When It Comes To Economics, Karl Missed The Marx

“It was a Russian ship. They taught me all about you imperialist swine. I was exposed to the works of great thinkers - Karl Marx, Lenin, L. Ron Hubbard, Freddie Laker.” – Top Secret

Pa Wilder wouldn’t let me date girls who ran in track.  He didn’t want me hanging around with fast women.

One of the advantages of writing these posts are the times when my family will ask me what I’m writing about.  They’re not reading it, of course, but it’s always a good conversation starter and it gets me off of the topics of “Why isn’t the trash out?” and “Who is going clean the lint from between Dad’s toes?”  Tonight Pugsley was the one who took one for the team was interested.

“What are you typing about tonight, Dad?”  He knows that as a writer I’m a fair typist.

“Well, it’s about economics and bad ideas.  Probably one of the worst ideas ever.”

“What was it, Cheetos-flavored Chapstick®?  Crystal Pepsi™?”

I gave The Mrs. Gorilla Glue® Lip Balm.  That left her speechless.

“Well, one economist in particular had some pretty bad ideas.  He had the idea that the things we made were only worth the labor that went into making them – nothing more, and nothing less.”

“So what about the $200 sneakers that toddlers make in Pakistan and only cost $2 to produce?”

“Well, that’s another idea that we’ll get to, but we can use that example.  In this economist’s mind, the toddlers who made the sneaker should have made most of that $200.  He would have argued that the $198 profit in the sneakers was exploiting the worker.”

Of course we were talking about Karl Marx.  Although he wasn’t the first one to embrace the “Labor Theory of Value”, this horrible idea was used to make more people miserable than the Kardashians ever have.

The biggest flaw inherent in the Labor Theory of Value in Marxism was the destruction of the price system.  In this case, if we had the same labor component in our sneakers and in, say, a polished piece of poo (don’t laugh, they did it on Mythbusters®) then they should cost the same.

Whoever stole my furniture polish, I will find you.  That’s my Pledge®.

Yes, shiny polished poo and fashion sneakers should cost the same to a Marxist – heck, if it took more time to make it really shiny, that would be worth more than the sneakers.  This sounds like nonsense, but the commies sold it to the revolting masses in Russia.  Why should other people make money?  The idea that they’re making a profit means you’re being cheated!

While this might have been a good strategy for children playing “store” in kindergarten or Hollywood™ stars protesting for (insert weekly cause here) it didn’t work out so well in practice.  The Labor Theory of Value caused all sorts of problems in the Soviet Union.  One of the first stories I ever heard about this is one I’ve related before – the Great Soviet Nail Failure.

The story goes like this:

A Soviet factory is told by Moscow to increase nail tonnage.  The solution?  Very large nails – one pound railroad spikes.

Obviously, the commissar in Moscow got in trouble.  The next commissar (after the first one got, umm, fired) gave a new order to the factory:  “Make lots of nails.”  So, they made thousands of tiny finish nails.  They were sad that the whole “invading Finland thing didn’t work out, or else they could have made Finnish nails.

Looks like they’re gonna need a new commissar.

I got a job at the chess factory.  I took a knight off.

While the nail story can’t be corroborated, what can be proven is that one Soviet factory produced exclusively shoes for young children with the leather they were sent.  Why?  They got a production bonus for making more pairs of shoes, regardless of if there was a need for them.

What they were missing, of course, was price.  No one sent a signal back that they made too many tiny shoes.

The entire reason for this nonsense is that profit simply didn’t exist.  You can’t have fully automated luxury communism if there aren’t prices for the things we use based on supply and demand.  Price tells factories what to make without requiring armies of bureaucrats to decide.  Failure means you lose your factory and someone smarter (or, luckier) gets it.

This is, of course, the reason that 21 year old girls are getting college degrees in Medieval Rap Lyrics.  Their labor is as good as anyone else, right?  So why don’t they get a job paying $235,000 a year with a company car and an apartment in New York and a clutch of sassy rich trampy friends?

Economics.  The highest value of labor of a 21 year old girl getting a college degree in Medieval Rap Lyrics is worth exactly as much as she can get in tips at Hooters®.  But they honestly believe that they deserve that cool job because . . . they work as hard as anyone else.

Marx would be proud.

I tried to pay for my dinner at Hooters® with an energy drink.  I guess Red Bull™ doesn’t always give you wings.

While we were talking about economics, Pugsley started getting the idea.

It turns out that Pugsley loves computers, and is really irritated.  The nice graphics cards he likes are in short supply.  First, the ‘Rona ruined the supply chain, so there are shortages up and down the line in the computer manufacturing world.

Second, high-end graphics processing cards (so they can watch the Pac-Man® in High Definition™) for computers are in really short supply.  It turns those graphics cards are they’re great for mining for cryptocurrency.  One video card with a manufacturer’s list price of $700 was going for $1,500.  The high-end graphics card is going for $3,000.  Pugsley figured that the higher-end card could pay for itself in crypto (at current prices and mining rates) in about nine months to a year.

So, yeah, it makes sense that these things cost $3,000.  Heck, at $3,000 they’re still a bargain, assuming crypto doesn’t disappear down a black hole to zero.  Which it could, because crypto is the ultimate expression of the opposite of Labor Value – every bit of crypto value is based on subjective value – it only has value because we agree it does.

So why doesn’t the manufacturer raise the price so that they can keep more of the value of their video cards?

I went to a topless Amish bar the other night.  No bonnets.

Well, in this case, their core audience is gamers, who can be very, very loyal.  Crypto mining might go away in a year or two.  But if the video card users/fans feel they’ve been robbed?  Gamers will go to the number two manufacturer.  But they still won’t have girlfriends.

The manufacturer is playing the long game.

The high prices irritate Pugsley.  Pugsley would dearly love to have a nicer graphics card, but can’t afford them at these inflated prices.  His (minor) revenge is that his graphics card is whirring away right now mining itsy-bitsy amounts of crypto.  In a small way, he’s benefiting from the whole process.

In a free market you get people who take advantage of price-mismatches like that.  Scalpers fill this role, too.  As long as they don’t cheat the system (which they often do) it’s an honest living.  Me?  I had season tickets to an NFL© team for a time.  They were doing well, and I generally doubled my money (on the games I didn’t go to) every year.  Heck, I even reported the income to the IRS.

The beauty of a transaction in a free economy is that both people win.  If I want a burger and it costs $2, well, it’s because Dairy Queen® wants the $2 more than it wants the burger.  Me?  I want the burger more than I want the $2.

Which is also what they pay for their corn.

In a free exchange, both parties win.  And if I think $2 is too much for the chewy hockey-puck burgers our Dairy Queen™ makes in Modern Mayberry?  Well, they get a signal that people aren’t buying their burgers.

Or Cheetos®-flavored Chapstick™.

Author: John

Nobel-Prize Winning, MacArthur Genius Grant Near Recipient writing to you regularly about Fitness, Wealth, and Wisdom - How to be happy and how to be healthy. Oh, and rich.

17 thoughts on “When It Comes To Economics, Karl Missed The Marx”

    1. Yeah. We all saw that coming.

      What slays me is that trying to convince … Some folks of a conservative bent that the Bidenreich would usher this in (along with other things they have enough sense to deplore) got *nowhere*. “Orange Man SO raycisss”.

      In fairness to them, of course, it didn’t matter. The steal was in for Our Beloved FICUS.

    2. Yup – that’s on target. And it’s working. The money is being soaked up faster than you can imagine.

  1. And anyone who read and processed just that one post appropriately is smarter than 60% of all college economics students, 70% of all university professors in general, 80% of all university economics professors, 90% of all poli sci students and welfare recipients, and 100% of all theater and journalism majors and graduates, since ever.

    They are, however, in the bottom quintile of intelligence compared to most non-college kids working for fast food franchises or doing construction general labor.

    1. Actually we were rather surprised by the lack of connecting the dots among most of the labourers building our house. The framers worked 3 days a week, complained it was a long week, and then started they never had enough money. Of course the smart guys figured some stuff out and were the bosses. They still only worked 3 days a week, but didn’t complain about money.

      Same thing about investing in gear and learning new methods. The broke ones wasted too much on beer. The smart ones bought better gear and learned new methods (bosses) so that they had more money for beer.

      Got a niece that graduated with honors in a useless degree in a field with too many anyway. She endlessly bitched about getting minimum wage and part-time & off-hour work in a biz requiring lower skills than a burger flipper. Somehow she thought that loading a government-required biz survey with bad comments would help her pay?!? She stated that she should be paid 3 or 4 times what she is making. Didn’t answer my question of why didn’t she just go get that magical job.

      Amazing the number of people that think a ditch digger (my hobby it seems) should be paid more than than a highly-skilled, critical-need guy. Also, the same bunch have no appreciation of the mental effort required for high-end tech work that leaves you just as exhaust at the end of the day as digging the ditch. The difference between the two is the number of people capable of doing each job. Note that a guy that invests in equipment to dig a ditch is compensated better than the tech guy.

      1. Thanks for proving my point: the construction laborer working three days a week, and bitching because he doesn’t have enough money, realizes that he makes more money if he works five days a week.

        He has just surpassed the intellect of every Marxist, who thinks everyone from architect to the guy who empties the sawdust bin and everyone in between, should all get the same amount, because all labor is labor.
        QED

    2. And anyone who read and processed just that one post appropriately is
      [wiser] than

      FIFY

      First they come for our words. Every blasted time.

  2. Is profit even a motivation anymore when we are being showered on a regular basis with make-believe money? The whole economy is just a giant shell game.

    1. With the return of the establishment curruptocacy, “investing” becomes one of watching the influence peddlers to find winners. Classic among those are GE and the favored banks. Looks the big tech oligarchs have joined the band. I made money noting the peddlers under 0bama. Will work under Xi Briben and the kneeing Camel.

      Most of that 1.9T will disappear just like 0bama’s 0.8T disappeared into nothing that anyone can note (other than the solar fraud). The influence peddlers will hoover it up.

      1. ABC I was shocked this week when I read that AIG got nearly 1.9 trillion in bailouts total in 2008 would link the source but I did not save it. Notice how there is no reporting on the debt ceiling, or the cost of each vaccine given. Cuomo is still a POS but evil black rifle has distracted people again.

        My Dad used to take picures of us boys with historical news paper front pages. When he passed I got the duty of going through his stuff. I found the Moon Landing front page big letters thought that was pretty cool. Laughed when I saw the little paragraph on a former senator who killed a female when he went off a bridge at some place called chapaquiddick.

        Boy was he lucky to survive and his punishment, a license suspended for 16 months (from wiki not the paper)

  3. Ahhh…the 19th century German rat bum POS who intended to burn the world down with his “lasting curses” that we are still grappling with because manboons is not a learning animal.
    Utopia was never on the menu for comrade Karl the enlightened evolved lightworker being.
    He would make a good printing press czar in Western Zimbabwe or the FUSA.
    Lumber is up 188% since 2018 and the grocery isn’t too big to fail and neither is mommygov.
    Faculty lounge choom bongload magic thinking of duh winning winnarz has real world consequences.
    At least we’ll get to ride on the NYC to Hawaii unicorn flatulence engine high speed rail with free drinks from conductor AOC.
    All aboard, foward, yes we can, Si se puede. Uhmm…ummm…umm.

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