Questions regarding the Labor Theory of Value?

I’m remaking my Labor Theory of Value video. My current plan is to break up the topic into various sub-topics like the fetishism of commodities, use-value and exchange value, supply and demand, abstract labor, socially necessary labor time, skilled labor, etc, each comprising a different short video. But I want input from viewers as to what sort of questions they would like to see addressed in this video series. No question is too simple or to complex. I can’t promise I will address all of them, but hearing from viewers would be very helpful in shaping my thinking about these videos.

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22 Responses to Questions regarding the Labor Theory of Value?

  1. Paul says:

    History of economics topics: What parts of the LTV did Marx originate, and which came from earlier thinkers (Ricardo had one, right?)? What was Marx’s reasoning in crafting his theory the way he did, in relation to prior theories?

    Could also be interesting to debunk some bourgeois criticisms (briefly); search for “mud pie” to find one about whether labor expended uselessly creates value. That discussion could even lead into crisis theory–i.e., unrealizable value retroactively becomes a “mud pie” in a crisis.

  2. geoff says:

    i was interested in differences between the LTV’s of ricardo marx and smith…

  3. Whee! says:

    I’m sure you’re aware, since I discovered his blog through your blogroll, that Sam Williams plans to do a post later this month on “the Austrian School of bourgeois economics.” Just mentioning it because it may be of use to you for this project.

  4. m says:

    based on my experience the question that people only superficially acquainted with the LTV most often raise is: “why is it only human labour that can create surplus value/new value? if an animal or a machine creates a surplus product, why isn’t that surplus value as well?”
    I think you should answer this question, pointing out that it’s not some kind of magical physical property that makes human labour a “special” input (the point being that value is not a physical property at all…) etc. thanks

    • Dave says:

      Here is my (slightly un-orthodox) answer for the question of the peculiarity of labour:

      “From the standpoint of economic *reproduction* it is clear that the choice of value base is not limited to labour. It can be substituted for any commodity-type that enters directly or indirectly into every other commodity, for example oil or steel. The ‘steel value’ of a commodity is the total quantity of steel necessary to produce it. However, as a concept of economic value any value base other than labour runs into theoretical problems; if 1 ton of steel requires 0.5 tons of steel in its production then its steel value is not unity as the concept requires. On the other hand if the steel value of one unit of steel remained exactly one there would be no net production of steel.

      Social labour is special in this respect. It is a direct and indirect input to
      every commodity and assumes the commodity form as labour power is bought
      and sold but it is not produced as a commodity. There is no direct analogy
      between the reproduction of one ton of steel and one person hour of labour
      so there is no non-unity problem here. The concept of abstract labour is also
      applicable to all types of economies with a social division of labour throughout
      history, not merely when goods and services assume the commodity form. It is
      ‘abstract’ precisely because of the general human capacity to acquire skills and
      perform all kinds of concrete tasks.

      Labour is a universal but scarce resource. During any given period of time
      there is a limited amount of person hours available in production which con-
      strains the feasible consumption pattern. This imposes a practical necessity to
      allocate it in various branches of production in order to meet changing social
      demands.”

      Hence many alternative bases of economic break down even as concepts as indicated above. Once this theoretical argument for the peculiarity of social labour is established, it is an empirical question whether its predicted role in economic value has any merit.

  5. Dave says:

    I would strongly urge you to point out the striking empirical result that if one formulates the labor theory of value in a statistical sense, the predictions hold remarkably well. (This was predicted by Emmanuel Farjoun and Moshé Machover in 1983 and confirmed independently by Anwar Shaikh in 1984.)

    This way beginners may realize that Marxist political economy need not be a sterile academic dispute between a handful economists but is capable of generating *testable* predictions of real world phenomena that are scientifically and politically interesting.

    • m says:

      Andrew Kliman has raised serious doubts about these empirical results. Due to the fact that I haven’t yet read the original papers by Shaikh and others, I cannot comment on the debate, but wanted to point out, that there are people who questioned these so-called confirmations of the LTV. (though funnily enough these people are also proponents of Marx’s LTV.)

      • Dave says:

        Hi M,

        I’m afraid the doubts raised by Kliman are very weak. There are several issues which his doubts fail to recognize. His basic objection is that the correlation between labour-values and prices are spurious because the latter are correlated with costs which are the major component underlying prices.

        But the objection has it backwards: For what are costs if not prices? Surely a labour theory of value cannot fall short to something as tautological as a cost theory of value.

        The objections are met in section 4.3 in my paper:
        http://reality.gn.apc.org/econ/Zachariah_LabourValue.pdf

        For a more technical refutation of the objections, see Cockshott & Cottrell, “Robust correlations between prices and labour values: a comment” in Cambridge Journal of Economics, Vol. 29, No. 2.

        Hence, for all the commendable effort Brendan has made on this site — greater than many Marxist economists — I afraid the reliance one economist is problematic.

      • By “reliance on one economist” are you referring to Marx?

      • Dave says:

        No, Marx is arguably the starting point in a popularization. I was referring to reliance on the work by Kliman.

      • I know, I was joking.
        If you want I can provide a list of other writers who have influenced my videos in addition to Kliman: Marx, Rubin, Hilferding, Harvey, Mandel, Burawoy, Braverman, Shaikh, Schwartz, Morris-Suzuki, Perelman, Olin Wright, Freedman, Carchedi… to name a few. I hope to read both your work and the other works you have mentioned soon, in fact I managed the first 40 pages of Laws of Chaos a few weeks back… But I have many books to read and lots of videos to make, I have no academic background in this area, and this is not my day job… so please lend a man some patience.

      • Dave says:

        Hi Brendan,

        I think the first 40 pages of Laws of Chaos are sufficient to get the flavour of the argument and the need for a framework that is at heart statistical, like capitalist market economies. The subsequent chapters are perhaps slightly too mathematical in nature.

        However, the authors gave a further popularization of their reasoning in New Left Review that I would highly recommend:

        “Probability, Economics and the Labour Theory of Value”
        Emmanuel Farjoun and Moshe Machover, NLR I/152, July-August 1985, pp. 95-108
        http://www.newleftreview.org/?view=449
        (if you don’t have access to it, I can e-mail it to you)

        While I’m at it, I was very impressed by the Bibliography-video you made. If I may add two more items on your reading list:

        “Forces of Labor: Workers’ Movements and Globalization Since 1870”
        by Beverly J Silver

        A short but excellent book that takes the first steps towards a general theory of working-class formation and organization.

        “Credit Crunch: Origins and Orientation”
        by Paul Cockshott and myself
        http://reality.gn.apc.org/econ/creditcrisis.pdf

        An article to be published in Science & Society this year, written for a general Left audience. It opens with some insights from political economy and aims to explain the current crisis in a broad Marxist framework of global political economy. Note we make use of a very different theory of the historical origin of money.

  6. jroubidoux says:

    Dear Brendan,

    Don’t be to harsh on that old video of yours it was a great, and a great first effort, and I am really looking forward to what ever improvements you are going to make to it.

    What I am interested in with respect to the labor theory of value is not so much its technical defense as a legitimate aspect of a practical economic model of human production and the source of profit (since there are two levels of value both use and exchange rate to profits) but rather how the theory justifies the workers taking over the factories/corporations. Since the labor is the only or at least the dominant source of surplus value (which is a sufficient defense) it turns out that labor value is both the source for capital investment and reinvestment so the workers not only reproduce themselves but they also reproduce the factory (business). What ever nest egg the capitalist brought into it was long ago repaid and so much so they are entitled to very little in return when the workers realize that its their sweat equity in the whole enterprise that makes it exist at all. So they are completely morally justified to dispossess title of ownership of the factory from the capitalists and equitably distribute the surplus value to themselves. Even more they have a claim on any vast sums of profit left unspent by the capitalist as well (since in effect that surplus was stolen from them by a wage slave system).

    Loans and liens on the factory need some work to. But I think a take over by workers is a bankruptcy for the corporation (workers need to reincorporate under a non-profit status)so the banks ought to be happy with getting the liquidation price of the factory/corporation or if that is no good then a re-negotiation of the loan as consolation. I prefer out right default and to hell with them but I am trying to think of how this might really get handled.

    Now the issue of how they organize after the take over ought to get some consideration but obviously a workers democracy is where it needs to go or we just exchange one form of exploitation for another. In principle it is a cooperative interaction which makes the surplus value so there ought in principle to be some sort of cooperative mode of distribution of the surplus among the workers.

    Perhaps this could be a tag along type thing since it probably will not go directly to the thesis in the strictest sense but it does have the advantage of being what the whole thesis arrives at as the ultimate consequence. There was a moment there during Lenin’s revolution when real soviets got established and there was real workers democracy after they took over the factories before the long slide into state capitalism. I think you have some affinity to Lenin and Trotsky and could probably handle this with out coming off as a red eyed Bolshevik zombie (I was a cold war kid). Just an angle.

    Anyway keep rockin’ the vids and thanks you so much for making them.

    Joe

  7. Dave says:

    Ok, that’s great. I have no academic training in economics either, Marxist political economy is just something I’ve done on my spare time.

    Are you involved in some political organization? Your project would be ideal for collective work.

    (If time ever permits I could point to some weaknesses raised by Moseley and Mohun in Kliman’s numerical examples, that albeit have the merit of being readable to the layman, are misleading.)

  8. Giorgio says:

    Hi Brendan,

    I have no training in Economics so I have been trying to understand Marx’s theories and
    the LTV by looking at various materials (articles and videos) on the internet, by reading
    Das Kapital, and by discussing these topics with friends. I find the LTV very interesting
    and, in my opinion, it explains many phenomena in our economy and in our society.

    On the other hand, I read over and over again the criticism that “value is subjective”, and therefore
    the LTV does not hold (e.g. in a few comments to the video “What is Capitalism 2 / 2”,

    Even though I am not an expert, this argument against the LTV seems rather artificial and very
    little convincing to me.

    In a future video, I think it would be useful to stress even further that, in the capitalistic
    mode of production, value cannot be subjective: capitalistic production is a process that can
    reproduce itself only under certain conditions.
    For example, the value of labour power is constrained on one hand by the fact that the workers
    must live out of their wages, and on the other hand by the fact that the capitalists must
    keep wages as low as possible to maximize their profit.

    So, maybe a future video could concentrate on the topic: “Why value is NOT subjective”.
    The video could contain concrete examples such as: suppose that, according to my personal,
    subjective evaluation, I decided to pay a worker 1 cent a day, what would happen? Or suppose that
    I decided to pay her 1 000 000 $ a day. What would happen?

    This might help to put an end to all those “value is subjective” discussions.

    Giorgio

  9. I will address Dave Zachariah’s statistical claims when I have time.

    But for now, the key points are these:

    1. They talk endlessly about their strong correlations between values and prices. But they aren’t computing the correlation between the values of individual products and the prices of individual products (e.g., a car, a barrel of oil, etc.) What these people ACTUALLY do is compute the correlation between the value of the entire annual output of different industries and the price of the entire annual output of different industries (all of cars and light trucks produced in the U.S. during the year, all of the oil pumped in the US during the year).

    They admit to doing this, if you read very carefully. But they prefer to refer very misleadingly to the correlation between “values” and “prices”.

    Now, not surprisingly at all, in large industries, the total annual value of output is high, and the total annual price of output is high, while in small industries, the total annual value of output is low, and the total annual price of output is low.

    Big f’ing deal. There’s a strong correlation between dogs and cars, too. In large cities, there are lots of dogs and lots of cars; in small towns, there aren’t many cars and there aren’t many dogs. But this is all that their “strong” empirical results amount to.

    And we need to keep in mind that government statisticians are the ones who CREATE large industries and small industries, by bundling industries into larger and smaller groups. In _Reclaiming Marx’s “Capital”: A refutation of the myth of inconsistency_, I provide a simple example in which there are 9 “sub-industries” and no real correlation between values and prices. Then they get bundled into three “industries” (one with 5 of sub-industries, another with 3, and the last with 1). Now the correlation between “values” and “prices” is almost perfect.

    2. There is no such thing as “the” labor theory of value. Even if their results weren’t spurious, the results would not support MARX’s value theory. And results (such as mine) which disconfirm their claims aren’t evidence against Marx’s value theory. As I explain in _Reclaiming Marx’s “Capital”_:

    “It has also been thought that “the empirical results support Marx” (Desai 2002: 64). This is clearly incorrect. The LTP’s proponents acknowledge that it differs from Marx’s own value theory. “It is worth recalling that neither Marx nor Ricardo argue that cross-sectional variations are negligible. Indeed, they both emphasize that at any moment in time prices of production may significantly differ from values” (Shaikh 1984: 64; cf. Cockshott and Cottrell 1998: 70–71, Tsoulfidis and Maniatis 2002: 360).

    “In fact, Marx explicitly rejected one of the LTP’s key implications: if the amounts of capital advanced in two different industries are equal, then profit will tend to be lower in the industry in which less variable capital is advanced. A rather well-known passage in volume I of Capital says the opposite:
    “Everyone knows that a cotton spinner, who, if we consider the percentage over the whole of his applied capital, employs much constant capital and little variable capital, does not, on account of this, pocket less profit or surplus-value than a baker, who sets in motion relatively much variable capital and little constant capital” (Marx 1990a: 421).

    “Thus evidence that supports the LTP does not serve to confirm Marx’s value theory. Conversely, evidence that disconfirms the LTP––such as the evidence I will present below––does not serve to disconfirm Marx’s theory. His defense of the law of value rests on the three aggregate price-value equalities, as we have seen, and he explicitly denied that price-value differences in individual industries have any bearing on the law’s validity. “[T]he law of value [is not] affected by the fact that . . . governing average prices for commodities . . . differ from their individual values. This again affects only the addition of surplus-value to the various commodity prices; it does not abolish surplus-value itself, nor the total value of commodities as the source of these various price components” (Marx 1991a: 985).

    “A few years before he died, Marx wrote something similar in response to Adolph Wagner’s critique of Capital. Wagner, a German economist, had pointed to the fact that prices depend on demand, and had construed this as evidence against Marx’s value theory. Marx agreed with the first point but rejected the second:

    “What has this to do with my theory of value? To the degree that corn is sold above its value, other commodities, whether in their natural form or in their money-form, are, to the same degree, sold below their value, and, to be sure, even if their own money price does not fall. The sum of values remains the same. . . . [I]t even remains the same in monetary expression, if money is reckoned among the commodities.”

    • Dave says:

      Hi Andrew,

      I think your objection to measuring correlations is seriously misconceived.

      The empirical studies so far have measured the ‘size’ of outputs in various industries in terms of their prices and labour-values, and found a strong correlation between both. This is predicted from the claim that market prices are measures of labour-value.

      Your objection does not reflect on what it means to say that an “industry is large”. It is precisely this aspect that is put to test: does a large output in terms of labour-value imply a large output in terms of prices? And how strong is this relation?

      If the measured strength was indeed a completely spurious then just about any other value-base would work equally well. A large output in terms of steel-content would imply an equally strong relation with output in terms of prices.

      But this is not the case. In fact no alternative to labour can match its predictive power. This is a corroboration of the empirical strength of the labour theory of value. Similarly, one could look at the price/labour-value ratio and find that its distribution is far more narrow than any alternative.

      Of course you are completely right that less aggregated data is to be preferred. The greater number of industry sectors one tests, the more significant the result. An example of this aspect is given in the UK data.

      Moreover, I’ve never heard or read the ‘key implication’ that “if the amounts of capital advanced in two different industries are equal, then profit will tend to be lower in the industry in which less variable capital is advanced.” The key prediction is rather that industry sectors with high organic compositions tend to have lower *rates* of profits.

      Finally, I think there is a more fundamental problem with your line of argument. It fails to look at the structure of the scientific argument.

      1. A claim is made, that labour is the basis of economic value.
      2. A mechanism by which this is thought to operate is given.
      3. The theory is made operational by positing various empirical tests that could strengthen or weaken it.
      4. The results turn out to be broadly in line with the predictions.

      The implications of your objections, however, is that no empirical tests of the labour theory of value could be made. The consequence is to insulate the theory from testability — the most important property of a scientific theory. This is perhaps understandable if one’s central project is in some way to defend a “correct interpretation” of some economic texts from the 1800s.

      My primary interest, however, is political economy.

      • “If the measured strength was indeed a completely spurious then just about any other value-base would work equally well.”

        Prove it. I happen to know this claim is false, but it’s your claim, so the burden is on you to prove it.

        “This is perhaps understandable if one’s central project is in some way to defend a “correct interpretation” of some economic texts from the 1800s.

        My central project is to make space for a reclamation and development of Marx’s own, original critique of political economy. This requires, inter alia, exposing and defeating the suppressers of Marx and the charlatans.

        As an instance of suppression, Note Zachariah’s failure to respond on the following crucial issue: “evidence that supports the LTP does not serve to confirm Marx’s value theory. Conversely, evidence that disconfirms the LTP … does not serve to disconfirm Marx’s theory.”

        Zachariah does not forthrightly admit that his theory (the LTP)–which he calls “the labour theory of value”–differs from Marx’s theory. He acts as if there is no difference. In other words, what he calls “THE” labor theory of value is HIS theory. Marx’s own, different theory does a disappearing act.

        Only you wouldn’t know it, because he gives you the impression that he is developing and defending Marx’s own theory instead of a *contrary* theory.

        Such dishonesty!!! Is it any wonder why I hate these suppressers and charlatans?

  10. Jake says:

    Hi there, I’m very much new to the site am not sure if this is the correct place to give my query…but I relatively new to marxian economic theory and have had a bit of trouble with criticisms of LTV.
    The foremost of such is that from Steve Keen (from ‘debunking economics’ fame).
    His quite ravenous criticisms are available here if you can be bothered to go through them:

    The misinterpretation of marx’s theory of value:
    http://www.debtdeflation.com/blogs/wp-content/uploads/papers/Keen1993MisinterpMarxTheoryValue_JHET15pp282-300.pdf

    USE-VALUE, EXCHANGE VALUE, AND THE DEMISE OF MARX’S LABOR THEORY OF VALUE
    http://www.debtdeflation.com/blogs/wp-content/uploads/papers/Keen1993UseValueDemiseLabourTheoryValue_JHET15pp107-121.pdf

    as well as his master’s thesis (which you may have to skim or skip bits as it is >100 pages in length):
    http://www.debtdeflation.com/blogs/wp-content/uploads/papers/Keen_Marx_Thesis.pdf

    Hopefully you may be able to address some of the issues because I happen to think his critiques are probably the most scathing Marxists must address and defend if we are to support LTV.

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