Not for all the money in the world …

by Daniel on August 4, 2004

Due to a sudden period of enforced idleness, my insomnia is back (my previous schedule of working five caffeine-fuelled 14 hour days a week and recovering at the weekend had cured it nicely. I can recommend this method to anyone although to be honest, my doctor frowned on it). As a result, I find myself thinking about the aggregativity of capital, labour theories of value, and so on. I therefore pass on this small question which may be of some amusement to those of our readership who indulge in either cannabis or value theory; the two groups may find it equally interesting.

If you had all the wealth in the world, ie you owned every single object of value that was known to humanity ….

what would you spend it on?

For what it’s worth, I contend that you’d spend it on buying the labour power of everyone else in the world to be your slaves, and that this is a (pretty weak) argument for some form of the labour theory of value. But it does highlight a quite interesting property of economic theories which don’t have a theory of value; because value arises only from exchange, they are scale-invariant, so there is no question of putting a value on the system as a whole. I’d be interested if any Austrian readers had any thoughts on this, not least because it would save me reading a few books.

Sweet dreams …

{ 23 comments }

1

Jimbo 08.04.04 at 3:09 am

Answer from a non-economist: You’d inevitably be God.

If you didn’t own people already, you wouldn’t own everything of value in the world. Vice versa, if you owned everything of value in the world including people, then you would need to invest some of that value in reproducing your slaves. Since you own everything including the slave’s shit, that might simply seem like an accounting change, but differentials will undoubtedly arise among the slaves; some slaves will be more efficient laborers or have more value in some other way and so it will make sense to invest more to reproduce that slave than another. Those slaves will begin to accumulate value in themselves, but also for themselves.

Now you are simply playing God as the cycle reproduces itself; and you will have about as much control over the process as does God—meaning not much aside from setting the initial conditions of what constitutes value.

Don’t mind me, I’m clearly out of my element…

2

Hemaworstje 08.04.04 at 3:35 am

are you sure? because i think otherwise

3

bob mcmanus 08.04.04 at 5:48 am

Mary Louise Parker

4

Mario 08.04.04 at 5:57 am

Whores

5

boo 08.04.04 at 6:33 am

If you owned everything of “value”, as subjectively defined, you would never need to buy existing things. The most you could do is use it to create new things. This production requires both capital and labor. Since you own all the capital, therefore you would spend it all on labor simply by default.

Now, if you owned half the things of value and held domination over half the labor in the world, would you use that power to pursue the half of things you don’t own, or instead the half of labor you don’t have domination over? If you had to choose only one or the other, I mean.

6

boo 08.04.04 at 6:52 am

Lets imagine that there is an opposite yet equal overlord who controls the other half of labor and thigns of value. Now, if you wanted to weaken him, would you try to win over the labor he holds domination over, or instead attempt to acquire the things of value he holds?

It seems that if you could swing his labor over to your side, you could simply kill him and take his things of value. Yet if you acquired his things, he would lose his ability to employ his labor, and you could then bribe his labor over to your side.

The labor theory of value therefore doesn’t help in analysing this situation. I’m not sure why Marx didn’t think of this.

7

mc 08.04.04 at 8:21 am

Well maybe because Marx wasn’t thinking of absurd hypothetical situations but reality?

8

bad Jim 08.04.04 at 8:35 am

Being prematurely retired and moderately wealthy, I can actually comment on this. I like shirts, but my closet is only so wide, my dresser drawer only so deep. There’s a point at which you have too much to put away.

Cars are another matter. My ’99 Integra is starting to show its age; it’s got this ding and that (not to mention its driver) but it drives like a dream, only 49K miles. I need a new car like I need a tattoo or a hole in my head.

In general we seem to be incapable of saying “enough”, and at every point, given the choice, we tend opt for bigger and better.

Isn’t gluttony a sin, though? Not to mention pride?

9

bad Jim 08.04.04 at 9:28 am

Let me think about Mary Louise Parker, though.

10

Michael Mouse 08.04.04 at 10:55 am

As some have already hinted, you’re pretty much stuck with spending it on services.

(And the main service you’re going to need to start with is an army of accountants to make sense of it all, and another army of managers to organise it all.)

Not sure I buy the premise though – that all the wealth in the world is simply the sum total of all the objects of value. Intangibles have value (at least, my employer is prepared to trade its money for my intangible output).

Also, “objects” here seems a bit ill-defined. It can’t mean only the physical objects, or you’d only be moderately wealthy. But if it includes such abstractions as companies and electronic money, it’s hard to see how it excludes people.

11

Scott Martens 08.04.04 at 12:43 pm

I see your point about scale invariance. You can only exchange all the labour in the world for all the things of value in the world, so there is never any prospect of assigning things a value except as a proportion of aggregate labour. (Or, failing a labour theory of value, some other maximal quantity of whatever value is held to derive from.) Actually, I always thought that was a fairly good argument for a basically labour theory of value, since all the labour in the world produces all the sustainably produceable consumable goods and the only other contributions are either non-renewable resources extracted from nature or “dead labour” in the sense of capital goods that embody past labourers’ contributions to present production.

Although I have to ask, why would this scale invariance be true of marginalism? With what could one exchange all the value-bearing assets of the world if one was an omniproprietary marginalist? Is the value of everything in a marginalist world the aggregate marginal utlity of everything possessed of utility to the person who has the greatest marginal use for it? If one defined utility in human-centric terms – defined a person-facility as the satisfaction of one unit of need for one person – we could define the value of all things in scale-variant terms. The more people there are, the more needs to satisfy, the more value the enseble of things able to meet all or some of those needs might have. Even if we measured value in per capita terms instead of as an aggregate, there is still no reason to think that one economy might not be able to satisfy more units of need per capita than some other economy.

Of course, this relies on imagining that there could even in principle exist a metre which can rank and compare different needs for different people, a notion which poses some serious philosphical challenges. Even ranking utility for a single person is difficult. Still, I suppose it can’t be any worse than the transformation problem.

12

Jeremy Osner 08.04.04 at 1:13 pm

Wouldn’t you need to spend it all to buy back your soul?

-alternate answer-

Eternal life, of course!

13

Tracy 08.04.04 at 1:16 pm

If you own everything of value in the world, then there’s nothing to spend it on since you already own whatever you could buy.

If you own everything of value in the world except human labour, then you’re going to have start exchanging some of the things you own for people’s labour (unless you’re happy to maintain yourself entirely by your own labour and the products you own).

This isn’t much of an argument for the labour theory of value. For example, imagine another situation where you own every edible object in the world. You can then spend your wealth on labour and non-edible objects (warm clothes, CDs, etc). I do not think that is an argument at all for the labour+non-edible-objects theory of value.

14

jam 08.04.04 at 1:16 pm

It’s a transient condition, though, having all the money in the world, isn’t it? Once you’ve engaged in one transaction, you no longer have all the money in the world. Whoever you bought labour from now has some.

15

Becky 08.04.04 at 1:45 pm

“If you had all the wealth in the world, ie you owned every single object of value that was known to humanity ….”

That defines God. God He, who can speak worlds into existence with a word, owns everything, including us. What God has done is given all of it back to us to freely use, in exchange for nothing but our devotion. In His economy, the only thing that has real value, is our eternal souls.

16

Scott Martens 08.04.04 at 1:57 pm

Tracy, you familiar with Sraffa? That was basically his argument about labour theories of value, except he used corn, steel and labour in his example.

You could, of course, imagine an economic theory centred on corn – or edible objects in general – but that means seeing people principally as the mechanism by which corn reproduces itself and satisfies its needs. There is nothing contradictory or illogical about doing so. It is akin to claiming that chickens are an egg’s way of making more eggs. And yet, it seems very uncompelling as economic theory.

I’m not advocating a labour theory of value per se either. The thing I’m more struggling with is what a theory of value is for. It seems to have more to do with the ideological intent of the theorist than any statement about the universe as a whole. A labour theory focuses on the economic system as a means by which workers survive from day to day. Marginalism has this Calvinist sort of bent, defining value as a consequence of utlity. Someone like Veblen or even Keynes seems to see the whole thing in a more hedonistic light, as if the economy was a way of getting the dirty work done so that we can all get sloshed at keggers on the weekend and everybody can have a good time.

What follows is pretty straight-forward: Marx wants economic structures to relieve the burdens of the working class but has little regard for the complexities of asset allocation; marginalists want assets allocated to those who can make the most of them, even when what they make of them is purely egotistical in function; hedonists want to redistribute wealth so that we can all have some fun, even if redistribution interferes with the efficient allocation of capital. Each seems to have a different conception of the good life and this political consideration motivates their choice of theory of value.

At least, that’s my current theory. It is subject to change without notice.

17

Scott Martens 08.04.04 at 4:11 pm

And of course, hours later, I realise that the original post said that economic theories that don’t have a theory of value are scale invariant, which rather undermines what I was saying. *sigh* It’s one of those days…

18

nick 08.04.04 at 4:55 pm

I’d bet half of it on ‘O’ in roulette (on a US wheel, natch).

Of course, winning would cause some problems thereafter. But losing would give me room to try and win the rest back.

19

woodturtle 08.04.04 at 5:37 pm

Why ask questions when you can just try it out yourself? Grow your hair long, practice eating grasshoppers and honey, go off in the desert and wait for the devil to show up and make you an offer, very similar to the one you describe. First hand experience is always the best, I think.

Old World- devil offers you all the riches and boss status.
New World- devil offers you perfect pitch, song-writing ability, and excellent guitar playing skills.

I would find the crossroads in the desert and make sure I got the New World devil deal also. You never know- you might spend all that money foolishly and end up busted broke and need those musical skills to fall back on.

20

mc 08.05.04 at 7:44 am

Ok I don’t understand much at all about these theories. But yes, the idea that there’s no fixed value because value arises from exchange seems self-evident. If you owned everything of value, and no one else could buy them from you, then those things you own would no longer have value. Just like if you had a million dollars but were the last man living on earth, that million dollars wouldn’t be worth a thing. So, indeed, there’s no fixed value on anything, individual or whole.

What I don’t get is the point of buying labour when you already own everything. Why would you need anyone’s services at all? To produce what, since you already have everything?

Plus, wouldn’t the definition “every single object of value” include labour? I think it’s artificial to make a distinction between products or properties as physical objects, and services as non-physical, they both serve as currency, as things of value in exchanges.

Also, if you owned every company in the world, you’d automatically ‘own’ all its workers too. So if you ever needed anything more than the everything you already have, they’d be forced to work for you anyway. There’d be no room left for exchage. You wouldn’t have to pay them. Unless the strict necessary to avoid them starving for the duration of the job you require.

That would make you the most gratuitously evil dictator ever.

Sorry to sound like such a cliché communist, but if I owned everything, I’d definitely redistribute it. There’d be no other sensible option.

21

Tracy 08.05.04 at 7:52 pm

Scott – I did not make myself entirely clear. When I said that the hypothetical world was not an argument for the labour theory of value, I meant it in the same way that it’s not an argument for Pythagus’s Theorem, or the theory that the universe floats in a pool of ether. The hypothetical is irrelevant to the truth of all three theories.

I suspect that the search for a theory of value arises from a combination of human curiousity and the obvious fact that the price of various objects does not vary according to some obvious criteria like weight, colour, or necessity for survival. Of course a true theory of value can have a number of benefits, like a true theory of gravity, but even if there is no obvious value to answering scientific or mathematical or logical questions you still find people running around investigating them.

And the idea of marginal utility strikes me as somewhat less arguable than that of the second law of thermodynamics (and I say that as someone with an degree in engineering). That we both need food to survive, and that if we keep eating without bound eventually our stomachs would explode is I think obvious enough that we can all, regardless of political persuasion, agree that there is a point where another mouthful of food is of less value than the previous. Ditto for other objects. Wearing too many clothes is as uncomfortable as wearing too few. At some point a house can get so big that the cleaning bills and the time spent hunting for lost guests outweighs the pleasure of another room. One shot of insulin can be life-saving, two life-endangering.

The idea that the economy is a way of getting the dirty work done so that we can all enjoy ourselves on the weekend is not exactly restricted to Keynes and Veblen. It shows up in every Econ 101 class when they discuss the work-leisure trade-off. Work brings disutility and income (including the non-monetary sense, a hunter-gatherer has to go out and gather food even if they never see a dollar in their lifetime), leisure brings utility but no income. You need to hang around till Econ 201 or later to get theories that involve a positive utility from work (e.g. theories involving artist’s motives).

mc – if owning everything meant that nothing had value to you, this implies that you would stop breathing. Or eating. Or drinking. After all – water, food, oxygen would all be equally valueless. This does not match with what we know of human biology. To a hiker in the wilderness food is valuable, even if there is no one around to exchange it with. And ditto for our hypothetical owner-of-everything.

22

mc 08.05.04 at 9:30 pm

Tracy – I was thinking of “value” as “market value”, monetary value, quantifiable value, price – given the context of the hypothesis Daniel made… I thought that was the definition of value used here. Like I said I’m not familiar with these theories or the background, I was just thinking of the common sense of the word.

Seems to me you’re talking of a different meaning. Aside from survival and physical needs, of course, people make their own decisions about what’s of value to them personally, what’s convenient, what’s appealing, what they really need beyond the necessary stuff. But individual needs and preferences are not what determines the value in an exchange. They do affect it in many ways at a much wider level, I guess, if everyone stopped using cars, cars would have no value. But if you stop using yours, because you don’t “value” (prefer, need) it anymore, you can make money reselling it. Same for the big house that you find no longer valuable or practical to maintain. Someone else will place a quantifiable value on what you don’t “value” yourself. You’re not going to price it less just because you don’t need it or like it anymore.

23

Joshua W. Burton 08.06.04 at 8:32 am

“For what shall it profit a man, if he shall gain the whole world, and yet have no allowable deductions?” (Spider Robinson)

Comments on this entry are closed.