Yet_Another_Boring_Marxist
1st December 2012, 18:44
I wrote this critique of the Austrian School a while ago and I want to post it on the r/communism group blog, however since I've only read a hundred and a half pages of Das Kapital I thought it would be good to let you look it over. Also there are a few things in my critique that go directly against Marx, such as the fact that I do not agree with him that money is a commodity since it does not have any value outside of the market place, however I don't think this is a problem because he stated very explicitly in Das Kapital that money's value as a commodity came from the fact that it's value was composed of gold, hence it's not relevant in today's world. Anyway, here we go:
A Critique of the Subjective Theory of Value
The Austrian School, believing that it has the solution to every major economic debate, has attempted to eliminate the entirety of socialist economics in one fowl swoop by disproving the Labor Theory of Value. According to Jim Cox:
"Disagreements between the socialist theory and that of the free marketeer can ultimately be traced back to the question of the theory of value"~ The Concise Guide to Economics
Oh really now Jim Cox, is that so? I was under the impression that our criticism of capitalism stemmed from the fact that under capitalism there can be 3.5 million homeless people while there are over a 18 vacant houses 1., or from the fact that it is a system that has allowed 80 million people world wide to starve to death when there is enough food produced each year to feed everyone in the world over 2700 calories!.2, or perhaps we simply disagree with capitalism because we earnestly believe the economic theories of capitalism simple don't make logical sense and that a better economic system is possible. But I digress.
Jim Cox goes on to disprove socialism by criticizing Marx's pizza craving:
"If the labor theory of value was correct then a diamond found in a diamond mine would be of no greater value than a rock found right next to it since each would require the same "amount" of labor-time... According to the labor theory of value if you have a slice of pizza for lunch, valued because of the labor-time required to produce it, you must necessarily value the next slice the same. The labor theory of value is a denial of the well-established law of diminishing marginal utility which states that the value to the consumer falls with additional consumption of the good in question. How a true believer Marxist ever justifies ceasing pizza eating is still a mystery." ~The Concise Guide to Economics
He then goes on to criticize the socialist's taste in film
"One has to wonder what two Marxists attending a movie do as they leave together. Is each timid in expressing his opinion as to the pleasure or displeasure of the experience since he may disagree with his companion?"
"After all, the movie required the same amount of labor-time in its production. How in this theory can the value of land space, a nature-given resource, ever be explained? According to the labor theory of value, if a skilled carpenter produces a solid, comfortable chair which is useful for decades in a mere four hours, whereas a klutz in four days produces a chair which collapses with the first attempted use, the latter chair is more valuable."
So what does Jim Cox propose in the place of the Labor Theory of Value?
"The alternate theory, the correct theory of value, is that value is subjective. The subjective theory of value concludes that goods have no inherent value, that goods are valuable only to the degree that there is a valuer desiring the good…Returning to the examples above, the diamond is more valuable because people enjoy a diamond more than a rock, a photo of someone dear is more important to the photo owner than a photo of a stranger. People stop eating pizza after a few slices because the (necessarily subjective) pleasure diminishes with additional consumption; different movies appeal to different patrons' tastes. A working chair is preferred to a pile of chair pieces...In short, the whole of socialist economic theory is derived from the mistaken labor theory of value--it collapses for lack of a base; the whole of free market economic theory is derived from the solid base of the valid subjective theory of value."
Admittedly, Jim Cox does make a valid point. From this point of view it would look like the value of a good can't be said to come from the price of labor since the value of a good fluctuates with the supply of the good, the demand for the good, and it's marginal utility. However, Jim Cox ignores an important question, where does value and wealth come from exactly?
Monetary wealth is not a means to itself. Money is entirely without value outside of the context of commerce and therefore cannot be called a commodity.3 because a commodity can satisfy a need or want simply through the act of possessing or using it. For example: if I work an hour and this hour is rewarded with about eight dollars, I can then use that money to purchase a good that is created by labor and has value, such as a cell phone and I can say that said cell phone was worth an hour of work. Now let’s say the cell phone is worth 16 dollars, then it's worth two hours of work. Without the context of the exchange, money has no value because the very act of work is a means of obtaining goods which have value, not the money it's self since money is no more than a physical manifestation of the total value of work possessed. Though there is one problem with this scheme.
What if I work for two hours, and find out that the price of the cell phone has now changed to three hours of work due to various market factors? Now, if the value of the good produced by work changes, then how can this be reconciled with the fact that the amount of value I possess in the form of money does not change with the value of work I did yesterday?
The answer is that the amount of money I am paid for my work is based off the value of that work at the time I was paid. Therefore money represents the value of work within a fixed amount of time, or that if I earned eight dollars yesterday from work that is now worth ten dollars today, then the money I have is still eight dollars since my money represents the value of the work yesterday rather than the constant market value of the work, since such a value doesn't exist due to the constant fluctuation of market value.
So, let’s say I am at a jewelry store and I see a rock next to a diamond. Now, I am indifferent to the amount of labor was taken to mine these objects, as like Jim Cox says, I am only interested in their marginal utility value. So If they were the same price I'd buy the diamond because the diamond has more marginal utility value, and likewise I am more willing to pay a higher price for the diamond. But when I pay for the diamond, I am making a value judgment of the diamond by agreeing that the diamond is worth the money to pay for it, and more importantly the amount of work I put in to make that money. So the value of the diamond comes from labor not because the consumer considers the diamond as valuable as the value of the labor that it took to create the diamond, but because by agreeing to purchase the diamond the consumer is agreeing that the diamond is as valuable as the work it took to be able to pay for it. Ergo, the value the diamond has according to the consumer comes from labor but not necessarily the labor it took to create the diamond but rather the value judgment that the consumer makes every time he consents that the price of a good is equal or less than the amount of labor it takes to pay that price. However there is another problem with this, how can a diamond be hundreds of dollars and days of work if the work.
The answer is that in order for the capitalist to make a profit, he pays the worker less than the full monetary value of his work and pockets the remaining surplus value for himself. The very system of wage labor is defined by extracting this unpaid surplus labor from the wage laborer and therefore rewarding the wage laborer far less than he has actually created. For example, if a capitalist pays a diamond miner 7 dollars for every diamond that the miner can bring to him (which is the common rate for African miners) then he can resell said diamond for 100 dollars, thus earning him a profit of 93 dollars without contributing to any value creation while the creator of wealth himself receives only a measly 7 dollars of labor value when the full value of his labor is 100 dollars. Therefore, the relationship between the creator of value, the worker, and the capitalist that employs him is a parasitic relationship where the worker, under the threat of death through starvation, works for the capitalist and only receives partial payment for the value he creates, while the himself capitalist receives the majority of the value created by the worker without creating value himself.
The extraction of surplus labor from wage labor by the capitalist is proof that capitalism is an inherently exploitative system and that the existence of the capitalist class is only possible as long as the worker is exploited. If the merit of socialist economics and capitalist economics is entirely based on the labor theory of value, then the fact that the labor theory of value proves that capitalism can not help but to oppress the working class ultimately demonstrates the folly of those who believe that capitalism is the least oppressive economic system and that the working class can be emancipated from anything less than a socialist revolution.
Notes 1.http://www.truthdig.com/eartotheground/item/more_vacant_homes_than_homeless_in_us_20111231/ 2.http://www.worldhunger.org/articles/Learn/world%20hunger%20facts%202002.htm 3. While Marx did say that money was a commodity, this was because money was fixed to gold during Marx’s time. Since that is no longer the case, then it can be said that money is not a commodity as it has no value independent of the market place.
A Critique of the Subjective Theory of Value
The Austrian School, believing that it has the solution to every major economic debate, has attempted to eliminate the entirety of socialist economics in one fowl swoop by disproving the Labor Theory of Value. According to Jim Cox:
"Disagreements between the socialist theory and that of the free marketeer can ultimately be traced back to the question of the theory of value"~ The Concise Guide to Economics
Oh really now Jim Cox, is that so? I was under the impression that our criticism of capitalism stemmed from the fact that under capitalism there can be 3.5 million homeless people while there are over a 18 vacant houses 1., or from the fact that it is a system that has allowed 80 million people world wide to starve to death when there is enough food produced each year to feed everyone in the world over 2700 calories!.2, or perhaps we simply disagree with capitalism because we earnestly believe the economic theories of capitalism simple don't make logical sense and that a better economic system is possible. But I digress.
Jim Cox goes on to disprove socialism by criticizing Marx's pizza craving:
"If the labor theory of value was correct then a diamond found in a diamond mine would be of no greater value than a rock found right next to it since each would require the same "amount" of labor-time... According to the labor theory of value if you have a slice of pizza for lunch, valued because of the labor-time required to produce it, you must necessarily value the next slice the same. The labor theory of value is a denial of the well-established law of diminishing marginal utility which states that the value to the consumer falls with additional consumption of the good in question. How a true believer Marxist ever justifies ceasing pizza eating is still a mystery." ~The Concise Guide to Economics
He then goes on to criticize the socialist's taste in film
"One has to wonder what two Marxists attending a movie do as they leave together. Is each timid in expressing his opinion as to the pleasure or displeasure of the experience since he may disagree with his companion?"
"After all, the movie required the same amount of labor-time in its production. How in this theory can the value of land space, a nature-given resource, ever be explained? According to the labor theory of value, if a skilled carpenter produces a solid, comfortable chair which is useful for decades in a mere four hours, whereas a klutz in four days produces a chair which collapses with the first attempted use, the latter chair is more valuable."
So what does Jim Cox propose in the place of the Labor Theory of Value?
"The alternate theory, the correct theory of value, is that value is subjective. The subjective theory of value concludes that goods have no inherent value, that goods are valuable only to the degree that there is a valuer desiring the good…Returning to the examples above, the diamond is more valuable because people enjoy a diamond more than a rock, a photo of someone dear is more important to the photo owner than a photo of a stranger. People stop eating pizza after a few slices because the (necessarily subjective) pleasure diminishes with additional consumption; different movies appeal to different patrons' tastes. A working chair is preferred to a pile of chair pieces...In short, the whole of socialist economic theory is derived from the mistaken labor theory of value--it collapses for lack of a base; the whole of free market economic theory is derived from the solid base of the valid subjective theory of value."
Admittedly, Jim Cox does make a valid point. From this point of view it would look like the value of a good can't be said to come from the price of labor since the value of a good fluctuates with the supply of the good, the demand for the good, and it's marginal utility. However, Jim Cox ignores an important question, where does value and wealth come from exactly?
Monetary wealth is not a means to itself. Money is entirely without value outside of the context of commerce and therefore cannot be called a commodity.3 because a commodity can satisfy a need or want simply through the act of possessing or using it. For example: if I work an hour and this hour is rewarded with about eight dollars, I can then use that money to purchase a good that is created by labor and has value, such as a cell phone and I can say that said cell phone was worth an hour of work. Now let’s say the cell phone is worth 16 dollars, then it's worth two hours of work. Without the context of the exchange, money has no value because the very act of work is a means of obtaining goods which have value, not the money it's self since money is no more than a physical manifestation of the total value of work possessed. Though there is one problem with this scheme.
What if I work for two hours, and find out that the price of the cell phone has now changed to three hours of work due to various market factors? Now, if the value of the good produced by work changes, then how can this be reconciled with the fact that the amount of value I possess in the form of money does not change with the value of work I did yesterday?
The answer is that the amount of money I am paid for my work is based off the value of that work at the time I was paid. Therefore money represents the value of work within a fixed amount of time, or that if I earned eight dollars yesterday from work that is now worth ten dollars today, then the money I have is still eight dollars since my money represents the value of the work yesterday rather than the constant market value of the work, since such a value doesn't exist due to the constant fluctuation of market value.
So, let’s say I am at a jewelry store and I see a rock next to a diamond. Now, I am indifferent to the amount of labor was taken to mine these objects, as like Jim Cox says, I am only interested in their marginal utility value. So If they were the same price I'd buy the diamond because the diamond has more marginal utility value, and likewise I am more willing to pay a higher price for the diamond. But when I pay for the diamond, I am making a value judgment of the diamond by agreeing that the diamond is worth the money to pay for it, and more importantly the amount of work I put in to make that money. So the value of the diamond comes from labor not because the consumer considers the diamond as valuable as the value of the labor that it took to create the diamond, but because by agreeing to purchase the diamond the consumer is agreeing that the diamond is as valuable as the work it took to be able to pay for it. Ergo, the value the diamond has according to the consumer comes from labor but not necessarily the labor it took to create the diamond but rather the value judgment that the consumer makes every time he consents that the price of a good is equal or less than the amount of labor it takes to pay that price. However there is another problem with this, how can a diamond be hundreds of dollars and days of work if the work.
The answer is that in order for the capitalist to make a profit, he pays the worker less than the full monetary value of his work and pockets the remaining surplus value for himself. The very system of wage labor is defined by extracting this unpaid surplus labor from the wage laborer and therefore rewarding the wage laborer far less than he has actually created. For example, if a capitalist pays a diamond miner 7 dollars for every diamond that the miner can bring to him (which is the common rate for African miners) then he can resell said diamond for 100 dollars, thus earning him a profit of 93 dollars without contributing to any value creation while the creator of wealth himself receives only a measly 7 dollars of labor value when the full value of his labor is 100 dollars. Therefore, the relationship between the creator of value, the worker, and the capitalist that employs him is a parasitic relationship where the worker, under the threat of death through starvation, works for the capitalist and only receives partial payment for the value he creates, while the himself capitalist receives the majority of the value created by the worker without creating value himself.
The extraction of surplus labor from wage labor by the capitalist is proof that capitalism is an inherently exploitative system and that the existence of the capitalist class is only possible as long as the worker is exploited. If the merit of socialist economics and capitalist economics is entirely based on the labor theory of value, then the fact that the labor theory of value proves that capitalism can not help but to oppress the working class ultimately demonstrates the folly of those who believe that capitalism is the least oppressive economic system and that the working class can be emancipated from anything less than a socialist revolution.
Notes 1.http://www.truthdig.com/eartotheground/item/more_vacant_homes_than_homeless_in_us_20111231/ 2.http://www.worldhunger.org/articles/Learn/world%20hunger%20facts%202002.htm 3. While Marx did say that money was a commodity, this was because money was fixed to gold during Marx’s time. Since that is no longer the case, then it can be said that money is not a commodity as it has no value independent of the market place.