Quote from: AZwarel on June 07, 2016, 12:32:16 PM

Quote from: StraightAArdvark on June 07, 2016, 03:11:16 AM

Quote from: AZwarel on June 07, 2016, 02:58:46 AM

Quote from: StraightAArdvark on June 07, 2016, 02:44:18 AM

Quote from: AZwarel on June 07, 2016, 02:36:06 AM

This whole concept of "production cost must equal/below product value" is fishy, failed labor theory thinking, marxist bs, totally debunked and failing basic logic since 100+ years.

And you were doing so well up to here Sad

The cost of production does need to below retail price, otherwise you're losing money. "Value" is a different variable altogether, so having price (cost) on one side and "value" on the other is comparing apples to oranges.
Nothing Marxist about any of this.

That is labor theory of value thinking what you are saying, if you think that as a macroeconomic phenomenon: "The cost of production does need to below retail price, otherwise you're losing money"

A whole industry can only be "unprofitable" if they produce mud pies. If i am losing money, that means i made a bad speculation about future demand, and i oversupplied the market,

With you thus far...

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AND my production costs are greater than the guy next to me.

That's where you loose me. If you're making hula hoops & you need to sell 10k hulas/day @$5 to make ends meet, and your buddy, the other hula manufacturer needs to do the same, you're both up shit's creek. Him going out of business won't help you much either -- you both grossly overestimated hula demand Sad

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Not that the market does not appreciate my precious product and too evil to buy it from me for the "fair price". I either go bankrupt hence reducing the supply on the market totallity or make demand for my product.

How could the definition of value be different on the production side, and on the consumer side? Price (cost) is just the numerical expression in some unit of account of the value of anything that can act as an economic good.

I denominate cost in $, how do you denominate value? Or are you using "value" as just another word for cost?

And that is where the problem lies. No sane investor will start making hula hoops BEFORE making a gross calculation about demand!!!!! That is a paramount of importance for my argument, that you can not separate production (supply) from consumption (demand), not even in theory. The whole point of production in the end is satisfying needs, profit is just an incentive to do it the most efficient way (that is why market economy leads to abundance, and socialist planning leads to shortages and lines).

We're dealing with hula hoops.
1. Before the first [hula hoop, smart phone, beetcoin] was made, there was exactly zero demand for hulas. Supply generates demand, [plug in some trying network effect analogies here]. The shrewd hula entrepreneur does not aim to satisfy demand, his business plan is to ride the crest of increasing demand, demand that he, himself is helping to create. Accurate estimates become much less likely.

2. The Hula magnate doesn't know how many other disruptive visionaries will manufacture hulas, so tries to reduce his cost of production via economies of scale (helicopter hangars & Chinese chicken coops chuck full of hula gear).

3. There's also the real world. Success of a real business is not a profit/loss balance sheet. Disruptive visionary sells his paradigm-changing brainchild to *investors*, who go on to fund his & his clan's lifestyles while the enterprise is in operation. The investors, in turn, may use the storefront to move large sums of money, etc., etc. The business doesn't need to succeed in the vulgar sense, see nearly every BTC business ever.

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So in your example, not necessarily both of us would go bankrupt, because if i shut my factory down, the gross supply of hulas going down, and may or may not find a new marginal utility among the buyers (aka, it increases in price/unit, till it reaches 5$, or not, still depends on the demand. But that is what marketing is for, to create "surplus demand"!).

In my example, both of us will go bankrupt because both of us grossly overestimated hoop demand (which dwindled/failed to materialize). To model beetcoin/halvening situation, our gross revenues are cut in half, so our net goes into negative, because fixed costs. This doesn't assure that both of us *will* go bankrupt, but such an outcome isn't impossible.