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Federal savings association Federal savings associations (also called "federal thrifts" or "federal Savings Banks"), in the United States, are institutions chartered by the Office of Thrift Supervision which is now administered by Office of the Comptroller of the Currency after the agencies merged. Institutions chartered by the OTS are still regulated according to the rules and regulations of Federal Savings Banks. Mortgages issued by Federal Savings Banks are pursuant to the provisions of the Home Owners' Loan Act, a U.S. federal statute. Although the activities of federal thrifts were once confined primarily to taking deposits from consumers and making residential mortgage loans, federal thrifts are now authorized to offer a wide range of financial products and services. Federal thrifts should not be confused with national banks which are banks chartered under federal law by the Office of the Comptroller of the Currency. Although the differences between federal thrifts and national banks have diminished as the authorized activities of federal thrifts have expanded to include virtually all traditional banking activities, they are still distinct institutions subject to different regulatory schemes and supervised by different regulators. They are not savings and loan associations. | https://en.wikipedia.org/wiki?curid=2182706 |
Centre National d'Appui au Développement et à la Participation populaire CENADEP (Centre National d’Appui au Développement et à la Participation populaire) is an environmental federation of the Democratic Republic of the Congo. CENADEP was founded in 2000. The spokesman is Joseph Bobia. CENADEP's main aim is to protect the Congolese rainforest. | https://en.wikipedia.org/wiki?curid=2186009 |
Conditional factor demands In economics, a conditional factor demand is the cost-minimizing level of an input (factor of production) such as labor or capital, required to produce a given level of output, for given unit input costs (wage rate and cost of capital) of the input factors. A conditional factor demand function expresses the conditional factor demand as a function of the output level and the input costs. The conditional portion of this phrase refers to the fact that this function is conditional on a given level of output, so output is one argument of the function. Typically this concept arises in a long run context in which both labor and capital usage are choosable by the firm, so a single optimization gives rise to conditional factor demands for each of labor and capital. Since the optimal mix of input levels depends on the wage and rental rates, these rates are also arguments of the conditional demand functions for the inputs. This concept is similar to but distinct from the factor demand functions, which give the optimal demands for the inputs when the level of output is free to be chosen; since output is not fixed in that case, output is not an argument of those demand functions. With two inputs, say labor and capital, the optimization problem is to minimize the total cost (amount spent on factors of production, say labor and physical capital) subject to achieving a given level of output, as illustrated in the graph | https://en.wikipedia.org/wiki?curid=2187778 |
Conditional factor demands Each of the convex isoquants shows various combinations of labor and capital usage all of which would allow a given amount of output to be produced. Each straight line segment is an isocost curve showing various amounts of labor and capital whose combined usage would cost a given amount unique to that isocost curve. Conditional on producing the amount of output consistent with, say, the middle isoquant, the lowest cost can be obtained by using amounts of labor and capital such that the point on the given isoquant is on the lowest possible isocost curve--that is, at the point of tangency between the given isoquant and one of the cost curves. At the tangency the marginal rate of technical substitution between the factors (the absolute value of the slope of the isoquant at the optimal point) equals the relative factor costs (the absolute value of the slope of the isocost curve). This optimization can be formalized as follows: where "L" and "K" are the chosen quantities of labor and capital, "w" and "r" are the fixed unit costs of labor (wage rate) and capital (rental rate) respectively, "f" is the production function specifying how much output can be produced with any combination of inputs, and "q" is the fixed level of output required. The resulting factor demand functions are of the general form for labor demand, and for demand for physical capital | https://en.wikipedia.org/wiki?curid=2187778 |
Conditional factor demands That the wage rate and capital rental rates affect the optimal input quantities can also be seen graphically because they both affect the slope of the isocost curves in the above graph, while the required quantity "q" of output affects them because it determines the relevant isoquant in the graph. As the target level of output is increased, the relevant isoquant becomes farther and farther out from the origin, and still it is optimal in a cost-minimization sense to operate at the tangency point of the relevant isoquant with an isocost curve. The set of all such tangency points is called the firm's "expansion path". | https://en.wikipedia.org/wiki?curid=2187778 |
Corner solution A corner solution is a special solution to an agent's maximization problem in which the quantity of one of the arguments in the maximized function is zero. In non-technical terms, a corner solution is when the chooser is either unwilling or unable to make a tradeoff. In economics when someone says "I wouldn't buy that at any price" or "I will do X no matter the cost", those are corner solutions. Another example is "zero-tolerance" policies, or parents who are unwilling to expose their children to any risk, no matter how small and no matter what the benefits of the activity might be. "Nothing is more important than my child's safety" is a corner solution in its refusal to admit there might be tradeoffs. The term "corner solution" is sometimes used by economists in a more colloquial fashion to refer to these sorts of situations. The word "corner" refers to the fact that if one graphs the maximization problem, the optimal point will occur at the "corner" created by the budget constraint and one axis. A corner solution is an instance where the "best" solution (i.e. maximizing profit, or utility, or whatever value is sought) is achieved based not on the market-efficient maximization of related quantities, but rather based on brute-force boundary conditions. Such a solution lacks mathematical elegance, and most examples are characterized by externally forced conditions (such as "variables "x" and "y" cannot be negative") that put the actual local extrema outside the permitted values | https://en.wikipedia.org/wiki?curid=2189949 |
Corner solution Another technical way to state it is that a corner solution is a solution to a minimization or maximization problem where the non-corner solution is infeasible, that is, not in the domain. Instead, the solution is a corner solution on an axis where either "x" or "y" is equal to zero. For instance, from the example above in economics, if the maximal utility of two goods is achieved when the quantity of goods "x" and "y" are (−2, 5), and the utility is subject to the constraint "x" and "y" are greater than or equal to 0 (one cannot consume a negative quantity of goods) as is usually the case, then the actual solution to the problem would be a corner solution where "x" = 0. The more usual solution will lie in the non-zero interior at the point of tangency between the objective function and the constraint. For example, in consumer theory the objective function is the indifference-curve map (the utility function) of the consumer. The budget line is the constraint. In the usual case, constrained utility is maximized on the budget constraint with strictly positive quantities consumed of both goods. For a corner solution, however, utility is maximized at a point on one axis where the budget constraint intersects the highest attainable indifference curve at zero consumption for one good with all income used for the other good. Furthermore, a range of lower prices for the good with initial zero consumption may leave quantity demanded unchanged at zero, rather than increasing it as in the more usual case. | https://en.wikipedia.org/wiki?curid=2189949 |
Leontief production function In economics, the or fixed proportions production function is a production function that implies the factors of production will be used in fixed (technologically pre-determined) proportions, as there is no substitutability between factors. It was named after Wassily Leontief and represents a limiting case of the constant elasticity of substitution production function. For the simple case of a good that is produced with two inputs, the function is of the form where "q" is the quantity of output produced, "z" and "z" are the utilised quantities of input 1 and input 2 respectively, and "a" and "b" are technologically determined constants. Suppose that the intermediate goods "tires" and "steering wheels" are used in the production of automobiles (for simplicity of the example, to the exclusion of anything else). Then in the above formula "q" refers to the number of automobiles produced, "z" refers to the number of tires used, and "z" refers to the number of steering wheels used. Assuming each car is produced with 4 tires and 1 steering wheel, the is | https://en.wikipedia.org/wiki?curid=2189967 |
Global Industry Classification Standard The (GICS) is an industry taxonomy developed in 1999 by MSCI and Standard & Poor's (S&P) for use by the global financial community. The GICS structure consists of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries into which S&P has categorized all major public companies. The system is similar to ICB (Industry Classification Benchmark), a classification structure maintained by FTSE Group. GICS is used as a basis for S&P and MSCI financial market indexes in which each company is assigned to a sub-industry, and to an industry, industry group, and sector, by its principal business activity. "GICS" is a registered trademark of McGraw Hill Financial and MSCI Inc. The classification standard is regularly updated by S&P Dow Jones Indices and MSCI. Numerous changes over the years have resulted in the addition, deletion, or redefinition of various sub-industries, industries, or industry groups. Since 1999, there have been two revisions at the sector level: | https://en.wikipedia.org/wiki?curid=2193074 |
Gofer A gofer, go-fer or gopher is an employee who specializes in the delivery of special items to their superior(s). Examples of these special items include a cup of coffee, a tailored suit, and a car. Outside of the business world, the term is used to describe a child or young adult who is learning how to do tasks and is sent to fetch items. A similar job is that of peon in Commonwealth countries. is a linguistic simplification of the two words go + for = gofor. Simplified, in English, it means go for this or go for that. Gofor reflects the likelihood of instructions to "go for" coffee, dry cleaning, or stamps, or to make other straightforward, familiar or unfamiliar procurements. The term "gofer" originated in North America. Likewise "gofer" may refer to a junior member of an organisation who generally receive the most vexing and thankless work. Law firms with a top-heavy management structure, having not enough junior lawyers to take care of menial yet necessary tasks, can be referred to as having "too many loafers and not enough "gophers"". In the 1953 movie "She's Back on Broadway", at about the 11 minute mark, the word is used backstage at a Broadway show, with a clear explanation. In the first season (1976) of the television series "The Muppet Show", Scooter was given the stage manager job because his uncle owned the theater where the Muppets performed. The pun was that a gopher not only is an animal, like the Muppets supposedly are, but is a fast animal, collecting food and delivering it somewhere else | https://en.wikipedia.org/wiki?curid=2194289 |
Gofer At some point in the Muppets series, Kermit the Frog suggested that he himself was a gofer, but probably didn't last long in the job. In the fourth season of Boy Meets World, Corey gets a job as a gofer for two shady businessmen (Buddy Hackett and Soupy Sales). Another example of a gofer is the fictional character of Salvatore "Turtle" Assante (Jerry Ferrara) on the comedy-drama HBO television series "Entourage". In the "Taxi" episode "Alex the Gofer", Alex takes a part-time job as an assistant to Broadway producers. The term gofer is used in the anime Zombie-Loan. Brad Pitt's character Cliff Booth is a gofer for Rick Dalton (Leonardo DiCaprio) in the 2019 movie "Once Upon a Time in Hollywood". | https://en.wikipedia.org/wiki?curid=2194289 |
Cato Journal The is a triannual peer-reviewed academic journal which covers public policy from an Austro-libertarian point of view. It was established in 1981 and is published by the Cato Institute. It publishes articles discussing politics and economy. The journal is a "free-market, public policy journal ... for scholars concerned with questions of public policy, yet it is written and edited to be accessible to the interested lay reader". The editor-in-chief is James A. Dorn (Cato Institute). The journal was established in 1981, when two issues were published. The frequency of publication has been triannual since 1982, with the exception of volume 15 for 1995. The Fall 2001 issue of the describes itself as "An interdisciplinary journal of public policy analysis" and contains articles by Alan Greenspan, Thomas M. Humphrey, Charles I.Plosser, Manuel H. Johnson, William A. Niskanen, Robert D. McTeer, Kevin Dowd, and Alan Reynolds, among others. In 2004/2005, the grouping together of issues into volumes switched from a Spring-Fall-Winter grouping to a Winter-Spring-Fall grouping, thereby synchronizing it with the calendar year. | https://en.wikipedia.org/wiki?curid=2194985 |
Value product The value product (VP) is an economic concept formulated by Karl Marx in his critique of political economy during the 1860s, and used in Marxian social accounting theory for capitalist economies. Its annual monetary value is approximately equal to the netted sum of six flows of income generated by production: The last five money-incomes are components of realized surplus value. In principle, the value product also includes unsold inventories of new outputs. Marx's concept corresponds roughly with the concept of value added in national accounts, with some important differences (see below) and with the provision that it applies only to the net output of "capitalist" production, not to the valuation of "all" production in a society, part of which may of course not be commercial production at all. The concept is formulated more precisely when Marx considers the reproduction and distribution of the national income (see e.g. his manuscript called "Results of the Immediate [or Direct] Process of Production", available in English in the Pelican edition of "Das Kapital"), and also online; and the last chapters of "Das Kapital" Volume 3). Marx wrote this in 1864, i.e. about 70 years or so before the first comprehensive Gross National Product and Capital Formation statistics were pioneered by the likes of Wassily Leontief, Richard Stone, Simon Kuznets and Colin Clark (the United Nations standard accounting system was first finalised in 1953). Marx's manuscript for "Das Kapital" Vol | https://en.wikipedia.org/wiki?curid=2196719 |
Value product 3 ends with a discussion of "relations of distribution", but he did not live to complete his analysis. In outline his approach is quite clear however. Marx called gross output (or the total value of output sales) the ""value of production"" ("VPn"). If variable capital paid formula_1, circulating constant capital consumed formula_2, fixed capital consumed formula_3, and surplus value produced formula_4, then: and So, Marx's "value product" really expressed his view of the true total "new value added" or the net product. In his view, this total is equal to the value of wage payments + surplus value, the latter which would include, apart from net profit, interest and rent, the net tax levy and royalty-type fees paid in respect of incomes generated by production of output, plus the surplus-value component of unsold inventories of new output. Marx himself never discussed taxation and royalty-income in detail; they were only a small portion of the total national income when he lived (around 5-10% or so). Marx claims that, in an accounting period, the workforce in the capitalist sector normally produces a new value which is equal to its own wage-cost, plus an additional new value (called surplus value). However, Marx warns that: For this reason, Marx criticized ratios such as the "share" of profits and wages (wage share) in the gross or net product as deceptive, because they disguised the real capitalist relations of production, specifically the rate of surplus value | https://en.wikipedia.org/wiki?curid=2196719 |
Value product His primary interest was in the ratio between generic profits and wages (the rate of exploitation). The equation of new value added with net output or GDP (also known as gross value added) would have made no sense to Marx, mainly because net output "includes" depreciation (or the consumption of fixed capital), yet "excludes" various property rents paid by producing enterprises from their gross income (on the ground that renting out an asset does not itself constitute production) as well as a portion of net interest (regarded as property income). As regards depreciation, for Marx the value of "real" depreciation at least did not constitute any "new" value, but, value "conserved" and "transferred" to the new products by living labor. It appeared as added value, only because when costs are deducted from gross sales income to obtain net profit, depreciation is regarded as a component of the new "gross" profit income. In official national accounts, a distinction is made between gross value added (including depreciation charges) and net value added (excluding them). Of course, in reality it could be that real ("economic") depreciation diverges from depreciation for tax purposes. In that case, the reported consumption of fixed capital could contain an element of undistributed profit | https://en.wikipedia.org/wiki?curid=2196719 |
Value product Additionally, official national accounts may include in consumption of fixed capital the value of those "insurance premiums, interest and rents" paid from gross income, which relate directly to the acquisition or maintenance of productive fixed assets, on the ground that they are part of the cost of operating productive fixed assets. In Marxian economics, however, these flows would be regarded either as a faux frais of production, a circulating constant capital outlay, or an element of gross surplus value. By contrast, Marx considered rents paid by producing enterprises from their gross income as a part of surp-lus value, and as an integral part of the cost structure of the social product. Business rents, excluded as intermediate expenditures from GDP, therefore are included in the Marxian value product as a component of surplus value. From a Marxian point of view, official value added also includes some dubious components such as the rental value of owner-occupied housing. This entry is the market rent of owner-occupied housing that would apply "if" the housing was rented, treated as a "service". But most of it does not refer to any real flow of income, nor is it clear that this component has anything to do with production. As regards net interest, the official product accounts will exclude a portion of it, insofar as it is defined as "property income" unrelated to the value of production | https://en.wikipedia.org/wiki?curid=2196719 |
Value product But if it is paid from current gross revenues of producing enterprises, then it should be included in the Marxian value product. For this reason, the Marxian net interest aggregate is likely to be larger than the official one. Marx's idea of value creation and value product makes little sense from the point of view of the theory of factors of production and production functions. Marx himself already anticipated this, in chapter 48 of Capital Vol. 3, titled "The Trinity Formula" where he discusses the view that land, labour and capital (which he sarcastically calls the "holy trinity" of political economy) all create a new value equal to factor income (Marx regarded human labour and land as the mainsprings of material wealth, but he considered "value" as a purely "social" attribution referring to labor-content). In modern macroeconomics, the controversy surfaces again, and is discussed in amusing essays by Prof. Anwar Shaikh (see references). In Marxian social accounting, one theoretical controversy concerns the treatment of the wages of so-called productive and unproductive labour. "Unproductive labour" by definition does not make net additions to the new value product, but only "transfers" value from other sectors on the basis that it reduces the costs of capitalist production | https://en.wikipedia.org/wiki?curid=2196719 |
Value product Depending on how the gross and net product are defined, the value of these wages could be accounted for either as a component of surplus value, or as a circulating constant capital outlay, or be "excluded" from the value product altogether. Different interpretations are offered by Shane Mage, Murray Smith, Anwar Shaikh and Fred Moseley. One aspect often overlooked in this controversy is that wages costs and labour costs are not the same thing. Employers and employees must also pay social insurance levies of various types, and there may be other imposts on wages; also, the "buying power" of wages is reduced by indirect tax imposts and profit imposts. This affects the magnitude of a society's variable capital and the value of labour power. Another Marxian accounting controversy, less discussed, concerns which net tax receipts of government constitute part of the new value product. Obviously taxes included in official gross product measures do not equal the net total tax take, because some taxes are unrelated to production and therefore excluded. The Marxian critique of public finance appears to be rather undeveloped as yet, however. In principle, net tax levied on current production and paid out of current gross revenues would be included in the value product. Least discussed is the problem of finding a non-arbitrary, rigorous distinction between value created and value transferred in respect of services | https://en.wikipedia.org/wiki?curid=2196719 |
Value product The conceptual problem here is essentially that it may be difficult to specify unambiguously what the nature and function of the "product" sold is, when services are rendered. Some Marxists have argued however that Marx's value relations and value aggregates cannot be measured at all, and at best only experienced. That was manifestly not Marx's view; already in his "Grundrisse" manuscript he had referred to a balance sheet cited by Malthus; in Das Kapital he attempted to calculate the rate of surplus value according to data provided by Frederick Engels; and towards the end of his life, as Leontief noted, he wrote that he wanted to study the "ups and downs" of economic activity mathematically (but Samuel Moore convinced him that the data to do it did not exist yet). Engels later remarked that the problem really was that much data relevant to testing Marx's concepts simply was not available. Subsequent Marxian scholars have argued the critique of political economy should continue, with regard to the new economic concepts and theories, rather than stop at the point where the ink dried on the last sheet of paper that Marx wrote on. One reason is that the new concepts and theories might distort the representation of economic reality, just as much as the old ones that Marx criticized | https://en.wikipedia.org/wiki?curid=2196719 |
Value product In the USSR and other Soviet-type societies, Marx's social accounting approach strongly influenced the Material Product System (MPS), a social accounting method alternative to GDP accounts, which distinguished sharply between "productive" and "non-productive" sectors of the economy. These accounts focused on balances of the value of material goods produced. In some respects, this is ironic, since Marx's social accounting referred to the capitalist economy, not to a socialist economy. The MPS accounts were abandoned in favour of GDP accounts after the downfall of official communism in the USSR and Eastern Europe, although they are still compiled as parallel accounts in North Korea and Cuba. | https://en.wikipedia.org/wiki?curid=2196719 |
Law of value The law of the value of commodities (German: "Wertgesetz der Waren"), known simply as the law of value, is a central concept in Karl Marx's critique of political economy first expounded in his polemic "The Poverty of Philosophy" (1847) against Pierre-Joseph Proudhon with reference to David Ricardo's economics. Most generally, it refers to a regulative principle of the economic exchange of the products of human work, namely that the relative exchange-values of those products in trade, usually expressed by money-prices, are proportional to the average amounts of human labor-time which are currently socially necessary to produce them. Thus, the fluctuating exchange value of commodities (exchangeable products) is regulated by their value, where the magnitude of their value is determined by the average quantity of human labour which is currently socially necessary to produce them (see labor theory of value and value-form). In itself, this theorem is fairly simple to understand and intuitively it makes sense to many working people. However, theorizing its implications is a much more complex task as it kept Marx busy across more than two decades. When Marx talked about "value relationships" or "value proportions" (German: "Wertverhältnisse"), he did not mean "the money" or "the price". Instead, he meant the value proportions that exist between products of human labour. These relationships can be expressed by the relative replacement costs of products as labour hours worked | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value The more labour it costs to make a product, the more it is worth and inversely the less labour it costs to make a product, the less it is worth. Money-prices are at best only an expression or reflection of Marx's value relationships—accurately or very inaccurately. Products can be traded above or below their value in market trade and some prices have nothing to do with product-values at all (in Marx's sense) because they refer to tradeable objects which are not regularly produced and reproduced by human labour, or because they refer only to claims on financial assets. The "law of value" is often equated with the "labour theory of value", but this is strictly speaking an error, for five reasons. Nevertheless, in the Marxist tradition, Marx's theory of product-value is conventionally labeled "the labour theory of value"—while controversy persists about how much Marx's theory actually differs from that of the classical political economists. In "Das Kapital" Marx normally thinks of the quantity of labour that determines product-value as the ratio between the average total amount of labour-time required to produce a reproducible good, and the corresponding average amount of labour required to produce a unit of gold (see also gold standard). Already in 1844, long before he wrote "Das Kapital", Marx was very aware of credit money | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Whereas "commodity money" (coinage or bullion) played an important role in the earlier stages of capitalist development, the growth of integrated capital markets meant increased use of credit money. Marx felt that the initial assumption of gold-money as a standard of value was justified, in analysing the capitalist relations of production and distribution. Thus, as follows: X quantity of product = Y quantity of average labour hours = Z quantity of gold-money Marx's idea is effectively that the value of traded products is the "objectified expression" of the current social valuation of the human labour implicated in producing them. For Marx, labour itself has no value in bourgeois society, only a price. Only the "results of human work" have value; the labour has to materialize itself in some kind of object which has value, and can be owned for a price or a fee. The importance of labour is its ability to preserve capital value, increase already existing value, and create wholly new value. How any individual happens to regard a particular product normally cannot change that social valuation at all; it's simply a "social fact" in the same way as "the state of the market" is a social fact, even though particular products can at any time trade at prices above or below their socially established value | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Marx realized very well, that the assumption of gold-money was a simplification—there might not be such a stable relationship between price-levels, average commodity values, and gold quantities — but he regarded the assumption as helpful, in explaining the basic laws of motion ["Bewegungsgesetze"] of the capitalist mode of production "in its ideal average". While Marx used the concept of the law of value in his works "Grundrisse", "A Contribution to the Critique of Political Economy", "Theories of Surplus Value" and "Das Kapital", he did not explicitly formalise its full meaning in a mathematical sense, and therefore how it should be exactly defined remains to some extent a controversial topic in Marxian economics. Different economists dispute how the proportionality between exchange-value and labour-time should be mathematically understood or modeled, and about the measures which are relevant. Underlying this debate are difficult conceptual questions about how the causal relationships in the economy between price relativities and time worked should be understood. Marx's analysis of value was dialectical, in the sense that he thought value phenomena could only be understood dynamically, holistically and relationally, but he did not spell out all the conceptual, quantitative and logical implications of his position with great exactitude. The scholarly debate about those implications continues even today | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Excess demand can raise the prices of products traded, and excess supply can lower them; but if supply and demand are relatively balanced, the question arises of what regulates the settled exchange-ratios (or average price-levels) of products traded in that case, and this is what the law of value is intended to explain. According to the law of value, the "trading ratios" of different types of products reflect a real "cost structure of production", and this cost structure ultimately reduces to the socially average amounts of human labor-time required to produce different goods and services. Simply put, if product A takes 100 hours of human work to produce in total, and product B takes 5 hours to produce, the normal trading-ratio of A and B will gravitate to a rate of around 1:20 (one of A is worth 20 of B), because A is worth much more than B. Moreover, if A and B are combined and used up to make product C in 40 hours, then product C is likely to be worth the equivalent of around 145 hours of human work in total, including the work of actually making product C. For that reason, most market trade in products is regular and largely predictable as far as price levels are concerned, rather than chaotic and arbitrary. According to Marx, price movements were not simply random, arbitrary or chaotic, but governed by causal laws that limited price variability. The concept of a "cost structure" refers to the (direct and indirect) current labour inputs required to make a product, reflected in its price level | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value The concept of a "price structure" refers to the fact that prices rarely exist, or change, in isolation; instead, price-levels are interdependent on other price-levels, so that, if some prices would change, a lot of other prices would start to change as well—transmitting a change in valuation across the economy. A "structure" exists if there is a fairly stable relationship across time between price-levels which are interdependent. Marx argues that the cost structures and price structures for products are, in general, determined by the law of value. The law of value originates in the "terms of exchange" established for different products. If a producer has to supply too much of his own product to get a different product, this has direct consequences for the additional time he has to work to sustain himself and the trading of his product. Over time, and with more market integration, relatively stable values for products are established in accordance with production norms which exist independently of the productivity of individual producers. In that situation, each producer has to adapt his own production to those socially accepted values, the average terms of trade for products vary only within fairly narrow margins, and thus producers' activities fall under the sway of the law of value, which links "the economy of labour-time" with "the economy of trade". Paradoxically, as Marx says, the more that the producers become dependent on exchange, the more exchange appears to become independent of them | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Product-markets begin to operate according to their own laws, to which the producers can only adjust themselves. If some prices go up, many other prices will go up as well because people have to cover their increased costs. If some prices go down, many other prices will go down as well since products otherwise fail to sell when cheaper alternatives become available, but no individual is in control of these price fluctuations, or in control of how all the price changes will impact on each other. All they can really do to influence the market is to raise or lower their own prices, but even so they can do that only within certain limits. Ordinarily, people have to accept and work with many given cost-price levels and given sale-price levels which they cannot do anything about. If a product cannot be produced at a certain cost, or if it cannot be sold at a certain price-level, it is unlikely that it will be available much at all. In this way, Marx argues, production activities actually become dominated by the values of the products being produced and exchanged (so-called "market forces"), often quite irrespective of what human needs might be, because these product-values will determine whether and how it is "economic" or "uneconomic" to produce and trade particular products. According to Marx, "economic value" is a purely social category. It is only and exclusively a characteristic of things which are really produced and reproduced by human labour | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Thus, things have an "economic value" simply and only because it takes human labour-time to make them. This value exists and persists quite independently of fluctuating prices in markets. Although they are connected, the value relationships between labour-products and price relationships can vary independently of each other, within certain limits. A price can be attached to almost any object, but this does not automatically mean that the object also has a value in Marx's sense of being the product of labour. The field of application of the law of value is limited to "new output by producers of traded, reproducible labour-products", although it might indirectly influence trade in other goods or assets (for example, the value of a second-hand good may be related to a newly produced good of the same type). Thus, the law does not apply to all goods, services or assets in an economy, and it does not rule the whole economy. In modern Marxism, the law of value is often equated with "market economy", but that was not Marx's own idea. Rather, it limits, regulates and constrains the trade in products. Simply put, the socially necessary labour requirements set limits for the movements of product prices. Primary products are a special case, which Marx discusses in his theory of differential and absolute ground rent. World market prices for primary products can at any time be strongly influenced by the yield of harvests and mines in different countries, regardless of labour effort | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value There are, besides, various kinds of products which, for one reason or another, are not subject to the law of value (see below). According to Marx, the knowledge that the law of value existed, expressed in one form or another, sometimes more clearly and sometimes less, was very ancient—it reached right back to the first nomadic traders in food, crafts, services and minerals. People knew very well that there was a definite relationship between time worked and the value of products traded; in itself that was not a very difficult insight to grasp. In fact, three hundred years before the Scottish and English political economists, Ibn Khaldun had already formally presented a fairly sophisticated understanding of the law of value. The economic effects of the availability or lack of labour—already reckoned with some precision in ancient Sumer more than four thousand years ago—were rather self-evident in practical life. Nevertheless, different thinkers in history failed to "conceptualize" the law of value with any adequacy. The basic idea of the law of value was expressed by Adam Smith in "The Wealth of Nations". Neoclassical economist Paul A. Samuelson (1971) famously argued that "the beaver-deer exchange ratio can range anywhere from 4/3 to 2/1 depending upon whether tastes are strong for deer or for beaver" and, therefore, it seems that trading ratios are regulated only by the volume and intensity of consumer demand, as expressed by consumer preferences, rather than by labour-time | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value According to the classical economists, however, such shifts in trading ratios would quickly cause a switch from beaver-hunting to deer-hunting or vice versa; short-term fluctuations in demand could not usually change the labour-costs of hunting as such, except if new technologies suddenly made it possible to capture more game in less labour-time, or if the herds of animals had become seriously depleted. The concept of the law of value was also stated by David Ricardo at the very beginning of his "Principles of Political Economy and Taxation", as follows: At the most basic level, this Ricardian law of value specified "labor-content" as the substance and measure of economic value, and it suggests that trade will—other things being equal—evolve "towards the exchange of equivalents" (insofar as all trading partners try to "get their money's worth"). At the basis of the trading process is the economising of human time, and normal trading ratios become known to, or accepted, by economic actors. This leads naturally to the idea that the law of value will "balance out" the trading process. The corollary is that market trade is regarded as intrinsically "self-regulating" through the mutual adjustments of supply and demand: market trade spontaneously tends towards an equilibrium state. Marx's real concern was to understand and analyze how the law of value determines or regulates exchange, i.e | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value how the balancing of the production of outputs and the demand for them could be accomplished, in a society based on a universal market such as capitalism, and how this was regulated by labour-time. Marx's theory specifically aims to grasp capital "in motion", i.e. how, through the circulation and competitive dynamics of capital, changing expenditures of social labor are reconciled with (or fail to be reconciled with) changing social needs. In the third volume of "Das Kapital", he aims to show how the competition for profits from production is constrained by the law of value and how this shapes the developmental pattern of capitalist production. He concludes that the law of value cannot directly regulate commodity prices in capitalist production, but only indirectly (prices of production are constrained by comparative costs in labour time). Marx praised Adam Smith for already recognizing that in the transition "from simple commodity exchange and its law of value to... exchange between capital and wage-labour... "something new" occurs, [so that] apparently (and actually, in the result) the law of value changes into its opposite." However, Marx noted both Adam Smith and David Ricardo were unable to explain consistently how product-values were regulated by labour-time within "capitalist" production | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Both Smith and Ricardo deeply believed that price structures for products were determined by the law of value; but, Marx argued, neither of them could explain how that value-price relationship operated, without contradicting themselves. They could not theoretically reconcile the regulation of commodity trade by law of value, with profit-receipts "in proportion to capital employed" (rather than in proportion to labour-time worked). Smith and Ricardo mooted the concept of "natural prices" instead, to postulate a "natural" (intrinsic) self-balancing tendency of markets—at the point where demand and supply were balanced, the "natural" price (the "true" value) had been reached. The effect was that their "labour theory of value" was disconnected from their theory of capital distributions. In Marx's theory, a true supply/demand balance in the capitalist economy—which, if it existed at all, would occur only incidentally—would mean that goods sold at their normal production price, but this did not automatically or necessarily mean that they sold at their "value". The production prices could be persistently above or below product-values. Economic value exists necessarily, according to Marx, because human beings as social beings and moral subjects must co-operatively produce and economize their means of life to survive. Humans have to value things, and each other, in order to survive. In so doing they are subject to relations of production | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value They know that their products have a socially accepted value, even if no trade occurs yet. Three main kinds of relationships are involved which are objectively and empirically verifiable, and often formalised in law: The attribution of value to labor-products, and therefore the economising of their use, occurs within these three types of relationships interacting with each other. The value of one product then depends on the value of many other products, and, in a community of independent private producers, their economic relations are then necessarily expressed through the product-values of what they trade. This expression involves character masks. Over time, most products acquire a normal exchange-value, meaning that what a product costs relative to other products remains fairly stable. However, because these three types of relationships co-exist and interact objectively independent of individuals, it may appear that economic value is an intrinsic property of products, or alternately, that it is simply a characteristic that results from negotiations between market actors with different subjective preferences. Marx recognised that value has both objective and subjective aspects, but he was primarily concerned with the objectification of value through market trade, where objectified (reified) value relations rule human affairs (see value-form) | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Paradoxically, he argues, this phenomenon meant that human lives became "ruled and dominated" by the products which people themselves had produced, and more specifically by the trading values of those products. When more and more of human requirements are marketised, and a complex division of labor develops, the link between value and labor-time becomes obscured or opaque, and economic value seems to exist only as an impersonal "market force" (a given structure of priced costs and sale-values) to which all people must adjust their behaviour. Human labor becomes dominated by the economic exchange of the products of that labor, and labor itself becomes a tradeable abstract value (see Abstract labour and concrete labour). The result of the difficulties in explaining economic value and its sources is that value becomes something of a mystery, and that "how" the attribution of value really occurs is no longer clear. The three relationships mentioned become mixed up, and are confused with each other, in commercial and economic discourse, and it appears that things and assets acquire an independent power to create value, even although value is a human attribution. Marx refers to this as commodity fetishism or thingification ("Verdinglichung" or reification) which culminates in what he calls fictitious capital. Value then seems to appear spontaneously out of trading activity | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value He regards this perception as an inevitable effect of commercial practice, since it involves the circumstance that objects acquire a value which exists independently of the valuer, a value "set by the state of the market" which individuals normally cannot change and must adjust to. The end result is that value theory is banished from economics as a useless metaphysics, surviving only in the form of assumptions made about price behaviour. Because money-prices offer convenient quantifiable and generally applicable units of economic value, no further inquiry into value is deemed necessary. To solve the riddle of economic value, Marx argues, we must investigate the real historical origins of the conditions which give rise to the riddle in the first place, i.e. the real economic history of trade and the way that history has been reflected in human thought. Once we do this, value is no longer defined simply an attribute of products and assets, but as a relation between objects and subjects. Thomas T. Sekine has interpreted Marx's law of value as a purely theoretical principle of market equilibrium which has no application to empirical reality. This raises the question of how we verify that it is a "law" at all. Paul Mattick argued that Marx offered no theory of market equilibrium, only a dynamic theory of enlarged economic reproduction | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value In reality, markets were rarely in equilibrium anyway (that was more a hypothesis used by economists, or a euphemism for "price stability"), and what explained the market behaviour of individuals and groups was precisely the imbalances between supply and demand propelling them into action. On this interpretation, capitalist development is always imbalanced development which, typically, the state tries to mitigate or compensate for. Under capitalist conditions, balancing output and market demand depended on capital accumulation occurring. If profits were not made, production would stop sooner or later. A capitalist economy was therefore in "equilibrium" "so long as it could reproduce its social relations of production, permitting profit-making and capital accumulation to occur", but this was compatible with all sorts of market fluctuations and disequilibria. So long as workers were "back to work" each working day, maintaining the value of assets and creating new value, it was "business as usual". Only when shortages or oversupply began to threaten the existence of the relations of production themselves, and block the accumulation of capital in critical areas (for example, an economic depression, a political revolt against capitalist property or against mass unemployment), a genuine "disequilibrium" occurred; all the rest was just ordinary market fluctuations. Real social needs and their monetary expression through market demand might be two very different things | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value A demand might exist without any buying power, and it might be that more could technically be supplied, but isn't (see Capacity utilization). Economic equilibrium was not created by any perfect match of supply and demand, but by the social framework which permitted the balancing act to occur. The role of the political state was essential in this, to provide an enforced legal framework for fair trade, currency stability and secure property rights Marx himself regarded the idea that society was somehow balanced out by market trade as a typical figment of "bourgeois ideology" and he was a strong critic of Jean-Baptiste Say. In the real world, there was only a more or less haphazard adjustment of supply and demand through incessant price fluctuations. In reality, a lot of non-market activity was necessary to keep market activity going, and the role of the state was indispensable (for the security of private property, currency stability and the enforcement of trading obligations). The law of value can interact with other phenomena which modify its effects. The 15 main factors counteracting the operation of the law of value, as a law governing the economic exchange of products, are the following: All of these phenomena occur to some degree or other in any real economy. Hence the effect of the law of value would usually be mediated by them, and would manifest itself only as a tendency, or as a law of "grand averages". Nevertheless, price-value divergences are typically quantitatively limited | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Although the real cost structure of production can be distorted by all kinds of extraneous factors, the law of value places limits on the amount of the distortion. Even if goods sell at an abnormally low or high prices, that abnormality relates to a "normal" referent price, and it is precisely that price which, according to Marx, is constrained by the law of value, i.e. by the proportionalities of human labour-time reflected in the cost structure of products. Marx argues that, as economic exchange develops and markets expand while traditional methods of production are destroyed and replaced by commercial practices, the law of value is modified in its operation. Thus, the capitalist mode of production is a type of economy, in which both inputs and outputs of production have become marketed goods and services (or commodities) which are bought and sold freely. Here, capitalists do not make money simply from trading or renting, but from the capitalization of production itself. Products and labour are purchased to manufacture new products which have a higher value in the market than their cost price, resulting in a profit from the added value. In such an economy, Marx argues, what directly regulates the economic exchange of new labour-products is not the law of value, but their prices of production. The theoretical problem which Marx then tries to tackle is how the movements of production prices across time are nevertheless regulated by the law of value | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value That was the problem which classical political economy failed to solve. The production price is the price at which output would have to sell, in order to realize the average, normal rate of profit on the capital invested in producing that output. That is largely a matter of cost-prices, profit margins and sales turnover. If we find that the distribution of sale-prices for a given type of commodity converges on a particular normal price-level, then, Marx argues, the real reason is, that only at that price-level the commodity can be supplied at an acceptable or normal profit. In pre-capitalist societies, where many inputs and outputs often weren't priced goods, but allocated "by right" or according to custom, the concept of an "average production price" would be rather meaningless. Large price differences existed even between towns, provinces and regions, yielding welcome profit to merchant traders. In capitalist society, differences in capital yields are constantly being leveled out by competition on a larger and larger scale, creating industry norms for normal returns on investments. The corollary in capitalist production is the increasingly free movement (or, at least, mobility) of labour and capital among branches of industry, in other words that capital and labour can be traded and shifted around fairly freely, with the aid of better transport and communication systems. In "Capital, Volume I", Marx largely ignored price fluctuations for the given inputs and outputs of production | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value He assumed that the prices of commodities were equal to their values. There were, however, three main reasons for this simplification: The fact that products can be traded above or below their value (and hence that more labour can exchange for less labour) became a fundamental theoretical problem for classical political economy. That is, the classical political economists failed theoretically to reconcile the law of value with unequal exchange (the exchange of unequal values). For Marx, the exchange of non-equivalents was not an aberration in the exchange process at all, but instead the pivot of business competition among producers in capitalist society. Price-value differences for labour-products determined how much of the new surplus value produced by enterprises, potentially contained in an output of commodities, could be realized as profit by those enterprises. Capitalist economic exchange, Marx argues (contrary to David Ricardo's theory), is not a simple exchange of equivalent values. It aims not to trade goods and services of equivalent value, but instead to make money from the trade (this is called capital accumulation). The aim is to buy as cheaply as possible, and sell as dear as possible, under the competitive constraint that everybody has the same objective. The effect is that the whole cost-structure of production permanently includes profit as an additional impost | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value In an overall sense, Marx argues the substance of this impost is the unpaid surplus labour performed by the working class; part of society can live off the labour of others due to their ownership of property. In this situation, output values produced by enterprises will typically deviate from output prices realised. Market competition for a given demand will impose a ruling price-level for a type of output, but the different competing enterprises producing it will take more or less labour to produce it, depending on productivity levels and technologies they use. Consequently, output values produced by different enterprises (in terms of labour-time) and output prices realised by them will typically diverge (within certain limits): enterprises can get more or less income for the value of what they produce. That divergence becomes a critical factor in capitalist competition and the dynamics of the production system, under conditions where the average price-levels for products are beyond anyone's control. If capital accumulation becomes the dominant motive for production, then producers will do everything they can to cut costs, increase sales and increase profits. Since they mostly lack control over the ruling market prices for their inputs and outputs, they try to increase productivity by every means at their disposal and maximise surplus labour | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Because the lower the unit-costs of goods produced by an enterprise, the greater the margin will be between its own cost-prices and the ruling sale prices for those goods in the market, and therefore the larger the profits that can be realised as result when goods are sold. Producers thus become very concerned with the value added in what they produce, which depends crucially on productivity. In the classical competitive situation, capitalists basically aim to employ workers to: Such price-cutting competition is limited in scope however, because if competitors adopt the same production methods, the productivity advantage will disappear. In addition, beyond a certain point workers will begin to resist their exploitation, and they may join trade unions. And, if market prices for products were reduced to their most competitive cost-prices only, profits would fall to zero. This leads to constant attempts worldwide to improve production techniques to cut costs, improve productivity and hold down labour-costs, but ultimately also to a decline in the labor-content of commodities. Therefore, their values will also decline over time; more and more commodities are produced, for a larger and larger market, at an increasingly cheaper cost. Marx claims that this trend happens "with the necessity of a natural law"; producers had no choice about doing what they could in the battle for productivity, if they wanted to maintain or increase sales and profits. That was, in Marx's view, the "revolutionary" aspect of capitalism | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Competition among producers inexorably gives rise to market monopolies for products, which may constrain further significant advances in productivity and innovation. According to Marx, monopolies and competition always co-exist; monopolies in the production of goods and services are rarely permanent, and as soon as competition is blocked at one level, it reappears at another level. However, Marx never discussed all the different forms of economic competition in capitalist society. His main concern was to explain what the competition was ultimately about, and what structural factors were involved, from the point of view of the production system as a whole. The negative influence of the tendency of the rate of profit to fall on business income could, Marx argued, be overcome in the long run only by organizing production and sales on a larger and larger scale, or by technological revolutions which reduced the cost of raw materials, labour and fixed equipment. That was capitalist progress. But to be able to compete in product markets in the end requires enormous amounts of investment capital, which (1) cuts out most would-be producers and (2) lowers the profit rate on investment capital. In turn, investors will no longer commit very large amounts of capital to investment projects if they are uncertain about whether those projects will yield an adequate return in the future. The more uncertainty there is, the more difficult it is to "securitize" (insure) their longer-term investments against losses of capital | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value If the state will not provide financial backing, private finance must provide it, but the latter is reluctant to do so if the risks outweigh the yields. This causes a powerful development of capital markets and supporting financial services, including shadow banking (credit facilities by non-bank organizations). In a developed capitalism, the development or decline of the different branches of production occurs through the continual entry and exit of capital, basically guided by profitability criteria, and within the framework of competition. Where demand and profits are high, capital moves in, and when demand and profits are low, capital moves elsewhere. Thus, supply and demand are reconciled, however imperfectly, by the incessant migrations of capital across the economy. Yet, Marx argues, this whole process is nevertheless still regulated by the law of value; ultimately, relative price movements for products are still determined by comparative expenditures of labour-time. Thus, market prices for outputs will gravitate towards prices of production which themselves are constrained by product-values expressible in quantities of labour-time. In serious economic crises, Marx suggests, the structure of market prices is more or less suddenly readjusted to the evolving underlying structure of production values. The economic crisis means that price and value relationships have gotten badly out of kilter, causing a breakdown of the normal trading process | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value According to Marx, the basic meaning of crises for capitalists was, that they could not longer invest their capital at an adequate profit income, which usually meant also that their capital lost part of its value. For workers, crises meant an increase in unemployment, and wage-cuts. Some output and assets might also be destroyed, because they could not be sold, or because they did not make money. Solving the crisis meant reorganizing production and trade, to meet the new requirements for profitable sales. Usually, crises were happening all the time somewhere in the capitalist economy, but those crises were limited to specific industries going bust – such crises normally did not spread to the whole economy. However, at some point, the crisis of particular branches of activity could set off a chain-reaction which would spread to the whole economy. Marx himself never developed a substantive theory of capitalist crises, beyond commenting about the economic crises he was able to observe himself. His main claim was that the crises are "system-immanent" (due to endogenous causes), and not an accidental aberration, i.e. they are a necessary feature of capitalist development. A large Marxist literature on "crisis theory" nowadays exists, in which different authors defend various ideas about the "ultimate" causes of capitalist crises (see also crisis theory) – basing themselves on a few scattered comments by Marx on the topic | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Such theories are very difficult to prove scientifically, for five reasons: According to a popular Marxist interpretation, crises are the necessary result of the falling profitability of production capital, which, according to Marx, was an effect of rising overall productivity (raising the organic composition of production capital and lowering the value of commodities). But supposing that we can prove definitely that profitability did gradually decline across (say) 25 years, it is still not proved why a serious economic crisis would occur precisely at the end of that period, rather than (say) after 5 years, or 10 years, or 15 years. That is, by demonstrating an empirical profitability trend, the main causes and effects of the trend are not yet proved. In addition, production capital is a smaller and smaller fraction of the total mass of capital accumulated, and thus, it is not proved how the reduced profitability of only a minor part of the total capital can, by itself, throw the whole of capitalist society into crisis. What can be definitely proved, is that slumps have happened fairly regularly in the history of industrial capitalism from the 1820s onward, some being more severe than others. In the real economic history of capitalism, there is therefore no evidence of a spontaneous tendency toward economic equilibrium: capitalism develops spasmodically, through booms and slumps. Every crisis is supposed to be the last one, until a new crisis occurs | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value That was, for Marx, a good reason for doing away with the capitalist system, and bringing production under planned, collective control by the freely associated producers. Marx believed that the operation of the law of value was not only modified by the capitalist mode of production, but also in the world market (world trade, as contrasted with the home market or national economy). The main reason for this was the existence of different levels of the intensity and productivity of labour in different countries, creating for example a very different cost structure in different countries for all kinds of products. Products that took 1 hour of labour to make in country A might take 10 hours to make in country B, a difference in production costs which could strongly influence the exchange values realised in the trade between A and B. More labour could, in effect, exchange for less labour internationally (an "unequal exchange" in value terms) for a prolonged time. In addition, the normal rate of surplus value could be different in different countries. That makes a huge difference not only to profitability, but to the ability to sell products at competitive prices. So traders would try to use this differential to their advantage, with the usual motto "buy cheap, sell dear". This promotes the internationalization of business. The result, some Marxists argue, is an international transfer of value, from countries with a weaker bargaining position to those with a stronger one | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value The differential in labour valuations becomes a source of profit (see also global labor arbitrage). Among German Marxists, Marx's fragmentary remarks on the law of value in a world market setting stimulated an important theoretical debate in the 1970s and early 1980s. One aim of this debate was to move beyond crude Ricardian interpretations of comparative advantage or comparative costs in explaining the pattern of world trade. To some extent similar debates took place in the US, France and Japan. In particular, when the volume of intra-industry trade (IIT) between countries grows (i.e. the same kinds of products are both imported and exported by a country), and when different branches of the same multinational import and export between countries with their own internal price regime, international comparative advantage theories of the Ricardian type do not apply. Nowadays, Marxian scholars argue, comparative advantage survives mainly as an ideology "justifying" the benefits of international trade, not as an accurate "description" of that trade (some economists however draw subtle distinctions between comparative "advantages" and comparative "costs", while others switch to the concept of competitive advantage). Ultimately, the "comparative advantage" ideology is based on a very simple ideology about trade | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value This ideology says, that if everybody specializes in what they are the best at producing, this provides the greatest amount of wealth for everybody, because then everybody will be operating in the most efficient way. But this ideology is hopelessly naive. The simple reason is that, even if products are produced very efficiently, this says nothing about the terms on which products will be traded, and the incomes which producers will get for their work. They might work very efficiently, but get very little money for their effort. The operation of the law of value in the world market might however seem rather abstract, in view of the phenomena of unequal exchange, differences in accounting norms, protectionism, debt-driven capital accumulation and gigantic differences in currency exchange rates between rich and poor countries. These phenomena can create very a significant distortion in world trade between final market prices for goods, and the real production costs for those goods, resulting in superprofit for the beneficiaries of the trade. The value and physical volume of manufactured exports by developing countries increased gigantically more than the actual income obtained by the producers. Third world nations relatively speaking received less and less for what they produced for sale in the world market, even as they produced more and more; this is also reflected in the international terms of trade for manufactured products | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value The postulate of the law of value does however lead to the Marxian historical prediction that global prices of production will be formed by world competition among producers in the long term. That is, the conditions for producing and selling products in different countries will be equalised in the long run through global market integration; this will be reflected also in International Financial Reporting Standards. Thus globalisation means that incipiently the "leveling out of differences in industrial rates of profit" through competition begins to operate internationally. Trading ratios and exchange-values for products sold globally would thus become more and more similar, in the long term. There has been a long debate among Marxists about whether the law of value also operates in non-capitalist societies where production is directed mainly by the state authorities. This debate occurred separately from the socialist calculation debate. There is still little agreement on the issue, because different Marxists use different definitions and concepts which are often influenced by political attitudes. In his famous pamphlet "Economic Problems of Socialism in the USSR", Joseph Stalin argued that the law of value did operate in the economy of the Soviet Union | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Stalin was primarily concerned at the time with the problem of wasted labour, in an economy where workers often could not be easily fired (they had a constitutionally guaranteed right to a job, and there was considerable featherbedding of employees), and where there was often no clear relationship between salary-levels, work performance and actual output. The Stalin theory of the law of value was critically discussed by Włodzimierz Brus in "The market in a socialist economy". Apart from Stalin, the most influential theorist of the law of value in the 20th century was Yevgeni Preobrazhensky. In his book "The New Economics" (1926, published in English in 1965), Preobrazhensky tried to specify clearly what the law of value should be understood to mean, for the purpose of economic policy. His main thesis was as such: This influential analysis equated the law of value with market economy, and counterposed it to state-organized economy. There was, in other words, a structural conflict between the market principle and the collective planning principle. Preobrazhensky then aimed to show how state-organized economy could prevail over market forces in such a way, that the economic growth path would be optimal. His basic idea was that a tax on the millions of farmers in the Russian empire could finance urban industrialization | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Preobrazhensky's approach to the law of value became the common assumption of left-wing Marxists discussing the transition to socialism, until the theorists of market socialism began to challenge it and gained more intellectual influence. According to Fred L. Block, nowadays "Contemporary scholarship rejects the assumption...that state and market are distinct and opposing modes of organizing economic activity." Supporters of the theory of state capitalism in the Soviet Union (such as Tony Cliff and Chris Harman) and scholars such as Andre Gunder Frank have also believed that the law of value operated in Soviet-type societies. However, it is not always clear what they mean by the law of value, beyond the vague idea that the direct producers remain dominated by their own products, or that labour costs remain important, or that Soviet-type societies remained influenced by the world market. In 1979, Tony Cliff explained: Many Western Marxists reasoned that if workers were oppressed in the Soviet economy, the Soviet system could not be socialist, and that if it was not socialist, it must be capitalist – be it a special kind of capitalism, a capitalism mainly directed by the state. A similar theory was adopted in 1967 by the Chinese communists: after Stalin died in 1953, according to this theory, a sort of coup d'état had occurred in the Kremlin, which led to the "restoration of capitalism" throughout the USSR. The 1965 Soviet economic reform was interpreted as a proof of that theory | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Some Western Maoists followed this interpretation. A 1977 resolution of the Bay Area Communist Union, an American Maoist group, stated that: "In socialist society, commodity exchange, as well as value and the law of value continue to a certain extent. Only communism obliterates all aspects of commodity exchange, value, money, etc. However, one commodity does disappear under socialism: labor-power." From the 1930s to the 1950s, when Soviet industrialization seemed to be forging ahead, many Western Marxists theorized that Soviet state capitalism was a "higher stage" of capitalism than ordinary capitalism. But when it became very clear, in the 1980s, that Soviet economic growth was lagging behind the West, the Soviet state-capitalist stage was often reconceptualized as a "lower" stage of capitalism, which would in due course lead to "ordinary" capitalism (in Cliff's theory, all capitalisms in all countries are "state capitalisms" of one sort or another – some more developed, and others less developed). In his famous book "State capitalism in Russia" (1948), Tony Cliff theorized that the law of value "tends to equalise supply and demand, a situation in which price is equal to value, or more correctly, is equal to price of production | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value " Although there seemed to him to be little internal evidence that the law of value regulated the Soviet economy, he believed the law of value was "the arbiter of the Russian economic structure as soon as it is seen in the concrete historical situation of today—the anarchic world market." Critics of this interpretation argue that the Soviet economy was, in reality, rather autarkic (self-sufficient), that foreign trade was state-directed and played a comparatively small role in the economy as a whole, and that the foreign transactions were often non-commercial (often a form of barter, subsidized transfers or counter-trade). Rudolf Hilferding regarded state capitalist theories as conceptually incoherent, because – he argued – the law of value presupposed market competition among private enterprises. If the allocation of resources was performed by a state dictatorship, there was no capitalism at all. According to Ernest Mandel, the law of value, as a law of exchange, did influence non-capitalist societies to some extent, inasmuch as exchange and trade persisted, but because the state directed the bulk of economic resources, the law of value no longer "ruled" or "dominated" resource allocation | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value The best proof of that was that there was mostly no clear relationship at all anymore between the exchange-value of goods traded, how they were allocated, and what it really cost to produce them; accounting information, insofar as it was valid, might in fact be unable to show anything about the real nature of resource allocation. The prices in the Soviet economy were, for the most part, not market prices but administered prices set by the planning boards (there was also a black market, mainly for consumer goods). Insofar as the social priorities of state policy ensured that people got what they needed, that was a good thing; but insofar as resources were wasted because of a lack of sensible cost-economies, it was a bad thing. Cost-accounting is, of course, no more "neutral" than profit-accounting; a lot depends on what costs are included and excluded in the calculation. Mandel blamed the waste of resources in the Soviet economy on bureaucracy, and regarded the USSR as a bureaucratically degenerated workers' state. He believed that if there was genuine democracy instead of bureaucracy, there would be no more waste. Mandel's critics believe this is a naive theory because: Charles Bettelheim complained that Mandel lacked a "dialectical synthesis", because, in a somewhat Cartesian way, Mandel tried "to deal with the complex reality of the transitional society by means of the simplest and most abstract categories of "pure" and fully developed socialist society | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value " Other critics think the problem is rather different: it is that almost all Marxists have created a theoretical dichotomy between "market economy" and "planned economy", suggesting that "either" there is market anarchy, "or else" a planned, non-market economy. In the real world, such a dichotomy rarely exists—almost all economists agree that planning and markets are "compatible"; in fact they usually depend on each other. According to Peter Frase, "The Market has been so mystified by its apologists that we no longer recognize a planned economy when we see it." In socialist Cuba, Che Guevara adopted the view that if more resources were directly allocated to satisfy human needs, instead of commercially supplied, a better life for people would result. Guevara organised an interesting conference at which the theoretical issues were debated. At that time, Cuba benefited from plentiful subsidies by Eastern bloc countries, principally the Soviet Union, which compensated for the US trade boycott against Cuba. However, the Cuban Government defaulted on most of its international debt in 1986, reducing its access to foreign credit, and from 1989 the support of the Eastern Bloc disappeared, causing a steep decline in the Cuban national product. The Cuban economy was thereafter sustained to a large extent with foreign tourism, foreign remittances, foreign counter-trade and joint-ventures with foreign companies | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value In recent years, there have been a number of pro-market reforms, and attempts to reduce state-bureaucratic regulation. The modal standard of living and quality of life in Cuba is still among the best in Central and Latin America. Generally, the Western New Left adopted the idea that true socialism would involve the abolition of the law of value, since commodity production would be abolished – goods and services would be allocated according to need, and primarily according to non-market principles. This recalled an idea by Nikolai Bukharin and Yevgeni Preobrazhensky in "The ABC of Communism" (1920): John Weeks has argued that the law of value is unique to an economy based on the capitalist mode of production. He rejects the claim by Engels that the law of value is associated with the entire history of economic exchange (trade), and modified when the vast majority of inputs and outputs of production have become marketed, priced commodities. Marx himself said that the law of value "develops fully only on the foundation of capitalist production", implying that the law of value already asserted itself "before" capitalist production, although not fully. Indeed, in a criticism of Adam Smith, Marx specifically refers to the law of value governing "simple commodity exchange"—the point being that this law is transformed in capitalist exchange where "more labour is exchanged for less labour (from the labourer’s standpoint), less labour is exchanged for more labour (from the capitalist’s standpoint)" | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Other Marxists (including Ernest Mandel, Michael Perelman and the Japanese scholar Kozo Uno) followed Marx and Engels in believing that the law of value emerges and develops from simple exchange based on simple commodity production. If the law of value was unique to capitalism, it becomes impossible to explain the development of pre-capitalist commodity exchange or the evolution of trading processes in a way consistent with historical materialism and Marx's theory of value. So a better approach, it is argued, is to regard the application of the law of value as being modified in the course of the expansion of trade and markets, including more and more of production in the circuit of capital. In that case, a specific society must be investigated to discover the regulating role that the law of value plays in economic exchange. In contemporary Venezuela, the German socialist economist Heinz Dieterich has argued that the production and distribution of products should occur in accordance with their true labour costs, as shown by special macro-economic labour accounts estimating how much work-time products take to make (in socialism of the 21st century this is called "equivalence economy"). The idea here is that people "get even" when they get just as much work back, as they put in themselves. However, this argument is very controversial | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Its critics claim equivalence economy is practically impossible, and some indeed point to Marx's rejection in the "Grundrisse" of the "time-chit" theory of allocating goods proposed by 18th and 19th century utopian socialists such as John Francis Bray and John Gray. On this view, Dieterich at most shows that the allocation of goods according to commercial principles is "only one method" of allocating resources; other methods such as sharing, redistribution, subsidization, barter, grants and direct allocation according to need may often serve the interest of fairness, efficiency and social justice better, provided that people accept a common ethic about what is best for all, if they can see that adopting such an ethic has good results. Thus, while integrated labour accounts are certainly useful to have as a planning tool, allocating resources according to the labour-time they represent is most likely not useful as a general economic principle (it could be useful in specific areas of activity). One feasible alternative to Dieterich's labour-equivalents is a new type of digital credit system, in which people gain or lose credits (and therefore gain or lose access to resources) depending on what they verifiably do, and on what age they are | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value This alternative has not yet been very popular among socialist theorists, because generations of socialists have been educated in the idea that socialism aims to abolish monetary instruments, and because the idea seems to many to be too close to "social-democratic subsidization" or "funny money" social credit theories. Nevertheless, monetary transactions in modern capitalism are increasingly only digital credits and debits, the technology exists to make transactions by mobile phone, and more than 90% of all money in developed capitalist countries is bank money, not cash or cash deposits. The international debate is still continuing. How progressive the Soviet Union really was is still being debated even today, for example by Bob Allen in his book "Farm to factory." For some socialist economists, the socialist economy is an end in itself, for others it is only a means to an end. Some socialist theorists (such as Paul W. Cockshott) are "monothetic theorists": they wish the whole of the economy to be dominated by one economic principle, such as labour-value, or a few basic economic principles. Other socialist theorists (like Alec Nove) are "pluralist theorists", believing that the economy functions best if there is a variety of different systems for producing/distributing different kinds of products and services, using a variety of property forms. Historical research is being done on the commons, often inspired by Elinor Ostrom | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value This is an attempt to understand empirically how people were able to manage land use collectively for 500 years or more, without significant state support or supervision. A frequent complaint in the discussion is that socialists, like their liberal and conservative counterparts, confuse an ethical principle of resource allocation (the "why") with the economic technique of resource allocation (the "how") – the result being an economic policy in which the means and the ends are confused. In almost any society, market and non-market methods of allocating resources are in practice "combined", which is acknowledged in official national accounts by the inclusion of market and non-market sectors. The real question for economists is how the two can be combined to achieve the best economic result for citizens, and what the effect is of market and non-market methods on each other. This can be a highly politicized and contentious dispute, since the chosen methods can advantage some and disadvantage others; it is very difficult to devise allocation methods which distribute the gains and losses of economic policy in an equal or equitable way among all economic actors. Typically, pro-capitalist theorists argue that "there is no alternative to the market", and the anti-capitalists argue that markets "could not even exist" without many non-market mechanisms and supports (i.e. marketisation merely shifts the burden of unpaid work effort onto someone else) | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Almost all modern economies are "mixed economies" meaning that they combine market allocation of resources with non-market allocation, in various ways. That is why the modern economic controversies are almost always about the relative importance which different kinds of allocation mechanisms should have. This debate is, of course, very strongly influenced by the income which the different economic actors can get, if particular economic policies are realized. Traditionally, criticism of Marx's law of value has been of three kinds, i.e. conceptual, logical and empirical. The conceptual criticism concerns the concept of value itself. For Marx, economic value in capitalist society was an objectified social characteristic of labour-products, exchanged in an economic community, given the physical reality that products took a definite amount of society's labour-time to produce, for a given demand. A product had a value, regardless of what any particular person might think about it, priced or unpriced (see value-form). Marx regarded the law of value as analogous to an objective physical law, since people could never escape from the fact that the products they consumed presupposed an objective cost in human labour time. Critics however argue that economic value is something purely subjective, i.e. a personal valuation determined by personal preferences and marginal utility; only prices are objective. One of the first Marx-critics to argue this was the Austrian Eugen Böhm von Bawerk | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Marx himself never denied that subjective valuations existed, but argued rather that they "co-existed" with objective values which were ultimately not determined by preferences but by real production costs. In the real world, many prices are not "objectively manifest" either—they are only ideal prices used for the purpose of calculation, accounting and estimation, not actually charged or applying directly to any real transaction. Yet, these notional prices can nevertheless influence economic behaviour, inasmuch as the prices estimated affect expectations of incomes and expenditures. Economists then debate about when a price can be said to be "objective". Marx argues that products have different objective costs of production, reducible to different amounts of labour-time. Against this view, one could also argue that the physical amounts of "comparable resources" (such as energy, land, water, etc.), necessary to manufacture a car, are much larger than resources necessary for growing a carrot, explaining why the cost (and, hence, minimal price) of a car is larger than the cost of a carrot. In other words, it is the total input costs (including costs of labour), not the amount of labour per se, which create the difference in costs (and, therefore minimal equilibrium prices) of the goods. However, Marx argues in the first chapters of "Das Kapital" that most of such costs (i.e. insofar as they refer to reproducible goods) are again reducible to direct and indirect costs in human labour time | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value When we see a car, we do not see the worldwide cooperation of labour-efforts that produced it at a certain cost, yet those labour efforts, weighed against other labour efforts, determine its value. Austrian economics explicitly rejects the "objectivity" of the values of goods as logically and conceptually unsound. On this view, we cannot validly say that products took a certain amount of labour, energy and materials to make, and compare them on that basis. It follows that the Austrian School thinks most contemporary economic theory is invalid, as it relies in one way or another on the aggregation and comparison of actual and ideal prices. This is forcefully argued by Friedrich von Hayek who therefore was skeptical about the objectivity of macroeconomic aggregations as such. However, this raises the question of "what is the explanatory power of Austrian economics", if all we can say about a realized price is that it expresses a subjective preference, given that there are billions of subjective preferences which are all different. Ecologists and environmentalists have criticized Marx on the ground that natural resources have (or should have) a value which has nothing to do with production costs in labour time, because in fact they are entropic "non-reproducible" goods. However, Marx himself never denied this; he was merely referring to the "bourgeois" valuation scheme, originating from commercial trade, double-entry bookkeeping, private property theory and the theory of prices | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Precisely "because" natural resources were for a long time either non-reproducible or freely available goods (i.e. not reproducible commodities) the whole tendency in the market economy was for those resources to be "plundered" for private gain, rather than economized appropriately. Their "value" became apparent only when they became scarce. Ecologists also note that Marxist theories of value caused large-scale environmental problems in the industrialization of the Soviet Union, China and other countries ruled by communist parties; thus, whether or not an economy is a market economy or a state economy does not seem to make much difference, the problem is rather with the values of human cultures themselves or with industrialization processes as such. This more complex debate cannot be dealt with in this article; it may be noted only that newly industrializing countries to a large extent "imitated" technical methods used in industrialized countries, and that Marx can hardly be held responsible for all the things done in his name—he had explicitly referred to problems of environmental despoilation quite a number of times, including in "Das Kapital". He never dealt systematically with socialist economics, amongst other things because he lacked an evidential basis for theorizing about that. The logical criticism revolves around the idea that Marx is unable to reconcile the domain of value relations and the domain of price relations, showing exactly how value "magnitudes" correspond to price "magnitudes" | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Various arguments are made to show that Marx's theory of value is "logically" incoherent. The most famous of these is the controversy about Marx's prices of production, sometimes called the transformation problem in which it is argued that total output value must equal total output production prices, and total profits must equal total surplus value, so that the distributions of particular output values and output prices can then be "inferred" from each other, via mathematical functions and a tidy accounting sum, assuming the same rate of profit on capital invested by all sectors. However, it cannot be proved, whether logically or empirically, that the total output value is equivalent to total output production prices, or, for that matter, that total profit equals total surplus-value. On that ground alone, many critics argue, there is already no proof that there is any necessary quantitative relationship between them (Marx simply assumes that relationship, but does not prove it). If that is so, then, the critics argue, there is no sense in which the Marxian product-values can "explain" market prices for products as the "determinants" of those prices | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value An additional problem discovered in mathematical modelling is that the assumption of the identity of total production prices and total values (or the identity of total surplus value and total profits) cannot be maintained simultaneously with the assumption that the rate of profit on production capital is "the same" for all industries—to create a consistent theory requires making additional assumptions. Although this is often overlooked by economists Marx himself used a uniform rate of profit for all industries in "Capital Vol. 3" "only" for modelling purposes, to show in a simple way how the ruling profit rates on capital impacted on the development of production system, and he explicitly "denied" that a uniform rate of profit obtained in reality; he only argued that at any time there would exist an average ""minimum acceptable"" profit rate on capital invested in industries, and if there was no realistic possibility at all of reaching at least that profit rate sometime in the future, capital would very likely be disinvested after a while, since the relevant business would then simply lack commercial viability; alternatively, the business would be taken over, and restructured to restore an acceptable profit rate. This minimum profit rate applying to new investments is closely linked to the "ruling interest rates" applicable to producing enterprises | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Marx's "general rate of profit" specifically represents the "minimum profit rate" on capital, below which the producers, in the normal run of events, cannot stay in business for long. It is "neither" an empirical average of many profit rates, "nor" merely a theoretical ratio, but a real systemic constraint. Marx and Engels explicitly denied that "in reality" total product-value would be equal to the total of production prices (see prices of production). Such an "accounting identity" was ruled out in the real world by continual variations in labour productivity and because, at any time, no competitive force existed that could exactly cancel out the difference between goods sold above value and goods sold below value. It was also ruled out by the imperfections of the price-form itself, which, the fetishization of price statistics notwithstanding, permitted the expression of product-values only in an approximate way (see real prices and ideal prices). At best—Marx assumed—there was a reasonably close correspondence between total product-value and total production prices. He believed economic fluctuations implied that if some products were sold below their value, this necessarily meant that other products were sold above their value, and vice versa | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value The divergence between total product-values and total production prices on the whole was, Marx believed, probably not so very large, in an open, competitive market within the domestic economy, where enormous price-value discrepancies were ordinarily impossible to maintain commercially for any length of time. A measuring unit of value can exist only as a "theoretical" entity (or as an ideal price comparable to an empirical price) which is also exactly how Marx used it in his simplified illustrations of value relationships. He simply uses a number for the value-quantity and another number for the price-quantity, to indicate a proportion. Empirically, one can only get as far as establishing a "grand average" for the price of an hour of work (this is often referred to in Marxian economics as the "monetary equivalent of labour time", or MELT) and one can discuss the extent to which labour is undervalued or overvalued in a "relative" (comparative) sense. This interpretation is not accepted by all Marxist scholars, because—the critics argue—all price-value differentials among different outputs are "necessarily" and "by definition" cancelled out at the aggregate level, not just in an assumed theoretical model, but in reality. They point to passages where Marx suggests that the sum of product-values must be equal to the sum of production prices, implying that there can never be more new product-value or less product-value than is expressed by the sum total of output production prices | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value If they argue that equality does not hold, then there cannot be any determinate quantitative relationship between production prices and product-values. Product-"values" in Marx's sense quite simply "cannot" be directly observed, only "inferred" from the actual behaviour of trading relations. In that regard, Marx's concept of ""value" has exactly the same status as the official category of "value added" (which is an inferred magnitude). Product-values manifest themselves and can only be "expressed" as trading ratios, (ideal) prices, or quantities of labour-time, and therefore the academic "transformation controversy" is according to many modern Marxist theorists "misguided"; it rests simply on a false interpretation of the relationship between the value-form of commodities and the price-form. What Marx really meant by the "transformation" was that the direct regulation of the exchange-value of commodities according to their labour-value is, in a capitalist mode of production, transformed into the regulation of the exchange of commodities by their production prices—reflecting the fact, that the supply of commodities in capitalist society has become conditional on the accumulation of capital, and therefore on profit margins ("no profit, no sale") | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value As soon as we admit that product-prices may fluctuate above or below the socially average product-values for all kinds of reasons—a central determinant of market dynamics—the quantitative relationship between product-values and product-prices is at best "probabilistic", not a fixed function of some type. The structure of Marx's argument in "Capital Vol. 3" is that there is a constant "contradiction" in capitalism between the inescapable labour-costs incurred to produce products, and the laws of price competition which create pressure to maximize the return on capital invested—a contradiction which must constantly be mediated in practice, bringing about the "real movement" of the production system (ideally, capitalists would prefer just to trade assets without the nuisance and trouble of hiring labor, but the assets have to be "produced", that production requires "labor", and therefore that labor has to be "organized" in a commercially effective way). The only way to transcend the scientific "arbitrariness" to which the young Marx already referred, was by understanding and theorizing the dynamics of the capitalist system "as a whole", integrating all the different economic forces at work into a unified, coherent theory that could withstand the test of scientific criticism | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Thus, Marx's value "theory" offers an interpretation, generalisation or explanation concerning the "grand averages" of the relative price movements of products, and of economic behaviour in capitalist production as a social system, but it is not possible to deduce specific real product-prices from product-values according to some mathematical function, among other things because, to find labour-values, a relationship between product-prices and labour hours worked must already be assumed. What we "can" verify is as follows: The empirical criticism is that Marx's law of value contradicts the known facts about the allocation of resources in capitalist society. The main empirical criticism is simply that there is no observable quantitative correspondence at all between changes in relative expenditures of labour-time, and changes in relative market prices of products, however measured (the measures are also contested, for example on the ground that qualitatively different kinds of labour cannot be compared and equated). Most critics have tried to refute Marx's theory with a mathematical model, rather than looking at real data to see if the capitalist economy really behaves in the way Marx claims it does. A recent empirical criticism has to do with what Marxists call "financialization". In developed capitalist economies, the majority of workers and capital assets no longer directly participate in the production of new commodities by private enterprise | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Many workers work in service industries which manage, maintain or distribute already existing resources. That is the result of two centuries of industrialization and mechanization in developed capitalist countries (plus outsourcing to newly industrializing economies). The bulk of capital assets in developed capitalist countries are not physical means of production used by private enterprise to create new commodities; they are financial assets, real estate and other types of property not used for production. This means that human labour is no longer regarded as the mainspring of wealth-creation, and it raises the question of how the law of value could, in that case, be a regulative force in the allocation of resources, or how it could determine prices. According to Professor Hillel Ticktin: This issue has not yet been resolved, because there is little scientific agreement about how the "real economy" (producing goods and services) and the "financial economy" (trading property and assets) are related to each other, or how the "developed world" is related economically to the "developing world". Because "globalization" can mean almost anything, it does not explain anything about the world economy. Additionally, although Marxists have written many articles in which they very precisely try to classify productive and unproductive labour, there has been no comprehensive organizational analysis of the modern division of labour, or a critical analysis of the statistical categories used to understand it | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value These three lines of criticism lead the critics to the conclusion that Marx's law of value is metaphysical and theoretically useless. Austrian economics goes a step further by attributing no special objective meaning to price levels at all, which it considers a mere "statistical outcome" of comparisons between each party's ratios between the value of money (taken to be just another kind of a good) to values of goods being sold or purchased. The prices, therefore, are "knowledge", which may (or may not) influence behaviour of economic agents differently "in each particular case". However, it can be argued that this approach is inconsistent, insofar as nothing in their theory entitles the Austrians to aggregate prices at all; "because" each price expresses a unique subjective preference, adding up prices is like adding up apples and pears; each price refers to a unique set of circumstances. If the Austrians are correct, there can really be nothing "objective" about the "statistical outcome"—it is merely an interpretation based on numerous valuation assumptions. Marx himself thought that the concept of value was necessary to explain the historical origins, the development and mode of functioning of capitalism as a social system, under conditions where traded, priced assets were only a subset of total assets possessing a potential exchange-value | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Short-term price fluctuations could not say anything about the long-term development of the capitalist production system; that required an analysis of the determinants of long-term average price movements, and "structural" factors. According to primitive economics, all prices are of the "same kind" and differ only quantitatively; they only express more or less money, and can only go up or down. For Marx, this idea was not only false, but totally absurd, since different kinds of prices can assume different valuation principles, contractual obligations, conditionalities, inclusions/exclusions as well as relationships between economic actors. Different kinds of prices express different kinds of trading relationships. Marx noted that the forms prices take are highly "variegated", and he drew a sharp distinction between real prices and ideal prices. That is why businessmen assumed a theory of value, even if they were not aware that they were doing it. The "scientific theory" merely made explicit what they were implicitly assuming for the purpose of doing business. The economists "assumed" all sorts of things about an economy and economic actors, in order to build models of price behaviour; Marx thought "those assumptions themselves" needed to be looked at and theorised consistently, based on insight into the historical formation of economic categories. However, his critics claim that his own approach has hidden assumptions as well, and that these assumptions contradict praxeology | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Marx anticipated this criticism, which he regarded as very shallow. In his pamphlet "Wages, price and profit" (1865), Marx argues that the way economic relationships observably appear to the individual is often the inverse of the real process, considered as a whole. It is perfectly possible not only to participate in market trade without much knowledge of markets and their overall effects, but also to participate in markets with a "false" or "one-sided" interpretation of what is really going on in the exchanges. After all, the participants in trading activity all have their own interest in the matter, and look at it from their own point of view. In this sense, Marx warns that market trade can stimulate all sorts of delusions about what relationships are really involved. Marx also argued that if one could not explain the simplest cases of an economic phenomenon, one could not explain all its variations either; in fact, one could not explain anything at all. Marxists often assumed that Marx provided a theoretical system of what they call "the totality" (the whole economy, or the whole of society). In reality, Marx only aimed to portray the essence of capital, by means of a study of the capitalist mode of production in Western Europe (using illustrations from English industry). According to historical materialism, production is the basis of society, and Marx analyzed that basis. Marxists have also often assumed wrongly that Marx's abstract theory can be applied "directly" and "immediately" to observable reality | https://en.wikipedia.org/wiki?curid=2200186 |
Law of value Yet Marx's historical and logical analysis of economic forms is often an "abstraction from" observable reality. It is an analysis which only aims to define the "essence" of economic phenomena (i.e. what their true or overall significance is), based on a critical inspection of the evidence. Thus, Marx often offers only a "simplified" or "idealized" account of economic phenomena. The largest part of Marx's economic writings was never published in his lifetime, and was never prepared for publication by Marx himself. The ideology of "Marxism" was formed already long before all the facts and all the texts became available, which meant that Marx the man, his life and his work were frequently interpreted in a false way. | https://en.wikipedia.org/wiki?curid=2200186 |
G20 The (or Group of Twenty) is an international forum for the governments and central bank governors from 19 countries and the European Union (EU). Founded in 1999 with the aim to discuss policy pertaining to the promotion of international financial stability, the has expanded its agenda since 2008 and heads of government or heads of state, as well as finance ministers and foreign ministers, have periodically conferred at summits ever since. It seeks to address issues that go beyond the responsibilities of any one organization. Membership of the consists of 19 individual countries plus the European Union. The EU is represented by the European Commission and by the European Central Bank. Collectively, the economies account for around 90% of the gross world product (GWP), 80% of world trade (or, if excluding EU intra-trade, 75%), two-thirds of the world population, and approximately half of the world land area. With the growing in stature after its inaugural leaders' summit in 2008, its leaders announced on 25 September 2009 that the group would replace the G8 as the main economic council of wealthy nations. Since its inception, the G20's membership policies have been criticized by some intellectuals, and its summits have been a focus for major protests by left-wing groups and anarchists. The heads of the nations held summits twice in 2009 and twice in 2010. Since the November 2011 Cannes summit, summits have been held annually | https://en.wikipedia.org/wiki?curid=2206608 |
G20 The is the latest in a series of post–World War II initiatives aimed at international coordination of economic policy, which include institutions such as the "Bretton Woods twins", the International Monetary Fund and the World Bank, and what is now the World Trade Organization. The was foreshadowed at the Cologne summit of the G7 in June 1999, and formally established at the G7 Finance Ministers' meeting on 26 September 1999 with an inaugural meeting on 15–16 December 1999 in Berlin. Canadian finance minister Paul Martin was chosen as the first chairman and German finance minister Hans Eichel hosted the inaugural meeting. A 2004 report by Colin I. Bradford and Johannes F. Linn of the Brookings Institution asserted the group was founded primarily at the initiative of Eichel, the concurrent chair of the G7. However, Bradford later described then-Finance Minister of Canada (and future Prime Minister of Canada) Paul Martin as "the crucial architect of the formation of the G-20 at finance minister level", and as the one who later "proposed that the G-20 countries move to leaders level summits". Canadian academic and journalistic sources have also identified the a project initiated by Martin and then-US Treasury Secretary Larry Summers. All acknowledge, however, that Germany and the United States played a key role in bringing their vision into reality | https://en.wikipedia.org/wiki?curid=2206608 |
G20 Martin and Summers conceived of the in response to the series of massive debt crises that had spread across emerging markets in the late 1990s, beginning with the Mexican peso crisis and followed by the 1997 Asian financial crisis, the 1998 Russian financial crisis, and eventually impacting the United States, most prominently in the form of the collapse of the prominent hedge fund Long-Term Capital Management in the autumn of 1998. It illustrated to them that in a rapidly globalizing world, the G7, G8, and the Bretton Woods system would be unable to provide financial stability, and they conceived of a new, broader permanent group of major world economies that would give a voice and new responsibilities in providing it. The membership was decided by Eichel's deputy Caio Koch-Weser and Summers's deputy Timothy Geithner. According to the political economist Robert Wade: The G20's primary focus has been governance of the global economy. Summit themes have varied from year to year. The theme of the 2006 ministerial meeting was "Building and Sustaining Prosperity". The issues discussed included domestic reforms to achieve "sustained growth", global energy and resource commodity markets, reform of the World Bank and IMF, and the impact of demographic changes due to an aging world population. In 2007, South Africa hosted the secretariat with Trevor A. Manuel, South African Minister of Finance as chairperson of the G20 | https://en.wikipedia.org/wiki?curid=2206608 |
G20 In 2008, Guido Mantega, Brazil's Minister of Finance, was the chairperson and proposed dialogue on competition in financial markets, clean energy, economic development and fiscal elements of growth and development. On 11 October 2008 after a meeting of G7 finance ministers, US President George W. Bush stated that the next meeting of the would be important in finding solutions to the burgeoning economic crisis of 2008. The Summit of Finance Ministers and Central Bank Governors, who prepare the leaders' summit and implement their decisions, was created as a response both to the financial crisis of 2007–2008 and to a growing recognition that key emerging countries were not adequately included in the core of global economic discussion and governance. Additionally, the summits of heads of state or government were held. After the 2008 debut summit in Washington, DC, leaders met twice a year: in London and Pittsburgh in 2009, and in Toronto and Seoul in 2010. Since 2011, when France chaired and hosted the G20, the summits have been held only once a year. The 2016 summit was held in Hangzhou, China, the 2017 summit was held in Hamburg, Germany and the 2018 summit was held in Buenos Aires, Argentina. A number of other ministerial-level meetings have been held since 2010. Agriculture ministerial meetings were conducted in 2011 and 2012; meetings of foreign ministers were held in 2012 and 2013; trade ministers met in 2012 and 2014, and employment ministerial meetings have taken place annually since 2010 | https://en.wikipedia.org/wiki?curid=2206608 |
G20 In 2012, the Ministers of Tourism and Heads of Delegation of member countries and other invited States, as well as representatives from the World Travel and Tourism Council (WTTC), World Tourism Organization (UNWTO) and other organisations in the Travel & Tourism sector met in Merida, Mexico, on May 16th at the 4th T20 meeting and focused on 'Tourism as a means to Job Creation'. As a result of this meeting and The World Travel & Tourism Council’s Visa Impact Research, later on the Leaders of the G20, convened in Los Cabos on 18-19 June, would recognise the impact of Travel & Tourism for the first time. That year, the Leaders Declaration added the following statement: "We recognise the role of travel and tourism as a vehicle for job creation, economic growth and development, and, while recognizing the sovereign right of States to control the entry of foreign nationals, we will work towards developing travel facilitation initiatives in support of job creation, quality work, poverty reduction and global growth." In March 2014, the former Australian foreign minister Julie Bishop, when Australia was hosting the 2014 summit in Brisbane, proposed to ban Russia from the summit over its role in the 2014 Crimean crisis. The BRICS foreign ministers subsequently reminded Bishop that "the custodianship of the belongs to all Member States equally and no one Member State can unilaterally determine its nature and character." Japan hosted the 2019 summit. 2020 summit will be in Saudi Arabia | https://en.wikipedia.org/wiki?curid=2206608 |
G20 The Leaders’ Summit will be held on 21-22 November 2020 in Riyadh. In the run-up to the Summit, the Presidency will host more than 100 meetings and conferences, including ministerial meetings, as well as meetings of officials and representatives from civil society. To decide which member nation gets to chair the leaders' meeting for a given year, all members, except the European Union, are assigned to one of five different groupings, with all but one group having four members, the other having three. Nations from the same region are placed in the same group, except Group 1 and Group 2. All countries within a group are eligible to take over the Presidency when it is their group's turn. Therefore, the states within the relevant group need to negotiate among themselves to select the next President. Each year, a different member country assumes the presidency starting from 1 December until 30 November. This system has been in place since 2010, when South Korea, which is in Group 5, held the chair. The table below lists the nations' groupings: To ensure continuity, the presidency is supported by a "troika" made up of the current, immediate past and next host countries. The operates without a permanent secretariat or staff. The group's chair rotates annually among the members and is selected from a different regional grouping of countries. The incumbent chair establishes a temporary secretariat for the duration of its term, which coordinates the group's work and organizes its meetings | https://en.wikipedia.org/wiki?curid=2206608 |
G20 The 2018 chair was Argentina, which hosted the 2018 summit in Buenos Aires. The 2019 chair was Japan, which hosted the 2019 Osaka summit. The current chair of is Saudi Arabia-2020, which will host the 2020 Riyadh summit. The 2021 summit will be held in Italy. In 2010, President of France Nicolas Sarkozy proposed the establishment of a permanent secretariat, similar to the United Nations. Seoul and Paris were suggested as possible locations for its headquarters. Brazil and China supported the establishment of a secretariat, while Italy and Japan expressed opposition to the proposal. South Korea proposed a "cyber secretariat" as an alternative. It has been argued that the has been using the OECD as a secretariat. there are 20 members of the group: Argentina, Australia, Brazil, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, and the United States. Spain is a permanent guest invitee. Representatives include, at the leaders' summits, the leaders of 19 countries and of the European Union, and, at the ministerial-level meetings, the finance ministers and central bank governors of 19 countries and of the European Union | https://en.wikipedia.org/wiki?curid=2206608 |
G20 In addition, each year, the G20's guests include Spain; the Chair of ASEAN; two African countries (the chair of the African Union and a representative of the New Partnership for Africa's Development) and a country (sometimes more than one) invited by the presidency, usually from its own region. The first of the tables below lists the member entities and their heads of government, finance ministers and central bank governors. The second table lists relevant statistics such as population and GDP figures for each member, as well as detailing memberships of other international organizations, such as the G7, BRICS and MIKTA. Total GDP figures are given in millions of US dollars. !Member !Leader position !State leader !Finance portfolio !Portfolio minister !Central bank !Central bank governor | https://en.wikipedia.org/wiki?curid=2206608 |
United States domestic market The term (USDM) is an unofficial term used chiefly by automotive enthusiasts to describe the United States' economic market for American-brand automobiles and parts. Similar automotive enthusiast terms Japan Domestic Market (JDM) and European Domestic Market (EDM) are used to designate Japanese- and European-market automobiles and parts respectively. The term is also applied to vehicles that comply with United States regulations, most notably the lights and bumpers, which differ from European standards. The incompatibility requires manufacturers to develop USD and EDM versions of their models if they want to sell them in both regions. Sometimes the conversion in the factory lane is done after the model was launched in the European Market. The conversion to United States federal laws is often called "federalization". | https://en.wikipedia.org/wiki?curid=2212820 |
Physical plant Physical plant, mechanical plant or industrial plant (and where context is given, often just plant) refers to the necessary infrastructure used in operation and maintenance of a given facility. The operation of these facilities, or the department of an organization which does so, is called "plant operations" or facility management. Industrial plant should not be confused with "manufacturing plant" in the sense of "a factory". HVAC plant usually includes air conditioning (both heating and cooling systems and ventilation) and other mechanical systems. It often also includes the maintenance of other systems, such as plumbing and lighting. The facility itself may be an office building, a school campus, military base, apartment complex, or the like. In broadcast engineering, the term transmitter plant is the part of the physical plant associated with the transmitter and its controls and inputs, the studio/transmitter link (if the radio studio is off-site), the radio antenna and radomes, feedline and desiccation/nitrogen system, broadcast tower and building, tower lighting, generator, and air conditioning. These are often monitored by an automatic transmission system, which reports conditions via telemetry (transmitter/studio link). | https://en.wikipedia.org/wiki?curid=2213560 |
Cost the limit of price was a maxim coined by Josiah Warren, indicating a (prescriptive) version of the labor theory of value. Warren maintained that the just compensation for labor (or for its product) could only be an equivalent amount of labor (or a product embodying an equivalent amount). Thus, profit, rent, and interest were considered unjust economic arrangements. As Samuel Edward Konkin III put it, "the labor theory of value recognizes no distinction between profit and plunder." In keeping with the tradition of Adam Smith's "The Wealth of Nations", the "cost" of labor is considered to be the subjective cost; i.e., the amount of suffering involved in it. The principle was set forth in Warren's "Equitable Commerce" (among other writings) and has been called a "mainstay of 19th century individualist anarchism." It was further advocated and popularized by Benjamin Tucker in his individualist anarchist periodical "Liberty", and in his books. Tucker explained it so: Warren put his principle into practice in 1827 by establishing an experimental "equity store," called the Cincinnati Time Store, where trade was facilitated by notes backed by a promise to perform labor. This scheme was exactly that advocated by Pierre Proudhon some years later under the name "mutuellisme"; however, it is believed that Proudhon developed his ideas independently. | https://en.wikipedia.org/wiki?curid=2217004 |
Trustee in bankruptcy A trustee in bankruptcy is an entity, often an individual, in charge of administering a bankruptcy estate. In the United States, a Trustee in Bankruptcy is a person who is appointed by the United States Trustee Program, a division of the United States Department of Justice. In limited circumstances, the creditors involved in a bankruptcy case can elect a trustee. In a Chapter 7 Bankruptcy ("Liquidation") the trustee gathers the debtor's non-exempt property, managing the funds from the sale of those assets, and then paying expenses and distributing the balance to the owed creditors. In a Chapter 13 Bankruptcy ("Reorganization") the trustee is responsible for receiving the debtor's monthly payments and distributing those funds proportionally to the debtor's creditors. The Bankruptcy Trustee will act on behalf of the debtor to guarantee that both the creditors’ and the debtor's interests are maintained in accordance with the bankruptcy laws, and will often be required to act as a negotiator between the two parties. Since the 1990s, duties similar to those of a trustee are sometimes performed by an individual called a Chief restructuring officer (CRO), generally prior to, or subsequent to, a bankruptcy proceeding (generally, a Chapter 11 proceeding). A CRO is an official of the company who has direct contact with the creditors and who has executive power to implement changes | https://en.wikipedia.org/wiki?curid=2221576 |
Trustee in bankruptcy The advantage of using a CRO is that the arrangement gives both the creditor and debtor more say over the future of the company than might be the case where a Chapter 11 bankruptcy trustee is appointed. In Canada, a licensed insolvency trustee (LIT) is an individual or a corporation licensed by the official superintendent to hold in trust and, subsequently, to distribute a bankrupt's property among the creditors in accordance with the distribution scheme under the Bankruptcy and Insolvency Act (BIA). The bankrupt and all other persons holding bankrupt's property must transfer the property to trustee. The trustee may also assist individual in preparing and submitting a consumer proposal to creditors. The trustee must arrange mandatory counselling of the bankrupt. The trustee must follow the procedures under the BIA, call creditors meetings and send the parties required notices of proceedings and documents. The trustee is responsible for preparation of pre-discharge report and may oppose the bankrupt's discharge. | https://en.wikipedia.org/wiki?curid=2221576 |
Post-industrial economy A post-industrial economy is a period of growth within an industrialized economy or nation in which the relative importance of manufacturing reduces and that of services, information, and research grows. Such economies are often marked by: The industry aspect of a post-industrial economy is sent into less developed nations which manufacture what is needed at lower costs ("see" outsourcing). This occurrence is typical of nations that industrialized in the past such as the United Kingdom (first industrialised nation), most of Western Europe and the United States. | https://en.wikipedia.org/wiki?curid=2222308 |
Samuelson condition The Samuelson condition, authored by Paul Samuelson, in the theory of public goods in economics, is a condition for the efficient provision of public goods. When satisfied, the implies that further substituting public for private goods (or vice versa) would result in a decrease of social utility. For an economy with "n" consumers the conditions reads as follows: MRS is individual "i" marginal rate of substitution and MRT is the economy's marginal rate of transformation between the public good and an arbitrarily chosen private good. If the private good is a numeraire good then the can be re-written as: where formula_3 is the marginal benefit to each person of consuming one more unit of the public good, and MC is the marginal cost of providing that good. In other words, the public good should be provided as long as the overall benefits to consumers from that good are at least as great as the cost of providing it. (Remember that public goods are non-rival, so can be enjoyed by many consumers simultaneously). When written this way, the has a simple graphic interpretation. Each individual consumer's marginal benefit, formula_3, represents his or her demand for the public good, or willingness to pay. The sum of the marginal benefits represent the aggregate willingness to pay or aggregate demand. The marginal cost is, under competitive market conditions, the supply for public goods. Hence the can be thought of as a generalization of supply and demand concepts from private to public goods. | https://en.wikipedia.org/wiki?curid=2229699 |
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