The LTV and scarcity

[mollymae]

I'm having trouble figuring out how scarcity factors in to the labor theory of value. For example, say there was an extremely rare gemstone that could only be found in 2 or 3 mines. It wouldn't necessarily take any more labor to recover them, cut them and manufacture them, than any other more common gemstone. However, it would be worth much more on the market since it is scarce. How does the LTV apply to this hypothetical situation? Thanks

[bailey_187]

I had a similar question once, and it was explained like this:
Imagine a class a water that has 50ml in. There is always 50ml, but different factors, such as shaking it, can change the level the 50ml is at. The same with commodities. The socially necesary labour time is the 50ml, but market forces (in the gem case having little supply) can change the level it is at (the price) like shaking the class of water.
Dont know if that makes sense or is correct.

[Kotze]

extremely rare (...) wouldn't necessarily take any more laborHuh? If certain stuff is uncommon, it is usually also hard to find and unearth, which implies more labour.

[REVLEFT'S BIEGGST MATSER TROL]

I'm having trouble figuring out how scarcity factors in to the labor theory of value. For example, say there was an extremely rare gemstone that could only be found in 2 or 3 mines. It wouldn't necessarily take any more labor to recover them, cut them and manufacture them, than any other more common gemstone. However, it would be worth much more on the market since it is scarce. How does the LTV apply to this hypothetical situation? Thanks

Yeah but dem cappies would search for more of da gemz cause they rare, so they will stop being scarce eventually,

[mikelepore]

Just do the math.

Consider mineral "A", which is relatively common. Suppose you dig for 100 hours, and this extracts 5,000,000 grams of the mineral. Divide to take the ratio of hours/mass.

Consider mineral "B", which is relatively rare. Suppose you dig for 100 hours, and this extracts 5 grams of the mineral. Divide to take the ratio of hours/mass.

To say that a mineral is more "rare" is the *same thing* as saying that extracting it requiring a greater number of labor hours per unit of mass. It's not just a theorerical connection. The two phrases mean the same thing.

[mollymae]

Just do the math.

Consider mineral "A", which is relatively common. Suppose you dig for 100 hours, and this extracts 5,000,000 grams of the mineral. Divide to take the ratio of hours/mass.

Consider mineral "B", which is relatively rare. Suppose you dig for 100 hours, and this extracts 5 grams of the mineral. Divide to take the ratio of hours/mass.

To say that a mineral is more "rare" is the *same thing* as saying that extracting it requiring a greater number of labor hours per unit of mass. It's not just a theorerical connection. The two phrases mean the same thing.

ah! Okay.

[mikelepore]

But even after you solidly understand this point, don't expect that you will convince the strong capitalism supporters of it, such as the so-called Libertarians. They will respond with some ad hoc argument, that is, they will quickly throw together any response just to contradict you. They already have it in mind that any line of reasoning that seems to remind people that LABOR PRODUCES WEALTH must be rejected out of hand.

[mollymae]

What sort of objections do libertarians generally raise about the LTV?

[Jimmie Higgins]

I agree with what Kotze and Mike and other people said about the labor... the more labor value put in, the more base value the commodity will have.

But on top of that, scarcity does play a part because it can increase the "cost" or price of the item. Think about a mint condition old car - the cost is high because it is rare. So market fluctuation can cause the price to go up or down, but this price is still connected to the base value of the commodity. Everything being equal, a rare skateboard is not going to have the same value as an equally rare car from the same year and so on. Why? Because there is more base value in the car than in a skateboard - if it was only "scarcity" that mattered, then they would be of equal value and more or less equal cost.


What sort of objections do libertarians generally raise about the LTV?Short answer: labor is a free exchange and just one cost for the capitalist like machinery or rent. I think most see profit as the result of smart investments creating a bigger return - but they can not explain what creates value, they probably think that value is created by smart ideas and innovation or something like that.

Ironically, their hero Adam Smith is much closer to Marx in outlook than Smith is to modern economists because he - sometimes - recognized that labor is the source of extra value. David Ricardo is even better on the Labor theory of Value, but strangely I never hear libertarians citing him:lol:.

[mikelepore]

What sort of objections do libertarians generally raise about the LTV?

They ignore the part about how the theory applies to real commodities which are exchanged in the real world because they are useful to the buyers, and they point out that labor wasted making mud-pies wouldn't contribute to exchange value.

They ignore the part about how the theory refers to the labor time made necessary by the kinds of tools and methods that are typical for a given society, and they point out that if a person found a lump of gold just lying on the ground that it would still have a lot of exchange value.

They ignore the part about how the theory was developed to apply to generic commodities that are sold by the mass or volume (bushes of corn, tons of iron, etc.) and they point out that the the theory can't explain the market for collectible oddities like Rembrandt paintings.

They ignore the part about how the theory refers to commodities that are continuously produced, and they point out that the theory doesn't explain the market for land.

They ignore the part about how the value sets the base line around which the price fluctuates due to supply and demand, and they point out the fact of fluctuation due to supply and demand, as though Marx had never heard of it.

In short, many of their objections are based on misstating what the theory says.

But that's not all.

Another thing they will do is to claim that "value is subjective". To do this they will confuse the relevant meaning of the word "value" (ratios of exchange in the marketplace) with the other and irrelevant meaning of the word "value" (the psychological factor of how strongly a person likes something). This is how I usually reply to them: Whereas the word "subjective" applies to judgments that are matters of individual taste (such as a preference for fast music versus slow music, etc.), statistics about the economic reality, such as the values of commodities, can't be considered "subjective."

Often they will argue in favor of the theory of marginal utility that was proposed in 1888 by the economist Jevons. A response to that can get complicated, so I will skip that for now.

Often they will make a segue into their claim that wealth is created in the world by the acts of investor speculation, investment of savings, taking a risk, making a trade, and a "genius" having a "good idea" -- in other words, denying the socialist premise that wealth is created by the act of labor making intelligent modifications to nature's raw materials.

[mollymae]

Thanks for the replies.

[MarxSchmarx]

In case you are still wondering, there is quite a cottage industry based on showing how the labor theory of value is formally equivalent to the marginal theory of value (which deals with scarcity and suchwhat) and vice versa.

Here is one recent example of this trend, but it goes back at least to the 1960s:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1489383

and perhaps earlier in the eastern bloc.