“No, I haven’t found a black swan, but I do have a problem.”
“I don’t think you will find a black swan in the conclusions we have reached. You’ll find many problems not covered by the Law of Capital Investment. But the law itself is simply a statement of the workings of an invented mathematical entity, money. Sometimes we get into dilemmas through a failure to distinguish between mathematical necessity and objective realism. Marx fell into that error and it vitiated his whole work. For example and in particular, his definition of value. Did you happen to notice that we spoke of cost in money and price in money and never once mentioned value?”
“Now that you speak of it, yes.”
“Can you define value?”
“Well, perhaps not. I seem to know what it means.”
“Marx defined it as a measure of the number of work-hours required to produce a given article. His definition was meaningless in the real world, and he ran into all sorts of difficulties, which he tried to avoid by patching the definition. But the definition was wrong and his beautiful, monumental, logical structure was invalid. He was important only as an agitator against social injustice and he contributed more error than truth to the art of economics. He made a similar mistake in assuming that a man lives in his belly rather than in his head. Animals do, but not men. They must serve their bellies, it is true, but aside from that, their motives may have nothing to do with economic considerations. Consequently Marx’s Economic Determinism was not valid. But I’ve digressed again. Value in economics is a relationship between an individual and a thing or a service. It is a personal relationship which expresses how much a particular individual desires a thing or a service. Economic value of a thing or a service approximates the average of the summation of the personal values placed on the thing or service by the individuals who constitute the consuming public. Value plus purchasing power in the hands of the consuming public constitutes effective demand. Price is a function of supply and demand. Value may be expressed in dollars and cents through this complex functional relationship, but value is not price, and is not a measure of work-hours, it is a word used to express the desire of an individual to possess a thing or a service. I am not giving the word a new definition; I am simply stating explicitly the observed fact that such is what people mean when they speak of value. Sale takes place when the value to the prospective buyer is greater than the value to the owner. Note the difference between Marx’s idea of value and that which I have expressed. Marx attempts to measure value by the amount of labor expended. Yet it is an obvious fact in the real world that an inefficient, careless, or unimaginative worker can slave for hours to produce an article practically worthless, that the public won’t buy, valueless. An intelligent skillful inventive worker may turn out in a short time an article that the public will snap up at once at a high price. Which has the greater value?”
“The one made by the better workman, of course.”
“Of course. There is an old maxim which states it neatly: ‘The value of a thing is what that thing will bring.’ Even in our present system in which the government ensures the maintenance of sufficient purchasing power, if an entrepreneur is so inefficient that he produces articles of value less than cost, he goes broke. However, I’ve digressed again. I’m a garrulous old man. What was it you wanted to talk about?”
“Oh no, I enjoyed your digression and it cleared up another point. As to what is bothering me, I believe I understand the present financial system and I see that it works more smoothly than the one in my day, but there are still things about it that I just can’t see the justification for. Especially this dividend or inheritance check. Why in the world should everybody in the country be handed money to spend whether they work or not? I concede that it is all right for widows and orphans, the sick and the blind and crippled, but why support in idleness some big overgrown lunk who is too lazy to support himself ? Why put a premium on laziness? Here is my idea: let’s increase the discount if necessary, and give a big dividend to those who need it but can’t support themselves, but if a drone won’t work, let him starve. Don’t let him live off the rest of us.”