Article discreditng the thesis that Mao "killed millions of people" in The Great Leap

[kandrathe]

I was thinking as I read this about software, so I'm glad you mentioned it. It is all about labor, but lines of code that do no form cohesive systems have little to no value.

Like a well designed bridge, labor value alone is insufficient to describe the resultant object compared to another. A poorly planned, or designed bridge, with substandard materials is a death trap. Even though it contains the same labor value as a well planned, and designed bridge with premium materials.

When I used to build large complex systems for fortune 50 companies, a dozen seasoned veterans who are knowledgeable in the craft are worth more than any number of lesser skilled. There is a phenomenon called the mythical person-month. The problem is that as the number of people involved grows on a project the inter-communication problem grows exponentially.

Then, I'd say there is the problem of valuing "design" itself. If you look as a pair of sneakers of today, or down hill racing skis, they are leaps and bounds better than those made in the 1960's. Does design have value? If the 1960's sneakers take more time to produce, are they more valuable even though they perform poorly compared to modern sneakers?

[FireIceTalon]

Then, I'd say there is the problem of valuing "design" itself. If you look as a pair of sneakers of today, or down hill racing skis, they are leaps and bounds better than those made in the 1960's. Does design have value? If the 1960's sneakers take more time to produce, are they more valuable even though they perform poorly compared to modern sneakers?

In this context, I would say design has value, though it is relative to time and space. Even though sneakers from the 1960's took more labor time to produce (assuming this is true) than modern sneakers, it doesn't necessarily make the former more valuable since socially necessary labor time must also be congruent with the best-available productive forces that are currently available in society .

https://en.wikipedia.org/wiki/Socially_n...abour_time

However, it ought to be said that by "socially necessary labour" Marx refers specifically to the total labour-time which on average is currently required to produce an output. It is this current labour cost which determines the value of output. So in a developed market Marx's exchange value refers to the average quantity of living labour which must be performed under currently prevailing conditions to produce a commodity. It is obvious that these conditions are incessantly changing, both in relation to quality of labour, quality of machinery, quality of distribution, and volumes of labour, machinery, sales in the branch, so estimating 'current' requirements is very much an exercise in approximation and dependent on the scales involved.

I would interpret the word "currently" to be of vital importance there. Obviously, the productive forces of today are more advanced in producing nearly all commodities than they were 50 years ago, and therefore the socially necessary labor time to produce like commodities now almost certainly differs from back then. So comparing them from different times would be apples and oranges, really.

So, water in a desert has the same value as water in a city by a lake?

After all, you don't produce water, it's just a thing you pipe out to places and exchange it.

Marx clearly distinguished between 'value' and 'use value'.

"Labor is not the source of all wealth. Nature is just as much a source of use values (and it is surely of such that material wealth consists!) as labor, which is itself only the manifestation of a force of nature, human labor power." [Marx, Critique of the Gotha Programme, 1875]

Water, obviously, as a resource occurring spontaneously in nature, has 'use value'. But that is a different thing from its actual value. 'Extracting the water, piping into places', and all the other processes of labor involved would be what gives it its value.

[Jester]

I would interpret the word "currently" to be of vital importance there. Obviously, the productive forces of today are more advanced in producing nearly all commodities than they were 50 years ago, and therefore the socially necessary labor time to produce like commodities now almost certainly differs from back then. So comparing them from different times would be apples and oranges, really.

If comparisons across time and between goods are just "apples to oranges," then there is surely no point in having a theory of value at all, because the whole point is to provide a general theory of what gives products value. If the LTV is true, then it must provide a useful way to understand productivity growth across time. If innovation decreases the socially necessary labour time required to produce particular goods, what does that mean about those goods? Do they have less value? Or do they embody more labour?

-Jester

[kandrathe]

I would interpret the word "currently" to be of vital importance there. Obviously, the productive forces of today are more advanced in producing nearly all commodities than they were 50 years ago, and therefore the socially necessary labor time to produce like commodities now almost certainly differs from back then. So comparing them from different times would be apples and oranges, really.

If comparisons across time and between goods are just "apples to oranges," then there is surely no point in having a theory of value at all, because the whole point is to provide a general theory of what gives products value. If the LTV is true, then it must provide a useful way to understand productivity growth across time. If innovation decreases the socially necessary labour time required to produce particular goods, what does that mean about those goods? Do they have less value? Or do they embody more labour?

-Jester

I think for very simple predictable cases, such as were around in the early industrial revolution, LTV would have seemed a natural reformation of classical economic theory. Such as, making bricks, cutting down trees. Or using those bricks, and milled lumber to form a walls, floors, and buildings. You can see the rudimentary desire to attribute labor value to the transmutation of a thing, like mud, or a felled tree into another thing, like a brick, or a board.

I believe Marx had an axe to grind on behalf of Workers, and so wanted to justify making all value relative to LTV, or worker contribution. Marx's interest was not scientific, but rather a moral proposition of right and wrong. In this case, any "science" here is extremely flawed by the muddled definitions he uses, the tautology you pointed to earlier, and I would add to this his confirmation bias. LTV works fine, except for all the cases where it falls flat on its face.

But, as Espy noted of water, things we find (air, water, coal, food) have Use value, and its value still relates to shortage. If you happen upon 1000 gallons of cold, clean drinking water in a desert, it has more value than the same 1000 gallons found next to a spring fed well in the city by the lake.

We can leave labor out of it. As the possessor of the 1000 more precious gallons in the desert, knowing its scarcity, and our future needs, we would alter our behavior in negotiating a "fair" trade with others.

Some other areas where I think LTV fails are where there is extreme chance, or speculation involved. If I have two parcels of land, and dig a mine on one. The 12 miners I've employed find 12 ounces of gold after an 8 hour session of mining, and on the other parcel I happen to spot a 12 ounce nugget just laying on the trail after a 5 minute walk. Are they of equal value?

Another, as I eluded to above is when wielding extreme intellect (such as in design, or acts of creativity). If I teach a computer, or a monkey to press keys, or even if we were to ensure they are done as words in order to make reasonable sentences, it in no way compares to well written literature. We can call this the Monkey Theory of Value -- which will never be on par with anyone who actually knows how to compose a well structured creation of intellect.

Finally, LTV is devastated in all cases where all transformations are done without human labor that subsequently result in profits. Or, even when equally done by equally skilled laborers, resulting in different outcomes. Like the difference (in 1000$/ Sq. Km) between growing soy beans ($30), wheat ($56), tomatoes ($1,415), or cannabis ($47,660).

I can use the book we wrote, (as opposed to the one done by MTV) where we have our digital book binder make 10,000 copies over night, which we sell as an Amazon partner over the next 4 weeks. For fun, lets say it took 18 x 40 hour weeks to write the book, or 720 hours. And, we seem to be able to sell them for $9.99. Our 10,000 books return $99,900 dollars, divided by our 720 hours of effort... viola... our labor was worth $138.75 per hour... unless I press the button on our digital book binder and it makes another 10,000 books over night. Now, my labor value has magically doubled. It gets even weirder if we just sell e-books. My labor value changes every time a book sells.

It wouldn't need to be a book either, it could be a 3D printer that takes internet orders, makes and ships widgets, all without human labor. Marx claims that things without labor, have only their original use value, but it is the transformation, performed by the 3D printer that makes the "ink" take form into the object widget we need.

Ultimately, how do you properly define the “comparative quantity of labor which is necessary” for production as a homogeneous unit that can function as a universal measure of the labor value of all commodities?

We know the answer.

[Jester]

Just realized, I actually worded that incorrectly and thus made the error of conflating socially necessary labor time and 'productivity', my bad. Innovation does indeed increase productivity, but the same value is being created; just that it is done so across a broader span of productivity. This was essential in explaining about how 'dead labor' (capital) increasingly sucked the life of living labor and lead to an ever-increasing rate of exploitation of the worker.

So, if I am interpreting this correctly, if a new kind of technology allows a worker (with the same labour power inputs) to produce 10 widgets in the time it used to take to produce 5, then the value of each widget has been cut in half? The same value is now divided over twice as many widgets?

I may be misreading you, as I don't quite understand what a "broader span of productivity" is. I have interpreted it here as an increase in productivity - goods produced per input.

-Jester

[kandrathe]

Finland implements a UBI experiment for two-years...

http://www.nytimes.com/aponline/2017/01/...ncome.html

[kandrathe]

Just realized, I actually worded that incorrectly and thus made the error of conflating socially necessary labor time and 'productivity', my bad. Innovation does indeed increase productivity, but the same value is being created; just that it is done so across a broader span of productivity. This was essential in explaining about how 'dead labor' (capital) increasingly sucked the life of living labor and lead to an ever-increasing rate of exploitation of the worker.

So, if I am interpreting this correctly, if a new kind of technology allows a worker (with the same labour power inputs) to produce 10 widgets in the time it used to take to produce 5, then the value of each widget has been cut in half? The same value is now divided over twice as many widgets?

I may be misreading you, as I don't quite understand what a "broader span of productivity" is. I have interpreted it here as an increase in productivity - goods produced per input.

-Jester

Isn't the core of productivity the ability to make more widgets in less ( labor optional) time?

[Jester]

Isn't the core of productivity the ability to make more widgets in less ( labor optional) time?

That's what I would have figured, but then, I'm a bourgeois pigdog. The exercise here is trying to think through what FIT is saying on its own terms, to see if any or all of the following are true:

1) I am confused about what FIT is actually saying.
2) I am confused about the Labour Theory of Value.
3) FIT is confused about the Labout Theory of Value.
4) The Labour Theory of Value is inherently muddled, and there is no sense to be made out of it, despite the centuries of trying.

-Jester

[Occhidiangela]

This dog does not hunt, as Occhi would say.

*Warcraft II mage voice*
You summoned me?

I've stayed out of this conversation and will note that I've remained puzzled at how low the prime has stayed. It's almost as though someone at the Fed is afraid of even a 1/8 or 1/4 % change in funds cost will trigger a caustic ripple effect.

[kandrathe]

I've stayed out of this conversation and will note that I've remained puzzled at how low the prime has stayed. It's almost as though someone at the Fed is afraid of even a 1/8 or 1/4 % change in funds cost will trigger a caustic ripple effect.

I believe the extremely low rates have hurt (in discouraging savings) more than have helped (by encouraging borrowing/spending). The average person is unable to earn (or save for retirement either) an interest rate in CDs, Money Market or Savings accounts, and mostly being without the necessary investment knowledge is unable to leverage "free/cheap money" in the ways of those with financial wherewithal. Ergo, the accelerating gap between the fraction of "haves", and the "have nots".

That's what I would have figured, but then, I'm a bourgeois pigdog.

Are not we all?

The exercise here is trying to think through what FIT is saying on its own terms, to see if any or all of the following are true:

1) I am confused about what FIT is actually saying.
2) I am confused about the Labour Theory of Value.
3) FIT is confused about the Labout Theory of Value.
4) The Labour Theory of Value is inherently muddled, and there is no sense to be made out of it, despite the centuries of trying.

I'm going to go out on the limb and say ... 5) All of the above.

What I do know (from my work in the 80's on the systems for large machine industrial manufacturing) is that when assessing the cost of manufacture, we commonly break down "widgets" into

• Materials,
• Direct Labor,
• and Overhead

If possible, in determining Overhead, it helps to use elements of "Activity Based Costing" to distribute costs associated with Widgets directly to the widgets where possible. Some areas, like upper management, accounting, or IT are just butter-knifed across all widgets equally. Some, like plant, plant operations, etc. can be attributed for the processes that occur in that plant. But, some non-direct labor processes (like engineering design projects, taking orders (order processing), pick/pack, shipping, or inter-plant transfers are best if those costs are assign according to "fair" cost drivers. Many items in the process are purchases from suppliers, and have a materials cost, but also labor for pick/pack and managing inventory. If the Widget is something complex, like an automobile, you roll up all the cost buckets for sub-assemblies in a huge tree like web until you ultimately find the total material, labor, and overhead costs. Overhead, especially when butter-knifed, benefits from more units sold per month.

Ultimately, it informs the price at which a profit can be earned. Otherwise, as we found in some cases, we were losing money on every machine we built. Because, the market would not support the cost to make the Widget. We stopped making them, or examined the process for ways to reduce the cost to make it. Never did we find that the costs of "Direct Labor" was an issue. They intentionally paid workers at 1.5x union wages. A high cost machine was always due to things like sending a sub-assembly to another plant for some process available at that plant (painting, spin mold, casting, welding, plating, etc...). And, whenever possible, overhead was trimmed. I left that industrial systems position due to being wooed away after 5 years by a higher salary offer at the end of a long recession, due in large part to the companies flattened wage raises during the recession years.

[Jester]

I believe the extremely low rates have hurt (in discouraging savings) more than have helped (by encouraging borrowing/spending). The average person is unable to earn (or save for retirement either) an interest rate in CDs, Money Market or Savings accounts, and mostly being without the necessary investment knowledge is unable to leverage "free/cheap money" in the ways of those with financial wherewithal. Ergo, the accelerating gap between the fraction of "haves", and the "have nots".

One either wants more saving, or more spending. Can't have both, because they are opposite activities. The value of more savings is that it reduces inflation. The value of more spending is that it increases demand, raising wages and increasing employment. The second has clearly been of more value than the first, because unemployment has been high, and inflation has been low. That may be changing now, but only slowly over the last 8 years. (If anything, monetary policy has been too *tight*, as Scott Sumner would argue.) Raising the interest rate would have been a huge mistake. I still think it is, but at least the case for it is clearer today than for the past 8 years.

The average person's income is far more important than the rate of return on their accumulated wealth. If you have a saver who squirrels away $20,000, a huge amount for a poor family, a change in interest rates from 0% to 1% yields... $200. Do that every year for 20 years, and that same 1% interest now gives you... $4400. That's the change in income for someone with a whole lifetime of savings, nearly half a million dollars in the bank. This is just not enough to make a big difference in peoples' incomes, even for devoted savers.

The availability of more and better employment opportunities far outweighs the value of returns on savings, except for those who are *already* rich. Most people aren't. The value of a better job, or just not losing the one you have, vastly outweighs any conceivable advantage from higher interest rates.

-Jester

[kandrathe]

I believe the extremely low rates have hurt (in discouraging savings) more than have helped (by encouraging borrowing/spending). The average person is unable to earn (or save for retirement either) an interest rate in CDs, Money Market or Savings accounts, and mostly being without the necessary investment knowledge is unable to leverage "free/cheap money" in the ways of those with financial wherewithal. Ergo, the accelerating gap between the fraction of "haves", and the "have nots".

One either wants more saving, or more spending. Can't have both, because they are opposite activities. The value of more savings is that it reduces inflation. The value of more spending is that it increases demand, raising wages and increasing employment. The second has clearly been of more value than the first, because unemployment has been high, and inflation has been low. That may be changing now, but only slowly over the last 8 years. (If anything, monetary policy has been too *tight*, as Scott Sumner would argue.) Raising the interest rate would have been a huge mistake. I still think it is, but at least the case for it is clearer today than for the past 8 years.

The average person's income is far more important than the rate of return on their accumulated wealth. If you have a saver who squirrels away $20,000, a huge amount for a poor family, a change in interest rates from 0% to 1% yields... $200. Do that every year for 20 years, and that same 1% interest now gives you... $4400. That's the change in income for someone with a whole lifetime of savings, nearly half a million dollars in the bank. This is just not enough to make a big difference in peoples' incomes, even for devoted savers.

The availability of more and better employment opportunities far outweighs the value of returns on savings, except for those who are *already* rich. Most people aren't. The value of a better job, or just not losing the one you have, vastly outweighs any conceivable advantage from higher interest rates.

-Jester

Well, I'm not looking for anything drastic. I just think they just let the rate go too low, for too long, without fiscal policy stimulus to shore it up. The Federal government (i.e. Congress / Obama ) err'd on too much reliance on monetary policy, without enough fiscal policy stimulus. The first 2009 stimulus was not very stimulating, and was not sustained enough to recover the economy.

[Jester]

Well, I'm not looking for anything drastic. I just think they just let the rate go too low, for too long, without fiscal policy stimulus to shore it up. The Federal government (i.e. Congress / Obama ) err'd on too much reliance on monetary policy, without enough fiscal policy stimulus. The first 2009 stimulus was not very stimulating, and was not sustained enough to recover the economy.

I certainly agree with you there. But conditional on congress being unwilling to pass further fiscal stimulus, the correct stance of monetary policy is to keep rates low until the economy recovers, or inflation kicks in. More from congress would certainly have been nice. We'll see what happens now - bond markets have certainly come to the conclusion that the Federal Government is about to loosen the purse strings.

-Jester

[kandrathe]

...the correct stance of monetary policy is to keep rates low until the economy recovers, or inflation kicks in ....

My only concern is that zero becomes punitive to those who need to save (without risk). Low is ok, so long as it is not too low. Too low, being zero. I'd like to see a normal floor for inter bank borrowing at maybe .5, and .25 under extraordinary conditions.

St. Louis Fed - The Fed and Interest Rates: A Floor with a Subfloor

How the Fed is hurting seniors

Or,

So let me explain how I think about zero rates and their relationship to the depression we’re in. (Yes, it is a depression, even if we’re having some job growth; there was a lot of job growth between 1933 and 1937, but it was still the Depression).

Think of the supply and demand for loanable funds. The tricky thing about interest rates is that there are seemingly two theories of interest rates — loanable funds, which is about supply and demand for savings, and liquidity preference, which is about the tradeoff between money and bonds. Which is right? Both are — because savings and investment also depend on GDP, which can change. That’s one point of approach into the IS-LM model.

from NYT - Zero Bounds and Butter Mountains (Wonkish) FEBRUARY 6, 2012

So, ultimately, I'd like to see Janet Yellen push back at the policy makers and tell them to do their jobs. Not take on "saving the economy" as an extraordinary monetary policy mission alone. All the things Ben Bernanke and friends did have both positive outcomes, with profound negative side effects.

[Jester]

How the Fed is hurting seniors

I don't comprehend the macroeconomic logic of this at all.

Keeping interest rates low is not only bad for seniors and savers, it is bad for the economy as a whole. In a global marketplace, low interest rates in the United States discourage lending to the United States. The reason the Fed had to step in to buy Treasury paper is that there is lower demand because of ultra-low interest rates.

That is clearly, obviously wrong. Low interest rates and low bond yields are the *result* of investors lending to the United States. There was *tremendously high* demand for treasury paper. Bond yields remained at historic lows (AKA bond prices remained at historic highs) from 2008 right up until very recently. Investors held great mountains of US government bonds, as safe assets during an ongoing flight to safety. That didn't change at all until Trump was elected, presumably on the belief that he will increase spending and lower taxation.

-Jester

[kandrathe]

That is clearly, obviously wrong. Low interest rates and low bond yields are the *result* of investors lending to the United States. There was *tremendously high* demand for treasury paper. Bond yields remained at historic lows (AKA bond prices remained at historic highs) from 2008 right up until very recently. Investors held great mountains of US government bonds, as safe assets during an ongoing flight to safety. That didn't change at all until Trump was elected, presumably on the belief that he will increase spending and lower taxation.

-Jester

Who is buying US Treasury Bonds?

1. Nearly 30 percent of the Federal debt is owed to 230 other Federal agencies.
2. One-fourth [of publicly held debt] is held by other governmental entities, like the Federal Reserve, and state and local governments.
3. Foreign governments and investors hold nearly half of the nation's public debt.
4. if you add up debt held by Social Security, and all the retirement and pension funds, nearly half of the U.S. Treasury debt is held in trust for your retirement.

These investors are "Other (individuals, government-sponsored enterprises, brokers and dealers, bank personal trusts and estates, corporate and non-corporate businesses, and other investors) - $1.198 trillion. (Sources: Federal Reserve, Factors Affecting Reserve Balance, May 12, 2016. Treasury Bulletin, Ownership of Federal Securities, Table OFS-2, as of June 2015)"

Which is <10% of the total Treasury Bonds held. Its a good racket for the US government; you print fiat money, use it to buy bonds with a GRR, which are eventually paid off by future tax payers.

"Is the Fed simply monetizing the debt? That's one of the effects. The Fed purchases Treasuries from its member banks, using credit it created out of thin air. It has the same effect as printing money. By keeping interest rates low, the Fed helps the government avoid the high-interest rate penalty it would usually incur for excessive debt."

I see zee smokes and zee mirrors...

The sell off began last summer as the bond market hit its tipping point. In the face of the US economy beginning to recover, large stake holders, including foreign banks started to pull back from their propping up of the US economy. Foreign governments have balance of trade issues, in which they seek to keep US consumption high, and the value of the dollar amenable to favorable trade for their workers/economy.

The grim reality is...

In other words, without all of this debt that Barack Obama and Congress have been getting us into, we would be in the worst economic depression in U.S. history right now. And I haven’t even factored in state and local government debt, corporate debt or household debt. The truth is that I am not exaggerating one bit when I say that we are enjoying a debt-fueled standard of living that we simply do not deserve.

IWB -- The Shocking Truth About How Barack Obama Was Able To Prop Up The U.S. Economy

[Jester]

I remain baffled by the combination of stuff I agree with and stuff I think is crazy. First, the question "who owns the US debt" and "who was buying US debt since 2008" are different questions with different factual answers.

Much of the Federal debt is, as you say, just accounting between government programs, money owed by one part of the government to another. (I think of Social Security this way, but that does tend to start arguments with people who think this is a separate fund and not just a government pension scheme.) But that has been true for ages. This is not hazardous debt, and could be cancelled harmlessly except for the accounting issues. It has no macro relevance.

The Federal Reserve has a congressional mandate to create stable 2% inflation, and the method by which they do that is to print money and buy bonds through repo markets when inflation is low, and the opposite when inflation is high. Bonds that move on and off the fed balance sheet for this reason are simply the operation of monetary policy, in pursuit of pretty modest targets.

That leaves about half the debt, most of which is held by foreign governments and investors - banks, pension funds, etc. They hold US debt because it is super-safe debt denominated in the global reserve currency. If they didn't like what was happening, they could sell, and if they did, the Fed couldn't do much about it, without risking either rampant inflation, exchange rate collapse, or both. But they are not selling, and so the US faces no problem at present. We'll see what happens with a president who wants to cut taxes and increase spending, but my bet is that the US $ is very robust, because it is backed by the US taxation power.

-Jester

Afterthought: If you're getting your truth from cranks like IWB, no wonder it looks grim...

[Alram]

Chinese Professor Fired For suggesting Mao Was Responsible For Famine

A Chinese professor has been sacked after he criticised Chairman Mao Zedong on his 123rd birthday in an commentary he posted online that enraged leftists...

Deng Xiaochao, 62, an art professor at Shandong Jianzhu University in central China, posted a commentary on his Weibo social media site, dated Dec. 26, Mao's birthday, suggesting Mao was responsible for a famine that led to 3 million deaths and the Cultural Revolution in which 2 million died...

Modern history is a sensitive subject in China as so much of the party's legitimacy rests on claims of its achievements.
The party tries to manage the interpretation of history, though officials say online information is threatening that control.

[kandrathe]

...
The party tries to manage the interpretation of history, though officials say online information is threatening that control.

The great firewall of China... the Party will supply all the Truth you need to know.