Labor Theory of Value vs. Supply and Demand

[Kwisatz Haderach]

Under the LTV system people are "paid" in labor hours. If something took 10 labor hours to make 10 hours of your labor is spent purchasing it. Am i right on this?

No. You are thinking of the labour accounting system that is one of the proposed ways to determine prices and worker compensation in a socialist or communist economy. The labour accounting system is based on the LTV, but the LTV does not require you to support it. Indeed, the LTV by itself does not require you to support anything - it is merely a description of how value is determined in an economic system.

Other comrades in this topic have done a good job of explaining the LTV.

can someone explain to me how a Marxist economy would function then. How items would be obtained, how production would be controlled ect.

Well, that is pretty much the same question I answered here, although the discussion went off-topic afterwards... The three main ways to organize a socialist or communist economy are based around labour accounting, energy accounting and gift economics respectively. Here's a copy of the relevant part of my post for those who haven't read that topic:

Leftists don't want a barter economy because barter implies markets, and we want to get rid of markets altogether.

So how do we plan to get rid of money? Well, you have to consider the functions of money in a market economy and how the same functions could be achieved without it. Money serves to guide both production and distribution of goods and services; it gives information about supply and demand to producers, allowing them to make production decisions, and it helps determine which consumers get what. To eliminate money we need to find a different way of (a) gathering information to guide production decisions, and (b) distributing goods and services among consumers.

There are many ways of doing both of those things without money. Gathering information about our supply of natural resources and capacity to produce things is pretty straightforward; instead of measuring costs in money we could easily measure them in labour-time (so many workers with such given skills must work for so many hours in order to produce such object - that's the kind of thing all corporations already know). Gathering information about consumer demand is a bit trickier, but there are many different ways to do it. We could have polls and surveys to ask people what they want; we could have people voting online (the internet makes a moneyless economy much easier); we could have a place in each store where customers can give their input; or a combination of the above. Then we need a coordinating body to match production with demand. This could be a state if you're going for state socialism, or a gathering of workers' councils if you want something more decentralized, or we could even leave it up to public opinion (publish the information about demand and rely on social pressure to make the producers produce what is demanded - not my favourite idea, but it could work).

As far as the other role of money is concerned, creating a distribution of wealth - here we can say with nearly absolute certainty that we could easily do better in a moneyless economy. There are many ways to distribute goods and services without money, and all of them would create a better society. We could do it with labour accounting: Have a certificate or debit card-type object that records how much time a person has worked, and allows that person to buy goods and services that took an equal amount of time for other people to produce. If you worked 40 hours you can buy any combination of things that took a total of 40 hours to produce. We could do it with energy accounting: Much like the above, but measuring total energy input rather than labour time (total energy input = calories burned by human workers involved in production + energy used by machines involved in production). We could go for an egalitarian or needs-based distribution: Don't worry about accounting and just give every person a more-or-less equal share of something, adjustable up or down if they demonstrate more need than average. This can work for goods that are available in abundance and are unlikely to be over-demanded if they are given out for free - stuff like pencils, toothbrushes, and other mundane items. Very few people will take more of these than they need.

I think we ended that discussion talking about whether labour accounting could adequately take all costs into consideration. We can continue here, if you want.

[gla22]

ok alot has been cleared up for me here about the LTV. I guess i was arguing against labour accounting (which is based on LTV) taking all costs into consideration rather than LTV itself. Thanks for your patience.

[mikelepore]

How do we, as Marxists, feel about the law of Supply and Demand? Do we reject it? Do we reconcile it somehow with the Labor Theory of Value?

According to Marxian economics, supply and demand determine the price of a commodity, but they don't determine the price in reference to "no particular" reference point. Supply and demand determine the price in reference to the value as a starting point, with the price as a departure from it. The socially necessary labor time determines the value, and supply and demand determine how much of a positive or negative offset from the value will be found in the price. Supply and demand can make the price oscillate; the value is the level about which the price oscillates.