An Experiment

While at the “Occupy Minnesota” “rally” over the weekend, I saw a few signs saying that “Labor Creates Wealth”.

Now, I’ve got nothing against labor.  I work for a living; without someone to build things to sell, capital and management will be more or less out to dry.

But does labor create wealth?

For those of you who believe this, I’m going to propose an experiment.

  1. Do some work.  Any work at all.  Dig a ditch, draw a painting, ride a bike from downtown to downtown, bake a tray of cookies, write a blog post, play guitar in the skyway, build a dog house, make your bed, it doesn’t matter.  Just do some…labor.
  2. Check to see if you have gotten any “wealth” – money, food, lodging, coffee beans, green stamps, trading cards, coupons, strings of beads – by simple dint of having labored.

 I’m guessing “no”.  And without wanting to spoil the experiment, I’m going to speculate on exactly why. 

Without someone willing to pay you something for that “labor”, the “labor” you did in #1 above was just something you did for fun (hopefully; I mean, you didn’t really expect to be paid, did you?)

And who is it that finds someone who needs, and is willing to pay for, a ditch or a drawing or for you to ride your bike, or is hungry for cookies or your insight or your music, or needs a dog house?


Now, you could very well be your own manager – it happens all the time.

And unless you dig with your hands, draw with your blood, inherited a bike, conjure flour and sugar and chocolate chips and butter and heat from pure mind power, can ethically blog from the library, imitate a guitar with your voice, or pound nails with your face, someone needs to “invest” in a shovel, a pencil, a bike, ingredients and a stove and gas, a computer, a guitar, and a hammer and some wood, in the hopes that they’ll generate a “return” on the investment – money or food or lodging or whatever you get for your labor.  Again – you could be the investor!   But without someone – you, your mom, a venture capitalist, or a bank listed on the NYSE – to “invest” in making sure you have the tools you need to make sure your labor produces something to take to market, you’ll be, well, pounding nails with your face, as it were.

It’s called “Capital”.

17 thoughts on “An Experiment

  1. And the beauty of the capitalist system is that everybody gets to do what they’re good at doing because somebody else is doing the other stuff that makes it possible. Read “I, Pencil” for a brilliant illustration of integration and cooperation in a capitalist system.

  2. I guess it depends on how you define “management”. In a fair share of companies, “sales” in distinct from management. And without “labor”, sales or management can knowck on all the doors they want…without anything to sell. And I, as an investor, can pour all the Capital I want into a biz, but unless and until the labor makes the widget, I got nuthin”.

    So if the sign holder believes ONLY Labor creates wealth, you’ve got a point. But I think he’s pointing out if you only have “investors” or “managers”, you’ve still got the same problem. They’re ALL essential ingredients in the recipe.

  3. Labor theories of value have been quite attractive, historically, Benjamin Franklin, Bastiat, Locke and even Adam Smith have all dabbled in it in one form or another. Only religiously committed Marxists hold on to it now, but it taps into a strong desire for people to see high value in their own labor. Psychologically, we shouldn’t be surprised this error keeps popping up.

  4. Then there are those who say, “I’m here – give me some money!” They might be the same ones who show up at the Plaza and say, “I’m here – change everything!” If so, then they are 0 for 2 in doing something that demonstrates any value or gains them currency of any kind.

    Sure, some kind souls will give them some food and others will donate the electrical power so they can recharge their cellphones and iPods, but it’s really just one more cruel trick that’s being played on them. They mistake grace for entitlement, and indoctrination for education and are helplessly unprepared before the maw of reality.

    They sure are cute when they’re that young, though.

  5. The ideological fault line that keeps appearing is this: progs believe that the contribution, no matter how small, of non-capital resources, be they direct or indirect labor or the use in any way shape or form, of public infrastructure by the product or service, creates an obligation to pay a dividend that is risk free.

    Progs believe in redistributing things. In the words of Elizabeth Warren: “Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

    She treats success in business like a giant lottery. So, I guess I could have invented the Apple Computer in my garage. Except I didn’t. And I didn’t buy any Apple Stock after that. Boo hoo! Poor me. Steve Jobs died owing me nothing. I salute his ingenuity and enterprise. The next Steve Jobs will succeed not because the government gave him a grant or forgave $100,000 in loans for a degree in diversity studies. The next Steve Jobs will create more than his share of positive fallout for society just by doing what all entrepeneurs do: working hard, never giving up on their dreams and sacrificing.

  6. Marxists say that capitalism is based on exploitation and the misappropriation of the value of labor because a capitalist will pay someone, say, $5 for his or her labor to create something and then the capitalist will sell that something to someone else for $10. The capitalist’s profit of $5 represents value “stolen” from the worker.
    But of course the capitalist is able to sell at the $10 level because that is how the market sets the price. How in the world can they conclude that value of the labor that went into making the item is worth $10?

  7. Sorry Terry, your example might llok good in an elementary school textbook, but has no application to the real world.

  8. Actually, I define wealth as “people working.” It is the only real way to create wealth, whether that shows up as money, goods and services, personal satisfaction, or some fine art that endures until the next rain washes it off the sidewalk doesn’t matter, it’s wealth. Capital is accumulated wealth, whether it’s money, machinery, or knowledge, it’s the result of past work by somebody, and it can be used to multiply the wealth created by a given amount of work. The reason these yahoos are so dangerous is that they wish to destroy capital by consuming the wealth (of others) and producing nothing by their own labors.

  9. I’ve got an idea for a better experiment.
    Let’s send the “99%” to Canada! It’s a socialist country, with free healthcare, no free political speech, strict gun laws, and most of the 99% don’t seem to like the US very much anyhow.
    It’s win-win!

  10. Since you asked, what I was talking about is I think your example is a little to simple to have much relevance.

    So then you decide to add……”You read a lot of elementary school textbooks, Mackbee?” That’s your comeback? Really? Thanks for making my case for me.

  11. Hey did you hear what President Obama just said?

    “To achieve these greater gains, one step, above all, is essential—the enactment this year of a substantial reduction and revision in Federal income taxes. . . . [A] net reduction in tax liabilities . . . will increase the purchasing power of American families and business enterprises in every tax bracket, with greatest increase going to our low-income consumers. It will, in addition, encourage the initiative and risk-taking on which our free system depends—induce more investment, production, and capacity use—help provide the two million new jobs we need every year—and reinforce the American principle of additional reward for additional effort.”

    I’m just kidding. He didn’t say that, but John F Kennedy did in 1961. I guess he wasn’t one of the 99%.

  12. Jeebus, Mackbee, you always use simple models to illustrate points in econ. Certus parabus & all that.
    The point of my story was that you can’t say “My boss payed me the market price of my labor and that wasn’t the real value of my labor. My boss than sold my labor at its market price and that was the real value of my labor”.
    It’s not supposed to be an example of anything that can be applied to the real world, it illustrates a problem with the the belief that the value of something consists of the labor required to produce it.

  13. What I see more and more is the idea that your labor isnt worth what someone will pay for it, but worth a significant share of all profits. IOW, if you work at an assembly job that requires about a hour of training and literally anyone can do it AND the company that you work for is wildly successful, you deserve a higher than market level of compensation, while someone who does the exact same thing for a company that just breaks even only makes market level. But the first guy deserves much more because that company makes lots of money. I see that continuously with this OWS thing. People complaining that they make minimum wage for a unskilled job, but the owner of the company bought a pool! Clearly the belief is that if he can afford a pool, he should instead pay his unskilled people a higher wage than someone who runs a company that makes no money. Labor isnt worth what its worth, its worth is based on if the worker was lucky enough to get on with a company that makes money.

  14. Didn’t POTUS give a commencement speech a few years ago urging college grads to avoid the money treadmill of corporate life & go into public service instead?
    Well, walking dogs and scooping their poop is a public service, isn’t it?

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