Labour Theory of Value

[Anonymous]

Can some comrade please give me a brief and succinct refutation of this common misunderstanding of Marx’s Labour theory of value. When I attempt an answer it becomes long winded (use value, exchange value etc)and I need to keep it reasonably brief. 

Value is not defined by the quantity of work (one could put a lot of work to destroy his house but it would be a negative value!), it is defined by how much importance an individual puts on a good to achieve his own preferences. Value is not intrinsic but subjective, that’s why people exchange things (work against money for instance)and how they get wealthier. To create wealth you need division of labour and voluntary exchanges.
 

[DJP]

TheOldGreyWhistle wrote:

Value is not defined by the quantity of work (one could put a lot of work to destroy his house but it would be a negative value!), it is defined by how much importance an individual puts on a good to achieve his own preferences. Value is not intrinsic but subjective, that’s why people exchange things (work against money for instance)and how they get wealthier. To create wealth you need division of labour and voluntary exchanges.

In Marx, ‘Value’ relates to the amount of reproducable socially necessary labour-time embodied in the commodity. In this sense ‘value’ is not subjective but intrinsic. The trouble is, as with all words, in a different context it can mean a completely different thing.I recently read this blog post which I thought was quite good: http://kapitalism101.wordpress.com/2012/04/05/value-cant-be-created-in-exchange/Or you could watch this rather excellent video: http://www.worldsocialism.org/spgb/video/marx-and-economics’The labour theory of value’ is something that really belongs to Smith and Ricardo, not Marx. 

[DJP]

Also worth watching is ‘Das Mudpie’http://kapitalism101.wordpress.com/2010/05/13/law-of-value-3-das-mudpie/

[ALB]

There’s some stuff on this in the Education section of this website (under Publications). In particular:http://www.worldsocialism.org/spgb/education/study-guides/guide-value-price-and-profitandhttp://www.worldsocialism.org/spgb/education/study-guides/russian-revolution-and-bolshevik-dictatorship-and-labour-theory-valueAnd there’s John Keracher’s Economics for Beginners here.

[Anonymous]

DJP wrote:

‘The labour theory of value’ is something that really belongs to Smith and Ricardo, not Marx. 

 Now I am very confused! If Recardo and Smith expained the expoitation of the working class, why do we refer to ourselves as ‘Marxist’. I have always used the Labour Theory of value to explain exploitation.The Party states that Labour theory of value. The labour theory of value explains how wealth is produced and distributed under capitalism, and how the working class is exploited. Human labour power applied to nature-given materials is the source of most wealth. The wealth produced, however, belongs not to the workers but to those who own and control the means of wealth production and distribution (land, factories, offices, etc.). Wealth production under capitalism generally takes the form of commodities produced for sale at a profit.The value of a commodity is determined by the amount of socially necessary labour time required under average conditions for its production and reproduction. Subject to any monopolies or government subsidies, it is around a point regulated by value that the price of a commodity fluctuates according to supply and demand. 

[DJP]

Hopefully this article is of interest. It’s all about the difference between value and exchange value which often gets blurred in secondary texts.http://libcom.org/files/kliman.pdf

[Anonymous]

Never mind

[Anonymous]

TheOldGreyWhistle wrote:

Now I am very confused! If Ricardo and Smith explained the exp;oitation of the working class, why do we refer to ourselves as ‘Marxist’. I have always used the Labour Theory of value to explain exploitation.

The labour theory of value is, rightly, regarded as the cornerstone of Marxian economics. Its importance to socialists is that it explains how the working class is economically exploited under capitalism. In its Marxian form, it says that the value of a commodity is determined by the amount of labour time that has to be spent on producing it from start to finish under average conditions of production.Marx’s specific contribution to the theory was to point out that what workers sold to a capitalist employer was not, as had been supposed by earlier exponents of the theory such as Ricardo and Smith, their labour (i.e. the work they did) but their labour power, by which he meant their capacity to work. This, like any other commodity being bought and sold, had its value determined by the amount of socially necessary labour that had to be expended to produce it from start to finish.

[ALB]

Yes, I would have thought that the Labour Theory of Value was the cornerstone of Marxian economics even if Adam Smith and Ricardo had different versions to Marx. After all, it is obvious that only work can produce wealth and so it’s not such a great step to argue that only work can produce “value” and exchange value — even if it isn’t to those Marx called the “vulgar economists” who dominate academic teaching of economics these days and only take a businessman’s view of economic phenomena.

[Young Master Smeet]

Quote:

Value is not defined by the quantity of work (one could put a lot of work to destroy his house but it would be a negative value!), it is defined by how much importance an individual puts on a good to achieve his own preferences

The short answer is that millions of subjective individual purchasers produce roughly uniform prices, and we are entitled to examine the basis upon which those millions come to the same sort of price.   Our main premise is that human brains a roughly similar, and reasonable people in similar circumstances come to similar conclusions. A closer examination of the purchasing relationship reveals a quick answer.  The subjective position of a purchaser is to want something for nothing [*], the seller won’t let it go for nothing, and so demands a price.  Their minimum price is the price they paid for it, to which they will try and achieve a mark up (if they can); and so on up the supply chain.  The thing that stops them naming any price they like is the existence of competitors, who are also  trying to sell their goods; and ultimately, the fact that the goods concerned are reproduceable.   The source of competition is production, and thece human effort.  [*] as one economist corrected me, and I’ve seen procurement personnel do this in action, in fact purchasers want to be paid to take the goods away.

[DJP]

The thing is, though it’s probably only important if you want to be an ultra-geek, as far as I know, Marx never used the term ‘labour theory of value’ to refer to his theories.Marx didn’t set out to come up with a theory to explain the individual prices of commodities (though his theory does this) but a theory to explain how labour is regulated in a capitalist exchange economy.A lot of introductions to Marx say that he said that the price of individual commodities gravitate towards there value (socially necessary labour time) equivalent  but I don’t think this is necessarily the case. All Marx said was that total value equals total price and that value and surplus value is distributed between capitalists through the competitive struggle for profits.In Capital 1 Marx, to illustrate that value is created in production and not exchange, presumes that price equals value. In the later volumes this presumption is dropped to explain the workings of the market and competition.

[Young Master Smeet]

DJP wrote:

A lot of introductions to Marx say that he said that the price of individual commodities gravitate towards their value (socially necessary labour time) equivalent  but I don’t think this is necessarily the case. All Marx said was that total value equals total price and that value and surplus value is distributed between capitalists through the competitive struggle for profits.

Actually, I would say the opposite, goods only sell at their value by accident, and Marx was wrong, total prices don’t equal total values (and, I suspect it would be the case that a good deal of value goes unrealised as price).  I think value is more like a sort of gravity for prices, which are subject to other forces as well.

[DJP]

Young Master Smeet wrote:

Actually, I would say the opposite, goods only sell at their value by accident, and Marx was wrong, total prices don’t equal total values (and, I suspect it would be the case that a good deal of value goes unrealised as price).  I think value is more like a sort of gravity for prices, which aere subject to other forces as well.

Interesting. I would agree that for an individual commodity, price = value only by accident, I think Marx would have said this?’Value’ is expressed in terms of socially necessary labour-time, ‘exchange-value’ in price. Socially necessary labour time is determined through the mechanism of market exchange. If capital fails to become valorised, i.e expanded in production, it is because it has not been invested in socially necessary avenues.In Marx total value = total price is true by definition. To say something else is to depart from what Marx said, which would mean having to use a completely different analysis.The above is as much a question as a statement.

[Young Master Smeet]

DJP wrote:

Interesting. I would agree that for an individual commodity, price = value only by accident, I think Marx would have said this?

I was just reading a passage in Grundrisse (link) t’other day where he said pretty much that.

Marx wrote:

The value (the real exchange value) of all commodities (labour included) is determined by their cost of production, in other words by the labour time required to produce them. Their price is this exchange value of theirs, expressed in money. […] The value of commodities as determined by labour time is only their average value. […] The market value is always different, is always below or above this average value of a commodity. Market value equates itself with real value by means of its constant oscillations, never by means of an equation with real value as if the latter were a third party, but rather by means of constant non-equation of itself (as Hegel would say, not by way of abstract identity, but by constant negation of the negation, i.e. of itself as negation of real value).

DJP wrote:

Socially necessary labour time is determined through the mechanism of market exchange. If capital fails to become valorised, i.e expanded in production, it is because it has not been invested in socially necessary avenues.

Value transfers across branches of industry via the rate of profit (i.e. the price of a good is calculated as the price of prduction plus the rate of profit) in those industries with relatively large labour inputs transfer surplus value to industries with large capital inputs.  It’s perfectly reasonable to say that some surplus value is not realised as price, but merely transfers direct to consumers.

DJP wrote:

In Marx total value = total price is true by definition. To say something else is to depart from what Marx said, which would mean having to use a completely different analysis.

Marx was wrong on this one, his maths on the transformation problem have been exploded, and all other attempts to make that work are truly tortuous, it’s easier to say that prices can’t equal value. The simplest disproof are antiques and arts: their prices are not at all determined by value (since they are unique and cannot be reproduced).

[DJP]

Young Master Smeet wrote:

DJP wrote:

In Marx total value = total price is true by definition. To say something else is to depart from what Marx said, which would mean having to use a completely different analysis.

Marx was wrong on this one, his maths on the transformation problem have been exploded, and all other attempts to make that work are truly tortuous, it’s easier to say that prices can’t equal value. 

Having re-read Kliman’s ‘Reclaiming Capital’ I’m not so sure about this. The so-called ‘transformation problem’ is not a problem at all. The problems come from mis-interpretating what Marx wrote.A further consequence of total prices not equaling value would be that all of Marx’s arguments about exploitation go out the window.

Quote:

The simplest disproof are antiques and arts: their prices are not at all determined by value (since they are unique and cannot be reproduced). 

I don’t think this supports at all what you are saying; the price paid from them comes out of the total surplus value, unless they are bought with funny money how can this not be the case?

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