Marxist_Fire
31st July 2006, 00:38
I am a Marxist, but I have several friends who are very strong proponents of capitalist economics. They have raised critiques of Marxism by denouncing the Labor Theory of Value as "outdated", "disproven" and "wrong." Another claim is that "even non-capitalists" have abandoned the LTV. I have several questions:
1. How, specifically, do you describe the LTV? What is it, exactly?
2. Why do people say the LTV is "outdated," "disproven," "wrong"? What are the criticisms of it?
3. Please explain more about the bourgeois notion of value: marginal utility, subjectivism, etc.
4. How can I effectively defend the LTV?
Thanks.
ComradeRed
31st July 2006, 02:01
1. How, specifically, do you describe the LTV? What is it, exactly? I've told few people about this, but when I was learning about the labor theory of value, I've thought of the "embodied labor" in a commodity kinda like the mud in a mound of mud.
Constant capital is simply a premade mound, variable capital adds more mud to the mound; mud being value.
Intuitively this makes sense, if you read chapter one of Kapital vol. I.
The relation of values, or magnitudes of mud mounds, is the exchangeability of a commodity.
This also explains why price depreciates over time ;) Value doesn't decrease in the commodity, other newer commodities' values increase.
2. Why do people say the LTV is "outdated," "disproven," "wrong"? What are the criticisms of it? Basically that the STV (subjectivist theory of value) is right and there's nothing that can be done about it. This is nonsense since there is no real argument.
Look no further than Neoclassical nonsense and Austrian Autism for criticisms.
3. Please explain more about the bourgeois notion of value: marginal utility, subjectivism, etc. Look at microeconomics, that's where bourgeois economics places their theory of value.
Specifically return to values, etc.
Here's some books on Microecon that's free :) (http://www.economicswebinstitute.org/books.htm)
4. How can I effectively defend the LTV? Well, you may want to point out that there is no real criticism against the LTV other than "It doesn't work that way, trust me, I somehow know magically."
Read as many alternative economic texts as you can. Not to brag but rather complain, most of them are unfortunately in technical journals that are very mathematical.
You may want to read Debunking Economics for more criticism of bourgeois economics, and also The Production of Commodities by Means of Commodities by Piero Sraffa (he's an economist inspired by Marx, there's a section in there on reducing labor back to dated labor inputs which works out mathematically too).
Short answer: learn math carefully, then criticize the hell out of microeconomic fallacies.
ComradeRed
1st August 2006, 08:30
-"The LTV cannot explain why works of fine art sell for millions of dollars or why aged wine garners such a high price." As for art, what do you think it is? It's pure labor (practically).
Do you think it just magically comes onto the canvas?
As for wine making, the fellow probably has no clue how wine is made. You have to take into account the labor from the grapes, making it into juice, making the caskets and bottles, fermenting, and the labor to make the means to do all of these things and transport it.
This stacks into a hefty amount of labor for some rather negligible amount of old grape juice.
-"The LTV cannot explain why land has exchange value." Marx mentions this in Das Kapital, vol. I, chapter 1:
A thing can be a use value, without having value. This is the case whenever its utility to man is not due to labour. Such are air, virgin soil, natural meadows, &c. A thing can be useful, and the product of human labour, without being a commodity. Whoever directly satisfies his wants with the produce of his own labour, creates, indeed, use values, but not commodities. In order to produce the latter, he must not only produce use values, but use values for others, social use values. (And not only for others, without more. The mediaeval peasant produced quit-rent-corn for his feudal lord and tithe-corn for his parson. But neither the quit-rent-corn nor the tithe-corn became commodities by reason of the fact that they had been produced for others. To become a commodity a product must be transferred to another, whom it will serve as a use value, by means of an exchange.)[12] Lastly nothing can have value, without being an object of utility. If the thing is useless, so is the labour contained in it; the labour does not count as labour, and therefore creates no value.
-"The LTV can't explain why money (bills, coins) is worth something when it is issued." This is something that I've been wondering about recently too, since there is no standard any more. But the role of money has remained invariant to change: to express value.
The actual value of the paper money itself is rather negligible, the real value is what it represents (the median of exchange).
It still holds in this situation, but more work needs to be done here.
-"With the LTV, a mud pie is worth as much as an apple pie." Well, taken in to account that there is labor in making apples, and the means to make the apples, and deliver the apples, and to make the means to deliver them, whereas mud is merely water and dirt and labor, it perfectly explains why mud pies are worth less than apple pies.
Ehhh, I get the argument:
Someone can spend hours and hours and hours working on making a giant mud pie, but it is worthless.
I need a good response to that argument.
"A thing can be a use value, without having value. This is the case whenever its utility to man is not due to labour. Such are air, virgin soil, natural meadows, &c. A thing can be useful, and the product of human labour, without being a commodity. Whoever directly satisfies his wants with the produce of his own labour, creates, indeed, use values, but not commodities. In order to produce the latter, he must not only produce use values, but use values for others, social use values. (And not only for others, without more. The mediaeval peasant produced quit-rent-corn for his feudal lord and tithe-corn for his parson. But neither the quit-rent-corn nor the tithe-corn became commodities by reason of the fact that they had been produced for others. To become a commodity a product must be transferred to another, whom it will serve as a use value, by means of an exchange.)[12] (http://marxists.org/archive/marx/works/1867-c1/ch01.htm#12) Lastly nothing can have value, without being an object of utility. If the thing is useless, so is the labour contained in it; the labour does not count as labour, and therefore creates no value."
Capital (http://marxists.org/archive/marx/works/1867-c1/ch01.htm#S4)
In other words, the labour theory of value is based on a unit of labour, which is defined as socially necessary labour. If the object being laboured upon has no use-value (i.e. it is useless), such as your mud pie, then it is valueless, as no socially necessary labour went into it.
1. Some people are more efficient with their time.
The above explanation also serves to answer this criticism. The labour theory of value uses labour as a unit, meaning that one unit of labour is a certain amount of socially necessary labour time. When someone labours more intensely, they are creating more value in a shorter period of time because of it.
"The value of a commodity would therefore remain constant, if the labour time required for its production also remained constant. But the latter changes with every variation in the productiveness of labour. This productiveness is determined by various circumstances, amongst others, by the average amount of skill of the workmen, the state of science, and the degree of its practical application, the social organisation of production, the extent and capabilities of the means of production, and by physical conditions. For example, the same amount of labour in favourable seasons is embodied in 8 bushels of corn, and in unfavourable, only in four. The same labour extracts from rich mines more metal than from poor mines. Diamonds are of very rare occurrence on the earth’s surface, and hence their discovery costs, on an average, a great deal of labour time. Consequently much labour is represented in a small compass. Jacob doubts whether gold has ever been paid for at its full value. This applies still more to diamonds. According to Eschwege, the total produce of the Brazilian diamond mines for the eighty years, ending in 1823, had not realised the price of one-and-a-half years’ average produce of the sugar and coffee plantations of the same country, although the diamonds cost much more labour, and therefore represented more value. With richer mines, the same quantity of labour would embody itself in more diamonds, and their value would fall. If we could succeed at a small expenditure of labour, in converting carbon into diamonds, their value might fall below that of bricks. In general, the greater the productiveness of labour, the less is the labour time required for the production of an article, the less is the amount of labour crystallised in that article, and the less is its value; and vice versâ, the less the productiveness of labour, the greater is the labour time required for the production of an article, and the greater is its value. The value of a commodity, therefore, varies directly as the quantity, and inversely as the productiveness, of the labour incorporated in it."
Capital (http://marxists.org/archive/marx/works/1867-c1/ch01.htm#S4)
2. Some people spend their time uselessly or they mess up.
Time spent uselessly or messing up isn't productive labour and therefore doesn't factor into the value of a commodity.
4. Products will always be subject to supply and demand and speculation.
Of course they will, but this is irrelevant. On average, commodities trade at their cost of production.
"
By the competition between buyers and sellers, by the relation of the demand to the supply, of the call to the offer. The competition by which the price of a commodity is determined is threefold.
The same commodity is offered for sale by various sellers. Whoever sells commodities of the same quality most cheaply, is sure to drive the other sellers from the field and to secure the greatest market for himself. The sellers therefore fight among themselves for the sales, for the market. Each one of them wishes to sell, and to sell as much as possible, and if possible to sell alone, to the exclusion of all other sellers. Each one sells cheaper than the other. Thus there takes place a competition among the sellers which forces down the price of the commodities offered by them.
But there is also a competition among the buyers; this upon its side causes the price of the proffered commodities to rise.
Finally, there is competition between the buyers and the sellers: these wish to purchase as cheaply as possible, those to sell as dearly as possible. The result of this competition between buyers and sellers will depend upon the relations between the two above-mentioned camps of competitors – i.e., upon whether the competition in the army of sellers is stronger. Industry leads two great armies into the field against each other, and each of these again is engaged in a battle among its own troops in its own ranks. The army among whose troops there is less fighting, carries off the victory over the opposing host.
Let us suppose that there are 100 bales of cotton in the market and at the same time purchasers for 1,000 bales of cotton. In this case, the demand is 10 times greater than the supply. Competition among the buyers, then, will be very strong; each of them tries to get hold of one bale, if possible, of the whole 100 bales. This example is no arbitrary supposition. In the history of commerce we have experienced periods of scarcity of cotton, when some capitalists united together and sought to buy up not 100 bales, but the whole cotton supply of the world. In the given case, then, one buyer seeks to drive the others from the field by offering a relatively higher price for the bales of cotton. The cotton sellers, who perceive the troops of the enemy in the most violent contention among themselves, and who therefore are fully assured of the sale of their whole 100 bales, will beware of pulling one another's hair in order to force down the price of cotton at the very moment in which their opponents race with one another to screw it up high. So, all of a sudden, peace reigns in the army of sellers. They stand opposed to the buyers like one man, fold their arms in philosophic contentment and their claims would find no limit did not the offers of even the most importunate of buyers have a very definite limit.
If, then, the supply of a commodity is less than the demand for it, competition among the sellers is very slight, or there may be none at all among them. In the same proportion in which this competition decreases, the competition among the buyers increases. Result: a more or less considerable rise in the prices of commodities.
It is well known that the opposite case, with the opposite result, happens more frequently. Great excess of supply over demand; desperate competition among the sellers, and a lack of buyers; forced sales of commodities at ridiculously low prices.
But what is a rise, and what a fall of prices? What is a high and what a low price? A grain of sand is high when examined through a microscope, and a tower is low when compared with a mountain. And if the price is determined by the relation of supply and demand, by what is the relation of supply and demand determined?
Let us turn to the first worthy citizen we meet. He will not hesitate one moment, but, like Alexander the Great, will cut this metaphysical knot with his multiplication table. He will say to us: "If the production of the commodities which I sell has cost me 100 pounds, and out of the sale of these goods I make 110 pounds – within the year, you understand – that's an honest, sound, reasonable profit. But if in the exchange I receive 120 or 130 pounds, that's a higher profit; and if I should get as much as 200 pounds, that would be an extraordinary, and enormous profit." What is it, then, that serves this citizen as the standard of his profit? The cost of the production of his commodities. If in exchange for these goods he receives a quantity of other goods whose production has cost less, he has lost. If he receives in exchange for his goods a quantity of other goods whose production has cost more, he has gained. And he reckons the falling or rising of the profit according to the degree at which the exchange value of his goods stands, whether above or below his zero – the cost of production.
We have seen how the changing relation of supply and demand causes now a rise, now a fall of prices; now high, now low prices. If the price of a commodity rises considerably owing to a failing supply or a disproportionately growing demand, then the price of some other commodity must have fallen in proportion; for of course the price of a commodity only expresses in money the proportion in which other commodities will be given in exchange for it. If, for example, the price of a yard of silk rises from two to three shillings, the price of silver has fallen in relation to the silk, and in the same way the prices of all other commodities whose prices have remained stationary have fallen in relation to the price of silk. A large quantity of them must be given in exchange in order to obtain the same amount of silk. Now, what will be the consequence of a rise in the price of a particular commodity? A mass of capital will be thrown into the prosperous branch of industry, and this immigration of capital into the provinces of the favored industry will continue until it yields no more than the customary profits, or, rather until the price of its products, owning to overproduction, sinks below the cost of production.
Conversely: if the price of a commodity falls below its cost of production, then capital will be withdrawn from the production of this commodity. Except in the case of a branch of industry which has become obsolete and is therefore doomed to disappear, the production of such a commodity (that is, its supply), will, owning to this flight of capital, continue to decrease until it corresponds to the demand, and the price of the commodity rises again to the level of its cost of production; or, rather, until the supply has fallen below the demand and its price has risen above its cost of production, for the current price of a commodity is always either above or below its cost of production.
We see how capital continually emigrates out of the province of one industry and immigrates into that of another. The high price produces an excessive immigration, and the low price an excessive emigration.
We could show, from another point of view, how not only the supply, but also the demand, is determined by the cost of production. But this would lead us too far away from our subject.
We have just seen how the fluctuation of supply and demand always bring the price of a commodity back to its cost of production. The actual price of a commodity, indeed, stands always above or below the cost of production; but the rise and fall reciprocally balance each other, so that, within a certain period of time, if the ebbs and flows of the industry are reckoned up together, the commodities will be exchanged for one another in accordance with their cost of production. Their price is thus determined by their cost of production.
The determination of price by the cost of production is not to be understood in the sense of the bourgeois economists. The economists say that the average price of commodities equals the cost of production: that is the law. The anarchic movement, in which the rise is compensated for by a fall and the fall by a rise, they regard as an accident. We might just as well consider the fluctuations as the law, and the determination of the price by cost of production as an accident – as is, in fact, done by certain other economists. But it is precisely these fluctuations which, viewed more closely, carry the most frightful devastation in their train, and, like an earthquake, cause bourgeois society to shake to its very foundations – it is precisely these fluctuations that force the price to conform to the cost of production. In the totality of this disorderly movement is to be found its order. In the total course of this industrial anarchy, in this circular movement, competition balances, as it were, the one extravagance by the other.
We thus see that the price of a commodity is indeed determined by its cost of production, but in such a manner that the periods in which the price of these commodities rises above the costs of production are balanced by the periods in which it sinks below the cost of production, and vice versa. Of course this does not hold good for a single given product of an industry, but only for that branch of industry. So also it does not hold good for an individual manufacturer, but only for the whole class of manufacturers.
The determination of price by cost of production is tantamount to the determination of price by the labor-time requisite to the production of a commodity, for the cost of production consists, first of raw materials and wear and tear of tools, etc., i.e., of industrial products whose production has cost a certain number of work-days, which therefore represent a certain amount of labor-time, and, secondly, of direct labor, which is also measured by its duration."
Wage Labour & Capital (http://www.marxists.org/archive/marx/works/1847/wage-labour/ch03.htm)
5. Some products require valuable and difficult to extract materials.
Which take more time to extract themselves, thereby increasing the value of the product.
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