: The Labor Theory, upon which the entire proposition that working with capital ownerd by another is exploitation, is a dubious economic theory. Ive seen it used time and time again to 'explain' exploitation and it really ruins a socialists a arguments when scrutinised. This is a paraphrased text.
Actually, its not one hundred percent necessary- at best its a means of showing how exploitation is structural, rather than simply a determined rip-off by capital. At the end of the day, no matter how value is derrived, profits come from the difference between the value on the market of the goods produced by the workers,a nd teh value paid to them for their commodified skills.
: Karl Marx’s labor theory of value asserts that the value of an object is solely a result of the labor expended to produce it.
Ricardo's, with ADAM SMITH before him.
: According to this theory, the more labor or labor time that goes into an object, the more it is worth. Marx defined value as
: "consumed labor time", and stated that "all goods, considered economically, are only the product of labor and cost nothing except labor".
Average necessary social labour time.
: The labor theory of value is the fundamental premise of Marx’s economics and the basis of his analysis of the free market. If it is correct, then much of Marx’s critique of capitalism is also correct. But if it is false, virtually all of Marx’s economic theory is wrong.
Not necessarilly, but we'll continue, it is a sort of central plank.
: Here is an example of how the labor theory of value works: A worker in a factory is given $30 worth of material, and after
: working 3 hours producing a good, and using $10 worth of fuel to run a machine, he creates a product which is sold for $100. According the Marx, the labor and only the labor of the worker increased the value of the natural materials to $100. The worker is thus justly entitled to a $60 payment, or $20 per hour.
Not quite- according to Marx the worker produced the $60 difference, but nothing is said about 'entitlement'. Its simply noted.
: If the worker is employed by a factory owner who pays him only $15 per hour, according to Marx the $5 per hour the factory owner receives is simply a ripoff.
No, its a structured difference, based on the difference between the value of the worker's skills on the market, and the value of the goods he produces (Thus if he is unskilled Labour, and could live on £5 an hour, that is what he would be paid, regardless of the value of his *produce* on the market).
: According to the labor theory of value, all profits are the rightful earnings of the workers, and when they are kept from the
workers by capitalists, workers are simply being robbed.
No, we are entering into a contract in which we are paid the full value of our labour power- i.e. we sell our capacity to work (or rent it rather), which then is used in production by the capitalist in exactly the same manner as would a spanner or screwdriver. This is what alienation means, we alienate, make seperate from ourselves, our labour power, and sell it, we have no personal connection to production, except as a tool.
: The other approach is the market-exchange theory. According to this theory, value is not inherent in objects, but is a product of many different consumer judgments. According to market-exchange theories, value depends upon people’s desires: the more they esteem an object and are willing to trade for it, the more it is worth. This theory is the basis of free-market capitalism, which Marx bitterly opposed.
But lets remember- when workers produce a good, it has a known market value, even if value is subjective (and Marx would say that *price* is subjective) then the workers have produced a good in its entirety, and should still receive its full market value. It simply wouldn't exist without them.
: Which theory is correct? Both of them cannot be, since they lead to diametrically opposite economic systems. The labor theory is flawed in that it considers labor to be the cause of value - it is not. The value is derived from the valuing.
ANd how does that occur, upon what basis- remeber- any evaluation of an object must be based upon common comparable features- Labour is the *sole* comparable feature between commodities. (Unless you listen to Georgists wittering about Land...).
: The assertion that labor is the sole determinant of value is hard to accept just based upon common sense and experience. The assertion that only labor gives an object value ignores the fact that many natural objects in which no labor has been invested – such as scenic views, pure water, gems and minerals, and wild fruits and vegetables – have economic value.
Indeed, Marx takes folk who think that way to task in his 'Critique of the Gotha Programme', see also Capital volume three for Marx's take on teh Theory of Rent.
:Also the labor theory cannot by its nature account for the fact that people value some natural objects, such as diamonds, tremendously more than other natural objects, such as leaves.
Erm, yes it can- Diamond's are very hard to come by, and take a highly significant degree of labour time to extract them- in fact it was the value of water V. Diamonds that led Smith to propose the LTV. Added to that the semiotic use-value of intrinsic worth, and Diamonds are easilly explicable by Marxian economics.
: The labor theory of value also fails to take into account changing consumer desires and the contextual nature of value. In a
horse-and-buggy culture, horse-shoes are tremendously valuable commodities, but in a society without horses they are virtually useless.
Average socially necessary labour time- note the necessary, that implies that you must be able to sell the damn things, that the *use-value* (which is utterly distinct from labour time) must be needed. Also, Marx gives an example of the weavers, who, when faced with competition from factories, found the price of their goods plummeting, (because factories produced at lower value) and thus had to work harder.
:Similarly in a society with much leisure time, games and recreational facilities become important, but in a subsistence economy in which people must work nearly continuously just to stay alive, such things may actually have negative value.
And they are thusly known as excess, and they are valued in as much as you *can* do them, they are valuable because they take up time that might otherwise be needed for production, hence hollidays are heavilly valorized.
: The labor theory also ignores the importance of time and position. A 20-year-old wine is far more enjoyable than one-year-old wine. Oil in a desert is a potentially valuable resource, but oil in the local reservoir or in the middle of a farmer's field is a hazard.
No, thats use-value again.
: For example, most workers prefer to be paid when their work is completed rather than when their products are sold – which may be months later. For workers to be paid now, rather than later, someone must advance their wages, and clearly this service has a value. But proponents of the labor theory would have it both ways: workers are to receive the full future value of their product now. In other words our wine worker would be demanding the full value of the wine ten years before it is bought.
To, because intriguingly, we are paid for our skills retroactively, we work for a week, and are paid for the week past. Plus, we are not paid the full value of the commodity at that time- if my cricket ball firm sells cricket balls, all year, for £10 and I recieve £3 per ball I make, surely I should get the £10 as it is worth then? And if the price doesn't change three months down the line- wherefrom is profit made?
With the wine, I would demand its value at time of sale.
: The final theoretical failure of the labor theory of value is the value-effort fallacy. It is folly to assume that all effort produces value. Every day each of us wastes time on fruitless efforts. To equate labor with the automatic creation of value is to fallaciously imply that all human effort is infallible and constantly (and equally) productive.
*Average* socially *necessary* Labour time (Marx in 'Value Price and Profit' and in 'Capital' speicifcally refutes the question of 'what about a lazy worker?' by this vary point, we are looking at the average social time needed.).
: The labor theory is even more absurd in practice. If all value is derived from labor, and entrepreneurial effort is "parasitic", who would bother to invest the time and money necessary to build factories, plan product development or organize a production process? If all profits are "exploitation", what incentive does anyone have to risk resource on a new and untried product or service? Where will the resource come from to finance new investment in tools?
1:Aren't workers risking everything they own when they get a job?
2:the point is to have *no money* and thus the incentive is social need rather than provate gain.
: Communist countries,as we have said before, have not abolished profits. They have merely transferred all profits to the state, which typically uses them to build a huge military apparatus at the expense of consumer production.
Because they were not communist, they were state capitalist, they still retained a wages system, and produced for profit on the market.
: The labor theory of value is violently anti-consumer by its nature. Under this theory, sellers are compelled to price all goods by the amount of labor that goes into them, rather than how much they are demanded by consumers.
Value is different from price, value is the mean price, and arises negatively from price on the market (Hegelian sense- 'Grundrisse'). Of course the consumers are involved, it would be daft economics without them.
:Thus stores could charge no more for an aged foreign wine than for a local cheap wine (given equal labor input) or more for the work hacked out by a beginner.
No, because people are buying a use-value.
:This inevitably produces a surplus of unskilled and shoddy work, and a shortage of skilled work, because doing something better that does not involve more sheer time-effort produces no more gain for a worker.
Thats what we have now- shoddy work thats knocked off quick- no one plans to run an economy accorfding to Labour time value (Marx rubbishes labour time vouchers in 'Grundrisse' spectactularly so). the point is to have an economy where skill can be appreciated.
: The labor theory also means the end of all economic freedom. Engels, Marx’s disciple, wrote: "For a pure Marxist society to long endure, voluntary exchange between individuals must be abolished." In a communist society you produce what the rulers tell you (and it doesnt matter if those rulers are the state or your fellows 'votes').
Can you source that one please? And it doesn't mean choice is gone, it means that instead of exchange you have free access. In a free communist society you produce as you will, but humans are inevitably a social animal, something your notions of freedom cannot handle, I cannot be free to poison the community with lead fumes, nor to put my cabbage patch where the intended hospital must go. the only way to be free in society is through democracy.
: The most interesting fallacies of the labor theory of value are methodological. Labor theory arose from two extremely poor
: methods of economic research. First it attempted to establish economic laws of exchange by examining only supply – ignoring demand entirely.
As I have noted, demand is intrinsic to the methodology. the premise is, though, that competition between producers will force prices down to the cost of production, unless we have another reason why not- hence value steps up, and no, non of Joel's marginal-preferrence theory could handle competition in its model..
: Even worse, the entire labor theory is unproven. In the entire first volume of Das Capital, where Marx proposed the labor theory, there is not one "positive proof". Rather Marx offers a fallacious "negative proof" in which he argues:
: Premise 1 – some factor in the production of a good gives it value [true];
: Premise 2 – only those goods to which man has applied labor have value [false];
Goods without Labour only have potential value (gold underground), but nothing can enter the market without human labour.
: Procedure – Examine all the factors producing a good by discarding those which did not create equal value in equal quantity, and end up with one factor – Labor. [Arbitrary].
No, examine production to find any universal factor that might be adequately used to compare a condom with a Diamond ring.
: Conclusion: Labor must be the source of value [False].
Labour is the only universal factor.
: If you want to argue why making a profit is bad then do not do so from the labor theory of value - its a false premise and really ruins a socialists criticisms. Any other examples of anti-profit arguments would be welcome.
Not really, I have shown your argument to be largely eroneous, I suggest going down and looking for the Anarchist FAQ link- it provides a much better critique between marginal preference theory and Labour value theory than you have just given.
I went through *all* those points with Joel about half a year ago now...weren't you reading our uber posts?