Hosted on Acast. See acast.com/privacy for more information.
[00:00:00] [SPEAKER_04]: It will be the end of our country. She's a Marxist, everybody knows she's a Marxist. Her father's a Marxist professor in economics and he taught her well
[00:00:09] [SPEAKER_04]: I will order my government to deny entry to all communists at all Marxists
[00:00:15] [SPEAKER_00]: This is the debunking economics podcast with Steve Keen and Phil Dobbie
[00:00:22] [SPEAKER_02]: What did Karl Marx ever do to have said Donald Trump?
[00:00:25] [SPEAKER_02]: An imagined university professors studying Karl Marx. Wow, I guess Steve Keen will never make it in Dremereg
[00:00:32] [SPEAKER_02]: Over again and I've read bits of desk capitals as well so that's me out
[00:00:35] [SPEAKER_02]: But as a former marketer, not a Marxist, I have one question about Karl Marx and we'll look at what that is
[00:00:42] [SPEAKER_02]: And what it means on this week's debunking economics podcast with us
[00:00:52] [SPEAKER_02]: So Steve, the polliner I've always had with Marxist theory of surplus value
[00:00:56] [SPEAKER_02]: This idea that workers work for themselves for part of the day then a bit longer to add value for a trip or a mixer
[00:01:01] [SPEAKER_02]: That it can be sulfur-profit
[00:01:03] [SPEAKER_02]: I mean that thinking assumes that prices are set based on a cost
[00:01:08] [SPEAKER_02]: It's a cost-plus approach, and he is a labor-cost-plus approach
[00:01:12] [SPEAKER_02]: And that the value of a good is determined by how much it costs to make
[00:01:16] [SPEAKER_02]: Now that might be applicable today for some things like supermarket brand
[00:01:21] [SPEAKER_02]: Breakfast cereal stuff that really is price-dependent
[00:01:24] [SPEAKER_02]: But a Gucci handbag which sells for $1500, that's not determined by the cost of workers
[00:01:29] [SPEAKER_02]: So, aren't Marx's theories a bit out of date?
[00:01:33] [SPEAKER_01]: Well, Marxist theory isn't what you think it is
[00:01:35] [SPEAKER_01]: And this is one of my great frustrations in dealing with not just near classical economists
[00:01:41] [SPEAKER_01]: But, for a short- ago, I'm a bit nervous
[00:01:43] [SPEAKER_01]: But also podcasts
[00:01:45] [SPEAKER_01]: You've got an excuse, you've got an excuse, okay?
[00:01:49] [SPEAKER_01]: You're a graduate of Marxist theory.
[00:01:51] [SPEAKER_01]: You're a graduate of Marxist theory.
[00:01:52] [SPEAKER_01]: Wow, wow.
[00:01:53] [SPEAKER_02]: If you think that's funny, you should see my wife.
[00:01:56] [SPEAKER_02]: I would have done a chance to get a start of the graduate Marxist as well from coming in, perhaps.
[00:02:00] [SPEAKER_01]: Okay, let's go back on track.
[00:02:02] [SPEAKER_01]: So, I first read Marx's theory of economics in 1973
[00:02:08] [SPEAKER_01]: After I let a student revolt over the teaching of economics at a sitting university
[00:02:12] [SPEAKER_01]: And the thing I couldn't swallow was when you were talking about there
[00:02:16] [SPEAKER_01]: That's, you know, everything was based on the cost of labor
[00:02:20] [SPEAKER_01]: And, you know, workers were paid for a paid, paid equivalent of six hours labour
[00:02:28] [SPEAKER_01]: But they worked for 12, six hours would be reproduced
[00:02:31] [SPEAKER_01]: The means is as if systems but the labor contract with the required work for 12 hours
[00:02:35] [SPEAKER_01]: And that was the working day in Marxist time
[00:02:38] [SPEAKER_01]: And therefore the gap between the two is the source of profit
[00:02:41] [SPEAKER_01]: And machines offered added no value
[00:02:43] [SPEAKER_01]: And I just thought, hang on a second
[00:02:45] [SPEAKER_01]: This actually happened to be the time of the huge building burden
[00:02:49] [SPEAKER_01]: In Sydney and it was a global phenomenon
[00:02:51] [SPEAKER_01]: Wasn't a city that had a huge credit-based bubble
[00:02:56] [SPEAKER_01]: In both commercial, well estate and residential mainly commercial
[00:03:01] [SPEAKER_01]: And the whole skyline of Sydney, you know what that looks like
[00:03:04] [SPEAKER_01]: It was just dotted with kangaroo cramps
[00:03:07] [SPEAKER_01]: I'm interested in a colleague walking off to having our collective reading of Marx
[00:03:11] [SPEAKER_01]: That only did a very good explanation for Marxist, why those think don't add value
[00:03:15] [SPEAKER_01]: And I read it and found that in fact Marx's explanation used to be
[00:03:20] [SPEAKER_01]: The one that everybody thinks he still is
[00:03:22] [SPEAKER_01]: Which is something unique about labor
[00:03:24] [SPEAKER_01]: When you buy an apple, you get an apple
[00:03:27] [SPEAKER_01]: When you hire a worker, you're done by the worker
[00:03:29] [SPEAKER_01]: You buy your, you're buying the capacity to work
[00:03:32] [SPEAKER_01]: And you, so that's what you get as a commodity
[00:03:35] [SPEAKER_01]: What you've got to pay for them is the cost of production of that capacity
[00:03:39] [SPEAKER_01]: To work which is the means of assistance
[00:03:41] [SPEAKER_01]: That's unique to labor and that's where profit comes from
[00:03:44] [SPEAKER_01]: That was the explanation he had right up in the late in 57
[00:03:47] [SPEAKER_01]: And then in 1857 he re-read Haguele, which is a coincidence
[00:03:52] [SPEAKER_01]: And started using Haguele's philosophy
[00:03:54] [SPEAKER_01]: And developed an explanation which I'm happy to talk about
[00:03:57] [SPEAKER_01]: In more detail, it would be too much of a dump
[00:03:59] [SPEAKER_01]: To go straight into it right right away
[00:04:01] [SPEAKER_01]: But that fundamentally said that all inputs to production
[00:04:03] [SPEAKER_01]: Can produce a surplus
[00:04:05] [SPEAKER_01]: So it's a hence machinery
[00:04:08] [SPEAKER_02]: So the argument would be
[00:04:09] [SPEAKER_02]: We'll say, okay if you got more efficient work
[00:04:12] [SPEAKER_02]: But using something because you got machine that allows you to have less workers
[00:04:15] [SPEAKER_02]: But you produce something then you get your profit from that
[00:04:20] [SPEAKER_02]: But it's still based on cost-plasses
[00:04:23] [SPEAKER_02]: And it's still saying, well, okay, the price that something is being sold for
[00:04:27] [SPEAKER_02]: Is the cost of that production plus a profit element
[00:04:30] [SPEAKER_02]: Whatever that profit might be, that's still the assumption
[00:04:33] [SPEAKER_01]: That's still there and I like that it makes sense even
[00:04:36] [SPEAKER_01]: And crazy things like Gucci handbags
[00:04:38] [SPEAKER_01]: Because what determines that difference between
[00:04:42] [SPEAKER_01]: What do you pay as cost of inputs and what you sell
[00:04:45] [SPEAKER_01]: Or to flock the damn thing for
[00:04:47] [SPEAKER_01]: Is your capacity to put a markup above the cost of production
[00:04:51] [SPEAKER_01]: And the markup itself is produced by the fact that production
[00:04:54] [SPEAKER_01]: Is exploiting free energy
[00:04:56] [SPEAKER_01]: That's another curly that I've worked in over
[00:05:00] [SPEAKER_01]: Recent years rather than way back in the early 70s
[00:05:04] [SPEAKER_01]: But you found them in to have a range different markups
[00:05:07] [SPEAKER_01]: Whether it's a conventional, industries, whether it's a conventional markup
[00:05:11] [SPEAKER_01]: Now if you look at computers which we were talking about before we came online
[00:05:15] [SPEAKER_01]: The markup computers used to be huge
[00:05:17] [SPEAKER_01]: Now it's quite small
[00:05:20] [SPEAKER_01]: I don't know what the cost of production of the laptop is these days
[00:05:24] [SPEAKER_01]: But if you pay 1,000 bucks or it is quite probable that the cost of production
[00:05:28] [SPEAKER_01]: Of course the gentleman's in it was of the order of 750 bucks
[00:05:32] [SPEAKER_01]: So you're getting a markup of about one third
[00:05:34] [SPEAKER_01]: Gucci handbags because they've got this
[00:05:36] [SPEAKER_01]: You know, you know, cut off that comes from the actual brand itself
[00:05:41] [SPEAKER_01]: The markup can be gigantic
[00:05:42] [SPEAKER_01]: And that's what we see that the huge markups impose
[00:05:47] [SPEAKER_01]: So it isn't just that the cost of production
[00:05:51] [SPEAKER_01]: It's also the markup
[00:05:52] [SPEAKER_01]: Marks was normally talking in terms of things with which we're just
[00:05:55] [SPEAKER_01]: Every day commodities and nothing special about
[00:06:00] [SPEAKER_01]: It's the cornflake theory of pricing and that sense
[00:06:04] [SPEAKER_01]: Now you do have your luxury luxury goods and the markups are higher there
[00:06:09] [SPEAKER_02]: But also thanks to marketing
[00:06:10] [SPEAKER_02]: So the marketing and PR jobs
[00:06:14] [SPEAKER_02]: Those bullshit jobs that people talk about
[00:06:17] [SPEAKER_02]: Because they are actually the value creators in many cases
[00:06:20] [SPEAKER_02]: So figures I've got here and look at the web
[00:06:22] [SPEAKER_02]: So who knows whether it's correct or not but
[00:06:26] [SPEAKER_02]: Gucci 60% of the total cost of a Gucci purse is manufacturing and distribution
[00:06:30] [SPEAKER_02]: 40% went to marketing and branding
[00:06:32] [SPEAKER_02]: So they are worth more because they market the hell out of it
[00:06:37] [SPEAKER_02]: And you do get stylish magazines
[00:06:39] [SPEAKER_02]: And you'll see Gucci adds there
[00:06:41] [SPEAKER_02]: They spend a lot on TV advertising and the like
[00:06:45] [SPEAKER_02]: So the brand value of Gucci which allows them to charge that premium
[00:06:48] [SPEAKER_02]: Is coming from a lot of marketing
[00:06:51] [SPEAKER_02]: But they're still in a way really just a part of the cost of production
[00:06:54] [SPEAKER_02]: Isn't it?
[00:06:55] [SPEAKER_01]: And that's why you said there was a like 60% of the actual physical cost
[00:06:58] [SPEAKER_01]: 40% of the marketing cost
[00:07:00] [SPEAKER_01]: And in that sense when a firm is marketing and new product
[00:07:05] [SPEAKER_01]: They will budget certain expectation
[00:07:07] [SPEAKER_01]: How much money they've got to put in promoting the product
[00:07:10] [SPEAKER_01]: They actually get the sale to come out
[00:07:12] [SPEAKER_01]: So the marketing tends to be a constant
[00:07:14] [SPEAKER_01]: Another element of the cost of production
[00:07:16] [SPEAKER_01]: I've all a cost of marketing is part one of the all we have
[00:07:19] [SPEAKER_01]: Very well too, they call variable cost because they vary with number of units
[00:07:24] [SPEAKER_01]: Superjuice
[00:07:25] [SPEAKER_01]: It's not a fixed cost which is their regardless of how many units she sell
[00:07:28] [SPEAKER_01]: But it tends to be again though
[00:07:31] [SPEAKER_01]: Though you're not going to have a dramatic increase in the cost of marketing
[00:07:36] [SPEAKER_01]: To a unit at any stage
[00:07:38] [SPEAKER_01]: It's going to be set at what is common for that particular industry
[00:07:41] [SPEAKER_01]: So cars used to have an enormous marketing budget
[00:07:44] [SPEAKER_01]: They still do I expect
[00:07:46] [SPEAKER_01]: Tesla's manager and managed to run the cut that by sheer
[00:07:51] [SPEAKER_01]: The viral marketing
[00:07:53] [SPEAKER_01]: But all these marketing is a cost of production
[00:07:58] [SPEAKER_01]: And the what determines how much of a market you can put up
[00:08:02] [SPEAKER_01]: Is how much competition you feel that there is in your industry
[00:08:05] [SPEAKER_01]: And this is one reason we can get inflation after an event like COVID
[00:08:08] [SPEAKER_01]: Because with the government popping as much money as they did into the economy
[00:08:12] [SPEAKER_01]: There's so many sales occurring
[00:08:14] [SPEAKER_01]: The people just the perception of the level of competition is quite low
[00:08:18] [SPEAKER_01]: And therefore they think I can put the markups up
[00:08:20] [SPEAKER_01]: And it's been an increasing markups which are caused increasing inflation over time
[00:08:24] [SPEAKER_01]: And also the increasing wages
[00:08:25] [SPEAKER_02]: And awful that is happening to be a company company for doing it because the end of the day
[00:08:29] [SPEAKER_02]: It isn't cost plus is it determines prices people's willingness to pay
[00:08:33] [SPEAKER_01]: Well it's it's both and because you
[00:08:37] [SPEAKER_02]: We can't sell where people aren't willing to pay
[00:08:40] [SPEAKER_02]: There's much cost to produce then you haven't got a business model
[00:08:43] [SPEAKER_02]: But assuming you're over that cost
[00:08:47] [SPEAKER_02]: And that cost by the way obviously for some industries
[00:08:51] [SPEAKER_02]: You know that break even only comes with scale
[00:08:54] [SPEAKER_02]: And then to get to that scale you really do have to market heavily to try and convince people to buy your product
[00:09:00] [SPEAKER_01]: That's right. You're going to mark up the hill out of it
[00:09:01] [SPEAKER_01]: You're being mean you know I'm going to be too interested in that myself right now with Ravl
[00:09:05] [SPEAKER_01]: I don't have a marketing budget for it
[00:09:07] [SPEAKER_01]: And how they hold or I get visibility without visibility
[00:09:09] [SPEAKER_01]: People don't even exist they can't buy it
[00:09:12] [SPEAKER_01]: So part of your cost of production and getting into it
[00:09:14] [SPEAKER_01]: You know the incredibly complicated economies in which we live today
[00:09:17] [SPEAKER_01]: Building certainly millions of products that exist
[00:09:21] [SPEAKER_01]: With those millions of products how they hold you get you all seen above all the others
[00:09:25] [SPEAKER_01]: Marketing is a critical component of that
[00:09:27] [SPEAKER_02]: So as to the idea the value that you add
[00:09:30] [SPEAKER_02]: Can we just dismiss that idea then from Marks
[00:09:33] [SPEAKER_02]: Even though it's commonly quoted
[00:09:35] [SPEAKER_02]: That you know the the whole idea of surplus value has
[00:09:40] [SPEAKER_02]: You know might have been right at the time
[00:09:42] [SPEAKER_02]: Because I think of you know and with the job that you do
[00:09:45] [SPEAKER_02]: You know it's increasingly difficult to tell what value you are adding
[00:09:49] [SPEAKER_02]: And whether you're getting paid fairly for it
[00:09:52] [SPEAKER_02]: So I had a couple of marketing jobs as you know in telecommunications
[00:09:56] [SPEAKER_02]: Where I increase the e-bit of the business quite markedly
[00:10:00] [SPEAKER_02]: Because it's not a marketing, it's not that hard
[00:10:02] [SPEAKER_02]: Just going to make sure the prices right and bit smart about what the advertising looks like
[00:10:07] [SPEAKER_02]: What the message is and where you're sticking your ads
[00:10:09] [SPEAKER_02]: And my salary was in no way related to the value I added to the business
[00:10:15] [SPEAKER_02]: Because it was actually quite immense
[00:10:17] [SPEAKER_02]: He said modestly but the way Joe's paid was based on the market value for half decent marketing people
[00:10:24] [SPEAKER_01]: Rather than the value add that that's straight marks what you're talking there is straight marks
[00:10:28] [SPEAKER_01]: Because what you're saying is that you you get paid it, you know your pay rate reflected your
[00:10:34] [SPEAKER_01]: Cost of production the means of assistance plus a bit
[00:10:38] [SPEAKER_01]: Because you're a you know white collar work or an all that sort of jazz
[00:10:40] [SPEAKER_01]: What went back to the for the
[00:10:44] [SPEAKER_01]: Seller was the use value is marked used to call it of your labour
[00:10:49] [SPEAKER_01]: And that is far higher than the exchange value of your labour and therefore that's how they made a profit
[00:10:53] [SPEAKER_01]: Good point
[00:10:55] [SPEAKER_01]: So Carl's relevant, but he did see just marks as relevant marks is not
[00:10:59] [SPEAKER_01]: And this is one of my great frustrations that you've still got marks
[00:11:03] [SPEAKER_01]: As hanging under the labour theory of value
[00:11:05] [SPEAKER_01]: Which I'll give this something unique about labour and that's why you get to profit out of labour alone
[00:11:10] [SPEAKER_01]: And therefore they argue that there's get more technological industries that increase them
[00:11:14] [SPEAKER_01]: With the quality organic composition of capital, more machines compared to labour
[00:11:19] [SPEAKER_01]: That's going to cause a way to profit to full
[00:11:20] [SPEAKER_01]: Now that's bullets
[00:11:21] [SPEAKER_01]: But it's a bit more just hanging under it because it implies capitalism has to collapse into
[00:11:28] [SPEAKER_01]: Socialism at some point and that's the same sort of ideological reason that the
[00:11:31] [SPEAKER_01]: Classical thing done with the idea of supply and demand
[00:11:34] [SPEAKER_01]: Because it argued that capitalism is the best possible social system
[00:11:37] [SPEAKER_01]: Neither are looking at their own logic and saying hang on, we made a mistake there
[00:11:41] [SPEAKER_01]: Maybe we should change our argument so they're both religion then else then opts
[00:11:45] [SPEAKER_01]: Genuine intellectual
[00:11:47] [SPEAKER_02]: And you write it is pure Marxism isn't it
[00:11:51] [SPEAKER_02]: And actually pure Marx will be the case of my wife as well
[00:11:53] [SPEAKER_02]: Because before we move back to the UK she was I mean she's always worked in the PR industry until
[00:11:59] [SPEAKER_02]: Until more recently and she was working in an agency where they basically
[00:12:03] [SPEAKER_02]: She looked after her own clients
[00:12:05] [SPEAKER_02]: The agency kept 30% of the earnings from the client
[00:12:08] [SPEAKER_02]: She got the rest
[00:12:10] [SPEAKER_02]: So in Marx's world I mean she was working for what the client paid
[00:12:14] [SPEAKER_02]: And then worked another 30% for the fairly capitalist who was running the agency
[00:12:20] [SPEAKER_02]: So the agency could own our good afford a nice high since Sydney
[00:12:24] [SPEAKER_02]: So that's almost exactly the same thing isn't it more pure Marx
[00:12:27] [SPEAKER_01]: Yeah, yeah, so there's much as I'll not be the theory of value
[00:12:32] [SPEAKER_01]: The Marx is over a mental or troll framework
[00:12:35] [SPEAKER_01]: Particularly when it's free the libert theory of value is still the richest analytic framework of capitalism
[00:12:40] [SPEAKER_01]: Ever created
[00:12:41] [SPEAKER_01]: I think I'm out by certainly my overall currency to the most important economists goes to the the physiocrats who preceded Marx by a century
[00:12:50] [SPEAKER_01]: Because they understood the role of energy so they got the most important thing right
[00:12:54] [SPEAKER_01]: But Marx got most of the rest right and he got all the analysis of
[00:12:58] [SPEAKER_01]: You know, it's sectors of capitalism and one second leading the output of another as an input to his production and so on and so forth
[00:13:05] [SPEAKER_01]: But this stuff hanging under the labor theory of value that just shows the religious attitude of the way people think about
[00:13:11] [SPEAKER_01]: The social system in which they're in they want to have an explanation that suits their vision of way or what the
[00:13:19] [SPEAKER_01]: What the what deserves to get crucified what deserves to get sanctified and the Marx is just as bad on this front as near a classical's are
[00:13:25] [SPEAKER_02]: Right, yeah, and this idea mean you said it there, but you know
[00:13:29] [SPEAKER_02]: If the what you produce might be an input to something else so I mean if you were a Gucci handbag maker
[00:13:35] [SPEAKER_02]: And you thought well hang on a second I can make handbags and you know selling people the money myself
[00:13:41] [SPEAKER_02]: Well first of all, I mean they they'd have to work down the value chain and the supply chains
[00:13:47] [SPEAKER_02]: The Gucci has they'd have to get into the retail stores which take by the way
[00:13:52] [SPEAKER_02]: I think about for a lot of products 50% of the value
[00:13:56] [SPEAKER_02]: And you'd have to recreate the brand so I mean everything is you are just part of a big picture obviously and everything is is part of an input to something else
[00:14:04] [SPEAKER_02]: And so it's it's hard to play that that theory when you have such a complex web
[00:14:09] [SPEAKER_01]: I mean to go web. No, you can you can you can apply the theory and the reason that it doesn't apply to Gucci particularly is that
[00:14:17] [SPEAKER_01]: Gucci handbags or an out you need other commodity to produce Gucci handbags
[00:14:22] [SPEAKER_01]: You need very few Gucci handbags to produce other commodities
[00:14:25] [SPEAKER_01]: So it's since it's independent of their whole input output system because it's an absolute luxury good
[00:14:31] [SPEAKER_01]: Maybe you might need them for their casual James Bond movie and stuff like that, but then you're talking literally a Christmas of money anyway
[00:14:37] [SPEAKER_01]: So there's no way in which the pricing of a Gucci handbag feeds back and affects the price of all of the commodities in the economy
[00:14:44] [SPEAKER_01]: Where if you look at the price of a computer the price of a computer affects everything because everybody's using computers for sales and manufacturing and design and so on
[00:14:53] [SPEAKER_01]: And if you have computer and she's trying to put two large of markup on that itself causes cost pressures and other industries and that will cause pushback because 70% and this is the
[00:15:03] [SPEAKER_01]: It's a element of capitalism that most economy have no idea of either 70% of sales are made to other businesses only 30% or less since working from Alan Blondon's research back in a
[00:15:23] [SPEAKER_01]: When they did the survey and said how much of his sales are made to final consumers and how much are made to other businesses
[00:15:28] [SPEAKER_01]: The answer was 30% or less to final consumers 70% to other businesses because your outputs and this is a series inputs to produce other commodities
[00:15:37] [SPEAKER_01]: And that business to business element puts a constraint in how high markups can go
[00:15:42] [SPEAKER_02]: So the idea of a revolution and so I mean maybe I should have thought about it more when I was I mean to me
[00:15:48] [SPEAKER_02]: It was almost like the house in days of my career when I was earning you know two or three hundred grand in Australian dollars not in proper money working in in marketing
[00:15:57] [SPEAKER_02]: I was actually being exploited because the yeah because you know the value I was adding was so much more than that so it's time ladies and gentlemen for the overpaid marketers of the world to rise up and rebel against those people who are paying the news
[00:16:11] [SPEAKER_02]: Exhaust in salaries because they could be they should be earning them as more but I guess he does apply in the case of CEO's doesn't know I mean we pay absorbed in the amounts to CEOs because we see that they are theoretically
[00:16:22] [SPEAKER_02]: Adding more value than we're paying them because they help the share price go up whether they make the company more profitable as well
[00:16:28] [SPEAKER_01]: I mean this they've been in the fifth you have on a have like an update to Marxist analysis and get a more realistic picture of modern capitalism
[00:16:36] [SPEAKER_01]: I'd be bringing in the work of Blair fix because Blair is somebody that's he runs a web blog called economics and the top damage or highly recommend people to take a look
[00:16:45] [SPEAKER_01]: I'm expecting to on this podcast actually years ago. Yeah, it's a great guy but Blair looked at the distribution of income both between corporations
[00:16:52] [SPEAKER_01]: and inside corporations look at the salary of the CEO compared to the salary of the janitor and so on and tried to make sense of it
[00:17:00] [SPEAKER_01]: And finally got the insight blindingly it's one of these new revelations of insights the only way could make sense of the distribution of income
[00:17:07] [SPEAKER_01]: Was to say the people are paid according to their position in a hierarchy
[00:17:11] [SPEAKER_01]: The more people who answer to you the higher your pay and what we've now got is a period of superior middle system in pyramids make a lot of sense here because as well
[00:17:20] [SPEAKER_01]: Most is bad as the fairs the pay rates have seen the top of the pyramid reflect the number of people who asked it then below that pyramid
[00:17:27] [SPEAKER_01]: And that's where their power to extract huge payments comes from so we've got a combination of a production system that has to have
[00:17:36] [SPEAKER_01]: For capitalists to make a profit they've got to be paying less than their input costs have to be less than their sales revenue
[00:17:45] [SPEAKER_01]: And that's made possible because we're exploiting free energy which is where the other
[00:17:50] [SPEAKER_01]: That's where the ultimate source of having any profit of all comes from and then the the bar the bargaining power with inter corporation
[00:17:59] [SPEAKER_01]: Reflects your hierarchical status and that organization the janitor down the bottom the CEOs up the top and you get a 600 to one page difference
[00:18:07] [SPEAKER_02]: Right, I mean the middle you got all other people who do better than others simply because they are better
[00:18:11] [SPEAKER_02]: Amarketing themselves not necessarily adding the most value of better their job. There's all that sort of stuff all oceananigans that go on as well
[00:18:17] [SPEAKER_02]: Look when we come back having sort of discounted but not entirely this idea of surplus value or less in a supply sometimes but not always
[00:18:24] [SPEAKER_02]: Let's look at what else we can take from marks at the risk of you know if you've gone application in
[00:18:31] [SPEAKER_02]: To reside in the United States stop listening now because they'll find you but everybody else
[00:18:35] [SPEAKER_02]: What else can we take from the works of Karl Marx or look at that when we come back?
[00:18:56] [SPEAKER_00]: Which demon will by prime bid you this is the debunking economics podcast with Steve Keene and filled or be
[00:19:14] [SPEAKER_02]: Yep, if you're American don't eat a Marx because Donald Trump doesn't approve
[00:19:20] [SPEAKER_02]: Even though maybe there is more to Marx than mix the eye. I mean we talked about surplus value and maybe it's just a bit overly simplistic when you look at the idea of surplus value
[00:19:28] [SPEAKER_02]: And you start to look at how prices are really determined very often is determined by the marketing and brand value
[00:19:34] [SPEAKER_02]: But also Steve that is the interconnectedness of things as well. The fact that you know you buy my buy something from a company
[00:19:41] [SPEAKER_02]: But that company has put that together by using you know inputs from a whole variety of other companies as well
[00:19:48] [SPEAKER_02]: So it starts to get very complicated can you in that sort of complexity apply anything is there anything of that concept of surplus value
[00:19:55] [SPEAKER_01]: That would apply in the situation like that. Well, it did does turn up there because what you've got is
[00:20:01] [SPEAKER_01]: Ignite each sector needs inputs from other sectors to enable it to sell a product or sell a product and make a profit
[00:20:06] [SPEAKER_01]: And so you your input cost include a markup on the input cost of the organization you bought from and all these things feed through themselves and what's called an input output system
[00:20:16] [SPEAKER_01]: And marked with the first person to work out that as a mathematical concepts
[00:20:21] [SPEAKER_01]: Showing that you've either divided the economy into three sectors they had effectively workers can's work as consumption in investment goods and capital's consumption
[00:20:31] [SPEAKER_01]: And basically said that to produce the investment goods you've got to have workers inputs
[00:20:36] [SPEAKER_01]: And you've got to have you know have the outcomes commodities which are consumed by workers effectively come part of the inputs to producing investment goods
[00:20:44] [SPEAKER_01]: So that input output dynamic is something which you know we can actually source directly back to marks. It's one of the few decent innovations and economics of courses being ignored
[00:20:55] [SPEAKER_01]: By the mainstream average time they used to do it but they pretty much stopped doing it except where they call computable
[00:21:00] [SPEAKER_01]: Drainily equilibrium models about 30 or 40 years ago
[00:21:03] [SPEAKER_01]: So that marks really gave us a way to actually handle that complex system of inputs and outputs
[00:21:10] [SPEAKER_02]: And so very bump I took the main investors and capitalists that's different to the chain where you're passing something through from one company to an expert
[00:21:19] [SPEAKER_02]: I guess when you are so for example, you know a company that produces something sells to a retailer
[00:21:24] [SPEAKER_02]: But I guess the retailer is you know that you can apply the same principle of
[00:21:30] [SPEAKER_02]: Serpilus value to the retailer so they've got they buy stuff they've got a sell
[00:21:35] [SPEAKER_02]: They want to make a they've got a pay staff to you know unload it fill the shelves serve people
[00:21:43] [SPEAKER_02]: So all of that's a cost and the company obviously has to make a profit so has to charge a bit more than that to make it so gets all you doing is just replicating his
[00:21:53] [SPEAKER_01]: Serpilus value principle at every stage on you. Yeah, and it's quite a quite a strong
[00:21:59] [SPEAKER_01]: Foundation for analyzing that complexity of the input output nature of production and how you know if you're going to
[00:22:05] [SPEAKER_01]: To sell cars we've got to be putting them through a retail system most cars are sold by the company itself and distribution
[00:22:12] [SPEAKER_01]: And system but they've got to pay the distribution cost of part of making
[00:22:15] [SPEAKER_01]: Managing to turn the physical surplus you can produce and this is an important distinction a lot of work
[00:22:21] [SPEAKER_01]: And after the work about the physical surplus say you take your inputs you produce outputs that are can be sold for more than the inputs
[00:22:28] [SPEAKER_01]: But you've got actually sell them and this is where my reading of marks which have only sounds real for other people actually understood
[00:22:36] [SPEAKER_01]: Is the marks said that
[00:22:40] [SPEAKER_01]: The conventional economist talk about marginal utility and marginal cost and you get you maximize the profit where
[00:22:48] [SPEAKER_01]: You know, we're we're marginal cost equals marginal revenue and it's all about getting the margins right and
[00:22:54] [SPEAKER_01]: Mark said well actually what's going on is you have every commodity has about the use value and an exchange value
[00:23:02] [SPEAKER_01]: I said in a modern capitalist economy the use value the commodities are relevant to the produce
[00:23:07] [SPEAKER_01]: We're being the the neoclassical things sort of suits the world where you produce stuff the your own consumption
[00:23:13] [SPEAKER_01]: If you're going to give to somebody else, I mean you got less to your own to consume say you lose utility when you sell is that's a well-event the capitalism
[00:23:20] [SPEAKER_01]: So in capitalism use for either commodity becomes a single shipment exchange value and the gap between that in that
[00:23:27] [SPEAKER_01]: And it explains where profit comes from because when you look at you and me buying a commodity we're buying it for it's you
[00:23:34] [SPEAKER_01]: It's qualitative features you can buy you buy a phone because of its quality of its camera
[00:23:40] [SPEAKER_01]: It's software that's on side at what you can do with it. It's a subjective thing but you said when a capitalist buys anything
[00:23:47] [SPEAKER_01]: The use value the capital of season something is the capacity to use it to make a profit that's an objective
[00:23:52] [SPEAKER_01]: For the use value they cost the cost of the exchange value is also objective
[00:23:59] [SPEAKER_01]: But therefore they can be a gap because that the use value or independent and related to each other in Marx's philosophy
[00:24:07] [SPEAKER_01]: That's where the source of surplus comes from that you pay the quantitative exchange value to something that's cost of production
[00:24:16] [SPEAKER_01]: You use it to produce extra commodities also quantitative that is the source of profit and that applies to any input not just labor
[00:24:25] [SPEAKER_01]: So it's a much much richer version of Marx and it also lets you get to the point where you talk about things like marketing new products
[00:24:34] [SPEAKER_01]: The fact that if you're going to sell in new product then in that case people will pay a subjectively based price for it
[00:24:42] [SPEAKER_01]: You want to get the first, this is a personal rocket so you want to get the first personal rocket
[00:24:47] [SPEAKER_01]: Well it's going to be the Elon Musk or the world and those people who buy those personal rockets
[00:24:53] [SPEAKER_01]: And they will even pay any price so you get an enormous mark up being possible for that
[00:24:58] [SPEAKER_01]: And then over time as that becomes people's day using personal rockets for commuting flying goods around the planet Yard of Yard of Yard of
[00:25:05] [SPEAKER_01]: That the cost of that becomes part of the input output system and you can't have that outrageous mark up anymore
[00:25:10] [SPEAKER_01]: So all the stuff that you're very very rich with in analyzing capitalism
[00:25:13] [SPEAKER_02]: Yeah, I would happily chip in for a personal rocket for Elon Musk as I think a lot of people
[00:25:19] [SPEAKER_02]: You want to last them off the planet?
[00:25:20] [SPEAKER_02]: Yes, I know, yes, I know, yes, I know where there he comes back or not well hopefully not
[00:25:24] [SPEAKER_02]: But so the value then so this idea of the utility value
[00:25:30] [SPEAKER_02]: So when you're going through the manufacturing chain, I think what you're saying is a catalyst
[00:25:35] [SPEAKER_02]: You know, then again, what are these so long as it works and it adds value to the final product?
[00:25:42] [SPEAKER_02]: Where we get this more subjective element is as you say if something's new or something's got a brown value
[00:25:46] [SPEAKER_02]: So it's taking Apple logo on so the Apple logo is you know is that is an asset that's worth quite a bit obviously
[00:25:52] [SPEAKER_02]: And people like it and some people are very happy to have Apple phones so they will pay over the odds
[00:25:58] [SPEAKER_02]: So the utility value the utility they're getting from is not just the function of the phone
[00:26:04] [SPEAKER_02]: It's how they feel about it as well and you know, maybe they like to be seen as an Apple phone user for some reason
[00:26:12] [SPEAKER_02]: Because all smart people obviously use Google phones
[00:26:14] [SPEAKER_02]: But you know, it's so people there's this but that really any applies at the end of the distribution chain
[00:26:21] [SPEAKER_02]: Doesn't it really or the end of the production chain?
[00:26:23] [SPEAKER_02]: Yeah, well again this is the it's a kind of use marks all the way through to that point
[00:26:29] [SPEAKER_01]: But what you get out of marks is vicious and an evolutionary picture on capitalism
[00:26:34] [SPEAKER_01]: Because if you imagine having a, if you develop a new product
[00:26:38] [SPEAKER_01]: And we go back to the like the early days of computers they were absolutely novel computers we were used by
[00:26:45] [SPEAKER_01]: You know, assisting an artist but they weren't yet used by the coffee shop to charge you for your cap of shenap
[00:26:51] [SPEAKER_01]: So they were, you can get enormous markups of that search
[00:26:55] [SPEAKER_01]: And it was the novelty side of things and then as they start being used to you know, by the local shop to charge your cap of shenap
[00:27:03] [SPEAKER_01]: And give you the menus and so on then that margin got squeezed
[00:27:08] [SPEAKER_01]: So imagine a factor that corporations continue trying to do is to break out of being treated like a commodity
[00:27:14] [SPEAKER_01]: And that's why I think you know, you and I find good she hand back as a ridiculous as I think you do
[00:27:18] [SPEAKER_02]: You look good to get back to the Gucci handbag as well by the way
[00:27:21] [SPEAKER_01]: I think they really don't suit me, yeah, yeah, yeah, yeah, yeah
[00:27:25] [SPEAKER_01]: But yeah, I have what some for partners in the past and I think holy shit
[00:27:31] [SPEAKER_01]: I'm paying ridiculous price here because it's part of the status symbol of the system
[00:27:36] [SPEAKER_01]: It's crazy that those prices are paid but this is actually what another great not all the economists called
[00:27:42] [SPEAKER_01]: Conspicuous consumption, glycotholstein vebblin
[00:27:46] [SPEAKER_01]: And it's said that a lot of commodities are priced at a level to show that they're outrage of the show you can afford to buy them
[00:27:53] [SPEAKER_01]: This is sign of your social status and the classic element of that again in an evolutionary sense and the animal kingdom
[00:27:59] [SPEAKER_01]: As the peak the feathers of a male peacock, they're there to prex the girls to get the, you know, get the bird to go for you
[00:28:08] [SPEAKER_01]: You know if this is the crazy thing in birds but then in the bird kingdom the males of the fancy looking want the female standard to be drab
[00:28:15] [SPEAKER_01]: So the white looking female peacock, the multicolored males try to impress her with the tail
[00:28:21] [SPEAKER_01]: And that is just sign of I'm so you have so much you know inherent strength that I can afford this or name decoration
[00:28:29] [SPEAKER_01]: And it can be able to set a lot of capitalist consumption is precisely the same sort of thing
[00:28:34] [SPEAKER_01]: You're not buying a, you don't buy a Rolls Royce to get to work
[00:28:39] [SPEAKER_01]: You buy Rolls Royce to show you status off and therefore that status being able to push that status element is why Rolls Royce can charge the outrageous price that they do for their vehicles with a far higher mark up than you get
[00:28:52] [SPEAKER_02]: Proordinary cars so let's get back to this idea of all the different sectors there because I wonder whether monks
[00:28:58] [SPEAKER_02]: Well certainly a lot of economists are very static in their thinking on they so if we go back to a, you know, a shoemaker or making a pair of trainers
[00:29:08] [SPEAKER_02]: If the company makes a profit it doesn't keep all of that profit. It doesn't even return it as dividends to shareholders or all of it and it will either
[00:29:18] [SPEAKER_02]: Make more shoes so to use the profits to invest in being able to grow to make more shoes or to buy up other companies
[00:29:26] [SPEAKER_02]: Or to invest in machinery to improve productivity so there's nothing static in this is there
[00:29:33] [SPEAKER_01]: I mean companies are always looking for growth. Yeah, and that again is part of Marx's thinking he did the main multi-sectoral view of the economy
[00:29:42] [SPEAKER_01]: In bear and while we're talking back in the idea in 50s so I wanted the world in which he could be a may make a computer spreadsheet and model 30 or 40 sectors
[00:29:49] [SPEAKER_01]: But he basically talked about consumption goods investment goods and capital consumption goods and they are full of sold at investment goods native consumption goods and consumption goods native investment goods
[00:29:59] [SPEAKER_01]: But capitalists goods and this is where we're talking to the Gucci out end of the world and conspicuous consumption
[00:30:04] [SPEAKER_01]: They weren't in the input to the production cost of the other two sectors so you did get an independence for those commodities that weren't part of the input output system
[00:30:12] [SPEAKER_01]: And there's a immense richness in Marx's analysis and most of the worthwhile things that capital economists have done can be traced back to Marx's ideas rather than to
[00:30:24] [SPEAKER_01]: Vol. Rao or Marshall or that crowd so there's a but the trouble is Marx's own worst enemies are his friends because they don't want to give up on the idea that socialism is going to take over
[00:30:36] [SPEAKER_01]: So they hang out of this crazy idea of that labor being the only source of profit and therefore rising technology that they call a rising organic composition of capital
[00:30:45] [SPEAKER_01]: That's going to lead to less profit being made the fall and profit will mean the capitalist income down and exploit the workers the idea to get a
[00:30:53] [SPEAKER_01]: It's all nonsense because first of all philosophical remarks to the theory explained that any input to production can produce a
[00:31:02] [SPEAKER_01]: surplus over input costs and fundamentally what's the what was the core of this whole thing is we're exporting free energy
[00:31:09] [SPEAKER_01]: And that really is the energy that we're getting for free from them from nature that is the real source of our society to raise the level of human existence above that of the other animals on the planet
[00:31:22] [SPEAKER_01]: And and and the thing as Marx's ideas were compatible with that, but he never quite worked it out
[00:31:27] [SPEAKER_01]: But there are some points in Marx's logic where he starts to understand the laws of thermodynamics he went to some of the early lectures from some people who were
[00:31:35] [SPEAKER_01]: Developing the laws of thermodynamics and at one stage he also said effectively that the labor of the gap between the what the labor gets paid and what the labor
[00:31:45] [SPEAKER_01]: Labor of producers is energy it's an issue return and energy invested so there's a
[00:31:51] [SPEAKER_01]: Monitor my great tragedies that I want to the only way to get people to realize the quality of working in Marx is to get rid of the Marx
[00:31:59] [SPEAKER_02]: Yeah, very enough. So final question which I struggle with if we all work for substantially less than the value we create
[00:32:09] [SPEAKER_02]: How can we afford to buy the things that we make so the value is increasing prices, but wages aren't increasing and as demand match supply
[00:32:17] [SPEAKER_02]: So good to work because we know could generally can't afford good to handbags, but at a border level if we only contribute a small percentage to the value of goods
[00:32:25] [SPEAKER_02]: If goods say are worth a trillion dollars for example and wages are only a few million
[00:32:30] [SPEAKER_02]: Where is all the demand coming from?
[00:32:32] [SPEAKER_01]: This is the dilemma of what's what's called marked all the realization problem because it's already well to create
[00:32:40] [SPEAKER_01]: You know more outputs than inputs, but which this again has to be explained by saying we we find free energy in the universe
[00:32:47] [SPEAKER_01]: You know for a final lump of call somewhere you didn't have to pay for the lump of call you didn't make the lump of call
[00:32:53] [SPEAKER_01]: Burn the damn thing to get energy which enables you to do work and that's the free gift of nature is the actual source of all profit
[00:33:00] [SPEAKER_01]: So that's something when you have to embellish what Marx's original ideas were but one of the main problems that again turns up in Marx's logic which most Marxists can't see because they're stuck in the labor theory of value argument is that
[00:33:12] [SPEAKER_01]: When you first when you can produce a physical surplus and this is courtesy of
[00:33:18] [SPEAKER_01]: Exploding energy that physical surplus is useless if you can't actually sell the products
[00:33:23] [SPEAKER_01]: So when you get to the point where you want to sell the things rather than use value being irrelevant and exchange value being dominant
[00:33:29] [SPEAKER_01]: Which is the way Marx talks about where their true surplus comes from it flips over
[00:33:34] [SPEAKER_01]: You've got to have a use phase now the most important thing in exchange values irrelevant if you produce more units than the
[00:33:42] [SPEAKER_01]: Serbs of the market place or if you produce a dot then you can't turn that physical surplus you've generated into a monetary surplus
[00:33:49] [SPEAKER_01]: And that realization problem is the real issue for capitalism not the transformation problem which what Marx has wank on about because it's all stuck in the labor theory of value
[00:34:00] [SPEAKER_02]: Thinking so it's the ultimate is the end then so how much profit you're gonna make?
[00:34:04] [SPEAKER_02]: He's ultimately there's a limit to demand because the demand is determined by how much people gain paid and then you get up
[00:34:11] [SPEAKER_01]: You know the income distribution dynamics of capitalism is what was Marx again was the first person to explain properly
[00:34:17] [SPEAKER_01]: There's a when one of my favorite passages in Marx's in chapter 25 of volume one of capital. He suddenly starts talking about a wedge
[00:34:25] [SPEAKER_01]: Prop profits spiral and it's in most of the capital he assumes that workers get paid their subsystems level this passionate is extraordinary because he starts saying
[00:34:35] [SPEAKER_01]: In the sense of saying whether the level of wages can be above equal to or below what they were beforehand in the psychical vision
[00:34:41] [SPEAKER_01]: And that gives you the income distribution dynamics of capitalism which is what causes most of the firms and busting the system
[00:34:49] [SPEAKER_01]: And again, Marx with the person who understood that the people have stopped us understanding that a Marx
[00:34:55] [SPEAKER_02]: I want it Glee. Yeah, so I mean if we had less of a variation in wages then yeah, I can see the boom and best argument
[00:35:03] [SPEAKER_02]: But why can't you know
[00:35:07] [SPEAKER_02]: The wealthy see that argument as well because they're there but trying to protect their wealth, but they must realize in protecting our wealth
[00:35:12] [SPEAKER_02]: That means there's less money which is being
[00:35:14] [SPEAKER_02]: Available for lower income earners, which means they're not buying the stuff which is generating our wealth
[00:35:20] [SPEAKER_02]: I guess they take a set of fairly short term view on that one. Well everything is short term. This is the problem
[00:35:26] [SPEAKER_01]: You know you can capitalist
[00:35:28] [SPEAKER_01]: Well in the Marx it came set of wonderful phrase about this talking about how the revalued the stock market and he said at one point that
[00:35:37] [SPEAKER_01]: The we
[00:35:40] [SPEAKER_01]: Try to cope with the fact we don't know the future
[00:35:42] [SPEAKER_01]: We tend to extrapolate what we know about the present even though we know that that extra relations never worked in the past
[00:35:49] [SPEAKER_01]: And say but what else can you do when you have no way of handling
[00:35:53] [SPEAKER_01]: Do you have no way of knowing what's going to happen in the future you have to extrapolate what what you know
[00:35:59] [SPEAKER_01]: Forward so what would happen when there's a boom going on capitalism will borrow more money to invest you'll get an extended boom
[00:36:05] [SPEAKER_01]: That causes an increase in energy cost it causing increase in labor as you have a tight labor market that then cuts into the boom
[00:36:13] [SPEAKER_01]: You then have a profit being less than expected
[00:36:16] [SPEAKER_01]: Investment falls you fall back into a slump again and this cyclical nature is just built into the short termism
[00:36:21] [SPEAKER_02]: Which is a fundamental part of our nature. So it's not all about a pressed work is on the verge of
[00:36:27] [SPEAKER_02]: Revolution because we're still waiting for that revolution and then maybe we've figured out why it's not happening go back and re-read Marx
[00:36:34] [SPEAKER_02]: There we are good one Steve catch you next time. I can add bye just on him catch a copy of
[00:36:39] [SPEAKER_02]: Marx in your bag when you're going through customs in America
[00:36:42] [SPEAKER_02]: That's it for this week. See you next week the debunking economics podcast if you've enjoyed listening to debunking
[00:36:53] [SPEAKER_02]: Economics even if you haven't you might also enjoy the why curve each week
[00:36:57] [SPEAKER_02]: Roger hearing and I talk to a guest about a topic that is very much in the news that week
[00:37:02] [SPEAKER_02]: It's lively. It's fun. It's informative one more could you want so search the why curve in your
[00:37:08] [SPEAKER_02]: Favorite podcast app or go to why curve.com to listen