Cost the limit of price

Cost the limit of price

Cost the limit of price was a maxim coined by Josiah Warren, indicating a (prescriptive) version of the labor theory of value. Warren maintained that the just compensation for labor (or for its product) could only be an equivalent amount of labor (or a product embodying an equivalent amount).[1] Thus, profit, rent, and interest were considered unjust economic arrangements. As Samuel Edward Konkin III put it, "the labor theory of value recognizes no distinction between profit and plunder."[2] In keeping with the tradition of Adam Smith's The Wealth of Nations,[3] the "cost" of labor is considered to be the subjective cost; i.e., the amount of suffering involved in it.[1]

The principle was set forth in Warren's Equitable Commerce (among other writings) and has been called a "mainstay of 19th century individualist anarchism."[2] It was further advocated and popularized by Benjamin Tucker in his individualist anarchist periodical Liberty, and in his books. Tucker explained it so:

From Smith's principle that labor is the true measure of price – or, as Warren phrased it, that cost is the proper limit of price – these three men [i.e., Josiah Warren, Pierre Proudhon, and Karl Marx] made the following deductions: that the natural wage of labor is its product; that this wage, or product, is the only just source of income (leaving out, of course, gift, inheritance, etc.); that all who derive income from any other source abstract it directly or indirectly from the natural and just wage of labor; that this abstracting process generally takes one of three forms, – interest, rent, and profit; that these three constitute the trinity of usury, and are simply different methods of levying tribute for the use of capital; that, capital being simply stored-up labor which has already received its pay in full, its use ought to be gratuitous, on the principle that labor is the only basis of price; that the lender of capital is entitled to its return intact, and nothing more; that the only reason why the banker, the stockholder, the landlord, the manufacturer, and the merchant are able to exact usury from labor lies in the fact that they are backed by legal privilege...
—Benjamin Tucker , "State Socialism and Anarchism," from Individual Liberty, Vanguard Press, New York, 1926

Warren put his principle into practice in 1827 by establishing an experimental "equity store," called the Cincinnati Time Store, where trade was facilitated by notes backed by a promise to perform labor. This scheme was exactly that advocated by Pierre Proudhon some years later under the name mutuellisme; however, it is believed that Proudhon developed his ideas independently.[4]

If a little network of self-managing workers agreed to trade among themselves respecting the principle of "the cost the limit of price", each one of them would buy and sell their commodities at lower prices (and costs, in this network) without worsening their effective purchasing power, and by that, they could persuade other self-managing workers to join (which would further reduce prices). Such a hypothetical price-of-cost network would be compelled to develop the best science about costs ever made. W. Brian Arthur's theory of increasing returns could explain how an equitable but free trade ("price-of-cost") market may compete against the always-ruling "price-of-compromise" State capitalism exploitation system. Instead of experimental "labor notes" or similar, the use of current money for "equitable commerce" by a price-of-cost network would start to change the market itself: an open universalistic utopia instead of isolated, little, weak, elite utopias with limited synergy.

"Cost the limit of price" seems more properly to indicate a (prescriptive) labor theory of price, considering seriously the distinction among whatever meaning of "cost", whatever meaning of "price", and whatever meaning of "value". "Cost the limit of price" could understate that whatever different price resulting by whatever different method of pricing acts as an non-equitable, unjust "extortion" based upon wants (upon "needs") or even upon "urgencies" ("violence upon wants" instead of freedom from wants). The alleged different prices can be legitimately named "prices of compromise". Usually competition amends almost all of that force addiction. Léon Walras, economist and mathematician, found that in a hypothetical situation of perfect competition prices would approach costs, and profits would approach zero.

To ensure fairness within a cost price network, the main advantages of membership should be under the conditions of: 1. cautious deposits; 2. allowing to their customers the complete transparency of the business; 3. previous acceptance to boycott whatever violator until reparation. "Cost the limit of price" aims to establish an equitable exchange of labor. Incomes should not include profits: one's profit is always another's exploitation of the same amount ("plusprice") by pricing. In such a "reciprocal transparent cost price network" whatever currency would change the real meaning itself of money, it would become a sharp tool just to measure only everybody's working time, and no more measuring somebody's extortion by prices. By the generalization of the "cost the limit of price" rule, the intrinsic "surplus" from the productivity, without having any form of profit, gets the form of purchasing power per currency unit, so that among the possible consequences are: a lesser need of money to live, deflation, distributed investment power among consumers. Money should mean not merchandization in any humiliating sense.

See also


  1. ^ a b In Equitable Commerce, Warren writes, "If a priest is required to get a soul out of purgatory, he sets his price according to the value which the relatives set upon his prayers, instead of their cost to the priest. This, again, is cannibalism. The same amount of labor equally disagreeable, with equal wear and tear, performed by his customers, would be a just remuneration
  2. ^ a b Wendy McElroy, "Individualist Anarchism vs. "Libertarianism" and Anarchocommunism," in the New Libertarian, issue #12, October, 1984.
  3. ^ Smith writes: "The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it." Note, also, the sense of "labor" meaning "suffering."
  4. ^ Peter Kropotkin, "Anarchism," from the Encyclopaedia Britannica, 1910

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