November 12, 2008

Labour Theory of Value: Interim Report (Part 1)

Filed under: Economics, Marx — duncan @ 1:21 pm

Okay – I’m classifying this stuff as way stronger than ‘hunch’, but still quite a bit weaker than ‘I can cash this out in a 100,000 word monograph’. From the top:

1) The Labour Theory of Value, as (I think) it’s generally understood, is wrong. (Which requires a bit of elaboration, so)

– It’s not totally clear to me what ‘the Labour Theory of Value as generally understood actually is. I think there are probably a few different sets of ideas that can be referred to as the LTV. Let’s say the basic one is something along the lines of: you’ve got your human beings. When human beings work, when they labour, as well manipulating and transforming physical objects (or the minds of impressionable young folk; or computer code; or whatever) they also confer onto those objects (or whatever) a social property – value. According to the LTV, labour is the source of all value. Now I’m not totally clear on how formulations like this are generally understood – but this picture seems to me to be prima facie implausible. How is value understood to be transmitted from labourer to product, or understood to be created in the manipulation or creation of the product? The LTV, in this form, seems to be to be powerfully counter intuitive.

– Now I don’t think adherents of the LTV believe that the value created by labour is simple market price. Rather, there’s understood to be a complex relationship between price and value, such that value in some sense regulates price, but that price can and often does massively deviate from value. This removes some of the prima facie implausibility; but it seems to me just to push the implausibility back a step. I’m not sure exactly how value is generally taken to regulate price [because a) I’m pretty ignorant of the literature; and b) what little I’ve read strikes me as obscure] – but assuming there’s some causal relation such that value regulates price, and assuming that value is ultimately understood to be created entirely by labour, you’re still left with the question – what exactly is being created or transmitted in the labouring process (and what is the mechanism of that creation or transmission?) Labour in > prices out. How?

– The simplest way of understanding this would be that human activity creates some sort of mana (???) or immaterial substance (??), ‘value’, which is embedded in the products of labour (and which can then be transmitted from those products to other products through the mediation of further labour). But this seems, again, implausible. It seems metaphysically implausible (why are we positing such a substance, even if we call it a social substance rather than a metaphysical one?), and it also seems empirically implausible. It seems like a familiar empirical fact that lots of commodities that don’t involve much labour in their production sell for high prices – or are regarded as very valuable. Whereas lots of commodities that involve heaps of labour sell very cheaply and are regarded as relatively valueless. Obviously this isn’t true all the time; but there seem to be pervasive enough counter-examples to throw what seems to be the LTV into some doubt.

– [Plus how exactly would labour inputs determine price? People buying products don’t know how much labour has gone into producing them; the people selling them need not either. And even if everyone does know the relevant labour inputs, why would this influence exchange values? If the influence is taken to be indirect, what would the causal mechanism of this indirect influence be? I can’t think of a plausible causal chain, here, that transmits labour inputs into prices, even as a general trend or in aggregate.]

– If I understand right, many adherents of the LTV don’t argue that the LTV is true at any micrological level (even as a long-term trend), but argue that it is true for the system as a whole. Which again, removes some prima facie implausbility, but again seems to me simply to push the implausibility back a step. Put aside as irrelevant the fact that it only makes limited sense to talk about prices in aggregate. (Because it does make sense to talk about, say, the rate of profit in aggregate, and that kind of thing is where the LTV is taken as having descriptive / explanatory power.) I still don’t see why say the ratio between constant and variable capital (or, in orthodox economics’ terms, between capital and labour) should influence the rate of profit (= the amount of value created relative to money spent). The question is still – what’s the causal mechanism here?

– [For what it’s worth, I’ve been in intermittent attendance at the Historical Materialism conference; on Sunday Geert Reuten presented an interesting paper (cowritten with Peter Thomas) about the shift in Marx’s discussion of the falling rate of profit between the Grundrisse and Capital. Basically (if I understood right) Reuten was talking about a shift (in Marx’s thought) from the falling rate of profit as a long term trend, with an eventual apocalyptic conclusion for capitalism, to a cyclical account that sees crises as providing capitalists, or capital, with the opportunity to recalibrate the capital-labour relation in a way that re-establishes a more substantial rate of profit. As far as I can tell, the implication of this latter argument (though Reuten didn’t I think discuss this) is that the falling rate of profit shouldn’t be understood as a long-term trend, and that therefore the changing organic composition of capital is not the major factor in the establishment of the profit rate. But that’s probably by-the-by.]

– Anyway, upshot is I just don’t see how the labour theory of value can provide an adequate account of the determination of prices, micrologically, in aggregate, or in the short or long term.

More to follow in subsequent posts.


  1. Hi Praxis, I feel like I’m in the same boat as you in regards to this LTV stuff. I understand some of the benefits of the notion, but it’s hard for me subscribe to it. I think you raise a lot of good points about it here, and I hope (nudge, nudge) someone decides to attempt an answer to your questions. I’m certainly don’t have the background to try, unfortunately. That being said, I saw this article in the recent issue of Radical Political Economics:

    I haven’t had a chance to read it yet, but it might go some way to answering your (and my) concerns. (And let me know if you don’t have a subscription to the journal, and I can send you a copy.)


    Comment by Nick — November 13, 2008 @ 9:22 pm

  2. Hey Nick – thanks. I had a read through the article. Basic thoughts:

    1) I think he’s conflating the early and the later Marx. I’m not a huge Althusserian (I haven’t read much Althusser), but I’m persuaded that there’s a fairly dramatic move, in Marx, away from the early humanist perspective that Ozel’s using to ground his metaphysics of value. (He leans very heavily on the Early Writings.)

    2) I also think it’s problematic to equate labour with basically all human activity. Apart from metaphysical issues, the question is just why certain forms of activity (in certain contexts) count, in capitalism, as (potentially) value-producing, whereas others don’t. (Why isn’t housework regarded as productive of capitalist value, for example?) Ozel gestures towards the problem when he says that leisure and labour get differentiated with the emergence of capitalism (though, again, who exactly is characterising housework, for example, as leisure?) – but he doesn’t seem to have an account of how that differentiation took place, or how it could have restricted the production of value to certain activities. My general feeling is that if you start with a maximally expansive definition of labour as activity-in-general, you’re not going to be able usefully to apply it to political-economic analysis. (Indeed, I think there’s a conflation of ‘value’ as just ‘stuff we value’ and ‘value’ as a political-economic category running through a lot of this kind of stuff.)

    3) I think that this – “Although human history is being continuously made by intentional actions of individuals, unintended effects of these actions are the reproduction of social structures, independent of individuals’ purposes” – is an important point. The question is what social theory we have to give an account of how social structures are reproduced without that reproduction necessarily being the intention of the actors involved. I think Marx is really good with this kind of thing – but again, that’s the later Marx. Ozel clearly thinks he can use Roy Bhaskar to supplement the analysis in ‘Capital’ – but I haven’t read Bhaskar, I’m afraid. 😦

    4) As a snarky point, I tend to get a bit nervous around stuff like – “there are times in which human essence is in contradiction with the human existence, when the conditions within which human beings live do not permit them to realize their own development potential. These conditions are associated with the existence of private property”. I by and large find metaphysical claims about human essence problematic (Darwinism = precondition for any creditable materialism, in my book) – but putting that aside, I think it’s pretty clear that loads of pre-capitalist societies didn’t permit the realization of humans’ development potential, whatever we choose to mean by that. Capitalism may be bad, but it doesn’t help our critique if we start seeing it as the only form of social organisation that’s historically hindered the realization of human potential.

    Anyway, sorry to mainly complain. I should possibly think about reading some Critical Realism.

    Comment by praxis — November 14, 2008 @ 2:46 pm

  3. I need to digest this series of posts before I can reply, but just want to say, great stuff. Harry Cleaver someplace criticizes the view of value as substance, he calls it the phlogiston theory of value. For me, I take the point to be tied up the conceptual and political priority of waged workers, how employers want more from employees than employees get from employers. I don’t know if one needs a lot of the LTV for that, but I think the point is an important one.
    take care,

    Comment by Nate — November 25, 2008 @ 7:58 am

  4. Thank you Nate. “For me, I take the point to be tied up the conceptual and political priority of waged workers, how employers want more from employees than employees get from employers.” Yes – absolutely. My sense of things is that the LTV looks like its doing more work, in Marx, than (I think) it is, because this – the conceptual and political priority of waged workers – is so obviously central. My feeling: Marx – and we – don’t require the LTV to make the claims & commitments we need to, in this regard. Or to put it another way – the stuff that reads as LTV-type analysis, in Capital, is generally doing double work, and the value-as-substance stuff can go without doing much if any damage to the rest of the political/economic analysis. Of course, if we’re using the LTV as a microeconomic-type theory of the determination of prices, then we’re going to have to look elsewhere for an alternative theory. But (a) I’m not sure how much it’s being used in that way, in Marx (or indeed in a lot of the Marxist literature); and (b) I don’t find much useful political content in the LTV in that respect anyhow. Marx’s account of the exploitation of labour is, of course, essential – but we can give an account of the centrality of wage-labour – and of the exploitation of wage-labour – to capitalism, without the labour-theory-of-value-as-substance. I see Marx as doing this, most of the time.

    Though as usual I haven’t read enough. 😦

    In any case, thank you for your kind comment. Take care…

    Comment by praxis — November 28, 2008 @ 5:32 pm

  5. hi Praxis,
    That’s a really clear statement of your take on this, thanks for that. When you put it this way I find it quite compelling. I have a hunch that people who get worked up about the LTV are convinced there’s important political stakes. My gut feeling is that there’s an … objectivism (for lack of a better word) to that kind of thing, capitalism breaking down under its own weight etc. But I could be totally wrong on that – I’ve not read enough either. I’d really like it if someone who has would write a survey of the history of this sort of problem, like one part intellectual history of what various marxists have thought when, and one part trying to correlate it to political views.

    Comment by Nate — December 1, 2008 @ 12:20 pm

  6. Sorry for the delay in response, but I wanted to thank you for your thoughtful reply, Praxis. I still haven’t had a chance to read through the essay (my interest in Marx has had to take a backseat to more pressing interests lately), but the comments here are really helpful, and I’ll definitely return to them when I get a chance.


    Comment by Nick — December 11, 2008 @ 9:28 pm

  7. Hello, Just stumbled on this nice blog and thought I’d deliver a comment, just for practice. First, the standard company disclaimer. I’m a total amateur, no school training in this stuff, trying to read Capital Vol. I on my own in my spare time, so I may not be following your arguments at all. In reading Marx, yes, I too am finding that “value” and thus “labor theory of value” has an aspect of phlogiston to it, but I don’t mind that. It is, to me, one of the virtues of Marx that he has this hypothetical property “value” in his system that helps me attach the economics to other issues, something neoclassical economics never allows. Anyway, I’m content to see “value” as a remnant of the Hegelian geist or a kind of élan vital. You can’t isolate it and plop it into a causal succession. You can’t just define it by saying it is this and isn’t that. As with Hegel, you just have to take it as an evolving constituent element of a totality that can’t be seen all at once from any one standpoint. You have go around and around and work out the definition in a, forgive the term, hermeneutical manner. Now, I know this sounds all fuzzy and evasive. But we have to recall that to Cartesians, Newton’s concept of “gravity” was pure phlogiston. “Where is it?” they wanted to know. “How is it causing this or that?” “We can’t perceive anything pushing or pulling objects, so what are you talking about?” And Newton himself was very bothered by this problem. In the end, he and his noncartesian defenders just said, well “gravity” is a convenient term for the “scientific object” these laws are describing. So far, in reading Marx, I am content to interpret “value” in this manner. Unfortunately, since we are talking about human beings as well as material objects, we do not have such a marvelously demonstrable set of rules, no neatly Newtonian laws of “value” to specify predictions.

    You were wondering, then, if I understand you, how “labor value” is imparted to commodities or detected in prices. To me, yes, this is all very confusing. But I picture this “value” as something that is not so much unilaterally causal or quantifiable as socially generated between subjects, or if you will, between producers and consumers, lord and bondsman, protagonist and antagonist, Romeo and Juliet, whatever. How does one “measure” such social emanations? You could take it as “supply” and “demand,” but either condition could be translated into the other. (To “supply” something is to simultaneously “demand” something, etc.) What passes between them or is generated between them is “value.” So when “labor value” is imparted into “objects” it is, as I see it, more like a form of communication, the way the “values” of an artist are imparted into the artwork and then perceived and “valued” by the viewer. The reason the commodity has “value” is that it may be materially “useful” or “desirable,” but ultimately it is because we are all seeking something that we desire or “value above all else”, and whatever it is, we seem to seek it in other people, as the Barbara Streisand song puts it. What do people want most? People! You can’t in the end just reduce it down to biology, there is always something left over. The commodity is not just transmitting value, it is structured more complexly like a sentence. Marx may have thought of himself as a materialist and “scientist,” but in a 19th century sense somewhat lost to us now.

    Now I realize all this has undoubtedly been said by others and refuted by still others. But to me one of the most interesting things about Marx is just trying to follow the hypothetical or ghostly term “value” through all its permutations and adventures. Darwinism, after all, could work with natural selection while leaving the “genetic” transmission mechanisms blank for the time being and modeling “predictions” historically and retroactively. For me, “value” arising somehow in various forms out of “what people do” (i.e., labor) helps me imagine and bring to life economic issues that seem dead in the neoclassical or positivist doctrines. It doesn’t bother me that, for now, I can think of a “value” of “labor power” as simply there, moving and communicating through the system, even though I can’t pinpoint it causally or quantify it as Marx would surely like to. Anyway, I am just starting, so I may change my mind. Hardly a thesis or answer, but one reader’s opinion. Regards, Nelson Alexander

    Comment by Nelson Alexander — February 4, 2009 @ 4:22 pm

  8. Nelson – thanks for your very rich comment; it resonates with a lot of the stuff I’m trying to work out here. I’m on the run at the moment – can’t respond in the detail your remarks deserve – but I’ll try to pick up on this in a day or two. Best…

    Comment by duncan — February 4, 2009 @ 5:02 pm

  9. Hi,
    Interesting posts. I’ve also been struggling with the LTV. I agree that the LTV is not necessary for Marx’s critique to work on many levels. But neoclassical types do like to dismiss Marx on the basis of the LTV, suggesting that the theory is patently absurd, and so discredits the whole Marxian project. So it might be worth thinking about how the LTV is something other than patently absurd, or utterly obscure (or at least no less obscure than the neoclassical alternative). Marx, at least in Capital, starts not by speculating about essences but by noting a very prevalent social institution– exchange. His question is: what is it that accounts for the ratios at which things exchange? I think he means by this: what is it that accounts for the ratios at which things exchange *in equilibrium*. In other words, when demand and supply are supposedly in balance (meaning producers are no longer either entering the market, driving price down, or leaving it, driving price up), how are the ratios at which things are exchanged determined? Now it is because Marx is something of an Aristotelian, holding that the different *kinds* of activity in the context of which (through use) things have value (eg. a fishing rod has value in the context of fishing, a pen in the context of writing) are qualitatively distinct, and therefore fundamentally incommensurable, that the question of exchange becomes problematic for him. If different things have value relative to different activities, and if different activities are incommensurable, then how is it that (at equilibrium) those things exchange at stable ratios? This sets up Marx’s observation that the only quantitative element that connects those different things is the (average) amount of labor that went into their production. That this might seem counter-intuitive is explained by Marx in terms of two obfuscating factors:
    1) price at equilibrium is always obscured by the ever present vagaries of demand and supply– so that we never actually ‘see’ equilibrium prices (this is as true for the neoclassical believers in general equilibrium theory as for Marx).
    2) the contribution of the value of capital to relative prices is attributed, by virtue of what GA Cohen calls ‘capital fetishism’, to capital itself rather than to the human labor bound up in capital.
    The neoclassical response to this kind of position would be: exchange ratios at equilibrium are determined by degrees of want, converted into quantities of utility, for which price stands as a proxy. But note that this presupposes that which I think Marx, as an Aristotelian, is committed to denying: that qualitatively different activities can be compared quantitatively. The only way for commensurability to be achieved (and therefore for exchange to get going) is for some common metric to be discovered– and the only metric shared by different objects is the labor time involved in their production. So that becomes the basis of exchange.
    The above account suggests the philosophical anthropology Marx is assuming in deducing his way towards the LTV. But it doesn’t solve the technical ‘transformation problem’– ie. how the LTV yields relative prices (although I am not clear that Marx ever says that this should even in theory be technically possible). I’m also confused about whether Marx thinks that *at some point in history* the exchange ratios given by the LTV were in some sense less ‘out of whack’ than under industrial capitalism– there are parts of Capital where this impression is given, and certainly this kind of thought seems to underpin the argument that the increasing organic composition of capital produces increasing distortions of the system relative to real human needs– if Marx does think that the LTV works better at some times than at others, this seems to suggest a degree of (meta?) commensurability that stands in tension with his Aristotelianism.
    Great blog– very glad to have found it!!!!

    Comment by steve — April 12, 2009 @ 7:08 pm

  10. Thanks Steve. I owe you a response on this – and I totally owe Nelson Alexander, above, a response. If you drop by again, Nelson, sincere apologies for leaving you hanging for so long. Unfortunately my head is well out of the LTV space – and I’m not sure that I’ll be back there for some time. In brief: 1) As I hope is clear from the context, I admire Marx intensely, and am highly sceptical of neoclassical economics, so I’m certainly not trying to diss the marx in favour of more mainstream apologetic stuff. 2) I have some doubts about the extent to which Marx can be characterised as an Aristotelean – he certainly admired Aristotle, but his remarks on him in Ch. 1 Vol. 1 are quite critical, so it depends how you mean. 3) I think that some forms of the LTV probably are patently absurd. But I think there are various ways it can be framed where it’s actually probably true – either definitionally (e.g. by making it tautologous, or by expanding our assumptions in such a way that it’s necessarily true given those assumptions), or, stretching things a little, because of the way in which the capitalist system redeploys labour in the interests of value production. I.e.: labour is shifted, through forced redundancies, etc, into the industries capital requires it in – industries that are, from capital’s POV, more ‘productive’ – and since such redeployments of labour are essential to the functioning of the capitalist system, there’s probably a strong sense in which labour could be said to be essential to the production of value. That may not be a million miles from Adam Smith’s version of the LTV, perhaps – with the big difference that (from a Marxist perspective, which I entirely endorse) Smith naturalises and back-projects a condition of capitalist production onto production as such. The cashing out of that difference would involve a treatment of the difference between labour per se and the Marxian categories of ‘abstract’ and ‘socially necessary’ labour – which I don’t feel competent to tackle, at present time and in present head-state. But that may give a vague sense of my current inchoate take on things…

    On the more general question of whether the LTV, or Marx’s perspective more broadly, is patently absurd – I totally agree with the (implied) idea that 1) it sure as hell ain’t more absurd than much of the bullshit we’re meant to swallow in economic orthodoxy; but also 2) given Marx’s obvious brilliance, it’s just methodologically unwise, as it were, to attribute foolishness to him unless we’re really confident that we’re not the ones missing something. I’m in no way confident of the latter – which is why this is an “interim report” 😛 (On the other hand, I am fairly inclined ti attribute foolishness to some interpretations of Marx’s thought, in the Marxist literature – if I remember right, these were meant to be the main target of the post…)

    And: thanks for the kind words!

    Comment by duncan — April 12, 2009 @ 10:29 pm

  11. […] the former has the disadvantage of being false. (My earlier remarks on the labour theory of value: 1; 2; 3) But there are plenty of places in the three volumes of Capital where Marx seems to be saying […]

    Pingback by Marx Reading Group: Chapter 25 – Initial Remarks on Value Theory « — March 14, 2010 @ 11:08 am

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