I well and truely hope this is the deathknell for supply-side economic policy. It's been all I've seen in my lifetime, and from those on the not-supply side it's been kinda shitty. 2008 was...
I well and truely hope this is the deathknell for supply-side economic policy. It's been all I've seen in my lifetime, and from those on the not-supply side it's been kinda shitty. 2008 was vindictive in that sense... for all the chatter about fiscal responsibility and how bailing out the top is for the best, that when push comes to shove (literally in this case), turns out everybody else needs money too.
Also, I want to get back to this in the morning to elaborate and source, but toss this out before bed as food for thought from an amateur:
We have a better macro. Marxist economics. Labor theory of value is correct. It has far more predictive power in a way that other economic models don't.
I wrote up a whole long thing, re-read it, than threw it away, because I realized I couldn't say it any better than this article and this paper. From the article: From the paper:
I wrote up a whole long thing, re-read it, than threw it away, because I realized I couldn't say it any better than this article and this paper.
From the article:
Neo-classical economics’s predictions concerning prices and labor-content are falsified. Orthodox economics predicts that there will be no connection between labor-to-capital ratios and profit. Farjoun and Machover’s probabilistic theory of labor-content, continuing the classical program of Smith, Ricardo, and Marx, predicts that industries with a high labor-to-capital ratio will be more profitable than those with a lower ratio. The prediction checks out as a statistical generalization. The statistical generalization falsifies the orthodox claim and provides support for the claim that the price of a commodity varies proportionally to its labor-content i.e. the labor theory of value.
From the paper:
A theory which makes no predictions is never scientific, whilst one whose predictions have now been in-validated has forfeited any prior claims to science. A scientific theory makes testable predictions. Note that by “prediction” we don’t just mean forecasting the future, though this can be part of it. An historical science can formulate temporal “postdictions” as logical pre-dictions.
That's an interesting article that gives some good background. One thing they say that might reduce the scope of the theory, even if it's considered to work: apparently the labor theory of value...
That's an interesting article that gives some good background.
One thing they say that might reduce the scope of the theory, even if it's considered to work: apparently the labor theory of value is about the value of commodities? Most spending isn't on commodities these days. But maybe they have a broader definition of commodities than I'd expect. Is an iPhone a commodity?
I see a claim in the article that looks sort of like a prediction:
Orthodox economics predicts that there will be no connection between labor-to-capital ratios and profit. Farjoun and Machover’s probabilistic theory of labor-content, continuing the classical program of Smith, Ricardo, and Marx, predicts that industries with a high labor-to-capital ratio will be more profitable than those with a lower ratio. The prediction checks out as a statistical generalization.
But it doesn't actually show us any numbers about what was predicted and what real-world data it was compared to. I guess we'd have to look at Farjoun and Machovers' paper?
Looking instead at the paper you shared by Cockshott and Cottrell, it seems pretty abstract and theoretical. The prediction seems to be:
Table 1: Correlations between sectoral prices and predictors, for 47 sectors of US industry
Observed price
Labour values
0.983
TSS prices
0.989
Sraffian prices
0.983
This isn't the sort of prediction I was hoping for. I was thinking more something like happens on the Long Bets website, where someone makes a prediction that you can actually understand and is about something meaningful to ordinary people.
The data itself isn't in the paper, so it would take more effort to check their work. Also the paper is pretty old. Here is where they say they got the data:
Specifically, the stock data came from files wealth14–wealth17 on diskette 4 of the BEA’s series of diskettes for Fixed Reproducible Tangible Wealth in the United States, 1925–1989
Someone more eager than me might be able to redo their calculations with newer data and see if it holds up, and better yet try to get some useful insights out of the comparison. It might be nice to see a scatterplot showing how well the predictions hold up for each industry.
Yes, I do believe so. I've not read it myself, although it is in the queue. I do apologize a bit then, that was the prediction power I was referring to. However, they are related, in that coming...
I guess we'd have to look at Farjoun and Machovers' paper?
Yes, I do believe so. I've not read it myself, although it is in the queue.
This isn't the sort of prediction I was hoping for.
I do apologize a bit then, that was the prediction power I was referring to. However, they are related, in that coming up with a verifiable economic theory at the same level of Newton's 3 Laws of Motion means that future predictions become possible.
What I've gathered from Cockshott's other material, including his Youtube channel, is that in order to see LVT make predictions, you must actively plan an economic experiment once you have a workable theory. Allocate X resources to a wide swath of an industry, predict output, see if output matches prediction.
(Second, seperate reply because it's substantial enough to warrant a seperate post) Cockshott did come up with a way of calculating things like output/consumption levels of actual USSR data and...
(Second, seperate reply because it's substantial enough to warrant a seperate post)
Cockshott did come up with a way of calculating things like output/consumption levels of actual USSR data and mapping the prediction against the later future data (using child growth as a metric of consumption and reported output numbers). Chart seen at this time, although it's halfway through the second of a 2-part video about using Julia to calculate this data. Source code here.
While not exclusively due to LTV, it's an important metric as part of that planning process.
Predicting output is one thing, but understanding demand quite another. I don't see this approach as a way to figure out which products people will want and how much they would pay?
Predicting output is one thing, but understanding demand quite another. I don't see this approach as a way to figure out which products people will want and how much they would pay?
Since one of the defining aspects of capitalism is that while costs set a floor on price, they don't set an upper bound (especially if there's a lack of competition). Thus, its completely...
Since one of the defining aspects of capitalism is that while costs set a floor on price, they don't set an upper bound (especially if there's a lack of competition). Thus, its completely impossible to predict price when that price is not tied directly to costs + fixed profit margin.
And one of those original points was that you can't apply the high-level macro down to specific products (This is true of other economic methods too IIRC). It might, however, be able to track demand for broad categories (like figuring out when demand for 2019 phones drops off after 2020 phones are released). I suspect many companies already do something like this to figure out prices and release dates for new goods.
We have all of the data for broad economic planning nowadays, courtesy of modern invoicing and accounting. It's just that the vast majority of that data is siloed within the confines of each private company.
Which makes sense...many companies would shit a brick if every salary for every employee/title (names excluded, of course) were posted publicly where employees could plainly see their worth relative to their coworkers and industry peers. Let alone their entire accounting system for their competition to see.
Which I think would be great. Public accounting for corporations. Should encourage some great added competition to reduce costs while keeping salaries high.
Hmm... I am wondering why it isn't called the labor theory of cost? It seems like the value to buyers is quite different? The desire to consume a certain kind of food may be different in different...
Hmm... I am wondering why it isn't called the labor theory of cost?
It seems like the value to buyers is quite different? The desire to consume a certain kind of food may be different in different places, depending on local customs and what else is available.
Because while I've been using it like that, it's not exactly about costs. Let's say for example that you make pencils. Takes you 10 minutes to make one. The value of that pencil is 10 minutes of...
Because while I've been using it like that, it's not exactly about costs.
Let's say for example that you make pencils. Takes you 10 minutes to make one. The value of that pencil is 10 minutes of labor. But if you build a machine, and now only need to spend 1 minute on that pencil, the value of that pencil goes down. Which means you've got 9 more minutes of free time available per pencil. Even if that machine ends up costing more in materials, those costs are irrelevant because it's reduced the total time you need to spend making pencils.
The LTV is about reducing human involvement in production. This is a net good, especially if the workers own the means of production and can decide how they want to re-allocate their labor.
I don't actually know the labor theory of value but here are some questions that might be interesting, or perhaps there is an FAQ somewhere? Suppose one person takes 1 minute and another person...
I don't actually know the labor theory of value but here are some questions that might be interesting, or perhaps there is an FAQ somewhere?
Suppose one person takes 1 minute and another person takes 10 minutes? Or suppose two people each take 10 minutes, but one of them makes a higher quality writing instrument than the other?
Does the labor theory of value take into account timing and availability? Many products are worth more if you can get them before versus after Christmas.
How does it account for differences in how workers value their time? It seems like a rush job, requiring work on extra shifts or weekends, can and should cost more.
More generally it seems like value is a matter of human judgement (and often chance) rather than a calculation based on cost. Two songwriters could write songs in a day, one could be a hit and the other remain obscure. Why this is could be based on quality or timing or just randomness.
It seems like a song everyone knows is more valuable, but this value doesn't come from cost or any objective evaluation of merit.
When discussing labor time, the unit is generally assumed to be 'average time for an average worker in that trade'. One mistake I had originally fallen into is that LVT was completely elegatarian,...
Suppose one person takes 1 minute and another person takes 10 minutes? Or suppose two people each take 10 minutes, but one of them makes a higher quality writing instrument than the other?
When discussing labor time, the unit is generally assumed to be 'average time for an average worker in that trade'.
One mistake I had originally fallen into is that LVT was completely elegatarian, hour for hour. But most proposals I've seen surrounding it account for worker efficiency/quality in some fashion.
In Towards a New Socialism, Cockshott proposed something like A,B,C grade for work, where B was standard deviation and A/C were above/below. One key aspect was to not stigmatize the three grades The grade would affect wage with a slightly higher/lower modifier. So one worker could choose to work shorter hours, at a more strenuous pace, while another more leisurely pace for more hours. IIRC the modifier was something like 15%.
One of the key points is that in a new socialist system, workplaces would be collectively owned and run by the workers. So they themselves (democratically) could determine their hours and any bonuses that should be attributed.
I'd like to think art of all types would be unpaid, exist outside of a traditional economy as more of a gift economy. By working to eliminate bullshit jobs, and thus allocating labor to sectors that need it, we would collectively have more time for our own pursuits, including art. Especially since one goal of planning now is a general reduction and/or reallocation of resources to reduce consumption and make our lives more sustainable.
It’s good to see a slight acknowledgment of the fact that everyone isn’t the same, but it doesn’t really get into the endlessly diverse, detailed, and subjective judgement calls we make about how...
It’s good to see a slight acknowledgment of the fact that everyone isn’t the same, but it doesn’t really get into the endlessly diverse, detailed, and subjective judgement calls we make about how we live, who we choose to work with, and how products are designed and evaluated. Organizations often try to limit diversity, but consumers can be whimsical and businesses often have to scramble to keep up with trends.
I suppose any macroeconomics is going to aggregate a lot of diverse economic activity. But I feel like if we start out by treating prices as the result of a complicated game between buyers and sellers, it’s closer to the truth than treating them as something you can calculate based on inputs. (People will often do calculations when deciding what to do, but they often include subjective components.)
I well and truely hope this is the deathknell for supply-side economic policy. It's been all I've seen in my lifetime, and from those on the not-supply side it's been kinda shitty. 2008 was vindictive in that sense... for all the chatter about fiscal responsibility and how bailing out the top is for the best, that when push comes to shove (literally in this case), turns out everybody else needs money too.
Also, I want to get back to this in the morning to elaborate and source, but toss this out before bed as food for thought from an amateur:
We have a better macro. Marxist economics. Labor theory of value is correct. It has far more predictive power in a way that other economic models don't.
What's an example of a prediction made using labor theory of value that turned out to be right?
I wrote up a whole long thing, re-read it, than threw it away, because I realized I couldn't say it any better than this article and this paper.
From the article:
From the paper:
That's an interesting article that gives some good background.
One thing they say that might reduce the scope of the theory, even if it's considered to work: apparently the labor theory of value is about the value of commodities? Most spending isn't on commodities these days. But maybe they have a broader definition of commodities than I'd expect. Is an iPhone a commodity?
I see a claim in the article that looks sort of like a prediction:
But it doesn't actually show us any numbers about what was predicted and what real-world data it was compared to. I guess we'd have to look at Farjoun and Machovers' paper?
Looking instead at the paper you shared by Cockshott and Cottrell, it seems pretty abstract and theoretical. The prediction seems to be:
This isn't the sort of prediction I was hoping for. I was thinking more something like happens on the Long Bets website, where someone makes a prediction that you can actually understand and is about something meaningful to ordinary people.
The data itself isn't in the paper, so it would take more effort to check their work. Also the paper is pretty old. Here is where they say they got the data:
Someone more eager than me might be able to redo their calculations with newer data and see if it holds up, and better yet try to get some useful insights out of the comparison. It might be nice to see a scatterplot showing how well the predictions hold up for each industry.
Yes, I do believe so. I've not read it myself, although it is in the queue.
I do apologize a bit then, that was the prediction power I was referring to. However, they are related, in that coming up with a verifiable economic theory at the same level of Newton's 3 Laws of Motion means that future predictions become possible.
What I've gathered from Cockshott's other material, including his Youtube channel, is that in order to see LVT make predictions, you must actively plan an economic experiment once you have a workable theory. Allocate X resources to a wide swath of an industry, predict output, see if output matches prediction.
(Second, seperate reply because it's substantial enough to warrant a seperate post)
Cockshott did come up with a way of calculating things like output/consumption levels of actual USSR data and mapping the prediction against the later future data (using child growth as a metric of consumption and reported output numbers). Chart seen at this time, although it's halfway through the second of a 2-part video about using Julia to calculate this data. Source code here.
While not exclusively due to LTV, it's an important metric as part of that planning process.
Predicting output is one thing, but understanding demand quite another. I don't see this approach as a way to figure out which products people will want and how much they would pay?
Since one of the defining aspects of capitalism is that while costs set a floor on price, they don't set an upper bound (especially if there's a lack of competition). Thus, its completely impossible to predict price when that price is not tied directly to costs + fixed profit margin.
And one of those original points was that you can't apply the high-level macro down to specific products (This is true of other economic methods too IIRC). It might, however, be able to track demand for broad categories (like figuring out when demand for 2019 phones drops off after 2020 phones are released). I suspect many companies already do something like this to figure out prices and release dates for new goods.
We have all of the data for broad economic planning nowadays, courtesy of modern invoicing and accounting. It's just that the vast majority of that data is siloed within the confines of each private company.
Which makes sense...many companies would shit a brick if every salary for every employee/title (names excluded, of course) were posted publicly where employees could plainly see their worth relative to their coworkers and industry peers. Let alone their entire accounting system for their competition to see.
Which I think would be great. Public accounting for corporations. Should encourage some great added competition to reduce costs while keeping salaries high.
Hmm... I am wondering why it isn't called the labor theory of cost?
It seems like the value to buyers is quite different? The desire to consume a certain kind of food may be different in different places, depending on local customs and what else is available.
Because while I've been using it like that, it's not exactly about costs.
Let's say for example that you make pencils. Takes you 10 minutes to make one. The value of that pencil is 10 minutes of labor. But if you build a machine, and now only need to spend 1 minute on that pencil, the value of that pencil goes down. Which means you've got 9 more minutes of free time available per pencil. Even if that machine ends up costing more in materials, those costs are irrelevant because it's reduced the total time you need to spend making pencils.
The LTV is about reducing human involvement in production. This is a net good, especially if the workers own the means of production and can decide how they want to re-allocate their labor.
I don't actually know the labor theory of value but here are some questions that might be interesting, or perhaps there is an FAQ somewhere?
Suppose one person takes 1 minute and another person takes 10 minutes? Or suppose two people each take 10 minutes, but one of them makes a higher quality writing instrument than the other?
Does the labor theory of value take into account timing and availability? Many products are worth more if you can get them before versus after Christmas.
How does it account for differences in how workers value their time? It seems like a rush job, requiring work on extra shifts or weekends, can and should cost more.
More generally it seems like value is a matter of human judgement (and often chance) rather than a calculation based on cost. Two songwriters could write songs in a day, one could be a hit and the other remain obscure. Why this is could be based on quality or timing or just randomness.
It seems like a song everyone knows is more valuable, but this value doesn't come from cost or any objective evaluation of merit.
When discussing labor time, the unit is generally assumed to be 'average time for an average worker in that trade'.
One mistake I had originally fallen into is that LVT was completely elegatarian, hour for hour. But most proposals I've seen surrounding it account for worker efficiency/quality in some fashion.
In Towards a New Socialism, Cockshott proposed something like A,B,C grade for work, where B was standard deviation and A/C were above/below. One key aspect was to not stigmatize the three grades The grade would affect wage with a slightly higher/lower modifier. So one worker could choose to work shorter hours, at a more strenuous pace, while another more leisurely pace for more hours. IIRC the modifier was something like 15%.
One of the key points is that in a new socialist system, workplaces would be collectively owned and run by the workers. So they themselves (democratically) could determine their hours and any bonuses that should be attributed.
I'd like to think art of all types would be unpaid, exist outside of a traditional economy as more of a gift economy. By working to eliminate bullshit jobs, and thus allocating labor to sectors that need it, we would collectively have more time for our own pursuits, including art. Especially since one goal of planning now is a general reduction and/or reallocation of resources to reduce consumption and make our lives more sustainable.
It’s good to see a slight acknowledgment of the fact that everyone isn’t the same, but it doesn’t really get into the endlessly diverse, detailed, and subjective judgement calls we make about how we live, who we choose to work with, and how products are designed and evaluated. Organizations often try to limit diversity, but consumers can be whimsical and businesses often have to scramble to keep up with trends.
I suppose any macroeconomics is going to aggregate a lot of diverse economic activity. But I feel like if we start out by treating prices as the result of a complicated game between buyers and sellers, it’s closer to the truth than treating them as something you can calculate based on inputs. (People will often do calculations when deciding what to do, but they often include subjective components.)