EXCERPT FROM R.I.P. ECONOMICS
A TRUE STORY
In the 1700s, free-market philosopher economists had the idea they should figure out how to determine the inherent value of things in order to explain the prices everyone could see, and who then had the idea that the inherent value of a thing should be equal to the value of the labor needed to make it, and who then, mistaking that idea for something real, formulated what they called the labor theory of value, an idea, not a real theory, that was later used by Karl Marx to come up with the idea that the labor theory value explains why it is necessary for capitalism to exploit labor, which led him to come up with the idea of communism.
In other words, the idea of communism was the result of philosopher economists unhinged from reality messing with ideas that had no practical use (the inherent value of a thing?) while claiming the abject poverty of the working class was the unavoidable result of free markets at work, which led Marx to argue that if abject poverty is the unavoidable result of capitalism, then the world needed a better idea.
Marx's argument was simple. If the inherent value of manufactured things is equal to the value of the labor required to make them (the labor theory of value idea), where will the profits come from that capitalists need to pay for necessary capital investments?
Marx’s famous answer, after he mistook the labor theory of value for the real world, was that the only way capitalists can remain in business or expand is by exploiting labor; not because of meanness, but because they have no choice. In order for capitalists to make a profit so they can acquire the capital needed to remain in business, they have to pay labor less than its true value.
Although the distance between that idea and the world was huge, Marx used it to lay the groundwork for communism, a theory (more like a bad idea) that when acted on yields catastrophic results.
And it all goes back to free market philosopher economists getting the idea that it would be good to figure out how to determine the “inherent value” of things.
After it was too late to put the bad toothpaste back in the tube, free-market philosopher economists decided to dismiss the idea that things have some sort of inherent value and switch to the idea that prices are the only thing that matters, another idea that continues to be mistaken for reality and that led to the creation of many theories that are not real theories and models that are not real models, all of which are based on unrealistic and knowingly false assumptions and which, when acted on, have had tragic results.