Law of Value- 8. Socially Necessary Labor Time (draft)

This is a draft of a script from my upcoming video series “Law of Value”.

Socially Necessary Abstract Labor Time

Alone on his tropical island Robinson Crusoe can take as long as we wants to build a cabin for himself. It’s up to him. We don’t have that luxury when we produce for market exchange. When Wonder Bread makes bread they are competing in the market against Pepperidge Farm, Arnold and White Rose. If their workers are less productive that doesn’t mean they can sell their bread for more money. The social value of bread is set not by the most inefficient of producers but by the average amount of time it takes to produce a commodity. This is called the “Socially Necessary Labor Time”. (SNLT)

In neo-classical economic theory there are all sorts of concepts that, though mathematically elegant on paper, have very little descriptive power in the real world. When was a capitalist society ever in General Equillibrium? When was there ever Pareto Optimality? When did consumers ever measure their desires in utils?

SNLT is a great example of the practical, real-world nature of Marx’s value theory. SNLT is something very real that we can observe at work everyday. The private labor that goes on behind factory doors will not know for sure how much value it is creating until the products of that labor enter the market to be compared to the products of other workers. In the market these private labors become social. Socially necessary labor time is asserted. This SNLT then acts back upon production. It disciplines what goes on in the factory. Factories that were spending more labor than was socially necessary are considered inefficient. They must change their production methods or else go out of business.

At the same time competition drives producers to constantly try to produce under the socially necessary labor time. If the SNLT for bread is 10 minutes a loaf and I make a new machine that allows my workers to produce bread for 5 minutes a loaf then I am producing at half the SNLT. This means that I can sell more bread at a lower cost, out-competing my rivals in the market and making a super-profit. Once other competitors catch on they will also buy new machines and the SNLT will move down to 5 minutes.

This process goes on everyday in a capitalist society. We have an obsession with time and efficiency. Everything from the working day, to the motions of workers are timed and rationalized. From the moment the alarm clock rings you are checking train schedules, punching time cards, and working as efficiently as possible. There is an entire field of industrial engineering which is devoted to decreasing the SNLT in society. Some of the most influential minds of the last century have been people like Henry Ford and Frederick Taylor who made substantial contributions to the reduction of SNLT.

The reduction of SNLT is also important in raising the rate of exploitation. When individual capitalists can get their workers to produce below the socially necessary labor time they gain extra profits. This quest for super-profits is what motivates much of the technological dynamism of a capitalist soceity. When the SNLT that produces consumer goods falls so do the prices of consumer goods. This cheapening of the means of subsistence allows wages to be reduced over time which allows capital to make extra profit. (obviously this paragraph needs serious rephrasing…)

Marx considered his theory of SNLT a major achievement that differentiated his value theory from the labor theory of value of Adam Smith and David Ricardo. Rather than just being a theory about the determination of prices by labor Marx’s theory was about the way private labor becomes social in a market society. It is only through the market that an economic bond between producers is established. And it is only through this bond called ‘value’ that production can be organized.

Sometimes on the internet you may hear someone attempt to criticize the labor theory of value by saying something like, “If I spend 100 hours to make a cupcake that doesn’t make the cupcake more valuable than one made in 1 hour. Therefore the labor theory of value is false.” Now you know why such a person is an idiot who forms their opinions about theories prior to understanding them.

Sometimes people try to argue that this idea of “socially necessary” means that demand is what creates value: People will only buy at the socially necessary price and so it must be their utilities that are creating that price. But such an argument makes multiple errors. For one it conflates value and price. Prices fluctuate all the time for various reasons. Value serves as a moving center of gravity for those prices. [I know Freeman hates this metaphor but I can’t think of a better one at the moment.] Utility can’t change value: no matter how much I desire a commodity I can’t change the amount of time it takes to make that commodity. Socially Necessary Labor Time is established by the average level of productivity which is given by the state of technology. As Marx later explains in his theory of capital, changes in technology are driven by the quest to better exploit the working class, not by the demands of consumers.

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3 Responses to Law of Value- 8. Socially Necessary Labor Time (draft)

  1. Pingback: Law of Value- drafts for the upcoming video series « Kapitalism101

  2. Paul says:

    Suppose widget A and widget B have the same SNLT under current conditions of production (and therefore same value), and suppose they’re both trading at prices approximately equal to that SNLT. Assuming we can go measure whatever we like, can the LTV tell us anything about how many units of A and B will be produced and sold?

    I think this may explain the attraction of “utils”. Consumer preferences are mysterious, but they can have very concrete effects, and it would be desirable to be able to explain which products are produced and why.

    • Perhaps I should make this point more clearly in the series at some point. Given a certain productivity of labor in different industries (that is, given the value of commodities), demand determines how much is produced- how much labor goes into this or that sphere of production. But this doesn’t mean that demand creates value. It only means that demand apportions value. The idea of utils is some theory of value originating in demand. Demand, in turn, is shaped by a pre-existing world of prices which are determined by the degree of productivity of labor in various industries.

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