Thoughts on Value Assigned by Labor Contribution

One thing early economists pondered that a many current economists agreed to set aside is the old notion of labor theory of value. Basically, an objective measure of the value of something produced because everyone can agree how much time it took to make/deliver it. It makes a kind of sense in the early days of industrialization, but becomes strained once people amass a lot of intellectual property. The notion still holds in popular imagination, but many economists have walked away from it.

For example, consider writing a book. After much effort, an author produces a manuscript. How to value it is the next question. Using the old method makes it easy. Multiply time spent by the author's hourly rate. Well. We don't really know the hourly rate, so let's just measure value in time units for know and understand that the hourly rate is really a unit conversion factor. Time into money.

• What a book generates in revenue when published is a different thing. Quite different. That measures what others see as the value and is recognized to be subjective. Some may adore it. Some may burn it. Preference. Subjective.

Before publication we make 9 copies of the manuscript and hand them around for feedback. Now there are 10 copies of the book.  No one would argue the value of the set rose 10x. Instead they fashion a sum of values for each labor contribution. Since we don't know the conversion rates for the people doing the copies, we must stick to time here too. Is it really a numeric sum, though? Are the people making copies contributing equally? In the modern era it doesn't matter much because copies can be made rapidly. That wasn't the case not long ago. Let's be idealistic, though, and stick with numeric sums.

• The idealistic method is easy, but we can introduce those conversion factors if needed. Instead of summing different types of time, we'd sum the same kind of 'dollars' and let the hourly rates absorb any belief we had that introduced inequality.

Now, through some unfortunate event, the original manuscript is destroyed. Eaten by a time-traveling T-Rex. Doesn't matter because we aren't going to track the labor associated with destruction. The T-Rex isn't being paid by anyone. The next question concerns how the sum is altered to represent the loss in value. Which term in the sum do we remove? The one for the original book because that was the thing destroyed? The book still exists in the form of 9 copies, so perhaps not. Maybe we should we spread the initial value of the book across those new 9 copies as an average? Probably not. That obscures the fact that the people making the copies didn't do the author's work. Should we pretend one of the copies is the new manuscript and remove the value created for one copy? Maybe, but then the sum reads as if the thing destroyed is one of the copies instead of the original manuscript. Try convincing a collector of books some day that the copy is just as good as the original when they think about buying it. They won't accept the argument.

• There are multiple ways to handle this, but the point made here is that we are fudging a formula to match what we believe to be the remaining value. Our original meanings for the terms get lost in the construction.

If we tried for a description that made use of a multi-world idea like one described by Karl Popper, we would argue that creation of the original manuscript created both World 1 and World 3 objects. The physical manuscript is present in World 1 and the 'ideal' version of it is in World 3. [Though it is highly unlikely Popper would have used Plato's terminology, we can use it loosely here.] Value would be present in the sum for each object with the bulk of it assigned to the World 3 representation. Upon destruction of the original manuscript, we lose that term in the sum, but not the term for the World 3 object because there are still 9 copies of it in World 1.

• This still has issues with meanings in the sum. How do we divide the authors contribution between the two objects? Anyone watching the author would see they are both created in the same timeframe, so a split is subjective and the very thing we are trying to avoid.

Some economists have retreated to a safer position arguing the question 'What is the value of X?' is about as meaningful as 'What is the difference between a duck?'. 

• Quantum physics theories are similar where they make no statements about meaningless questions. Many more questions have no answers unless until 'the system' is probed which means we don't know if it was that way before or became that way because of the probe. That difference turns out to be meaningless as well. 

Instead we ask 'At what value did X trade for Y last?' Whether it is $USD/gold ounces or kgs of copper kgs for kgs of gold doesn't matter. Two items minimum and a timestamp are necessary for a value question to be well formed. For our manuscript example, the book has no value until it trades. It does not have a ZERO value, though. It has a NULL value. No answer. What is the difference between a duck? What is the value of the manuscript? Same kind of question.

What does that do to the sum, though? It is eliminated unless all trades use the same measure and occur at essentially the same time. This can be done if we know hourly rates since we are converting to $USD here in the US, but all the trades better occur relatively simultaneously. Don't let much time go by or $1USD yesterday won't be the same as $1USD tomorrow. Not so bad, right? Well. With the hourly rates back, we are quite done with any objectivity. Trades are negotiations about preferences. Very subjective. Can we just stick with the original units of time? No. We'd be adding apples and oranges. The author's time is spread over the act of writing. One day is not like another. Consider opportunity costs to see this. If we can't even sum the author's duration, we are trapped. What is the difference between a duck?

To get back to the old notion of using labor as the means to assign value, we have to avoid Popper's World 3 objects. The manuscript is just paper with ink on it. Just a World 1 thing until read where it becomes World 2 subjective experiences. Try convincing an author that their new book is just ink on paper. They'll tell you they have a copy of it in their head too, so the World 1 and World 2 objects interact. Hmm… We never tried to assign value to the World 2 things. Those were supposed to be why people bought the book and would show up later as revenue. An author will tell you, though, that particular description is incomplete. So why not World 3 as well. World 4 too if there becomes a pop culture subjective representation of the book. Tolkein's Middle Earth books got that far.