Marx's Labor Theory of Value

Since I first had to teach Marx in a history of thought class, I have come to appreciate him much more. His writings are full of interesting insights, and many of the critiques of him turn out to be critiques of a strawman. Marx is far better than I had thought!

So it was with great interest today that I went to a lecture by a Marxist on the Marxist theory of value: maybe there were gems in there I had missed as well.

No: the Marxist theory of value is far worse than I had suspected. The notion that only living labor can produce surplus value appears to be based on sheer assertion and definition. It seems to me could create an equally sound theory of value for my ideology of "Celticism": I define surplus value as something that is only produced by living Irishmen (and women... let's not be ethnocentric and sexist!), value which is then expropriated from them by the exploitative non-Irish. If you ask me, "So, industries that employ lots of Irish show the highest profits?" I reply, "No, the capitalist competitive process redistributes that Irish surplus value equally across all industries." It is as though I tell you that, by definition, there are elves all over the place, and then construct an elaborate framework to explain why it is we never see any evidence of them anywhere.

And the thing is, Marxists don't need the labor theory of value! It is an albatross around their necks. They could adopt modern value theory, and just claim that capital grabs a huge share of the producer surplus and only leaves crumbs of that surplus for labor. And that assertion they could defend with actual evidence, rather than having to construct a theory as to why all of the evidence for their claim is continually vanishing.

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  2. A couple years ago I went looking for a quote in The XVIIIth Brumaire of Louis Napoleon. That was when I discovered the strawman nature of one common criticism of Marx: that he was a crappy writer. XVIIIth Brumaire is bracingly well-written: concise and witty. I ended up reading the whole thing in a sitting. ("Unputdownable!" - Henley.)

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    1. Good writing indeed, if, perhaps, a little sharp with those with whom he disagrees.

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  3. When I saw this post title, I was worried you were going to endorse the theory because of the nice things you said about Marx earlier. But I agree with both posts. In fact if I ran into a younger version of myself, that person would certainly call me a Marxist, and the current me wouldn't be too upset over it.

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  4. Gene: I of course subscribe to the Celtic theory of value. Celts of the world unite: you have nothing to lose but your chains, and a world to win!

    Seriously, though, Sam Bowles and Herb Gintis and Robert Paul Wolff show formally, using a little matrix algebra, that defining x values as the amount of good x embodied directly and indirectly in a commodity, where x is any "basic" commodity in Sraffa'a sense, it will be true that positive profits entails the exploitation of x in just the sense Mars says labor is exploited, that, the that the x value of a unit of x is lass than unity.

    Kevin Quinn

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    1. Kevin, I have no idea what "The X value of the unit of X is less than unity" means. Can you give me a concrete example?

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    2. And Kevin, do the people you cite *start* with a labor or cost-based theory of value as the basis for their analysis?

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  5. Gene: Marx argued that labor is exploited because the labor value of a unit of labor power is less than unity. He usually makes the unit a day's worth of labor power. So he says the capitalist can hire a day's labor power with wage goods which embody less than a day's labor, and this is the source of profit. He can be hired for, say, 5 hours and creates value of 8 hours.

    The people I refer to were working with a Sraffian model of production of commodities by means of commodities. There are n goods. You have an nXn technology matrix, A, in which aij is the input of good i needed to make one unit of good j. equilibrium prices and profit rate are then determined (for a given wage) from
    p=pA(1+r) + wl, where p is a 1xn row vector of prices, r is the rate of profit, w is the scalar wage and l is a 1Xn row vector of labor inputs per unit of output for each of the n goods. Since you have fixed coefficients, yes, this is cost-based: demand plays no role in the determination of prices.

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    1. "He can be hired for, say, 5 hours and creates value of 8 hours."

      Yes, and the amount of wheat "embodied" in a loaf of bread can only buy 1/3 of a loaf of bread. Cereal grains of the world unite and throw off your chains!

      "yes, this is cost-based"

      Kevin, I have no doubt that from nonsensical premises nonsensical results will follow! (By the way, Murphy calls Sraffa's work "Production of Fallacies by the Means of Fallacies.")

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  6. Gene: I think you are misunderstanding. The Bowles and Gintis result is a reductio argument against the labor theory of value.

    As for what "Murphy" has to say about Sraffa - who is Murphy and why does he like to parade his ignorance? Piero Sraffa forgot more about economics than you or I or almost anyone- certainly this Murphy- will ever know.

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    1. Yes I did misunderstand. My apologies.

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  7. Oh. now I think I see: Murphy must be an Austrian, still smarting from Sraffa's take-down of Hayek in the 30's. Can you say "eviscerate"? I knew you could! (-;

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    1. Oddly enough, Murphy wrote his doctoral dissertation agreeing with Sraffa against Hayek! Keynes and Hayek and Lachman were able to answer Sraffa very well, something Murphy has never acknowledged.

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  8. Well, I don't know about that, but as for Production of Commodities by Means of Commodities, I would be surprised if there were any fallacies Murphy could identify - mistakes of logic, that is. You may not like the assumptions, you may therefore think it has no application, but as a piece of thought it is a masterpiece. Ask Paul Samuelson. Ask Duncan Foley. Just who is the miserable little murphy to disparage it?

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  9. Just one more comment on Sraffa. I also teach the history of economic thought and Sraffa's work is an excellent example of the best uses of HET. His work as the Editor of Ricardo's Collected Works led him to see Ricardo in an entirely new way, and this re-vision of Ricardo, first broached in the Editor's Intro. to the Complete Works was the seed of PCBMC. His interpretation did what the best HET does: he saw Ricardo, not as giving bad answers to the questions we now ask and know better, thanks to progress, how to answer, but as asking different questions entirely.

    In particular, he saw Ricardo as using an imperfect vehicle in the LTV to try and give a coherent account of a technically determined "surplus" characterizing an economy with a given technology, the size of which is invariant to redistribution between classes. The LTV, Sraffa finally concludes, is neither sufficient nor is it necessary for answering this question. Sraffa tries to do so in PCBMC.

    Ok, I'll stop now!

    Kevin

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    1. By the Way, Kevin, I am not at all critical of Ricardo or Marx for having used such a theory. I just think it strange to find people still using it in 2013

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