anyone else read ej's twits?

[gwynedd1]

Re: anyone else read ej's twits?

Mosler was dead wrong.

Raise real interest rates high enough and you kill everything: consumer lending, commercial lending, inflation, and economic growth.

High interests rates can tend increase loans. Cash is hoarded while higher interest rates cause bond purchases. One reason why low rates had no effect on housing was that "zero risk" is loaned at any rate. Not every asset will attract money at low rates like this. "Housing can't loose" hurt more than low rates. I also think treasury yields make people who hold them feel rich. So there are lots of counter trends. Loans are liabilities and assets . Tampering one side of the equation generally impacts the other. In an environment where people want to borrow money at higher rates and can't because the return is too low for the lender then it may not have the effect people think. Why would banks make risky loans at 3%? I don't think interest rate is a good measure. The rate only matters to the extent that it affects the supply of money and the rate of borrowing. Higher rates do reward the lender and makes them want to loan.

http://www.hoover.org/publications/h...t/article/6549

“After the U.S. experience during the Great Depression, and after inflation and rising interest rates in the 1970s and disinflation and falling interest rates in the 1980s, I thought the fallacy of identifying tight money with high interest rates and easy money with low interest rates was dead. Apparently, old fallacies never die.”

[Raz]

Re: anyone else read ej's twits?

Mosler attributes the end of inflation because of the Natural Gas Policy Act of 1978 which allowed the prices to rise for gas and allowed energy companies to get off oil. I would also add Alaska and the North Sea. ...

Mosler was dead wrong.

Raise real interest rates high enough and you kill everything: consumer lending, commercial lending, inflation, and economic growth.

[gwynedd1]

Re: anyone else read ej's twits?

Maybe you'd trade it for some hand crafted maple syrup?

That is good stuff too.

I thought that the labor theory of value only related to exchange value. Is this not correct?

I would not think so. The classical economists well knew that things sold for something other than the cost to produce, but they viewed it as a dead weight. However it was viewed this way from the point of view of general prosperity. Economics tends to focus on the private interest perspective. Political economy however is quite different. Labor theory somehow became associated with Marx. However from what I recall he looked at capital profits to be sourced from the labor surplus. So his labor theory was somewhat something different than the classical economists.

I understand that it is easier to criticize than to offer alternatives. However, the claim was made that Marx predicted our economic crisis working from the LTV and I stated that I believe he was using a flawed methodology. The burden of proof is on those making and defending the claim. Disproving a different theory does not prove yours. If the big bang is disproved it doesn't mean that the Genesis creation story is therefore correct or vice versa.

As I said before Marx was not the only exponent of labor theory of value. I tend to think his view was flawed on it even if he did point out faults in the assumptions of primitive accumulation. He just looked at capital profits being nothing more than taking the surplus of labor. Value theory is not very formulaic of any kind. That is why I think it must be viewed as an object of complexity.

Had I stated that theory XYZ is correct and therefore it proves that the economic crisis was caused by ABC then it's logical to try poking holes in it. Nowhere have I pushed an alternative theory that I claim is more correct. I have only mentioned subjective theory of value to prove that alternative theories do exist (it was claimed earlier that they don't). For what it's worth I find subjective theory of value to be much more logical. And yes, clearly some people value crack, prostitution, cigarettes and all other kinds of vices that others may find distasteful. That people can make stupid decisions and poor valuations is not in question. In fact, showing that people have different valuations is further proof of the logic of subjective value.

Yes I would agree that subjective value is another good model to use. One thing I think of as a definition is deciding between what is most likely to allow human life to sustain itself such as after the dying of the sun verse a short term pleasure. Value depends on this decision.

My issue with Marx is that he seems to have started with a goal in mind and created an economic system that attempts to justify it. I don't think his economic theories make sense and therefore don't prove his point.

Again all the classical economists used labor theory but certainly did not apply this as to what someone would pay. It was what they thought people should pay, and they wanted polices to reflect the cost of production not how much interests could extort from one another. That labor theory is all Marx is a bit of a myth. So also is the idea that all the labor theories were the same. I don't like his theory either since I do not see capital profits as entirely skimming the labor surplus. I believe monopoly does this, not capital. Land is the biggest of them all. Private property is quite literally a government granted monopoly and I find it ironic how many libertarians fail to recognize it as a creature of government and a monopoly at that. This does not mean I am against it in principle but the monopoly rents it creates should be the source of the revenue not labor which is collectively a strategic value.

[DSpencer]

Re: anyone else read ej's twits?

Think you could afford my canned nanny berry puree?

Maybe you'd trade it for some hand crafted maple syrup?

Did someone not mention that Marx called the value systems distinctly as use value and exchange value? He did not have a single value system so why do people pretend he did?

I thought that the labor theory of value only related to exchange value. Is this not correct?

What's the flaw? Put out a value system of your own and watch me poke holes in it. Value is like defining good and evil.

Someone misses their plane so its bad.
The plane crashes which makes it good that they missed the plane.
Stalin was the one who missed the plan so its bad.

good and evil, value .....

Give me your flawless value system....The only thing marginal utility does is indicate very specific transactions and they often conflict with larger more general value systems.

All those have marginal utility for those that demand it. If someone wants crack then crack has utility according to marginal theory. The same reductio ad absurdum method was used to "discredit" labor theory so don't call the kettle black.

I understand that it is easier to criticize than to offer alternatives. However, the claim was made that Marx predicted our economic crisis working from the LTV and I stated that I believe he was using a flawed methodology. The burden of proof is on those making and defending the claim. Disproving a different theory does not prove yours. If the big bang is disproved it doesn't mean that the Genesis creation story is therefore correct or vice versa.

Had I stated that theory XYZ is correct and therefore it proves that the economic crisis was caused by ABC then it's logical to try poking holes in it. Nowhere have I pushed an alternative theory that I claim is more correct. I have only mentioned subjective theory of value to prove that alternative theories do exist (it was claimed earlier that they don't). For what it's worth I find subjective theory of value to be much more logical. And yes, clearly some people value crack, prostitution, cigarettes and all other kinds of vices that others may find distasteful. That people can make stupid decisions and poor valuations is not in question. In fact, showing that people have different valuations is further proof of the logic of subjective value.

That isn't what the labor theory of value is so I don't know what point your statement makes. Labor theory tries make the costs of things in line to what it takes to produce them as a belief based upon the benefits of human progress. Its the belief that political economies should encourage industry and longer term value propositions, and not to reward wealth by exchange values which net to less than 0. Labor value recognizes the strategic benefits of encouraging production. Private capital does not benefit from maximum public prosperity. Adam Smith said this.

My issue with Marx is that he seems to have started with a goal in mind and created an economic system that attempts to justify it. I don't think his economic theories make sense and therefore don't prove his point.

[gwynedd1]

Re: anyone else read ej's twits?

And you don't find this COMPLETELY ABSURD?



It has price because it has value. It has "use value". It has "exchange value". It has "subjective value". It has "intrinsic value". It has value in basically every sense other than what LTV says. Why else would people pay for something? Because everyone that buys land is acting irrationally? Something that generates rent has value.

I would agree certainly that LTV saying land has no value is absurd. LVT is basically aimed at reducing land exchange value and to increase use value.

http://www.henrygeorge.org/pchp26.htm

[DSpencer]

Re: anyone else read ej's twits?

Land, according to LTV has no value.

And you don't find this COMPLETELY ABSURD?

It has price, and thatīs because it can generate a stream of rent.

It has price because it has value. It has "use value". It has "exchange value". It has "subjective value". It has "intrinsic value". It has value in basically every sense other than what LTV says. Why else would people pay for something? Because everyone that buys land is acting irrationally? Something that generates rent has value.

[gwynedd1]

Re: anyone else read ej's twits?

You're probably right. If we do have a repeat of the 70's, then timing any "Volcker" move will be critical in getting out of gold.

The distinction between those who hold gold as a hedge against currrency or systemic collapse vs those who hold it as an inflation hedge may come into play; if the Fed shows any signs of monetary restraint/responsibility, then risk of sovereign debt/currency crisis may pull back and gold may tank/correct significantly. If inflation takes off and bond yields continue to ramp, then gold is likely to follow. It may be different this time though. Once the looting has taken place and the plutocracy is set (note the wealth transfer that is occuring full bore in plain site since 2008 with ZIRP and QE), they may pull a pre-emptive Volcker, write of the bad assets/debts via Fed absorption of balance sheet; it will cause a recession like the 1980s, but may effectively reset thes system allowing another generation of debt build-up to begin.

Mosler attributes the end of inflation because of the Natural Gas Policy Act of 1978 which allowed the prices to rise for gas and allowed energy companies to get off oil. I would also add Alaska and the North Sea.
I think I agree with him but not because I would deny inflation, but I am beginning to think monetary policy just does not have much long term impact. I think banks loan when they think they can make money and its all accounted for in the environment. Its also his point that QE is really a gambit. The idea is to lower interest rates to drive people out of cash and cash equivalents. What happens if they don't move from cash? It back fires since it lowers the yields and money flowing into the economy. So in a gambit to increase bank credit it shrinks the public credit flows since the assets are now sending the receipts to the treasury. The Fed can hold up a sign "Eat Here" but rumors of roaches are not going to work up an appetite.

[gwynedd1]

Re: anyone else read ej's twits?

Believe it or not, not all trees need planting. They were doing just fine before humans even knew they could be planted. My point is simple: things can and do have value independent of human labor and that value can change independent of human labor as well.

I am eating acorn flat bread with garlic mustard pesto made with black walnuts for lunch. That should answer the question as to what I believe. I also thank the squirrels who also work in my economy. I know enough about foraging to also know that "gathering" cultures would encourage wild food like planting hopniss or wild plum near their settlements. In fact plants are extremely manipulative in using animal labor for their benefit to propagate. Angiosperm flowering are now dominate so much they we call their symbiont worker bees. The worker is rewarded. Do you think gathering wild honey helps the bees? Its not independent of labor at all and certainly not human labor. Wild food also tends to be rather labor intensive. Think you could afford my canned nanny berry puree?

Did someone not mention that Marx called the value systems distinctly as use value and exchange value? He did not have a single value system so why do people pretend he did?

At this point I don't even know what you're trying to say. You say LToV is flawless, but you won't even define what you think it is so how can it be disproved?

What's the flaw? Put out a value system of your own and watch me poke holes in it. Value is like defining good and evil.

Someone misses their plane so its bad.
The plane crashes which makes it good that they missed the plane.
Stalin was the one who missed the plan so its bad.

good and evil, value .....

Give me your flawless value system....The only thing marginal utility does is indicate very specific transactions and they often conflict with larger more general value systems.

All this talk of cutting yourself with razors and brothels and selling crack and marginal utility...what claim are you trying to disprove and who is making it? It sounds like a straw man and a red herring all mixed into one.

All those have marginal utility for those that demand it. If someone wants crack then crack has utility according to marginal theory. The same reductio ad absurdum method was used to "discredit" labor theory so don't call the kettle black.

If the whole point of LToV is that sometimes human labor can add value....who cares? Who disputes that? What meaningful conclusions can be made from that?

That isn't what the labor theory of value is so I don't know what point your statement makes. Labor theory tries make the costs of things in line to what it takes to produce them as a belief based upon the benefits of human progress. Its the belief that political economies should encourage industry and longer term value propositions, and not to reward wealth by exchange values which net to less than 0. Labor value recognizes the strategic benefits of encouraging production. Private capital does not benefit from maximum public prosperity. Adam Smith said this.

[Southernguy]

Re: anyone else read ej's twits?

"Likewise land has value before any labor is spent on it."

Land, according to LTV has no value. It has price, and thatīs because it can generate a stream of rent. The rent comes from a reduced group of people being able to monopolize a scarce resource given by nature and indispensable for life.
The price of land is a direct function of the rent it can generate at a given time in a given place.
If someone invented a way to monopolize air, then most of us would be obliged to pay rent to use air.
In the case of fresh water that has already happened. You ought to pay rent to be able to use a fresh water source to irrigate a piece of land.
Tap water, on the other hand, acts mainly like any other merchandise, itīs value (and itīs price) depend on the labor necessary to "produce" it. That is, to transport it, purify it, etc.
However, tap water can, and frequently is, when in the hands of private companies, a source of rent. As there are very few opportunities for many suppliers to compete, companies end getting a rentiers earnings from tap water as well as for other public services.
Thatīs why states come into the picture through regulation. To lessen (at best) opportunities for rent seeking through monopolistic practices.
The case of exceptional types of merchandise (the signed baseball ball) is, well, exceptional. I think (donīt remember what LTV theorists say about the subject) that exceptional actress, singers, football players et al. are people who found a ways of grabbing a part of social plus value without being capitalists or land owners.
Otherwise, labor is payed for in what is absolutely necessary, in a given set of historical social conditions; to keep going and reproduce itself.

[DSpencer]

Re: anyone else read ej's twits?

When was it valued? Planting a tree is labor and so also is the time value of waiting for the fruit on that labor. Such a thing can be estimated so is it growing in value or does it already have a value in a point in time? However no one can know what the value of it will be since the market via marginal utility, buying power etc will determine it. However again, the marginal utility of the labor based upon this market estimate will determine how labor is deployed. The better it can be estimated the more it will be reflected in labor costs rather than windfall profits or losses.

Believe it or not, not all trees need planting. They were doing just fine before humans even knew they could be planted. My point is simple: things can and do have value independent of human labor and that value can change independent of human labor as well.

Boats don't work in the desert and so is a poorly applied perspective. It has been known for hundreds of years that private interests conflict with common interests. Therefore value theories are not going to be compatible between interests. Labor theory is to maximize labor utility because that is the variable within our means. Deploying that labor will not always match the final utility of the output. Labor theory or utility theory alone can be proven false. Vices like gambling, cigarette smoking, cutting yourself with razors don't really put marginal utility in a good light just like labor theories of value look odd on something like famous art work. Value theories are ultimately existential questions, but human labor is most certainly involved. Even land has no value unless it will be put to use in some way.

The point is marginal thought claims to have put a knock out punch on the labor theory of value. That is just patently false. Its a point of view. In the Austrian fetish of consumer and private points of view marginal does indeed mean everything. However that is as far from the production planning phase in a macro economy as it can get. If the highest bidder on a piece of land goes to a brothel owner who sells crack out of it has that maximized GDP?


Perhaps a good analogy is a chess game. There are material considerations, and there are positional considerations. A pawn may have more power than a queen in the right position. However the queen is much more likely to have high utility because its the best material piece. However the piece that delivers check mate will have the highest utility. Labor puts pieces on the board and utility is how they are arranged. There is no point in pretending that a pawn that can deliver checkmate isn't valuable. However there is also no point in not queening a pawn in other circumstances to increase the material that will in all likelihood deliver higher utility.

At this point I don't even know what you're trying to say. You say LToV is flawless, but you won't even define what you think it is so how can it be disproved?

All this talk of cutting yourself with razors and brothels and selling crack and marginal utility...what claim are you trying to disprove and who is making it? It sounds like a straw man and a red herring all mixed into one.

If the whole point of LToV is that sometimes human labor can add value....who cares? Who disputes that? What meaningful conclusions can be made from that?

[vinoveri]

Re: anyone else read ej's twits?

If the past is prologue it's not likely to work out that way.

I lived through the 1970s and watched Arthur Burns and William Miller try this with spectacular failure. What good does it do to raise rates in 1/4 point increments when real rates are already negative and inflation begins to rise at least as fast as this "gradualist" approach? Volker's sledge hammer was the only thing that worked and I'll bet 2/3rds of my net worth the Fed will never again attempt that one.

You're probably right. If we do have a repeat of the 70's, then timing any "Volcker" move will be critical in getting out of gold.

The distinction between those who hold gold as a hedge against currrency or systemic collapse vs those who hold it as an inflation hedge may come into play; if the Fed shows any signs of monetary restraint/responsibility, then risk of sovereign debt/currency crisis may pull back and gold may tank/correct significantly. If inflation takes off and bond yields continue to ramp, then gold is likely to follow. It may be different this time though. Once the looting has taken place and the plutocracy is set (note the wealth transfer that is occuring full bore in plain site since 2008 with ZIRP and QE), they may pull a pre-emptive Volcker, write of the bad assets/debts via Fed absorption of balance sheet; it will cause a recession like the 1980s, but may effectively reset thes system allowing another generation of debt build-up to begin.

[Polish_Silver]

Savings Glut criticized

Both bernanke and the Magumbo Guru have discussed the "savings glut".

What we really have are high debts and excess capacity.

Governments have borrowed to employ their citizens and built a bunch of industrial roads to nowhere. Like Bailing out GM. There is excess production in cars, houses, gassahol, consumer goods, because of mercantalist policies, subsidies, low interest rates, etc.

The first thing you do in a business is determine whether sufficient market exists to justify an expansion of activity. Companies that over expand go bust. They get tricked when government manipulates interest rates down, as pointed out by the Austrians.

Credit cycles, caused by a leveraged money system, are another root cause, and this has been recognized as far back as Hume. Calling this "capitalism" is misleading.

Libertarians hate banks.

Does china have a "savings glut"? No. They print money to keep their currency cheap and run a trade surplus. The "savings" is just the money they print and use to buy T-bonds. I'd like to see china stop printing and run a budget surplus---we'd see how big thier "savings glut" is.

[gwynedd1]

Re: anyone else read ej's twits?

I'm not sure how or if this relates to what I've said. It seems to be another way of papering over the flaws in LToV. It sounds to me like: labor theory of value has no flaws, except when it doesn't work and that's because some other theory is applicable anytime that LToV doesn't work.

If a tree that produces fruit for your cart grows in size and doubles its production, has its value not increased without your work?

When was it valued? Planting a tree is labor and so also is the time value of waiting for the fruit on that labor. Such a thing can be estimated so is it growing in value or does it already have a value in a point in time? However no one can know what the value of it will be since the market via marginal utility, buying power etc will determine it. However again, the marginal utility of the labor based upon this market estimate will determine how labor is deployed. The better it can be estimated the more it will be reflected in labor costs rather than windfall profits or losses.

Likewise land has value before any labor is spent on it.

It has value but that is the problem. The more value it has the worse it is because it means there is competition over its productive power. The goal in a macro economy is to drive down marginal utility. Value is not added , nor is land a variable to be modified. Then you are not taking into consideration the marginal utility of labor. If we allow rewards for owning property then we will be rewarding the wrong kind of effort. So again labor can never be completely removed anymore than air can be removed from making fire. Human productive power, needs and resources create value. Just focusing on one element does not paint a picture.

If a painting thought to be an original by a master is determined to be a fake, does the labor spent on it change? Does its value? If a baseball is signed by a famous player does it's value change? What if he spends the next year signing a million more? Why is a beautiful painting perceived to have more value than an ugly one? There's so many examples where LToV doesn't make sense that don't involve any kind of "economic shock".

You don't think finding out a painting is false is a market shock? You think a person would not value a baseball less if they knew a million more would appear? That is not a market shock?

Maybe I just don't understand your idea of what the labor theory of value is. If you define it perhaps I can explain why I think it's flawed. Then maybe you can explain how it's not.

Boats don't work in the desert and so is a poorly applied perspective. It has been known for hundreds of years that private interests conflict with common interests. Therefore value theories are not going to be compatible between interests. Labor theory is to maximize labor utility because that is the variable within our means. Deploying that labor will not always match the final utility of the output. Labor theory or utility theory alone can be proven false. Vices like gambling, cigarette smoking, cutting yourself with razors don't really put marginal utility in a good light just like labor theories of value look odd on something like famous art work. Value theories are ultimately existential questions, but human labor is most certainly involved. Even land has no value unless it will be put to use in some way.

The point is marginal thought claims to have put a knock out punch on the labor theory of value. That is just patently false. Its a point of view. In the Austrian fetish of consumer and private points of view marginal does indeed mean everything. However that is as far from the production planning phase in a macro economy as it can get. If the highest bidder on a piece of land goes to a brothel owner who sells crack out of it has that maximized GDP?


Perhaps a good analogy is a chess game. There are material considerations, and there are positional considerations. A pawn may have more power than a queen in the right position. However the queen is much more likely to have high utility because its the best material piece. However the piece that delivers check mate will have the highest utility. Labor puts pieces on the board and utility is how they are arranged. There is no point in pretending that a pawn that can deliver checkmate isn't valuable. However there is also no point in not queening a pawn in other circumstances to increase the material that will in all likelihood deliver higher utility.

[DSpencer]

Re: anyone else read ej's twits?

The labor theory of value is not flawed. Misusing it certainly creates flaws.



Say I have 1 wheel with 2 ox carts having a broken wheel. The cart I want to move first will give me the highest amount of utility. Perhaps one has manure and the other perishable fruit. So I want to get the fruit moving to market first. If they take the same amount of resources and labor and I have a preference, it proves that labor is not all there is to value.

OK so is that the end of the story? No because why did that wheel have utility? Its because it was broken. It was an economic shock. What it represents is a distortion from a planing perspective. From a planing perspective I want marginal utility to be low. I want two wheels, not one. A third wheel would be a buffer stock with no marginal utility. Does that mean that having a spare wheel is of less value than being short one wheel? Does it mean that 3 wheels are worthless? What if there were wheels everywhere? It would mean wheels are worthless. Then, no one would put labor into them. That is when it meets labor. Labor is going to be quite reactive and thus very much related to economic planning.

* Labor theory pertains to economic planning.
* Marginal utility applies to economic shocks

A perfectly planned economy without restrictions will tend to be priced into the time taken to produce them. 3 people who want an apple and 3 apples does not extract economic rents. 1 apple and 3 people who want an apple does but that is a supply shock and a macro economic plan that failed. Certainly there is skill involved and producers can plan poorly.

The other point of view on this is that labor theory applies to how humans can affect value. The idea is not to make things valuable, but to add value. Something cannot have utility until it exists. The only variable we have control over is human labor. So you want a plan to motivate more labor. There is no direct means to modify the economic shock that raises marginal utility. All we can do is to throw labor at it.

However one additional complaint I have is that those who misapply marginal utility is this idea there is no free lunch. Since the determined value is clearly not related to the amount of labor put into it, by definition, value can increase with no work. How can there be no free lunch with marginal utility?


Maybe its easier to say labor has marginal utility as well and the best way to direct it to where its needed is paying them accordingly. At some point time will increase their marginal costs linking time spent with value.

On both extremes it reaches absurdity since giving a knife to someone is suicidal can hardly be seen as valuable and likewise the time it took to build a bridge that falls into the river hardly defines its value. They are both worthless.

I'm not sure how or if this relates to what I've said. It seems to be another way of papering over the flaws in LToV. It sounds to me like: labor theory of value has no flaws, except when it doesn't work and that's because some other theory is applicable anytime that LToV doesn't work.

If a tree that produces fruit for your cart grows in size and doubles its production, has its value not increased without your work? Likewise land has value before any labor is spent on it. If a painting thought to be an original by a master is determined to be a fake, does the labor spent on it change? Does its value? If a baseball is signed by a famous player does it's value change? What if he spends the next year signing a million more? Why is a beautiful painting perceived to have more value than an ugly one? There's so many examples where LToV doesn't make sense that don't involve any kind of "economic shock".

Maybe I just don't understand your idea of what the labor theory of value is. If you define it perhaps I can explain why I think it's flawed. Then maybe you can explain how it's not.

[Raz]

Re: anyone else read ej's twits?

...
On a separate question, say the Fed announces next year that it's raising rates by 25 bps, and intends to raise rates very very slowly over the coming decade; what happens to Au? Wouldn't surprise me to see gold drop 20% immediately, and then further. Gold is indeed insurance and continues to climb, but as soon as a whisper of tightening is heard, look out. This is the contingency I'm not sure how to handle/avoid.

If the past is prologue it's not likely to work out that way.

I lived through the 1970s and watched Arthur Burns and William Miller try this with spectacular failure. What good does it do to raise rates in 1/4 point increments when real rates are already negative and inflation begins to rise at least as fast as this "gradualist" approach? Volker's sledge hammer was the only thing that worked and I'll bet 2/3rds of my net worth the Fed will never again attempt that one.