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Rectifying the Greatest Error in the History of Economic Thought: "Demand for Commodities Is Not Demand for Labor" Versus the Marxian Exploitation Theory

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Rectifying the Greatest Error in the History of Economic Thought: "Demand for Commodities Is Not Demand for Labor" Versus the Marxian Exploitation Theory

4.85 60,393 ratings · 2,551 reviews
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Overview: Adam Smith and Karl Marx claimed that originally all income was wages and that profits appeared only later, with the coming of capitalists, who deducted their profits from what until then had been wages. The unmistakable implication of this claim is that profits constitute a theft of part of wages. This belief, that profits are stolen from the wage earners, has been almost unchallenged and has been a continuing source of civil discontent, hatred of businessmen and capitalists by wage earners, violent revolution, civil war, enslavement, and mass murder. Literally, scores of millions have suffered and died because of the belief in the inherent injustice of profits. It is the foundation of the support for socialism and communism. To my knowledge the claim that profits are a deduction from wages has been accepted universally, with the single exception of the present author. It has been accepted even by the leading critic of the belief that profits are stolen. That critic, the great Austrian-school economist Eugen von Böhm-Bawerk, believed that even though profits were a deduction from wages, as Smith and Marx had claimed, they were nevertheless a justified deduction. The deduction, Böhm-Bawerk argued, arose from the fact that, other things being equal, present goods are more valuable than future goods. As a result, Böhm-Bawerk held, wage earners themselves, each performing an equal amount of labor, but working in a sequence over a period of years, would not divide the value of their ultimate product equally. The last worker in the series, who was paid virtually immediately after the completion of his work, would be paid less than the first worker in the series, who might have to wait several years after the completion of his work before being paid. The same principle would apply mutatis mutandis to all the workers in between. Capitalists, according to Böhm-Bawerk, made it possible for all the workers in the series to be paid as quickly as the last worker in the series, indeed, even more quickly; for example, after the lapse of just a week, however long the total productive process might take. In sum, the capitalist buys the workers’ claims to the receipt of wages in the future for smaller payments of wages in the present, payments which, dollar for dollar, are more valuable than the larger future wage payments given up. Böhm-Bawerk’s critique is certainly ingenious. However, it is wrong in an essential respect. Namely, it shares with Smith and Marx, the belief that workers producing and selling the products of their labor are paid wages and that profits are a deduction from wages, even if a justified deduction. The truth is that if there ever was a time, such as allegedly existed in Adam Smith’s “original state of things,” when there were no capitalists but only manual workers, who produced products and who were able to keep all of the proceeds, the money those manual workers received was not wages but SALES REVENUES. As the great classical economist John Stuart Mill pointed out, "demand for commodities is not demand for labor." What this means, for example, is that when someone buys a loaf of bread, he does not pay the wages of bakers. He buys only the loaf of bread, which means that he pays a sales revenue to the seller, who, of course, receives a sales revenue, not a wage. Not only did the manual workers in Smith’s “original state of things” earn sales revenues rather than wages but the fact that no capitalists were present, means that there was no capitalistic spending, i.e., no buying for the sake of selling. The implication of this is the there were no money costs of production to deduct from sales revenues. And the inescapable implication of this is that the sales revenues were PURE PROFIT.

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Published December 4, 2017
ISBN 37172628
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George Reisman
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George Reisman is the author of several novels. Originally from the East Coast, they now live in the Midwest with family. In addition to writing, George Reisman enjoys gardening, cooking, and reading way past bedtime. Their work often explores the complexities of everyday life and human relationships.

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Mark Nelson
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Took a moment to build, but the payoff was spectacular. It held my rapt attention, even when certain twists were telegraphed. A wonderful companion for a quiet weekend.
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Masterpiece from start to finish. The prose is exquisite. It’s accessible yet undeniably sophisticated. I will undoubtedly revisit this masterpiece.
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I was completely blown away. I became deeply invested in the protagonist's journey. A masterclass in storytelling. A true literary gem.
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Honestly one of the most premium reading experiences lately. The author orchestrated a breathtaking finale. Truly a work of art. An effortless 5 stars.
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A profoundly satisfying read. The pacing was impeccable and the characters felt incredibly authentic. I was completely immersed. I am now a lifelong fan of this author.
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Such a rich narrative. The pacing was impeccable and the characters felt incredibly authentic. I was completely immersed. Worth every moment spent reading.
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Masterpiece from start to finish. It strikes a perfect harmony of dialogue and world-building. Every chapter felt necessary. I will undoubtedly revisit this masterpiece.
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I was completely blown away. I became deeply invested in the protagonist's journey. A masterclass in storytelling. I am now a lifelong fan of this author.
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A very strong entry. The middle had a deliberate pace, but the climax was phenomenal. A wonderful companion for a quiet weekend.
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A profoundly satisfying read. I became deeply invested in the protagonist's journey. A masterclass in storytelling. I will undoubtedly revisit this masterpiece.
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Took a moment to build, but the payoff was spectacular. The protagonist was compelling, though some subplots felt slightly overshadowed. A wonderful companion for a quiet weekend.
Charles Diaz
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Absolutely brilliant. It strikes a perfect harmony of dialogue and world-building. Every chapter felt necessary. Worth every moment spent reading.
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Edward Martinez
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Absolutely brilliant. The pacing was impeccable and the characters felt incredibly authentic. I was completely immersed. A true literary gem.
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Honestly one of the most premium reading experiences lately. The prose is exquisite. It’s accessible yet undeniably sophisticated. I will undoubtedly revisit this masterpiece.
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Robert Wilson
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I was completely blown away. The prose is exquisite. It’s accessible yet undeniably sophisticated. An effortless 5 stars.
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Exceeded all my expectations. The pacing was impeccable and the characters felt incredibly authentic. I was completely immersed. A true literary gem.
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A highly sophisticated read. It held my rapt attention, even when certain twists were telegraphed. A very distinguished novel.
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Such a rich narrative. The author orchestrated a breathtaking finale. Truly a work of art. An effortless 5 stars.
Carol  Davis
Carol Davis August 08, 2024
Exceeded all my expectations. The author orchestrated a breathtaking finale. Truly a work of art. Worth every moment spent reading.
Kimberly Torres
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Mark Moore
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Excellent, though slightly flawed. Beautiful writing, though I craved slightly more depth in the lore. Still, undeniably engaging. A very distinguished novel.
Jacob Williams
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I thoroughly enjoyed the elegance of it. It held my rapt attention, even when certain twists were telegraphed. A solid 4 stars from me.
Matthew Adams
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I find myself somewhat conflicted. The tempo was somewhat languid, and I found my mind wandering. Not poor, simply average. Unlikely to reread, but a reasonable expenditure of time.
Donald Young
Donald Young January 13, 2024
A very strong entry. Beautiful writing, though I craved slightly more depth in the lore. Still, undeniably engaging. Quite impressive overall.
Charles Baker
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A profoundly satisfying read. The pacing was impeccable and the characters felt incredibly authentic. I was completely immersed. Worth every moment spent reading.
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Michelle Davis January 15, 2025
Honestly one of the most premium reading experiences lately. The prose is exquisite. It’s accessible yet undeniably sophisticated. An absolute must-read for connoisseurs of the genre.
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I was completely blown away. The pacing was impeccable and the characters felt incredibly authentic. I was completely immersed. I will undoubtedly revisit this masterpiece.
Lisa Collins
Lisa Collins November 02, 2024
Absolutely brilliant. It strikes a perfect harmony of dialogue and world-building. Every chapter felt necessary. An absolute must-read for connoisseurs of the genre.
Nicholas Hill
Nicholas Hill March 18, 2024
Absolutely brilliant. I became deeply invested in the protagonist's journey. A masterclass in storytelling. A true literary gem.
Gary Turner
Gary Turner September 12, 2024
A highly sophisticated read. A brilliant concept executed with flair. Just a few pacing choices I would change. A solid 4 stars from me.
Thomas Nguyen
Thomas Nguyen January 13, 2025
A profoundly satisfying read. It strikes a perfect harmony of dialogue and world-building. Every chapter felt necessary. An absolute must-read for connoisseurs of the genre.
Dorothy Rodriguez
Dorothy Rodriguez June 25, 2025
Honestly one of the most premium reading experiences lately. I became deeply invested in the protagonist's journey. A masterclass in storytelling. A true literary gem.
Michael Anderson
Michael Anderson December 10, 2025
Such a rich narrative. I became deeply invested in the protagonist's journey. A masterclass in storytelling. An absolute must-read for connoisseurs of the genre.
Melissa Rodriguez
Melissa Rodriguez August 14, 2025
A decent, if standard, experience. The prose was competent, yet the characters lacked the depth I usually seek. A fair 3 stars.
Margaret Hall
Margaret Hall December 19, 2025
Excellent, though slightly flawed. Beautiful writing, though I craved slightly more depth in the lore. Still, undeniably engaging. A solid 4 stars from me.
Deborah Nguyen
Deborah Nguyen March 03, 2025
Masterpiece from start to finish. It strikes a perfect harmony of dialogue and world-building. Every chapter felt necessary. An effortless 5 stars.
Susan Allen
Susan Allen March 17, 2024
I thoroughly enjoyed the elegance of it. It held my rapt attention, even when certain twists were telegraphed. A very distinguished novel.
Kevin Wright
Kevin Wright October 28, 2025
Masterpiece from start to finish. The prose is exquisite. It’s accessible yet undeniably sophisticated. An absolute must-read for connoisseurs of the genre.
Thomas White
Thomas White December 24, 2024
Took a moment to build, but the payoff was spectacular. The middle had a deliberate pace, but the climax was phenomenal. A very distinguished novel.
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