Marx's Labour Theory of Value is Superior to Subjective Value Theory
Marx's Labour Theory of Value: The theory outlined by Marx which states that value (underlying value and to a certain degree price) is accounted for by 'socially necessary labour time', that is, the average amount of 'labour time' it takes, on average and under average conditions, to produce a given commodity. This theory holds that all new value is produced by labour, and that profits (surplus) derive from value produced by labour that is not payed directly back to the labourer in the form of wages (this inequality between value produced and wages is Marxian exploitation)
Subjective Value Theory: a set of theories which aim to demonstrate that there are no objective standards of value, and that all value (prices) arise from the subjective attitudes towards the product of the consumer and the producer - the consumer either would or would not prefer to part with x money for y commodity, and the seller either would or would not prefer the consumer's money to keeping his product. This is associated with the supply and demand theory of price and the concept of 'marginal utility', which holds that the value of a commodity is the price a person is willing to pay for the next or 'marginal' item (a lot for my next diamond, very little for my next glass of water and so on)
I"ll by briefly elaborating on the definition of Marx"s labour theory of value. Marx holds that there are essentially three kinds of value: use-value, exchange-value, and value proper. Use-values, which it is "the work of history to discover", are the particular material qualities of objects which give them use to human beings. Something may have use-value, then, without being sold on the market, that is,without being a commodity (such as oxygen). All commodities, however, must have use-value; they must be socially useful in order to be sellable at all. Superficially, this seems quite similar to subjective value theory, since use-values can undoubtedly be subjective " I have a nut allergy, so nuts have no use-value to me, but quite a high use-value to others who enjoy them.
The important point to stress here is that what Marx is seeking to explain, ultimately, are prices (since prices are what people normally mean when they talk about values; "how much is that ipad worth?"); people"s individual views on the use-values of objects are irrelevant to the question of value until that object is transformed into a commodity by being sold on the market. For example, I value oxygen very highly, but this does not automatically translate into a pricing scale for oxygen, since oxygen is not sold on a market. The same goes for human beings in a post-slavery society. So, what it is that occurs, aside from people"s individual preferences as regards use-values, that creates price once commodities are sent to market?
Clearly, what is significant about prices is that they differ from one another; an apple is worth, say 50p, whilst a new laptop could be upwards of "1000. All commodities can be compared with each other in this way, and these quantitative differences are what Marx called "exchange values". Exchange-values indicate how much of one thing you would need to equal the value of another thing, for example, I would need 2000 apples to equal the value of one laptop given the prices above. In a barter society, then, we might imagine trades of this sort literally occurring " 2000 apples for one laptop and so on. But in modern society, of course, we use money as a universal equivalent (for various reasons I won"t go into until it"s necessary) " this means that we measure the value of all commodities against a certain quantity of some accepted currency, so instead of paying 2000 apples for a laptop, I pay "1000 pounds. This also suggests, of course, that an apple is worth half as much as "1, i.e. 50p (apologies for the UK units!).
But here a problem arises: what is the common denominator that makes all commodities, including the money-commodity (gold/silver) commensurable, that is, measurable against one another? If I wanted to measure the career successes of top athletes in different sports against one another,how would I do it? The very first thing I would have to do is to think of a common quantitative denominator (say, major competitions won), so that the achievements in qualitatively different sports could be made commensurable for the purposes of comparison (notice that the only reason I would need to do this is to compare the different athletes, just as the only reason I need to find a commensurable "something" in commodities is because they do, in fact, need to be compared on the market). This common "something", says Marx, is labour, but here we need to clear up some misunderstandings.
Obviously it is true to say that a quantity of labour goes into the production of all commodities - it is a true common denominator. But critics of Marx will often use the "mud pie" objection, which objects to the labour theory of value on the grounds that labour used to create useless objects (like mud pies) will clearly not produce value. This is clearly true, but Marx has already countered this by saying that all commodities must have use-values in order to even be commodities. If a commodity cannot be sold, it is not a commodity, and we don't have to worry about its "value"; value is a term that only applies to commodities.
But there is a second common objection. Marx held that the way we should measure labour is in "labour-time" - higher the labour time, the greater the value. But if this is true, why wouldn't it be the case that a lazy worker who takes twice as long as everyone else to make a chair would in fact be producing twice the value? Surely, if greater labour time equals greater value, fast and efficient workers, who produce things quickly, would be producing the least value and not the most! Well, here we have to introduce the absolutely fundamental difference between Marxian labour value and the labour value theories that preceded him. Previous theories advocated just such a flawed model as above, where lazy workers miraculously made things that were worth less, despite their higher labour-times. Marx's key adjustment was the notion of "socially necessary labour time"; it is not the individual or concrete labour embodied in the commodity (the two hours it took to make a particular chair) that produces its value, but the average amount of labour time it takes to make chairs of the same quality under average conditions.
This works as follows: let"s say there are four factories, all making chairs of a similar quality (so that they will be directly competing in the marketplace). Initially, all four factories take 1 hour to produce 1 chair, and all four factories sell their chairs at "20 per chair. But then factory 1 discovers a way, be it new technology, division of labour or whatever else, to produce chairs twice as fast, at a rate of 2 per hour or 1 per half hour. Under a "naive" or pre-Marxian labour theory of value, that person should now be producing half the value per chair, since each chair requires half the labour time as before. But here the fact that the chairs sold by factory 1 are being sold on a market comes into play.
There is no reason whatsoever for factory 1 to halve his prices - this would be economic madness. He could, if he wished, go on selling at the market price of "20. If he did so, his profits would soar, not because he is taking in more revenue, but because his costs have decreased substantially thanks to the greater efficiency of his workers. In reality, he will probably slightly lower his prices so as to undercut his competitors and gain market share - the fact remains that, whatever your production times and costs, you still get to/have to sell at the market price, the price determined by the average labour-times taken to produce similar products. We can imagine the opposite scenario, wherein factory 1 is twice as slow as the other factories, producing only one chair every 2 hours. Now, it would be great for him if he could follow naive labour value theory and double his prices to compensate, but the "law of value", the law that says that prices must reflect average labour times, disciplines him away from this option (since no-one would buy his chairs at the higher price!). He must continue to sell at something like "20, and since his labour costs are so high due to inefficiency, he makes less profits that the other factories, or perhaps even losses.
The other effect of the law of value is that it forces prices, over time, to closely orbit values. In the first scenario we thought of, we saw that factory 1 had halved his labour times and undercut his competitors, gaining both super-profits and greater market share. At this very temporary stage in the competitive process, wherein one firm has just recently gained an advantage, prices are actually differing from values a little, since the decrease in socially necessary labour-time effected by factory one has not yet fully "manifested" in market prices - chairs are still being sold at more or less "20 dollars, even though values fallen slightly. But the other companies won-t suffer factory 1"s advantage for long - they will strive to lower their own individual labour-times to at least meet factory 1's lower labour-times, so that they to can afford to lower their own prices to compete in the market. Over time, then, the other three factories will also halve their labour-times, with the simultaneous result that the socially necessary or average labour time will decrease to half of what it was before. At the same time, the other three companies will be lowering their prices to compete with factory 1 - eventually then, prices and values will converge at around half of what they were before - chairs will now cost 10 instead of "20, fully reflecting the halving of socially necessary labour times (values).
Prices could not have remained artificially well above values, at around the "20 dollar mark, for the simple reason that companies are disciplined by the law of value to adjust prices to average labour times. If, say, factory 4, had continued to sell his chairs at "20 after the global fall in average labour times (for chairs) in the hopes of making very high profits indeed, he would go bankrupt, because customers will buy the cheaper chairs from the businesses whose prices were properly disciplined to fall in line with average labour times.
There's obviously a lot more to say on this, but I"ll leave my discussion here for now and let Con respond.
All of this information can be found in any edition of Vol. 1 of Marx's 'Capital'
For some reason the text settings on this site have transformed all of my hyphens and pound signs into quote marks - please forgive!
First off, thanks for posting and beginning this very interesting debate. I look forward to some academic discussion, and many hours of brushing up on my economic textbooks!
I’ll begin with a brief analysis of this debate and the various sides/theories. Debating academic theories is always tricky when a set of criteria for weighing each theory isn’t present. A simple way to think about these criteria is this: how much of a phenomenon does a theory successfully explain? Think of an apple falling on Newton’s head (I’m modifying this story for my own purposes). An apple falls on Newton’s head (the phenomenon) and he seeks to explain why this is the case and comes up with a few theories.
Theory One states that the apple was attracted to his head. Theory Two states that the apple was attracted to the ground. He takes the apple, tosses it in the air, and moves out of the way. Theory One would suggest that the apple would follow his head, while Theory Two would suggest that the apple would fall to the ground. Seeing that the apple falls to the ground, logic would dictate that Newton should prefer Theory Two over Theory One.
In this debate, you can imagine this phenomenon to be production, consumption, and the driving force that facilitates what people buy and for how much. Obviously, what the phenomenon is can certainly be a matter of debate in its own right, but I’ll focus on this more simplistic version for now. In doing so, both Pro and Con can measure each theory based on how well this phenomenon is accounted for.
With this foundation in mind, let’s first consider the Pro’s position. Pro’s opening remarks about Marx’s Labor Theory of Value (LTV) is more than adequate for explaining the fundamental “mechanics” of how this theory explains the phenomenon of consumption through labor-time driven intrinsic value. There is nothing that I fundamentally disagree with, and will save myself some valuable labor-time by not disputing his analysis. But let’s measure this against the mandate that the Pro set forth in his initial challenge:
“My argument in this debate will be that Marx's labour theory of value, as outlined in Capital and elsewhere, is the only valid theory of value, and in particular that it is superior to the theories currently being touted by contemporary advocates of the subjective value theory proposed by the Austrian school… My opponent will need to argue that, contrary to my position, subjective value theory is a superior critico-economic tool, and that Marx's value theory can be proved invalid.”
On the Con, my first responsibility is to measure how well the Pro’s opening arguments satisfies his own mandate for this debate. In short, while I take no issue with Pro’s explanation of LTV, there is no line of argument that establishes how LTV is the only valid theory of value, nor how it’s superior to Subjective Theory of Value (STV). I’m sure the Pro will provide this line of argument in further rounds, but I hope that he is also able to account for one troubling aspect of his mandate without having to significantly alter or abandon his mandate.
First off, having to argue that LTV is the “only” valid theory puts quite the burden on the Pro. Given that STV isn’t the only theory on value, eliminating all possible contenders is quite the task. Second, what constitutes a “valid” and “invalid” theory is a tricky thing to define, particularly without the kind of criteria I provide above. Is a theory “valid” if it completely accounts for the phenomenon? Is a theory “invalid” if it fails to account for any part of the phenomenon regardless of how large or small?
Why is this a problem? Well, without getting too academic, having ambiguous, undefined terms and ideas like this prevents the Pro from “knowing” when they’ve satisfied their burden. In other words, how can the Pro ever know that LTV has been proven to be “valid” if we don’t understand what the state of being “valid” actually means? More so, how will the Pro know when LTV is successfully the “only” valid theory left standing?
LTV vs. STV
The big picture of this clash between LTV and STV can be wrapped up in an important question, “What role, if any, does the human mind have in determining the value of something?” The Labor theory comes from a larger family of theories called the “Intrinsic Theory of Value”. This family defines value as objective. The value of an object is as concrete as the matter that makes up that object. The human mind, and its subjective nature, thus has no influence on this objective value.
STV is actually an umbrella term for a variety of theories originating from the works of William Stanley Jevons, Carl Menger, Leon Walras, and others1. These theories share two important concepts1: economic phenomena can only be understood from the actions of individuals since groups can’t act without individual actions; and, this understanding must take into account the subjective preferences, thoughts, and knowledge of these individuals. In other words, economic theories must consider the influence of the individual human mind.
Like Newton’s apple, let’s look at a real world example to see which theory may offer a better explanation. Diamonds are highly valuable in today’s market as “rare gems”, and yet as recently as 1930 this wasn’t the case. Other gems such as rubies and sapphires were considered more exotic2. Diamonds were scarce until the second half of the 19th century when South Africa experienced a diamond rush which flooded the market, thus killing demand3.
Shortly after this, De Beers solidified its hold on the production side of diamonds through buying and controlling diamond mines and distribution arms3. However, it wasn’t until De Beers brought in advertising agency N.Y. Ayer, that a unique phenomenon occurred: supply of diamonds continued to grow, while demand reversed and grew. How? Four words: “A diamond is forever”. N.Y. Ayer created what is widely considered one of the most successful ad campaigns, and created an increase in sales of 55% in the US alone by 19384. Thus began De Beers’ near century long domination of the diamond industry4.
Here we have an example where the labor-time and process of mining diamonds remained fairly the same; the supply of diamonds increased; and the naturally declining demand for diamonds was reversed by an ad campaign. LTV would predict that the value of diamonds would remain consistent since the labor-time remained fairly constant, and yet the outcome is quite different. We also have a real world example that seems to contradict the Pro’s theory that the “law of values forces prices to closely orbit intrinsic values over time”. If this was accurate, then De Beers’ story would be quite different.
From this, can we make the claim that LTV is the “only valid theory of value”? Obviously not. In this case, this phenomenon is explained by the influence of human subjectivity: N.Y. Ayer successfully managed to create a unique, subjective value in the minds of many. Karl Popper would argue that this counterexample is reason enough to consider LTV as a falsified theory5, but let’s finish with an overview look at the theory’s shortcomings.
To deny the influence of the subjective means that LTV ignores a bigger picture. First, LTV is unable to account for particular outliers or unique cases. Under Marx’s own definition of use-value as material usefulness, LTV can’t even consider a diamond to be a commodity since diamonds offer more of an aesthetic value. In the example of the four factories, LTV can’t allow or predict a case where Factory One can deviate its prices on chairs from the “average labor-time driven market price”, even though this example completely eliminates marketing or consumer demand that would also naturally influence prices (and not just temporarily as the De Beers example demonstrates).
Finally, LTV relies on a few assumptions that require further reasoning to be accepted in this debate. First is the assumption that labor is the natural common denominator of intrinsic value. There is no line of reasoning provided by the Pro – other than an underlying appeal to Marx’s authority – that puts labor on the mantel of “common denominator of value”. Second, the Pro simply assumes that labor-time is a satisfactory measurement of intrinsic worth. Once again, the assumption remains unsupported, and more so, seems to ignore the complexities that go into labor: supplies, equipment, experience, outside influences, etc. LTV tries to eliminate these complexities through “average labor-times”, but how are these averages quantitatively determined?
STV provides a far superior analytical tool by taking into account subjective demand and marginal supply. It brings into account the possible influence of the subjective, and invites entire branches of psychology, communication, and economic research to contribute to the explanation of the economic phenomena we observe. Finally, it challenges the most fundamental assumption of Intrinsic Value theories: that subjectivity can be escaped. Ending on a point I’m happy to expand on in the following rounds: contemporary STV rests on a bed of research and literature that demonstrate the social, and subjective qualities of our reality6.
Perhaps a final question remains: can LTV truly escape the influence of human subjectivity?
Thanks to Con for a very articulate and game-raising first post; I can see I"m going to have my work cut out for me! I"ll limit my comments on the meta-debate side of things as much as possible while still responding to Con"s remarks.
Firstly, I accept Con"s conception of what the criteria should be for deciding the best theory; the theory that best explains the phenomena under consideration should come out on top. My only alteration would be in the description of the phenomenon. From the Marxian perspective, what we are trying to ascertain is not an over-arching explantion of "production, consumption and the driving force that facilitates what people buy and for how much". This is a little too wide-ranging for a Marxian analysis limiting itself to explaining value. What Marx"s value theory is aiming to explain are prices specifically, and only as a secondary objective the reverberations of the law of value in the economy at large. I think this is a useful way of limiting the discussion which also has the virtue of tapping into what most people find themselves mulling over when the question of value is raised: "how is the price (value) of something determined?"
In terms of measuring the validity of each theory, we should remember that we are not dealing with a mathematical equation. All of the ideas presented here will be validated solely by the opinions of the voters having weighed up the arguments. As with any sociological question, the proof is in the plausability of the account, not in a chemical reaction. Now then, to the issue at hand!
Firstly, I accept Con"s notion that the LTV/STV debate comes down to a question about the role of the human mind in determining value. I want to stress that Marx is not trying to argue that every aspect of economic activity or the nature of a commodity is objectively determined; far from it. But he is indeed arguing that what he calls value or value proper is determined independently of the vicissitudes of subjective opinion. Recall that Marx distinguishes between "use-value" and value. Use-value is the aspect of a commodity which is indeed influenced by subjective trends, and it would be a mistake to think that by use-value Marx only meant material properties. The use-value of a commodity is any useful purpose that it can serve, be that purpose industrial, mechanical, chemical or aesthetic. What ties the use-value of a thing to its material properties is the fact that certain material properies must be present in order for that thing to satisfy a given criterion of usefulness; just as a steel girder has to be strong in order to hold up buildings (its use-value), so too does a diamond have to be shiny in order to have a specific aesthetic value. Material properties are a pre-requisite of use-value; they are not synonymous with it.
What Marx is contending is that use-values (in essence, subjective values) are NOT what ultimately determine prices. The subjective attitudes of consumers dynamically affect use-values and, as Marx has already pointed out, a commodity must have a use-value. But we should not take any more from this statement than that which it is strictly offering. In having a (subjectively determined) use-value and thus being permitted to enter the world of commodities, a given commodity becomes saleable, and this transportation of something from the uncertain world of mere "objects" to either the realm of useless things or that of useful commodities is ALL that use-values determine. In short, they determine whether or not something can be sold. After this fundamental determination (thanks to subjectively determined use-values in concert with objective material properties), it is left to value proper to determine the price at which that commodity will sell in the market-place.
Let"s take a look at Con"s De Beers example with this in mind. Keen to sell more diamonds and thus realise more revenue, they enlist the help of a advertising agency. The agency sets to work on transforming the subjective attitudes of consumers, and is highly successful; sales increase by 55%. What is happening here from the Marxian perspective? The ad agency is transforming the use-values of diamonds, not by adjusting the material properties of diamonds themselves (which would have the same effect), but by adjusting the subjective attitudes of people towards diamonds. With diamonds now a must-have item, sales naturally increase. But an increase in sales does not equal an increase in value from the Marxian perspective. What the De Beers campaign did was allow the company to realise the value, via sale, of many more diamonds than they could before. It did not increase the value of diamonds.
Perhaps now is a good time to pre-empt a common reaction against the LTV. It will probably be very difficult for people not to conclude, having heard me talking about the partly subjective character of use-values, and in conjunction with Con"s claim that "N.Y. Ayer successfully managed to create a unique, subjective value in the minds of many", that we are actually in agreement about the subjective nature of value. Part of the problem arises from the polyvalency of the word "value" itself. When we hear, during an election season, that some critical battle is being fought on the basis of "values" (conservative Christian vs secular liberal values etc), the word "value" is obviously being used in a very different sense to the way Marx used it. Values of this kind are indeed subjective, and it is not in any way Marx"s goal to argue that there are no subjective values, or that labour-times somehow account for people"s opinions. All that Marx is saying is that subjective opinions (values) do not account for prices any more than people"s religious or political values do. The sense in which Marx is using the word value is completely restricted to the sense in which it denotes the differential prices commodities fetch in the market place; these alone are what are accounted for by labour-times.
So, on to the question of shifts in prices due to factors other than changes in socially necessary labour times. It is not true, as far as I am aware, that marketing alone can significantly alter prices, although it can certainly influence sales, and thus the realisation of value. The story is different with supply and demand. Marx"s view of supply and demand is that the two terms do explain quite a lot. They explain why prices may, at a given moment, have shifted temporarily above or below, "natural" or "equilibrium" prices. If supply rises steeply relative to demand, due to, say, demand falling off sharply for cultural reasons, prices will indeed fall. Conversely, if demand rises sharply relative to supply, prices will rise.
Supply and demand, for Marx, are adequate explanations for these temporary fluctuations around equilibrium prices; what they do not explain, however, are the equilibrium prices themselves in money terms, or why the equilibrium price of one commodity differs from the equilibrium price of another. Equilibrium prices themselves can only be explained by the differences between average labour times between different products. Moreover, market forces (movements of capital into industries with higher returns on investment) flatten massive spikes in supply and fill in the troughs, causing prices to stablise over time in close orbit of equilibrium prices (labour-time values). Prices, then, are not synonymous with values, but market forces nevertheless dictate that prices never range too far from values, and maintain a tendency towards price-value equilibrium.
Now then, why is labour the common denominator of value? It is the common denominator by virtue of the fact that it is the only thing shared in common between all commodities. There are no physical, chemical, biological etc features that all commodities share in common, and since only qualitatively identical features can be quantitatively compared, the common factor of commensurability between commodities cannot be anything physical or aesthetic. Moreover, as I have stated repeatedly, value is only an intelligible conception when attributed to commodities sold on a market. The fact that all commodities contain a quantity of human labour is precisely what makes them saleable and thus into commodities. It is for this reason that no natural qualities of objects can be sources of value, since natural qualities do not, in themselves, turn objects into commodities (though they do contribute to use-value). It is for this reason that scarcity, for instance, cannot be an alternative source of objective value; nothing, scarce or plentiful, is a commodity while it simply sits in the ground or on a tree. Labour is what transforms objects from their natural, "god-given" states into commodities (by a combination of physical transformation and transportation from one place to another, usually), and thus contributes value to them.
A final word on "intrinsic" value. In what sense is the LTV propounding a notion of "intrinsic" value? One consequence of the LTV is that the values of commodities can change even within the lifetime of those commodities. If I produce a car now, and it remains unsold for a number of years, I might very well find that its value has declined by the time I sell it, because in the interim the socially necessary labour time of similar qualities models has reduced. It"s original value was thus not "intrinsic" in the ordinary use of the word. It was "objective", but responsive to the fluidity of the very objective conditions that gave rise to it. I prefer, therefore, to think of the LTV as propounding a theory of objective but contingent value; objective in that it exist independently of subjective preferences, but contingent in that it responds dynamically to constantly changing objective circumstances.
That being said, I look forward to the next round of a great debate!
Again, all of the material from Marx can be found in Vol.1 of "Capital"
I, too, thank the Pro for a great debate! My textbooks are getting good use. First, a point of clarification: intrinsic is never described in the literature as something that is “unchanging”, but concrete. This allows for value to be contingent. Moving forward…
Concerns With The Resolution
In regards to my critiques of the mandates the Pro defined (A. proving LTV is the “only” valid theory & B. “valid/invalid” are very ambiguous terms), Pro only addressed the validity concern. I will note that no challenge exists to my first critique, and that the Pro still has not provided any line of reasoning that dismisses other alternative theories so LTV can secure its place as the “only” valid theory.
A look into the literature of neoclassical, intrinsic/labor, and contemporary economics actually shows that we often are dealing with mathematical equations. This means that economics is partially a quantitative science susceptible to the same standards of validity philosophers of science debate about all the time. I brought up Karl Popper’s Falsification as an example, but regardless of what standard, validity is often more than a simple appeal to a majority vote.
The Phenomenon Under Study
Pro argues that this scope ought to be narrowed to the phenomenon of price, or basically to figuring out how things achieve a certain price. To argue that Marx is “aiming to explain prices specifically” is problematic on two points. First, this ignores an overarching purpose of Marx’s Das Kapital, which the Pro actually touches on in the acceptance round: explaining the phenomenon of exploitation1,2. Second, Marx touches on two definitions of “price”: natural price (what an item is priced at due to cost of labor, materials, etc) and market price (what an item is sold for in the market place). As political philosopher, Robert Paul Wolff (1981) explains, “Marx, like Smith and Ricardo, seeks a theory of natural prices, not of market prices, although he has a good deal more to say than his predecessors about the dynamic processes by which capitalists, in responding to deviations of market from natural prices, take actions which cause the economy to grow and alter1.”
If the price of a commodity is our phenomenon, then it must be recognized that LTV was only intended to explain natural price, which will support my original argument that LTV ignores a bigger picture.
In my critique of LTV being unable to account for diamonds having use-value to individuals, the Pro countered by clarifying that Marx’s notion of use-value includes the utility of an object’s properties to people’s subjective wants/desires. As he put it, diamonds can have use-value if people find them shiny. I embrace this definition, and apologize if my argument seemed to communicate otherwise. However, the Con’s characterization of the importance of use-value seems to contradict with the literature surrounding Marx’s theory.
Contrary to the Pro’s interpretation that having a use-value was a prerequisite to being a salable commodity, Marx understood that while this was true, this sort of value was also much more2. Marx argued that exchange value and use-value were in a dialectical relationship3. Here’s my attempt at a layman’s (aka me) explanation:
If I’m selling my car, Marx would argue that this car has an exchange value (an intrinsic value based off of the labor that was put into making it), and a use-value (how useful it is). Since I’m selling this car, it no longer has any use to me (except as a means of getting money) and therefore I’m giving up use-value. When I sell the car, I exchange the car for something of (ideally according to Marx) equal exchange-value. The buyer, however, pays for the exchange value, and inherits the use-value because the car is now useful to him. In essence, the buyer experiences a surplus of value, or an additional amount of value than I receive as the seller.
Now, it’s important to realize two things from this example. First, as the seller I set (or negotiate) what would be considered the final market price. The usefulness of the car to me for getting money, and the usefulness of the car to seller as a means of transportation will both have a profound impact on the final market price. Second, this surplus of value becomes important when we become concerned with exploitation - as Marx is1,2.
If we treat a worker’s ability to work (labor power) as a commodity, it becomes something he can sell in exchange for something else. This is the basic definition of having a job: I sell my ability to work to my employer in exchange for a wage. In this transaction, I’m merely exchanging my work for a wage at an equal value. The buyer (my employer) however is buying more: my employer gains the utility of my labor, which is the ability to make products or provide services that can be sold for profit. In short, the employer gets more value out of the transaction.
In this example, once again the ultimate market price of the commodities made is left up the employers (employees generally have no input on what much products/services are sold for). In many ways, the ability to set the market price is a part of the utility he buys from his employees because without them, he would have nothing to price in the first place. The employer makes a profit by selling the employee’s production (products/services), pays back the exchange value (through wages) and keeps the surplus. It’s here that Marx finds the possibility of exploitation3.
Part one of the take home message: use-value isn’t just a prerequisite for something to be sold, it’s the very reason natural prices deviate from market prices. If everything were sold at its natural price, no one would get anything but an equal transaction (somewhat of an ideal as described by Marx4). Profits wouldn’t exist.
Part two: all of this demonstrates my point about LTV’s inability to see the “bigger picture” of what drives market prices. Considering that Marx was concerned with natural prices1, and understanding the exploitation of the working class1,2, there is a limited ability to describe why subjectivity affects market prices beyond physical characteristics that affect use-value. If we’re looking at the “only valid theory of value”, shouldn’t it be able to account for value on the other side of things as well? Let’s return to the De Beers example to demonstrate this.
De Beers Revisited
While it’s important to remember that according the sources I’ve cited, Marx wasn’t primarily focused on the market pricing/selling of diamonds, let’s look at the Pro’s use of the theory for this example. Pro argued that a Marxian analysis would agree that subjectivity played a role in increase sales, but not that the value of a diamond itself. Immediately, we can recognize this as flawed from Marx’s own writings as I discuss above: buyers are concerned with both exchange and use-value. Therefore, the value of the diamonds as a commodity did increase (once again under the Marxian view).
Most importantly, the utility that N.Y. Ayer created fails to completely meet Marx’s definition of use-value. In the very tagline alone, the value of a diamond isn’t based on concrete characteristics: “A diamond is forever”… sure, but really? Is this a physical property? N.Y. Ayer created an entire brand around the company and its product, something that went well beyond the physical properties of the diamond’s surface. This is typical of any product or service: just think about why you buy Macs or Pcs, Cokes or Pepsis, etc. This is why I argue that, under Marx’s strict definition of use-value, the subjective value that N.Y. Ayer created around diamonds wouldn’t count.
Labor & Common Denomination
While I appreciate the Pro’s attempt at explaining the logical rationality of “labor” as a common denomination, current economic literature seems to disagree. As Steve Keen (1993) explains, “The conclusion that labor cannot be the only source of value has
long ceased to be novel. As well as being fundamental to neoclassical economics, that conclusion has been asserted explicitly or implicitly by, among others, Sraffa 1960, Steedman 1977, Bose 1980, Hodgson 1980, Roemer 1983, Wolff 1981, Bandyopadhyay 1984, and Carling 1984.” The Pro has failed to draw upon the theoretical foundations provided by the likes of Adam Smith and David Ricardo1, which not only gave a framework for Marx’s theory, but also try to provide some logic behind reducing a common denominator to just labor-time.
What I have presented are the limitations of LTV, according to the very literature that has come after (and includes) Marx’s Das Kapital. First, Pro continues to provide an in depth understanding of LTV, but hasn’t brought any arguments into effect in regards to it being the “only valid” theory of value. Second, the literature around LTV seems to contradict a few key points that Pro relies on: primarily the scope of the theory (natural vs market prices), the role of use-value, and the academic acceptance of “labor as the only common denominator”. Given that much of the Pro’s arguments involving supply & demand rely on these contradictions, I’ll await further clarification before addressing them if needed.
Since the Pro hasn’t provided any critiques against STV, I will conclude and eagerly wait in anticipation for Pro’s final round.
Let’s get to it!
Marx is, indeed, primarily focussed on explaining natural prices; the reason for this is that, for Marx, natural prices are values. Where market prices which deviate from natural prices predominate, it it because the market has not yet disciplined producers into producing at the socially necessary labour time (as in 'undercutting'). Since my mandate is to show that Marx’s LTV is the only valid theory of values, this does not automatically constitute a weakness in my argument.
Homestretch! As a side note: since this both the last Con argument, and final round of the debate, all citations I bring up will only be from sources I’ve introduced in previous rounds.
I’m starting outside of the normal flow of the arguments for a moment, but this defense of my use of exchange value is necessary to proceed. The Pro argues that I’ve misinterpreted Marx’s definition of exchange value, and have conflated this term with value-proper. He basis this argument on my definition used in my car example: an intrinsic value based off of the labor that was put into making it. Once again, Pro may confuse “intrinsic” with “absolute”.
Now I will grant to the Pro that my definition is certainly simplistic, but not inaccurate. Exchange values are intrinsic, and are determined by labor (labor time), and as my example demonstrates, express the “proper value” of an objective as a value form3. Furthermore, it is exchange value (and not the proper value) that forms one half of Marx’s dialectical relationship with use-value that my car example was demonstrating. Both sellers and buyers are concerned with the exchange of value: getting the same amount of value that you give.
Prices Pt. 2
The Pro argues that for Marx, natural prices are values and therefore satisfy the mandate of being the only valid theory of value. First, it is unclear to me where Marx specifically makes this line of argument given two points. First, Marx still recognizes the existence of a subjective value based off of physical properties. As we both agree, this use-value doesn’t play a role in the natural price. Marx gives no claim that use-value isn’t a value, however, which means that he does recognize a value outside of natural price. As a result, we can’t conclude that Marx only meant natural price as value without a more specific analysis of the text.
Second, this argument ignores the dialectical relationship between exchange value and use-value as both Keen in “Use-Value, Exchange Value, and the Demise of Marx’s Labor Theory of Value”1 and Cohen in his article, “Marx’s Dialectic of Labor”2 explain. The Pro disputes this, which I will address here as well. Once we accept this as an accurate interpretation we will see how the Pro’s claim on natural prices fails once more.
As we both agree, commodities require a use-value to be salable. For Pro, this is the only major influence a use-value has. Both Keen and Cohen, however, argue that Marx saw the role of use-value as much. To a seller, the exchange value of a commodity is the only real concern: getting equal intrinsic value based on labor time. For the buyer, however, this concern for “equal intrinsic value” exists in addition to a concern with the utility of the commodity. As I demonstrate in my previous round, this extra addition helps to influence market price, which highlights how the full value of a commodity (exchange + use) is realized. This, therefore, contradicts the Pro’s notion that natural prices alone encompass all value.
Note: in the Pro’s analysis of the car example, he claims that both parties get an equal amount of utility (seller gets utility of money). This utility doesn’t come from the commodity of the car. If we look at money as a commodity in this case, the seller becomes the buyer and vice versa (the owner of the car is “buying” this commodity through the worth of the car).
Da Beers Revisited… Revisited
Once again, differing interpretations of Marx’s theory seem to lead to different conclusions about my Da Beers example. So far, we’ve discussed our different interpretations on what constitutes value (natural prices vs. commodity value), and the influence of use-value (making a commodity salable vs. influencing the ultimate market price).
The Pro argues that I’ve somehow conflated use-value and values without any sort of direct reference to where I conflate them, and I hope that I’ve shown via my explanation of Marx’s dialectical relationship, that this isn’t the case. He also claims, “It is absolutely not the case that Marx's view entails that the ad campaign increased the value of diamonds…” Let’s be clear: I make the argument that the value of diamonds as a commodity increases, not the diamonds themselves (this latter point is actually a crucial aspect of the Da Beers example). The value of the commodity did increase, because a commodity is the sum of exchange and use-value. This example shows that when N.Y. Ayers increased the utility of the diamond, the overall value of the commodity increased. To suggest otherwise ignores the historical market performance of diamonds.
Finally, to address the issue of use-value in this example: my point is that Marx’s concept of use-value is unable to accommodate certain phenomena that don’t fit the criterion of “subjective value linked to physical properties”. The Pro challenges this by pointing out that the ad campaign was still linked to the physical properties of diamonds and wouldn’t work for something like carrots. This misses the extended point I made here: the use-value isn’t able to accommodate all of the extra subjective values created from a campaign, and as I said in round three, for the brand of De Beers. For example, “a diamond is forever” becomes a statement of worth: a legal trademark without physical property that can be exchanged. Intellectual property would be another example.
Pro argues for a concept of exploitation that derives from profit, or surplus-value. As Sheen1 points out, and I discuss in round three, surplus-value is not simply profit, but the net result of this dialectic between exchange value and use-value (refer to my previous sections for the logic on this dialectic). An employer gets a surplus of value from the utility of the employee’s labor power, while the employee only gets a fair exchange of intrinsic value from wages. The Pro argues for a Marxian interpretation of profits, but in the absence of specific logic cited from the text, and in the face of these contradictions in interpreting Marx’s theory, I don’t have enough to make a satisfactory critique.
The Pro critiques my statement about the “current state of academic literature”. I make no argument that “economics are against LTV”. Whether this is true or not, my point is that the literature I’ve brought up contradicts A. some of Pro’s interpretations derived solely from Marx’s book, and B. the usefulness of LTV on market value analysis. He argues that I will “need to express” the ideas of economic thinkers, which fails to recognize the thinkers I cite, including Wolff. To be clear: I’m not an economist. My interpretations and arguments regarding Marx’s values, theoretical scope, and the dialectical relationships mainly come from the thinkers I’ve cited.
Finally, the Pro summarized his concluding round with an array of critiques against STV, many of which constitute new arguments presented in the concluding round. Since I would have to dedicate an entire round to the defense on these critiques (which puts me at an unfair disadvantage), I will save this act for another debate and ask voters to consider typical debate decorum that often includes “no new arguments in a final rebuttal”. The Pro had the time to bring these critiques well before the end of the debate.
For the sake of simplicity, I’m going to summarize the winning points of the Con into three distinct arguments:
Done and done! Once again, thanks for a great debate!