Hacker News Reader

Comment by mr_toad | Hacker News Reader

> you get no profit.

Marginal value of production is almost always lower than average value, because of diminishing returns. Profits are made on the average value.

A Marxist take in this is that labour should be paid on the average value of production, and labour should get all the profits.

View on HN

If we wanted to go into more detail, we could consider production as a function of the cost of labour and the rental cost of capital, rather than restricting our attention to labour and assuming capital is fixed. In this case, the law of diminishing returns typically disappears, since in theory we can rent more capital and scale all operations proportionally. Therefore, due to the link between profit and the law of diminishing returns that you've explained, there should be no profit if all capital is rented. The reason profit still exists in this model is that capital is often owned rather than rented. So in this sense profit derives ultimately from the ownership of capital. That is not Marxist theory, that is mainstream economics (e.g. Mankiw & Scarth).

> labour should get all the profits.

and the question becomes "who supplies the capital to enable the labour, if labour gets all the profits".

The other question is what does labor get when there are temporarily low or negative profits?

I used to work at a company which gave 10% of its profits to the workers each month as a bonus. But I was only there during some money-losing months so I got zero bonus. Imagine if that had been my entire pay!

> what does labor get when there are temporarily low or negative profits?

good question - the current system ensures that labour gets paid, regardless of profits being negative or not (until the company collapses). This is enshrined into law - you cannot leave wages unpaid, and it sits above creditors in seniority.

If they gave 100% of their profits to the workers as the only pay, then long term workers could presumably self-insure.

It looks like excellent solution for startup: just pay 100% of startup profit to workers by giving them 100% of shares, so they will self-insure themselves and be OK when startup will fail.

That almost guarantees that fewer companies will be started, since your model removes incentive for people to benefit from starting companies.

The socialist solution is actually centralized planning over multiple industry sectors. The workers would be paid profits from a huge, diversified conglomerate, mot merely the one industry sector that they happened to be working in. Of course, this leads to all the known drawbacks of central planning.

Marx didn't actually claim that labour should "get all the profits" - in fact he went to great lengths to explain his criticism of the contemporary socialist movement for demanding that (in Capital, Volume 1). Instead he differentiated profits from surplus value, the latter also containing the share of profits needed for reinvestment, further capitalization of the company etc. He criticized the 19th century socialists for demanding all profits should go the workers, because that would mean the inevitable failure of the company (the competition would reinvest, furthering productivity, and in the end outcompete the company paying out all profits).

Instead, Marx argued for worker control over the profits.

That requires either labor itself to own the capital (e.g. a co-op), or the state to have a monopoly on capital (e.g. communism)

if labour owns the capital, then that "somebody providing the capital" still exists. Coops demonstrates that profit still need to exist, which is contradictory to the idea that labour should get all the profits.

The only way "labour gets all the profits" is under the umbrella of communism - and even then, the state still extracts profit anyway (just under a different name - that of central allocation).

In a co-op or partnership structure, the workers provide capital and superintendence/control in addition to labor. That's why the workers can get all the profits. And it's also why "pure" co-ops or partnerships are generally restricted to low-capital-intensity businesses - by definition, it's going to be quite hard to raise external capital. You could do it by issuing bonds, but the risk profile is unattractive for all involved.

Communism implies a society that has gotten rid of the very concept of state. There is no leader.

Communism also implies getting rid of currency altogether.

You mean socialism.

ding ding ding, we have a winner (so it's at the bottom naturally).

Reply on news.ycombinator.com