The Marxist idea that profit is excess value confiscated from the workers by the capitalist is patently wrong. Profit is the default income with or without a wage earner; wages are deductions from profit.

The labor theory of value, for real

The key assumption of the Marxist position is the labor theory of value. This creates the idea that the capitalist steals from the worker through profit: the wage worker creates value through production; the capitalist confiscates the product of that the wage worker's labor for a fraction of its value and profits by selling it for its full value, the excess of which -- though rightfully owed to the laborer who generated said value -- is stolen by the capitalist.

The fallacies of the labor theory are many; perhaps the biggest one, illustrated within the above, is a huge case of affirming the consequent. Their cart is so far in front of their horse they can't even call them connected.

First, let us reaffirm one thing: value is not created by any step of production, neither labor nor distribution nor management nor capitalization. Material goods are indeed created by labor. Value, however, ONLY exists within the minds of human beings, and is only "created" through the process of exchange -- either between human actors in the form of trade, or between a human actor and his environment through labor. A good, no matter how laboriously or skillfully crafted has no intrinsic value. INTRINSIC VALUE DOES NOT EXIST.

This can be proven: it would be impossible for the laborer to reap said value without demand, that is someone to exchange the product of his labor to. The product of labor can only be valued if there is demand for the product, which means that the product of labor depends not up on the hours or skill involved in the labor but upon the desire of a consumer to obtain the product. The fact that there are still people that believe in the labor theory of value makes me sad for humanity.

Now back to this cart and horse...

PROFITS EXIST BEFORE LABOR

As pointed out by V. Menshikov at Mises.Org, the fact is that for a person who directly sells what he produces with no wage labor employed under him, ALL of his income is "profit". A common mistake is to view "profit" as what remains of income after wages are paid. This mistake ignores the problem of the self-employed: with no wage labor, there is only direct profit.

We can then see that "profit" is the default state for any voluntary exchange, regardless of future costs. If the self-employed worker who directly trades his goods to his consumer is profiting, then from whom is he stealing? Himself? If we play some word games and decide that this does not qualify as "profit" then how does employing a wage worker -- who, without the prior supposedly-not-profit income could not be employed -- magically change said income into "profit"? It doesn't; value created through voluntary trade is always "profit". Even if we concede that the value must exceed the costs to be considered "profit", the self-employed worker -- assuming his revenue is enough for him to both live on and to cover his costs -- still profits even when there is no wage labor involved.

Since profit pre-exists wage labor, it cannot be said to be a deduction from any increase to income created by wage labor; wage labor can only be seen to supplement profit and as such is not in any concievable way "stolen" from the worker. The reverse isn't true either; the worker does not "steal" from the proprietor's rightly-owned profits; rather he supplements those profits in exchange for a wage.

This illustrates yet one more of the many ways in which the Labor Theory of Value is an utter crock; and yet communists, socialists and "democratic" socialists still riff their ideals based on that broken theory. I suppose it is because long-winded bores such as myself wax pedantic on the subject; I think it's high-time Average Joe threw in his two cents on this, once he's done muddying his way through the concepts of self-ownership, non-aggression and natural rights.

Thomas Shirk is a computer programmer, Voluntaryist and aspiring philosopher. Please come back to his blog and follow him on Facebook and Steemit for regular updates on Voluntaryism, capitalism and other philosophical insights