I'm Shrijith Venkatrama, the founder of Hexmos. Presently, I am building LiveAPI, a super-convenient engineering productivity tool. LiveAPI processes your code repositories at scale and automatically produces beautiful API docs in minutes.
As I build LiveAPI, I am also making an effort to learn about various economic matters.
In a modern economy, the division of labour is highly specialized and sophisticated. This setup allows individuals to focus on a specific task or job, earning monetary or immediate rewards, which they then use to meet their needs and desires. However, to truly fulfill their needs, they must rely on the work of other specialized individuals in the economy.
In essence, your wealth is tied to how much you can command the labour of others. This makes labour the original currency behind acquiring anything. Whether it's products or money, a deeper examination will always trace their value back to labour.
What Determines the Value of Labour?
The worth of labour isn’t arbitrary—it’s shaped by a variety of factors, including:
- Time Spent: The hours or days invested in completing a task.
- Effort Required: The physical or mental difficulty of the job.
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Skill Level: The expertise needed to perform the task effectively.
- Acquiring these skills often demands years of training and practice.
- Negotiations: The outcome of bargaining processes between workers and employers or buyers.
This evaluation process is complex, often abstract, and subject to interpretation. As a result, most people prefer to focus on the money something costs, ignoring the labour, effort, and process behind it. This monetary shorthand simplifies transactions but detaches us from the true value of work.
Labour as a Constant; Commodities as Variables
Labour costs tend to remain constant, as human biology dictates the effort, skill, and time required for specific tasks. For example, a delivery worker with a certain skill set will need roughly the same level of effort and time to perform their tasks over the years.
In contrast, the value of commodities can fluctuate significantly. Take gold and silver as examples:
- When mines are abundant and mining techniques are efficient, their value drops due to increased availability.
- Conversely, when resources become scarce or harder to extract, their value rises.
This variability in commodities highlights the stability of labour as a measure of value. The ultimate question becomes: How much pure labour went into this service or product?
Real vs. Nominal Price of Labour
The price of labour can be viewed in two ways:
- Real Price: The amount of necessities and comforts a worker can buy with their earnings.
- Nominal Price: The amount of money paid for their labour.
Ultimately, a worker's prosperity is determined by the real price of their labour, not the nominal price. After all, what matters most is what their earnings can actually provide in terms of a better life.
Labour remains the cornerstone of value—both as the true measure of wealth and as the engine driving economies forward.
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