Bluffer’s Guide To Economics/ WAGES

The classical theory of value, the labour theory, focuses on the objective cost of sustaining productive flows rather than the subjective price of stocks of products, and holds that labour, as the only factor with agency, is the ultimate source of exchange value. From early on, socialists used this logic to argue that the entire price of any product therefore should be retained by the workers themselves, and that therefore the profits of employers where exploitation, even in the rare case when the employer previously contributed labour to form the capital being used, they where entitled to nothing more than the replacement value of the capital. Proponents of Capitalism, who thus far had promoted the labour theory in so far as it served their arguments with the landed gentry with regard to rent driving up rices and wages, needed to abandon it in reaction to socialist arguments. Thus, neoclassical economics had to switch the focus of value theory away from an objective source of value and retreat to a circular position that the source of exchange value is, well, the actual price as determined by the subjective desires of the consumer, therefor the price is always fair. Not only does this sidestep the issue of the source of value, it avoids the issue of exploitation. If the legitimate price of anything is whatever you can get for it, then the value of labour is what it will sell for as a commodity on the market, which in practice is its subsistence and nothing more; that which is required to pay for the basic necesseties to live according to the standards of your community and class. In other words your employer needs to keep you alive and comfortable enough to maintain social order and by doing so can appropriate the product and capture its entire value as Interest. Whatever portion of the value of the product is not lost to rent and interest is called wages, and the level of wages, as a percentage of total income is the primary measure of exploitation.

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