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Labour Theory of Value
How do you refute this above theory?
“The labour theory of value is the proposition that the value of a commodity is equal the quantity of socially necessary labour-time required for its production.”
A commodity according to Marx is a good which is labour produced for the purpose of exchanging with something else.
If something had no value prior to you extracting it from the earth, then why did you extract it?
Clearly a value judgment had to be made in order for an individual to deem the extraction worthy of the physical endeavor. Thus, one must recognize that there is a degree of intrinsic value inherent to the material, although quantifying that value is a separate question. The point is that there is intrinsic value otherwise one would not have labored to extract it. The material, once extracted, is now changed due to labor, and thus has a new value: intrinsic value + labor.
The value of oil in the ground was nil before people valued it. It was human imagination that gave it value. Now that people value oil, even unextracted oil still in the ground has value. Oil fields of unextracted oil can be bought and sold for value. It is people’s subjective valuation that gives value, not intrinsic value or labor.
One cannot value something he/she is unaware of, let alone its uses. Only after we discover an object as well as its utility do we gain the capacity to realize its value. So, there is an intrinsic quality to all objects. One that is discovered. Granted, that value cannot ever be manifested without agency. So, ‘intrinsic value’ is simply a classification of value. It’s a term that acknowledges that objects have value irrespective of our knowledge or lack thereof. I don’t think this acknowledgement necessarily implies that the value is ontologically objective, albeit it is epistemically objective. For example, knowing what you know now about oil, if you were viewing the technological advancement of a civilization that has yet to discover oil, (or better yet, it’s utility so people just walk passed it like it’s nothing), could you really argue oil has no value because the state of their subjective experience is that of ignorance?
Hi David
But we can value something, values something too much or not value at something at all or enough because we have a lack of or erroneous information about this something.
Hi Ricky,
What we introduce is scale as we calculate risk vs reward in attempts to quantify the objects value. And, yes, our judgment is prone to error.
@properal — ” I don’t think an object can have value when no one values it.”
I said the same thing, although I worded it as follows: “Granted, that value cannot ever be manifested without agency. ”
David, (@recursive)
This is what puzzled me. You seem to agree that objects do not have value unless people value them, and still claim that they have intrinsic value + labor value. If they have intrinsic value then they have value without people valuing them. Marx got around this problem of goods produced with labor like mud pies but not being valued by anyone by saying some things are not “socially necessary” so they have no value. How do you explain things having intrinsic value + labor value yet not being valued by anyone?
And what a big old mess the “socially necessary” concept is!
I just finished debating a Marxist and he could not define this concept clearly, as the often do they merely accuse you of not being up to the “job” of understanding Marx´s works and point you in the direction of the obscurant passages of Das Kapital.
I also stated that labour is merely one factor of production just like many others in the the capitalist production system.
Mark limits his study to commodities, which he defines as goods produced for exchange derived from labour. This is rather truncated as it leaves out many other NON labour derived goods e.g. land, natural resources. He also does not account for the human skills, ideas (brain-power) which ALL play extremely important roles in the Capitalist production system, all important factors.
But wait, the Marxist I debated with claimed that this human capital, these skills, ideas, innovations etc are the result of socially necessary labour time!! To which I replied:
“However, there are, as I have mentioned, other factors of production in the capitalist production system which are non tangible such as human capital and intellectual capital, much of which I must say is the result of labour i.e. work experience, but not all of it e.g. ideas which result in innovations, inventions and higher productivity. Moreover, how on earth would one go about attempting to measure the socially necessary labour time invested in the work experience!?”
A messy old dinosaur of a system is Marxist economics.
To clarify my claim: Objects do have value, but it is people that quantify it. The degree to which one values an object is ontologically subjective. Thus, to say, “This object has zero value,” is to simply say “I do not value this object.” Zero is a holding place. That is its function. The expression of which does not negate any potential value in the future. It is simply a person in the present saying, “Given what I know now, I have no reason to value this object.” Although, with the right information, that perspective can change. And, we’re not talking about fraud here as you see with snake oil. So, how can one teach another the value of something without showing its benefits empirically?
If I can show you the benefits of something empirically, then I have shown you objective value. Although, it is not ontologically objective. It is epistemically objective.
I don’t know if you’re expecting me to address “mud pies,” but if so, all I can say is that the term is much like an unspecified pronoun. ‘Mud’ can be anything full of various minerals, or even top soil. And ‘pies’ is applied metaphorically as it looks like one.
I agree Properal.
Value resides in the mind of individuals, we give value to something due to our perception of its utility/technological use and how this will satisfy an ends we seek, resulting in what we perceive as the removal of uneasiness.
I must stress that we can be wrong in our perception of the utility of a thing, we can overestimate it and at times underestimate it, likewise we can be wrong in our perception of how we think this thing will satisfy the ends we seek. We can also be wrong in our perception of the ends we seek. To conclude, we act on imperfect information, we err.
Example: I book a meditation course because I think that it will make me feel more relaxed and help get to know myself, find some clarity and purpose in my life.
I perhaps am making a mistake in my perception of what yoga is about (its utility) as far as it getting to know myself and finding purpose in my life goes, perhaps I am overestimating it, perhaps a psychology course or philosophy course would be better suited.
Prof. Don Boudreaux demonstrates the subjectivity of value in this short video:
Cracking video.
The shirts example is wonderful. It clearly shows how 2 different labour produced goods, with the same amount of labour time and resources invested in their production can be valued so differently by different people. Most people know who Che was or have heard of him, some think he was a cool guy and would love to wear his shirt, a handful would not be seen dead in shirt with this sociopath´s face on it e.g. me. On the other hand a handful of people know who Friedman was, some of them think he was a cool guy and would love to wear his shirt, even fewer know who he was and would not be seen dead in this shirt.
Well, I’ll stick my 2 cents in here. I totally disagree that value, at is root, is subjective. Sure, we may have an opinion and subjectively value something, but over time, “real value” is a relative measurement and will prove itself out. As usual, all our explanations of how things “work” revolve around the human being. It’s all about what we believe and think. It’s all about us isn’t it? All we have to do is dream about what is valuable and what is not…to make it so.
Total misconception. Ultimately, what is valuable is outside our control.
Do you value something that’s more convenient or less convenient? More convenient for sure. Why? More convenience means less time and energy (labor). Why is that important? Because your time and energy are a fundamental and finite resource, and so of ultimate value, and so are limited resources for you to exchange.
While the human perception of value may be subjective, in the end, economizing your energy over time will drive your perception of value. To value things that consume more of your time and energy, whether you are aware of it or not, is a loss of personal “economy” of your finite resource, and it will be painful because in the end, it results in physical loss and loss of time, and the opposite just as true.
The “true” value in oil, or anything, is its utility, with utility meaning its savings of time and energy, understanding that in a universe where mankind’s time and energy are finite, oil proves its “relative value”, because the time and energy needed to extract and refine and transport it, is less than the energy and time it saves us in its use for our transportation. So in the end it is a net gain in our available time and energy. That is real value. This net gain is also where wealth comes from.
Dreaming up real value is nonsense, and why free markets need to exists: to prove out real value, which ultimately is the conservation of time and energy. It’s the invisible hand, calculated beyond comprehension, and is inescapable.
Lee
“Total misconception. Ultimately, what is valuable is outside our control.”
Utility is objective, aka technological utility i.e. how something can be used or consumed. Take an umbrella for instance, it can be used to a) keep the rain off of us or b) keep the sun off of us. This utility is what we perceive and ultimately why we value an umbrella.
Water for instance is something we need, this is indeed outside our control, it would sound strange to say I value water. However, I could say I value spring water or filtered water over municipal tap water. I could also say that I value water a great deal after training or in summer when it is hot.
Lee Roesner (@liberty56),
The “true” value in oil, or anything, is its utility, with utility meaning its savings of time and energy, understanding that in a universe where mankind’s time and energy are finite, oil proves its “relative value”, because the time and energy needed to extract and refine and transport it, is less than the energy and time it saves us in its use for our transportation.
Some people forgo time and energy savings that oil enables so they can ride their bike to work. They are exhibiting that they value their bike ride over time and energy savings they would get by purchasing gas and using their car. People have different preferences and this leads them to value things differently. Markets are a mechanism to reconcile these different value preferences. If values where objective we probably would not need markets.
Subjective Value and Market Prices | Jörg Guido Hülsmann
Ricky/Properal
I would not disagree with either of you, but would only make a distinction, that what happens inside our head (reason and subjective preferences of value) are one thing, but acting out those preferences in a physical world, where there is physical law, and where there is restraint on what can be and what cannot, is another, and is where free markets (acting in that physical world) “prove” that value out by the relative physical consequence all action has.
Yes, people can choose what they value, but acting on any choice will not be without it’s “relative cost” of time and energy. This accounting, whether you’re aware if it or not, is what cannot be escaped when you consider again our time and energy are finite.
I totally get this is easy to write off as unimportant, but you’ll find it drives your decisions every day.
Yes, you can ride your bike to work instead of drive. It’s your choice, but it’s also your net loss in that it will take you an extra hour to ride to work, and then back. So your choice will cost you 2 hours more of your finite time, and X amount more of your finite energy (labor) every day. That’s 2 hours less with your family everyday…etc…but it’s your choice.
This is to realize in the physical world we have “relative value” (not the perception of value in your head). Since your time and energy are finite, the question now is what do you value more; your family or riding the bike to work?
In your head you can value both equally, but in the physical world, you cannot have both (2 hours on your bike and 2 hours with your family), as “acting” on what you value on one thing has a net relative physical effect on time and energy on the other things you value.
So yes, you can choose to ride your bike and get home all sweaty an hour later than your neighbor everyday, and see when you get home that he has finished all his yard work and sitting on the patio having tea with his family, or you can buy a car and be with your family.
Totally your choice, but the point is to see that what you value in your head, unrestrained (I value everything a lot!) is one thing, but is different than the restraint of “relative value” in the physical world, and to understand that to physically achieve all the things you value in your head “a lot”, requires you to “act” efficiently to conserve your finite energy and time, in order to physically realize those things you subjectively value.
I’ll add one last thing again and that is you do not have to be aware of this accounting of your finite time energy, because you’ll find it is pleasurable to move toward efficiency and painful to move against it.
Does this make any sense?
Steven Horwitz just publish a relevant article yesterday:
We’re Still Haunted by the Labor Theory of Value, The Copernican Revolution in Economics
Excerpt:
But the real Copernican revolution in economics was how the subjective theory of value related to the value of labor. Rather than seeing the value of outputs being determined by the value of the inputs like labor, the subjective theory of value showed that it’s the other way around: the value of inputs like labor were determined by the value of the outputs they helped to produce.
The high market value of well-prepared food is not the result of the value of the chef’s labor. Rather, the chef’s labor is valuable precisely because he is able to produce food that the public finds especially tasty, beautiful, or healthy.
Let us forgo the use of the word “labor” in the equation for VALUE, because WORK is a more accurate word. Work = energy times time. The question is: can anyone name anything on the planet that does not have some”use” to someone? If you can name such a thing you may have found something with NO VALUE, if not you are simply IMPOSING your definition of value on the rest of the world. One man’s junk is an other man’s treasure.
Properal….I would absolutely agree with that. The examples above of valuing certain “food” and “junk” (in our head) is hard to distinguish real relative value in the physical world because they are delicate examples, but are no less connected, when acting out on anything has relative effect on the other.
For instance, the reason I value junk is because it save me $ (time and energy), not because I value junk. If you put “junk” next to “new” and they were the same cost, which would you value more?
The $ I save by buying junk means I can now spend these extra $ on better quality food. “Real value” is all connected out here, when it’s not just in your head.
Here is an easy example regarding Properal’s comment.
If I take a widget that costs $1 to make. What is its value? $1?
No, that would be its cost of time/energy or work as Frank said to creative it. It’s “real value” is “realized” from its use in the physical world, producing the degree of its utility, measured in how much time and energy it saves me, or its convenience.
Say, if I use this widget every day, and it allows me to produce in 4 days what normally would take me 5 days, than the value of this widget would be far more than $1. No? How much more?
