Marxist Economics: Why Labor Is the Source of Value

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When one first enters the world of Marxist political economy it appears as a daunting task. Where to start? What to read? Perhaps you attempt to start with Capital Vol. 1. Perhaps you start with a couple of blogs and articles. Wherever you start, if you have no background in philosophy it can seem like a bit much. The difficulty of Marxian economic theory is not that it speaks with some philosophical terms, for all economic theory is laden with terms that originate in philosophical thinking. The difficulty is generally of two kinds: one is not used to the technical language and dialectical style of Marx, and/or one is already acquainted with other systems of standard economic theory which makes it difficult to grasp even the basic beginner concepts of a new theory since old definitions block understanding of new conceptions. One such concept which people have great trouble with in Marxian economic theory is value. I will assume the reader already knows the standard conceptions of what economic value (utility) is and shall focus on explaining the Marxian concept of value.

Marx’s theory of economic value is well known as a labor theory of value (LTV). There are two values Marx distinguishes as being at work in our modern world: use-value and exchange value. Use-value is the use (utility) a commodity has for us, what we desire it for. Exchange value is what a commodity trades for, or what you generally understand as being its price. Use-value is psychologically driven and only accounts for the kinds of things we want, not the value they exchange for, because of this Marx dwells little with this type of value. From here on value refers exclusively to exchange value. Let it be said before there is any confusion: value and price are not the same concept and serve different functions in reality. Ideally value and price would be the same, but because of the complexities and fluctuations in the real world these two rarely align for long. There are also things which have a price that have no value, and it will be left for another article to explain what this exactly means and why it is the case.

The big question that should be on one’s mind at this point should not be the elaboration of this theory of value, but rather what justifies the claim that labor is the only source of value, the foundational claim of the LTV? There are many that dispute this, and many elaborate theories have been constructed about other things value can just as easily be based on such as physical goods production, etc. There is actually a quite good and simple point that explains why human labor is the sole source of value. Supposing that there is an industry that is completely automated and devoid of human labor inputs of any form, not even occasional maintenance, would the products of this industry have a value? Would anyone pay for the products of this industry directly? Let us be naïve and tentatively say ‘yes’. Who exactly are we paying? The managers of this industry? They’re machines. The workers? They’re machines. But, you may say, how do you know machines don’t produce value? Well, because we don’t recognize the work of machines as something that requires anything in exchange for being done, nor do machines demand us to.

Machines have no desires to fulfill, no social obligations, such as payment they demand us to meet in order for them to do work. If you paid a machine for its work, what would it do with it? Nothing. Machines work and keep working until they can’t; that is all there is to them in a sphere that only inputs but never needs to take from the economy. The fully automated industry creates its products, we take it, and the machines keep on working to create the products. These products are free because they have no value, there is no conscious being behind it all that will refuse to hand over or make the product if it isn’t compensated for its labor. Maybe these products are picked up by truckers, taken to warehouses, and distributed in malls, and thus these items gain value through this human labor, but as far as the machines go there is no value that anyone recognizes. If these items have a price at the end of the day it is only because after being produced, a human being somewhere has a hand in its movement and distribution even if they are behind a fleet of automatic drones doing the physical work. Anything that is paid is always paid to a person who engages in the economic sphere to give and take according to the value they command. The recognition and realization of value is a relation between human beings and nothing else.

Supposing that someone owned that fully automated factory, anything he charges is just an arbitrary price gate enforced by government force, and there is no value being recognized in the price. If machines ever become sentient, acquire self-determination, and desires to fulfill, then their work will create value, until then human beings and their labor is the only source of value. All things traded, all things bought, are only recognition that somewhere, somehow, a person spent a portion of their life working to move, create, and get you to buy a commodity.

About the Author

A.W.
Autodidact on philosophy and science. My aim is merely to reveal one sided views for what they are, and to offer points for critical reflection.

10 Comments on "Marxist Economics: Why Labor Is the Source of Value"

  1. Bazyli Kronstadt | November 13, 2015 at 7:59 pm | Reply

    Good article. Clear and concise.

  2. On the one hand, you write: “If these items have a price at the end of the day it is only because after being produced, a human being somewhere has a hand in its movement and distribution even if they are behind a fleet of automatic drones doing the physical work. ”

    But then, you also realize that prices in this industry can be decided by a governing body. “Supposing that someone owned that fully automated factory, anything he charges is just an arbitrary price gate enforced by government force, and there is no value being recognized in the price.”

    It appears as if you’ve contradicted yourself.

    So then what is exactly is the purpose of the LTV? If prices can be determined by a government body? The way you’ve described it, is as if the LTV is a philosophical category (one that is not even necessary for prices) and not an economic one.

    • It feels like you can substitute the subjective theory of value into Marxism and it doesn’t create any contradictions.

  3. As someone who considers himself a Marxist, and identifies with a large number of Marxist concepts such as Historical Materialism, Surplus Value, etc. I’ve had to hurdle with this for a while, whilst I can see its application, its always been too abstract, maybe I’m misunderstanding a little. I do understand the difference between Value and Price:

    Say someone ran a one person production operation for bracelets. The difference between it being fully automated and her using tools to create it is a distinction without a significant difference (which is acknowledged in the article so thats not my problem), somewhere along the line labour was involved in acquiring the robots/tools and programming/utilizing them to create the bracelets. Anyway, say she was only producing them for personal consumption, her reasoning for producing them would be that the utility of the bracelets themselves exceeds the amount of effort (labour) required to acquire the necessary resources, capital and means of production to produce the bracelets, she is subjectively assigning a value to the product which exceeds the socially necessary labour. If she was to sell them to her friend for money, she would be be assigning an exchange value to the money that is greater than the bracelets and costs involved in producing the bracelets, and vice versa for her friend. It seems that value is subjectively assigned in these scenarios, the labour itself involved in producing it was assigned a subjective value.

    Can someone point out the errors in my thinking? No bully, I’m just trying to wrap my head around :^

  4. Chris,

    I did mention that value and price are not the same. The explanation for that is complicated. Suffice to say, the fact that you can be coerced into paying a price when no one is doing any labor involved isn’t a contradiction. A mob coercing you to pay for the assurance that they won’t burn down your business place is not engaging in a value trade. You are being forced to give up value you have in the form of money or else.

    Azuposter, labor for personal consumption does not enter into the marketplace and has no value. Value is a relation between buyers/sellers/traders. Whether you are expending more labor than the SNALT does not matter, you are directly producing for yourself and it is merely a personal satisfaction, use value (utility), that you seek.

    • My point was that at exchange, she subjectively assigned a value to the labour and costs of production that was less than that of the money she was receiving in exchange for it. It makes exchange value a consumption, for the purchaser, the value of his money was less than that of the value of her labour. It feels like Value is an abstraction, it does not have a relation to the labour nor the products but rather the perceived utility of the item.

  5. The way you framed that question was just confused. Someone who is creating something for private consumption is not engaged in creating exchange value. Someone engaging in private production is merely gathering the products and means of producing whatever product they privately consume. The labor they expend is not exchange value. You could only say that this person only values the use of their time less than they value their money, i.e. a use-value preference.

    • Say someone ran a one person production operation for bracelets for private consumption.
    o This then becomes a mere example of use value.

    • her reasoning for producing them would be that the utility of the bracelets themselves exceeds the amount of effort (labour) required to acquire the necessary resources, capital and means of production to produce the bracelets,
    o This basically reduces to her valuing bracelets more than she values her own time laboring to make them

    • she is subjectively assigning a value to the product which exceeds the socially necessary labour.
    o No. She cannot assign exchange value here. You made the mistake of equivocating exchange and use value. Exchange value, which is what I meant by value in most of the piece, only exists with commodity exchange for money or other commodities since that is where value is real. There is not and cannot be a subjective appraisal of exchange value.

    • If she was to sell them to her friend for money, she would be be assigning an exchange value to the money that is greater than the bracelets and costs involved in producing the bracelets, and vice versa for her friend.
    o This regards utility, once again. In this situation the utility is equalized and the differences neutralized. In the act of trade we are implicitly making the money and the commodity represent the same exchange value no matter what we feel about it. That money has a constant value in the market. Supposing your friend paid more for the bracelet than an equivalent sells in the market, that’s just a price deviation from the actual value that can happen for various reasons, such as them being their friend (usually it’s the opposite, you generally pay your friends less lol)

    • It seems that value is subjectively assigned in these scenarios, the labour itself involved in producing it was assigned a subjective value.
    o The price was subjectively raised for psychological reasons, ignorance, or many other factors. The value of the bracelet is always the SNALT. Were the person making bracelets to go to market with the production of the bracelets taking more time than the SNALT for bracelets of its kind, she would tank her business because she’ll not be able to produce to maintain herself in the market. She’s not producing as many as she should with the time and inputs she has, and thus will simply be outproduced and outsold out of the market.

    • Hmmm… Okay I’m starting to understand a little more. I guess my question now is how it relates to price, which you said you’d address in your next article. No need to answer me for this this time just do it in your article because you’ll have more space and time to write it but:

      When there is absolutely no Labour involved in production whatsoever, then there is no value correct? Is this what you were referring to? Does this relate to changes over-time in Socially Necessary Labour Time to nill even if there was expended Labour by individuals in the past who no longer seek to to trade or benefit from their production?

      • In addition it seems like i’ve got it reversed, Utility is subjective, Value is not. Though Value will always fluctuate due to changes in SNLT, and is difficult to quantify?

  6. When human labor is taken out completely from a process there is no longer any value. It is of course true that humans originally made this perfect self maintaining process, and it would be right that the person/people who created this system would be compensated for this great achievement of labor. However, once the original machines have worn out and been reproduced by the system of machines themselves, and the original creators dead, the only ones to legitimately claim the system was a product of their labor and thus deserve compensating value are gone. The system maintains itself ideally as a closed resource economy unto itself with no human inputs in raw materials or maintenance. Such a system would produce no value, and why should it? It is just a complex machine system that functions solely to produce for human consumption. Basically Star Trek replicator tech, money and the idea of exchange value become utterly meaningless.

    Use value is what you call utility. It is subjective in that it merely acts as the determinant of what will be produced because someone wants it. The exchange value is objective SNLT and changes according to the natural conditions imposed by raw materials and the technologies and techniques used to produce. Commodities always are valued at the SNLT. If it takes 12 hours to produce one bale this month, and next month some revolution comes that makes it 6 hours to produce, the bales from this month that are still yet to sell next month will have their value reduced to 6 hours of SNLT. This is why people who cannot keep up with production outputs eventually are pushed out of the market. They produce less and have to sell for less as well. They are doing labor that exceeds the average of the industry and that excess labor is not recognized in the market as value.

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