Before I begin, I want to make a personal remark.
Contrary to many on this forum, I am not here to talk about how one can become rich or talk about becoming an entrepreneur. I am totally not interested in that! The thing that interests me about MJ. DeMarco's books is his original outlook on value and money. He is the first person who writes books that are the beginning of an ideology I am working on.
MJ. DeMarco and I have one thing in common. He was 'thrown out of'' The Script, because his father left his family, leaving the task of taking care of him and his two brothers to his mother. He had first experienced an abundant life when his father was at home. But suddenly they were poor because his father had left him. And that hurt. Because he was not raised in poverty, at least not at the beginning, he felt the hurt of poverty, and had a wish to end it, but did not know how, because he believed that only people with special talents could become rich, and he hadn't any. Then MJ. DeMarco met an entrepreneur, who had become rich by inventing something and then building a business around it. From that moment on he saw 'a way out' of his own poverty and did everything he could to become a successful entrepreneur.
I was also 'thrown out' of The Script. But that was not because of the pain of poverty. I have been born into a basically poor family and accepted that as normal. It didn't hurt me at all and still doesn't. During the rest of my life up till now, I was poor, and didn't care a hoot about it!
I still don't!
What threw me out of The Script was something else painful.
I was born with an extremely active mind. I was born a child prodigy, but my parents didn't realize this. At school others rejected me, because I was so different. They would have been bullying me for being a nerd. But it so happened that my mother saw that, and made me learn to fight by taking Judo lessons! That stopped all bullying. After having a fight with the strongest boy at my school, openly arranged and witnessed by many, and defeating him, they just let me alone. After that, if some of them had a problem with their homework, they went to me, and asked my help, which I always gladly gave.
When I was young, I studied books about mathematics and physics just for fun, and I became extremely good at it! I passed the end exam not only as the best of my school, but, so I learned later, as the best of the entire Netherlands. When the diplomas were awarded, I got an extra paper stating that.
While still at that school, I had taught myself first arithmetic to do properly. This was because the school didn't teach that very well. Then I went on to learn algebra, geometry, complex number theory, and then taught myself calculus. On top of that, I taught myself physics, and also trained myself in classical music. I first tried to teach myself how to play the organ, and was fortunate to first have a woman teacher, who, after about two years passed me on to one of the best church organ players in The Netherlands. So I was a child prodigy in both science and art!
The 'disaster' that struck me happened when I studied mathematics and physics at the University of Leiden, The Netherlands. At that time I became interested in meditation. I began to combine my studies in mathematics, physics, and, yes, music, with meditation. I was experimenting to find out how I could learn faster through meditation.
And then, one day, after an encounter with a Zen Master (who turned out to be an imposter, by the way) he put me into a Koan-like situation. This was such a blow to my mind, that I went home, and after meditating for three days straight, just to deal with that blow, I succeeded to put my mind into somewhat of some order. But to deal with all the side effects took me about four years!
Not only my mind but also my brain had changed! All that studying and meditating had caused a profound change in the functioning of my brain. Ever since then I 'feel' a rhythmic wave go through my body. This is not an illusion, as I was frequently told, because once I was connected to a monitor measuring my brain patterns as a preparation for an eye-operation. The person performing the measurement thought that his equipment malfunctioned because of the strange readings he got!
This transformation had caused a huge disruption in my life!
Why?
Because when I tried to talk about this transformation, others didn't believe me! It was beyond their imagination that a brain could undergo such a transformation! And since then I have been struggling with two things.
1. How can I convince others, that I am not insane, and that such an alteration of the functioning of the brain could really exist?
2. How could I use this altered functioning of my brain to do things that would be of value to others?
Since then I am interested in the concept of value. Later, I became interested in the concept of money and how money and value are connected. It took me literally decades to find that one out! It is obvious once you see it. But it goes right against what everybody thinks about value.
Now you might ask: what, exactly, is the effect of this transformation? It allows me to do one thing. My brains can 'switch off' my thought and thinking, and bring me into a mental state, whereby there is only consciousness, and no thought whatsoever. In that state, it is possible to become aware of the foundations of any thought structure, and one can move to the deepest root of any system of thought. One can 'see' where it originates.
That is how my brains can 'see' that the basis of The Script, for example, is The Labor Theory of Value, as I am going to explain below.
I have never been interested in becoming rich. I had another problem. Namely, how could I arrive at someplace in society without being considered insane? Not only that. How could I use this altered functioning of my brain to bring things about that would help others? Because only if I could do this last thing, I could be in harmony with society without having to deny myself. My quest(ion) was, how can others benefit from this strange thing going on in me?
So, what do I have in common with MJ. DeMarco? Neither he nor I have ever been part of 'The Script'. But his struggle was a different one than mine. I didn't suffer from being poor. He did suffer from being poor and succeeded to end his suffering by becoming rich. My suffering was a totally different one. One that I only fairly recently understood!
I am, at present, re-reading Unscripted . I had read it before, but I hadn't connected it to what I already knew. Moreover, between my first reading and this second reading I had a tremendous brain wave about how, exactly, value and money are connected, and how earning money happens in all cases!
What I want to share here, is a suspicion I had. And now that I reread it, I see it confirmed.
Unscripted basically says, that virtually all people in the West live in what MJ DeMarco calls: 'the hyperreality of the Script'. He describes it very well in 'Unscripted '. But where did 'The Script' come from? What is its ultimate source? Or, better, out of which mistake has it arisen?
I know that Henry Ford is the one, who introduced the 5 workdays 2 weekends 8 hours a day plan. Before Henry Ford, the workdays were longer. Elsewhere people earned nevertheless less. And there was no two days off on the weekend either. Only a free Sunday, because of The Bible.
Henry Ford had good reason for his invention of The Script. He realized that he could have better workers in his factories when they were well-rested, and had some idea why they did what they did. This was especially important with conveyor belt work. How can one stand to do one simple task over and over again? Extremely boring! Charlie Chaplin has rightfully made fun of it in his movie: 'Modern Times'.
There was something else about Henry Ford. Before him, automobiles were luxury products. He saw that if they became it would transform the world. But even his mass-production could not produce these cars so cheaply, that many, especially 'the working people = wage slaves' could afford them. Therefore he raised the wages up to a level so that his own workers could afford them. Especially because he made it possible they could pay them in installments. He succeeded in avoiding 'the Bartender problem' = 'a customer asks the bartender to loan him money. He argues that the bartender will not suffer because of it, because he will use the money only for things the bartender sells' The 'bartender problem' was avoided, because Henry Ford speculated, that the families of his workers would find ways to use those cars to create new services, for which they were paid. So in the long run his cars would become commodities.
The deployment of the conveyor belt by Henry Ford reminds me of a story of a man, here, in The Netherlands, called Godfried Bomans. Although he is now practically forgotten, he was known as a writer and had very funny ways to describe many things in the world. He had also an interesting commentary on the workweek.
His story ran somewhat like this. 'An industrialist realized, that division of labor through a conveyor belt made the actions so simple, that even monkeys were able to do it. So he went to the local zoo and picked up a bunch of chimpanzees. He showed these monkeys what they had to do. And, indeed, it took only 2 hours to make the monkeys work with the conveyor belt to assemble his product.
All seemed to go well... for about four hours. But after this time the monkeys became so extremely bored, that they stopped working altogether. It began when one money threw his wrench at another money. This triggered other monkeys to react. After only ten minutes one could see, in this factory, one monkey grabbing a lamp and swinging back and forth. Other monkeys were running on the conveyor belts. Others again were chasing after each other.
It was a complete mess! No production was produced after that.
This industrialist had forgotten one thing.
Those chimpanzees didn't have families!
He brought the monkeys back to the zoo, and let human workers return to his factory.
So far Godfried Bomans.
Now, let me return to the subject, and continue on a more serious note. The deepest root of The Script stems from two books. The first is 'The Wealth of Nations', published in 1776 by Adam Smith. The second is 'Principles of Political Economy and Taxation' published by David Ricardo in 1817.
In both books, a theory of value was introduced. Within circles of economists, it is known as The Labor Theory of Value.
According to Adam Smith, the value of any good or service is the result of, in modern terms, the labor that has been necessary to produce that good or to create that service.
In Adam Smith's own words. Quote: 'The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose on other people.'
David Ricardo refined it. His book begins with: 'The value of a commodity, or the quantity of any other commodity for which it will exchange, depends on the relative quantity of labor which is necessary for its production, and not on the greater or lesser compensation which is paid for that labor.'
Maybe this is difficult to grasp immediately. What Ricardo says, is that price does not define value, but that it is the other way around. Value determines price. And value is in its turn determined by how many man-hours of labor are needed to produce commodities.
Ricardo gave an example. He asserted that when the amount of time needed to produce a pen is 10x that needed for the production of a pencil, then the price of that pen is 10x that of that pencil. Therefore, labor-value reveals itself in prices, and not the other way around.
When you unite Adam Smith's definition of value with that of David Ricardo, you arrive at The Labor Theory of Value, which says that the value of any good or any service is the result of the number of man-hours that went into its production or creation.
Marxism is one of the main poisonous results of this definition of value. His whole argument of the exploitation of the Proletariat by the Bourgeoisie is derived straight from The Labor Theory of Value.
Originally, Marx believed that value only arises out of amounts of labor time; numbers of man-hours. Later he modified it somewhat. He became aware, that people who were more trained earned more. Therefore it had to be, that an hour of the labor of a schooled worker had to have more value than that of an unschooled worker. He could not get around that fact.
Yet, one can still explain that with The Labor Theory of Value. Just introduce the term: 'human capital'. This schooling also takes labor. To become more proficient in anything is a matter of hours, sometimes decades of daily practice of several hours per day. You are then changing your own mind, through the labor of training into 'human capital'. One could use this as an argument that defuses this counterargument. Nevertheless, this is a modification of The Labor Theory of Value, which changes it somewhat into something like this: 'the total number of man-hours needed to produce a good or to create a service is a measure of its value'. This 'total number of man-hours' then consists of the actual amount of man-hours spent in producing the good or creating the service, + the total amount of man-hours needed to make the man-hours more valuable.
Therefore, in our Western society, it is this modified Labor Theory of Value that is the foundation of The Script.
The Labor Theory of Value is also the source of envy of the rich! If somebody is a multi-millionaire, and the total amount of time he has spent to get rich is about equal to that of a wage slave, or of a middle-class person, these people see that as dishonest. It is the source of all measures to 'tax the rich'. Or, worse, to erect such terrible social orders like Fascism and Communism, which are all supposed to be better 'social orders' because they 'correct' this problem. They are supposed to correct the structural dishonesty of huge differences in outcome, of equity. (Hitler: 'Arbeit macht Frei!) Translated; Labor creates freedom! These words are above the gate of the entrance of Auschwitz!
But what virtually nobody realizes, is that it is never true that we are paid for the hours we work!
Let me repeat that!
We are never, never, never paid for the number of hours we work! To think we are is itself a hyperreality illusion!
But before I explain that, let me give an example that shows how problematic the concept of value is! One that demolishes all of present-day economics!
Suppose you are on a deserted beach, walking in the sun, far from civilization. Suddenly you see something about 10 meters away in front of you. Something sparkling.
You go there to find out what it is. And then, at your feet, you find a huge diamond! One that is so huge, that, so you realize, you can sell for at least 20 million dollars!
In other words, you have found something of tremendous value!
The question now is this: where does the value of this diamond come from?
Definitely not from labor. You can hardly call walking for meters and pick it up, work!
Economists think they have the answer. They say that this diamond has this huge value because there are not many places on earth where you can find huge diamonds. This has always been so. Therefore there are not many such huge diamonds ever found. And that is mainly because the geological processes that produce such diamonds take billions of years to complete!
You read this correctly. Not millions of years, but billions of years!
Economists, therefore, say, that it is the scarcity of this diamond that is the cause of its value.
But that is a strange explanation! Because, what, exactly, is scarcity?
Economists explain it as follows: 'the number of diamonds lying around is far less than the number of people who want such diamonds. And that is what scarcity is.
But if that is so, then it is not always labor that is the source of the value of that diamond. Apparently, the value of such a diamond does not originate from the labor needed to 'produce' it but has to come from the wants of people. (Economists who assert this, and who therefore reject The Labor Theory of Value are called Austrian economists.)
Indeed! Ludwig von Mises defines value in a totally different way than Smith and Ricardo do. Ludwig von Mises' definition of value is: 'The value of a good or service is the importance an individual attaches to that good or that service.'
Notice that labor does not even appear in this definition! Yet, at first sight, it looks very plausible. The air we breathe, for example, has a tremendous value to us. We cannot live without it. But because it is not scarce, nobody pays for it. That is why its price is zero.
But there are major problems with this definition of value, too!
To begin with, this definition of value is basically a full capitulation of economics as a science! If value depends only on the importance individuals attach to goods and services, it is totally subjective!
A theory based on subjectivity cannot be transformed into a scientific theory, because science, whatever its form, must be independent of the opinions of anyone. Therefore, if value, which is the most central concept of economics, is subjective, it is impossible to develop it into a scientific theory of economic value!
I must say that I look with great amusement to Austrian and Misean economists. I see how they 'twist and squirm' when they get the reproach that their theory is unscientific, exactly because of the subjectivity of value. Ludwig von Mises himself uses very pompous words to try to rationalize himself out of this through obfuscation!
Economics has come to a grinding halt because of this! Only Marxists still believe that they have a scientific theory of economic value. They refuse to see that it is totally wrong! That is why they are such fanatics!
But it is even worse! Economics, at present, offers no help whatsoever to entrepreneurs!
The diamond example shows that The Labor Theory of Value is wrong, but also that its only alternative cannot be used as a basis of a genuine science of economics!
Mind you, this diamond example is not an exception either! That kite will not fly! (That is what Ricardo thought, although he was aware of this, and other exceptions. Rare paintings of dead Masters is another he mentioned.) Wine, put in barrels in wine cellars becomes more valuable the longer the wine is allowed to ripen. That is, the longer nothing is done with it! How can value arise from abstaining from work?
Wheat growing in the fields does not grow because farmers go to the plants, and pull them upwards one by one. Our food grows in nature by itself. The only thing a farmer does is to create optimal conditions for our grains and vegetables to grow. The same can be said about milk and meat production. Just feed the cows, and the milk in them arises. You only have to get it out. Chickens grow by themselves, and not because of some labor applied to eggs. And isn't it also true, that in the Tesla factories of Elon Musk, cars are built by robots? In other words, he does not use laborers as Henry Ford did, but he uses natural forces. Elon Musk does not build cars. He grows cars in his factories! Elon Musk is a car farmer!
Is there a way out?
Can we have a definition of value that can salvage economics?
Can we have a definition of value that can be used to transform economics into a genuine science?
Yes, there is! Yes, it is possible!
However, I shall only continue here, if there is somebody on this forum who wants to have a real understanding of the surprising connection of value to money!
Anybody here interested?'
Contrary to many on this forum, I am not here to talk about how one can become rich or talk about becoming an entrepreneur. I am totally not interested in that! The thing that interests me about MJ. DeMarco's books is his original outlook on value and money. He is the first person who writes books that are the beginning of an ideology I am working on.
MJ. DeMarco and I have one thing in common. He was 'thrown out of'' The Script, because his father left his family, leaving the task of taking care of him and his two brothers to his mother. He had first experienced an abundant life when his father was at home. But suddenly they were poor because his father had left him. And that hurt. Because he was not raised in poverty, at least not at the beginning, he felt the hurt of poverty, and had a wish to end it, but did not know how, because he believed that only people with special talents could become rich, and he hadn't any. Then MJ. DeMarco met an entrepreneur, who had become rich by inventing something and then building a business around it. From that moment on he saw 'a way out' of his own poverty and did everything he could to become a successful entrepreneur.
I was also 'thrown out' of The Script. But that was not because of the pain of poverty. I have been born into a basically poor family and accepted that as normal. It didn't hurt me at all and still doesn't. During the rest of my life up till now, I was poor, and didn't care a hoot about it!
I still don't!
What threw me out of The Script was something else painful.
I was born with an extremely active mind. I was born a child prodigy, but my parents didn't realize this. At school others rejected me, because I was so different. They would have been bullying me for being a nerd. But it so happened that my mother saw that, and made me learn to fight by taking Judo lessons! That stopped all bullying. After having a fight with the strongest boy at my school, openly arranged and witnessed by many, and defeating him, they just let me alone. After that, if some of them had a problem with their homework, they went to me, and asked my help, which I always gladly gave.
When I was young, I studied books about mathematics and physics just for fun, and I became extremely good at it! I passed the end exam not only as the best of my school, but, so I learned later, as the best of the entire Netherlands. When the diplomas were awarded, I got an extra paper stating that.
While still at that school, I had taught myself first arithmetic to do properly. This was because the school didn't teach that very well. Then I went on to learn algebra, geometry, complex number theory, and then taught myself calculus. On top of that, I taught myself physics, and also trained myself in classical music. I first tried to teach myself how to play the organ, and was fortunate to first have a woman teacher, who, after about two years passed me on to one of the best church organ players in The Netherlands. So I was a child prodigy in both science and art!
The 'disaster' that struck me happened when I studied mathematics and physics at the University of Leiden, The Netherlands. At that time I became interested in meditation. I began to combine my studies in mathematics, physics, and, yes, music, with meditation. I was experimenting to find out how I could learn faster through meditation.
And then, one day, after an encounter with a Zen Master (who turned out to be an imposter, by the way) he put me into a Koan-like situation. This was such a blow to my mind, that I went home, and after meditating for three days straight, just to deal with that blow, I succeeded to put my mind into somewhat of some order. But to deal with all the side effects took me about four years!
Not only my mind but also my brain had changed! All that studying and meditating had caused a profound change in the functioning of my brain. Ever since then I 'feel' a rhythmic wave go through my body. This is not an illusion, as I was frequently told, because once I was connected to a monitor measuring my brain patterns as a preparation for an eye-operation. The person performing the measurement thought that his equipment malfunctioned because of the strange readings he got!
This transformation had caused a huge disruption in my life!
Why?
Because when I tried to talk about this transformation, others didn't believe me! It was beyond their imagination that a brain could undergo such a transformation! And since then I have been struggling with two things.
1. How can I convince others, that I am not insane, and that such an alteration of the functioning of the brain could really exist?
2. How could I use this altered functioning of my brain to do things that would be of value to others?
Since then I am interested in the concept of value. Later, I became interested in the concept of money and how money and value are connected. It took me literally decades to find that one out! It is obvious once you see it. But it goes right against what everybody thinks about value.
Now you might ask: what, exactly, is the effect of this transformation? It allows me to do one thing. My brains can 'switch off' my thought and thinking, and bring me into a mental state, whereby there is only consciousness, and no thought whatsoever. In that state, it is possible to become aware of the foundations of any thought structure, and one can move to the deepest root of any system of thought. One can 'see' where it originates.
That is how my brains can 'see' that the basis of The Script, for example, is The Labor Theory of Value, as I am going to explain below.
I have never been interested in becoming rich. I had another problem. Namely, how could I arrive at someplace in society without being considered insane? Not only that. How could I use this altered functioning of my brain to bring things about that would help others? Because only if I could do this last thing, I could be in harmony with society without having to deny myself. My quest(ion) was, how can others benefit from this strange thing going on in me?
So, what do I have in common with MJ. DeMarco? Neither he nor I have ever been part of 'The Script'. But his struggle was a different one than mine. I didn't suffer from being poor. He did suffer from being poor and succeeded to end his suffering by becoming rich. My suffering was a totally different one. One that I only fairly recently understood!
I am, at present, re-reading Unscripted . I had read it before, but I hadn't connected it to what I already knew. Moreover, between my first reading and this second reading I had a tremendous brain wave about how, exactly, value and money are connected, and how earning money happens in all cases!
What I want to share here, is a suspicion I had. And now that I reread it, I see it confirmed.
Unscripted basically says, that virtually all people in the West live in what MJ DeMarco calls: 'the hyperreality of the Script'. He describes it very well in 'Unscripted '. But where did 'The Script' come from? What is its ultimate source? Or, better, out of which mistake has it arisen?
I know that Henry Ford is the one, who introduced the 5 workdays 2 weekends 8 hours a day plan. Before Henry Ford, the workdays were longer. Elsewhere people earned nevertheless less. And there was no two days off on the weekend either. Only a free Sunday, because of The Bible.
Henry Ford had good reason for his invention of The Script. He realized that he could have better workers in his factories when they were well-rested, and had some idea why they did what they did. This was especially important with conveyor belt work. How can one stand to do one simple task over and over again? Extremely boring! Charlie Chaplin has rightfully made fun of it in his movie: 'Modern Times'.
There was something else about Henry Ford. Before him, automobiles were luxury products. He saw that if they became it would transform the world. But even his mass-production could not produce these cars so cheaply, that many, especially 'the working people = wage slaves' could afford them. Therefore he raised the wages up to a level so that his own workers could afford them. Especially because he made it possible they could pay them in installments. He succeeded in avoiding 'the Bartender problem' = 'a customer asks the bartender to loan him money. He argues that the bartender will not suffer because of it, because he will use the money only for things the bartender sells' The 'bartender problem' was avoided, because Henry Ford speculated, that the families of his workers would find ways to use those cars to create new services, for which they were paid. So in the long run his cars would become commodities.
The deployment of the conveyor belt by Henry Ford reminds me of a story of a man, here, in The Netherlands, called Godfried Bomans. Although he is now practically forgotten, he was known as a writer and had very funny ways to describe many things in the world. He had also an interesting commentary on the workweek.
His story ran somewhat like this. 'An industrialist realized, that division of labor through a conveyor belt made the actions so simple, that even monkeys were able to do it. So he went to the local zoo and picked up a bunch of chimpanzees. He showed these monkeys what they had to do. And, indeed, it took only 2 hours to make the monkeys work with the conveyor belt to assemble his product.
All seemed to go well... for about four hours. But after this time the monkeys became so extremely bored, that they stopped working altogether. It began when one money threw his wrench at another money. This triggered other monkeys to react. After only ten minutes one could see, in this factory, one monkey grabbing a lamp and swinging back and forth. Other monkeys were running on the conveyor belts. Others again were chasing after each other.
It was a complete mess! No production was produced after that.
This industrialist had forgotten one thing.
Those chimpanzees didn't have families!
He brought the monkeys back to the zoo, and let human workers return to his factory.
So far Godfried Bomans.
Now, let me return to the subject, and continue on a more serious note. The deepest root of The Script stems from two books. The first is 'The Wealth of Nations', published in 1776 by Adam Smith. The second is 'Principles of Political Economy and Taxation' published by David Ricardo in 1817.
In both books, a theory of value was introduced. Within circles of economists, it is known as The Labor Theory of Value.
According to Adam Smith, the value of any good or service is the result of, in modern terms, the labor that has been necessary to produce that good or to create that service.
In Adam Smith's own words. Quote: 'The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose on other people.'
David Ricardo refined it. His book begins with: 'The value of a commodity, or the quantity of any other commodity for which it will exchange, depends on the relative quantity of labor which is necessary for its production, and not on the greater or lesser compensation which is paid for that labor.'
Maybe this is difficult to grasp immediately. What Ricardo says, is that price does not define value, but that it is the other way around. Value determines price. And value is in its turn determined by how many man-hours of labor are needed to produce commodities.
Ricardo gave an example. He asserted that when the amount of time needed to produce a pen is 10x that needed for the production of a pencil, then the price of that pen is 10x that of that pencil. Therefore, labor-value reveals itself in prices, and not the other way around.
When you unite Adam Smith's definition of value with that of David Ricardo, you arrive at The Labor Theory of Value, which says that the value of any good or any service is the result of the number of man-hours that went into its production or creation.
Marxism is one of the main poisonous results of this definition of value. His whole argument of the exploitation of the Proletariat by the Bourgeoisie is derived straight from The Labor Theory of Value.
Originally, Marx believed that value only arises out of amounts of labor time; numbers of man-hours. Later he modified it somewhat. He became aware, that people who were more trained earned more. Therefore it had to be, that an hour of the labor of a schooled worker had to have more value than that of an unschooled worker. He could not get around that fact.
Yet, one can still explain that with The Labor Theory of Value. Just introduce the term: 'human capital'. This schooling also takes labor. To become more proficient in anything is a matter of hours, sometimes decades of daily practice of several hours per day. You are then changing your own mind, through the labor of training into 'human capital'. One could use this as an argument that defuses this counterargument. Nevertheless, this is a modification of The Labor Theory of Value, which changes it somewhat into something like this: 'the total number of man-hours needed to produce a good or to create a service is a measure of its value'. This 'total number of man-hours' then consists of the actual amount of man-hours spent in producing the good or creating the service, + the total amount of man-hours needed to make the man-hours more valuable.
Therefore, in our Western society, it is this modified Labor Theory of Value that is the foundation of The Script.
The Labor Theory of Value is also the source of envy of the rich! If somebody is a multi-millionaire, and the total amount of time he has spent to get rich is about equal to that of a wage slave, or of a middle-class person, these people see that as dishonest. It is the source of all measures to 'tax the rich'. Or, worse, to erect such terrible social orders like Fascism and Communism, which are all supposed to be better 'social orders' because they 'correct' this problem. They are supposed to correct the structural dishonesty of huge differences in outcome, of equity. (Hitler: 'Arbeit macht Frei!) Translated; Labor creates freedom! These words are above the gate of the entrance of Auschwitz!
But what virtually nobody realizes, is that it is never true that we are paid for the hours we work!
Let me repeat that!
We are never, never, never paid for the number of hours we work! To think we are is itself a hyperreality illusion!
But before I explain that, let me give an example that shows how problematic the concept of value is! One that demolishes all of present-day economics!
Suppose you are on a deserted beach, walking in the sun, far from civilization. Suddenly you see something about 10 meters away in front of you. Something sparkling.
You go there to find out what it is. And then, at your feet, you find a huge diamond! One that is so huge, that, so you realize, you can sell for at least 20 million dollars!
In other words, you have found something of tremendous value!
The question now is this: where does the value of this diamond come from?
Definitely not from labor. You can hardly call walking for meters and pick it up, work!
Economists think they have the answer. They say that this diamond has this huge value because there are not many places on earth where you can find huge diamonds. This has always been so. Therefore there are not many such huge diamonds ever found. And that is mainly because the geological processes that produce such diamonds take billions of years to complete!
You read this correctly. Not millions of years, but billions of years!
Economists, therefore, say, that it is the scarcity of this diamond that is the cause of its value.
But that is a strange explanation! Because, what, exactly, is scarcity?
Economists explain it as follows: 'the number of diamonds lying around is far less than the number of people who want such diamonds. And that is what scarcity is.
But if that is so, then it is not always labor that is the source of the value of that diamond. Apparently, the value of such a diamond does not originate from the labor needed to 'produce' it but has to come from the wants of people. (Economists who assert this, and who therefore reject The Labor Theory of Value are called Austrian economists.)
Indeed! Ludwig von Mises defines value in a totally different way than Smith and Ricardo do. Ludwig von Mises' definition of value is: 'The value of a good or service is the importance an individual attaches to that good or that service.'
Notice that labor does not even appear in this definition! Yet, at first sight, it looks very plausible. The air we breathe, for example, has a tremendous value to us. We cannot live without it. But because it is not scarce, nobody pays for it. That is why its price is zero.
But there are major problems with this definition of value, too!
To begin with, this definition of value is basically a full capitulation of economics as a science! If value depends only on the importance individuals attach to goods and services, it is totally subjective!
A theory based on subjectivity cannot be transformed into a scientific theory, because science, whatever its form, must be independent of the opinions of anyone. Therefore, if value, which is the most central concept of economics, is subjective, it is impossible to develop it into a scientific theory of economic value!
I must say that I look with great amusement to Austrian and Misean economists. I see how they 'twist and squirm' when they get the reproach that their theory is unscientific, exactly because of the subjectivity of value. Ludwig von Mises himself uses very pompous words to try to rationalize himself out of this through obfuscation!
Economics has come to a grinding halt because of this! Only Marxists still believe that they have a scientific theory of economic value. They refuse to see that it is totally wrong! That is why they are such fanatics!
But it is even worse! Economics, at present, offers no help whatsoever to entrepreneurs!
The diamond example shows that The Labor Theory of Value is wrong, but also that its only alternative cannot be used as a basis of a genuine science of economics!
Mind you, this diamond example is not an exception either! That kite will not fly! (That is what Ricardo thought, although he was aware of this, and other exceptions. Rare paintings of dead Masters is another he mentioned.) Wine, put in barrels in wine cellars becomes more valuable the longer the wine is allowed to ripen. That is, the longer nothing is done with it! How can value arise from abstaining from work?
Wheat growing in the fields does not grow because farmers go to the plants, and pull them upwards one by one. Our food grows in nature by itself. The only thing a farmer does is to create optimal conditions for our grains and vegetables to grow. The same can be said about milk and meat production. Just feed the cows, and the milk in them arises. You only have to get it out. Chickens grow by themselves, and not because of some labor applied to eggs. And isn't it also true, that in the Tesla factories of Elon Musk, cars are built by robots? In other words, he does not use laborers as Henry Ford did, but he uses natural forces. Elon Musk does not build cars. He grows cars in his factories! Elon Musk is a car farmer!
Is there a way out?
Can we have a definition of value that can salvage economics?
Can we have a definition of value that can be used to transform economics into a genuine science?
Yes, there is! Yes, it is possible!
However, I shall only continue here, if there is somebody on this forum who wants to have a real understanding of the surprising connection of value to money!
Anybody here interested?'
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