The Labor Theory of Value as an aggregate value of human production

[Dean]

OK, I've always struggled with the notion of the LTV until this morning when I was thinking of the criticism in general expressed in Bohm-Bawerk's critique of Marx. He ultimately argues that, because market pricing ultimately fluctuates from the labor evaluation model, and Marx accepts this point in his works, the LTV is inadequate or wrong in terms of economic valuation.

However, there is an important distinction between the Market and Labor based models:

The LTV describes a constant function of the work force. That is to say, the LTV, when applied to a given product, reflects a fraction of potential output, which in turn is directly tied to the available labor force and hours in a given society.

The Market value model describes a fluctuating, leverage-based model of pricing. This model is tied to political and economic constructs, as well as provincial characteristics. So when the market values something, it reflects the dynamics of power - not of available productive capacity.


Thoughts?

[∞]

Wait so does he reject or accept the LTV?:confused:

[Dean]

Marx uses the LTV to explain how labor value is transferred to the capitalist class.

I think its absurd to reject the LTV on purely abstract grounds. What else can define the relative value of something? The labor cost of something directly translates into a certain function of relative scarcity in human society.

[RedMaterialist]

Marx uses the LTV to explain how labor value is transferred to the capitalist class.

I think its absurd to reject the LTV on purely abstract grounds. What else can define the relative value of something? The labor cost of something directly translates into a certain function of relative scarcity in human society.

Surplus labor value is transferred to the capitalist class when the capitalist takes or appropriates the commodity which the worker has produced, to which the worker has added value during the production process.

The labor cost of something (in capitalist production) is determined by the cost necessary to produce the labor. This cost is manifested in the market price of the labor.

It wasn't Marx who discovered the labor theory of value. Ricardo, Adam Smith and others did that. Marx did, however, discover surplus value and showed how it is appropriated by the capitalist as profit.

[Dean]

Surplus labor value is transferred to the capitalist class when the capitalist takes or appropriates the commodity which the worker has produced, to which the worker has added value during the production process.

The labor cost of something (in capitalist production) is determined by the cost necessary to produce the labor. This cost is manifested in the market price of the labor.

It wasn't Marx who discovered the labor theory of value. Ricardo, Adam Smith and others did that. Marx did, however, discover surplus value and showed how it is appropriated by the capitalist as profit.

No, he didn't. Other thinkers alluded to it (and I'm 99% sure I've read of another who provided a framework for it)- he went more in depth, however. Adam Smith recognized its presence, for instance.

An interesting thing about Adam Smith... he strongly expresses the LTV in the very first lines of The Wealth of Nations.

When people reject the LTV I ask them - "what else would you propose we replace it with?" Subjective and marginal theories of value only work in (and refer to) specific phenomena - they don't explain how value is created.

Recognizing the shortcomings of the LTV shouldn't be a shorthand model for dismissing it.

[mikelepore]

When people reject the LTV I ask them - "what else would you propose we replace it with?" Subjective and marginal theories of value only work in (and refer to) specific phenomena - they don't explain how value is created.

Many capitalism defenders say that value is created by each act of two people agreeing to make an exchange.

They usually commit this fallacy of composition: "I wouldn't have agreed unless the exchange was an improvement for me, and you wouldn't have agreed unless the exchange was an improvement for you, therefore the net result of many people in the world making agreements is that the environment generally is continuously being improved."

[Revolutionair]

I am not going to kill you, if you give me 5 dollars. This exchange is an improvement for me, else I would not have suggested it. This exchange is an improvement for you, else you would not have accepted. I just created value, thanks Austrian school!

[mikelepore]

Revolutionair, your response is the same as mine -- sort of -- I told them: I won't stick this hot poker into your eye if you'll sign the confession -- exactly the same idea.

[anarkostalinist]

I think Marx's main point was to take the existing LTV of Smith/Ricardo and introduce the concept of exploitation. His predecessors' LTV simply showed that market prices were based on the quanity of labor to be avoided by the purchaser (by buying on the market instead of making it himself) -- they were trying to show a "scientific" foundation for prices beyond mere haggling in the market. Marx wanted to make political economy serve the working class struggle by showing that all "exchange value" (commodities sold at market prices) has its origin in the partially remunerated labor of the working class, the exchange-value of production exceeding the cost of "reproduction of labor" -- basically the simple idea that we're paid less than the value of what we produce. Profit is thus not the result of the "genius" or "thriftiness" of business owners/managers, but simply stolen from the working class in the form of surplus-value, the unremunerated portion of the workers' labor. By introducing the concept of "average labor-time", he removes the market-based valuation of wages from consideration of profit. In other words the price of labor is not an exchange-value like any other commodity, but the result of capitalist oppression of the working class, which permits the institutionalized theft of surplus-value. Though Marx didn't discuss this, I think the most radical point of the LTV is that once communism establishes an egalitarian economic system, we can manage a centrally planned economy based on units of "average labor" instead of money, representing the depreciation of production machinery, extraction/transport of raw materials, etc., as fractional "labor-minutes" in the final total "labor-value" of a commodity. The elimination of money as a means of exchange and accounting is the most radical consequence of the LTV, and a necessary step in the evolution of communist society which could thus avoid black markets, suppressed inflation, managerial bargaining, and most other "failures" of central planning. Needless to say, labor-based accounting to the level required for national-scale economic planning would never have been possible before the development of contemporary information systems, so it was inevitable that communist countries could never really "implement" the LTV as the foundation of their economy, and thus inevitably they reverted to irrational prices and inegalitarian, capitalist policies.

[KC]

OK, I've always struggled with the notion of the LTV until this morning when I was thinking of the criticism in general expressed in Bohm-Bawerk's critique of Marx. He ultimately argues that, because market pricing ultimately fluctuates from the labor evaluation model, and Marx accepts this point in his works, the LTV is inadequate or wrong in terms of economic valuation.Well the entire issue of the "transformation problem" is that Marx in Volume III transfers from values to prices of production without really explaining it (I think he does so in a sort of dismissive manner, as if it wasn't a problem at all, although I don't remember exactly what he says and am too lazy to dig up quotes in Capital).

Bohm-Bawerk's entire argument is that this is not possible because abstracting prices of production to values would be abstracting to meaninglessness.

This was due to his complete misunderstanding of both Marx's theory of value and of what he meant by "price of production". Sweezy explained this - in his exceptionally well-written preface to Hilferding's response to Bohm-Bawerk - as due to the fundamental difference in outlook between the political and neoclassical economists.

This is why Hilferding, in his response, starts at the krux of the real disagreement - that of the meaning of value - and then proceeds from there all the way up Bohm-Bawerk's argument to its highest point - the transformation problem - and shows how it is completely wrong in every aspect, from both the presumptions being made to the conclusions and accusations put forward.

This fundamental difference is in treating value as a social unit, i.e. as a social relation between people that is imposed on the good by social interaction - the Marxian position - versus treating it as an objective thing that is inexplicable through social interactions.

To neoclassical economists value is something imposed on people by a good; to Marxists it is something imposed upon a good by people. This is easily explained by the neoclassical fascination with appearances, and how things look on the surface, and their refusal to go deeper. It is ultimately explained by both Marx's theory of alienation and, in capitalist society specifically, commodity fetishism.




The LTV describes a constant function of the work force. That is to say, the LTV, when applied to a given product, reflects a fraction of potential output, which in turn is directly tied to the available labor force and hours in a given society.

The Market value model describes a fluctuating, leverage-based model of pricing. This model is tied to political and economic constructs, as well as provincial characteristics. So when the market values something, it reflects the dynamics of power - not of available productive capacity.Marx reconciled the laws of supply and demand and the fluctuation of market prices with the labor theory of value in Wage Labour & Capital. If you accept that the transformation of value into prices of production isn't an issue, that is.

Bah, just saw this thread is old as fuck.

[RedZelenka]

In my opinion, Boehm-Bawerk's critique is right, as far as it goes. The LTV can be successfully reformulated in a subjective mold (http://www.mutualist.org/id56.html), but as it stood Marx' economic doctrines were both wrong and incomplete on many grounds. This is on of many reasons why, despite my Communist tendencies, I have not been able to call myself a Marxist.

[ZeroNowhere]

Bohm-Bawerck did not have a single criticism. Which one are you referring to? For example, the inconsistency criticism is simply a clear symptom of not having paid attention to either volumes I or III, and is generally his best-known one, so I presume that you don't mean that one.

[RedZelenka]

I'm talking about the fact that any cost-theory or objective labor theory of value is nonsense. Value is clearly subjective, it doesn't even make sense outside of that context. You don't even have to get into the marginal school to realize this, it's already in Stirner.

I don't really think it's even worth arguing that Marx's economics were flawed in many ways, he was basing himself off of Ricardo and people who wrote in the 18th century. As much as it may bug the Marxists, we have made advances in economics since then.

[Zanthorus]

Value is clearly subjective, it doesn't even make sense outside of that context.

When Marxists refer to 'Value' in the context of capitalism, we refer to the common magnitude which is expressed by the exchange-value's of commodities. When two objects are equated with one another as exchange-value's, their palpable bodily existence is abstracted from and the relation between them reduced to a purely quantitative determination. A certain magnitude of value can be expressed in terms of televisions, guitar amplifiers, shoes, waste paper bins or whatever you like, it in no way effects this magnitude. If economic value was subjective, this would be impossible, as televisions, guitar amplifiers and waste paper bins all have different subjective worth to different individuals. The idea that value is an objective social quanta comes out more clearly when we examine the preconditions for the production of useful goods to be simultaneously the production of exchangeable goods, goods with an exchange-value. In the first place, goods with exchangeable value must be some useful good. But not merely a good which is useful for the immediate producer. Otherwise it would be instantly consumed. In order to be exchanged, the good must be useful for someone other than the immediate producer, and form a use-value for the producer only insofar as it is capable of this exchange. The use-value produced must be a social use-value. For a good to be a social use-value, it must be produced within the context of a social division of labour, which forces all producers to rely on social production for the satisfaction of their individual needs. But not all social forms with a division of labour produce exchange-values. Within the capitalist enterprise itself, an extensive division of labour preponderates. Yet the products within the firm never take the form of exchange-value, they only take this form when being exchanged with other firms. The difference between the division of labour within the firm and between firms is that in the latter the labour of the different branches is private labour, labour performed seperately from the rest of society, for the account of private individuals. The fact that labour in capitalist society is private labour which creates social use-values necessitates some mechanism for the private labour to take on a social form. This medium through which private labour becomes social is precisely value. Value is what regulates the interactions between the private individuals of capitalist society, and apportions out the labour-time of society between the differing branches of production in order to satisfy social wants, the latter being a natural necessity in all forms of society, the operation of which can only occur in commodity producing societies through the medium of value. As such a medium, through which private labour becomes it's opposite social labour, the proposition that the substance of value is social labour-time becomes not only an eminently sensible proposition, but in fact a tautology. What it means to say that labour is the source of value is precisely that social labour is the essence of social labour.


I don't really think it's even worth arguing that Marx's economics were flawed in many ways, he was basing himself off of Ricardo and people who wrote in the 18th century. As much as it may bug the Marxists, we have made advances in economics since then.

Marx was not merely 'basing' himself on Ricardo, he improved on Ricardo's theory in immeasurable ways. For Ricardo, the Labour Theory of Value was a way of describing prices, one which broke down when it came upon various phenomena like monopolies or goods whose supply was inflexible. For Marx the labour theory of value is a description of the social relations of capitalism.

Anyway, according to your reasoning it wasn't even worth arguing over Francis Bacon's support for Atomism, since he was basing himself on Epicurus and Democritus in opposition to the previous thousand years of 'science' in Europe. Science however does not work like that. It does not continuously progress towards higher truths. Much of the time new empirical discoveries will throw a spanner in the works of the previous theory and whole new theories will have to be elaborated, or previously ridiculed theories may take on a new stature. The name 'Big Bang' was actually given to the theory by one of it's opponents, an eminently respected cosmologist whose name escapes me, but was reportedly attempting to ridicule the proponents of the theory by mocking the idea that the universe originated in a 'big bang'.

In social sciences, the state of any particular theory is even more difficult to state because it is difficult to carry out experiments in the same way in which physicists, chemists or biologists can. In the latter case, the experiment involves the observation by a subject of an object external to them. In the case of social science, the object of study includes the studying subjects themselves. This leads to all kinds of varing interests getting in the way of proper scientific inquiry, since what is being dealt with is not wether matter is constantly being created by a point in the centre of the universe or wether after the initial beggining of the universe nothing else was created, but subjects which deal with people's lives and livelihoods. Also, humans will not act the same in a laboratory as they will in their usual environments.

Many economists besides just Marxists will also dispute the 'advances' made in economics over the past hundred odd years. Keynesians, Post-Keynesians, Sraffians and Institutionalists all disagree with good portions of prevailing economic orthodoxy. In point of fact, economic orthodoxy is largely pro-market, so if we agree that economics is indeed advancing towards some kind of truth at present, we must also cease being Communists.

[zimmerwald1915]

The name 'Big Bang' was actually given to the theory by one of it's opponents, an eminently respected cosmologist whose name escapes me, but was reportedly attempting to ridicule the proponents of the theory by mocking the idea that the universe originated in a 'big bang'.
Not that it's relevant to the discussion, but it was Fred Hoyle.

[RedZelenka]

When two objects are equated with one another as exchange-value's
This, right here = nonsense. Objects are not equated in exchange. They are exchanged precisely because of a double-inequality of valuations. This is pretty obvious.

he improved on Ricardo's theory in immeasurable ways.
And screwed them up comparably.

[Dean]

I don't really think it's even worth arguing that Marx's economics were flawed in many ways, he was basing himself off of Ricardo and people who wrote in the 18th century. As much as it may bug the Marxists, we have made advances in economics since then.

I've heard this a million times from people who don't seem to understand their subject at all. If there are real criticisms, you can present them.


I'm talking about the fact that any cost-theory or objective labor theory of value is nonsense. Value is clearly subjective, it doesn't even make sense outside of that context. You don't even have to get into the marginal school to realize this, it's already in Stirner.
It would be more correct to say that value is the aggregation of subjective values. At the same time, it's clearly social.

But there are two disparate models of value to consider. When commodities confront each other in the market, they exist as magnitudes of value and substances of value. The former refers to the relative value of a commodity to others in a market, the latter is the substance, or character of value: use value.

Both can be seen as subjective. The value of 1 coat = 10 yd linen is subjective insofar as it refers to the value of a coat in relation to another commodity. The use-value is determined by subjective needs.

However, the magnitude of value is necessarily social. So, too, is use-value once it enters into exchange.

This is an example I've posted before to illustrate the point:

2 older men whose concepts of price are outdated confront each other in exchange. They both feel that, for instance, the price of milk is outlandish at $2.50/gallon when they used to get it for $1.00.

In this case, the one man is selling a bale of hay. He knows that in the past (the price he felt just) a bale of hay was worth $5.00. But today he frequently sees them going for $15.00.

What do you think he'll charge for his hay?

From this, it is apparent that valuation occurs as a function of exchangeable commodities; this means that value is necessarily social.

In fact, the very notion of "subjective value" is nothing but a basis for social value> So value can only be "subjective as opposed to social" in distancing it from social fact. Without going too far into that issue, its worth noting that value can only be enumerated in purely subjective situations; exchange, and commensurate trade-value cannot, therefore exist.

[Zanthorus]

This, right here = nonsense. Objects are not equated in exchange. They are exchanged precisely because of a double-inequality of valuations. This is pretty obvious.

All that 'double inequality of valuations' is that when two commodity producers exhcnage their products, the products they exchange have no immediate use-value for them, but only have a use-value insofar as they constitute exchange-value, and the use-value of the product as such is only a use-value for the buyer. It would certainly seem that this was an obvious enough point for Marx to grasp, since the latter is basically what is meant by labour being social labour. Chapter 2 of Capital again pretty clearly states that exchange only occurs when the goods produced by independent commodity producers do not form a use-value for their immediate owners. The problem here is that you are determined to conflate use-value and exchange-value. In terms of use-value it is fairly clear than in exchange there is a 'double inequality of valuations', but this 'inequality of valuations' leads to an equality of exchange-values, otherwise the exchange would not take place, as one commodity owner would have a product whose value was below that required to carry out the transaction.


And screwed them up comparably.

So Ricardo's tracing of the LTV back to the first man to kill a deer with a spear was 'screwed up' by Marx's analysis of how products take the form of value within a society of independent commodity producers? :lol: