Ask an Economist (Post #1005 and counting)

[scy12]

n economist isn't best suited for your question. As a finance guy, or an oil speculator. I know my economics, but any answer I give will be a guess that I woul be 99% sure would be wrong. How could I factor in unknown shocks 8 months out? Talk to a speculator. Good economists don't make futile projections. I know better than to answer a question when I don't really know the answer.

Alright. It just seems there many interesting questions one can ask in which people do not know the answers. That is your individual viewpoint on the matter (It is futile to even attempt to answer them) and i will respect it even if i don't always agree with it.

 

[JerichoHill]

@@gangleri

I am still confused.

I mean, do you mean physical vs. mental labor? I'm paid about 10x the rate of a minimum wage worker (high skilled mental vs. low skilled physical), but then I'm paid 10x less than a sports player (highly skilled physical.

I really, honestly, do not understand what your question is asking. Can you phrase a Very Specific Example

 

[Mise]

@@Veritass
How much of the recent increase in unemployment is a direct product of raising the minimum wage? What other numbers can we look at to determine this?
Thanks.
Ah, a subject I can speak with some authority on. As I understand it, the unemployment rise has been unduly felt by minorities and teenagers. Now, not only are those the most likely demographic groups that are most likely to be paid minimum wage, they're also the groups more likely to be employed in low-skill occupations that would be first to cut as consumption spending decreased (retail, anyone?). I believe that the rise in unemployment is probably mostly (>90%) attributable to the economic conditions, and not the after effects of a minimum wage increase.

Jean-Claude Trichet warned that not setting interest rates to specifically target inflation (which explicitly includes oil and food prices) would cause the kind of unemployment that Western Europe suffered during the 1970s, and continues to suffer from. How much of a risk do you think this is to the US?

(In case my 1 sentence paraphrasing doesn't do M. Trichet justice, here's where I got it from: http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/05/trichet_beware_the_oil_shock.html )

 

[Homie]

@JH
Thanks, I´m flattered.

About gangleri´s question. I think he may be talking about Cost of Production Theory. Basically, how much is something worth? It seems like he thinks a good´s (product´s) worth is equal to the natural resources + the labor used to make it. But he wants to know how great is the proportions of labor and resources that play into the worth of the good. Am I close gangleri?

@gangleri
If that is what you are wondering I can tell you that C.O.P theory is obsolete. Something´s worth is subjective and varies from person to person and is not really related to C.O.P. I may be a painter and have put in 10 min to make something that someone considers a master piece and paid me millions of dollars for it. But yeah, with mass produced goods, the price will be close to the C.O.P because competition will drive down the price towards it. But that doesn´t mean that its worth is equal to C.O.P because in some circumstance maybe I´ll get more for it. E.g. on my last trip to the US I brought 6 iPhones home and sold them easily for 50% more, arbitrage in action baby.

 

[Cutlass]

I meant something like this. I just wanted to know what's the value behind a dollar of human effort and natural effort. You know, the time&effort spent by a human or the nature to create something.

There is no absolute value. It varies with many factors. It varies with time and place, and as JH said, with skill level and, how many people are capable of a certain job. And many other factors.

 

[gangleri2001]

@@gangleri

I am still confused.

I mean, do you mean physical vs. mental labor? I'm paid about 10x the rate of a minimum wage worker (high skilled mental vs. low skilled physical), but then I'm paid 10x less than a sports player (highly skilled physical.

I really, honestly, do not understand what your question is asking. Can you phrase a Very Specific Example

Ok. let's try to rewrite the question, and forget everything on dollars, euros or yens.

Well, money is some sort of scale to measure value, right? So, how could I get an idea of value?

You see, a scale mesures something: time, space, etc. And I wonder, what does currency mesure? And the answer is: value.

But then I try to imagine an example of value I can't. I know that value is an abstract concept, but when I try, not to describe it, but to imagine or understand its nature, I can't.

I come up with variables of value: skills, availability, etc. Variables that only describe it in a certain way, but when we put them alltogether don't let me get an idea of value: it just look like an amount of (sometimes even contradictory) variables.

I want to imagine it as a unit and not as an abstract concept in order to understand how many "values" can I find in a unit of money (in that case, dollar), that's to say, a way to understand the actual value behind money. Do you understand?

 

[JerichoHill]

@@Mise
I get your paraphrasing. I don't see 70s unemployment (Europe or US, both were horrid) occuring in this downturn. We're already getting signals that monetary policy is going to tighten up. GDP has positive real growth (barely) and that doesn't jibe with truly fightening structual problems. We're concerned because we might hit 6% unemployment, but double digit unemployment seems highly unlikely.

I do prefer interest rates and central banks, implicitly target inflation

@Homie
If that is what you are wondering I can tell you that C.O.P theory is obsolete. Something´s worth is subjective and varies from person to person and is not really related to C.O.P.
Yup

@Cutlass
There is no absolute value. It varies with many factors. It varies with time and place, and as JH said, with skill level and, how many people are capable of a certain job. And many other factors.[/QUOTE]
Gangleri, Cutlass is hitting the nose on the head here. There isn't a specific answer to the question you're attempting to answer. You could consider a 1 dollar hamburger 10x more valuable than a 10 DVD, but that ignores individual consumers' demand curves and the utility derived from consumption.

In any respect, prices of goods are created by supply and demand. Utility of a good is entirely outside that equation. Thus, one cannot use the price of the good as a proxy for its utility to the individual.

 

[gangleri2001]

There isn't a specific answer to the question you're attempting to answer.

Then give me your personal answer on what is value and how do I see it expressed in money.

 

[JerichoHill]

Money is just the physical representation of the value of your labor

 

[ravensfire]

Money is just the physical representation of the value of your labor

I would think it's often the physical representation of how someone else's perception of the value of your labor.

I'm a programmer, so if I'm going to upgrade my PC, or fix a problem, I value the time of a repair tech as pretty low. I can do it myself. But throw the same problem at my Dad, and he's go an entirely different value.

You can't put an absolute value on somelike like labor - it varies by situation, location and time. Finding a roof/gutter company can be difficult in summer after a storm, but easy in the winter.

-- Ravensfire

 

[cFccFc]

Well, thats why its worth more money in the summer, and less in the winter. Eventhough money is the physical representation ov value of labor, it doesn't mean that all types of labor at all times in the year concerning the same object is worth the same.

In the summer the rep. might cost 1000 $, while in the winter it might cost 500 $. Still representation of labor.

But I would also say that money isn't just that. Its also a way to value services in a valuta.

 

[JerichoHill]

@@ravensfire

I specifically left off all the caveats associated with how one determines the value of labor. Yes, you're perfectly right, but I was just putting out a very general, non-clunky, definition.

 

[gangleri2001]

Couldn't these variables (situation. location, time, etc.) be considered variables of absolute value?

Man, the more I think, the clearer I see that trying to answer the question of absolute or relative value is like trying to answer the question of destiny or free will: both can be.

 

[Cutlass]

I don't know if the problem with the question is one of language or not, though it sorta appears so to me.

So, for example, your job is flipping burgers. You make a different wage flipping burgers in downtown New York in 2008 than you would doing the exact same thing in London. Or in Boise Idaho, or Anchorage Alaska, or Tokyo, or Johannesburg, South Africa. You also make a different wage flipping burgers in New York in 2008 than you would have in 1950. The work stays the same, but the circumstances of the work change.

What does the boss have to pay to get someone to show up every day and flip burgers? That's what your wage will be.

What that wage is "worth" also varies. If you are flipping burgers in a small town 100 miles from Indianapolis, you may have a lower income than if you were in New York, but the cost of living is also far lower. So you may well be better off.

What the dollar, or other currency in use, is worth also varies in time and location. The relative value of any currency changes over time relative to other nations money (except when government policy prevents that).

There just isn't an absolute objective value for anything. Anything that you can put a price on, that price is subject to change at different times and in different locations.

 

[innonimatu]

Couldn't these variables (situation. location, time, etc.) be considered variables of absolute value?

Man, the more I think, the clearer I see that trying to answer the question of absolute or relative value is like trying to answer the question of destiny or free will: both can be.

Yes, you were only getting answers about who "money is value" and "value is money". In the end (most) economists cannot answer this question because it goes beyond the short mathematical horizons of their craft... it is political, which is to say, it's about power. Some economists believe money embodies labor and can be objectively measured, some yearn to have the old association of money with some shinny metal back and define everything else's value in relation to that, some believe value is entirety subjective, some plot funny graphics about alleged "use value" and say their scrawling can explain everything, some ... you get the idea.

Money is, and has always been since early settled civilization, more than a simple means of trade. Property, value and money are different aspects of one and the same thing: power. It can be provided as compensation to buy other people's support, those people can be used to coerce other people's will, etc.
And because anything that relates to the workings of power is deeply polemic, you simply cannot get any kind of authoritative answer. You can only search the alternative theories and figure out your own. Or simply pick and endorse one, as any good citizen is supposed to do.

I guess I should give some kind of useful recommendation. There are lots of "schools of thought" among economists (which should say something about how political the subject is). If you can find the time read the better known works by Marx, Veblen, Hayek, Samuelson and Galbraith, just for an overview of the most interesting ones (my opinion, of course, and I can't claim to have yet managed to decently understand even this small group). Then add Foucault and a few other sociologists you like, for a non-economic look at the workings of power.
But in the end, frankly, all this ends up working as a smokescreen, creating the idea that the subject is too hard to understand and best left alone. I don't want to reinforce that idea - if any conclusion can be drawn from this lack of agreement, it is that people who try to make you believe in the "solutions" offered by some particular "school" without even arguing or explaining anything are not to be trusted.

By the way, about economics: Friedman is junk, don't waste your time with that school.
(But don't just trust my word for it. )

 

[JerichoHill]

@@innonimatu (but really gangleri)
This is one of the few times that Inni and I agree. There isn't an agreement that economists share about value, but many different ideas. I personally don't view economics as a hard, everything can be revealed with mathematics, science. Tastes and beliefs and other intangibles are really hard to accurately quantify.

Gangleri, you have to find a mathematical method that can quantify intangible qualities of objects/ labor. There just simply isn't any agreement on how to go about doing such. This is not a situtionat where a Randian, objectivist approach is even remotely close to being right.

Don't know much in sociology, but I'd remove Marx from your list of economists and put him with the sociologists. Probably want to do that with Hayek too.

 

[lovett]

Well, money is some sort of scale to measure value, right? So, how could I get an idea of value?

Well, I think, you buy something with it!

Have you ever been to a 99 cents shop or a poundland? That's the value of your respective dollar or pound.

 

[innonimatu]

@@innonimatu (but really gangleri)
This is one of the few times that Inni and I agree.

There were a few times. Actually I don't think you are a bad guy - for an economist!
those I really have an issue with are the ones who try to reduce everything to mathematics.

Don't know much in sociology, but I'd remove Marx from your list of economists and put him with the sociologists. Probably want to do that with Hayek too.

Marx is there because (I believe) he was the last person to do significant work upon the labor theory of value. Hayek exactly because he was politically important. My pet peeve about treating economics as separate from the rest of society...

 

[Cutlass]

There were a few times. Actually I don't think you are a bad guy - for an economist!
those I really have an issue with are the ones who try to reduce everything to mathematics.



Marx is there because (I believe) he was the last person to do significant work upon the labor theory of value. Hayek exactly because he was politically important. My pet peeve about treating economics as separate from the rest of society...

Sometimes if it had remained "political economy" it would have made more sense.

However, I would agree that Marx is more the sociologist than economist, because while his subject was a criticism of economics, it's more the socio-political criticism than an economic one. He is describing a behavior of capitalists, and recommending a countering political behavior for labor.

And the "labor theory of value" just doesn't work.

 

[gangleri2001]

Mmm... A political question? I'd rather say that it actually is a philosophical one. If you think on it, you'll surely realize that asking what is value or how can someone imagine or get an idea of it is like asking who am I and where I from. Politics and sociology are secondary.