Summations Only

Of course they would if they had to. The reason no one pays money for air is because no one has to pay money for air.That doesn't mean no one would pay money for air. No. I'm claiming that 'value in trade' is a pointless synonym for 'price' and that 'value in use' is what actually determines a consumer's willingness to pay, which in turn sets the demand curve and is thus behind an entire one half of the puzzle in determining market price of a good or service. Then your model is even more useless since it effectively renders sale prices meaningless and fails to accurately predict consumer response to sale prices. Consider a situation in which each store decides to advertise a lower price for their bags of peas. It's their 'Twelve Days of Christmas 12% Off' sale. So the new price for a bag of peas in each store is 80 in Store 1, 88 in Store 2, and 97 in Store 3. Naturally, people buy more (I'm sure you'll agree with this but fail to realize that such behavior is a product of 'value in use' and has nothing to do with 'value in trade'a pointless synonym for 'price'). So we watch the sales for the same amount of time as we did when the prices were higher and we see people buy 400 bags of peas from Store 1, 300 bags of peas from Store 2, and 200 bags of peas from Store 3. The income generated by this for each store is shown in the table below (this is your chart using your math and model): Using your formula for calculating value we see that the value of a bag of peas during the Twelve Days of Christmas sale dropped to 86. This is no surprise for you, of course, since you view price as a determiner of value; a lower price will naturally yield a lower value. But what of the price value ratio? Were people getting a better value for their money? You'd certainly think so; after all, that's why people like to shop when stores have sales. So what of that ratio? No significant change! In fact, the sale for Supermarket #1 turned out to be bad for consumers since they ended up getting less value for their money than before the sale. Under your system, they were better off paying 90/bag than they were paying 80/bag. Strange that.Under your model, a sale could very well fail to give consumers a better value for their money. But does this make sense? If a sale-priced item doesn't necessarily reflect a better price/value ratio than it did before the sale, shouldn't this be reflected in how people behave regarding sales, namely that they should not respond positively to sale prices since they may or may not be getting better value for their money? But that's not how people actually respond to sales in the real world. People actually respond to sales positively in every instanceall other things being equal. Your model should have predicted people not buying as many items from Supermarket #1 as they did (had they bought only 300 bags of peas, they would have improved their price/value ratio from 0.928 to 0.92, a definite improvement over the 0.93 they ended up at).So your model predicts that at sale price, people should consume the same amount as at regular price to maximize their price/value ratio. Yet that's not what people do. And since the predictions of your model fail in the real world (people actually do buy more peas when peas are on sale), your model is, by all scientific standards, falsified. The only thing that could salvage your model is if people didn't take value for money into consideration when making purchases; but since they do (and they usually try to maximize their value for the money), there isn't much left for your model to stand on.So where does your model ultimately go wrong? Well, in about a thousand places, but here are a few of the big ones, and they relate to the way you understand value and the role you give it in your economic system:

• First, value determines willingness to pay (WTP), willingness to pay determines how much a firm can charge for its goods or services. If people are only willing to pay $X, then the firm cannot charge $X+1. Value sets price. Not the other way around.
• Second, price gives us an at least figure for WTP; if people pay $X for an item then their WTP is at least $X, though they may be willing to pay more. Thus price can serve to help measure value, but it is not the same thing as value and it does not determine value. It indicates minimum value, but that's about it.
• Third, price/value ratio cannot be calculated for more than a single consumer. No one going to the supermarket bases their decision on whether something is a good value for the money on how many other people bought the same thing and on what affect that might have had on the price/value ratio. People know the value when they walk into the supermarket, the price is on the sign, and they do the math in their heads. It's an individual problem, not an aggregate one.
• Finally, there is no 'value' anywhere in your model; you've just inserted the word 'value' in place of the word 'average price'. 'Value of a bag of peas' really means 'Average price of a bag of peas'. 'Price/value ratio' is just 'Price/average price ratio'. You're not talking about or even dealing with 'price' and 'value'; you're just talking about 'price' and 'price'.

All these factors demonstrate why your conception of value is useless in terms of studying economic behavior. It provides no additional information for us to consider. It doesn't offer an explanation for consumer behaviors. It doesn't even explain its own problems: how goods selling for less money one day can actually end up creating a worse price/value ratio. And perhaps worst of all is that your conception of value makes it the same as 'average price', for which the English language already has a term ('average price', in case it was missed) and for which it needn't another.On the other hand, the conception of value others have been arguing for is extremely useful. It provides additional informationnot just selling price can be known, but we can also figure out willingness to pay. It offers an explanation for consumer behaviors: people buy more at sale price because it always gives them a better value for the money because the value doesn't whimsically change every time the clerk scans an item at the checkout. It presents no problems that need to be explained away. And perhaps best of all, it isn't a concept for which the English language already has another term.So why on Earth should anyone prefer your conception of value over the other one being argued for in this thread when it is so painfully clear that the latter is substantially more useful and supported in real-world applications?Jon

Of course I do. What's your point? What does any of this have to do with the value that ownership adds to the value of a finished product? No one will pay more for the first farmer's corn than for the second farmer's corn because their willingness to pay for corn has nothing to do with whether the land it was grown on was free or purchased with a loan.That someone first owned the land, and that someone next extended a loan, created no additional economic value whatsoever. It simply enriched the people who owned the land and extended the loan at the expense of the person who did the actual work producing something of real value (corn). All the money paid back by the first farmer comes from what he earns selling his corn, and that amount doesn't increase just because he owes a debt to the investor. The investor didn't create wealth; he just set up a situation where he could siphon off wealth created by someone else.The simple act of owning something doesn't create wealth. In fact, completely contrary, it was only when the investor temporarily relinquished ownership of his money that wealth could begin being created. Our second farmer began creating wealth with no obstacles or problems because the land he wanted was not already owned and he didn't need to get someone else's money in order to purchase it. But the ownership of the land by the real estate mogul and the ownership of the money to buy that land by the investor were nothing but obstacles to wealth creation for the first farmer. Had he gotten the same deal as the second farmer, he would have created the same amount of wealth but kept it for himself instead of having to give part of it to someone else who clearly played no role in the creation of that wealth (as evidenced by the fact that the amount of wealth created is identical whether the owner and investor exist or notso long as the wealth creators can overcome the obstacles they set).Thus the only role filled by owners and investors is that of hijacker: they hold hostage the resources that real wealth creators use to create wealth. And it's obvious why they do this: because they don't actually want to do the work of creating wealth themselves and by holding the means of production hostage they can guarantee a favorable cut for themselves in exchange for releasing those means to the people who actually create wealth. You're talking to people about economics. And if your theories about economic value truly are about economic value then they should be applicable to any economic system imaginablenot just Capitalism. And that's their failure, not mine, and not economics.JonEdited by Jon, : No reason given.

Since most of the discussion in this thread revolves around you, if you no longer feel like the thread is going anywhere, what choices are there?If you leave the thread open but no longer participate, it is as good as dead. Or, put it in summation mode for everyone's final say.The outlook for the thread is bleak either way.

You're joking, right? At least one such resource has been discussed extensively in this thread already. And there are many more. Depending on where you live: water, wildlife, wood, stone, sunlight. No they aren't. Because even in the context of capitalism, price and value are not related the way you describe. The 'value' you are talking about has no meaningful reason for existing as a concept since it is nothing more than 'average price'; and the 'value' you claim is not relevant ('value in use') is actually what determines the nature of the demand curve. No you aren't. You're just using clever math tricks to come up with some way to explain 'price' and 'value' as not being the same thing, even though you ended up just turning 'value' into 'average price'. No one here is buying that this is some basic function of how Capitalism works, because it isn't. If all you want to talk about is Capitalism and why it is so wonderful, then why did you start a thread falsely claiming that you wanted to talk about economics? Not that your descriptions of 'price' and 'value' are any more accurate in the context of Capitalism than in the context of economics in general, but at least then we would have all known that you're not really serious about discussing the topic in realistic terms.Jon

What you're describing here is the classical demand curve. Yes, amount sold and selling price are all good indicators of the value people place on various resources, goods, and services.But all this sense is contradicted when you say goofy things like: In general, people don't place value on resources, goods, or services based on the price charged for them.¹ If ramen noodles went up in price to $1000 per package, then according to you poor people should suddenly view a package of ramen noodles as having the same value as their used cars and try their hardest to own at least one. Yet that's not what happens: poor people don't suddenly value ramen noodles more; and they don't try to buy a package of ramen noodles. They already know the value of a package of ramen noodles independent of its price and they know that they do not get $1000 worth of value from a package of ramen noodles because their value of ramen noodles didn't change when the price went up (that is, they still only get 20 worth of value from the ramen noodles, and that is why they will not pay $1000 for them). This is not true for most goods (see footnote), and even for those goods that it is true for, selling price and value are still two completely different things. One is represented as the intersection of the demand and supply curves; the other is the demand curve. No I wouldn't. I'd just accept that if I want peas I have to pay $1.10 for them, which I would only do, strange as it might seem to you, if I already valued peas at more than $1.10/bag. Of course, just because I value a bag of peas at at least $1.10/bag doesn't mean I wouldn't still try in vain to find bags of peas at $1.00, just like people who place an infinite value on air still prefer to buy it where they can get it the cheapestoutside. The reason you think a candy bar is worth more than 5 is because you make more money than you used to. Remember, dollars are only a common unit of measurement for resources, goods, and services. You cannot say that your value of a candybar has changed over the years just because you are now willing to pay more for one. You can only say that a candybar is more valuable to you now than it was in the past if the amount you are willing to pay for that candybar equates to you giving up more goods and services elsewhere than you would have in the past. But If 5 bought a loaf of bread and a candybar in the past, and $1 buys a loaf of bread and a candybar today, and you find that these represent your past and current willingness to pay for these items, then it would be true that a candybar has not increased in value for you at all, since you are still only willing to give up the same amount of stuff to get one. See footnote. This is not true for most goods and services. The way to change value is to change how individuals view the utility of a good or service. Even when you include luxury and status goods, the high price is still being used by the consumer to form their view of the item's utility (e.g., a more expensive car has more utility to someone has a symbol of their success than a cheaper one would). And this is only true of luxury and status goods, which are the minority of things consumed. And this is true; but it's completely disconnected from the other things you've been saying.Jon
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¹ An exception might be luxury and status goods, as part of the desire people have for these items is driven by how unattainable the price makes them to everyone else. But even in this case, selling price and value are two separate things.

You're missing my point. Whether the producer gets his inputs for free or by purchasing them from someone else, the value of the items he produces will be the same and he will generate the same amount of income for his business either way.The only difference is that when the inputs are free, he keeps all the income. When the inputs aren't free, he gives up some of his income to whomever he has to buy the inputs from. Either way: same amount of wealth created.You seem to think that just because there are more people getting their hands on the wealth that there is somehow more wealth, and that the people who get most of the wealth are somehow the most responsible for creating it in the first place.Both these ideas are wrong. I know. But then again, I'm not the one claiming it is. You are the one who came up with a silly little table in which you calculated the average price paid for peas at different grocery stores and called that the 'value' of a bag of peas. I don't think anyone has ever disagreed that selling price can be used as a means of judging people's value of goods or services. What has been disagreed with is that price sets value, which it doesn't. But both farms generated the same wealth. You cannot say that the first farm generated more wealth than the second just because that wealth was shared with more people! Nor can you say that the banker was somehow responsible for the creation of any of that wealth when it is clear as day that the amount of wealth created is identical with or without him! I'm criticizing nothing. I'm explaining what is actually happening. You're explaining the same thing.The conclusions you're drawing and trying to support with that explanation are just ridiculous, though.Jon

It's economics. Everything gets denominated in currency. We've already seen that we can think of air in terms of how many dollars it is worth to people ($∞). We can do the same with a pile of shit as well ($0).But that doesn't mean there is any other relationship between a pile of shit and fresh air.Price and value are not the same. It's true that they are related and can impact one another, but not in the way you keep insisting where they are almost identical. They are much more different from one another than you keep making them out to be. But that's bass ackwards. Demand affects selling price, not the other way around. If a person is willing to pay $38 for a single widget, then you can charge them that much for that widget. If they are willing to pay $64 for two widgets, then you can charge them that much for two widgets. Willingness to pay (value) determines selling price. People take price into consideration when determining how much of a good or service to consume, not in determining how much of a good or service to demand. No. The demand curve is the value people place on a good.Jon

Umm... is there any additional wealth created at all? Do our two farmers create different amounts of wealth from one another?Is the only difference here that in one scenario the person creating the wealth has to share it while in another he doesn't? Don't be ridiculous, Percy. This simple fact doesn't make the loan holder's acquisition of this wealth anymore justified just because he writes it on a piece of paper.Is a thief an okay guy if he enters the family heirlooms he stole from your house on his income ledger? Of course not!But as everyone has already said, what appears in the accounting books is irrelevant. We understand that we work within a system that appropriates wealth to the owners of capital disproportionate to their actual contribution to the creation of that wealth. But who the law says owns the wealth has nothing to do with who actually created the wealth. Not at all. I am well aware that in our system those who own the means of production also own the products produced. The loan holder deserves compensation simply because he is capable of demanding it and the enforcing agencies in power support his cause. Obviously the availability of capital is essential to the creation of wealth. But you aren't talking about the availability of capital. You're talking about the unavailability of capital. Someone else owns the land that the farmer needs for generating wealth, and this makes that capital unavailable. Afterall, the capital was available since the beginning of time, until someone stuck a sign in the ground and mustered forces to ensure that the capital remained unavailable to anyone unwilling to give to the 'owner' of that capital his demanded compensation.And so you still haven't addressed the point I raised: both farms generated the same amount of wealth, so how can you say that the banker or original owner of the land were in anyway responsible for the wealth generated by the first farmer when the second farmer put in identical work hours and generated an identical amount of wealth?Where's the wealth generated by the banker? The original land owner? Let's follow our noses and figure out where that money really came from! Fair enough.We can drop the discussion of value for now.There's still this thing about wealth creation, though.Jon

Of course if the money and capital were in the hands of the people with the ideas and willingness to workthe people capable of generating wealthinstead of the hands of a few elite who, by your own admission can do nothing useful with the money on their own (they just move it around), then we wouldn't really need the charade, would we?The system of 'investing' is only necessary because the means of production are owned by people incapable of using them for the generation of wealth.Why keep these noncontributing layabouts around? But you're not even talking about investors. You're talking about marketers, talent coaches, recording studio employees. You're talking about laborers.What did the investors add to the process other than a means for enriching themselves in exchange for the freeing up of some of their resource hostages?No one thinks the singers on American Idol are any better because someone owned the means of production and charged the laborers for their use of it. No one.Jon

I never made such an argument.The investor is a middle man taking advantage of the fact that there is a laborer possessing the ability to generate wealth with capital owned by someone who is not generating wealth with it.The investor would not exist were the capital necessary for the generation of wealth already in the hands of the laborers capable of generating wealth with it.Jon

Good. Now prove it. Why put both roles into the same person? It's easier to understand when there is one person who owns the capital (the means of production) and another who possesses the power to purchase those production means (the investor). Not the words I would use. In fact, you might notice that I've made no claim one way or the other regarding the ethics or morality of the system, other than to say it is unjust from the perspective of the laborerwho is responsible for all of the wealth creation yet only receives a fraction of it. They try it everywhere. Anywhere a fisherman has free access to water for fishing, or an energy company free access to wind or sunlight for generating electricity, or a villager free access to forest wood for building boats, or a hunter free access to wildlife for harvesting meat, or...None of these producers need to take out loans to purchase the resources mentioned; and if their competitors had to take out a loan, they wouldn't be able to charge more for the productthey'd just have less wealth in their pocket at the end of the day. Ownership generates precisely zero wealth. No it's not. Holding the capital hostage until laborers capable of wealth creation pay your demanded ransom is the way Capitalism works. It's even the first thing Wikipedia will tell you (which means it must be pretty essential, since Wikipedia articles usually don't start getting bogus until the third or fourth sentence in):

quote:

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Wikipedia on Capitalism:

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Capitalism is generally considered to be an economic system that is based on private ownership of the means of production

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It's owning capital. Holding it close. Keeping it for yourself. It's not making it availableit's the exact opposite of what you describe it to be!Capital is present in every economic system. Not every economic system is Capitalism. Because I can describe the situation as it is? C'mon!Shouting accusations of being an 'anti-capitalist' (as if that were even a bad thing) is just you grasping at straws.Don't go down that road. Please.Jon

Apparently it is just a fantasy. That's what you and Percy keep claiming. Despite economic systems all around the world functioning in such a way...It's just a fantasy. Oh brother! And it's me that's 'nave' Analogy for what? Ahh yes. All them poor people. If only they had been more capable!Get real. You're ridiculous. There's no point talking to you.A black man has more chance of talking sense into a Klan leader than anyone has of talking sense into you.Jon

Read the rest of the thread.

Did you even read what you were responding to? Did the word 'entitled' or 'greedy' appear anywhere? Did I call a laborer "unimportant for wealth creation" or did I say the "laborer ... is responsible for all of the wealth creation"?What class am I attacking? Where have I formed alliances? When did I attack the middle class?And lastly: are you even literate?Jon

It's an honest description that accurately describes the roles of the characters involved. It is not meant to be judgemental or accusatory.For the most part, I have no problem with the capitalist system. It shouldn't be used for things like health care, education, and so on. But it's actually an alright system for a lot of things.Owners of capital are still hijackers though. And the capital they own is their hostage.I own capital. I'm a hijacker. I have hostages. I can admit it without hating myself. Can you? Very strange. I've actually made nary a reference to anything even remotely communistic at all. All of my statements have been observations about Capitalism, from my description of the characters to my explanation of their roles.It's all been about Capitalism.But since you've nothing left to offer to the argument other than silly accusations of me being a communist or anti-capitalist (as if that's even relevant or a bad thing), I suppose there's little point in us continuing.Jon