Theory of Value

[RomuliousRevolution]

I have another question; What is the Theory of Value?


Romulious

[Invariance]

Labour Theory of Value (http://www.marxists.org/glossary/terms/l/a.htm#labour-theory-value)

[Nwoye]

well the study of the nature of value is a study into what gives everything we use (toothbrush, cell phone, computer, car, etc) its value.

Marx theorized that there were two kinds of value: exchange value and use value. use value is any value which comes from an item just by it's general usefulness - a sock has use value because it keeps my feet warm, a cell phone has use value because it is a means of long range communication, etc. use value exists in nature, and in modern society. exchange value however, is (according to Marx) independent of use value, and exists only in an exchange economy. also, he correctly pointed out that exchange value only exists in relation to other commodities. to illustrate, an apple has no intrinsic exchange value - it only gains value when viewed relatively with other commodities. we don't know how much value an apple actually has, we just know it has the same value as half of a watermelon and the same value as two oranges.

now Marx sought to find what common denominator all commodities could be juxtaposed against in order to determine their value. he proposed labor as the determinant of value - specifically, "socially necessary" labor. he basically said that we can reduce all labor to a single standard (socially necessary labor) and then judge the value of all commodities by how much socially necessary labor was embodied in them. it basically gave us a way to judge the value of commodities objectively, outside of exchange - it gives us a unit of measurement. instead of an apple equaling half of a watermelon or two oranges, it represents 10 minutes of labor. and a watermelon represents 20 minutes, and an orange represents 5 minutes.

from there, he used this theory of value (the labor theory of value) as the basis of his economic analysis - analyzing how value was added to commodities, and how this value was stripped away from laborers in the form of surplus value, thus creating profit for the capitalist.

also, as Sraffa pointed out, it gives us a way to aggregate the values of pieces of heterogeneous capital - through dated labor. but that's more high level economic stuff that we won't get into now.

[turquino]

For a long time classical economists puzzled over what it was that allowed different types and quantities of things to trade with one another. Why was it that 5 beds were equal in value to 1 house? The string of equalities: X amount of gold = Y amount of coal = Z amount of wool … etc. indicated all these things must share some common substance, but no physical quality (weight, shape, texture) of these things could be found to explain this equality.

The classical economists decided the common substance that gave a thing value must be human labour, measured in the duration and intensity used to produce it. A single locomotive might be equal to 100 tonnes of wheat because both took 10,000 hours of labour to produce. The value of the locomotive when it is finished is 10,000 labour hrs.

Karl Marx explained his theory of exploitation by distinguishing between ‘labour’ and ‘labour-power’. A worker performs labour for an owner, but the owner pays the worker for her labour-power (wages); that is the amount of labour in the commodities necessary to sustain and reproduce her for a period of time. The difference between the labour of the worker and what she receives for her labour-power is the ultimate source of capitalist profit.

Neoclassical economists only believe in subjective value, and reject the labour theory of value. To them something’s price is determined by its subjective ‘usefulness’ and the forces of supply and demand (which are explained by the law of value!).