Summations Only

Your reply merely repeats your mistake and does not address my point. As I stated in the other long running thread your approach is correct from an accounting point of view but because it does not reflect the reality of what happens it is a bad model.

Were I more people I could reply to all the responses, but as I am one person I've been responding to those that seemed to bear most directly on the topic.--Percy

You're quoting from the section on classical economics. In the next sentence it mentions Karl Marx.The definition of value I'm using is from the neoclassical synthesis, which according to the Wikipedia article on Neoclassical economics "dominates mainstream economics today."But the relationship between value and price is not a simple one. Walk into 10 supermarkets and you'll likely find 10 different prices for Rice-A-Roni. Some supermarkets will have promotions. Some people will have coupons, some of which give Rice-A-Roni away for free. Just what is the value of Rice-A-Roni? I don't know for sure in any formal sense, but my own suggestion would be the total amount people paid for Rice-A-Roni divided by the number of boxes sold.Here's what the Wikipedia article on Value (economics) has to say about value and price in neoclassical economics: Straggler might like to give that last sentence a second read: --Percy

Too simple, I would suggest, since "the market" does not, in fact, determine salaries.Employer and employee are not buyer and seller. Employees don't renegotiate their wages every day or every hour; they're usually on contract. And those contracts are subject to constraint from other parties, as well as a cultural constraint that you can't cut someone's pay, you can only give them a raise or fire them altogether. The "stickiness" of wages is well-known:

quote:

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Many firms, during recessions, lay off workers. Yet many of these same firms are reluctant to begin hiring, even as the economic situation improves. This can result in slow job growth during a recovery. Wages, prices, and employment levels can all be sticky. Normally, a variable oscillates according to changing market conditions, but when stickiness enters the system, oscillations in one direction are favored over the other, and the variable exhibits "creep"-- it gradually moves in one direction or another. This is also called the "ratchet effect". Over time a variable will have ratcheted in one direction.

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That doesn't describe a market system, because if a variable only moves in one direction, it can't be said to be determined by the market. Compensation can't be an identity with value of labor because compensation only moves in one direction, but value can move in both directions.That proves they can't be identities - they're subject to different constraints. $25. $25. No, it's not, Percy. But these are prices, not identities with value. As the Wikipedia article on Value (Economics) says: [quote]An economic value is the worth of a good or service as determined by the market.[/qs]The worth, not the price. Or as it continues to say: Value is linked to price. It is not an identity with price. You're substantially misrepresenting the content of your sources even as you quote them, because you mistakenly view price and value as identities.

Yes, because value and price are not identities.

But why the company does well or poorly is directly related to the topic and your apparent blindness to the fact that it is average people working and not rich people passing money back and forth that is at the heart of wealth creation.All the wealthy class does is hold hostage the resources used by the working classes to produce goods and servicesto generate wealth. And then they act as though the occasional release of a hostage is deserving sainthood.Well pucky to that!Big pucky.Jon

Yes, 'cos I can cherry-pick too. It's not agreed by neoclassicists either. According to your own quote from WP: It does not say "always" and "all", nor indeed "usually" and "most".I therefore suggest that we use a definition of value which isn't completely stupid, and which bears some relationship to the meaning of the word "value" in the English language as it is spoken. And if we want a technical term meaning price, then I suggest that we use the word "price". Having been given two different words for two different things, it seems fatuous to use them for the same thing. For one thing, if you're going to use the word "value" to mean price, then what word are you going to use to mean value?

I think you're reading too much into what looks like the traditional tentative academic style of expression, but in any event, I'm talking about mainstream economics which derives from versions of neoclassical economic theory that largely equate value with price. Mainstream economics should be the primary focus of this discussion because that is where all the available economic figures come from. Economic statistics are based upon mainstream economics where value is largely equated to price, i.e., what buyer and seller are able to agree upon.Mainstream economists who prefer not to equate value with price don't believe that it is wrong but that it is insufficiently detailed and nuanced, and then you begin getting into discussions of marginal utility, supply/demand, rational choice, etc. In other words, they believe it is wrong to equate value with price only in the same way that is wrong to say that the Earth is spherical rather than an oblate spheroid or even more detailed descriptions.Economic statistics are not based upon any other theory of value than the one from mainstream economics, and in particular not the one advocated by other participants here who equate value with something that, in Straggler's characterization, can't be quantified. It is even more important to note that it makes no sense to use statistics based upon the theory of value from mainstream economics to argue for a point of view that rejects that theory.Anyone who doubts that mainstream economics equates value with price need only look at the value-added tax. Common in Europe, this tax is assessed at each stage of the supply chain. Staying with my earlier scenario, the manufacturer is assessed a value added tax on the amount of value he added to the product. Since he's the manufacturer and produced the product from raw materials, the value he added is the amount he charges wholesalers minus his total cost of production including purchase or raw materials.In turn the wholesaler is assessed a value added tax on the amount of value *he* added to the product, which is the amount he charges retailers minus his total costs, which includes the price he paid the manufacturer.And in turn the retailer is assessed a value added tax on the amount of value *he* added to the product, which is the amount he charges customers minus his total costs, which includes the price he paid the wholesaler.The final value of the product to the customer is the initial cost of the raw materials plus the sum of the values added at the various steps of the supply chain, which happens to be its price. It also represents the amount of wealth created.The value of this product at various stages of the supply chain becomes part of the economic statistics we see reported from time to time. Th concept of value used for these statistics is the same one from mainstream economics. It is very common here at EvC to see someone rejecting the dominant paradigm of a field with arguments that it is "completely stupid" and isn't using the right English definitions. The common outcome of discussions with creationists here these days is disappointment that the discussion fulfilled none of its potential because the other side knew so little and was uninterested in remedying that lack, and I feel much the same way in this thread. I make no claim to infallibility, but if I'm wrong it won't be demonstrated by bald assertions that neoclassical concepts of value are "completely stupid" and defined incorrectly.While looking over the Wikipedia article on Value (economics) I came across this paragraph that may characterize what most in this thread seem to believe: Is this what you guys are pushing?--Percy

Well, not if it's going to lead to equivocation. See, in plain English, creating value is a good thing, destroying value is a bad thing. If we adopt your jargon, however, then an illegal cartel can "create value" by throttling the market, while a philanthropist is "destroying value" by giving away medicine.If we were speaking English, it would be true to say that we should reward people who create value (or allow them to reap their own rewards). If, however, we are speaking percyese, then the creation of value is not necessarily a good thing, and sometimes deserves the reward of being tarred, feathered, and ridden out of town on a rail.Perhaps you could avoid ambiguity even so. For example, every time you refer to someone "creating value" you could add a footnote explaining that this may involve acts which are worthless or heinous or criminal or destructive or otherwise harmful to society, and that to create value is by no means something that society should unconditionally reward. That would prevent people, including yourself, from getting confused. Alternatively, you could use some phrase which means what you apparently mean by "creating value" which has no ambiguity whatsoever, such as "getting one's hands on some money". Can you find a mainstream economist who says that free software has no value? It also not unheard of to see someone rejecting something that is completely stupid on the same grounds. Very often it's me talking to a creationist --- or to someone with a similar interest in obfuscating a subject.As for "the dominant paradigm" --- very well, let us suppose for the sake of argument that neoclassical economics deserves to be the dominant paradigm. Let us grant to it a qualified amount of ambiguous success (evolution it ain't). One might still ask what proportion of that success is down to some neoclassical economists using the word "value" as though it were synonymous with "price".If some evolutionary biologists went everywhere by hopping on one leg, I would not be tempted to emulate them, because that is not what makes evolutionary biology work. It wasn't a bald assertion. I have demonstrated it at some length. "Real value" or "actual value" as a concept of value? Well, call me crazy, but that might just work.Edited by Dr Adequate, : No reason given.Edited by Dr Adequate, : No reason given.

Well now you're just doing your best Buzsaw imitation. Great. Using the description from Wikipedia, which I provide here again, describe to me how this "works": I'm particularly interested in your willingness to purchase the book for $100,000. Or explain how you determine the economic value of the book given that it's available in the thriftshop for $.25 but is valued by at least one its owners at $100,000. Or explain why, if this owner of the book values it at $100,000, he jumps at your offer of $1000 for it.In mainstream economics a book is worth what someone is willing to pay for it. Assuming there are many copies of the book available, including 2nd hand, that means there is a market for the book. It will change hands at various prices depending upon a number of conditions, including need, urgency, availability, convenience of purchase, condition if it's 2nd hand, etc. The prices at which it changes hands, taken collectively, establish a value for the book. Private sales of the book probably don't make it into any economic statistics, but we can be sure that the sale of the book by retail outlets and the entire supply chain behind it are recorded in our economic statistics, and they will reflect the totals of the price charged across all sales at all levels.--Percy

Does Buzsaw often state obvious truths? I hadn't noticed. What is it in that paragraph that you don't understand?

Your Wikipedia quote doesn't say that mainstream economics equates value with price, only that they link value with price.I don't think anybody here disputes that value is usually linked to price. But value and price are not identities; not even your wikipedia article (currently) makes that assertion.

The part of the Wikipedia quote I was working with was, "In neoclassical economics, the value of an object or service is often seen as nothing but the price it would bring in an open and competitive market."But I agree with you when you say this: That's why I used the term "largely equates". I could as easily have said "linked", and in other places Wikipedia uses either precisely that term or a synonym. Obviously value and price can't be identical, and I've already posted 2 or 3 messages in this thread describing scenarios where prices are variable, so obviously I don't think value and price are identities.When people start quibbling over word usage it's an obvious sign of deep skepticism, but I am not making things up, at least not on purpose. Everything I'm saying is my understanding of mainstream economics, and if you check out the Internet or books on economics it should back up what me and Wikipedia have been saying, though of course they will not use the same words and I hope there's no expectation that they should.--Percy

Well, that quote doesn't say that value equals price, either. "Open and competitive market" is a critical condition that you're frequently overlooking. I don't think "largely equates" and "linked" are in any way synonymous, and eliding the difference between them is, largely, where you're going off the rails.For instance while the value of one's employment may wax and wane, the price of one's employment - one's wage or salary - is known by economists to be sticky, in that it increases but does not readily decrease.Two variables under completely different constrains cannot be identities, they cannot even "largely equate" each other, because if the value of employment "largely equated" the price of employment, the value of employment would be about as sticky as the price of employment.But it's obvious that it isn't. That alone is proof that value cannot "largely equate" price. I don't want you to think I'm quibbling about word usage, because nothing is more boring to me. I'm quibbling about idea usage; "largely equates" and "is linked to" are two different ideas about how two variables can be related to each other. "An open and competitive market" is a different idea than "the market economy of the United States in 2000-2012." You're getting ideas from your Wikipedia sources that are not actually present in them. That's the quibble, here.

Hi Crash,I have no problem with "is linked to". Apologies for any confusion.And you're right, salaries are sticky. Or you might say there's some inertia.And no, I'm not ignoring competition. Here's what I said in an earlier message about prices, and note that I mention promotions (sales) and coupons and different prices in different supermarkets: But let me pose to you the same questions I posed earlier about this passage from Wikipedia which seems to be describing where you guys are coming from: Would you be willing to purchase the book for $100,000? How would you determine the economic value of the book given that it's available in the thriftshop for $.25 but is valued by at least one its owners at $100,000? Or explain why, if this owner of the book values it at $100,000, he jumps at your offer of $1000 for it.--Percy