McDonalds: "What, my peon, you don't work two full time jobs?"

[Razgovory]

Pretax profits of all firms in 2012 totaled $1.77 trillion, compared with $800 billion in 2000. That is a gain of 121 percent. During the same period, total real wages grew by just 7 percent, less than the 11.2 percent population increase.

This is what I don't get.  We have this massive increase in profits and no hiring?  No increases of wages?  No buying of services that would require hiring and wages in another sector?  Where exactly are these profits going because they sure are not being re-invested anywhere.

It is like money is being siphoned off from the economy and kept in a box.  Trickle-down fail.

Maybe the money isn't actually there.  Maybe there is something gives the illusion of profits without there being much actual profits.

[Ideologue]

How in the world would valuing goods based on labor and capital result in real values? 

I don't have the economic grounding to do more than offer it as speculation, but I'm fascinated by fundamentally similar goods having outrageously different prices (and I suppose the R8 is actually more in line with a ZR1 than a Camry--but we're still talking thrice the price).

What is the market valuing in such a case?  A name, a brand.  That's illusion.

But in any event, I strongly suspect that the economy is becoming more and more rich people buying things from rich people.  You can have a massive amount of trade and production and even "growth"--but more people sharing that prosperity is not a logically necessary outcome, I'm sure you'll agree.

[Admiral Yi]

I don't have the economic grounding to do more than offer it as speculation, but I'm fascinated by fundamentally similar goods having outrageously different prices (and I suppose the R8 is actually more in line with a ZR1 than a Camry--but we're still talking thrice the price).

What is the market valuing in such a case?  A name, a brand.  That's illusion.

But in any event, I strongly suspect that the economy is becoming more and more rich people buying things from rich people.  You can have a massive amount of trade and production and even "growth"--but more people sharing that prosperity is not a logically necessary outcome, I'm sure you'll agree.

Sure, demand is a function of taste for the most part, and taste is subjective.

Now, is there anything to your real value of labor thingy or not?

[crazy canuck]

but more people sharing that prosperity is not a logically necessary outcome, I'm sure you'll agree.

I agree that they dont share in the way you mean.  That has never been the case in a capitalist society.  That is of course the main criticism of capitalism so you dont actually have to tell us that.  We all know it.  But what society in general does enjoy is an increase in standard of living.  At least that has been the case historically.  If you can suggest a system that is better than capitalism at providing an increase in the standard of living for society then please enlighten us.

[Ideologue]

I don't have the economic grounding to do more than offer it as speculation, but I'm fascinated by fundamentally similar goods having outrageously different prices (and I suppose the R8 is actually more in line with a ZR1 than a Camry--but we're still talking thrice the price).

What is the market valuing in such a case?  A name, a brand.  That's illusion.

But in any event, I strongly suspect that the economy is becoming more and more rich people buying things from rich people.  You can have a massive amount of trade and production and even "growth"--but more people sharing that prosperity is not a logically necessary outcome, I'm sure you'll agree.

Sure, demand is a function of taste for the most part, and taste is subjective.

Now, is there anything to your real value of labor thingy or not?

Of course there is.  What is an asset bubble, after all?

[MadImmortalMan]

CC, your question presupposes the assumption that the primary goal is to increase the standard of living for everyone. That may or may not be the case depending on who you ask.

[Admiral Yi]

Of course there is.  What is an asset bubble, after all?

I don't see the connection.

[MadImmortalMan]

Of course there is.  What is an asset bubble, after all?

I don't see the connection.

Tulips get out of control because value is subjective.

[Admiral Yi]

Tulips get out of control because value is subjective.

I got that.  I thought Teh Log was proposing some objective value of goods based on the labor and capital used to produce them.

[Sheilbh]

This is what I don't get.  We have this massive increase in profits and no hiring?  No increases of wages?  No buying of services that would require hiring and wages in another sector?  Where exactly are these profits going because they sure are not being re-invested anywhere.

And historically low levels of investment.

The Economist had an article about how the decline in labour as a percentage of GDP is a global phenomenon and I don't think it's necessarily a problem. But I think the situation in the US (and I think the UK) is problematic: record profits, companies hoarding cash and historically low levels of investment and stagnating wages.

I think CdM's partly right, some of it is probably about shareholder value.

[Ed Anger]

Speaking of McDonald's I ate a filet-o-fish today. No sauce or cheese.

[Ideologue]

Tulips get out of control because value is subjective.

I got that.  I thought Teh Log was proposing some objective value of goods based on the labor and capital used to produce them.

I think there is an objective value--which could be obtained if we had perfect information on human hours spent collecting material, putting it together, along with designing labor-assisting technology used in the process, etc., and perfect information on the true value of all those hours viz. other types of labor, as well as perfect information regarding rarity and other concerns, such as taste.

The market often highly approximates that value--and if the market functioned perfectly rationally and with perfect information would no doubt equal it.  But as the market does not function perfectly rationally nor with perfect information, gross deviations away from the objective value are reached.

In any event, I think this talk (I call it a "labor theory of value"--catchy, yes? ) distracts from the more important point, that CC seemed to misunderstand, which is that an economy based on rich people trading with rich people is possible, and indeed is becoming increasingly factual.  I suspect it may have something to do with record corporate profits coexisting with stagnating/regressing real wages.  A society where 99.9% of the wealth in the hands of 0.01% of the people is a possibility.  So too is a decreased standard of living for most.

And obviously there are systems superior to American capitalism.  There are like twenty or thirty of them operating in the world today.

[crazy canuck]

CC, your question presupposes the assumption that the primary goal is to increase the standard of living for everyone. That may or may not be the case depending on who you ask.

I make no such assumption.  The primary goal in a capitalist system is to maximize profit.  The fact that it also provides better standard of living explains why it is widely accepted in modern democratic countries.

[Ideologue]

Oh yeah, I should mention that one of those twenty systems is YOURS.  Commie.

[crazy canuck]

A society where 99.9% of the wealth in the hands of 0.01% of the people is a possibility.  So too is a decreased standard of living for most.

Yes that is possible but not probable.  Well, not probable in properly functioning democracies.  I make no claims about the US.