Seventeenth-century philosopher John Locke stated that as much as 99

MartyTargetTestPrep

1. How do workers like shareholdes and pension holders equate to labour? Even if we knew that most of the owners capital is being given to workers (shareholders and pension), then also how can we even say that owners are not fully compensated w.r.t their contribution? I mean shareholders are basically owners right ? And I am not even sure why the passage calls them "labour", thereby equating them to non- owners. It is not clear that by the logic of the passage are we suposed to define workers as "labour + pension + shareholders" or only labour?

2. On a separate note, we know that owners contributed to 1/3 output and we know that a part of the remaiing 1/3 is given to shareholders so is this info not sufficient for us to conclude that owners of the capital are not fully compensated for their investment thereby making D correct?

3. Why not Q6- C. Pls elaborate

KarishmaB, Nikhil, arvind910619
Q2 - C) Owners of capital goods receive a share of this income that is no greater than the proportion of total output attributable to the use of capital goods.
(D) Owners of capital goods are not fully compensated for their investment because they pay out most of their share of this income to workers as wages and benefits.
Why is C correct, no greater can mean equal to or less than and proportion received by owners is not 1/3 but half of it as half of 1/3rd owners receive goes out as benefits, to shareholders, pensioners etc.
On the other hand D is correct as owners are not fully compensated as half of 1/3 does slip away from them

Q6, (C) At least one of them was a close contemporary of Locke.
I hope C is incorrect because all it means is at-least one of them lived during the period of John Locke

Hi KarishmaB,

Thanks for your wonderful explanations.

I just have one silly doubt in terms of understanding the context of the passage.

How this (Formulators of labor theory were Locke's intellectual heirs.) has been concluded from this (For Locke’s intellectual heirs it was only a short step to the “labor theory of value,” whose formulators held that 100 percent of the value of any product is generated by labor)?

How "whose" is referring back to "Locke's intellectual heirs"? I have tried a lot but not able to understand this.

Can you please please help me with the same?

Thank You.

John Locke stated that as much as 99 percent of the value of any useful product can be attributed to “the effects of labor.” For Locke’s intellectual heirs it was only a short step to the “labor theory of value,” whose formulators held that 100 percent of the value of any product is generated by labor.

First understand what is meant by 'Locke’s intellectual heirs.' They are the people who endorsed his ideas and views, his philosophy. The sentence tells us that people who endorsed his views took a small step forward... leading to the 'labor theory of value' (instead of 99%, full 100% generated by labor).
Then these heirs are the ones who formed the 'labor theory of value.'
So 'whose formulators' refers to those intellectual heirs of Locke who formed the theory.

I understand that it is a somewhat indirect reference but it makes sense if we consider that the author perhaps thought that a few early intellectual heirs of Locke formulated the 'labor theory of value,' not all of them.
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P1: JL’s theory on labor value->Labor theory of value
P2: Capital Goods and total output->Author’s opinion: Labor Theory of value (Disregarding of capital goods’ contribution and JL must take blame)
All this passage is about a theory and why the author thinks that theory is disregarding.

1.The author of the passage is primarily concerned with
Type: Primary Purpose

(A) criticizing Locke's economic theories
Trap: Distortion
If we are not paying attention, we might think that the labor theory of value was proposed by Locke. However, what he was proposed was one step short of the labor theory of value.

(B) discounting the contribution of labor in a modern economy
Trap: Too Narrow
Although the passage does say that about one-third of the total output of consumer goods is attributable to the use of capital goods, the author is not discounting the contribution of labor in a modern economy. The author states this fact to support his opinion mentioned at the end of the passage.

(C) questioning the validity of the labor theory of value
Fits our notes and passage summary.

(D) arguing for a more equitable distribution of business profits
Trap: Wrong Verb and Too Narrow
We have to be really careful whether the answer choice use argumentative verbs or descriptive verbs.
The author uses descriptive verbs while stating how the output is distributed. Also, the author states this fact to support his opinion stated at the end of the passage.

(E) contending that employers are overcompensated for capital goods
The passage never mentions anything about the fairness of employers’ compensation.

2. According to the author of the passage, which of the following is true of the distribution of the income derived from the total output of consumer goods in a modern economy?
Type: Detail
Focus of the Question: Distribution of income derived from total output

(A) Workers receive a share of this income that is significantly smaller than the value of their labor as a contribution to total output.
The passage says that capital goods contribute to one-third of the output. However, two-third of the income from the output is given to workers and the remaining third serving as compensation to the owners of the capital goods. Moreover, part of this remaining third is received by workers who are shareholders, pension beneficiaries, and the like.
So, we can the workers’ share of income is not significantly smaller that their contribution.

(B) Owners of capital goods receive a share of this income that is significantly greater than the contribution to total output attributable to the use of capital goods.
On the contrary, the owners of capital goods receive less than the contribution to total output attributable to the use of capital goods because a part of that income is distributed amongst workers who are shareholders, pension beneficiaries, and the like.

(C) Owners of capital goods receive a share of this income that is no greater than the proportion of total output attributable to the use of capital goods.
Same Explaination as (B):The owners of capital goods receive less than the contribution to total output attributable to the use of capital goods because a part of that income is distributed amongst workers who are shareholders, pension beneficiaries, and the like.

(D) Owners of capital goods are not fully compensated for their investment because they pay out most of their share of this income to workers as wages and benefits.
The passage doesn’t mention anything about what the return on investment for the owners of capital good is.

(E) Workers receive a share of this income that is greater than the value of their labor because the labor theory of value overestimates their contribution to total output.
This answer choice states a cause-and-effect relationship between the labor theory of value and workers’ share of income. However, nowhere in the passage has the author described a causal relationship between the two.

[quote="GMATNinja"][quote="zoezhuyan"][quote="GMATNinja"]
You're right to recall where the passage states that owners pay part of their share to employee shareholders and pension beneficiaries.

However, choice (D) doesn't match this statement. Instead, choice (D) states:

Owners of capital goods are not fully compensated for their investment because they pay out most of their share of this income to workers as wages and benefits.

What's that? According to the passage, do owners pay out most of their share in the form of wages and benefits? Nope. This differs greatly from what's written in the passage, mixing up how the income is distributed.

That's why (D) is not supported by the passage, and that's why we eliminate it.

GMATNinja

I realize that this question is thoroughly discussed on the form, but I have a few follow-up questions that involves math to clarify my understanding...

So, we start with the total output of consumer goods
--> 1/3 of the total output of consumer goods is produced using capital goods
--> 2/3 of the total output of consumer goods is produced by labor

Now, the 2/3rds of the total income that comes from the total output of consumer goods goes to the labor
Then, the remaining 1/3rd of the total income that comes from the total output of consumer goods goes to the owners of capital goods (and part of this 1/3... we do not know how much of this part precisely, goes to workers who are shareholders etc.)

= So, each party is essentially getting a proportion of the income equal to the same proportion of their output, although this may be different every so slightly for the owners of capital goods because they also have to share a bit with the workers who are shareholders etc.

Now, however, I see why D is still confusing/a trap answer based on the following sentence "the labor theory of value systematically disregards the productive contribution of capital goods." All that this is saying, is the labor theory of value doesn't account for the work that also goes into producing consumer goods, correct? Nonetheless, when the author mentions "part of this remaining third is received by workers who are shareholders, pension beneficiaries..." one can go off the wrong turn of concluding that capital goods are so underappreciated/the owners don't even get their fair cut. But that is too extreme/not explicitly said. Your point above is that we do not really know how much of the 1/3 in income that the owners of capital goods have to share, so we take a different approach used in Choice C that they are getting no greater than 1/3.

Is my reasoning correct?

I apologize for the lengthy post, but I wanted to make sure I wrapped by head correctly around this tricky question!

Hi EducationAisle zhanbo AndrewN AjiteshArun MartyTargetTestPrep -

Question on RC00141-07



I dont see how (D) is accurate.

When you read the following



How can you be so sure that the formulators of "labor theory of value" ARE the same people as Locke’s intellectual hiers ?

Per the purple font , Locke’s intellectual hiers are recognizing John Locke's theory as VERY SIMILAR to the "labor theory of value"

But who exactly, are the formulators for the "labor theory of value (100%)"?

We cant say.

Perhaps the formulators of the "labor theory of value" were born much earlier (Say, in 11th century, much earlier than both John locke and John Locke's hiers)

Lastly, I am aware that RC passages dont follow SC principles but even if you do use SC principles, I dont think one can clearly say one way or the other that Formulators and Locke’s intellectual hiers are 2 different groups of people or the same people.

Thoughts ?

Hi GMATNinja KarishmaB

I have doubt in Q 6

RC00141-07
6. The author of the passage implies which of the following regarding the formulators of the labor theory of value?

(A) They came from a working-class background.
(B) Their views were too radical to have popular appeal.
(C) At least one of them was a close contemporary of Locke.
(D) They were familiar with Locke's views on the relationship between labor and the value of products.
(E) They underestimated the importance of consumer goods in a modern economy.

Here, the correct answer is "(D) They were familiar with Locke's views on the relationship between labor and the value of products.". But the passage no where implies that they were familiar with Locke's views.

For Locke’s intellectual heirs it was only a short step to the “labor theory of value,” whose formulators held that 100 percent of the value of any product is generated by labor (the human work needed to produce goods) and that therefore the employer who appropriates any part of the product’s value as profit is practicing theft.

Please help.

Thanks!
_________________

Check out this post for an explanation of question 6.

In short: to be Locke's "intellectual heir," you would need to be familiar with Locke's theories, so that your own theory could grow from his initial ideas. So by using the phrase "intellectual heirs," the passage does imply that the formulators of the LTOV were familiar with Locke's views.

I hope that helps!
_________________

Why is option-E in Q6 wrong?

Read detailed explanation here in the link below

https://gmatclub.com/forum/seventeenth- ... l#p2972623

Best.

KarishmaB, For a normal passage, In Primary Purpose , how should one distinguish b/w Questioning and Criticizing? What's the trigger?

Here there is a specific line "disregards", but still the answer is not A. a

Normally, in the RC passages we get, the author would be objective so he would usually talk about a particular failing of a theory or the aspects in which it is not applicable etc but his handling of the subject will be neutral and objective, focused on facts etc.
Criticism involves some emotions as well so anyway I would think twice before I pick that as the answer.
But here, it is clear because option (A) says "criticizing Locke's economic theories." He is not criticizing Locke's economic theories. He is questioning the validity of only one of his theories - labor theory of value.
_________________

GMATNinjaTwo, VeritasKarishma, MartyTargetTestPrep, AndrewN,VeritasPrepBrian,GMATRockstar
KarishmaB

avigutman, AndrewN,MartyTargetTestPrep , RonTargetTestPrep
dear experts, why not D for this question?
in my opinion, maintenance needs labor,

appreciate for your elaboration.

GMATNinja - but how can we prove that "formulators" and "intellectual heirs" are same people? It could as well be two that both are different set of people referred in the passage?

Can someone please help me understand Q4? If you can share the OE, that would be helpful too.

Explained here in the link below

https://gmatclub.com/forum/seventeenth- ... l#p2329655

Official explanation

https://gmatclub.com/forum/seventeenth- ... l#p2972609

Cheers