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555-605 Level|   Business|   Short Passage|                     
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Could someone help to explain option E is correct for question 5?

This is what I understood from the last paragraph of the passage:

The labor theory failed to take into account the productive contribution of capital goods.

The question is asking for a statement that supports the labor theory right? I felt that option E acted more as a weakener rather than strengthening the labor theory of value. Could someone please help provide some insight on this? thank you
From the first paragraph, we know that the formulators of the labor theory of value (LTOV) believed 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."

Question #5 asks how a proponent of this theory argue against the following:
Quote:
The labor theory of value systematically disregards the productive contribution of capital goods—a failing for which Locke must bear part of the blame.
So, how would someone who believes that "100 percent of the value of any product is generated by labor" respond to the charge that he/she is disregarding the "productive contribution of capital goods"?

Take a look at answer choice (E):
Quote:
(E) The productive contribution of capital goods must be attributed to labor because capital goods are themselves products of labor.
Here, a proponent of the LTOV is arguing that capital goods are just like any other goods -- they are products of labor. Because human work was required to create the capital goods in the first place, anything that capital goods produce can be attributed back to labor. So, the LTOV is not "systematically disregard[ing] the productive contribution of capital goods," but rather saying that the value of capital goods, like that of any other good, is generated by labor. (E) is the correct answer for question #5.

I hope that helps!
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VeritasKarishma why not d over e. Even if capital goods are human made,its contribution is allocated to capital goods:--
in this line ''human effort is required to produce goods for the consumer market, effort is also invested in making capital goods (tools, machines, etc.), which are used to facilitate the production of consumer goods.
So, capital goods allocation means we pay people who make machines their due. Can't understand why d is wrong!

Which of the following arguments would a proponent of the labor theory of value, as it is presented in the first paragraph, be most likely to use in response to lines 23–25 (last sentence in bold) ?

(A) The productive contributions of workers and capital goods cannot be compared because the productive life span of capital goods is longer than that of workers.

(B) The author's analysis of the distribution of income is misleading because only a small percentage of workers are also shareholders.

(C) Capital goods are valuable only insofar as they contribute directly to the production of consumer goods.

(D) The productive contribution of capital goods must be discounted because capital goods require maintenance.

(E) The productive contribution of capital goods must be attributed to labor because capital goods are themselves products of labor.


To produce consumer goods, we need capital goods (machines etc) and labour.

Labour theory states that 100% contribution should be attributed to labour only.

(E) explains why the contribution of capital goods should be attributed to labour too (and hence attribute 100% to labour) - because labour creates capital goods too. So it makes sense to attribute everything to labour.

(D) is not very logical. Capital goods require maintenance is not a valid reason for discounting them and attributing their contribution to labour.
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shubham2312
guys can someone explain why option A of question 1 is incorrect or share diffrence between "criticizing" and " questioning the validity".
in regard to question 1.
Option A talks about "theories", but the passage is talking about only one theory.

Sent from my ONEPLUS A3003 using GMAT Club Forum mobile app


So I was stuck between the two options and while I understand it is theories vs the one theory discussed in the passage, I was very confused between "criticizing" and "questioning the validity". Isn't the bold statement conclusively (and blatantly) criticizing the theory? There is no tone of doubt which is what I associate with the term questioning validity.
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ankitsaroha
shubham2312
guys can someone explain why option A of question 1 is incorrect or share diffrence between "criticizing" and " questioning the validity".
in regard to question 1.
Option A talks about "theories", but the passage is talking about only one theory.

Sent from my ONEPLUS A3003 using GMAT Club Forum mobile app


So I was stuck between the two options and while I understand it is theories vs the one theory discussed in the passage, I was very confused between "criticizing" and "questioning the validity". Isn't the bold statement conclusively (and blatantly) criticizing the theory? There is no tone of doubt which is what I associate with the term questioning validity.
There is not a huge difference between "criticizing" and "questioning the validity" in the context of these answer choices. A more solid difference between (A) and (C) is that (A) focuses on Locke's theories, while (C) focuses on the "labor theory of value" (LTOV). While the LTOV shares many commonalities with Locke's stated beliefs, the author makes an important distinction between the two: Locke said that 99% of the value of a product can be attributed to labor, while LTOV proponents take it a step further and say that 100% of the value of a product can be attributed to labor.

The author's main criticism is aimed at the LTOV, not at Locke. Locke merely bears "part of the blame" for the failings of the LTOV. So we can't say that the passage is primarily concerned with "criticizing Locke's economic theories" -- instead, the primary purpose of the passage is to "question... the validity of the labor theory of value." (C) is the correct answer for question #1.

I hope that helps!
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Can anyone please explain the meaning of Q3?
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Can anyone please explain the meaning of Q3?
Quote:
3. Which of the following arguments would a proponent of the labor theory of value, as it is presented in the first paragraph, be most likely to use in response to the statement that “The labor theory of value systematically disregards the productive contribution of capital goods”?

(A) The productive contributions of workers and capital goods cannot be compared because the productive life span of capital goods is longer than that of workers.
(B) The author’s analysis of the distribution of income is misleading because only a small percentage of workers are also shareholders.
(C) Capital goods are valuable only insofar as they contribute directly to the production of consumer goods.
(D) The productive contribution of capital goods must be discounted because capital goods require maintenance.
(E) The productive contribution of capital goods must be attributed to labor because capital goods are themselves products of labor.
According to the labor theory of value, "100 percent of the value of any product is generated by labor (the human work needed to produce goods)."

The author states that the "labor theory of value systematically disregards the productive contribution of capital goods." In other words, according to the author, SOME of the value of a product is generated, not by labor, but by the capital goods (tools, machines, etc.) used to produce that product. So the author would NOT agree that ALL of the value of any product is generated by labor; instead, the author contends that the value is generated by labor AND by capital goods.

How might a proponent of the labor theory of value respond to the author's comments? Remember, such proponents believe that 100 percent of the value is generated by labor. But what about the contribution of capital goods? The proponents would say, "Yes, capital goods generate some of the value... but the capital goods themselves are products of human labor!"

The author suggests that the productive contributions of capital goods should NOT be counted as labor contributions. However, proponents of the labor theory of value would argue that the productive contributions of capital goods SHOULD be counted as labor contributions. Those tools, machines, etc., didn't just fall from the sky: humans produced those capital goods. So according to the proponents, any productive contribution of capital goods should be attributed to the labor that was needed to produce those capital goods.

I hope that helps!
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Can someone please explain how they got down to QUESTION NO. 4 OPTION D?
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Can anyone tell me why Question 6 has D as the answer and not E?

Quote:
RC00141-07 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.
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MahimaYadav
Can someone please explain how they got down to QUESTION NO. 4 OPTION D?
ozhass
Can anyone tell me why Question 6 has D as the answer and not E?

Quote:
RC00141-07 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.

Question 4


To answer Question #4 (about the organization of the passage), the best thing to do is to use POE to get rid of the incorrect answer choices:
Quote:
(A) The author explores the origins of a theory and explains why the theory never gained widespread acceptance.
The author does explore the origins of a theory, but never addresses whether that theory has gained widespread acceptance. (A) is out.

Quote:
(B) The author introduces the premise of a theory, evaluates the premise by relating it to objective reality, then proposes a modification of the theory.
The author never proposes a modification to a theory -- instead, he/she merely points out a failing of the theory. Get rid of (B).

Quote:
(C) After quoting a well-known authority, the author describes the evolution of a theory, then traces its modern form back to the original quotation.
The author does quote a well-known authority and describe the evolution of a theory, but does he/she trace this theory back to the original quotation?

The quotation in question is "“the effects of labor.” At the end of the passage, the author links the failings of the modern theory back to Locke, but not specifically to this quotation. Because it is somewhat nonsensical to say that the author traces the theory back to this quotation, (C) is out.

Quote:
(D) After citing a precursor of a theory, the author outlines and refutes the theory, then links its flaw to the precursor.
This is precisely how the passage is organized -- the author introduces Locke ideas as the precursors to the labor theory of value, criticizes that theory, and then links the theory's failings back to Locke. (D) is looking good.

Quote:
(E) After tracing the roots of a theory, the author attempts to undermine the theory by discrediting its originator.
As pointed out by VeritasKarishma in this post, the author doesn't undermine the theory by discrediting its originator -- he/she criticizes the argument itself, and then states that Locke is partially to blame for this flaw in the argument.

Eliminate (E). (D) is the correct answer to question #4.

Question 6


Question #6 asks about the "formulators of the labor theory of value (LTOV)."

Let's look at the evidence for (E):
Quote:
(E) They underestimated the importance of consumer goods in a modern economy.
The LTOV formulators believed that 100% of the value of any product is generated by labor.

The author goes on to make a distinction between consumer goods and capital goods. He/she argues that the owners of capital goods (in other words, NOT the laborers) should be compensated for the contribution that capital goods make in producing consumer goods. This is an argument against the LTOV.

The author states that, by insisting that 100% of the value of any product is generated by labor, the "labor theory of value systematically disregards the productive contribution of capital goods."

So, the formulators of the LTOV do not underestimate the importance of consumer goods -- according to the passage, they underestimate the contribution of capital goods.

(E) is out.

Now take a look at (D):
Quote:
(D) They were familiar with Locke's views on the relationship between labor and the value of products.
The formulators of the LTOV are described in the passage as Locke's "intellectual heirs." In order for this to be true, they would need to be familiar with Locke's theories, so that their own theory could grow from his initial ideas.

(D) is the correct answer to question #6.

I hope that helps!
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Hi GMATNinja Gnpth SajjadAhmad

Why D is the OA for Q.No:6, RC00141-07.

Per my understanding:
Followers of Locke find that LTOV is acceptable. Formulators of LTOV held that entire credit must go to workmen and employers should not view it in profit perspective.

My doubt is, How we can infer that the formulators of LTOV are familiar with Locke's theory.
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RC00141-04 Which of the following statements, if true, would most effectively counter the author's criticism of Locke at the end of the passage?

(A) Locke was unfamiliar with the labor theory of value as it was formulated by his intellectual heirs.

(B) In Locke's day, there was no possibility of ordinary workers becoming shareholders or pension beneficiaries.

(C) During Locke's lifetime, capital goods did not make a significant productive contribution to the economy.

(D) The precise statistical calculation of the productive contributions of labor and capital goods is not possible without computers.

(E) The terms “capital goods” and “consumer goods” were coined by modern economists and do not appear in Locke's writings.

daagh GMATNinja
Can anybody please explain why "E" is incorrect?
If those terms/bifurcation did not exist at that time when theory was created, how can those be considered. Thereby, countering the author's criticism.

Thanks in advance!
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Questions 3 & 6


gvvsnraju@12
Hi GMATNinja Gnpth SajjadAhmad

Why D is the OA for Q.No:6, RC00141-07.

Per my understanding:
Followers of Locke find that LTOV is acceptable. Formulators of LTOV held that entire credit must go to workmen and employers should not view it in profit perspective.

My doubt is, How we can infer that the formulators of LTOV are familiar with Locke's theory.
Take a look at this post for an explanation of (D) for question #6, and let me know whether that clears it up!

RaunaqSinghPunn
RC00141-04 Which of the following statements, if true, would most effectively counter the author's criticism of Locke at the end of the passage?

(A) Locke was unfamiliar with the labor theory of value as it was formulated by his intellectual heirs.

(B) In Locke's day, there was no possibility of ordinary workers becoming shareholders or pension beneficiaries.

(C) During Locke's lifetime, capital goods did not make a significant productive contribution to the economy.

(D) The precise statistical calculation of the productive contributions of labor and capital goods is not possible without computers.

(E) The terms “capital goods” and “consumer goods” were coined by modern economists and do not appear in Locke's writings.

daagh GMATNinja
Can anybody please explain why "E" is incorrect?
If those terms/bifurcation did not exist at that time when theory was created, how can those be considered. Thereby, countering the author's criticism.

Thanks in advance!
(E) specifies that the terms did not appear in Locke's writings, which is different than saying that the things that those terms refer to did not exist at that time. The fact that the terms did not exist in their current form is not an effective counter to author's argument.

Here's an example: a person went on an unprovoked murderous rampage and then stole a sandwich in ancient times, before the words "murder" and "sandwich" were coined. We can still criticize this person's actions as immoral, even if the terms for those actions did not yet exist.

Similarly, the author can still hold Locke accountable for disregarding the contribution of "capital goods," even if the term did not yet exist at the time of Locke's writings.

I hope that helps!
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Hi GMATNinja,
Can you please explain why C is the answer to question 1 ? The option states that the author's main point is to question the 'validity' of the LTOV. But I don't think the author is doing so. I believe he points out a limitation or a flaw in the theory, and on the basis of this reasoning I marked B. Do you agree ?
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GMATNinja, I hope you can help me with my analysis.

For Qs 1. Why is option E wrong? /

From the passage, I felt that the workers received more than their value. They got 2/3rd of the compensation in proportion to the value added to total output and also the pension/shareholder advances etc.

When I was analyzing the answer later, the reason I came up with to prove answer E wrong was that maybe some workers owned capital as shareholders. Also even if the workers were paid more, was it because companies were following 'labour theory of value'? (which overestimates value of labour) Possibly not

Is this line of reasoning correct?
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Bhavyam
GMATNinja, I hope you can help me with my analysis.

For Qs 1. Why is option E wrong? /

From the passage, I felt that the workers received more than their value. They got 2/3rd of the compensation in proportion to the value added to total output and also the pension/shareholder advances etc.

When I was analyzing the answer later, the reason I came up with to prove answer E wrong was that maybe some workers owned capital as shareholders. Also even if the workers were paid more, was it because companies were following 'labour theory of value'? (which overestimates value of labour) Possibly not

Is this line of reasoning correct?
To refresh, here's what we were asked:

Quote:
1. 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?
And here's the exact wording of Choice (E):

Quote:
(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.
For us to keep (E), both parts of the choice must be true:

    I. Workers receive a share of the distribution of the income derived from total output that is greater than the value of their labor in creating that output.

    II. Workers receive this disproportionately greater share of income because the labor theory of value overestimates their contribution to total output.

In paragraph 2, the author tells us that "one-third of the total output of consumer goods is attributable to the use of capital goods." This suggests that the other 2/3 of total output is attributable to labor.

Then the author states that "approximately 2/3 of the income derived from this total output is paid out to workers as wages and salaries," and adds that part of the remaining 1/3 is "received by workers who are shareholders, pension beneficiaries, and the like."

As you've pointed out, this implies that workers do, in fact, receive a share of this income that's greater than the value of their labor. So part I of choice (E) seems to hold up.

Unfortunately, part II of choice (E) is not reflected by the passage at all. We're told flat-out that the reason some workers receive additional share is because they might own shares in their companies or be entitled to pension benefits. They are NOT receiving additional share because the labor theory of value overestimates their contribution.

The author never states or suggests that these forms of additional share are provided because the workers' contributions are overestimated, and never attributes shareholdings, pension benefits, and the like to any kind of belief in the labor theory of value.

I hope this helps clarify why and how to eliminate (E)!
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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.


I hope this is helpful!
Dear GMATNinja
do you mean the passage states :
Quote:
Approximately two-thirds of the income derived from this total output is paid out to workers as wages and salaries,
, rather than share?

please help
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zoezhuyan
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.


I hope this is helpful!
Dear GMATNinja
do you mean the passage states :
Quote:
Approximately two-thirds of the income derived from this total output is paid out to workers as wages and salaries,
, rather than share?

please help
The passage discusses the total income resulting from the output of consumer goods, and how this total income is shared between the owners of capital goods and workers.

One-third of the total output of consumer goods is attributable to capital goods, so the "share" owners of capital goods is one-third of the total income.

So, while "most" (two-thirds) of the total income is paid out to workers, we do not know that "most" of the remaining one-third -- the share of the capital goods owners -- is paid to workers. We only know that "part of this remaining third is received by workers."

I hope that clears it up!
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