Wednesday, June 1, 2011
Last night I started out talking about supply and demand. I ended up talking about price theory, and need to flesh out a couple of things. If I'm a hippy selling dope, what determines the price I sell a lid?
Roughly, the place I live costs me around four hundred bucks a month. I spend about four hundred on food. I walk most places, but when I need some wheels I'll call a taxi or ride the bus. So, unless the bike breaks, I can get by on fifty bucks a month. I rely on the free clinic at the Health Department for medical, so that's like, zero. Electricity, phones and heat, figure $150 a month. Clothes, around ten to twenty bucks a month.
Add it all up, it's going to cost me around a thousand bucks a month to live. My Propensity to Consume is a different thing to think about. That is, if I had more money, would I spend it?
Hard to say. The cool thing about dope is, if I have my munchies and TV, I'm pretty much set. But if I had more money? I might buy a new board. Or an X-Box. Chances are, I'd blow it. Head for the corner bar and spend it while explaining how I was putting it to the man.
But that thousand bucks. I gotta cover it. Problem is, I sell two types of marijuana.
One, I buy from Mikey (Miguel) down the street. Mikey gets his stuff from across the southern border. There are so many people willing to come to this country illegally, that getting the stuff is fairly easy.
Two, there's this farm out in the country where I have a patch that I've grown for years. Good southern exposure, and the strain--totally organic--is totally intense. It's better than any grass I get from Mikey, even though I don't harvest that much. And, my cost of production is really low. Since I trespass, I don't pay for the use of the land. No mortgage, no property tax. There's enough local rainfall that I don't have to worry about irrigation, plenty of sun, and so far no one knows where my patch is. For the few hours I have to spend pulling weeds at the start, I'm able to grow two hundred pounds each year of this killer weed. For free.
The stuff I buy from Mikey costs me. I pay four hundred dollars a pound for his stuff. Each pound I buy, I break into 16 lids that I sell for $80.00 per lid. So, each month, I have to sell at least 20 lids, at eighty bucks per lid. That's a gross of $1600.00 a month. Each lid costs me twenty-five bucks ($400.00 ÷ 16 = $25.00), so for me to net the grand I need each month to pay for my crib and my kicks, I only net $55.00 per lid. Twenty lids per month, or one a day, Monday through Friday, every month including February. Some days I sell two lids. Some days three. Some days zero. But I'm pretty low-key, so things are tight, a'ight?
But, then there's the killer weed. With this stuff, you get 100 highs per lid, versus fifty highs for the stuff I buy from Miguel. I pay $400.00 a pound for Mikey's stuff. I get the killer shit for, basically, free. What price do I charge for Mikey's stuff, and what price do I charge for the killer shit?
There are two theories of value that are prevalent today. One model seeks to reward the inputs for their share of added value, by looking at the end product and allotting to the inputs a proportional share of the selling price as reflected by that inputs added value. The other model, the labour theory of value, points out that nothing created could be created without the labour of those who have produced it, and since capital is a form of theft, that the returns of any enterprise should be returned to those who laboured in the production of that good.
The first model, that seeks to allocate rewards to the inputs based upon their relative value to the completed product sold, views labour as simply another input. It might be argued that labour is necessary to build an airplane at Boeing, but it is also true that the guy who buys the mill used by the millwright should also be rewarded for his timely investment in capital goods. In fact, the terrible notions put forward by the Labour Theory of Value. "For Marx, labour is value."
If you have the intellectual ability to disregard the value of the other inputs in the process of production, as does the Leftist, then you have the mental disregard to view the only deserving recipient of the proceeds from the production of any good or service as being simply dependent upon the worker, or workers, involved in the process of making the finished good or service. Go to the factory floor. The heroes are the men you find there.
Being a hippy is its own reward. It doesn't cost much to be a hippy. Respect for law is minimal. And respect for the property rights of others is non-existent. In fact, property itself must be disposed of in order for there to be a regime installed that values the worker for what he is worth, rather than for the Capitalist who offers only the slavery of the proletariat.
"But the concept of the homogeneity of productive human labour, underlying that of ’abstract human labour’ as the essence of value, does not imply a negation of the difference between skilled and unskilled labour. Again: a negation of that difference would lead to the breakdown of the necessary division of labour, as would any basic heterogeneity of labour inputs in different branches of output. It would then not pay to acquire skills: most of them would disappear. So Marx’s labour theory of value, in an internally coherent way, leads to the conclusion that one hour of skilled labour represents more value than one hour of unskilled labour, say represents the equivalent of 1.5 hours of unskilled labour. The difference would result from the imputation of the labour it costs to acquire the given skill, While an unskilled labourer would have a labour potential of 120,000 hours during his adult life, a skilled labourer would only have a labour potential of 80,000 hours, 40,000 being used for acquiring, maintaining and developing his skill. Only if one hour of skilled labour embodies the same value of 1.5 hours of unskilled labour, will the equality of all ’economic agents’ be maintained under these circumstances, i.e. will it ’pay’ economically to acquire a skill." (ibid.)
Social justice requires one to hold such thoughts in one's head.
How do you solve the problem of the hippy who uses land owned by someone else to grow his superpot? And since hippies are all about the social justice, at what price should he sell the stuff he gets from Mikey, and what price should he sell his good shit?
One thought that comes to mind is equality of outcome. What is more important? The number of highs received from a lid, or a reflection of price based upon the costs of inputs? I have two hundred pounds of the good stuff. What is it worth?
Under the labour theory of value, the hippie should basically give it away. He really didn't do any work to harvest the poundage. This, of course, is one of the failings of the labour theory of value. It doesn't really mean anything, since the more important question is, what would a customer be willing to pay.
One of my favourite books was written by Peter Drucker, and titled "Management: Tasks, Responsibilities and Practices." I know that our hippie, drug-selling, marijuana peddler would be lifted up by one of Drucker's observations about profitability. There are plenty of totally intense, awesome ideas out there. Don't view profit as the result of predatory practices of the Capitalist Pigs. View profitability as a Report Card. Lots of profits means that your ideas have social acceptance and social value. The more profitable you are, the more social acceptance and social value your works have. Since we live in markets where we may never know the end user of our labour, profitability is the "Thank You" card that you never receive from satisfied customers. In fact, the highest praise that a civilization can give to the truly worthy is a report card that exceeds the "Thanks" that you would accord the guy that sweeps the floor at the end of the workday.
So, you sell dope. You have two types of dope--run-of-the-mill and superweed--and you're trying to price the weed you're selling. The run-of-the-mill costs you more, but gives you fewer highs per ounce. What is a fair price?
The Labour Theory of Value really doesn't help you, does it?
There is a story, involving Henry Ford, of a breakdown on the assembly line that plagued Ford some seventy or eighty years ago. The call went out to a retired engineer, who came in and solved the production problem within an hour, leaving Mr. Ford with a bill for two-thousand dollars. Receiving the bill, Ford shot the bill back, requiring a breakdown of the bill to explain a two-thousand dollar bill for an hour's work. Back came the bill, itemizing the following:
On-site time: One hour, $20.00.
Forty year's experience: $1980.00.
There lies, between the lines, some similarities between Marx's Labour Theory of Value and the capitalist view of value expressed by Drucker. Marx notes the distinction between Skilled and Unskilled Labour, suggesting that the differences between are ameliorated after time. Mr. Ford's workman fixed a problem, relying solely upon his own skills, his own, human, capital. What was it worth to Mr. Ford to pay the gentleman? His down condition was costing him thousands. Any cost less than that, was an advantage to Ford.
What is the price a customer of Mikey should be willing to pay for his superdope? And who determines what that price is?
Tonight we've examined several different concepts, from comparative value, to determination of price. We've also looked at the propensity to consume, touched on the edge of disposable income, and seen that economists have different starting places when it comes to legitimizing the values of goods and services being bought and sold. Ideas, like "social justice" are normative values, while looking at the discreet costs of various inputs in the production process are more likely determined by objective values, that rely upon the increase in value of the final product through the production process as a result of that input, than merely an assertion based upon someone's arbitrary view that claims sole possession of value, through labour.
Thanks for reading.