Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion
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
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,
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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 Quote
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.
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 $, how do you denominate value? Or are you using "value" as just another word for cost?
And that is where the problem lies. No sane investor will start making hula hoops BEFORE making a gross calculation about demand!!!!! That is a paramount of importance for my argument, that you can not separate production (supply) from consumption (demand), not even in theory. The whole point of production in the end is satisfying needs, profit is just an incentive to do it the most efficient way (that is why market economy leads to abundance, and socialist planning leads to shortages and lines).
So in your example, not necessarily both of us would go bankrupt, because if i shut my factory down, the gross supply of hulas going down, and may or may not find a new marginal utility among the buyers (aka, it increases in price/unit, till it reaches 5$, or not, still depends on the demand. But that is what marketing is for, to create "surplus demand"!).
The same as two bakeries next to each other: if all equals* (price/unit of bread, quality, opening hours, etc), and the total supply of the two bakery is S, but demand is S-n, than one of those bakers will go bankrupt, but that does not mean that making bread is unprofitable. It just means that too many investor resource used up on that particular good at that particular space/time.
We can denominate costs in $. Value is subjective, but of course can be given an average $ rate/time continuum (which can be 1 second or 10 years). Kinda of like this: i value that good for x, we denominate it in price. The seller wants x+c+n, lets say x+c is the total cost of his production, and n is the value he wants to acquire from the whole process of making the good. Now, i can either rearrange my valuation of the good, and pay the higher price (which is my cost side) of x+c+n, but the utility of the good for me stayed x. The price i pay is my cost, the good i get for it is the value the good represents to me(!), price is an average of market discovery, value is totally arbitrary/subjective.
*btw, never anything equals, there are no perfectly equal goods, producers, decisions, there is information asymmetry in physics which forbids that uniformity even in theory (my factory cannot occupy the same space/time as yours, i can not use the same materials as you do, i can not employ the same employees, etc.).