The Labor Theory of Value

Trivas cites Brewster ( a prominent Austrian school economist)'s criticisms of Towards a New Socialism, I did not reply at the time, but last year at the urging of a Macedonian comrade I put up this reply to Brewster.

http://glasgow.academia.edu/paulcock...ue_of_Brewster

I don't believe the Cottrell and Cockshott model is a particularly effective rebuttal of the Misesian argument - though its has certain advantages - let alone the "only coherent intellectual opposition that the Austrian school faces from the left". I consider that it cedes crucial ground to the Austrians in accepting the need for a single universal unit of accounting - in this case labour time values rather than money - and it is to be noted that it envisages a limited role for the market in consumer goods which makes it more akin to a so called "market socialist" model

Mises' model is fatally flawed by its knee jerk assumption that a socialist economy would be a centrally planned economy (in the the sense of depending on a single society wide plan to coordinate inputs and outputs) This blinkered view of socialism operating according to what Mises called the "Fuhrer principle" disabled it from seeing that the relative scarcities of inputs could be effectively made known to producers via a self regulating system of stock control which, in turn, presupposes a decentralised socialist economy rather than a centralised one.

Once we possess information concerning 1) stock levels 2) technical ratios of a given input to a given output, we are in a position to determine the most appropriate combination of factor inputs that takes into account their relative scarcities and the opportunity costs of our decisions. We would thus be able to economise on inputs in proportion to their relative scarcities using only calculation in kind - not some administratively cumbersome universal unit of accounting

All of this is pretty straightforward and the bare bones of such a system are already in place and apparent in the way, for example, a modern supermarket monitors and regulates its stock flows. Here we see calculation in kind operating alongside monetary accounting. The socialist proposal is essentially to get rid of the latter completely (which incidentally consumes or wastes vast amounts of resources in the form of capitalist on-costs).

In the case of input supply bottlenecks all that is required is some notion of a hierarchy of production priorities as a rule of thumb with which to allocate scarce inputs. This I believe is the only real challenge to a socialist system of calculation but i do not consider it to be insurmountable problem at all

One of the best examples of this kind approach to socialist calculation is here http://www.worldsocialism.org/spgb/p...al-alternative

Is it just me or is this guy skipping a lot of posts?

Who are you referring to and what do you mean?

The OP, who seems to skip over all the posts I'd want to see him reply to.

TNS was not intended as a refutation of Mises but of Nove. The link I gave as a refutation of Mises relates to Kantorovich's demonstration that calculation in kind is possible, contra Mises.

This argument was long ago demolished by Bukharin who pointed out the circularity of asserting that subjective valuations determine prices when in fact the price of a commodity affects how we subjectively value it. Thus should the price be excessive we may well decide (subjectively of course). that we dont really want it after all

In still intrigued though by the mental gymnastics which our market apologists undergo in order to explain how it is, as Mises puts it, “exchange value… arises out of the interplay of the subjective valuations of all who take part in exchange" How exactly does the one thing translate into the other? The arguments put forward have always stuck me as extremely woolly, vague and unconvincing to the point of metaphysical obscrutantism. For instance a hungry pauper may value a slap up meal extremely highly but how does her valuation of this enter into the process of determing exchange ratios when she posseses little or nothing in the way of purchasing power with which to give expression to her "subjective valuation"? I would seriously love to know how your Austrian economist gets round that one

The Austrian School is based upon very poor economic foundations, in my opinion, and their notion of value is often extremely confused - often they confuse use value with exchange value and so end up barking up the wrong tree when attacking critics like Marxists

The argument that trade is a positive sum game is a case in point. You earlier stated that you would only trade your apple for my orange if you valued my orange more than your apple (and conversely I would only trade with you if I valued your apple more than my orange) -which kind of illustrates this confusion. Yes. that is obviously true from a perspective of use value but it is a different matter when it comes to the determination of exchange value and what strikes one immediately is the inappositeness of such an example. It is talking about barter whereas we are talking about the exchange of a sum of money for an apple (or an orange).

To be literally consistent, you would have to say that the use value of an apple exceeds the use value of say 1 dollar which is the price at which the apple sells in order to prompt you to buy the said apple. But what is the use value of 1 dollar?There is not much you can literally do with a dollar note (apart from wipe your bum, or perhaps start a fire, with it ) . True, you can exchange it for something else. but isnt this where the difficult of asserting trade is a positive sum game shows itself?

What if your situation was reversed and you were selling the apple? Would the use value of 1 dollar be the same? Apparently not. In the first instance you would underrate a dollar in relation to the apple in the second you would overate it.

Of course, we are talking about a moving target here in the form of an apple and your valuation of an apple will indeed change according to your circumstances - for instance whether you are hungry or not - but can the same thing be said of money against which all commodities exchange in general?

The implication woud seem to be that the more money you have the less would you hunger for the stuff. You should tell that particular fairy story to the billionares amongst us whose appetite for the stuff doesnt seem to have diminished by already having so much of it!!

I disagree, the contradictions come in at the capital/labor level (i.e. profiteering), not at the commodity level.

No, it's not just you. I still haven't seen him reply to the post where I suggested he'd pay more for processed fuel (ie, a resource that had been laboured on) than crude oil he'd have to fetch himself (that hadn't been laboured on), for instance.

OTC, the subjective theory of value identifies worth as being based on the wants and needs of the members of a society as opposed to value being inherent in an object; it doesn't determine prices. Marginal utility gives rise to prices (prices don't give rise to marginal utility). Price is merely the exchange rate between two commodities expressed in terms of one of the commodities.

No-one's disagreeing that prices are the fluctuations of exchanging commodities. No-one's disputing that commodities have use values (ie, there is a market for them, ie people want or need them). What's your point?

By the way, you still haven't answered my question.

By the way again, you owe me $24.

I.e. TOTALLY has nothing to do with economics, and thus no one should give a shit about it.

Again, when we say value, having a semantics argument does'nt work, we are talking about a type of "value" that is valuble to economics, so you can call it something else if you want, but it does'nt matter.

OTC, economics focuses on the meaning that the mind gives to the world around him, not on the intrinsic properties of the outside world itself.

I think you'll find that you're talking about psychology there.

Now, is it easier for you if I just add a running total to my posts?

Yeah I'll do that.

Trivas7 now owes me $32.

No .... economics focuses on how goods and resources are produced and distributed, and how the incentives of such effect the outcome.

Are you saying that economics refers to properties of the external world and if so what are those properties?

No, I'm saying it refers to the production and distribution of goods and services, and the incentive structures that determine them.

Look I understand what your getting at. But its a moot point, the Labor theory of value discusses the price of a commodity when supply and demand is at equilibrium, what part of that do you not understand?

I just disagree with you, big guy. The labor theory of value has nothing to do with prices; it answer the question: what is the value of a commodity? And FYI, in the real world supply and demand are never at equilibrium.

Your not disagreing with me, your disagreeing with Smith, Ricardo and Marx I.e. the founders of the labor theory of value, the labor theory of value talks about the VALUE of a commodity only in the sense of Price outside of supply and demand (or them at equilibrium),

Thats what Smith Ricardo and Marx were talking about, there is no argument here.

Subjective value i.e. what something is worth to a specific individual is NOT what they were talking about, they were talking about the market and how prices work.

So there is nothing to disagree with.

(btw, no one is interested in individual subjective evaluations, that does nothing in helping you figure out economic problems and pricing and understanding capitalism, that has no place in serious economics, your obviously juts hung up on the word "value" being used, let it go.)

Totally irrelevant to the theory.

The thing is, Marx was making assumptions about capitalism, simplifying some things to make others clear.

It's true that there are very few instances when supply and demand are at equilibrium. This does not negate the LTV; what it demonstrates is that capitalism is even less stable and more fucked up than Marx assumed. LTV is based on a situation of 'no monopoly buyers, no monopoly sellers'. In the real economy of course, big corporations can act as monopoly sellers, governments can act as monopoly buyers; silly old Marx for imagining as a thought experiment that capitalism could run harmoniously! Good job the supporters of capitalism are here to point out your error, otherwise communists might think capitalism can work! I'm glad the capitalists have demonstratied to us it can't, that's very nice of them and saved us much embarrasment.

Trivas7 owes me $40. The sarcasm is free.