The Exchange Theory of Value (Again)

From time to time we have discussions that feature the exchange theory of value. It's amusing to me that the clearest example I can recall is Mike holding forth on Dungeons & Dragons mechanics.
[W]hile you may argue that it makes no logical sense for an evil Paladin to be the martial equal of a good one, I'd posit that you're arguing logic in a game where wizards can cast an identify spell using a pearl worth "at least 100 gold pieces". And nothing anywhere explains how to calculate who determines the worth of that pearl. Are the pearls used to identify magic items in the desert smaller and more flawed than the ones in the fishing village that has pearl cultivation beds? That's a screwed up metaphysical system where market forces determine the efficacy of magic.
So what is a pearl worth? The usual answer is that it is worth what someone will give for it. This may lead to results that seem absurd in real life, too. Sometimes people who have a lot of money push the value of apparently trivial objects well above what ordinary people could afford. Is the single copy of Wu Tang Clan's Once Upon a Time in Shaolin really worth millions of dollars?

To dispute that it was, you would have to have some other standard than exchange to measure what a thing is "really worth." Many economic theories simply lack the furniture to argue about whether or not the pearl is "really worth" 100 gold pieces, or the album is "really worth" millions of dollars. Other theories that do are largely discredited: Marxists can talk about "surplus value" being extracted from laborers, but Marxist economics has never managed to work anywhere.

I was thinking about this today because of an article in the NYT that purports to show that as women take over in male-dominated fields wages drop.

If this is true, under the exchange theory of value the work of women is "really worth" less just because people are willing to pay less for it. It is, presumably, the same work. The work was "really worth" more if a man did it in a male-dominated field, and now is "really worth" less because women have entered the field. Is that right?

Well, one thing that would make it plausible is that womens' entry increases the supply of labor for that particular job; now everyone's labor is worth less in that field just because of the law of supply and demand. That may be the real explanation, but I want to set it aside for the purpose of this discussion. I'm interested in a theoretical question.

What interests me is -- as usual -- whether there is a moral question that should override the economic question. It often bothers me that so much seems to be for sale. I like to think that at least some things ought not to be traded in the market. Even in the market, too, I think some relationships are adequately unfair that they should be banned even if both parties to the trade are willing.

Here is a moral principle of fairness (which Aristotle said is an important component of justice, and which Rawls said was the whole of justice). It seems to be out of order with the economic principle, maybe, if the explanation is not merely an increased labor supply.

Does it show that the exchange theory of value is incomplete or inadequate? In Mike's D&D example, I thought the pearl would prove to have an objective value if it could be used for the spell. Does fairness perform something of the same role as magic, but in the real world? Or should we continue to discard other concepts than exchange value, and say that fairness does not apply?

37 comments:

raven said...

"Wages drop as women take over in formerly male dominated fields."

The nature of that job probably has more to do with this, assuming (and that is a huge assumption,) that the times is correct.

Maybe the women are not as useful as the men, in a field that was dominated by men. Case in point that has been discussed here recently- would a platoon of female infantry be "worth" the same as a platoon of men?

Maybe the job itself is less valuable ,or going toward obsolescence,or being automated.

The reason a painting sells for 20 million, or a collector Ferrari for 30 million, has the same underlying reason companies come out with new products on a steady basis- this years clothing, or ski, or backpack or car or whatever it is, is not significantly better than last years. A lot of people have everything they need to live comfortably, and a huge excess of either cash or credit availability enables them to seek novelty and meaning through a purchase of goods.

About fairness- Jerry Pournelle has said in a totally free and unregulated market there will be human flesh for sale- but for any moral authority to be dominant it is going to take a moral people.
The age old question -"Who decides?" It is just as easy for a moral authority to make a mistake or fail to anticipate(by definition) unintended consequences.
Who would have thought, in the supremely moral attempt to prevent people from destroying their lives with drugs, that we would enable the rise of hugely powerful cartels, ,corrupt our politicians and law enforcement, and nearly destroy the 4th amendment?

What, in your opinion, should not be traded in the marketplace? And what sort of an arrangement agreeable to both parties is unfair?
The ones I can think involve the unwilling participation of a third party, such as slavery.
The problem as always is "who decides".

Grim said...

What, in your opinion, should not be traded in the marketplace? And what sort of an arrangement agreeable to both parties is unfair?

I generally fall back on prostitution as the clearest case. The sacred is another case: if the government were to agree to license Apple iPhone ads to be plastered on the side of the Tomb of Unknowns, for example, I would think they were engaged in a moral horror no matter what price they got.

William Newman said...

In general value has to vary sharply depending on what a person can use stuff for, even if there's no one nearby to exchange with. And because a person strongly tends to allocate a small supply only to the most valuable uses, and because people commonly run out of crucial uses pretty fast, the value can easily fall off pretty dramatically as quantity increases.

If you are stranded in the Arctic in an abandoned camp with enough Quonset huts for an infantry company, and you need to endure until rescue in Spring, then one hut and enough fuel to heat it 'til spring are likely to be very valuable, and anything more than a safety margin past that not very valuable at all. Any theory of value that ignores that kind of falloff, and tries to assign some ideal value to Quonset huts instead of a situation-dependent marginal utility value, tends to fit the world pretty poorly.

(And it doesn't need to be an exotic thought experiment for that kind of very large marginal utility effect to kick in. Almost anyone's first gallon or three of potable water per day is enormously more valuable than the tenth or seventieth.)

Grim said...

I understand why the concept ordinarily applies. This is a special set of questions, though.

We can put the question about wages more sharply: Assume it was true that the only difference between the male work and the female work was that a man or a woman was doing it. Assume it is likewise true that the market proves willing to pay men more than women for the same work.

There is a moral question about whether that is wrong. But I am also curious about the economic question: is that enough to establish that women's work is less valuable?

Should we say, "Yes, we're finished -- the market has decided"? Can an employer justify his or her decision to pay women less because of the market's existing determination? Should the employer have to justify paying market rates that explicitly value women's work less?

raven said...

If my widget factory pays higher wages than Joes widget factory, my widgets are going to cost more, and I will sell less of them, possibly going out of the widget manufacturing business all together. And those higher paying jobs go too.

I have heard the left talk about how Henry Ford paid higher than prevailing wage, ostensibly out of some altruistic notion that his workforce could then afford cars. If ,in fact, he did pay higher wages, I suspect the true reason was he got a better, more efficient workforce, and thus could improve his car production level.
My advice to anyone seeking a higher wage is to make themselves more valuable to their employer. Ancient thinking, I know.
TANSTAAFL.

MikeD said...

My position remains the same. A thing or service only has whatever value that someone else will pay for it. Period. This has been true throughout history, even predating actual currency. If my loaves of bread are no better or worse than anyone else's loaves of bread, you will trade me only those goods you'd trade to anyone else for their loaves of bread (let's say you craft fine spears). And that then gives me the choice; do I feel that what you are offering in exchange is worth my bread (five loaves of bread for one of your spears)? If the answer is yes, then my loaves each hold a value of about one fifth of your spears. If I do not think that's fair, I can either refuse outright, or make a counter offer (four loaves for the spear), and around we go again. That then sets an exchange rate between me and you. But lets say food has gotten scarce. Maybe now, you'd be willing to make me a spear for three loaves of bread. Or if we got word that the hill people were raiding villages in our area, maybe I will give you seven loaves for your spear. Value does not remain static.

All money does is give us a universal good that can be traded. Your spears may be worth bread to me, but worthless to the bowyer (at least in his estimation). That means you either need to trade me a spear for loaves of bread to trade with the bowyer, or you have to work out some form of complicated exchange around the village to finally get your hands on one of his bows. Currency means we all agree that this coinage has value we'll exchange our goods for, thus you can take the product of your labor (your spears) and exchange it for something you can then take to anyone else in the village and purchase their goods with.

Labor is no different. If I do not produce goods, but am a skilled laborer, I can trade my physical effort for currency (or in a barter society, a portion of the goods produced, or perhaps even just food that you've paid for with your goods). In modern society, someone's labor only is worth what someone else will offer them (barring interference from the government or a labor union) and what they will accept for their labor. I have turned down job offers because they were not offering enough for how I value my labor. That is my right. And likewise, my employer is under no obligation to pay me whatever I ask, because that is their right. If the time comes that my employer is no longer paying me what I believe my labor is worth, I can ask for more or resign. And then my employer will need to evaluate if my labor is indeed worth the higher figure or if they can get by with a replacement.

There is nothing surprising or shady about the employer paying someone less than they paid previous employees. As long as the new employee agrees to accept the salary, then that is what the job is worth. If no one will accept the new, lower salary (or, more likely, the employer has high turnover in the position as people work at that position for the lower pay until such time as they can get a similar job at another business paying more for the same position) then clearly the employer is undervaluing the labor that job requires. These kinds of things end up being self correcting.

E Hines said...

...if the government were to agree to license Apple iPhone ads to be plastered on the side of the Tomb of Unknowns, for example, I would think they were engaged in a moral horror no matter what price they got.

You're imposing your definition of morality on parties engaging voluntarily in an exchange regarding their property? the unwilling participation of a third party, such as slavery. [Raven's comment] If the parties involved are not voluntary, it's not a valid exchange.

Should the employer have to justify paying market rates that explicitly value women's work less?

Justify to whom?

What economic system is more moral than a free market one? How are controls on that market (free, or the better one), other than to enforce the environment that allows it to operate, consistent with that system being optimal--and so the most moral?

Eric Hines

Grim said...

So, just to be clear, there's no problem with this?

"Why are women paid less than men?"

"Because they're worth less than men."

"Why are they worth less than men?"

"Because they're paid less than men."

E Hines said...

So, just to be clear,

You're imposing your definition of morality on parties engaging voluntarily in an exchange regarding their property?

and/or

Justify to whom?

and/or

What economic system is more moral than a free market one? How are controls on that market (free, or the better one), other than to enforce the environment that allows it to operate, consistent with that system being optimal--and so the most moral?

Eric Hines

Grim said...

I'm OK with imposing my system of morality, if that's the hang-up. For the most part, I let people do what they want to do. But I'm OK with drawing limits.

On the other hand, this particular limit is shockingly circular. I know why I'm opposed to prostitution. I'm not sure what justifies this wage question besides the circle.

E Hines said...

The circle is your construction, no one else's. It's on you to show that your construction is the only one possible.

Eric Hines

Grim said...

What's the confusion about that?

The exchange theory of value means that a thing is worth what you will give for it.

So, why is women's worth less than men's? Because people will exchange less for it.

Why will people exchange less for it? Well, it's not worth as much -- if it were, people would be willing to exchange more.

E Hines said...

OK.

"Why are women paid less than men?"

"Because they're worth less than men."

"Why are they worth less than men?"

"Because they're paid less than men."


Here's an alternative construction, since you're avoiding the thing:

"Why are women paid less than men?"

"Because they're willing to accept less than men."

"Why are they willing to accept less than men?"

"Because they want the job and are more willing to compete on price than men."

Just like a free market.

Eric Hines

E Hines said...

This seems to be your point of confusion:

The exchange theory of value means that a thing is worth what you will give for it.

No. The exchange theory of value means that a thing is worth what the involved parties are willing to exchange for it. The seller will determine the thing's value just as much as the buyer. It's an exchange theory, not a buyer theory.

If they don't agree on value, the exchange won't occur. That doesn't mean the thing is valueless; it means the thing's value is, presently, indeterminate.

Eric Hines

Grim said...

The problem, Mr. Hines, is that this is a theory of value. If you want to answer the question "Why are women paid less?" with "Because they will accept less," that's fine. The real question is -- does that actually mean their work is worth less?

On this theory, it has to mean that. Yet it is not hard to see that this is a strange thing to say, since they are doing the exact same thing.

Say the work is producing widgets, and they each produce 5 an hour. Widgets can be exchanged too, for $5 apiece. Thus, their work is worth (in exchange value) $25/hr to the boss. But the man's work has to be said to be worth more, because he won't work for less than $15/hr; the woman's work is only worth $12/hr. But both of them are worth $25/hr in exchange value from the boss's perspective.

So the woman is worth less... because she's more profitable. That's a strange thing to say, too.

raven said...

" Yet it is not hard to see that this is a strange thing to say, since they are doing the exact same thing. "

But are they? What if the man makes five widgets an hour, and the woman makes four? What if the man concludes 10 sales this month, but the woman only 9? Without a true measure of productivity, no real value can be assigned to the worker, male or female.

Ymar Sakar said...

Women have maternity leave, sometimes paid.

So, if the company is eating those costs, they have to find a way to deal with it. Men aren't allowed, so they get paid more per time due to security and overtime worked.

But for women, the company has to ensure they can pay the risks and costs, just like an insurance company.

The "benefits" are often a part of one's wage, including healthcare. Though company provided healthcare no longer exists, by law. Or perhaps only the grandfathered ones, the ones that paid a suitable bribe to DC (which was taken out of people's premiums).

Ymar Sakar said...

The statistics are lying. Well, normally they are always hiding one lie at least.

Grim said...

Raven,

But are they? What if the man makes five widgets an hour, and the woman makes four? What if the man concludes 10 sales this month, but the woman only 9? Without a true measure of productivity, no real value can be assigned to the worker, male or female.

So that's a different theory. It's not the exchange theory of value any more: the worker is now worth what they produce. That I could understand. If you regularly produce 4 instead of 5 in the same time period, you're objectively worth less.

What's weird about this theory is that productivity doesn't really factor in. They're worth what they are paid in exchange for their labor.

E Hines said...

The problem, Mr. Hines, is that this is a theory of value. If you want to answer the question "Why are women paid less?" with "Because they will accept less," that's fine. The real question is -- does that actually mean their work is worth less?

These are the same question. Value is jointly determined between the buyer and the seller, else there is no exchange. The woman's work is worth less, yes, because she's willing to make it worth less voluntarily in order to achieve an exchange in competition with her male competitor.

Regarding raven's widget scenario, a raven competitor widget, utterly identical to a raven widget, is worth less because it sells for less--utterly voluntarily in a free market: the buyer and seller have agreed to a lesser price than a raven widget is sold for--also in an utterly free exchange, just less often with those less valuable, yet identical widgets in the same market.

It's not that the woman is worth less (your original construction, from which you've deviated in your construction cited just above), it's that she voluntarily makes the service of her labor worth less.

What's weird about this theory is that productivity doesn't really factor in. They're worth what they are paid in exchange for their labor.

Not at all. They're worth what they are worth, utterly independently of what they do. Their labor is worth what they are paid for their labor.

Eric Hines

Tom said...

One thing I would consider is that money is not the only form of value or worth. It's possible the employer actually prefers the company of men and so pays them more as an incentive to stay, or pays women less as an encouragement to move on and make room for a man. Is that unfair? Or is it unfair to criticize someone for spending their money to suit their preferences? I haven't thought through this, but I tend to think that fairness doesn't necessarily always mean monetary equality.

Historically, back when men really were often paid more than women for the same work, it was because the men were supporting families, while the women were single and presumably looking for a husband. The men needed more, so they got more. There was probably an element of stability as well. The employer probably assumed the woman would quit when she got married, whereas the man might be a lifelong employee. Should we apply the idea of fairness to need instead of productivity?

MikeD said...

No one can determine the value of you as a person. But the price of your labor? That's between you and an employer. If the employer undervalues your labor, you are free not to agree with them and seek either a higher wage or another employer. A woman who accepts less pay than a man is willing to is the only person devaluing her labor. She is under no obligation to accept whatever salary she is offered for her labor, just as a man is under no obligation to accept whatever salary he is offered. All (barring governmental or union interference) are free to negotiate for whatever they feel that labor is worth.

I think you are conflating the two when you say a woman is worth less than a man. In fact, I can think of one particular incident at a company I used to work for where one young woman was so convinced that employers treat women unfairly as a standard practice, she asked one of her coworkers how much he was being paid in the same job (which he had a few years more experience in than she did), and was shocked to find out she was actually being paid more than he was. The difference is when she joined the company, the salaries being offered were higher (to attract talent that was declining the salaries that had previously been offered) and the man who had worked there for years never asked for a raise or thought that he wasn't being paid enough. So I ask you, who was at fault that she was being paid more than her more experienced male coworker?

Grim said...

See, I obviously don't think that people are worth what they are paid, or that there's any proper conflation of human worth with one's worth in the market.

The exchange theory is strange to me, though, because of this weird disconnect. Say it however you like: their labor is worth whatever they are paid for it, neither more nor less. Their labor is worth whatever they receive in exchange. Their labor is worth whatever someone else is willing to pay them in exchange for it. Whatever formulation is fine.

The weird thing about it, to me, is the disconnection between that formulation and the thing they produce. If they both produce 5 wigets worth a total of $25 in a given period of time, why is it that the labor of the one who accepts less is worth less? She's more profitable as an employee.

This is a purely theoretical question, but the way we think is important. On this concept, the right way to measure the value of her labor is exchange, not production. So two people who produce the same can be worth different amounts, which is strange. But the one who is more profitable to employ is worth less under the theory.

That strikes me as absurd enough that I think the theory must be wrong. This can't be the right way to think about questions of value in the market.

E Hines said...

If they both produce 5 wigets worth a total of $25 in a given period of time, why is it that the labor of the one who accepts less is worth less?

Why should they not have different values? They're different products, connected only through the chain from raw input to final possession by the end user. In an interconnected, competitive market for all the inputs and final sales. This has nothing to do with morality, but only to do with competitive, complex markets, which you wanted to eschew in favor of morality.

We left the moral question behind when we stopped talking about the worth of the woman and understood the exchange theory to be about the worth of the woman's labor.

Eric Hines

Tom said...

But the one who is more profitable to employ is worth less under the theory.

It's worse than that, really. That employee is more profitable because her labor is worth less.

So, the paradox seems to be that she is worth more because she is worth less.

However, that means you are using "worth" in two different ways. One way assumes that she is worth X because that's how much her labor profits her employer. The other is that she is worth Y because that's what they've agreed her pay will be. These are two different definitions, though, so it seems like equivocation.

Grim said...

See, Tom is on to the problem. We are talking about economic value. There's a weird paradox here.

These are two different definitions, though, so it seems like equivocation.

It's really not, though, because the employer is valuing her labor in both cases. In the one case, he's valuing her labor at $12/hr, because that's what he exchanges for it. He's valuing the product of her labor at $25, because that's the price he accepts in exchange for the product of her labor.

So we really to have to say that her labor is worth less to him, because he exchanges less for it than for the man's. But it's also worth more to him, because he obtains more in exchange for the product of her labor than for the man's. And as you say, her labor is worth more to him (viewed in terms of his profit from the exchange of her production with his client) just because it is worth less to him (viewed in terms of the exchange between him and her).

Grim said...

We left the moral question behind when we stopped talking about the worth of the woman and understood the exchange theory to be about the worth of the woman's labor.

No, we didn't. The moral question is fairness, which is very plausibly an important component of justice -- and arguably (although I don't really buy Rawls' argument, he did write a big book about it that has been widely celebrated for decades) all of justice.

Is she being treated fairly? Well, one way to talk about it is to say that yes, she obviously is being paid what her labor is worth -- because her labor is only worth what she is paid for it, by definition.

If the exchange theory of value is flawed, however, that way won't do. Then we'd need another principle (e.g., 'equal pay for equal work') that would let us determine if she is being treated fairly. I don't know if 'equal pay for equal work' is the right principle, but it is less paradoxical and more plausible than the exchange theory.

E Hines said...

Is she being treated fairly?

Of course she's being treated fairly. She's getting a wage she and her employer voluntarily agreed. That's the fundamental morality of a free market: all exchanges are voluntarily agreed, and from those exchanges, all participants to the exchanges are made better off than they were. Whether someone else is more or less better off from their exchanges is wholly irrelevant: that someone else isn't a party to this exchange.

Of course this assumes a common definition of fairness. A definition not yet agreed, nor even posited, in this thread, except by implication of my claim that if it's voluntarily agreed, it's fair.

Eric Hines

Grim said...

Well, another possible standard has been floated -- equal pay for equal work. It is not paradoxical in the way that the exchange value standard is, though it has numerous practical problems (e.g. equality of quality can be difficult to measure, even if equality of production is not).

Jesus talks about this, but I never got the idea that he was proposing that we should govern ourselves this way. I thought he was saying that God's generosity toward the less worthy in the Kingdom of Heaven was going to contrast with what we would ordinarily take to be justice on Earth:

1 For the kingdom of heaven of heaven is like a landowner who went out early in the morning to hire workers for his vineyard. 2 And after agreeing with the workers for the standard wage, he sent them into his vineyard. 3 When it was about nine o’clock in the morning, he went out again and saw others standing around in the market place without work. 4 And he said to them, “You go into the vineyard too and I will give you whatever is right.” 5 So they went. When he went out again about noon and three o’clock that afternoon, he did the same thing. 6 And about five o’clock that afternoon he went out and found others standing around, and he said to them, “Why are you standing here all day without work?” 7 They said to him, “Because no one has hired us.” He said to them, “You go and work in the vineyard too.”

8 When it was evening, the owner of the vineyard said to his manager, “Call the workers and give the pay starting with the last hired until the first.” 9 When those hired about five o’clock came, each received a full day’s pay. 10 And when those hired first came, they though they would receive more. But each one also received the standard wage. 11 When they received it, they began to complain against the landowner, 12 saying, “These last fellows worked one hour, and you have made them equal to us who bore the hardship and burning heat of the day.

13 And the landowner replied to one of them, “Friend, I am not treating you unfairly. Didn’t you agree with me to work for the standard wage? 14 Take what is yours and go. I want to give this last man the same as I gave to you. 15 Am I not permitted to do what I want with what belongs to me? Or are you envious because I am generous? 16 So the last will be first, and the first will be last.”

raven said...

Equal pay for equal work. Sounds so fair, and easy. Well, the PAY part is easy- as long as we can define pay...
but who, and how, is equal work defined? Job description? Volume of product? How do we compare the millwright with the HR secretary? Does the pay scale change with title change? Who enforces and interprets the rules? This sort of thing leads down a black hole of jealousy, litigation, regulation and micromanaging by those who have no stake in the business.

E Hines said...

Equal pay for equal work.

Stipulate, raven, that the problems you raise--valid every one--are resolved. Mandating that equal pay is rank slavery. It creates the mandater as having dominion over the employee, by telling him (or her) what s/he must offer his labor for. If he does not own the produce of his own body, he does not own his own body. The mandater does.

Eric Hines

Tom said...

Well, and I suggested a different standard of fairness, though I was not endorsing it: Need. But I agree that without a common standard this is a difficult discussion.

Grim: ... the employer is valuing her labor in both cases. In the one case, he's valuing her labor at $12/hr, because that's what he exchanges for it. He's valuing the product of her labor at $25, because that's the price he accepts in exchange for the product of her labor.

I don't know that they are the same. There are two different exchanges there, one for labor with one individual, one for a product with a different individual, and I'm not sure they are equivalent.

Let's say, in the above situation, that the employer expects to get $25 for the products, but that before they sell the market changes and now he can only get $5 for them. Since this is less than he paid his employee to make them, would it then be fair to ask his employee to give some or all of her wages back?

Let's take arbitrage as another example. That is simply buying things for lower than "market value" and selling them at market value for a profit. Nothing physical is produced, no value is added to the product itself, but in one exchange an item is worth one thing and the next it's worth more. Is that unfair?

Tom said...

For those arguing it's fair to pay the two equally productive workers different wages, I have to say it does seem unfair. The lower-paid worker probably agreed to the pay in ignorance of what other workers were being paid, so it seems like the employer is taking advantage of that ignorance. This speaks to how we view other people: Are they animals to exploit (anything is OK as long as you get consent), or are they human beings to be treated with dignity and fairness (we do what is right even if we could profit more by getting them to accept less)?

Another way to put this would be, is uninformed consent legitimate? In medicine, we say it is not.

All that said, I wouldn't want laws to try to fix this. There are lots of things I believe are immoral that I don't want laws passed to try to stop.

Grim said...

Tom,

The strangeness isn't in the fact that the product may be valued more by the employer than the labor. The paradox lies in the fact that we have to say that employees valued less are the more valuable in terms of the product of their labor, and that it is because they are less valuable that they are more valuable.

It's not strange that you'd value an employee more who would work for less (or an employee's labor more, if you like). What's weird is that we can't say that: that they will work for less doesn't make them more valuable, because the only standard of their labor's value is what you exchange for it. We are forced by the theory to say that they are (or their labor is) less valuable to the employer.

That just doesn't work. It doesn't make sense.

When I work on hard physical tasks, like digging a French drain or setting a post and hanging a horse gate on it, of course I would value help. I'll value the help most that gets the job done fastest, provided it gets the job done well. That's where value seems to me to lie. Whether or not I give any money for it is irrelevant to the question of what's valuable about the help, but if I do, of course I'll value your labor more if I can pay you less (subject to the moral requirement that a 'workman is worthy of his hire'). It's more valuable to me because it doesn't tax me as much as expensive help. Right? Exchange value of labor is exactly wrong.

Tom said...

Going back for a moment, let me say more about this: ... so it seems like the employer is taking advantage of that ignorance.

If we take the ignorance out of the equation, if a prospective employee knows that previous workers were offered higher starting pay, but that the market has changed and he knows his starting pay will be less and accepts that, then it does seem more fair.

Tom said...

Maybe some background reading is in order for me. The Wikipedia article on this is explicitly to the Marxian theory of exchange value. Is that what we're talking about? If not, Grim, could you link to a good article or summary of what you are talking about?

J Melcher said...

Missing term in this discussion" "opportunity costs".

Let's suppose the widget factory will pay any potential worker capable of making 5 per hour a wage calculated in the following fashion - you, the worker, tell me the generous HR recruiter, what you can earn for yourself working at home, and I promise to pay you $3 more than that, up to a "secret" capped wage that I can't disclose. So if you value your work at home at, you say, 6$ per hour, I may pay you $9. If you think you can get $13 of value pursuing your own interests and tasks for yourself at home, I may (if you haven't exceeded my cap) pay you $16. If you think you're worth $20, and tell me so, you could, possibly, be drawing a $23 dollar an hour wage from me.

Let's also move this example from sex to age. And we consider a long time worker with kids launched, money in a nest egg, a paid for largish house he plans to unload soon to another family so he and missus can retire to the RV life, and who would value extra time to work on fixing up the place to maximize the resale. He thinks his time at home is worth at least $12 an hour. And in this and other ways older workers tend to average self-value at about $12 an hour. This is the opportunity cost of working for himself, at home, he must forego to claim a $3 gain per hour by working for the widget factory. NOW we in turn consider a new worker with kids at home driving him crazy always demanding services, training, food, clean diapers, love, affection, a place to bestow adoration, time to share story books ... okay, the young parent LOVES being at home even with all the drawbacks. Net net, the joys and value of working with kids in the house less the aggravations of unappreciative neighbors and other adult family members and a government that doesn't collect any tax cut from home-base work -- the young worker estimates the value of home making is about $9 per hour, which must be written off to accept a $3 gain from the widget factory.

Paying each the same INCREMENTAL wage that they require to do what the widget production market demands, rather than what they prefer, based on their own estimates of self-worth, is unfair, exactly, how? On what moral grounds does the widget maker pay the older, secure, society-mission-of- reproduction mission-accomplished worker less of an incremental wage than the younger worker?

If we argue that staying home to be fixxer-upper to "real property" like as house is OVER valued by older workers, sharing perceptions of their society, while staying home to be care-giver to temporary dependent living treasures like children is UNDER valued, according to the valorization, commentary, and tax code of the society, fine. But that's not a problem of "market" wages.