Ritchie and the Labour Theory of Value

And your economic analysis is simply wrong…

Wealth is not built on profit. It is built on labour

I\’m subscribed to an old thread which Ritchie has just given that response to.

It\’s quite stunning really. Firstly there\’s the definite whiff of the Labour Theory of Value there, something we know is wrong. Well, at least since the marginal revolution we do, since the creation of neo-classical economics. But then Ritchie does seem to get confused here, he\’s been known to declaim that it\’s precisely neo-classical economics which is wrong. I\’ve always assumed that he in fact means neo-liberal economics, for he says that the alternative is the economics of Keynes. And as Keynes was very much a neo-classical, if not a neo-liberal, I have, as I say, just assumed that he\’s getting confused.

But maybe he really isn\’t? Perhaps he really does believe that goods and services have some fixed, eternal, actual, value, rather than value being whatever it is perceived to be in the eye of the beholder? That value being determined by the labour that went into production? That error that we can trace from St. Thomas Aquinas (and almost certainly earlier, from the Greeks) through Smith to Marx?

But leaving such trivialities behond, note the glaring error in this:

Wealth is not built on profit. It is built on labour

Err, no. Wealth can be built upon many things. Knowledge, labour, land, capital, entrepreneurialism, everything from what is simply lying around in the environment that surrounds us through the sweat of the human brow to simply cleverer ways of doing whatever it is that we\’re trying to do.

Profit is simply the way of measuring whether you are in fact creating wealth. It is, recall, the difference between the value as perceived by the consumers of those goods and services and the value of the alternative uses of the inputs you\’re using to create those goods and services.

If you are making a profit then what you are creating has greater value than those other uses of the same inputs. Creating greater value is the same, the very definition of, creating wealth.

I really do wish that he\’sd paid more attention to the economics part of his degree rather than blowing it off, as he did, as all nonsense.

21 thoughts on “Ritchie and the Labour Theory of Value”

  1. Proverbs 14:23

    In all labour there is profit, But mere talk leads only to poverty.

    God got there before the marginal revolution Tim. And Richie does talk, he got that bit right as well!

  2. Ritchie knows how to create wealth, just for himself.

    Are you sitting comfortably? Then we’ll being….

    Once upon a time, in 1984, some Canadians invented a board game. Frustrated that black market copies where being made, they cancelled many existing licensing contracts and shrewdly created a company called “Sans Serif” in Barbados to license the games outside North America and control the content.

    Richard Gill became Group Commercial Director in December 2005 and within 6 months was “rolling in cash”. “We sold over a million units that year. In ’86 it was 1.2 million units”

    Meanwhile in 1986, a manufacturing operation for the Trivial Pursuit boards was set up by Eireann Game Manufacturing in Ireland. In just 4 months from first visit, product was going down the line. Ireland is good for manufacturing as it has a low corporation tax. This company was acquired by “San Serif Print Publishing” in the UK, the UK licensee of trivial pursuit since 1985.

    A director of San Serif Print Publishing was called “Richard Murphy”.
    The entrepreneur who set up production in Ireland for tax purposes was called “Richard Murphy”.

    This “Richard Murphy” is clearly a tax dodger. UK Uncut, feel free to go and peacefully occupy his lounge.

  3. Wealth can also be built on extortion, theft.

    For most, it is built on margin and that margin being less than the perceived cost to those you offer your intermediary services to.

    This includes extortion, the greatest practitioner being The State. You saw on Saturday many thousands who considered it’s margin worth paying.

  4. @Noel

    And we can see from Murphy’s CV that we are talking about the same Richard Murphy, so no risk of mistaken identity then:

    “Eireann Game Manufacturing Limited (founding
    managing director) 1986 – 1991 (manufacturer of
    game boards for Trivial Pursuit, Pictionary and
    other games based in Limerick, Ireland)
    Originally independent – later owned by Serif –
    and my solution to the problem of
    manufacturing the 4 fold Trivial Pursuit board in
    Europe. I was responsible for creating the
    company and establishing it in Ireland in 4
    months, from first visit to product going down
    the line.”

    http://www.taxresearch.org.uk/Documents/RichardMurphycvJuly2006.pdf

  5. @Gary

    I know 😉 Under probing Ritchie admitted the Irish company was set up specifically to avoid tax and although as FD of San Serif Print Publishing he says he knew about paying royalties to Barbados, says he wasn’t aware of the naming similarity. Not a very good FD then!

    UK Uncut should also note that Googling the address on his website shows that planning permission was granted for (and Google Streetview shows was built) an annexe to his home. The VOA requires annexes to be charged council tax as if a separate property. The VOA website doesn’t show 2 valuations. Tax dodger! Go occupy!

  6. @Noel
    In many ways, that second charge is far more serious. Richard claims to have had some sort of Road to Damascus moment in the 1990’s which would reconcile his earlier behaviour with his more recent views. Fair enough.

    But the VOA/Council Tax matter is presumable more recent? ‘Cos if it were this century, that would make him an archetypal socialist.

  7. @Gary. As I have just found out the hard way, when a property is extended it cannot be revalued for Council tax purposes. this can only be done when the property is sold. I say the hard way because the house I bought last year has now just been revalued up a band because it was extended by the previous owner.

    However, I would expect anyone who believes that it is a moral duty to pay the right tax would ignore this piece of [Tory] legislation and immediately start paying the correct level of CT.

  8. Tim, you might enjoy reading Murray Rothbard’s An Austrian Perspective On The History Of Economic Thought. Relevant to this subject, Rothbard makes a very compelling case that the Labour Theory Of Value is a Calvinist invention. Calvinists believed work to be a “calling” from God, and thus subscribe to a “live to work” philosophy. Hence, a labour theory of value. Ritchie is a Quaker, remember. Basically, the argument is that pious protestants are always drawn to a LTV because they see work as the purpose of work, not the fulfillment of desires (“work to live”).

    Prior to Smith, there was plenty of proto-marginalist (price subjectivist) thought on the Continent. Catholic economists- the “scholastics” etc- were heading in that direction. The first proper economist isn’t Smith, it’s the Frenchman Richard Contillon, and a continental line of catholic economists leads from him to the Austrian school (a product of Catholic Austria) and the correct value theory which is of course subjectivist. They got it right because of a tradition of Aristotelian and Thomist thought (Aquinas wasn’t overtly labour theory). It was generally understood that work is merely a means by which you can create the things you want, not an end in itself.

    From this perspective, Smith comes out not as a towering giant of economics as in the hagiography we (in the protestant world, natch) cleave to. He is first in a line of buffoons. Interestingly, Smith, the Calvinist Scot, earlier in his life appeared to understand marginalist and supply/demand explanations for price, but then retreated conservatively back into a Calvinist view as he aged, thus infecting The Wealth Of Nations with the labour theory; which led directly to the even worse Ricardo, then Marx.

    Basically it explains why France was producing stars like Say and Bastiat, and we had the confused nonsense of Ricardo, Protestant Germany got Marxism, and our shiny economic star is the tepidly laissez-faire Smith, mithering about his diamonds and water.

    Whether you accept the thesis or not, he resolutely knocks on the head the myth that Smith used an LTV because nobody knew any better at the time. Subjective utility had already been discussed by earlier economic writers, and it was the dour Calvinism of Smith that led him to desire that value be consequent of toil in a “calling” assigned by the Almighty.

    Even if Ritchie doesn’t overtly subscribe to the LTV, you can bet he believes it in his heart, as do all “Progressives”; because they are basically just post-calvinists.

  9. …and just to waffle on… That Calvinist philosophy explains nicely Ritchie and “tax justice”. Under Calvinism- or post-Calvinism, let’s abbreviate that to PC- wealth is awarded to you by God as a reward for toil. If you acquire wealth in your calling, that is proof that God loves you and you are one of the Elect. But firstly, you shouldn’t acuqire wealth by the toil of others; that is what nasty (satanic) capitalists do. It should be the sweat of your own brow, not the sweat of other brows.

    And secondly you should not acquire wealth in order to enjoy it and spend it on fripperies. You must do good works with it. If you do not, it is the job of God’s divine instrument- the pious State- to take it from you and spend it on your behalf on good works. Hence the TJN stylee demand for expropriation of capitalist wealth by the State, for the funding of good works. Administered by the Elect. People like Richard Murphy, of course.

  10. Gary and Noel – I think this topic was researched last year. The Murph-meister’s reply that these are not business premises because he stores garden tools in it and his son has a train-et running through it. Therefore no business rates are applicable. As for council taxes…these are another matter

  11. So if I put a hoe and a spade in my business premises and add a pretty little miniature train I can avoid paying business rates?

  12. There is however a simpler, one-word answer to the LTV: eBay.

    But then he and his ilk are not arguing for what is right but what should be right; his championing of this in the face of reality is merely the outcome of the doublethink marxists live by.

  13. There is however a simpler, one-word answer to the LTV: eBay.

    Ah, you fail to understand the cunnynge subtilty of the LTV. The just price of a good is the average quantity of labour at the average price of labour[1] so specific prices (that is, the prices actually charged in the real world) can deviate from that. And indeed always do.

    [1] Which as we all know from Ricardo, is the price of corn. Lol.

  14. @SimonF
    Do you mean the property cannot be revalued until it is sold as in it is impossible to do so? i.e. the authorities have chosen to construct the law such that they have to defer collecting the right anount of tax? or that it does not need to be revalued until the property is sold i.e. your vendor could potentially misrepresent the liability you were taking on?

  15. @diogenes
    Yes, I remember the business rates question and the ‘train set’ defence. I also remember the Irish tax avoidance question coming up before and the ‘road to damascus’ admission/explanation.

    Now Noel Scoper, who does have some form on this matter, seems to be raising a third question.

  16. Murph is a brilliant man.

    I ask you, if you wanted to sucker grant money and many, many donations out of lefties, what would you call your fake charity?

    I can think of no better name than “Tax Justice Network”.

    I burn with envy.

  17. @Gary,

    Yes, Ireland came up before. But now Ritchie is actively campaigning against lowering CT rates in Northern Ireland and had the temerity to sit in front of the NI Select Committee and say “As I said when I introduced myself, I have created a number of real businesses; I am very aware of the sheer thrill of creating jobs; it is one of the most exciting things that anyone can do, and I’ve done it. So do not get me wrong about this; I would love to see more jobs in Northern Ireland, but if you’re going to do it, the best way by far is not to reduce tax”. At no point did he say to the select committee that his success came from exploiting the very thing he is campaigning against.

    As for the Council Tax, Google shows the previous owners built the annexe. This should have a separate council tax band from the main house (aside from the business rate issues previously discussed). VOA advice is very clear:

    http://www.voa.gov.uk/council_tax/self-contained-units-faq.htm

  18. @Gary,

    That’s about the gist of it. Although I wouldn’t say that the previous owners misrepresented the position as I suspect they were as ignorant of the law as me and caveat emptor.

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