Marxism For the 21st Century: A Response on The Labor Theory Of Value

Social Democracy for the 21st century is a self proclaimed “realist alternative” to the modern Marxist left. However, contrary to the realism which is promised by the website, upon parsing through some of the articles contained within it, it is clear that all the reader is offered is regurgitations of old bourgeois attacks against Marx which have long been refuted. Let’s take a look, for example, at their article attempting to refute the labor theory of value. The article is titled “why Marx’s labor theory of value is wrong (in a nutshell)”, and contains 7 points attempting to refute Marx. Let’s run over each one in detail and see how they fair

The Non Existent Contradiction in Marx 

The first claim which the liberals make about the labor theory of value is that Marx, in making the argument for the labor theory of value in capital 1, contradicts himself in a “devastating” fashion. However, upon reading it is clear that this supposed contradiction is non existent. The liberals present two separate quotes from Marx which they claim contradict each other. The first quote presented claims the following: “In the same way the exchange values of commodities must be capable of being expressed in terms of something common to them all, of which thing they represent a greater or less quantity. This common ‘something’ cannot be either a geometrical, a chemical, or any other natural property of commodities. Such properties claim our attention only in so far as they affect the utility of those commodities, make them use-values. But the exchange of commodities is evidently an act characterised by a total abstraction from use-value…. If then we leave out of consideration the use-value of commodities, they have only one common property left, that of being products of labour. But even the product of labour itself has undergone a change in our hands. If we make abstraction from its use-value, we make abstraction at the same time from the material elements and shapes that make the product a use-value; we see in it no longer a table, a house, yarn, or any other useful thing. Its existence as a material, thing is put out of sight. Neither can it any longer be regarded as the product of the labour of the joiner, the mason, the spinner, or of any other definite kind of productive labour. Along with the useful qualities of the products themselves, we put out of sight both the useful character of the various kinds of labour embodied in them, and the concrete forms of that labour; there is nothing left but what is common to them all; all are reduced to one and the same sort of labour, human labour in the abstract.” (Marx 1906: 44–45). This supposedly contradicts a separate point from capital wherein Marx claims “Lastly, nothing can have value, without being an object of utility. If the thing is useless, so is the labour contained in it; the labour does not count as labour, and therefore creates no value.” (Marx 1906: 48). Now, in claiming a contradiction between these two points out author has made apparent their complete lack of understanding regarding Marx’s work. What Marx means by the first quote can be summarized in the following terms: once it is acknowledged that because commodities are exchangeable with each other at certain ratios, and that therefore the intrinsic value of each commodity must be explainable on the basis of some third thing which is common to both, use value cannot act as this third variable, as commodity production represents an abstraction from use value- this is because commodity production is characterized by production for the purpose of exchange, rather than for the purpose of direct use- this is an objectively correct representation of the inherent functioning of capitalism. The second quote amounts to saying that in order for something to have value it must be considered useful. There is no contradiction between the two claims. It is entirely possible to claim that within a system production is based upon the purpose of exchange, and yet in order to have value commodities produced must have some degree of usefulness for the general population- if such wasn’t the case, capitalism would be a logical impossibility! The liberals then present their interpretation of these quotes, writing “On the one hand, we can totally ignore use value in ultimately explaining exchange values, but on the other hand – only a few pages later – nothing without utility (by which Marx no doubt means “use value”) can create value and by implication price. This is a bad contradiction, and requires that being an object of utility is a necessary condition not only for having labour value but also an exchange value.” The misplaced accusation of a “contradiction” here clearly then stems from the blatant misinterpretation of the former quote. Marx never claimed nor implied that we can totally ignore the subjectively discerned utility of a good in explaining its exchange value- on the contrary, Marx talked at length about the impact of demand on the exchange values of commodities. Rather, he was saying that use value cannot take the roll of the third thing which explains the intrinsic value of commodities in capitalism because production is based on exchange value rather than use value. However, the author claims another contradiction: to illuminate this contradiction, they cite the following Marx quote: “Lastly, suppose that every piece of linen in the market contains no more labour-time than is socially necessary. In spite of this, all these pieces taken as a whole, may have had superfluous labour-time spent upon them. If the market cannot stomach the whole quantity at the normal price of 2 shillings a yard, this proves that too great a portion of the total labour of the community has been expended in the form of weaving. The effect is the same as if each individual weaver had expended more labour-time upon his particular product than is socially necessary.” They summarize how this contradicts Marx’s theory when they write: “At this point, Marx’s socially necessary labour time as an independent determiner of exchange value or price has been shaken to its foundations.” This would be a valid point and a real, serious contradiction if Marx held the stance that socially necessary labor time is an independent determiner of exchange value and price- however, he doesn’t, at all. Again, Marx talks at length in value price and profit, wage labor and capital, and capital volume one about how supply and demand influence exchange value/price- socially necessary labor time is not the sole determiner of exchange value/price and Marx has never claimed such- Marx claims, rather, that socially necessary labor time is in large part the determinant of intrinsic value, which is something separate from exchange value or price as it essentially represents exchange value given supply and demand are at equilibrium. Once Marx’s actual stance differentiated by this gross strawman put forth by our author, it can be seen that it is in no way contradicted by the provided quote. Our authors assertion of a contradiction then is based on a very basic misunderstanding of the most fundamental elements of the labor theory of value. 

The Issue of Heterogeneous Labor

The next claim our author makes is the claim that Marx never properly formulates a method through which heterogenous labor is reduced to a homogenous socially necessary labor time unit. This is, of course, not true: Marx, for example wrote “Skilled labour counts only as simple labour intensified, or rather, as multiplied simple labour, a given quantity of skilled being considered equal to a greater quantity of simple labour […] For simplicity’s sake we shall henceforth account every kind of labour to be unskilled, simple labour” therefore, it’s merely a matter of deriving a specific reduction ratio. Luckily, this has been done with proper economic controls and mathematical techniques by contemporary economists. For example, Fujimoto and Ekuni (2011) formulate reduction ratios via the usage of linear programming problems and the Kakutani fixed point theorem to reduce heterogenous labor to a common unit. Furthermore, as Marx points out, reductions are made all the time in commodity exchange- the quote in which Marx lays this out is actually provided and responded to by our author- it goes as followed: “Experience shows that this reduction is constantly being made. A commodity may be the product of the most skilled labour, but its value, by equating it to the product of simple unskilled labour, represents a definite quantity of the latter labour alone. The different proportions in which different sorts of labour are reduced to unskilled labour as their standard, are established by a social process that goes on behind the backs of the producers, and, consequently, appear to be fixed by custom.” (Marx 1906: 51–52). However, the author responds with the following point: “But since Marx admits that most commodities do not even exchange for their true labour values, this argument does not work.” This is another point which fundamentally does not understand the basics of Marxism. The argument which Marx made does not require that Commodities are exchanged always in direct proportion to their exact labor value, and this is not something that he has ever claimed. Rather, Marx’s argument assumes the premise that the price of commodities is based fundamentally around labor value- these two are not by any means the same claim. Again, we see that it is the case that if our author had actually understood Marx at a very basic level they would see that there is no contradiction in what he has posited, and his argument maintains validity when compared to his earlier premises. The author also claims another contradiction in Marx, writing “if the only actual way we can determine the value of skilled value is by looking at the actual market exchange of the products of skilled labour for products of unskilled labour, then why bother with explaining the difference in terms of “expenditure of human brains, nerves, and muscles”?” Now, I’m not quite sure what they mean by “skilled value”, but I’m assuming they mean the value of skilled labor. This point is another blatant misunderstanding of Marx- Marx never claimed that we see inherently the value of skilled labor by looking at market exchange- intrinsic value can’t be inferred from exchange value as exchange value is subject to fluctuations in supply and demand, as Marx points out- Marx was merely claiming that producers make the proper regression ratios in order to reduce heterogenous labor to a common unit in the process of exchange, therefore proving such can be done and is. Moreover, even if Marx did claim this, where did he say there can be only one way to infer how this ratio must be conducted? Marx literally never claimed this, and the author of this article is merely putting words in Marx’s mouth to make it seem like a contradiction where there is none. This argument serves as the latest in many arguments based on complete straw mans. The author finishes off this argument by saying the following: “Furthermore, if exchange of the products of skilled labour for products of unskilled labour can be used to determine the value of skilled value as a multiple of simple labour, then the argument is circular. Exchange values determine labour values, but labour values are supposed to be a source of exchange values.” The problem with this argument is manifold: 1. Marx never claimed exchange of the products of skilled labor for products of unskilled labor can be used to determine the value of skilled labor, as intrinsic value cannot be inferred directly from exchange value. 2. Marx never said exchange value determines labor value, but rather that the process of exchange can give signals regarding what amount of labor can be profitably invested into a commodity. 3. Even if these gross misinterpretations of Marx were granted to say that this discredits the labor theory of value assumes that the concept of reciprocal causation is a logical impossibility rather than an observable phenomena of nature and physics. This closing argument posited by our author is based on too many misunderstandings to count. 

Joint Production

The author of this article then posits a 3rd argument, which, in contrast with their first two points, isn’t based on a complete and utter lack of understanding of basic Marxian concepts. A fascinating change of pace to be sure, even if a brief one. “even if Marx could overcome (1) and (2), he faces the problems of defining labour value in cases of joint production, where it is possible that the labour value of a commodity might be undefined, nil, or negative.” Maybe the most amusing part of this is the insinuation is that the first two contentions put forth are anything for Marx to overcome at all- Marx has overcome these arguments over 100 years ago! However, it is necessary to address their point about joint production. This argument originally comes from a couple of papers released by steedman in the early 70’s, and has been echoed countless times since as a “refutation” of the labor theory of value. However, as a paper released by Hosoda (1993) points out, negative labor values are only an occurrence which takes place in inefficient economies employing technologically inferior process’ of production, thus operating below their production possibilities frontier. Hosoda also argues that while this critique may hold for the simple two commodity case, it does not generalize to higher dimensions. However, as a paper by Allin Cottrell in 1994 points out, Hosoda even concedes too much. Cottrells arguments were manifold. Even in the two commodity case which Hosoda conceded, Cottrell says, there is an answer. For one, Cottrell points out that a system that appears to be inefficient and producing negative labor values in a static context may still be viable if the economy is on a von Neumann growth ray. Moreover, Cottrell argues that even if a system is inefficient it might still represent a possible equilibrium for a capitalist economy if the rate of profit exceeds the rate of growth. Moreover, when the issue of joint production is brought up, one aforementioned paper which dealt with the issue of hetergenous labor again finds relevance. In 2011, Fujimoto and Ekuni released a paper titled “Abstract Labor in a Model of Joint Production”. In the paper, as explained earlier they use linear programming problems and the Kakutani fixed point theorem while utilizing the generalized eigenvalue problem to formulate reduction ratios which were alluded to in capital volume 1 that come up with a generalized unit for labor values allowing for the possibility of joint production. Therefore, while the issue of joint production which our author brings up is an interesting subject to explore, it is by no means a conclusive refutation of the labor theory of value that has yet to be overcome in a coherent way. 

The Holiness of Free Human labor? 

Next, the author attempts to illustrate another flaw in Marx’s theory, that being the fact that while Marx asserted only free human labor can transform factor inputs into an output commodity and make a profit, there are clearly other types of labor, for example animals, machines, and slaves, which can do this. The existence of these other factors which also fill this roll destroy the LTV in that it rests on the premise that only labor can do so, according to our author. The problem, yet again, comes in that Marx did take these things into account. We again see our author is operating on a blatant strawman- Marx did not, in fact, say that free human labor is the only thing which can produce commodities, as the premise of our authors argument implies. In fact, animals, machines, and slaves, would all, as Marx himself said, constitute what Marx referred to as constant capital, which Marx directly acknowledged to be part of the process of transforming factor inputs into commodity outputs. To illustrate the fact that Marx never claimed free human labor is the only thing that can fetch profit by producing commodities, one merely has to look at Marx’s equation for how profit through the production of commodities is made, that being s/(c + v), where S represents surplus value, C represents constant capital (including animals, machines, slaves), and V represents variable capital. This basic equation which Marx laid out, by proving he took constant capital into account when explaining the production of commodities for profit, directly contradicts this straw man our author has attempted to erect. As for why he distinguished between the labor of animals and robots and the labor of humans, this can very simply be explained by the fact that free human labor as opposed to the other aforementioned form takes place through completely different social mechanisms and has very different economic implications- this is extremely not complicated. 

Fiat Currency VS The Labor Theory Of Value

In yet another attempt to discredit the labor theory of value, the author of this article brings up modern fiat currency. The authors argument is manifold: for one, the existence of modern fiat currency discounts Marx’s theory on money, as Marx posited that money must necessarily be a produced commodity, which modern fiat currency clearly isn’t. Secondly, fiat currency refutes the labor theory of value in that has value despite having no labor cost. This point has been thoroughly addressed elsewhere (see Jahu 2015), but I will take the time to go over it again now. Now, the issue with the first argument is that it is based on the premise that money is the same as currency from the Marxian point of view, and therefore Marx’s criteria for what money is not being met by fiat currency contradicts the labor theory of value- what this fundamentally ignores is the fact that by Marxian standards fiat currency is not money, and this point is therefore ultimately mute. Marx writes, for example, “Paper money is a token representing gold or money. The relation between it and the values of commodities is this, that the latter are ideally expressed in the same quantities of gold that are symbolically represented by the paper. Only in so far as paper money represents gold, which like all other commodities has value, is it a symbol of value.” According to Marx, fiat currency is not money, but rather a token of money. Marx furthermore never claimed that currency has to be a commodity, but rather that money does- and, since these two are not the same thing, we cannot extrapolate the former assertion from the latter. Regarding the second point, that fiat currency evidently has exchange value despite having no labor cost, there is a plethora of arguments to be raised here. Essentially, this is a conflation of exchange value and intrinsic value- demonstrating that something’s exchange value is not correlated with its labor value does not contradict the labor theory of value, as the labor theory of value does not assert that exchange value is determined by labor. Exchange value reflects monopolies, for example, which is the very thing which gives fiat currency its exchange value- fiat currency only has the value it has because a monopoly, the state, has decided that it has it. To say that the labor theory of value doesn’t take into account monopoly influence, moreover, would be a ginormous strawman- Marx and (I believe) Engels talked about monopolies as a product of the natural flow of capital and how it relates to the LTV at length, as did Lenin, as did Baran and Sweezy, etc. monopolies have been a factor which have been taken into consideration as a part of the LTV since the founding of the Marxian LTV, and acknowledged by every prominent Marxian economist ever. Furthermore, to get back to Jehu (2015), he also raises an interesting point about this exact argument, writing “The gold standard is abolished precisely to prevent the prices of commodities from reflecting their values. If you do not want the values of commodities to be expressed in their prices within circulation, the easiest way to do this is simply end the gold standard. Preventing commodities from expressing their values in their prices might be necessary once the values of commodities and their prices of production are now irreconcilably at loggerheads within the mode of production.” To reiterate, the artificial separation of price and value, which is how fiat currency came about, is not at odds with the labor theory of value. Our author has therefore again failed to refute Marx’s theory. 

The Empirical Validity of the Labor Theory Of Value

As we near the end of our authors list of refutations of the labor theory of value, the coherency of their arguments begins to sputter off. To demonstrate this, the author writes “the empirical reality is that prices are not set by means of the abstract socially necessary labour time of commodities or of money as a produced commodity”. This is quite an astounding claim. Our author claims that it’s just empirical truth that prices aren’t based on the cost of production, and yet doesn’t give one source vindicating this. However, luckily, I have done my research on this subject, and am happy to report with actual citations that our author is simply factually incorrect. So, let’s look at the empirical reality regarding the relationship between labor values and prices. Zachariah (2014) examined the correlation between labor output and price in Sweden. What he found is that the two are closely correlated, validating the assumptions of the labor theory of value. A study by the same author (Zachariah 2006) examining the same question more broadly attempted to investigate the empirical strength of the labour theory of value through looking at the correlation between labor value/cost of production, and market value by examining statistics from 18 countries. The study concludes that “The results are broadly consistent; labour values and production prices of industry outputs are highly correlated with its market price”. Another study released in the Cambridge journal of economics, conducted by Tsoulfidis and Maniatis (2002), found that labor value is a consistently extremely good predictor of market prices. The authors compared labor value to other theoretical predictors of price, and concluded that the results “provide further support for the empirical strength of the labour theory of value.” Another study conducted by Cockshott, Cottrell, and Michaelson (1995) analyzed UK economic data over an extended empirical timespan, using quantitative and empirical techniques to test key Marxian thesis’. They concluded that the empirical data they collected confirmed the basic theories encompassed by Marxian economics/theories of value. In case you’re assuming that I’m merely finding biased fringe sources to confirm my narrative, a study published by the European Central Bank (Bobeica, Ciccarelli, and Vansteenkiste 2019), confirmed that there is a correlation between labor cost and price inflation in 4 major economies (Germany, France, Italy, and Spain). Evidence from the German economy confirms the same narrative; another study published in the Cambridge journal of economics, (Fröhlich 2013), found that the labor theory of value yields “very good results” in explaining the market value of commodity’s. A great many other studies (Petrovic 1987; Ochoa 1989; and Baeza 1994) also confirm through an analysis of economic data the unmistakeable correlation between the cost of production/labor value and the price of commodity’s. Another paper by Cockshott and Cottrell (1997) overviewing the scientific literature and giving a summary of the status of the labor theory of value as a scientific theory concluded that it is a valid theory that is consistent with the available data. Therefore, not only is the labor theory of value strongly theoretically and logically justified, but has been empirically proven with incredible replication. So, our author, without citing a single source, claims that the labor theory of value, which asserts a correlation between labor value and price, is empirically invalid. Yet, when you actually look at the empirical evidence, all of it corroborates the basic claim of the labor theory of value- this is quite embarrassing for our author, and appears as yet another failed attack against Marx’s labor theory of value. 

Wage Labor and Capital 

Finally, to top off this list of bad arguments against the labor theory of value, the author claims “the problem that surplus labour value (if that concept could even be adequately defended) would not really explain money profits, since money profits can exist in a slave-based economy and very probably even in an economy where machines did most of the work.” The problem with this argument requires very little elaboration to demonstrate. Essentially, Marx’s theory of value applies to capitalism, and only capitalism. The law of value in itself is simply an analysis of the mechanisms of capitalism. Moreover, in Marxism, a necessary component of capitalism is the existence of wage labor- without wage labor, capitalism wouldn’t exist, as wage labor is one of the defining characteristics of capitalism. Therefore, appealing to modes of production in which wage labor doesn’t exist (as all labor is done by robots or slaves) does not negate the law of value which is fundamentally based on an analysis of capitalism alone. This argument simply has no implications regarding the validity to the law of value and is based on a very basic and fundamental misunderstanding of what the law of value even is. 

Conclusion

In conclusion, this article was another failed attempt at discrediting Marx’s theory of value. All of the arguments put forth were loaded with straw men fallacies, factual inaccuracies, and basic misunderstandings of fundamental Marxian concepts. While putting forth contentions which are admittedly at least more coherent and intricate than your average mud pie argument, not a single one withstands scrutiny. 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s