But, wait minute! Let’s imagine simple situation. We have very few people on the planet, a lot of unowned land and everyone is respecting the rights of the others to have their own property. But, to create property from the unowned land you must “mix your labor” with the unowned resource (J.Locke). And let’s imagine for the sake of argument that every citizen on the planet is doing this and after a while they all have their own capital, their own products, their own property. But, they aren’t self-sufficient. What will they done? Simple (as it happened). They will start exchanging some part of their products for others (don’t forget-everyone is having his own capital, no one is labour “slave”). So, someone will change 3 cows for 2 eggs, others will exchange 4 apples for 1 eggs, and so on. And there would be problems-it would be very hard to find what are you looking for. So, naturally and spontaneously a medium of exchange will develop. So, you will have for example a 1 mg of sugar and every other product will be measured with relation to 1 mg of sugar. And very soon the prices and market will arise. Then the profit will be nothing more and nothing less then the net gains over the net losses at the end of the calculating period. So, you can see that there is nothing that automaticlly connects profit and slave laborers. Again, everyone will produce for them-selves and still the profit will exist.
p.s. As my previous question that wasn’t answered very accurately, I showed with my example that you can have profit without exploiting anyone (the musicians for example). Although there is big true that IP is creating monopoly, still it isn’t the whole answer. (if you want to see libertarian guys who are fighting against IP with good arguments check Stephan Kinsella). So, the profit doesn’t arise from the value produced by the enslaved portion of the population. It is only a reward for the guy who is making some worthy product to the others. The others are rewarding him with their money, because he is creating something that is more VALUABLE than their money!

Profit arises from the value produced by the enslaved portion of the population.

I have two questions:

1)Is it a consequence of this theory that all profit emerges from arbitrage (technological and legal) if the cost of goods correlates so closely with the average cost of the labor inputs?

2)The local sushi restaurant charges $8 for lunch and $10 for dinner. Such practices are common; is this explained as a temporary, nightly supply – demand imbalance? It seems that the labor inputs for the same meal would be equivalent.

1. The exitence of intellectual property rights legislation which creates artificial monopolies and prevents the operation of a free market. Thus recordings by musicians for example on iTunes sell far above their real cost of production. The presence of the IP law leads to monopoly profits, a part of which can be negotiated by the artist. Proponents of the labour theory of value have, since David Ricardo, recognised that monopoly can give rise to rent incomes.

2. Bargaining position of the artist is strengthened as compared to an average worker since they are in the public eye. They are thus not freely dispensed with like a shop assistant who can be replaced by another without the customers noticing. Well known artists can then negotiate for a share of the monopoly profit.

I dont see that the proposition that labour values make themselves felt via wage expenditures undermines Marx, who, one must remember does not give any particular mechanism by which labour values operate. He merely, like previous economists, takes the labour theory of value as being an obvious empirical given. Since he takes it as an empirical fact, I dont think his argument is undermined if later economists come up with a mechanism to explain this empirical fact.

To Citizen Weston, what I take Marx to have been doing here is to be arguing against the then prevalent idea of an ‘iron law of wages’, the Malthusian concept that wages could never be raised above the subsistence minimum. Weston was putting forward a slightly different version of this, the argument that any general wage increase will be wiped out by the consequent inflation. This is an argument not about the relative values of commodities, but about the general price level, or the value of money. I can recall former Prime Minister Callaghan putting forward what was essentially the same argument as Weston when he argued that one man’s wage increase is another mans price increase.

Marx’s response comes down to saying that there is another free variable in the system — the profit share, and that generalised wage increases could reduce the profit share.

What is the prediction of the Farjoun and Machover theory under these circumstances?

Suppose the wage share rose from 50% to 75% of national income, then the effect is to compress the dispersion of prices relative to labour values because there is less leeway for firms to sell below labour values without making a loss.
So a general rise in wages will tend to reduce the profit share, and force market prices into closer correlation with labour values.

Of course since Marx wrote, the gold standard has been abandoned and with monetary there is now more opportunity for employers to pass on wage increases as price increases than there was in the 19th century.

Perhaps it is more fruitful to focus on less opaque areas to bring out the difference between Marx’s LTV and yours. Obviously I argued above that the “rate of exploitation” is meaningless in your version of LTV – possibly even the concept of exploitation, in the Marxian sense, is meaningless in your version of LTV.

Another way of introducing the same point would be to look again at Value, Price and Profit. Marx’s argument there clearly depends on wages *not* being the crucial issue. He argues that wage costs are not the determinant of final prices against Citizen Weston’s assertion that they are. He explains that the price of a product is ultimately, in the general case determined by the labour time which goes into making it, and that therefore wage costs can be raised without affecting the price at all, so long as the worker is still being paid less than the value he adds to the product with his labour.

So your LTV seems to be radically different from Marx’s, and Marx appears to have argued against your “labour theory of value” in one of his most famous works.

Hopefully I’ve misunderstood you.

At the intermediate level of industries, then the effect of reductions of wages accross whole industries the implications may be different, I am not sure. I would say that if in a whole trade the level of wages are depressed, then the selling price will tend to fall below its value in terms of embodied labour. I am not sure if Marx specifically addresses this, though I have a feeling that he does in his analysis of sweated trades. Without going and reading back through those chapters I am not sure.

If I understand your version of LTV correctly, the concept of rate of exploitation would have to be abandoned as meaningless, as in your version Value itself can only be measured as the cost of labour, and the rate of exploitation is founded on the difference between the Value added by labour and the cost of labour. As your LTV seems to me to identify wage costs with Value, the concept of rate of exploitation would have to be abandoned. Or is there some other way of thinking through these problems?

To think of it, there are other examples of where Marx’s thought relies on the idea of the cost of labour to the capitalist being different from the value added. Isn’t this crucial to Marx’s explanation of the possibility of profitability?