Thursday, May 8, 2014


Recently, noted anti-banking blogger, Charles Hugh Smith wrote in The Changing Nature of Middle Class Work, "If we ask, what is work?, the conventional answer is tasks that somebody will pay us to do. This is true, but it doesn't address why someone is willing to pay us. The answer is to create value."

Charles Hugh Smith and all those like him perpetuate fallacy. The fallacy that work creates value is a variant of David Ricardo's labor causes value theory, which Karl Marx built upon his entire theory. 

As I show in BUT I SPENT 150 HOURS HANDCRAFTING THAT OIL ON CANVAS! OR THE LABORER'S SILLY THEORY OF VALUE, labor has nothing to do with prices. Prices get set by winning bidders. 

All prices adhere to the one and only true law of trade, the Law of Price — the winning bids of purchase and sale in the face of what is on offer sets the price. Prices get set by winning bidders who possess the means — these days legal tender cash or credit — in the face of what is on offer.

If no one bids for anything made, no matter how skillfully done, it's worthless. If bids are below cost, oh well. That is an signal that most everyone in a society of property deem the work worthless and a waste of resources. 

The entirety of trade, or commerce, or real economics ties up with two words — property and profit. Without profit from effort, anyone would lack buying power to buy anything else. Without property, no one can trade. 

Though most think of property as things possessed, property always has meant the right of ownership and never the thing owned. Only when property gets created, can trade arise between two persons. 

The name for property put to making stuff is called capital. The name for property put to purchase and sale for cash and credit is wealth

Work is expressed skills through time. Work becomes the wealth of the laborer when traded away in a purchase and sale. Why someone pays for work is to gain property in that work. 

Cash and credit in the form of wages becomes the wealth of the employer when traded away in a purchase and sale for wealth of the worker, which is her work.

In a purchase and sale, work is what the laborer sells and wages in the form of cash or credit is what the laborer buys. 

Until an employer gains property in the effort of an employee, which we call work, the employer cannot do anything with that work. Taking possession of something without having property in something is called theft. 

Work of a laborer is no different than computer chips made by robots in a factory. Both are components of a larger product. 

The manufacturer of smartphones with computer chips does so in quest to trade away at profit, property in smartphones for property in cash or credit.

Value does not mean usefulness. Value is a ratio. Value is the ratio of one thing for another. The ratio of exchange, that is, the rate of exchange, or said as the exchange rate, is the value. 

When one two things in a purchase and sale is cash or credit denominated in cash, value gets called by the word price. Value is the quantity of what is acquired in a purchase in sale over cash or credit denominated in cash given up in that purchase and sale.  

So, 6 oranges for $1 is the value, written as 6 oranges / $1. 6 oranges together is a trade quantity. $1 is a trade quantity. 

Stuff doesn't have value. Stuff makes value. Value is a ratio of one thing for another in actual trade. Value arises from valuation. Always, value is a ratio expressed as one thing traded for another. 

Value arises solely in the moment of trade. When one of two things in trade is cash or credit, we give the word value another name. We call it price.  

Value results from reciprocal desire to gain property from whatever causes in the minds of those involved in the trade. 

To someone, she might sell $8 and buy a hamburger and a milkshake. To someone else, he might sell $8 for a six-pack of beer.  

Even though their subjective desires differ with respect to the same sum of cash, $8, any outside observer can observe objectively value in either transaction, one burger and shake for $8 as well as one six-pack of beer for $8. 

There is no other cause for price (value) than the quest to gain control of property. No one can realize profit gains without property owing to being among a society of property. No one can derive the usefulness of goods before possessing those goods.

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