[p2p-research] negative interest at NYT

[Ryan Lanham]

Patrick,

Labor as a source of value is pre-modern economics where the concept has
been replaced by utility which is discussed in incremental or "marginal"
terms in the field of microeconomics.

By the way, a motley lot discussed the LTV long before Marx.  In fact it has
been invented and discussed many times in history and there are loads of
economic histories on the topic.

It is typically taken by economists to be a pre-modern concept that is no
longer very useful or insightful because simple observation in any number of
types of economies proved it to be inaccurate.   People don't set values on
the basis of contributed labor.

Carl Menger, who was an Austrian forerunner of Friedrich Hayak, and I
believe his teacher, is famous for critiquing the LTV--really taking it out
of modern discussion.  That occurred in the late 1800s.

Most who deal with these things would argue that prices are not determined
by labor but by demand and supply.  If prices were determined by labor,
there would be little incentive to be efficient--a major problem with all
authoritarian socialist economies which tend to produce things people don't
want.  North Korea, Soviet Union, etc.  They didn't put things on store
shelves that people wanted but that they could produce.  That's not very
desirable to most people.

Marginal utility (a very flawed concept itself) allows one to determine how
much people want more and more of a good or how much utility they need
(money) to part with some commodity or good.

Money, by the way, is the ultimate shovel because it can become any kind of
shovel...like a wild card in a card game.   Thus, like a wild card, I would
always prefer money or buying money, to buying a shovel...until I absolutely
need a shovel.


Ryan Lanham



On Mon, May 18, 2009 at 12:19 PM, Patrick Anderson <agnucius at gmail.com>wrote:

> On Mon, May 18, 2009 at 10:03 AM, Ryan Lanham <rlanham1963 at gmail.com>
> wrote:
>
> > If you have a shovel and are not using it, you can lend it to me.
> > I use it and gain value.
> > What is the problem for compensating someone for such value?
>
>
> I'm glad you made this comparison.  It's much easier to understand why
> someone would pay to rent a physical tool.
>
> So the Renter should pay the Rentier, just as the Consumer pays the
> Owner, and as the Owner pays the Worker.
>
> But if these transactions are 'perfect', then where is the problem in
> Capitalism?
>
>
> Rent is composed of 2 separable concepts:
>
> 1.) Real costs including initial purchase costs (and any interest that
> owner had to pay), maintenance, insurance, storage, even "opportunity
> loss"
>
> 2.) Economic-Rent is the amount a user pays *above* those costs.  This
> is also called "Profit".
>
>
> The "partially correct" nature of these transactions make them
> difficult to analyze since people tend to oversimplify.
>
> Physical Sources such as shovels degrade over time.  If owners did not
> collect enough rent to at least cover costs, the users would slowly
> destroy the shovel with no funds to fix or replace it.
>
> That would be no good.  Even the users don't want to be without shovels.
>
> Most users are willing to pay rent if it is not too clumsy to do so,
> but if the rent gets too high, they begin to feel as though they are
> being "taken advantage of".  Are they?  Is Rent, Profit or Interest
> ever *too* high?  What would that even mean?  Is it a magic number?
> Why do we artificially cap the amount of interest a 'Bank' can charge
> with usury laws and such?
>
>
> The Labor Theory of Value (LTV) claims the Price above Cost
> (exchange-value) arises because of the amount of labor expended during
> it's production.
>
> But if that is the case, then why does scarcity effect price at the
> point-of-sale, long after production is complete?
>
> Why will nobody consider the plight of the Worker **while acting as a
> Consumer**?  For it is during this transaction that profit occurs.
>
> Capitalism makes a small impact on Monopoly, but does not eliminate it
> completely.
>
> In fact, Capitalism cannot function at ALL under conditions of perfect
> competition, for in that case Profit would be Zero since Price would
> equal Cost.
>
>
> Hmm...
>
> So paying rent is OK for covering Costs.
>
> And paying rent *might* be OK for growth beyond Costs (say purchasing
> even more shovels to be rented simultaneously because demand is
> currently too high to meet that demand).
>
> But if we are going to grow in this manner, my question is "who will
> be the owners of those new shovels"?
>
> Will it be the current owners ~ causing Capital to accumulate further
> and further into the hands of the few?
>
> Or maybe it should be the property of the people who PAID for it = the
> users who paid price above cost?
>
>
> Sincerely,
> Patrick
>
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