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10 Sep 2021, 15:59
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Question 3
RamseyGooner
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.
I got this one wrong. I was stuck between D & E - my thought process for elimintaing E was -
Let's say a consumer goods company produces corbonated-water and they have an equipment for bottling and all. Now the company will only pay wages to the workers on it's own payroll and it's highly unlikely that a cold-drink manufacturer will have workers with technical expertise who could have built a bottling machine, hence the machine came was outsourced and it is obvious that they will not pay wages to the workers of that other company which manufactured the machine. So even though the machine was product of labour the owner is not going to pay wages for it whereas, in D - maintenance is a part and parcel of assembly line workers' schedule. If a machine requires high maintenance then the staff needs to paid in a linear manner - which could offset the value created by the machine.
GMATNinja Nikhil @Nightblade can you please point out the flaw in my reasoning?
Proponents of the Labor Theory of Value (LTOV) think that 100% of the value of something comes from labor. So they think that if an employer keeps any profits from production, then that employer is committing theft.(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.
I got this one wrong. I was stuck between D & E - my thought process for elimintaing E was -
Let's say a consumer goods company produces corbonated-water and they have an equipment for bottling and all. Now the company will only pay wages to the workers on it's own payroll and it's highly unlikely that a cold-drink manufacturer will have workers with technical expertise who could have built a bottling machine, hence the machine came was outsourced and it is obvious that they will not pay wages to the workers of that other company which manufactured the machine. So even though the machine was product of labour the owner is not going to pay wages for it whereas, in D - maintenance is a part and parcel of assembly line workers' schedule. If a machine requires high maintenance then the staff needs to paid in a linear manner - which could offset the value created by the machine.
GMATNinja Nikhil @Nightblade can you please point out the flaw in my reasoning?
LTOV proponents don't distinguish between employees that work at one location or another. To use your example: if certain employees created the machines and other employees bottle the water, then LTOV proponents think that profits should be given to BOTH set of employees, and that the employer shouldn't keep any for him/herself.
You may think it's "obvious" that an employer wouldn't keep compensating an outside employee for the value of a machine, but an LTOV'er wouldn't agree. In fact, they would think that profiting from a machine without passing that profit back to the laborer who built that machine is theft!
One way or another, LTOV proponents think that all value comes from labor. Thus, profit from capital goods should make its way back to laborers, regardless of who exactly they work for. That's why you can't eliminate (E). For more on question 3, check out this earlier post.
I hope that helps!
26 Feb 2022, 09:33
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Official Explanation
1. The author of the passage is primarily concerned with
Difficulty Level: Hard
Explanation
Main idea
This question depends on an understanding of the passage as a whole. The first paragraph describes the labor theory of value and the theory's historical origins in the philosophy of John Locke. The second paragraph provides some analysis of the theory and uses the analysis to support a critique.
A. The passages describe a historical connection between the labor theory of value and Locke's economic theories and suggest that the influence of Locke on the labor theory of value is one reason why, according to the author, the theory may be inadequate. This perhaps suggests an indirect criticism of Locke and his theories, via his influence on more recent theories. However, Locke's economic theories are not criticized directly and are not the focus of the Passage.
B. Although the passage may suggest that a particular economic theory—the labor theory of value-may exaggerate the "contribution of labor in a modern economy" because the theory may neglect the importance of capital goods, the author does not suggest that the contribution of labor is unimportant.
C. Correct. This is the best answer. The second paragraph—more than half of the passage—is almost entirely focused on critiquing the labor theory of value. The first paragraph, by introducing the theory and providing some historical context, can be seen as supporting the critique, by introducing the theory to readers who may not be fmiliar with it.
D. The passage offers no argument fr or against a more equitable distribution of business profits.
E. Te's point at issue in this option is similar to the point at issue in D, to do with what might be right or wrong, or more equitable, in matters concerning the distribution of money or "compensation." The passage makes no argument as to what might be right or wrong in this respect.
The correct answer is C.
Difficulty Level: Hard
Explanation
Main idea
This question depends on an understanding of the passage as a whole. The first paragraph describes the labor theory of value and the theory's historical origins in the philosophy of John Locke. The second paragraph provides some analysis of the theory and uses the analysis to support a critique.
A. The passages describe a historical connection between the labor theory of value and Locke's economic theories and suggest that the influence of Locke on the labor theory of value is one reason why, according to the author, the theory may be inadequate. This perhaps suggests an indirect criticism of Locke and his theories, via his influence on more recent theories. However, Locke's economic theories are not criticized directly and are not the focus of the Passage.
B. Although the passage may suggest that a particular economic theory—the labor theory of value-may exaggerate the "contribution of labor in a modern economy" because the theory may neglect the importance of capital goods, the author does not suggest that the contribution of labor is unimportant.
C. Correct. This is the best answer. The second paragraph—more than half of the passage—is almost entirely focused on critiquing the labor theory of value. The first paragraph, by introducing the theory and providing some historical context, can be seen as supporting the critique, by introducing the theory to readers who may not be fmiliar with it.
D. The passage offers no argument fr or against a more equitable distribution of business profits.
E. Te's point at issue in this option is similar to the point at issue in D, to do with what might be right or wrong, or more equitable, in matters concerning the distribution of money or "compensation." The passage makes no argument as to what might be right or wrong in this respect.
The correct answer is C.
26 Feb 2022, 09:39
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Official Explanation
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?
Difficulty Level: Hard
Explanation
Supporting idea
This question asks us to identify something that is true of the distribution of the income derived from all of the consumer goods that are produced in the modern economy.
A. The passage makes certain claims about the relative distribution of income between workers and the owners of capital goods, with respect to the income derived from the total output of consumer goods. However, no clear comparison is made between the share thus received by workers and the "value" of their labor.
B. The passage states that roughly one-third of the total output of consumer goods is attributable to the use of capital goods and that the owners of capital receive one-third ofthe income from this total output. Te shares of income are roughly the same.
C. Correct. This is the best answer. As mentioned in connection with option B, the share of income to the owners of capital goods is roughly equal to the proportion of the total output of consumer goods that can be attributed to the use of capital goods.
D. Although the passage mentions that some workers because they are shareholders or pension beneficiaries, receive some of the income that "serves as compensation to the owners of capital goods," there is no indication that this is most of the share that serves as the compensation to these owners. Furthermore, the workers who are, say, shareholders, maybe owners ofcapital themselves. Therefore, the income that these workers receive as shareholders may be no reduction at all to the income received by the owners of capital.
E. The passage does not suggest that workers receive a share of the income derived from the total output of consumer goods that is greater than the value of their labor. And it provides no explanation of such a phenomenon.
The correct answer is C.
Difficulty Level: Hard
Explanation
Supporting idea
This question asks us to identify something that is true of the distribution of the income derived from all of the consumer goods that are produced in the modern economy.
A. The passage makes certain claims about the relative distribution of income between workers and the owners of capital goods, with respect to the income derived from the total output of consumer goods. However, no clear comparison is made between the share thus received by workers and the "value" of their labor.
B. The passage states that roughly one-third of the total output of consumer goods is attributable to the use of capital goods and that the owners of capital receive one-third ofthe income from this total output. Te shares of income are roughly the same.
C. Correct. This is the best answer. As mentioned in connection with option B, the share of income to the owners of capital goods is roughly equal to the proportion of the total output of consumer goods that can be attributed to the use of capital goods.
D. Although the passage mentions that some workers because they are shareholders or pension beneficiaries, receive some of the income that "serves as compensation to the owners of capital goods," there is no indication that this is most of the share that serves as the compensation to these owners. Furthermore, the workers who are, say, shareholders, maybe owners ofcapital themselves. Therefore, the income that these workers receive as shareholders may be no reduction at all to the income received by the owners of capital.
E. The passage does not suggest that workers receive a share of the income derived from the total output of consumer goods that is greater than the value of their labor. And it provides no explanation of such a phenomenon.
The correct answer is C.
