I'm reading Capital. Not interested in a discussion about whether or not this is a good idea, but I wanted to talk about this:
"A thing can be a use value, without having value. This is the case whenever its utility to man is not due to labour. Such are air, virgin soil, natural meadows, &c. A thing can be useful, and the product of human labour, without being a commodity. Whoever directly satisfies his wants with the produce of his own labour, creates, indeed, use values, but not commodities. In order to produce the latter, he must not only produce use values, but use values for others, social use values. (And not only for others, without more. The mediaeval peasant produced quit-rent-corn for his feudal lord and tithe-corn for his parson. But neither the quit-rent-corn nor the tithe-corn became commodities by reason of the fact that they had been produced for others. To become a commodity a product must be transferred to another, whom it will serve as a use value, by means of an exchange.) "
"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."
While the whole quote is rather interesting I separated this last pair of sentence because it's what I'd really like to discuss here. Marx spends this entire chapter (the first chapter, in fact) discussing the source of exchange value, and he goes so far as to say that all things of human creation are "crystalized" labor expenditure. However here, in the last sentence of the first chapter of Marx's magnum opus it would appear that he comes close to refuting the entirety of his own theory. You can show the absurdity of Marx's concepts using his own words in this passage
For instance, if we advance his idea that something must have "utility" in order to obtain exchange value, then we necessarily come to the conclusion that what matters isn't just that there is any utility, but rather how much utility is there at all and what utility is created from an action. If this weren't the case then there would be relatively little that could be created which would not have use value. Glass which I've smashed still has utility for other uses to which it can be put, but it does not have the utility of the beautiful glass sculpture which preceded it.
This means that we find the subjective theory of value engrained within Marx's work. It's not enough that something has labor expended into making the "commodity" but rather it must retain utility, and from this we can see that it must increase in utility in order to still increase in value. As soon as this admission is made we can see that Marx's theory of exchange value doesn't answer the questions such a theory must answer at all, rather it passes over the question entirely. Labor, whenever it is spent, is by definition (according to Marx) expended in increasing the utility of the good. This in turn means that utility must precede labor, it cannot exist without it, and as soon as we admit that we can see that the subjective theory of value is indeed the only theory of value, and Marx, whether or not he understood what he was doing, relies upon in explaining the labor theory of value.
Therefore the labor theory of value is, in Marx's framework (and once again whether he knew it or not) merely a corollary of the subjective theory of value. It is the only way that labor derives value, and therefore how much the "average" unit of labor is worth and the value of all commodities within the economy change based upon how much utility what is brought to market holds. How I maintain my claim then, that Marx never had a theory of value is this: what decides how much utility something will have? This is something which he doesn't answer specifically because it requires two things: An understanding of marginalism, and an understanding of opportunity costs/means/ends analysis the likes of which the Austrians propose to explain how anything obtains a "social" value. Marx only has a rudimentary idea of opportunity cost, and barely any conception of the other two aspects in a social setting.
Therefore even if we assume the LTV to be correct in how Marx frames it, we must nonetheless reject it as a satisfactory theory of value because it does not answer anything about the nature of utility, for while Marx does go into an analysis of why a commodity is valued on a very basic level (the service which it renders) he does not explain how this translates into economic demand for labor or for goods which tells us how labor itself obtains its value. Secondly we can reject Marx's own thesis by filling in the gaps in his theory. We know, from further analysis, that how things are valued on the market is independent from the labor expended upon them. Even if you didn't understand how things attained value or utility, you could still disprove Marx's theory because value must, by his own admission, guide the direction of labor and therefore exchange prices.
In short
What we can derive from this quote is that the labor theory of value relies upon the subjective theory of value, and therefore there is only a subjective theory of value. From this point we can actually refute Marx's own theory of value because he never successfully elaborated upon the subjective portion of his labor theory of value, and once we insert a subjectivist analysis in here: Austrian Economics, we can immediately disprove what Marx advances.
Marx inadvertently poses his monumental theory upon this very shaky building block which does not explain what he wants to explain. It's akin to a scientist who builds a system of physics off of the assumption that elements are the smallest building blocks in the universe. The whole thing falls apart as soon as it's revealed that they're not.
There is something within the labor theory of value which makes it contradictory: the true nature of subjective value and utility.
Yeah, I've come across that before. The LTV ultimately relies on subjective valuation since the cost-theory of value cannot explain price determination properly. In the Marxist paradigm, the LTV is just baselessly assumed.
The gaping problem with the theory is that even if it did it would still be a theory of subjective value, it's still utility and valuation which is pulling the strings, labor really has relatively little to do with it, it is simply the unit through which value acts upon the economy.
Well, no: if the cost-theory of value could correctly explain price determination then it would be the correct theory and Marx would not have to resort to upholding subjective valuation in his framework. But the latter conclusion was inescapable for him since it is the correct one. From there he just assumes that labour is the source of value, without adequate justification.
But this, subjective value theory, is then included in the LTV as Marx describes it, as I display above.
This isn't directly related but I'm also extremely perturbed by the fact that Alfred Marshall supposedly believed that in "the long run" the labor theory of value held true. This is a bit of a side note, but it would seem extremely obvious that it doesn't. Putting all other concerns aside I don't understand how one could believe this due to two things: The price of land ( in its pure form of rent) and interest. Even if you buy into Schumpeter's idea of a zero percent interest rate in the ERE, land prices would still exist, so how in the world could you think, with a neo-classical framework, that somehow any variation LTV could ever hold true? By definition in the ERE costs are now equal to revenue, but how does labor cost ever become the single determinant of value?
Perhaps he just meant that the cost-theory of value holds true in the long-run since under perfect information price is reduced to cost, not that labour solely determines value. Source?
Aristippus,
You are perfectly correct. I misunderstood Marshall's stance on the matter.
I think you're basically correct to see Marx's theory of value as what you would call "subjectivist." One point of analysis subjectivists often make is to note that when one exchanges x for y, one prefers the use-value of x to that of y. Marx's theory assumes another point of analysis: when one produces x to exchange for y, one prefers the production process of x to that of y. And then there is a third point of analysis: one prefers to trade x for y rather than simply expropriating y.
As far as I can tell, these three points of analysis cover the entire range of price determinants. Unfortunately, most economists seem to never move past the first one. Marx seems to be one of the few to incorporate all.
He reserves the term value for the evaluation made of the production process. So for example, I bake cookies that I trade you for orange juice. The point of analysis that really makes sense here is that I prefer the orange juice to the opportunity cost of making the cookies. I'm not considering the taste of orange juice vs. the taste of cookies. I might not like cookies at all, but that doesn't mean I'm going to make them and give them away for nothing.
But what if I baked cookies without realizing the quantity of orange juice you were willing to trade had less utility than the opportunity cost of baking the cookies? In that case, the price would be governed by the use-value that I attach to the cookies. In such cases, Marx would say that the commodities were sold below their values. This is one of the advantages of Marx's seemingly idiosyncratic definition of value. It allows it to have a connection to price and yet diverge from it so that the other dimensions of price can be considered.
It's not enough that something has labor expended into making the "commodity" but rather it must retain utility, and from this we can see that it must increase in utility in order to still increase in value.
See, I don't think the use-value needs to increase in order for the price to increase. For example, suppose you get arthritis and thus peeling oranges becomes more unpleasant. This means that you would require more cookies from me relative to the quantity of orange juice you're willing to produce. The utility derived from drinking orange juice or eating cookies hasn't changed for either of us, yet I find myself paying increased prices. However, there is also another factor to consider. And that's my ability to produce orange juice. It might be preferable to me to produce my own orange juice rather than increase the quantity of cookies that I have to bake.
The advantage of this three dimensional theory of price is that it allows for a more dynamic analysis of capitalism. It helps explain the development of technology and the business cycle, for example.