Applying a Karl Marx Lens to Time-Prices
From time to time in my prophecies, I turn to the questions from my readers.
Over the months since I began explaining the significance of time-prices, several readers have noted an apparent similarity to Karl Marx’s “Labor Theory of Value.”
With my time-prices and laurelled trips to China, am I becoming a closet Marxist? Or am I merely a “useful idiot” for the CCP? Some people think so.
I think that by publishing four of my famously pro-capitalist books within a year, climaxed by Wealth and Poverty, and giving Life After Google an award as “the best social science book of the year,” the Chinese are becoming tools of this capitalist. We’ll see.
Time-Prices Reign Supreme
Time-prices are a theory of true prices and values. The true price of anything is the number of hours you have to work to gain the money to buy it. When you run out of money you are really running out of the time to earn it. Time is the ultimate scarcity in economics, affecting every decision and transaction.
I say money is time. Money is the way the scarcity of time is rendered fungible as a medium of exchange and store of value across an economy. However, as I have explained in recent prophecies the converse epigram, “time is money” is false. Money has to be created by human ingenuity.
Measured in hours and minutes of work, time-prices are universal and translatable between economies and eras. They obviate subjective calculations and adjustments such as consumer price indices, Gross Domestic Product (GDP) deflators, and purchasing power parity comparisons between currencies. All prices everywhere can be expressed in hours and minutes of work.
Time-prices were significant in the Nobel Laureate work of William Nordhaus of Yale who called them “true prices” and are used resourcefully by the superb science and economic theorist Matt Ridley of Britain in his book, The Rational Optimist and other works. Watch for his new book on innovation, to be published in May.
To calculate the time-price, the nominal money price is divided by the nominal hourly income. Over the world economy, according the scrupulous calculations by time-price pioneers Gale Pooley and Marian Tupy, nominal global GDP per person per hour has risen from $1.16 in 1980 to $5.18 in 2018.
Time-prices are particularly effective in measuring the rate of technological advance. In one number of hours and minutes, the time price captures both the increase in wages and decline in costs conferred by innovation.
Using the fungible measuring stick of time, we discover that many economic “facts” confidently cited by economists are deceptive functions of these efforts to calculate true values by adjusting nominal prices for inflation (changes in the value or purchasing power of money.)
Ostensible economic facts or beliefs (in italics) that are refuted by time-prices include:
- A decline in the rate of innovation. (No decline is detectable in the rate of decrease in the time-prices of commodities or goods and services.)
- A burden of overpopulation on the planet. (While world population has grown 71% since 1980, Tupy and Pooley calculate, the true price of 50 key commodities crucial to human life has dropped 72%. The higher the population the greater abundance of commodities.)
- A decline in middle class incomes and wages. (Middle class incomes have continued to increase at roughly the same rates around the world and in the United States.)
- Exaggeration by Chinese rulers of the rate of economic growth in China. (Measured by time-prices, China has been growing at a rate of more than 11% per year compounded for more than 40 years, faster than Communist Party estimates.)
- Increasing inequality. (Inequality around the world, measured by time prices, has been declining.)
- Interest rates are strangely low or negative, adjusted for inflation. (In fact, the world has been experiencing benign deflation as measured by time-prices. Thus real interest rates, adjusted for true prices, are positive and normal, at roughly 3.5%, adding real growth (3.5%) to the nominal rate.)
- The world suffers unsustainable levels of global debt. (For a controversial finding, time-prices indicate that current levels of world debt are probably sustainable, since rates of growth and innovation are far faster than generally estimated by economists. The major threat is anti-growth tax rate increases motivated by the belief in unsustainable debts, rising inequality, and environmental chimeras.)
- CO2 in the atmosphere is fostering “extreme weather” averse to agricultural and marine productivity. (Contrary to the belief that increasing CO2 in the atmosphere has caused “extreme weather” that inhibits agricultural and fishing output, time-prices indicate that agricultural and marine prices have dropped some 75% over the last 40 years. During this period, CO2 in the atmosphere has increased 22%.)
So what does all this good news about capitalism have to do with Karl Marx’s labor theory of value? Marx believed that the economic worth of a good or service is determined by the “socially necessary labor” needed to produce it. Any surplus, such as profit or interest, constituted exploitation of workers by financiers and capitalists.
Marx was concerned less with what it cost to buy something than with what was the value conferred by the process of producing it and how this value should be distributed.
He believed that the world economy had entered a stationary state of abundance wrought by the permanent advances of the Industrial Revolution. He imagined that the looms, factories, machines, railroads and emergent electrical powers of the industrial revolution were a final human attainment of abundance, an “eschaton” or a final thing.
In the future, according to Marx, the problem would be not the production but the distribution of wealth. Familiar?
In Life After Google, I point out that repeating Marx’s error are the believers in a “singularity” whereby the machines of artificial intelligence and robotics gain an irretrievable supremacy over human intellect. Once again, intellectuals resembling Marx imagine that the technologies of their age are “final things” and that they obsolete human creativity and enterprise.
Marx was wrong in the late 19th century and the Singularitarian’s are wrong in the early 21st century. There is nothing final in capitalism or in human creativity in the image of our creator.
Editor, Gilder’s Daily Prophecy