No, this isn’t another post having a go at Apple, or Steve Jobs, or Mac Users, or any of that. Instead, we’re looking at an article in The Daily Telegraph and some twat called Michael Gartenberg, who is an “analyst” and this glorious gem of “analysis”-
Michael Gartenberg, an analyst at Gartner, says: “Consumers have shown that the price they are prepared to pay is not associated with [manufacturing costs] but with the perception of value, and the way Apple products are perceived, they have an extraordinarily high value.”
And how else, precisely, would you expect buyers in a market to judge value, Mr Gartenberg? Sigh.
It is astonishing how pervasive, in this day and age, thinking based on the Labour Theory Of Value is. That despite the fact that nobody of any significance in economics has (at least supposedly) believed in it since the 1860s and the so-called “Marginal Revolution” when economists realised that economic value, and thus prices, are not set by some deterministic function of a measurable quantity- such as labour, or “costs”- but are subjective and whimsical. You can’t calculate what a price should be, only explore the subjective perceptions of value in the market place empirically and, constantly, aware that those values are in constant flux. But probably the most generalised economic error in our society is this belief that prices “should” be something and much head scratching and conspiracy theorising when they turn out to be something other than this value they “should” be.
So here we have our “analyst” presenting the high perceived value of Apple goods to their customers as something unusual, as if it’s something special to Apple. Instead, it is how all prices work. Sigh. Again.
So okay, you can forgive ordinary folks who aren’t interested in economics not knowing this. You maybe can’t forgive a State that crams them into immiserating schools for years on end and never teaches them it unless they take a special economics course, but that’s another matter. But a market analyst ought to know it. Officially, only two economically interested groups still believe in the Labour Theory Of Value; traditionalist Marxists (because Marxist eonomic theory is entirely derived from the LTV, via the vastly overrated Adam Smith and David Ricardo). There’s also a group of pseudo-libertarian entryists calling themselves the libertarian “left”, led by a gurning jester called Kevin Carson, who believe in it too, but they are best ignored. The only other significant group (to us at least) still trapped in a swirling morass of nineteenth century value theory are the Georgists, who believe that all prices are a function of the price of land, which is Ricardo’s fault again. But you can’t really blame him in that he died a very long time ago, even if you can blame people who haven’t read any books on economics published since.
So, nobody significant believes in Labour (or Land) theories of value, not in the mainstream anyway. Free marketeers don’t. Monetarists don’t. Even Keynesians don’t. But presumptions about prices which contain an implicit labour theory are widespread and routinely communicated by quotes such as the one above. And this is pernicious.
It leads people to believe there is a “correct price”, and thus if the price is something else, something must be wrong with the Universe, or at least with the economy. It is because the LTV gets the value “chain” the wrong way around. It traces economic value from the beginning of production to the end (the good in the shop) trying to add all the producers’ wages up to sum to a final price. If you do that, it then seems that the “capitalists”, taking a little money from each “worker” at each stage, are stealing bread from their mouths, which is why Marx used it of course. You think, “if we could take the capitalists out of the picture, all the workers would get the money they rightfully deserve.” (The Georgist makes the same argument, but with “rentiers” instead of “capitalists”).
But the chain of prices works the other way. The final value of the good- determined subjectively at the point and moment of sale- defines the value of the labour. If you produce a high value good, your wages are higher than if you produce a lower valued good. It is very clear to see this if one is a one-man business, like what I am. I draw pictures for a living, and sell them in various ways. One way is by subscriptions on a website, but another is to sell them direct to a customer. And when your personal economics work this way, it is very very clear to see there is no “wage” driving the final value. If I draw a picture and it took me ten hours, and it is subjectively perceived to be worth $200 to some particular customer, my “wage” was, in retrospect, $20 per hour. But if I could only find somebody who thinks it is worth $50, my “wage” was $5 per hour. And if a rentier wants to rent me a studio for $400/month, but my income (from those final prices) can only support $200/month, then again he has to ultimately drop his price or not rent the studio. Production costs do not generate prices. Prices control production costs, be they labour or land or any other Damned Thing.
So, while it may be fun to describe Apple products as “over priced”, that isn’t true. There is no such thing. All one can say is, “well, I would not pay that price”, because an iPad (or whatever) does not have that subjective value to me, and me alone. I cannot, under economic theory say, for instance, “Devil’s Kitchen, you should not buy a Mac, it is overpriced”. All I can say is, “I would not buy one at that price”. But who knows, if Apple made it more valuable to me personally, like putting some porn on it or something, maybe now it would have that value. We cannot say until the moment of transaction occurs. Should I buy, or should I not? Nobody knows, least of all Michael Gartenberg.
Just before posting, I just thought I’d add, that the way the Marxists (and Carsonites) get out of the clear problem demonstrated by my “selling pictures” example is to talk about “commodities”. The idea is that the LTV applies to large markets of fungible goods- to quote Marx from Das Kapital-
A given commodity, e.g., a quarter of wheat is exchanged for x blacking, y silk, or z gold, &c
-and since these goods seem to have an “average” price which is metastable, they can be calculated from an averaged labour value. Because Marxism is a theory of the days of mass fungible employment- hordes of identikit workers labouring in the dark satanic mills, indistinguishable economically from one another- it seems naively plausible. Of course the problem arises that one cannot decide what is a commodity and what isn’t; we might have “a quarter of wheat is exchanged for x naked Wonder Woman pictures, y bespoke walking sticks, and z performances by The Beatles” and then we see quite clearly that the “commodity” workaround doesn’t get us anywhere at all.