist, that science exists. The public or the parents "school" the child with more specific knowledge required in modern society -- reading, writing, rithmetic, social rules, etc.

Take it from there, & think about all the personal & social inputs that go into producing a person capable of "going to college".

Then think about how colleges are funded (think federal/state taxes, for example) and maintained.

Think about, for example, graduate students who do the majority of university research while receiving, maybe, free tuition for their labor. Think about all the personnel who keep a university functioning, down to the maintenance guys.

All this, & more, are labor investments into the creation of modern knowledge.

[TxRider]

118. Of course

Knowledge is a product of labor, can be obtained or produced with a little or a lot of labor.

But you said....

"as labor, knowledge can produce more value than its own cost."



As a product of labor, your saying knowledge is also "labor" in and of itself? What do you mean "as labor?"

Replace "knowledge" in your statement with "a hammer"... another "product of labor" and see my confusion.

"as labor, a truck can produce more value than it's own cost"

[Hannah Bell]

121. knowledge isn't finite, like a hammer. you see your confusion of material

v. immaterial products of labor.

maybe it would be clearer/more precise if i'd said "thinking" can produce more value than its cost -- the idea of a hammer v. the hammer itself.

[TxRider]

125. Ok

I am speaking specific knowledge.

Say I know how to rebuild a Chevrolet 400cu inch V8 engine, that is a finite knowledge, and I possess it.

There was a cost involved in obtaining that specific knowledge.

Can that knowledge produce more value than it cost?

Without that knowledge the market value of my labor is less, but the actual cost of my labor is the same.

So with that knowledge I might profit, where without it I might not. Whether employed by an employer, or employing myself.

[Hannah Bell]

129. i see. i think the sum of all the bits of knowledge that are put together

for this task of rebuilding a chevy engine can, indeed, generate more value than they cost. perhaps not in the task of rebuilding chevy engines, & not when they are located only in a single individual, but in the abstract, i'd say yes.


i think where you're trying to go with this is: I have a unique idea that's never been thought & want to use it to make a new product -- shouldn't i be able to reap profits off my unique idea into infinity, since my unique idea, possessed & thought only by me, is the primary reason the new product will exist in the first place?

something like that?

[TxRider]

137. That isn't what I was thinking really

I was more thinking like the difference in specific knowledge possessed between say an engineering graduate, and a burger flipper at Jack in the Box.

One has specific knowledge, that when applied to his labor(time/energy), is more valuable in the market place than the same age person who's most valuable knowledge is when to flip a burger so it isn't either raw or burned, that when applied to his labor(time+energy) is not.

The engineer possesses his specific knowledge, others do as well for sure, but it is possessed and once possessed he can use it to add very high value to his labor(time+energy.

The burger flipper has specific knowledge as well, but it doesn't add much value to his labor(time+energy).

The possession of that engineering knowledge by a person who possesses it adds it's own measurable and definable value to their labor.

[Hannah Bell]

146. i see. not the cost of *your* labor, but the cost of your labor v. a burger flipper's labor.

an engineer can command a higher price in the labor market, partly because he has more specific knowledge than a non-engineer.

your point is that an engineering education "adds high value to one's labor (time+energy)?

that depends on what he's "laboring" on.

does an engineering degree help one to be a better burger flipper or pastry chef? does it help one sell more advertising or fell a tree better?

if the engineer is unemployed (engineering unemployment = around 5-8% last time i looked), does it help him clean the house for his employed wife better?

The degree doesn't "add high value to his labor". It (theoretically) gives him the knowledge/skills to perform specific kinds of labor that are better paid than burger flipping.

The "value" of his labor is socially determined, however -- not a function of the degree, but of social circumstance.

Put an engineer in the middle of the amazon with a tribe of hunter-gatherers & see how much his educated labor commands.

[TxRider]

155. Again

Knowledge applied to labor adds value the labor would not have without it.

An engineer flipping burgers isn't going to be applying that specific knowledge to his labor.

The question is does knowledge have value of it's own.

With the knowledge I might profit, without any I likely won't. Therefor knowledge has value, therefore labor is not the source of all value as you stated, but only a necessary component of all value.

[Hannah Bell]

162. And now we're back to square one, without change. "Knowledge" IS

labor. You're trying to turn it into a separate "thing". It's not.

"Engineers" do "brain work". Ditch diggers do "brawn work". They're both work.

Production of engineers requires more inputs than production of ditch diggers, but labor is required to produce both, & both LABOR.

They produce their living by working, usually for someone else, & not by cashing dividend checks from their trust fund.

[TxRider]

170. Heh

"You're trying to turn it into a separate "thing". It's not.

"Engineers" do "brain work". Ditch diggers do "brawn work". They're both work."

It is a separate thing. Knowledge is not thinking.

"Production of engineers requires more inputs than production of ditch diggers, but labor is required to produce both, & both LABOR.Production of engineers requires more inputs than production of ditch diggers, but labor is required to produce both, & both LABOR."

Exactly, an engineer cannot do his labor without "knowledge", any more than a ditch digger can dig his ditch without a "shovel".

Both are things that add value to the labor, in the engineers case it adds value to his thinking, in the diggers case it adds value to his digging.

First you say knowledge is the product of labor, now you say it "is" labor. Knowledge is a thing, not an act, labor is an act. Knowledge produces nothing without labor, it simply exists.

[Hannah Bell]

174. engineers don't think? they just somehow handle discrete bits of knowledge

like a ditch digger handles a shovel?

semantics. a child can memorize 2+2=4 without having a clue what it means or being able to use this item of "knowledge" to any purpose.

explain to me how knowledge is a "thing" like a shovel.

[TxRider]

177. ROFL

An engineer applies his knowledge to his thinking as a ditch digger applies his shovel to his digging.

He uses his knowledge in his act of thinking. Like a digger uses his shovel in his act of digging.

Maybe couching it in a negative light would help...

Take your trust fund rich kid who lives off his dividend checks. He graduated from the best engineering school in the nation. He possesses the knowledge, it exists in his head, with or without him ever doing any labor.

[Hannah Bell]

181. "a ditch digger applies his knowledge to thinking as a ditch digger applies his shovel to digging".

i don't see the similarity, except in the sentence structure. this explanation explains nothing.

"knowledge" doesn't exist in the head like a chapter in a book. you keep using it or you lose it.

i think you're equating "knowledge" to a chapter in a book, which a person stores somewhere in his head, as if he were a library.

[TxRider]

184. I am doing just that

For example....

I can disassemble and rebuild any engine, I haven't worked as a mechanic in 10+ years, that knowledge remains though, like a chapter in a book, like the shovel on my garage wall, waiting to be used in combination with my labor if someone needs an engine rebuilt and greatly increasing the value of my labor in that case vs what it would be without that knowledge in the same circumstance.

That circumstance arose recently, when I rebuilt the engine in a 1949 farmall tractor I was given because the engine was locked up. $500 and some of my labor later I have a tractor that runs like new. Would have cost $2000 to pay a shop to do it, more than the value of the tractor. The knowledge made my labor worth $1500.

I have had many occupations in my 50 years, I retain specific knowledge from each, in my head, like chapters in a book, ready to be used to increase the value of my labor to someone who wants to pay me a profitable rate. The knowledge adds value to my labor in each of those areas, above what it would be without that knowledge.

[Hannah Bell]

190. when you say "adds value to my labor," i think you mean "allows me to get a higher price for my

labor" in a market where this specific type of labor is well paid, yes?

engineers are well paid in your society & you have an engineering degree. so if you get a job as an engineer, you'll get paid as an engineer gets paid.

that's all you're saying, isn't it?

[TxRider]

192. Pretty much

Yes, added value as in making my labor more valuable to someone who would pay for that work.

[damyank913]

109. The cost of some knowledge can never be redeemed.

But that might be taking the question retorically. Economically, one would hope so.

[jtuck004]

188. Bill Gates has no competitors because...

He gave the market what it wanted, in several ways. (Note: It is not just labor that produces profits, but labor that produces Something Someone Else Wants).

Prior to Windows we had systems that ran at a command line (a blinking cursor on a blank screen for you kids). It was amazingly powerful on a server, and pretty good on personal machine, you could do a lot with 2 or 3 letter commands. But they all had one big failing. To be really productive You Had To Read The Directions. Uh-oh. Nothing was intuitive for the masses.

Then one day Windows came along and Grandma could put the disk in the drive, restart the computer, keep feeding disks and clicking "Next", and pretty soon had a system that was working. Not as efficient or as powerful as other systems, but working - they could type in a sort-of word processor, had spreadsheets, and soon, very often with the help of tech support, figure out how to connect to the new Internet thing.

The other thing he did was open the system so that anyone who wanted to could download a free program (compiler), or buy one, and write programs to do what they wanted - business stuff, genealogy, bowling, whatever. Lots of people wrote and sold programs, some of which ran well and some which didn't (and still don't). There were other computers you could do this with but you had to purchase a section of the program from them, not as open. Is Windows anywhere near as efficient as Linux, or Unix, or as well-engineered as other machines - heck no. but it is cheap, does the job, and is pretty intuitive for most common tasks, and that is all people want. And now Microsoft is so ubiquitous that they own the market, until something comes along that eclipses computers.

So the profit comes from labor if it is used to make something that people want, and you might make more if others can make money from it as well. And it just has to be good enough. Doesn't have to be in software either. What would that be? If you find out, I wish you would drop me a line ;)

(btw - I got to see all this happen. I started with Novell and IBM Token-Ring Networks (that was in the olden days, kids), worked with Windows as it appeared in the corporate space, worked for the first Internet Service Provider (ISP) in a town of a million and a half people. My boss at the ISP used to storm and scream about and at customers for using this crap called "Windows", because Unix, and Linux, and OS2 and everything else was better engineered. Didn't help when I pointed out that Microsoft was giving people exactly what they wanted, and it would win over all the others. Poor guy had the market cornered, but now his business is gone and Microsoft is bigger).

[Kaleva]

3. From collecting underpants.

[Hippo_Tron]

22. Step 1: Collect Underpants

Step 2:

Step 3: Profit!!!

[Name removed]

4. Deleted sub-thread

Sub-thread removed by moderator. Click here to review the message board rules.

[SDuderstadt]

6. You really ought to study the concept of....

"democratic capitalism".

http://www.kellysite.net/

http://www.democratic-capitalism.com/

[Hannah Bell]

10. answer the question, if you can provide a better answer than given.

[alberg]

59. Your analysis is ok as far as it goes, but consider what's contained in the phrase "field of play"

that a lot of folks have used in this thread. The phrase implicitly acknowledges that at root, the economy is a "game". And any good game requires rational rules for the game to be successful. If what we're talking about are win/lose games of short duration - like poker, it's perfectly acceptable for one player to dominate the game and leave the table with all the resources. A new poker game starts next week and we will all start off with the same number of chips so we all have a chance at being a winner.

But the real economy is not a short duration game. It goes on forever. Without the right kind of rules, the poker chips of this game aggregate into an increasingly small number of hands so that eventually most players are squeezed into marginal roles in the game or are not able to play at all.

Unless there are built in mechanisms that act as reset points or checks and balances in the game, where the chips are divided up again in some fashion or other, what always results is some form of oligopoly or monopoly. This is why anti-trust laws came into being. This is why Unions were important.

In the Social Democracies in Europe and other places, they've solved this problem with tax laws and other mechanisms that strive to create a balance between the competition of free markets and the needs of citizens to live relatively secure lives with guaranteed access to shelter, healthcare, education etc. that are essential for a baseline humane quality of life. The Free Market still exists (see Germany, France, the Netherlands etc. for example) but the "field of play" is rationally bounded to ensure a more secure way of life for those country's citizens.

Is it perfect? No.

Could we benefit in the US from adopting some of their approaches?

I believe the answer is yes.

[Hannah Bell]

65. the game may go on forever, but human lifespans don't. within human lifespans,

some have their labor expoited to produce profits for others, resets or no resets.

[alberg]

90. That's exactly my point. We need systemic resets like regulations and taxes

to prevent or minimize the exploitation. One of the tragedies of the recent SC decision on campaign spending is that it removed restraints on an immortal entity - the Corporation. Flesh and blood beings take their agendas and vote with them to the grave. Corporations, as artificial persons, now have the ability to pursue their agendas in the political arena essentially forever. The individual voter is limited to one lifetime. What entities do you think will be more successful in bending the levers of power to their benefit?

So, yes, exploitation is the issue. It was at the core of social change in the 1930's and needs to become the issue again today

What most people want their society to look like is summed up by FDR's Economic Bill of Rights:

“In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all—regardless of station, race, or creed.

Among these are:

The right to a useful and remunerative job in the industries or shops or farms or mines of the nation;

The right to earn enough to provide adequate food and clothing and recreation;

The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;

The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;

The right of every family to a decent home;

The right to adequate medical care and the opportunity to achieve and enjoy good health;

The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;

The right to a good education.

. . . America’s own rightful place in the world depends in large part upon how fully these and similar rights have been carried into practice for our citizens.”

--FDR's "Economic Bill of Rights.

The political movement that promotes these principles will get the support of the majority of Americans.

[leftstreet]

11. 'Democratic Capitalism' reminds me of Reduced Fat Twinkies n/t

[SDuderstadt]

12. I'm willing to bet you know nothing of the concept of...

"democratic capitalism".

[leftstreet]

14. Yes I know plenty n/t

[SDuderstadt]

16. Really?

Critique it for us.

[leftstreet]

17. I just did

'Reduced Fat Twinkies'

[SDuderstadt]

20. I rest my case....

some little pat phrase isn't a critque. I didn't think you wanted serious debate. I was right.

Nevermind.

[Hannah Bell]

23. so, about that theory of profit?

[leftstreet]

24. You posted a link to the Carey Foundation and expected to be taken seriously?

:eyes:

Bougie reactionary OMG Teh Socialism!! & Teh Communism!! is coming!!111

[SDuderstadt]

26. Do you know anything about Ray Carey?

Do you know anything about Charles Kelly? Can you show me where I slammed either socialism or communism? Did you know that liberalism promotes capitalism? Do you think capitalism is bad?

For those of you that think profit is necessarily dirty, if you have a savings account, do you let the bank have your money for free? Or, do you expect a return on it?

This knee-jerk "all capitalism is bad" is really troubling, especially given how the foundation of this country is small business.

[leftstreet]

29. Do you mean economic liberalism?

Wait, what?

Liberalism is a principle, capitalism is a system

[SDuderstadt]

30. And liberalism promotes capitalism....

dude. Take a political economics course.

[leftstreet]

31. LOL n/t

[Hannah Bell]

33. but about your theory of the origins of profit....?

[Hannah Bell]

18. so explain where profit comes from, in terms of this theory of capitalism.

[leftstreet]

7. K&InvisibleR

Excellent discussion topic

Why on earth would this subject get unRec'd?

[Ozymanithrax]

8. Profit is the perceived postive change in value...of anything.

Stock brokers make profit off selling futures.

Insurance exectuive make profit off bets that you won't expire before you pay off.

Yes, labor adds value to raw resources.

You can even profit simply by discovering a new fact.

But there is no one source of all profit.

[Hannah Bell]

13. when a stock broker sells a future, what is he selling? & is he a capitalist - or the employee of

a capitalist?

[Ozymanithrax]

25. Most likley a capitalist, or capitalist in training....

I mean, really, he does about as much honest work as a three-cared Monte dealer. (And I may be insulting con men and card sharps by saying that.)

But his profit is still based on a perceived change in value.

The source of profit, then, is human perception. The difference between a lump of iron ore and a box of screws is there only if we need a screw. If we don't, Iron ore has a beauty that is destoryed by melting it down, and the screw is worthless.

[Hannah Bell]

28. most stock brokers have employees?

what is a future?

•In finance, a futures contract is a standardized contract, to buy or sell a specified commodity of standardized quality at a certain date in the future, at a market determined price (the futures price). The contracts are traded on a futures exchange. ...

en.wikipedia.org/wiki/Future_(finance)


a future isn't a "perception". it's a contract to buy or sell at a certain price in the future.

the broker selling futures is just selling a commodity. he gets a percent on every sale, but whether the buyer's perception is right or wrong is, to him, immaterial.

if the broker works for himself he's not a capitalist, he's an owner-operator. his income is limited by the number of sales he himself can personally make & execute.

if the broker works for someone else, he's an employee, not a capitalist, no matter how many commissions he gets.

if the broker employees a team of sub-brokers, he's a capitalist who gets a cut of every sale his brokers make; i.e. his profit comes from their labor.

i think you're confusing the brokers & the buyers in your discussion of "perceived change of value".

[ConsAreLiars]

34. K&R. It might open a few eyes, although those with the blinders on will whine and moan. (nt)

[akforme]

35. It's the enviroment

This is something that I really can't explain my points on a blog, but people are only as greedy as their options. Greed is not a source, it's a symptom. The source is where it get's long and drawn out but it deals with many things. Human nature, ego, power and control. We live in shark fed waters, we just don't know it because we've been her our whole life.

If you haven't see "The Century of the Self" i highly suggest it. You can find it on google video.

[Hannah Bell]

36. as i suspec ted. second time i've posted the question at DU, & no viable

alternative explanation of the source of profit either time.

[dionysus]

42. probably comrade, because no one here argues that labor doesn't produce capital?

[Hannah Bell]

61. comrade, the argument is that labor produces the profit.

[dionysus]

63. i know. you won't find many people who dispute this.

there are other ways of producing profit, say like, buying gold at one price and selling it for more. but yes, i am pretty sure that we all realize that labor produces profit.

[Hannah Bell]

68. there are no "other ways". price arbitrage "produces" no profit.

[TxRider]

67. Labor alone does not does it

DOn't you need materials and knowledge applied to labor to profit?

I can be a brilliant engineer, possessing both the knowledge and skills of building a chip that will supply the world with all it's power needs for eternity, but without the capital to acquire the materials needed I cannot apply the knowledge and do the labor. There is no production, and no profit.

When a person graduates college, they have knowledge that when applied to their labor makes their labor more valuable than if they did not possess that knowledge correct?

But without capital, in the form of material or money to trade for material, without something to apply that labor to, there is no production is there? An employer provides that capital, and means to profit, for a negotiated trade of money which should be profitable to the employee as well should it not?

What is the actual cost of a man's labor?

Is all income above survival costs profit?

[Hannah Bell]

70. materials have a market value; they produce no profit until labor is

applied to them -- in their extraction or transformation into goods.

[TxRider]

96. Restating the obvious doesn't answer the questions.

Don't you need both the materials plus specific knowledge applied to the labor to produce anything?

Labor requires materials and knowledge to be able to produce value or profit yes?

When a person graduates college, they have knowledge that when applied to their labor makes their labor more valuable than if they did not possess that knowledge correct?

An employer provides capital, materials, specific knowledge and the means to apply that labor, for a negotiated trade of money which should be profitable to the employee as well should it not?

What is the actual cost of a man's labor?

Is all income above survival costs profit for the worker?

What is the value of the means of production and knowledge to do so that the employer provides worth?

[Hannah Bell]

108. Yes. To produce a product, resources & labor are both needed. "Knowledge" is produced by labor;

it's not some separate self-existing "thing."

"When a person graduates college, they have knowledge that when applied to their labor makes their labor more valuable than if they did not possess that knowledge correct?"

In some circumstances, it allows them to command a higher market price for their labor. Whether this means their labor creates more "value" is a different question.


"An employer provides capital, materials, specific knowledge and the means to apply that labor, for a negotiated trade of money which should be profitable to the employee as well should it not?"

The employer may provide some knowledge to the employee, but the employee provides more to the employer. The trade is not "profitable" to the employee. That's a misuse of terms.


"What is the actual cost of a man's labor?"

The "cost" of a man or woman's labor (as distinct from the "price" or "value") depends on prevailing market conditions. For example, the cost of raising a child (in terms of inputs) to fully-functional adulthood is higher in modern society than in a hunter-gatherer society.


"Is all income above survival costs profit for the worker?"

The employee receives less than the value he produces; thus, he makes no "profit" from his labor, though he may make lots of money.

Your second misapprehension is that "survival costs" are something like a tent & a pan of gruel.

Producing a person able to function, e.g., as a modern scientist, requires much more than a tent & a pan of gruel. Just to break even, society has to reproduce the infrastructure & institutions that will produce more scientists in the next generation, & the individual scientist has to receive a big enough share to reproduce a child capable of being a scientist in the future. That's what "mere survival" entails in the production of scientists.


"What is the value of the means of production and knowledge to do so that the employer provides worth?"

"Worth"? In what market conditions, in what time or geographical area, to whom?


Your questions beg a world of questions. You seem to be laboring under the delusion that employers & universities are the sources of "knowledge". They're not.

[TxRider]

124. Your making assumptions

You said...

"Yes. To produce a product, resources & labor are both needed. "Knowledge" is produced by labor it's not some separate self-existing "thing."

This is why I asked. I see a contradiction. A product that is not a thing? Labor produces something that is not a separate thing?

That is confusing.

I believe knowledge is a "separate thing". It's a possession. A certain knowledge is possessed by one man, that the man next to him does not possess. This is true yes?

It must be acquired, and it takes some amount of labor to do so, even if it's sitting watching a video. But it is a thing, something one does or does not possess.

------------------------

"The employer may provide some knowledge to the employee, but the employee provides more to the employer. The trade is not "profitable" to the employee. That's a misuse of terms."

It is not a misuse of terms. It costs me a discrete amount of money to provide my labor to my employer day to day.

Are you saying that I as an individual cannot have a relationship with my employer that is profitable to me. That it by definition cannot exist. That I cannot trade my labor to an employer for an amount well above what my own cost of providing that labor is?

[Hannah Bell]

127. maybe the fault of my terminology. people "produce" thoughts, ideas, concepts, but are they

"things"?

in what sense does one "possess" an idea? if i drug you, do you still "possess" it? you can't access it, but, it hasn't been destroyed. if i put a needle into your brain, have i destroyed "an idea"? or have i destroyed your ability to think?

i "think" you've gotten into the area of angels & pins, or semantics. "thinking" is human labor. to the extent that others maintain the ability to think, no idea, thought, concept can be possessed in the sense you mean.


it's a misuse of terms in that "profit" isn't what you imply.

If my labor takes $10 worth of raw materials & turns them into $50 of product, but I only get $10, i've expended $30 worth of time & energy without return = loss, not gain.

EVEN IF $10 will keep me housed & fed, the $30 surplus I produced with my work has been taken from me.

If my goal is to create $10 worth of value to house & feed myself, why can't I just do that, & let my employer work to create his $30 worth?

[TxRider]

132. Closer

""things"?

in what sense does one "possess" an idea? if i drug you, do you still "possess" it? you can't access it, but, it hasn't been destroyed. if i put a needle into your brain, have i destroyed "an idea"? or have i destroyed your ability to think?

i "think" you've gotten into the area of angels & pins, or semantics. "thinking" is human labor. to the extent that others maintain the ability to think, no idea, thought, concept can be possessed in the sense you mean."

To clarify. A specific knowledge. I possess the specific knowledge to make a fire with two sticks. You may also possess this knowledge.

Thinking is an act, and activity something you do. Knowledge of something is a thing something you have not an action or activity.


--------------------

"If my labor takes $10 worth of raw materials & turns them into $50 of product, but I only get $10, i've expended $30 worth of time & energy without return = loss, not gain.

EVEN IF $10 will keep me housed & fed, the $30 surplus I produced with my work has been taken from me."

Now were getting somewhere. If the $10 is your actual cost of labor, what your labor cost you to provide to your employer, then you expended exactly $10 worth of your time and energy, no more.

What the company sold the product for has little to do with it.

What you didn't do was profit from your labor. You broke even.

Had he paid you $25 you would be making a profit. As would he.

Had he paid you $55 you would also be making a profit, but he would be making a loss.

Assuming the $10 in raw materials also includes paying back the capital outlay for the shop, business insurance premiums, workers compensation insurance premiums, the light bill, future maintenance costs on equipment, etc. etc. that all have to come out of that $50 sale.

I don't care what my employers sells the products for. I am either profiting by my employment with him or not. I am selling my labor, enhanced by my knowledge, at a price that I profit from sufficiently, or I find new employment.

If I cannot find that, I gain more specific knowledge to enhance the value of my labor in a way that will allow me to.

[Hannah Bell]

133. "If the $10 is your actual cost of labor,

what your labor cost you to provide to your employer, then you expended exactly $10 worth of your time and energy, no more."

$10 is neither "the cost of my labor" nor "break-even". If I worked 8 hours & created $40 worth of new value, what you call "the cost of my labor" was produced in my first two hours of work. Yet I worked 6 more hours.

I didn't break even - I worked 6 hours for free. I lost 6 hours of my life for no return, while creating 6 hours of new value for you.



Nor is $10 even the "cost of my labor". $10 is the cost of 1 day's maintenance of the "cost of my labor".

The true cost of my labor is more, as it includes all the inputs that brought me to this position where I'm a healthy, educated person able to labor efficiently -- for you.

Most of the "costs of my labor" were paid for either by my parents, society, or myself. Which is why the working class keeps growing while the capitalist class keeps shrinking -- as a percent of the population.

[TxRider]

136. Ok lets keep going down this line.

Take the same situation. Your "value" equation.

$10 in raw materials, $10 your paid, $50 product sale price.

That means to you your expending $40 worth of time and effort.

Ok now say the market changes, nobody will pay more than $10 for the product, but the company keeps selling it anyway for whatever reason. Hoping for a rise in prices next year or something, they borrow money to keep going.

Now it is $10 in raw materials, $10 paid for your labor, for a $10 product sale.

By your "value" math that means you are now expending zero dollars worth of time and energy now and will work for free?

------------------


Lets take your second example... If the product only sells for $10 now..

"If I worked 8 hours & created $40 worth of new value, what you call "the cost of my labor" was produced in my first two hours of work. Yet I worked 6 more hours.

I didn't break even - I worked 6 hours for free. I lost 6 hours of my life for no return, while creating 6 hours of new value for you."

So now you have to work forever, infinitely, because no amount of hours will ever create value for the employer?

Your value equation is a very one sided piece of math. It is built on a false assumption.



While an employer can obviously underpay people, in effect stealing their value, he can also overpay and be taken advantage of.

Whether or not you as an individual profit from employment has nothing to do with what the profit of the company is or is not. It can go either way for either entity in the relationship.

[Hannah Bell]

144. ...should have been $30, my error if i said $40.

"$10 in raw materials, $10 your paid, $50 product sale price. That means to you your expending $40 worth of time and effort."

...and that's assuming I'm the only employee. :>)


"Ok now say the market changes, nobody will pay more than $10 for the product, but the company keeps selling it anyway for whatever reason. Hoping for a rise in prices next year or something, they borrow money to keep going. Now it is $10 in raw materials, $10 paid for your labor, for a $10 product sale. By your "value" math that means you are now expending zero dollars worth of time and energy now and will work for free?"


You're saying the capitalist is going to borrow money to keep producing goods at a 50% loss? Without cutting wages or increasing hours & cutting workers? Borrow money so he can knowingly, deliberately *lose* it? And pay interest on the borrowed money as well?

Can you give me some real world example of a case when this has actually happened, other than a very short-term situation where business was expected to pick up, say, within 6 months?

If the market suddenly shifted to the extent where the product would only sell for 50% less than the cost of production, I'd expect this:

1. The capitalist would shut down or drastically reduce production until business picked up (i.e. lay off people).
2. The capitalist would claw back wages or benefits, outsource labor, lay off personnel & increase the hours of the remaining personnel - some strategy to reduce labor cost.
3. The capitalist would try to source his materials cheapers.
4. The capitalist would shut down production permanently & try to convert or sell his plant & equipment.

I don't see your scenario every happening except in a very short-term context. The only reason he'd keep his workers on at the same wages while borrowing money is because he expected to get the outlay back within a reasonable amount of time.

The hypothetical you set up is one where a capitalist deliberately sets out to lose money. It's counterfactual, therefore irrelevant.

------------------


"While an employer can obviously underpay people, in effect stealing their value, he can also overpay and be taken advantage of."

He can - but not deliberately. If he pays people so much that he can't produce profits, the situation will be corrected --- & not merely corrected, but compensated for. He'll reduce wages enough to make up for the earlier loss in a reasonable time frame.

Depending on the market situation, there are limits below which he won't be able to reduce benefits/wages (or increase hours/speed up production) - because workers could get a different job in most situations. But it doesn't negate the general proposition.


"Whether or not you as an individual profit from employment has nothing to do with what the profit of the company is or is not. It can go either way for either entity in the relationship."

Employees don't "profit". They always produce more value for the employer than he pays them (*some specialized exceptions, but true as a general rule).

Capitalists don't hire employees to lose money or break even. They hire them to profit. No profit, no job.

[TxRider]

151. Missing the point

Companies operate at losses often, sometimes just one portion of a company or one product line can operate at a loss for years. The term "loss leader" comes to mind.

A new product line could lose money for years, and be supported by profits made at other production facilities in other regions.

Take Sony and Nintendo and Microsoft. Making console machines they sell at a loss for years. Their other division makes up for the loss in software sales and licensing.

If you work at the console factory, you are in fact adding no value under your calculation. The product sells for less than it cost to make it.




Beside the point though.

A persons profitability of their labor is not dependent on it's market value, but it's cost versus what you receive in trade for it.

Calculating the value of your labor by profit on the end product is also not an accurate means of calculation.

Market value for your combination of specific knowledge and the value of your labor with that specific knowledge applied to it is an appropriate indicator of it's value.

Your main point that labor is the source of all value and all profit is only true in a very abstract concept where all thought or action is labor, and goods and material and capital is thought of as labor.

Your statement...

"Capitalists have two choices: either continually reinvest their profits into this circuit of capital, or be destroyed by other capitalists who do."

Rings hollow to me.

Money reinvested into a company for maintaining operations is by definition not profit, and is a choice for any capitalist. It's simply operating cost. There is a risk that he will be destroyed by another capitalist, but that risk is always there regardless of what he does.

Constant growth is what leaves only those two choices, and requires constant reinvestment of profits to maintain that growth and expansion. Not all capitalist entities desire growth.

[Hannah Bell]

157. Missing the point

"Companies operate at losses often"

Not deliberately, not long-term, & not without making adjustments in their cost structure.


"sometimes just one portion of a company or one product line can operate at a loss for years. The term "loss leader" comes to mind."

This isn't "operating at a loss". The capitalist (or corp) is making profits. If a division is allowed to continue operating at a loss, there's a reason, i.e. they're expected to make a profit in the future, & current losses = costs of development, aka "investment".

A loss leader is a tactic used to draw in business that will buy other things, thereby producing enough sales to offset the loss on the loss leader. The store *profits*.


"If you work at the console factory, you are in fact adding no value under your calculation. The product sells for less than it cost to make it."

Then why is the capitalist employing me? It's pretty obvious, he's paying me to do the R&D that will produce future *profits*, which will eventually return to him the cost of paying me for five years without profits in that division.

It's the same as buying a new piece of equipment. You don't make the money you spent on it back for, e.g., five years, & only then do you begin to realize any profits on the investment.

My initial example was a simple one limited to one employee working for one employer.

The general principle is quite correct, even though the example doesn't account for time, investment & reinvestment, depreciation, benefits, retirement, tax subsidies, & any number of other real-world details.

Example: Microsoft had 58 billion in revenues in 2009, with net income (profit) of $14.5 billion = $155,913 per employee. That's profit after all the employees have been paid, costs of production, licenses, & reinvestment taken out.

If John is a better worker than Jack, or Division A breaks even while Division B makes a mint, is not so important as that $155,913 in profit per employee.




"A persons profitability of their labor is not dependent on it's market value, but it's cost versus what you receive in trade for it."

I disagree. But you know that. & even if you calculate all the costs that went into producing YOU, of a certain age, healthy, educated & ready to work -- plus the maintenance & reproduction cost for the same YOU -- most people's pay DOESN'T COVER IT.

Which is why the working class continues to grow, while the capitalist class shrinks, as a percentage of total population.



"Money reinvested into a company for maintaining operations is by definition not profit, and is a choice for any capitalist. It's simply operating cost. There is a risk that he will be destroyed by another capitalist, but that risk is always there regardless of what he does."

You've misunderstood completely. Reinvestment to maintain the same level of production IS an operating cost - i.e:

Profit = revenue - COSTS.

I'm talking about reinvestment of PROFIT. Profit is the money you make ABOVE & BEYOND the money you need to put back into the business to maintain the same level of production.

So what to do with profits? You could just consume them on a second house, vavations, toys. Some people do that. They're not capitalists, they're just small businesspeople. They don't use their PROFIT to make more profit, they consume it.

Some people just save them in a passbook savings account, but they're not capitalists either. They're barely holding the value of the money, if that.

These businesspeople may survive, or may not, but eventually there will come a point when they'll be out-competed by bigger capital - i.e. the local garage will lose business to Midas, or to flying cars, or whatever.

Capitalists reinvest their profit to make more profit. They expand their business, they start another business with newer technology, they speculate in land, or stocks, etc.

The risk of being destroyed by another capitalist is always present -- but the more capital you have, the less risk.



"Constant growth is what leaves only those two choices, and requires constant reinvestment of profits to maintain that growth and expansion. Not all capitalist entities desire growth."

Constant growth is produced by the competition of capitals. All capitalists may not "desire" it, but it's the default condition of the playing field.

[TxRider]

159. Beside the point though

A persons profitability of their labor is not dependent on it's market value, but it's actual cost for the individual to provide versus what you receive in trade for it.

Calculating the value of your labor by profit on the end product is also not an accurate means of calculation.

Market value for your combination of specific knowledge and the value of your labor with that specific knowledge applied to it is an appropriate indicator of it's value.

Your main point that labor is the source of all value and all profit is only true in a very abstract concept where all thought or action is labor, and goods and material and capital is thought of as labor.

Your statement...

"Capitalists have two choices: either continually reinvest their profits into this circuit of capital, or be destroyed by other capitalists who do."

Rings hollow to me. For one a capitalist has a choice to make no profit.

Money reinvested into a company for maintaining operations is by definition not profit, and is a choice for any capitalist. It's simply his operating cost. There is a risk that he will be destroyed by another capitalist, but that risk is always there regardless of what he does.

Constant growth is what leaves only those two choices you name, and requires constant reinvestment of profits to maintain that growth and expansion. Not all capitalist entities desire growth.

[Hannah Bell]

163. Sorry, you continue to speak of "a person's profitability". A person who works for someone

else doesn't make a profit. EVER. Except for his employer.

at this point, we're just going around in circles, i think. you've returned to your starting assumptions.

I take $10 worth of materials from the employer & transform them into goods with a market value of $50.

The employer has contributed $10 & paid me $10. He keeps $30.

I have the means to buy just 1/5 of his product. Yet I made 100% of it.

The materials cost $10 on the open market. Where did the other $40 worth of value come from?

In relation to the capitalist who employs me, I've lost, & lost big.

In relation to the situation in a "state of nature" where I'd have free access to the materials & get to keep everything I made with them, to use or distribute as I pleased, I've also lost.

In relation to the time spent creating materials v. the money I have to buy the materials I made, I've lost again.

Where is my "profit"?

Your thought is, because I made enough that day to feed myself & pay part of my rent - I "profit".

I can survive, therefore I've "profited".

It's laughable.

The capitalist put up $20 of money & got back $50 -- his $20 back, plus $30 more.

The worker put up 8 hours of labor, in which time he produced $50 worth of goods using materials worth $10. So he produced $40 of new value -- & got $10.

The value of the labor he expended was $40. He got $10. He LOST. He didn't profit.

He made the capitalist 150% richer than before, able to buy more property, able to bid up the price of income-producing properties, bid them out of the reach of the laborer, able to control more of the market & thereby exert tighter control over the laborer.

The laborer LOST.

[TxRider]

167. Don't get silly

I can profit personally, working for a company that profits, by working for a yet bigger company the profits...

Just because I work for an employer doesn't rule out the relationship being profitable for me. You seem to think it cannot be by nature of the relationship under any circumstances.


--------------


"Your thought is, because I made enough that day to feed myself & pay part of my rent - I "profit".

I can survive, therefore I've "profited".

It's laughable."

It's also an intentional gross mischaracterization and you know it.

The thought is, if I make enough to pay all my bills, eat well and cover all the costs of my provision of labor to my employer I break even.

If I make twice that I am making profit.

If my total cost of living decently is 50k a year, and I am paid $150k a year I am personally profiting.

Whether the company is profiting or not, whether they sell their product at a huge profit or a loss, either way I am personally profiting.

Profit being defined as selling my labor for more than the cost to me of producing it. In this case 3x what it costs me to produce it.

In actuality, in my -real- life, my cost of producing my labor is about 30k per year total, as I enjoy living a simple modest lifestyle and that is what it costs. Any pay over that 30k is profit for me to use as I wish, to reinvest in myself through gaining knowledge, to blow on frivolous enjoyments, but mostly put into savings.

In any case it has been a stimulating conversation.

Though I find your definition of profit seems to be inconsistent and is defined differently when applied to an employee, a self emoyed, and a company.

[Hannah Bell]

171. Then you have a special definition of "profit".

I took $10 worth of materials & turned them into $50 worth of goods.

If I broke even on my labor I should be able to purchase 100% -- $40 worth -- of what I made.

But I can't. I can only purchase 1/4 of the value I created.

If someone gathered widget straw for one hour, then said, "Take this widget straw & make 5 widgets from it for me. It will take you about 8 hours. I'll give you one widget in return for your 8 hours of work, & I'll keep 4 for my one hour of work," you'd know it was a bad deal.

But because the real transaction is disguised by money & the social roles of worker & capitalist, you call it "profit" when you work 8 hours & get paid for two.

Thus the ruling class continues to concentrate wealth at your expense.

[TxRider]

173. And that's the impasse

I define my personal profit under the common definition of profit = sales minus cost.

I sell my labor, I sell it for more than it costs me to produce my labor and I profit. No disguises.

If a man will not pay me a profitable price for my labor, I will not sell it to him.

If I cannot find anyone who will pay me a profitable amount for my labor, I add value to it by gaining knowledge or tools or other value adding thing so that someone will. Simple really.

And my profit is 3x the actual cost to produce my labor currently.

-------------

You define profit as non existent under any circumstances for an individual.

That if you do not receive the exact value added through your labor in combination with a plethora of other costs, inputs, and incomes from various sources, you are being robbed.

And even if you work for yourself, no matter what your income vs cost, there is no profit.

-------------

I think I'll stick with my definition, thanks... Yours sounds way too complicated and depressing.

[Hannah Bell]

175. I define profit as cost plus. In this case, I've expended 8 hours of labor &

produced $40 of new value.

Thus, since $1 exchanges for $1, & not for fifty cents, the value of my 8 hours work is $40.

If my employer pays me $10 for it & sells the products I made for $50, he gets $30 of profit, the only possible source of which comes from my uncompensated labor.

[TxRider]

179. So you say

But do you have a running spreadsheet of every cost your employer has sunk into that product.

In reality there is the $10 raw material, your $10 pay, cost of the factory building, machinery, electric bill, business insurance, unemployment insurance, workmans comp insurance, a CPA, sales taxes, federal taxes, machinery maintenance, sales staff, management staff, advertising costs, transportation costs to deliver to market, interest on various loans etc, etc, all occupying a slice of that $50 income and variable from month to month, and year to year.

Trying to determine the value of your labor in that scenario would drive me nuts. Never mind even if I could make an accurate calculation, under your definition, the best I could ever even hope for is to break even.

Profit cannot exist, I can never sell my labor for more than it costs me.

That's freaking depressing. There can never be satisfaction or happiness in that scenario in reality.



I choose sales minus cost. I can calculate it easily, and I can control it easily and am happier for it I would think.

[Hannah Bell]

182. the example is simplistic, but the principle is correct.

regardless of whether my employer has other costs, he doesn't employ labor unless, in the big picture, it makes him a profit.

i have no idea what you mean by "sales minus cost" in regard to your personal "price".

[TxRider]

187. It's simple.

A man wants to employ me to make widgets for 40hrs a week.

He wants to buy my labor, he wants me to sell my labor to him.

He wants to profit, and I want to profit. We each want to profit.

What do I have to sell my labor for to profit in this transaction?

I calculate my cost. It costs me 30k per year to pay my mortgage, bills, food, etc, All my essentials for my comfortably modest life. That is my cost.

So to work for 30k would be bad, no profit.

I tell the man I need 60k for my labor.

Now he has to decide if he can pay me 60k, and still profit. If he can and decides to pay me we both profit and we are both happy.

I sell my labor for 60k, minus it's cost to me of 30k, leaving 30k profit.

I have 30k profit per year to put into savings, spend on cruises, blow on hookers and drugs, whatever.

It's stone simple really. The value of my labor is what I decide it is, what I make it, not some arbitrary value composed of and affected by things I cannot possibly know the values of or have any control over.

-----------------------------

The way you explain it puts me in mind of you selling a man your used car, at a price you agreed to, and when he turns around and sells it to someone else for 30% more your all mad and insist you were cheated because he doesn't give you that 30%.

[Hannah Bell]

189. i see. so if i decide to sleep under a bridge & bathe in the river, & keep my asking price at $60K,

my "profit" would be even bigger?

did i make the car i sold? there's no analogy.

anyway, thanks for the enjoyable conversation. i respect the fact that you kept it civil, it's a rarity here!

[TxRider]

194. You could put it that way

It would probably be more representative of reality to say a person could forego the big flat screen, new cars in the driveway with car payments and 2500+sq foot house and thousands of balance on credit cards a persons profit would be bigger.

When I started my working life about 35 years ago it was at $1.16 an hour, waxing floors and cleaning toilets on an industrial janitor crew. I had no specific skills/knowledge so my labor was of very little value to any employer.

I have spent the 35 years since gaining as much knowledge specific to as many professions as I could.

To make my labor as valuable as I can to as many potential people as possible with decent success.

As well as trying to avoid the traps of expanding a materialistic lifestyle with every increase in income and not always living just beyond my means no matter what my income, like so many seem to do these days.

I drive a nice car, it is 13 years old. I live in a nice house, but it's 35 years old and 1500sq ft. I do not even have a credit card, and my only debt is a mortgage. I try to follow the rule of never paying interest on something that doesn't appreciate in value. I do not eat expensive fast food, I cook. In other words I simply try to use my income intelligently, not how corporate marketing tries to convince me to.

When I sell my labor to a person or company, it is at a rate that I profit from or I do not sell it to him, and I do not begrudge him a profit when I do. If either of us begrudge the other profitability the relationship is not one I want to be a part of.

And there are too many greedy employers who begrudge workers being profitable, and seek to pay less than the value they receive. But it is not a requirement of capitalism to do so.

The corporate marketing molded society we live in pushes living inefficiently beyond one's means expanding materialistic desires and living in debt at every turn, which is not a requirement for a happy life. In fact it's desire is to convince you that you are never happy, and to stoke perpetual desire for more than you need.

[Th1onein]

37. Profit comes from unpaid labor.

That simple? Yes.

[TxRider]

41. Ok.

Lets say I buy a bicycle and start delivering pizza.

I costs me $100 dollars a day to live, food, rent, insurance, bicycle payment etc. $100 to produce one day of my labor.

At the end of a day I have been paid $200 for delivering a bunch of pizzas, I didn't make them, I just picked them up from those who did, and delivered them to those who ate them and was paid for my labor.

Now since my labor only costs me $100 to produce, and I was paid $200, is the extra $100 profit?

Is that extra $100 "unpaid labor"?



So now I take that $100 and buy pizza ingredients, I make pizzas out of it and sell $500 worth of pizzas made from those pizza ingredients and my one day's labor.

The one days labor costs me $100, the pizza ingredients cost me $100, and I have $300 income above those costs. Is that profit? Is it unpaid labor?

[Hannah Bell]

72. in the first instance, you've bought the pizzas at their market cost &

distributed/sold them using your own labor. since you're working as owner-operator, you receive the full value of your own labor, minus your costs. if you'd been working for someone else, he would have received part of that value.

the second case is no different. you bought the pizza ingredients at their full cost & used your own labor to make the pizzas *and* distribute them.

you receive the full value of your labor, because you're the owner of your business, "exploiting" only your own labor. had you been someone else's employee, your employer would have gotten part of the value of your labor.

it's unlikely though, that you'd be able to sell *more* pizzas in the second case, since more of your time would have been spent baking than in the first case, leaving less time for sales.

which is one of the drawbacks of a sole proprietorship -- there are only so many hours in the day, so one's own labor is a finite resource.

[TxRider]

92. You didn't answer my question though

"in the first instance, you've bought the pizzas at their market cost & distributed/sold them using your own labor. since you're working as owner-operator, you receive the full value of your own labor, minus your costs. if you'd been working for someone else, he would have received part of that value."

But you didn't answer the question.

What are my costs? What is the actual cost of my labor?

I obviously received the full value, but was there a profit?




"the second case is no different. you bought the pizza ingredients at their full cost & used your own labor to make the pizzas *and* distribute them.

you receive the full value of your labor, because you're the owner of your business, "exploiting" only your own labor. had you been someone else's employee, your employer would have gotten part of the value of your labor."

But again, what was the costs, what was the cost of my labor, what was the profit?



"it's unlikely though, that you'd be able to sell *more* pizzas in the second case, since more of your time would have been spent baking than in the first case, leaving less time for sales.

which is one of the drawbacks of a sole proprietorship -- there are only so many hours in the day, so one's own labor is a finite resource."

Yes, so say I hire someone to use my $100 in ingredients, my oven, and my knowledge I teach them to make my pizzas, for an agreed upon value for their labor. While I go home and take a break for the day.

Now the worker makes the pizzas with my $100 worth of goods, my oven, and $500 worth of pizza is sold. How much of that $500 should that worker get?

[Hannah Bell]

95. I answered your question. You just didn't get it, I guess. Yes, there's a profit.

Profit is your sales, minus your costs (the market value of your labor + your supplies & cost of maintenance/reinvestment).

The profit you take as owner-operator is more or less the portion the owner would take were you working for someone else.

Except that since you're a one-person show, the profit portion is probably smaller than the big operator's would be, since he leverages economies of scale.

When you hire someone to do what you were doing, his wage will be similar to what other workers doing the same thing get. i.e. set by market conditions.

[TxRider]

99. Let's try again

What is the -actual- cost of my labor? Not the market value.

Profit I take is my sales minus my costs, just as you said.

The "market value" of my labor is a different thing entirely.



So what is my actual cost of labor?

That is the question you didn't answer.

[Hannah Bell]

111. You mean, the abstract cost of your labor, in terms of material & social inputs?

you mean the "costs" of all the inputs that went into creating you as a person capable of imagining & carrying out your pizza delivery business, plus the cost of keeping you alive in a manner so as to successfully reproduce such a person as yourself in the next generation & raise him to the (socially determined) age of self-sufficiency?

[TxRider]

119. No my actual costs of labor

The cost of labor to myself.

Profit is sales minus my cost of labor and materials.


If the cost of labor and materials is more than my sales, I cannot sustain my business.

In other words, if the $500 from selling my pizzas isn't more than my cost of labor and the $100 cost of materials, I cannot sustain making pizzas.

My labor has a distinct actual cost.

I must know that actual cost to know if I made a profit from selling my $500 of pizzas.




The post I responded to stated all profit is "unpaid labor".

If I did make a profit selling my pizzas, is that "unpaid labor"?

[Hannah Bell]

130. so basically, a market price of labor determined by the market costs of the inputs

to make you "you," amortized over your lifetime?


i'm not sure why i have to repeat myself: as an owner-operator, you receive the full value of the labor you expended making pizzas.

[TxRider]

138. heh

The poster said all profit is unpaid labor.

I assume he meant labor expended but not paid for, stolen labor.

If I sell $500 worth of pizza, at $100 cost, what is my profit?

Meant to show that if I do make a profit, say $200, is that profit the result of stolen labor?

You seem to be saying it is not, which means you agree that all profit is not unpaid or stolen labor.

[Hannah Bell]

147. Profit, specifically, is what capital gets -- an independent owner operator

isn't exactly "capital". Being both worker & owner. As worker, he gets the full value of his labor - not profit.

As owner, he "profits" - but only by "exploiting" his own labor.

A lot of owner-operators actually drive themselves harder than they'd think of driving their workers - often into early graves.

They see it as their virtue, & their identity.

It's another one of the ways capitalism destroys people.

[TxRider]

156. Or makes them quite happy and employed

As I said, it's growth that requires constant reinvestment in the capitalist cycle.

A business can be sustained indefinitely without growth, simply maintaining operating costs and using profits for other ends, like paying more to employees, charity, etc. or by not operating at a profit at all and raising operating costs to match income exactly.

Point being, a capitalist, as most plainly seen by an owner operator, can profit without stealing value from an employee namely himself. Meaning not all profit comes from "unpaid labor". Which is the point of the post I responded to.

[Hannah Bell]

164. sure, it may do that too. depends on circumstances, economic situation,

accidents of personality.

for myself, most of the independent businesspeople i know are highly stressed under a surface mask of geniality.

especially these days.

[Dreamer Tatum]

52. facepalm nt

[1]

38. amazing... ok, after watching all of the posts here, op is not looking for an answer....

op knows the answer. it's just not the answer op wants.

boo hoo, op. boo fucking hoo.

we read your sorry shit. we decline.

so bad, so sad...

sorry op. we don't fucking care...

[Hannah Bell]

76. looking for an answer i can't refute. shitty mangoes won't do it.

[blindpig]

39. Appropriated Labor.

The only place it can come from.

k&r

[Odin2005]

40. K&R. Talking about the Labor Theory Of Value is a good way to get the Corporatists howling.

Profit is theft.

[TxRider]

106. Really

So if I lend you $5k to buy a car.

And I charge you 1% interest and make a profit.

That is theft?

[izzybeans]

43. It comes from labor.

It's the only productive force there is.

[TxRider]

44. Knowledge is not productive?

[izzybeans]

49. Knowledge takes labor.

Marx used the word "labor" as a stand in for "human activity". If it is to be productive it must be active.

[TxRider]

50. So thought is labor?

Because it is active?

Observation is labor as well? Just sitting and observing and acquiring knowledge passively is then labor?

An example.

A woman finds a figurine, it costs her zero dollars.

She decides later to sell it for $10 at her yard sale.

I buy it for ten dollars.

The thing is, I saw a similar figurine sell for 2 million dollars on TV last night.

So I go to an auction, and sure enough, I sell the figurine for 2 million dollars.

The woman profited from her labor some fraction of the ten dollars, minus her labor.

Now was my profit of 2 million dollars minus the ten I paid her more a factor of my labor, or my knowledge? My labor was no more then hers, I found a figurine and sold it.

The knowledge I gained at random by happening to see a 30 second clip on the TV at my mom's house while she got up to make coffee? That is labor?

[izzybeans]

55. Sure.

Kind of a hokey example, but okay.

It's closer to "doxa" than knowledge, but I suppose you made a buck and had to take that bit of info and transfer it into actively seeking to sell it.

What I am referring to is what an engineer knows about her craft. It's labor power that is sold on the market, coopted by business owners to make a profit. You just did the same with trinkets. A factory worker can develop similar knowledge about electrical and mechanical engineering as they work and fix their machines. They just get paid less for it.

In a real example, the trinket maker sells you her labor, and you add to that cost a tiny margin, plus other "laid in" costs required to sell it. The more trinkets, the more tiny margins, the more tiny margins, the bigger your pile of cash. All of which are impossible with out the trinket makers knowledge and skills in trinket making. Their knowledge and labor produced the thing that made the profit. Another way of looking at is, knowledge is realized through labor which is the embodiment of productive value, a statement realized in your example as well.

When a good is sold and resold, it doesn't change this process, it just means the consumer is being charged an inflated cost because of inefficient transactions. Middle-men always inflate prices.

[TxRider]

62. Exactly

Meaning the value of a person's labor is in proportion to the value of the knowledge they have?

Is the value of each persons labor different, for that and other reasons?

Another hokey example question...



Two men identical twins.

One is illiterate, cannot read or write, has very little knowledge.

The other knows how to farm. He knows what seeds to plant, where to plant them, when to plant them, when and how to water them, when and how to harvest, where and how to sell them, and how to save enough seeds for the next year and where and how to store them over the winter and he has a piece of land and seeds to do so.


Illiterate brother digs ditches for minimum wage for three years. It's all his knowledge can apply to his labor.

The other profits greatly selling his corn for three years, and now has millions in the bank.

Illiterate brother however, through watching farmer brother, has now acquired the skills needed to farm as well.



This is where capitalism comes in. Illiterate brother has no land, no seeds, no equipment. He requires capital to be able to apply his new knowledge to his labor and therefore make his labor more valuable, to add more value to his labor.

He now has a choice, use an existing farmers capital, ie: sell his knowledge/labor to a farmer that has capital (work on the farm), or find another source of capital, ei: an investor to give him money and apply his knowledge/labor to that borrowed capital.

Two paths now stand open for illiterate brother.

He goes to Mr Farmer, hey Mr farmer! I know how to farm! I can run your farm for you, and make life easier and make you more money!. And illiterate brother makes 10x more than he did digging a ditch by working for Mr. Farmer. Is the farmer stealing his labor? Does the farmers capital, owning the farm, contribute nothing?

Then there is the other path....

He goes to Mr. Capitalist and convinces him that if Mr. Capitalist loans him capital, in the form of money, he will add his knowledge and labor to the capital and produce goods of greater value than the value of the capital. He promises he can and will do this, and will repay Mr. capitalist his capital in time, say, 5-10 years, plus 20%.

Brother has to do a lot more this way, and acquire and learn and apply even more knowledge, apply more labor, but he can profit more if he is successful. He must deal with many more issues acquiring and managing the farm than just working on a farm.

Now we have two farmers, both farming, both profiting, and a capitalist profits 20% as well.



Is Mr. capitalist is seen as having done nothing productive?

He has thought, and knowledge. He uses his knowledge to apply to his thought and acts to apply his capital to the best purpose, the place it will create most value. Is his process of doing so and action of doing so labor? Is it productive?

Is a loan or investment knowledge, applied to thought, producing an action? Is it labor? The action of thoughtfully transferring value for the purpose of creating more value?

What happens if illiterate brother blows it and loses the first crop, and cannot pay the capital back? and runs out of money and cannot buy seeds? Mr. Capitalist loses millions.. has he stolen from Mr. Capitalist?

[amborin]

60. emotions are labor, too; arlie hochschild discussed emotional work, in some of her bks;

[Igel]

45. They're all wrong.

Sales.

Until money changes hands, you have no profit. You can have a team of 100 workers putting in 60 hours a week to carefully elaborate eggshells to produce a 50 foot high extravaganza, but if nobody buys it it doesn't matter of it you $0.01/hr or $500/hr. There's no added value. It's still a pile of eggshells waiting to be composted. Because you put everything in dollar terms and assume that the price is stable and sufficiently high this minor point of trivia is just background noise. It's not background noise. It needs to be prominent in your assumptions.

Personally, I think there are two conversations waiting to be interlinked. Some labor advocates say labor everything, capital nothing. Some capitalist amateur theorists say the opposite--capital is everything. On the whole, there's usually more labor than capital so capital is scarcer and therefore more important. In principle, you can't use one without the other. You get a bunch of poor workers sitting there on a field saying, "Smelt iron ore, I have a seller for Va-Cr steel to these specifications at $2/ton" and nothing much happens. They look around and notice the absence of coal for coking, ore for smelting, the absence of a Bessemer furnace and hoppers and an oxygen supply. Or they sit around wondering what "smelt" means. Invested capital makes potential labor valuable--whether it's capital from private sources or the government. Labor makes capital useful, whether it's labor provided by private sources or the government.

Flipping your argument that labor is the one thing that can produce more value than it costs, I'd ask about salesmen. True, they put in effort and therefore labor. But often all they produce is higher prices. They don't touch the production. They touch the customer and get him to want the product and increase demand. If they do a great job, they increase demand so much or do such a great job convincing the customer that the price can really increase--thereby making them the heftiest contributor to the "added value". It's funny "added value" because it applies to stuff already made, and that added valued can easily be lost. (Then again, so can what more blue-collar labor "produces".)

So Ms. Celebrity--also a salesman--when she smears some colored animal and plant grease on her lips for a camera suddenly increases demand and prices--and "added value"--must put in more labor in her 3-hour photoshoot than a factory worker will contribute all year. And if she does something to reduce demand she subtracts value. Negative labor--you can hear it swooshing in, apparently. It makes for very messy labor relations. I'm not sure who to credit when things like ZhuZhu Pets become hot items--the sales staff? The designers? The people who molded their little eyes?

And let's not forget the people who organize production. Do they labor? Going back to the steel smelting--you have a lot of useless labor sitting there in the mud. What if I put in not my labor, but $700 million to put up the Bessemer furnace and get the raw materials and hire people to organize production and find customers willing to buy it? I've suddenly increased the value of the workers' labor from near zero to some non-zero amount. Moreover, I've done it not for the day but potentially for a decade or more. What do I get for my contribution to the added value of the labor? Labors have profited from my investment--they should pay, shouldn't they?

That one side stupidly forgot this doesn't mean that having everybody willfully forget it is a virtue.

Otherwise it's "We make a good team,/ Me and you, we do/ You could scratch my back/ And I'll scratch my back too." That's bad for capitalism, that's bad for socialism. It is human, though, something that you, I, and most other mostly hairless, tailless, back-scratching primates have in common.

[Hannah Bell]

87. i'm having a hard time finding the common thread of your argument,

but i'll take one piece:

"What if I put in not my labor, but $700 million to put up the Bessemer furnace and get the raw materials and hire people to organize production and find customers willing to buy it?"

The Bessemer furnace = capital stock, bought from another capitalist at its market price. The purchase nets no profit until the machine is used - by laborers - to make products which can be sold to get $ to repay the purchase price & associated costs.

Same with the raw materials: they're bought at their market price. No profits ensue until labor transforms them.

The people who "organize production" & "find customers" = labor.

I'm not sure what your point is. No one has said that materials & machinery don't contribute to production. Obviously they do. But they don't produce profit.

[TxRider]

104. Point is

The labor produces no profit without them.

Together materials and labor can produce a profit.

Without one or the other neither can produce a profit.

[Hannah Bell]

113. No. First you have to be clear about what profit is. If I go pick a berry & eat it,

I've consumed labor & resources, but there's no "profit". I used exactly the amount of labor needed to pick & eat the berry provided by nature, & gotten the full value of the labor I expended in picking the berry when I ate it.

This isn't "profit".

Profit is specific to capitalism.

Profit goes like this:

I own some undeveloped land with lots of berry bushes growing wild. I pay 10 people to pick berries & sell them at my farmstand.

Each person, working 9 hours a day, can pick an average of 5 buckets which contain enough berries to fill 20 small berry boxes (like those sold in the supermarket produce area), & each person also works one hour selling the berries, so 10 hours labor.

Ignoring for now the minimal cost of the farmstand, buckets, & small berry boxes, the cost of the picking & selling operation is my labor cost, say $5/hr, $500 total per day.

I sell the boxes for $2.50 each -- a bargain for consumers, since they sell for $3.50 in the supermarket.

Potential sales = 20 boxes x 5 buckets/worker x 10 workers = $1250.

Potential profit (less amortized cost of farmstand, buckets & boxes) = $750.

You notice, in this example that the workers themselves are only able to buy 40% of the berries they picked & sold.

[TxRider]

126. And?

Without the farm and berries, nobody makes a profit.

It is required, along with the labor, to make a profit.



Whether the workers profit or not or the berry farm profits or not is another matter. Without both neither can.

[Hannah Bell]

135. as i said, the berries grew wild, & the land was always there. the owner's only contribution is his

title to the land - which = no contribution.

It's not a berry farm, any more than the land around Mt. St. Helens is a berry farm.

But it produces delicious huckleberries for me to pick, thereby receiving the full value of my labor.

[TxRider]

139. Sorry

You said "owned" the land

Which to me implies cost of purchase, ongoing cost of property taxes, liability insurance, among other costs of ownership.

[Hannah Bell]

148. ok, he paid the taxes on the land. in what way did that help produce the berries, or pick them,

or put them into boxes & sell them to customers?

land ownership may cost something, but it doesn't produce anything that the land wasn't already producing unless you in some way develop the land -- not just pay taxes.

[TxRider]

158. Heh

It adds value, as if he didn't pay it he wouldn't own the land and even be able to hire pickers to pick the berries.

Without it no berries get picked.

An employer can pay an employee less than the fair value of his labor, he can pay him more. Has nothing to do with a capitalist system per se. It has to do with a greedy person. Capitalism does not require greed. It doesn't even require profit really in the sense you are using the term profit.

[Hannah Bell]

165. if he didn't own the land, the berry pickers could just go pick their own berries.

The OP doesn't say "capitalism requires greed".

It says "capitalism requires that people behave greedily".

Which it does, & you haven't proved anything different. You've simply asserted it.

Nor have you proved that capitalism doesn't require profit "in the sense I mean," which is the standard sense. You've simply asserted it.

As the profit motive is the stated rationale for the entire capitalist system, many will be surprised to hear your opinion on the matter.

[Duende azul]

47. Seriously, Hannah, you can't do this over here.

Pose such an innocent question, even without any caps in the headline. To people who don't want to be neocons but who like them their "democratic" capitalism? Who learned in their civics 101 that communism is evil?

See what you did?
You get no answers to a simple question but cause lots of panic.


Rec'd

[amborin]

86. i tend to agree, and K&R

even progressives have often times swallowed the "commies" meme; as just one example, even some UAW workers forget it was due to the efforts of "commie" organizers that the union came into existence and won crucial struggles

[unblock]

48. profit also comes from efficient resource allocation

if a system gets widgets to people who want widgets and and whatzits to people who want whatzits, the people who wind up with what they prefer benefit.

you can call that resource allocation "labor" if you care to, but it's really trading. i profit if i trade something i don't want for something i do, and the person i trade with presumably profits as well, unless they're acting irrationally.

MONEY only confuses the issue. it's merely one way to PROVE that you profitted from trading. if i do something and wind up with more than i started with, then i clearly profitted. but i still could profit by winding up with less money but more other stuff, provided i value the extra other stuff more than the missing money.

[mdmc]

51. thanks for the link..

[anonymous171]

53. This is why capitalists like Science but not philosophy or humanities

We are not allowed to challenge our basic assumptions about how our economy should function and the morality of such a system.

[TBF]

143. Rec this post. And the OP. Nice job HB.

nt

[piedmont]

54. You forget the concepts "Risk," "Loss," and "Depreciation"

And "labor" poorly directed would generate not profit but LOSS.

[Hannah Bell]

78. so what? individual capital is "lost" all the time; but it's recovered systemically.

[piedmont]

85. A gallon of gasoline spent driving in a circle has done work without creating anything. It is lost.

The gasoline has converted to a lower energy state (CO2, water vapor, and dissipated heat) without having increased the organization level or energy state of any other system. The capital spent buying that gasoline is gone. If the energy stored in that gasoline is not properly directed, the money spent on procuring that energy is lost. Same with labor. If you define the useful management of labor as also being labor, then I agree with you. The useful management of capital (and therefore risk) is also labor. Different forms and amounts of labor get compensated differently, and the arguments about those differences have been going on for centuries.

[Hannah Bell]

89. the value of that gas remains in the system as money, ready to reinvest.

if you want to talk "careful husbandry of resources," that's a different discussion. One look at packaging, distribution, & the disintegration of real estate in the rust belt tells you modern capitalism isn't about that.

yes, management is labor, & there's value in that.

[piedmont]

97. Sure, the system can reinvest it, but you will never get that parcel of energy back. It is wasted.

It doesn't matter whether we're talking about chemical energy stored in gasoline or in the tissues of human beings. Wasted work is wasted energy, a scarce resource. Even if the energy is renewable, as food should be (ignoring the enormous subsidy of fossil fuels to today's food supply), it is not inexhaustible. If you waste a resource, you will drive down the supply and the price will increase because of the scarcity of that resource. So even though the money you spent on that resource is back in the system, ready to invest, it is now worth less and incapable of buying the same things as before.

[Hannah Bell]

112. nor will the system ever get back all the energy expended in the weed growing

on my steps.

that's life. i believe it's one of the laws of thermodynamics, not of capitalism. don't confuse them.

[piedmont]

115. Capitalism doesn't exist independently of the laws of thermodynamics.

Waste a resource and the resource becomes more expensive. Capitalism is a system of efficiently using resources without a central hierarchy. I'm not at all saying it's perfect, but it does generally direct costs of waste to those doing the wasting and also rewards improvements in efficiency. One can game the system by artificially depressing the costs of resources, like gaining governmental cooperation in coercing workers to sell their labor at a discount.

The weed growing on your steps has not entered the human economic system and cannot be wasted. If you use your energy to pick that weed, and then dispose of it without producing a good (like compost) or service, then yes it has been wasted, as well as the energy you spent in picking it and destroying it. But of course if it was in your front steps then picking it would in and of itself be a service-- you will have reversed the disorder of your house by that little bit.

[Hannah Bell]

116. efficient? look at packaging. look at rich people's 100-room houses?

look at john travolta's lear jet & the fuel cost of shipping picnic furniture from china. look at planned obsolescence & my 1947 flashlight that still works like a champ with *the original bulb* (well, at least the one that was in it when i found it in an old garage in 1972).

look at your local garbage dump.

capitalism = wasteful.

the laws of thermodynamics have nothing to do with capitalism.

[piedmont]

128. Efficient as opposed to randomly bumping rocks together. The Soviet Union wasn't knownfor efficiency

"the laws of thermodynamics have nothing to do with capitalism."

Your statement notwithstanding, they do. Things fall apart. If you want to repair or replace them, it takes energy. The energy available to us is not inexhaustible. Each unit of usable energy in our system has a price of some sort or another.
John Travolta's jet and that picnic table from China are using energy that was stored millions of years ago and is being used faster than it is discovered. And when I said the system is not perfect, the use and mis-use of fossil fuels would be a prime example. Oil-producing countries own that resource. They are selling it at a price that future generations may look back at as too low. We are buying it, and its costly side-effects without putting aside money to remedy future damage.

My local garbage dump is not outside the economy. Money is being paid to dump things there, and people are realizing a cost for their wastefulness. In time that dump may be mined for resources that will be recycled.

[Hannah Bell]

131. Soviet inefficiencies were simply of a different type than capitalist ones.

& you seem to be co-mingling "waste" & "inefficiency" though they're not completely synonymous.

So explain to me how the laws of thermodynamics have impacted the laws & practices of capitalism to date.

Not in the future, when we theoretically run out of resources. To date, & historically. How did the laws of thermodynamics shape the determination of prices & wages, or the rights of contract, for example?

[piedmont]

134. That's rich.

"& you seem to be co-mingling "waste" & "inefficiency" though they're not completely synonymous."
And you seem to be reading whatever meaning into my words you please.

"So explain to me how the laws of thermodynamics have impacted the laws & practices of capitalism to date.

Not in the future, when we theoretically run out of resources. To date, & historically. How did the laws of thermodynamics shape the determination of prices & wages, or the rights of contract, for example?"

The days when I would write essays at the whim of others ended when I graduated college. You may want to ask yourself how in the world any economic system could exist that defies the laws of thermodynamics.

[Hannah Bell]

150. "i believe it's one of the laws of thermodynamics, not of capitalism. don't confuse them."

this was in response to you saying the value of a gallon of gas used to drive around aimlessly was "lost" to the system of capital.

I said no, it wasn't, because in the system of capital, the "value" of that gallon of gas is represented by money, & still existed, ready to be used for new purposes.

you say the *energy* is lost. i said part of the energy expended in any living process is lost & irrecoverable, per the laws of thermodynamics. Capitalism doesn't *care* if the energy is lost, because it's not *about* conserving energy generally; it's about producing products for the cheapest money price in order to receive the highest profits possible. Sometimes that may coincide with conserving energy -- sometimes it won't.

But overall, the effect of capitalism is to use up more & more resources per capita, more & more quickly. So I have no clue what you're talking about.

the laws of thermodynamics apply to energy; the laws of capitalism apply to capitalism. But the laws of thermodynamics affect the circuits of capital only at the margins; they're not determinate. Capitalism existed when resource use was very low per capita & continues to exist when resource use is much higher. So far, capitalism hasn't been much impacted by the laws of thermodynamics.

The first law of thermodynamics, which mandates conservation of energy, and states in particular that the flow of heat is a form of energy transfer.

The second law of thermodynamics, which states that the entropy of an isolated macroscopic system never decreases, or (equivalently) that perpetual motion machines are impossible.

The third law of thermodynamics, which concerns the entropy of a perfect crystal at absolute zero temperature, and implies that it is impossible to cool a system all the way to exactly absolute zero.


These laws have no different impact on the structure & laws of capitalism than they did on previous economic formations.

[damyank913]

56. Not necessarily...

Your position that only labor can add value is somewhat flawed. It is possible to buy a piece of land,and not sink another dime into it; and sell it at a profit with nothing more than the passage of time to credit. This sort of thing happens all the time in the stock market or in Las Vegas. Often, the risk you take is the only labor in it.

[Hannah Bell]

82. i buy a piece of land & wait. if it sells at a higher price later, the reason

is that the market price for the land has changed in the meantime.

if the market price has changed, the cause is ultimately labor, e.g. the labor that extended the city to my piece of land, the labor that discovered oil next door (& thus the possibility of extracting that oil & selling it by the application of labor), etc.

speculation doesn't add value, & thus can't generate profit. the land sells for its market price when i bought it, & when i sold it.

[damyank913]

91. That's only partially true

There are many examples of property losing value based on Macro reasons that have nothing to do with labor-just look at recent history of the real estate market. As for a commodity like gold or platinum the labor cost to get the material is insignificant. I'm not saying that it could be done without any labor input but when one has to dig up 8 tons of earth to get one ounce of platinum the force multiplier of the machinery is HUGE.
Also the gambling industry and the stock market are examples of risk making profit with no labor involved. The only reason I bring these up is because they are responsible for millions being made and lost every day.

[snooper2]

57. buy gold

:rofl: :rofl: :rofl:

[WillyT]

58. Schoolhouse Rock Should Do This One... 'How A Bill Becomes A Profit !'

:shrug:

[rucky]

69. Profits these days seem to come from speculative investments & hedge bets.

thin air.

Public companies are more focused on preserving their shareholder value than keeping competitive goods and services on the market.

[damyank913]

93. Absolutely true

[Cal Carpenter]

73. Under-compensating workers for the value of their labor

nt

[Cal Carpenter]

74. In pictures:

[Romulox]

77. k/r. How can it be "natural" for the great mass of us to toil for the benefit of the few?

And in an alleged "democracy", why have we so assiduously re-assembled the social structures of aristocracy?

[ThomWV]

79. Hanna Bell, your conclusion is sustainable, but the convoluted way you got there will kill you

Your argument fails at about the seventh sentence.

You began with cash or numbers in the hands of individuals and then you run it full circle but it doesn't end up where it started. Its not back in the hands of consumers, its in the hands of the capitalists themselves. You missed the two routes back to the hands of individuals completely. The way the money gets back is in payment for labor, in return on the originally invested money (rent on capital equipment and facilities). But the real point you miss is that after the creation of the product, after its transportation, marketing, and sale. After all of that part of your original investment remains - you still have the factory, the hammer, the anvil, and most import the trained workforce who may be employed to make the next unit of production.

You see the base of Capitalism is not that product that comes out the tail end - it is the investment in the means of production that created the stuff and can create the same stuff again and again.

[gmoney]

80. "Labor is the one thing that can produce more value than it costs. "

Not exactly. It's the mark-up on labor, materials, and other components that leads to profit.

Oversimplified, if you have a chunk of a metal that costs $10 to buy, a worker who costs $10 an hour (wages+benefits+overhead) works on it for an hour, and it takes $3 worth of energy to power the tools, and causes $2 worth of wear on the tools, the finished product's cost is $25, more or less. Then there's the cost of packaging, warehousing, shipping, administration, etc. that adds say another $10 to the item. So if it's sold to the customer at $35, the producer breaks even, and everyone gets paid. It's when the owner of the operation decides to charge $40, or $50 or $200, or $2000 for it is where profit comes in, and basically where capitalism happens.

It would be possible to run any business as a not-for-profit enterprise, especially if the competition were also not-for-profit. I believe most credit unions are run that way. They find the balance of expenses and fees, and if there's excess profit, they return it to the customer/shareholders -- at least mine does this. Or they can stash the excess until they have enough to build a new location and expand their services.

But yes, the problem isn't capitalism. It's when the drive for profits leads to unethical behavior in the name of satisfying shareholders, and generally that the majority of shareholders are either executives or entities outside the company who have no interest in the long-term viability of the company, working conditions, effect on the community, or deceptive business practices.

Maybe I'm wrong, but I think investors in the past were satisfied with "reasonable" profits and more modest gains than today. Crazy stuff like real-estate bubbles, the .com bubbles, etc. have investors acting as if 20% return is some sort of slow boat compromise, because there are cases where returns were more like 50% or 200%.

Meh... I'm just babbling.

[Hannah Bell]

83. "the mark-up" - from whence comes this "mark-up"?

[gmoney]

123. Generally from what the market will bear...

Why does a shirt sell at Target for $10, $20 at Old Navy, $50 at Macy's, and $300 on Rodeo Drive. Granted it's not the exact same item, but the utility value is comparable. It's a shirt. It's just that the operators at these particular stores know that they can get a lot more for it with a fancy label sold from a fancy store. Granted, there are trade-offs with marketing costs, facilities, etc. but it's essentially the same thing from one store to the next.

People calculate the profit margin different ways, trying to find the balance where the price and volume combine for the largest profit. If you double the price, but only lose 40% of sales, then that may be the most profitable combination. Test markets are all about this, trying to find the price points of products.

[Hannah Bell]

166. what are the causes of the market "bearing" x, but not y?

that elusive "price point" - from whence does it come?

[gmoney]

193. Consumers and competitors, basically

when you consider purchasing something, you consider its worth to you, and how much you'd be willing to pay for it.

The manufacturers and retailers are skilled in determining what is the highest price that will be acceptable to most people for a particular item.

You're considering buying a lamp. You're at the store and see one you like and in your mind, you think "I'd pay $50 for that." Then you look at the price tag. If it says $40, you think "that's a good deal" and probably purchase it. If the price tag says $60, you consider it, and maybe you buy it, or maybe you walk away thinking you'll wait until it goes on sale. If the price tag is $100, you walk away and probably don't look back.

All this is irrelevant to whether the store paid $45 for the lamp, or $5. It's perceived value of the consumer.

Of course, during hard times, people are more conservative with their money, and generally either look for bargains, or go without. So retailers cut costs to try to sell current inventory, trying to find the new price point given the economic conditions.

I don't think I'm telling you anything you don't know, or can't figure out for yourself...

[ThomWV]

84. So can a hydraulic press, a lath, and a backhoe

[Hannah Bell]

88. they produce no value whatsoever without the addition of labor.

[TxRider]

103. Beside the point..

Labor applied to them is amplified by some factor, a value which must be partially attributed to them.

They multiply the value of labor applied to a task by using them.

[Hannah Bell]

114. the "factor" you mention is included in the price at which they're bought from other

capitalists.

Resources = resources.

If tin can be used to make semiconductors, its value as a semiconductor material is acknowledged by society & included in its price.

Turning tin into semiconductors adds no additional value to the tin itself that isn't already included in the price of plain old tin.

Capitalists pay each other the *full value* of what they supply. The profit comes from labor.

[TxRider]

140. We're talking a press, a lathe and a backhoe

A backhoe pets a man dig hole in ten minutes that would take a day without it.

A lathe allows a man to modify steel in a day it would take many days to do without it, if he accomplish the task at all.

A press applies labor a man cannot, without the press.

Labor applied to these is amplified, multiplied, but the amount of labor done by the human remains the same.

[Hannah Bell]

168. Take it one step back: who made the backhoe? Factory workers, transforming

raw materials into backhoes, & receiving only a fraction of the value of what they produced as wages.

Take it one step back: who built the factories? Workers, using tools to transform raw materials, & receiving only a fraction of the value of what they produced in wages.

Take it one step back - who made the tools?

Workers, built the entire world & were dispossessed for their trouble, as at each step of the process, capitalists took most of the value & transformed it into private property.

A backhoe contains all the dead labor of the past, & still needs living labor to move even an ounce of rock.

[TxRider]

176. You can rationalize in circles all day

The fact remains the back hoe multiplies the operators labor.

It cost the man 10k to buy it.

Without it he can dig $5 worth in a day, with it he can dig $1000 worth in a day.

Does the back hoe produce more value than it costs to the man who buys it and uses it is the question.

[Hannah Bell]

178. no one denies the obvious fact that a tool increases labor productivity.

the question is whether a backhoe can produce profit.

the answer is, it can't.

it can't produce value, either, anymore than a hammer can.

[TxRider]

180. Not really

The question is can the man's labor produce profit without it.

If he cannot, then his labor is not the sole source of the profit.

The value of the increase in productivity, combined with his labor, make profit where neither can by itself.

[Hannah Bell]

183. whether men's labors can produce profit in the absence of tools?

let's see: how about a pimp with 20 girls?

[alcibiades_mystery]

102. These are "dead labor," or what Marx calls "constant capital"

They cannot produce the surplus alone (indeed, as even first year economists or anyone who's worked with any machine knows, they actually degrade with each repetition of a task). Only variable capital (i.e., labor power) can produce surplus value. Constant capital can only produce value equal to itself. This isn't even a controversial point in traditional political-economy (i.e., Ricardo).

[damyank913]

107. But in our (American) tax system capital reinvestment

is offset by accelerated depreciation. Or as I like to put it "We the people"...

[alcibiades_mystery]

117. That's neither here nor there with respect to the question

It's just another venue by which to pull surplus value from living labor. You can't produce it from constant capital, full stop.

[wickerwoman]

105. But it's not like the worker walks in the door with a $10 price tag attached.

The worker "costs" $10 because the employer has determined that that is the least amount of money he/she can get away with paying based very often on the perceived level of desperation in the local labor market.

There's no reason why it doesn't work the opposite way. The employer finds out what the customer is willing to pay $65 for the product. The materials. distribution, etc. cost $15. He takes half the profit for providing the means of production and to recoup his investment and pays the worker $25.

The only reason it doesn't work this way is that capitalism is designed so that people have to act against their own best interests in order to do the moral thing- pay a living wage to their employees.

[TxRider]

142. Actually it very often works the opposite way

For example Y2K when there were almost no CCOBOL programmers left in the market, and many thousands of old programs needing to be fixed. Salaries were through the roof.

Or the internet boom, when many companies couldn't find good programmers at any cost.

Or currently in the are of mining engineers, with so many retiring, and so few graduating.



People also do not have to against their own best interests in order to do the moral thing and pay a living wage.

A number just happen to choose to, but not all, and the system does not require it. In fact it works better when people choose your "other way".

[branders seine]

81. workers

that is the only source of increased value.

[TxRider]

141. But everyione is a worker

Even a fat cat CEO is a worker. And performs labor even if it just thought.

[branders seine]

196. thought is labor only if it is directed at creation of something tangible.

thinking about his golf game while sitting on his gold-plated toilet is not labor, although it may well be laborious after the filet mignon lunch.




I never said ALL labor results in profit. Upon reflection, using the word "profit" in the OP makes this question dishonest at worst, biased at best. It's a self-begging question.

[alcibiades_mystery]

100. Labor

More specifically, surplus labor.

Period.

[ElmoBlatz]

120. A simple question Hannah

Have you ever sold something for more than you paid for it? For ANY reason? Lets say you bought a picture for $25, and sold it to someone else for $30. You made $5 profit for doing nothing. Is that bad? is that greedy? Is that immoral?

[Hannah Bell]

122. sure. but i'm not sure why you'd ask. capitalism is the production regime under which

we construct our very identities.

it's not (to me, at least) ultimately a question of "morality". which is why the op contains the section refuting "greed" as explanatory.

[ElmoBlatz]

149. Huh?

You asked where profit comes from. Then you concluded it only came from labor.

I gave you an example where there was product and no labor involved.

[Hannah Bell]

153. oh, i see what you were asking. sorry, i didn't understand the reason for your question.

Trading isn't production, & creates no new value. It's price arbitrage; buying in a market where x has one price & selling in a market where x has a different price.

There's some labor involved. If I buy a sofa for $10 & sell it at a garage sale for $50, the garage sale takes some of my time & energy. Even if I never take possession of the sofa, just call around until I find someone who'll buy it, that's still "work".

But since I'm just an individual buying & reselling to another individual, the question of capitalist profit doesn't enter into it.

Reselling things as an individual is another case of "owner-operator," where the individual acts as both employee & employer, worker & capitalist.

[anarch]

145. I don't know...it seems to me that theft

or something similar can produce profit...but whatever commodity or symbol of power (e.g. money) you are stealing was almost certainly given value by someone's labor, even if you yourself are just taking the profit from someone else without expending labor of your own.

[TxRider]

154. Yup

Or I can simply apply knowledge.

I spot a weather forecast that I know will have an affect on a crop, it will be planted a week later, meaning a market shortage and rise in price. I purchase futures, and later sell them at a higher price than I paid.

It's still the product of labor in the abstract sense, as it did require labor for me to learn the knowledge, and labor for me to buy and sell.

In that sense all value comes from labor, as even something as simple as thinking is labor.

When used in the more common terms, a persons singular effort in the employ of another to produce a product, labor is not the sole source of value in the money recieved for the end product.

[GeorgeGist]

152. legalized theft

[bertman]

160. My head is swimming from reading all of the replies and responses to replies, so I

admit that I did not read but about one-third of them.

That said, I want to point out that the OP may be correct some of the time, but certainly not in all instances. Example: My business partner and I are capitalists. We are capitalists because we capitalize our company by providing our own money for it to operate with. We do that because the alternative is to borrow the money, which we prefer not to do.

We are unabashed profiteers. Not in a bad sense though, IMO. We make a profit because it allows us to continue operating our business. It also allows us to reward ourselves and our employees for the work we do. Because we, meaning our company--owners and employees--are good at what we do and provide a service that the public is willing to pay for, we have been able to make a profit every year of our existence. KNOCK ON WOOD. Even during last year, which was hellish for many of our competitors and tough for us as well.

Despite the fact that we make a good profit, our goal is NOT just to make more profit. Our goal is to be the best or one of the best in our field, to make our clients so happy that they use our services repeatedly and tell their friends, family, and associates that we are the company to use.

We ARE NOT interested in growing like the Blob. We have stayed small because it's comfortable for us and for our employees. We charge more for our product than many other companies who do the same work in the same area, yet it's other cheaper companies whose reputation is not as good as ours who are having trouble staying afloat in this dog-eat-dog economy. We are not always looking for cheaper production costs. In fact, we pay our employees MORE than most of our competitors plus we provide them with an excellent benefit package and profit sharing. That's one reason we cost more, but it's also one reason we have been successful.

The theories advanced in the OP all seem to relate to customers who are always searching for cheaper goods and services. It's a fact that a lot of people do that, but it's also true that many people value quality, exceptional service, and a company that treats its employees well. And they are willing to pay more for that. Companies that realize this can prosper and be profitable without being ever-growing "Blobs of Capital".

[jdp349]

161. This is an extremely wordy way of saying "shit doesn't get done unless someone does it..."

[Jimmy Gunner]

169. I've heard the color of money

is red. Blood red. Is it true?

- Jimmy Gunner

[Unvanguard]

172. "The opportunity cost of investment" is the short answer. The Marxist view of this was long-ago

debunked, and has since been discarded by credible economists of both left and right.

[Oldhat1970]

185. Profit Does not Exist!

I think the "term" profit should not be based on a "Fiscal" year or Calendar Year. We've based "profit" on some type of Calendar of which it should not be, but it is.

The argument here is that "all businesses" will at some point run their life span and go out of business. It's typical at the front end of this that we take funds to invest into capital. Now on the flip side of this (at the end of the business life cycle) we take that money in most instances and put it back into the company. So a true owner or "capitalist" does not make a lot of money over the life span of the business, there is no profit there.

What is there is the fact that you have created a positive cash flow and can use that money as your own, only to borrow for a limited amount of time (which of course could out last ones life. But a business will more than likely not make a "profit" over the life of the business).

Greed is a thing that is tossed around here a lot and profit is associated with "greed", but then when you have a loss it's treated as if most think there is really no loss, but instead "greed" is once again kicking in and enabling a loss.

Back to your original argument about creating a "profit" and what it is:

In your scenario it is a perceived profit based on an instant in time, in most cases a fiscal year in the business world. The idea about making this so called "profit" is about the perceived value of something at any given time by the consumer of that product. The person seeking to make a product to sell to the market is taking our notes (dollars) and converting them into hopefully a profit by converting it from the "note" into some type of widget. They are then taking this widget and betting that it will be worth more than the value of dollar it took to make it and hope it at least makes some form of return on the initial investment.

This return on the investment:

This is only a perceived profit, which goes back to my original idea that it should be looked at in the life span of a business, not a fiscal year of which we have applied in our society, at some point the business will use up it's so-called profit. It's the "stepping in and becoming the middle man of cash flow" that is perceived as profit being used by the owner by most.

I've lurked here for years, finally decided I needed to post. I will say that it is a conversation like this that I like to be involved with, I do not feel welcomed on this site simply due to the fact that not only am I an engineer, I am likewise a business owner, a 1st Gulf War Vet, and Ohio resident, it seems that I am the "anti matter" of most personalities on this site, hence the lack of posting on typical "political" issues. But a good conversation such as this is hard to pass up.

Is my idea on profit correct? Who knows, but please quit judging it on a standard of a fiscal year, that is our system simply calling it a profit during yet another instant in time.

Oh and regarding the "energy" being lost that was discussed earlier:

It is a fact that energy is never gained nor lost, it's simply converted into some other form of energy. Same goes with taking our notes and converting them into another object that then becomes a product. Money was neither gained nor lost here, no profit was truly made but most would perceive it as being such. The owner whom stepped into cash flow and either hoarded it or used it will eventually at some point depreciate those funds of the perceived "profit" in an instant of time and is gone. Is this Greed? It could very well be, but once those resources (so-called profit) has been used up by this greed, in the end really was not profit at all.

Now some might say that labor produces the profit? And a capitalist makes the profit. Just as an engineer making $100K a year and putting in his 2000+ hours a year for it. The same goes for the capitalist whom puts in their hours of getting a business started. Bill Gates actually worked for his money at some point in time, even though it hypothetcially could be 1 hour, he's made billions from that 1 hour...this is not profit, even though one may work 1 hour for that pay over a life-time, by your definition it is not profit but instead his reimbursement for his hour(s) work which is the same as the differnce in an Engineer making $100K/yr and a "Burer Flipper" making $15,000 per year so is the "rich man" whom worked 1 hour to start a business, he's compensated at a higher rate.

[troubledamerican]

186. Abraham Lincoln quote: "Labor precedes capital."

Hannah Bell is CORRECT. Next topic.

[jtuck004]

191. It compels capitalists... ?

Well, I was thoroughly enjoying this till I got to this point. Capitalism compels? But it is an inanimate system. It doesn't "do" anything. People who practice capitalism apply their motivations, genes, attitude, ego - all that "stuff" to capitalism.

I absolutely agree that profit comes from that labor which produces something useful for someone else (lot's of labor that doesn't do that, just hurts your back and feet). But just because there are lots of corps run like health insurance or credit card companies, correlation still does not imply causation, and you cannot remove the responsibility of humans to care for their family, community, and world by just blaming it on an economic system.

For example, Springfield Re-manufacturing (in Missouri, I think). They were closed down by owners, and the employees bought the company. Every worker knows what their labor contributes to the bottom line, no one is "obfuscated", and the upper management compensation is limited. They spin off other businesses and diversify to avoid the impact of recessions. It is capitalist, it re-invests profit, it uses labor to create profit, but it is set up with checks and balances to prevent excesses. I realize it may be an out-lier, but I do not see "it" compelling anyone to act in a way that is contrary to their values.

[maryf]

195. Kick, nt