The Senator is often in the media for his rants against the one percent and advocacy for workers, whom Sanders believes are underpaid.
But Sanders often goes unchecked in his economically illiterate rants, something Milton Friedman never let happen with socialists in his day. Fortunately, some are providing economics lessons when populist and socialist rhetoric needs refuting. Dr. Howard Baetjer, Jr. is among them, debunking Marxism.
Wolff may have been seemingly logical in his argument, but the Professor left out some important economic realities. His claims also went without follow-up from his interviewer, Abby Martin, a media personality who co-directed a film on Occupy Wall Street.
Professor Wolff asserts that the worth of a given worker’s output in one hour is greater than the hourly wage they receive. His argument is that although they may earn a living wage, they are never paid close to what they deserve.
Wolff hypothesizes about working classes wages,
“When I hire you for twenty bucks an hour, I know that for every hour that you give me your work, your brains, your muscles to work, I know that I’m going to have more stuff to sell at the end of the day because you were added to my workforce. You’re going to help me produce more goods or more services or better quality goods and services.”
To him, this is exploitation. The worker is always producing greater than their earnings and therefore is getting “ripped off” by their boss.
“The output has got to be more than twenty bucks. The only way I’m going to hire you for $20 an hour is if you produce more in the hour than I give you,” Wolff said.
Baetjer writes that,
“No entrepreneur will pay $20 an hour for output he expects to be worth less than $20. But does that not mean the worker is exploited? No. Wolff tells us only half of what’s true about this exchange, looking at it only from the viewpoint of the capitalist entrepreneur. We must look at it from the viewpoint of the worker, also. She gets $20 in exchange for an hour’s worth of “[her] work, [her] brains, [her] muscles.”
In other words, the employee and the employer are both “ripping each other off.” Well, at least they’re both benefiting.
“The answer is that the employer and employee value things differently. The employer values the work more than $20; the employee values $20 more than the work. Both exchange what they value less for what they value more. Both parties benefit from the exchange…” Baetjer muses.
Wolff assumes that the worker is not benefiting from the extra $20 an hour and that it’s only a net gain for the capitalist entrepreneur.
“The way this is said in modern economics is that value is subjective. This principle has been understood since the 'marginal revolution' in economics of 1870 when the idea of marginal utility was introduced,” Baetjer writes.
But just as important to Wolff’s analogy as subjective value is the idea of economic uncertainty or the profit and loss of the entrepreneur themselves.
Baetjer refutes the exploitation claim when he writes,
“The capitalist entrepreneur who hires workers in a free market does earn a profit if, but only if, he judges correctly how to combine scarce resources — labor, equipment, materials, buildings, electricity, shipping, design, advertising, and other inputs — to create new value for his customers. His profit or loss is his reward or punishment for getting that judgment right or wrong.”
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