Labour Theory of Value

[Lyev]

I think I understand the basic gist of LTV, but I feel as though I'm missing a key point. Basically LTV is: a commodity is worth the labour-power embodied in it, right? Is this talking about generalized, abstract labour? Oh, and is abstract labour only abstract because we live in a capitalist society? I mean, if there wasn't so much crap like fetishism obscuring the true source of value (socially necessary labour-time*) then we would be able to see that the labour embodied in a commodity is the true source of value, right? Also there's the alienation of a commodities true use-value; this is where the use-value lays dormant on the shop's shelf and has to exchanged (though it's exchange value) to unlock it's utility.

So some question I have; can someone better explain to me LTV? Also, in a communist society what makes us see LTV for what it truly is? And also what do capitalist economists use to discern value? Why is LTV relevant and important? And my last question is: I read somewhere the concrete labour is embodied in use-value and that abstract labour is embodied in exchange-value. Could someone explain that? Oh and a last question, I'm not sure I fully understand what abstract-labour is, or it's connection with other Marxian theories. Sorry for all the question, thanks very much comrades for your answers. Oh and please could people actually answer my questions rather just redirecting me to a website . (I've already tried one website, but some of it was quite hard to grasp). Thanks a lot for everyones patience.

*I'm not sure I understand what "socially necessary labour-time" means. Please could someone explain?

[Gustav HK]

Socially necessary labour time means the common amount of time it takes to produce a certain commodity in society. That means that a commodity doesn´t become more expensive just because the means of production are primitive and/or the workers are lazy, and thus it takes longer time. It is the normal production time in society that defines the socially necessary labour time.

Concrete labour is labour for a concrete commodity, for example a shirt, a chair, a car, etc.

Abstract labour is labour in general.

In barter economy you pay for concrete labour with concrete labour i.e. a concrete commodity, for example a chair, for another concrete commodity, for example a pound of meat.
In money economy you pay for concrete labour with abstract labour i.e. you pay with the universal commodity, money.

(I am actually not so sure about the last thing, but I think it is something like that).

[Lyev]

Thanks for your reply.

Socially necessary labour time means the common amount of time it takes to produce a certain commodity in society. That means that a commodity doesn´t become more expensive just because the means of production are primitive and/or the workers are lazy, and thus it takes longer time. It is the normal production time in society that defines the socially necessary labour time.

So just the mean, average time, yeah? How do you capitalists find value then, supply and demand? If so how can that discern value?

Abstract labour is labour in general.

So this is what Marx talks about when he says: "want is generalized", yeah?

In barter economy you pay for concrete labour with concrete labour i.e. a concrete commodity, for example a chair, for another concrete commodity, for example a pound of meat.

So is this a gift economy? How do you know your exchanging "equals" though? Ie. how would you know that both products have the same labour-time embodied in them?

[mikelepore]

So just the mean, average time, yeah?

Not average in the sense of what we see usually happening, but average in the sense to what the current condition of technology requires, what tools have been invented so far, what industry's throughput rate is for each kind of article.

****

Excerpt from Marx, Capital, Chapter 1:

"Some people might think that if the value of a commodity is determined by the quantity of labour spent on it, the more idle and unskillful the labourer, the more valuable would his commodity be, because more time would be required in its production. The labour, however, that forms the substance of value, is homogeneous human labour, expenditure of one uniform labour-power. The total labour-power of society, which is embodied in the sum total of the values of all commodities produced by that society, counts here as one homogeneous mass of human labour-power, composed though it be of innumerable individual units. Each of these units is the same as any other, so far as it has the character of the average labour-power of society, and takes effect as such; that is, so far as it requires for producing a commodity, no more time than is needed on an average, no more than is socially necessary. The labour-time socially necessary is that required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time. The introduction of power-looms into England probably reduced by one-half the labour required to weave a given quantity of yarn into cloth. The hand-loom weavers, as a matter of fact, continued to require the same time as before; but for all that, the product of one hour of their labour represented after the change only half an hour's social labour, and consequently fell to one-half its former value."

How do you capitalists find value then, supply and demand? If so how can that discern value?

I didn't understand that question.

[Lyev]

I didn't understand that question.

Sorry, I didn't make it quite clear. How does mainstream economics (ie. not Marxist economics) find value in a commodity if not using LTV?

[New Tet]

Socially necessary labour time means the common amount of time it takes to produce a certain commodity in society. That means that a commodity doesn´t become more expensive just because the means of production are primitive and/or the workers are lazy, and thus it takes longer time. It is the normal production time in society that defines the socially necessary labour time.

Concrete labour is labour for a concrete commodity, for example a shirt, a chair, a car, etc.

Abstract labour is labour in general.

In barter economy you pay for concrete labour with concrete labour i.e. a concrete commodity, for example a chair, for another concrete commodity, for example a pound of meat.
In money economy you pay for concrete labour with abstract labour i.e. you pay with the universal commodity, money.

(I am actually not so sure about the last thing, but I think it is something like that).

You put your finger on it in the first sentence.

You should add that even if the workers were very dedicated and invested even more labor time to an existing commodity, it wouldn't necessarily increase its exchange value. In fact I imagine that in some instances it's possible that added labor time to a particular commodity (except, possibly labor power itself) would be wasted and the commodity decreased in exchange value.

Maybe Comrade Lepore can set me straight in this matter.

[mikelepore]

Why is LTV relevant and important?

The 19th century was an age in which science made a lot of progress discovering was the underlying mechanisms for many things, such as evolution by natural selection, and explanations of chemistry, electricity, etc. The social sciences wanted to do the name thing, look for general laws to explain observed results. Capitalism has a peculiar result: economic insecurity and poverty for the people who perform all of the essential labor that generates society's wealth, and concentrated wealth in the hands of people who perform only nominal tasks that are not inherently necessary -- always that same result in every location. This requires an explanation. Marx set out to identify the sources of values, prices, wages and profits, to discover where they come from, and what processes determine them.

[Zanthorus]

Sorry, I didn't make it quite clear. How does mainstream economics (ie. not Marxist economics) find value in a commodity if not using LTV?

It doesn't. Most of mainstream economics adopts a subjectivist theory of value i.e the value of a commodity is whatever the buyer and seller want it to be.

At least that's my understanding.

[x359594]

I'll give a shot at explaining surplus value, a key component of the labor theory of value. (And forgive me comrades if it seems too simple.)

Suppose that, in order to obtain the things which are socially accepted as being necessary to have a living, the worker must receive a wage of $15.00 an hour. The exchange-value of the commodity produced in the factory (as determined by the capitalist marketplace) is $100.00. Suppose it takes one hour for the worker to produce each commodity, and that each commodity requires $5 worth of raw materials and $3 in depreciated machinery. Thus, in one hour, the worker's labor power transforms $8.00 worth of raw materials and machinery into $100.00 worth of commodity. In other words, the worker's labor has created $92.00 worth of value.

For this $92.00 worth of created value, however, the worker is only paid $15.00 by the capitalist. The difference between the value created by the worker and the wage value he receives in exchange for it is $77.00, which goes directly into the capitalist's pocket. It is the surplus value, the difference between the capital laid out by the business owner and the profit taken in by him. This difference is created solely by the capitalist not paying the worker for the full value of her work. In essence, the capitalist forces the laborer to work under the agreement, "I'll give you $15.00 if you give me $92.00."

To the charge that he makes his living by appropriating a portion of the value created by his workers, the capitalist is apt to respond, "But I deserve a share of the profits, because I am the one who is risking my capital, and I am the one who is providing the management know-how to run the business." In reality, this claim is nonsense. Since the capitalist produces no new wealth and creates no new value, all of the money which he invests has as its source some prior exploitation of labor (unless the capitalist has a printing press in his basement and prints his own money). As for the contention that the capitalist's profit is a reward for his managerial skills, modern corporate practice has already eliminated this argument since the capitalist relies on salaried managers to oversee the day to day operation of his business.

A portion of the surplus value which the capitalist appropriates is used to purchase the use-values which he needs or wants, but the major portion of this surplus value is reinvested into his capital. This reinvestment expands the sum of overhead and in turn increases profit, thus producing more surplus value for re-capitalization and re-investment. This process of accumulation, of continuously investing more money in order to make still more money, is the driving force of capitalism. Thus, whether he wants to or not, the capitalist is driven to continuously expand his capital in order to maintain his position as a capitalist.

[mikelepore]

How does mainstream economics (ie. not Marxist economics) find value in a commodity if not using LTV?

Mainstream economics usually focuses on the fact that the upward and downward factors of supply and demand make the price of a commodity oscillate.

But that approach is unsatisfactory because it leaves something important unanswered: if upward and downward factors continuously exchange dominant positions, like a rising and falling pendulum, that would imply that there are instants when upward tendencies and downward tendencies are in equilibrium and cancel out -- then what would the price be at those exact instants?

The following is mostly my own words, what Marx and Engels obviously realized but didn't use these exact words. Consider what the price of an article must be at that instant when the upward and downward factors of supply and demand are in balance and cancel. We're almost tempted to say zero but that would be wrong. We can't say that it's zero. The price is never zero for an instant. The ordinary commodity doesn't have a phase of positive prices (I'll pay you to give it to me) and negative prices (I'll pay you to take it away.) Instead, prices are always positive. But how can a signal oscillate and yet always be positive? That can only happen if it is oscillating around a positive central value, the way the function y = 100 + 10 sin x oscillates, from 90 to 110, around a central value of 100, with a temporary offset that varies from -10 to +10.

So, THE PRICE OF A COMMODITY MUST BE THE SUM OF TWO TERMS: a "value", which is always positive, plus an instantaneous offset, which alternates between positive and negative. (Mainstream economics never mentions this at all.)

It's only the offset from the value that is determined by supply and demand.

Mainstream economics ignores the gorilla in the living room. They say that supply and demand make the price oscillate, and then they never mention a word about the most important issue, the central line about which that oscillation is taking place.

The subject that mainstream economics will never mention at all, hoping that nobody will ever ask about it --that's the primary subject that Marx discussed.

In his 1865 pamphlet _Value, Price and Profit_, Marx said:

"You would be altogether mistaken in fancying that the value of labor, or any other commodity whatever, is ultimately fixed by supply and demand. Supply and demand regulate nothing but the temporary fluctuations of market prices. They will explain to you why the market price of a commodity rises above or sinks below its value, but they can never account for that value itself."

It's particularly important that, while the prices of various commodities are all oscillating with time, the lowest point for one article is still higher than the highest point for another article, for example, the lowest priced moment for a new car is still more expensive than the highest price moment for a basket of corn. How can the minimum of one waveform be greater than the maximum of another waveform? That's possible only if the supply and demand forces that cause oscillation are irrelevant and play no part in determining the underlying values. It indicates that the central values about which the oscillations occur are the fundamental results that require an explanation. The discussion about "socially necessary labour time" goes to that.

[Dave B]

Value, Price and Profit, VI. Value and Labour

On the other hand, the oscillations of market prices, rising now over, sinking now under the value or natural price, depend upon the fluctuations of supply and demand. The deviations of market prices from values are continual, but as Adam Smith says:

"The natural price is the central price to which the prices of commodities are continually gravitating. Different accidents may sometimes keep them suspended a good deal above it, and sometimes force them down even somewhat below it. But whatever may be the obstacles which hinder them from settling in this center of repose and continuance, they are constantly tending towards it."

I cannot now sift this matter. It suffices to say the if supply and demand equilibrate each other, the market prices of commodities will correspond with their natural prices, that is to say with their values, as determined by the respective quantities of labour required for their production. But supply and demand must constantly tend to equilibrate each other, although they do so only by compensating one fluctuation by another, a rise by a fall, and vice versa.


If instead of considering only the daily fluctuations you analyze the movement of market prices for longer periods, as Mr. Tooke, for example, has done in his History of Prices, you will find that the fluctuations of market prices, their deviations from values, their ups and downs, paralyze and compensate each other; so that apart from the effect of monopolies and some other modifications I must now pass by, all descriptions of commodities are, on average, sold at their respective values or natural prices. The average periods during which the fluctuations of market prices compensate each other are different for different kinds of commodities, because with one kind it is easier to adapt supply to demand than with the other.

[FONT=Arial][FONT=Arial]http://www.marxists.org/archive/marx/works/1865/value-price-profit/ch02.htm[/FONT][/FONT]

[FONT=Arial][FONT=Arial]So I think the argument is that if for some accidental reason the ‘price’ of a commodity deviates from its natural price, or 'value', the laws of supply and demand return it back to what it should be. [/FONT]

[FONT=Arial]This feeds in later with the more advanced volume III average rate of profit thing. If a capitalist is making a product where demand exceeds supply he can sell it above its value and make an above average rate of profit. [/FONT]


[FONT=Arial]At which point other capitalists move in tempted by higher than average rates of profit in that area of production. Increasing the supply and reducing the price, and the rate of profit to be made, until the allure of investing capital in that area fades somewhat.[/FONT]

[FONT=Arial]Vice versa, if a supply exceeds demand, the price falls as does the rate of profit in that area and the capitalist dis-invest or fail to replace consumed fixed capital etc. perhaps moving into more lucrative areas to be found in the above.[/FONT]

[FONT=Arial]Supply drops, and prices rise to the natural or true value in that area.[/FONT]

[FONT=Arial]If you don’t like that idea; if you are one of the goose herders in a ‘village’ and you only get one ounce of gold for 40 hours of goose herding due to the oversupply of goose eggs and geese.[/FONT]

[FONT=Arial]And the maker of blue suede shoes is getting two ounces of gold for 20 hours of blue suede shoe making you will be tempted to turn to that.[/FONT]

[FONT=Arial]Until in this truly multi tasking idealised village everyone gets [/FONT][FONT=Arial]approximately the same amount of gold for their 40 hours of labour.[/FONT]

[FONT=Arial]Unless it is a labour of love.[/FONT]
[/FONT]

[Dave B]

There is the option of course of being a gold miner ^

[anticap]

Expropriate, keep your eye on these spaces:

http://kapitalism101.wordpress.com/
http://www.youtube.com/user/brendanmcooney

Comrade Cooney has an LTV video in the works (a series, in fact), to replace his old one. He's soliciting questions/suggestions for it, so you might want to submit yours here or here.

[ZeroNowhere]

It is perhaps worth noting that 'value' is a category specific to capitalism (or rather, capitalist production), and labour does not produce values in socialism, merely use-values. Which is to say, there is no commodity production, but only use-values are produced (ie. useful things).

And my last question is: I read somewhere the concrete labour is embodied in use-value and that abstract labour is embodied in exchange-value.

Firstly, abstract labour is value-producing labour, it is specific to capitalism, where labour is not directly, but indirectly social. In socialism, as production is part of a social plan, this does not apply (even in the presence of labour credits). As for the question, the best explanation I can think of is Colletti's here. It is preceded by a fairly long section on Marx's theory of the state, but the whole thing is great, and it is generally all part of the same argument, as his views on the state to some extent parallel his theory of value and so on.

Why is LTV relevant and important?

Firstly for the theory of alienation/fetishism, as it is an important way in which social relations come to be independent and stand over people (more on that in the Colletti link). Secondly because it explains the origins of profits, and hence why the interests of the working and capitalist class are not harmonious, as well as the progress of capitalism as regards deskilling of labour and technological innovation, etc. Thirdly because it leads on to many of Marx's other important theories, such as his view of accumulation and the theory of the tendency of the rate of profit to fall. This is well demonstrated by Anwar Shaikh when he pulls off an impressive explanation of Marx's falling rate of profit theory starting from the basics of the LTV with a great amount of clarity in a fairly short time here (starting pg. 14). It is fairly evident how the S=L-V equation is important there.

Sorry for all the question, thanks very much comrades for your answers. Oh and please could people actually answer my questions rather just redirecting me to a website .

Well, to be fair, I redirected you to an article and an introduction that just happen to be hosted online...

[Lyev]

A few more questions: what are man-hours in socialist economic theory? And also what is the transformation problem and is at all linked to "man-hours"?

[anticap]

... what is the transformation problem...?

http://kapitalism101.wordpress.com/w...ation-problem/

[Lyev]

Thanks everyone for all your replies. I have a another question: how do you define what is "socially necessary"? How does society dictate what is the necessary labour-time?

[mikelepore]

The socially necessary labor time to produce a product means the time required by the newest tools that have been invented and the skills that are typical in a given society.

Excerpt from Marx, _Capital_, Chapter 1

"Some people might think that if the value of a commodity is determined by the quantity of labour spent on it, the more idle and unskillful the labourer, the more valuable would his commodity be, because more time would be required in its production. The labour, however, that forms the substance of value, is homogeneous human labour, expenditure of one uniform labour-power. The total labour-power of society, which is embodied in the sum total of the values of all commodities produced by that society, counts here as one homogeneous mass of human labour-power, composed though it be of innumerable individual units. Each of these units is the same as any other, so far as it has the character of the average labour-power of society, and takes effect as such; that is, so far as it requires for producing a commodity, no more time than is needed on an average, no more than is socially necessary. The labour-time socially necessary is that required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time. The introduction of power-looms into England probably reduced by one-half the labour required to weave a given quantity of yarn into cloth. The hand-loom weavers, as a matter of fact, continued to require the same time as before; but for all that, the product of one hour of their labour represented after the change only half an hour's social labour, and consequently fell to one-half its former value."

[Robocommie]

Thanks everyone for all your replies. I have a another question: how do you define what is "socially necessary"? How does society dictate what is the necessary labour-time?

Mike pretty much said it fairly succinctly. To put it another way though, if you think of the way things were made in the Middle Ages, hypothetically let's suppose a weaver could weave one blanket every day. But then let's suppose that weaver gets ahold of a loom, the old fashioned wood kind. That loom speeds up the work and the weaver could do maybe, two or three blankets a day. If a blanket took a single person a single day of work, now a blanket takes half or a third of that.

Industrialization makes this really dramatic, because suddenly industrialized power-looms like the kind seen in modern textile mills can work much much faster, let's hypothetically say they can make 5 or even 6 blankets a day.

Because the price for a commodity in mainstream economics is partly based on overhead, or the overall cost of making that commodity, this makes blankets cheaper. And since industrialized textile mills have started putting out cheaper blankets and in mass quantities, it naturally puts everyone else out of work because there's no way they can compete. Those old fashioned weavers will still be putting out 1 blanket every day, but it's no longer WORTH 1 day of labor because the textile mills have reduced it's value to 1/5th or 1/6th of a day's labor.

And this is one of the problems industrialization has confronted us as a society with. Because these machines are expensive, only people with a lot of start-up capitol can actually afford them, and thus the means of production belong to either the wealthy, or whoever can sell shares to investors. Either way, everyone else is going to have to be satisfied with the wages they're paid for operating the machines, cause they sure as hell can't compete with weaving blankets anymore.

[Lyev]

Thanks very much for all your patience, I understand it all better now. I watched the first video of David Harvey's lectures, that really helped too. I also watched a bit of Brendanmcooney on youtube about the transformation problem. Although, I found some of it hard to follow. Basically the transformation problem is: why don't values transmute nicely and smoothly into equal prices?