Over
the course of the history of socialism, Marxists have repeatedly been
accused of defending the “flawed” Labour Theory of Value which
critics allege has been proved to be invalid, albeit, different writers explain by offering different reasons. The Areo online magazine is
the latest to take aim at Marx and the Labour Theory of Value with an article by Shaun Cammack.
Members of the Socialist Party have been
quick of the mark to correct his article in the comments.
Robin
Cox
explains that, “There are so many things wrong with this article
it is difficult to know where to start. Lets start with its support
for the subjective theory of value.
Firstly, this overlooks that my subjective valuation of a commodity in
capitalism means nothing unless I have the means to purchase it –
money. Though money is essentially a social relationship it,
nevertheless, objectively constrains what I can consume. And the
objective distribution of money incomes therefore shapes the overall
pattern of consumption itself.
Secondly,
the theory asserts that ‘prices are entirely determined by the
value judgments of men’ but fails to grasp that these ‘value
judgements’ can conversely be influenced by prices themselves.
Thus, if the price of a commodity falls it becomes more ‘desirable’.
So there is two-way interaction between prices and ‘value
judgements’ – not one-way as the theory implies.
Thirdly,
as Ernest Mandel notes, the ‘Marginalist school was never able to
solve the problem of the “marginal value of money”, and that for
this reason it remained dualistic, combining a subjective theory of
value with an objective theory of money (e.g. the quantity theory)…
The dualism of the theory is seen if one imagines an increase in the
stock of currency suddenly causing a rise in wages, without any
change in the marginal value of the commodities concerned’ (1962,
Marxist Economic Theory). One might say this is – ironically – a
case of the ‘law of diminishing marginal returns’ being used to
refute Marginalism itself!
Nevertheless,
it is quite true, as Marx himself acknowledged, that ‘nothing can
have value, without being an object of utility’ (Capital Vol 1, Ch. 1). The question is – what determines the exchange value of that
object? Why should a suit be worth three pairs of shoes and not four?
‘Supply
and demand’ can only ever serve as a secondary explanation. The
tendency in capitalism is for the supply of a commodity to increase
should the demand for it grow – meaning supply and demand tend, in
the long run, to equilibrate. However:
‘If
supply equals demand, they cease to act, and for this very reason,
commodities are sold at their market-values. Whenever two forces
operate equally in opposite directions, they balance one another,
exert no outside influence, and any phenomena taking place in these
circumstances must be explained by causes other than the effect of
these two’ (Capital Vol 3, part 2, ch. 10)
Since
supply and demand ultimately cancel each other out something else
must then account for differences in prices. Why does a Berlingo van
cost so much more than a bicycle? This has to be because they share
something in common but differ in the magnitudes of this common
attribute.
Drawing
on Aristotle’s observation that ‘exchange cannot take place
without equality, and equality not without commensurability’, Marx
reasoned that this effectively ruled out ‘utility’ as the basis
on which commodities exchanged. How can you measure the ‘utility’
of chalk against cheese? You can’t since utility is subjective.
Commodities can only exchange on the basis of something they have in
common and by means of which they can be made commensurable. Without
commensurability there is no way of telling whether one commodity was
objectively equivalent to another, thus allowing you to make an
exchange. After all, you wouldn’t buy a bicycle for the price of a
Berlingo van, would you?
Money
enables us to measure the exchange value of different commodities but
what explains the difference in their prices? What is it that
commodities have in common that enables them to be measured against
each other and sold in proportions that ensured equivalence? The
answer is labour. This is why, roughly speaking, one suit equals
three pairs of shoes, and not four, in money terms. They involve
approximately the same amount of labour. Labour acting on
Nature-given resources is, after all, the source of all wealth.
Then
there is the question of exploitation. Marxists have technical
explanation for this which amount to saying that workers must produce
a greater value in their output than the value of their wages they
receive. This is not just a claim but an established fact. In the US
manufacturing sector for example workers receive in wages about one
third of the value of their hourly output – meaning two thirds of
what they produce represents unpaid labour. Capitalism’s supporters
like to argue that this ignores that capitalists have to pay for
other things like machinery. But what they overlook is that the
machinery is paid for ultimately out the two thirds unpaid labour
provided by the workers and that the machinery on being purchased is
the property of the capitalist not the workers. So is the luxurious
lifestyles of the super-rich paid for out of surplus value
Market
competition imposes on capitalist businesses the need to maximise the
economic surplus they extract from the workers. Without that they
cannot accumulate capital and hence will not be able to beat off the
competition. They will go bust in no time at all.
Might
I suggest this for further information https://www.worldsocialism.org/spgb/pamphlet/marxian-economics/
Tim
Kilgallon adds his voice. “You state “I
suspect very few people who consider capitalism exploitative to have
necessarily read Karl Marx or have a functional understanding of the
labor theory of value.” strangely enough I have the same suspicion
about your good self.
Just
one example of this: “This theory hinges on a single flawed
premise: objective value. In reality, value is subjective, as
products are valued differently by different people with different
needs. The value of an umbrella goes up in the eyes of a person
caught in the rain and down when the forecast predicts sun. The value
of any product goes up if few are available, and down if there are
plenty in every store.”
Even
to anyone with a scant knowledge of the Labour Theory of Value, this
statement demonstrates a lack of even the faintest idea of Marx’s
theory, let alone a functioning understanding of it. In terms of the
Labour Theory of Value, value is not related to the utility of the
object, therefore the absence of rain or otherwise does not impact on
the value of the object (in fact to be pedantic the utility does not
depend, as you suggest, on the weather forecast, but on the actual
weather!).
Even
within your own terms, the value of the object does not alter because
of a surfeit of the object, if as you wrongly suggest the value of
the object is linked to the utility of the object, umbrellas don’t
become less useful because there are more of them!
Your
article suggests that you have completely relied on undergraduate
lecture notes on the LTV, notes prepared by lecturers who have relied
on their undergraduate lecture notes on the LTV, which relied on
notes prepared by lecturers who have relied on their undergraduate
lecture notes on the LTV, which relied…
If
you are going to critique the Labour Theory of Value, you may find it
useful to actually find out what Marx’s theory states. I do not
mean to imply by this contribution that Marx’s theory is beyond
criticism, it is not. However I do think that if you are going to
critique a theory and then you should have the intellectual integrity
to actually examine the source material of the theory you are
critiquing.
Robin
Cox has suggested a link which provides a very clear and concise
exposition of the Labour Theory of Value, you may even wish to make
the big leap and read Marx’s actual work (Wages, price and profit
is a fairly straightforward start point), if you are interested in
genuine discussion about Marx’s ideas, rather than lazy critiques
of parodies of Marx’s work. If you are genuine in your enquiries
about the Labour Theory of Value, then I look forward to any comments
you wish to make about Marx’s work
Some
other links you might find useful:
you
could even listen to the following links .
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