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Counterfactual Theory of Value

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Re: Counterfactual Theory of Value

#51

Post by just-ok »

prometheus76 wrote: post #49
winnit wrote: post #48

Earlier quoted context omitted.

Not really, since you are swapping an easily available commodity ‘mud’ for bread and fillings. You should specify that the value added to the mud would be unequal to the value added to the sandwich ingredients to make the point you want to. Since you begin with different initial conditions you ‘muddy’ the conclusions.

OK, here's another refutation of the labor theory of value. A woodworking crafter with twenty years of experience takes five hours to make a bookshelf. A person who just started woodworking today takes twenty hours to make the same bookshelf, but it is out of square, out of plumb, is wobbly and has several nail holes in it. According to the labor theory of value, the noob bookshelf is worth more because the laborer t…

Not exactly, because the master woodworker’s prior labor to gain that experience would factor into the value assessment.

Re: Counterfactual Theory of Value

#52

Post by martindbp »

pydry wrote: post #12
martindbp wrote: post #11

Earlier quoted context omitted.

You can't prove it, but Musk is not a one-hit wonder. He's transformed the space industry by sheer force of will (as a part time founder & CEO), as Tesla has done for EVs, so it's quite reasonable to assign the success of Tesla to him.

His perception management skills are top notch and he works as an effective conduit for getting capital to engineers. The rest is...meh. In SpaceX's case they picked up on rocketry research where NASA left off because its budget was squeezed.

Getting funding, finding the most talented engineers, deciding what to build and motivating people are the high-level skills needed from a founder/CEO. I don't see any argument here against his importance to all companies that he's been involved in. Nobody's claiming he's building rockets all by himself.

Re: Counterfactual Theory of Value

#53

Post by prometheus76 »

just-ok wrote: post #51
prometheus76 wrote: post #49

Earlier quoted context omitted.

OK, here's another refutation of the labor theory of value. A woodworking crafter with twenty years of experience takes five hours to make a bookshelf. A person who just started woodworking today takes twenty hours to make the same bookshelf, but it is out of square, out of plumb, is wobbly and has several nail holes in it. According to the labor theory of value, the noob bookshelf is worth more because the laborer t…

Not exactly, because the master woodworker’s prior labor to gain that experience would factor into the value assessment.

OK here's my third refutation of the labor theory of value: you and I both have 1,000 hours of experience making bookshelves. You spend 50 hours making a beautiful bookshelf, and you carve scrollwork into the legs of the shelf and beautiful scrollwork into the front of each shelf, and it is level, square, and plumb. I spend 50 hours making a bookshelf, but it has one leg that is much thinner than the rest, and there is no scrollwork because I don't know how to do that, and I didn't really measure anything, I just kind of eyeballed it, so everything is out of plumb and out of square, and the bookshelf is rickety, at best.

According to the labor theory of value, our bookshelves are worth the same amount, because you put 50 hours into making yours, and I put 50 hours into making mine, and we have the same prior experience.

Re: Counterfactual Theory of Value

#54

Post by mbrodersen »

pydry wrote: post #12
martindbp wrote: post #11

Earlier quoted context omitted.

You can't prove it, but Musk is not a one-hit wonder. He's transformed the space industry by sheer force of will (as a part time founder & CEO), as Tesla has done for EVs, so it's quite reasonable to assign the success of Tesla to him.

His perception management skills are top notch and he works as an effective conduit for getting capital to engineers. The rest is...meh. In SpaceX's case they picked up on rocketry research where NASA left off because its budget was squeezed.

NASA is a massively ineffective bureaucratic organisation. Even with an “unsqueezed” budget it still wouldn’t have achieved what SpaceX has achieved.

Re: Counterfactual Theory of Value

#55

Post by dredmorbius »

marcosdumay wrote: post #46
dredmorbius wrote: post #37

Earlier quoted context omitted.

Adam Smith's commentary on wages and the considerations in their assignment is interesting. In Book 1, Chapter X, "Of wages and profit in the different employments of labor and stock", "Inequalities Arising from the Nature of the Employments Themselves": The five following are the principal circumstances which, so far as I have been able to observe, make up for a small pecuniary gain in some employments, and counter-…

All of those are very simple consequences of marginalist dynamics. It has been a long time since I have read it, but it's nice to see Adam Smith was so close to the answer centuries before people started distorting the problem politically and got all those obviously wrong but mainstream answers.

That's been something of a recurring theme for me in reading Smith.

He's prolux and the language is somewhat alien to a modern reader. He does make errors and has some of his facts wrong; see his advice to the American colonies, and his origin story of money, especially. But he is a keen observer with a shrewd mind, and recognises that fundamentally the purpose of an economic system is the support of the people (and specifically the poorest) and the state itself, and that wealth confers power which itself is distortionary. These messages are suppressed, whilst others given incidentally are ascribed undue significance.

Read Smith. Really.

https://old.reddit.com/r/dredmorbius/comments/4cyroa/adam_sm...

Re: Counterfactual Theory of Value

#56

Post by seanhunter »

sokoloff wrote: post #36
lifeisstillgood wrote: post #26

Earlier quoted context omitted.

Is the implication here that if we had a Black/Scholes/Merton method for salaries we would see a readjustment of salaries across the board as people could identify their value as wins above replacement - probably a huge shock to CEOs. Is it possible that automation provides that arbitrage opportunity?

The gap between the perfect fungibility of two contracts for asset A or B and the hopelessly imperfect fungibility of two employees is too wide for this to hold. (I think.)

Well one interesting implication of your insight here is that the more fungible/replaceable your skills are as an employee, the easier it is for the market to accurately price your labour and the less pricing power you have.

Conversely niche skills would mean a large variance in compensation due to price uncertainty ("I can't just go out and hire an exact replacement for sokoloff!"), and if there is demand for those niche skills it should mean high comp overall. And that's what we see in general in the labour market.

Re: Counterfactual Theory of Value

#57

Post by sokoloff »

seanhunter wrote: post #56
sokoloff wrote: post #36

Earlier quoted context omitted.

The gap between the perfect fungibility of two contracts for asset A or B and the hopelessly imperfect fungibility of two employees is too wide for this to hold. (I think.)

Well one interesting implication of your insight here is that the more fungible/replaceable your skills are as an employee, the easier it is for the market to accurately price your labour and the less pricing power you have. Conversely niche skills would mean a large variance in compensation due to price uncertainty ("I can't just go out and hire an exact replacement for sokoloff!"), and if there is demand for those…

Agree. I think an additional corollary is the wider gap between say $50K/yr and the value possible to create (as roughly capped by the gross margin fraction of sales/employee), the more variability you’ll see.

For a Subway sandwich artist, not only is the production process standardized (making “exact [practical] replacement” possible), but the value is also capped by how many sandwiches are sold on a given shift. No sandwich artist will make 5x as many as another. Rarely will excellence in an individual employee result in a sharp uptick in sales.

For a company that sells online ads, cloud computing, streaming services, or software that cap is so much higher as to be practically irrelevant for many roles.

Re: Counterfactual Theory of Value

#58

Post by sokoloff »

lifeisstillgood wrote: post #50
sokoloff wrote: post #36

Earlier quoted context omitted.

The gap between the perfect fungibility of two contracts for asset A or B and the hopelessly imperfect fungibility of two employees is too wide for this to hold. (I think.)

But ... Amazon for example redesigns i are ouse picking to make employees fungible. I am pretty sure project management is becoming totally fungible - the reporting and chasing and so forth, can be replaced by automation and is becoming so despite best efforts of millions of "mqnagers" Something intrigues me about this idea. The film / book "Moneyball" showed how to re-create great players "in the aggregate". I think…

Your first line has some auto-correct line noise in it, but I think I get the gist of your post.

Moneyball to me was a lesson and framework on how to make great teams, not great [individual] players. Focusing on under-valued qualities allowed the A’s to build a pennant-winning team on a low budget, by selecting free-agent players the baseball operations groups at other teams were over-looking/under-valuing.

Coming back to software, I think many of us know the three people we’d go form a startup with and the 50% of people who might be okay but we’d never sign up to start a company with. I don’t know if that is amenable to a Moneyball-style spreadsheet analysis though. If it is, VC firms would pay billions in aggregate for a working system.

Re: Counterfactual Theory of Value

#59

Post by just-ok »

prometheus76 wrote: post #53
just-ok wrote: post #51

Earlier quoted context omitted.

Not exactly, because the master woodworker’s prior labor to gain that experience would factor into the value assessment.

OK here's my third refutation of the labor theory of value: you and I both have 1,000 hours of experience making bookshelves. You spend 50 hours making a beautiful bookshelf, and you carve scrollwork into the legs of the shelf and beautiful scrollwork into the front of each shelf, and it is level, square, and plumb. I spend 50 hours making a bookshelf, but it has one leg that is much thinner than the rest, and there…

Heh, this is kinda fun.

Another follow-up question, then: How did you manage to spend 50 hours making it? Did you sit there, painstakingly, making one leg thinner than the rest for some reason? Did you sleep? Did you spend 20 hours of it browsing HN? In either case, this would likely fall under the category of unproductive labor: https://en.wikipedia.org/wiki/Productive_and_unproductive_la...

There's also the distinction of "socially-necessary labor", which feels (to me) like Marx's parallel to subjective value - the more socially-necessary, the more valuable the labor (a nice table vs. a crappy one).

In any case, the value is not just a measure of "hours put in" as you're making it out to be here; clearly I put more labor into it than you if mine looks/performs better in the same amount of time.

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