If Marx says that value is determined by socially necessary labour time isn’t that circular or basically the same as the marginalise argument that value is only determined by what is desired by society? I.e. isn’t the “socially necessary” part basically making a demand-side argument? Although at a societal level rather than individual.
Or have the lib brain worms got to me and this isn’t actually the main conflict between LTV and marginalism?
You wouldn't happen to be reading Value, Price, and Profit, would you? Marx discusses this in the 6th and 7th sections.
Marx is motivated by the need to pin down some standardized unit of measure for value against which anything else can be compared/measured. That common unit of measure is (average) labor-time, "crystallized" into a commodity, because labor inputs are common to the production of all commodities. Even currency (or at least currency tethered to gold/silver/copper), the unit of monetary value, can be measured according to the quantity of labor needed to produce it.
Marx acknowledges the seemingly tautological formulation that the value of labor is therefore measured by the value of labor but clarifies that what workers sell to capitalists isn't their labor, but rather their laboring power, i.e. their productive capacity, or what lib economists call "human capital". A worker who works for 8 hours isn't getting paid for the equivalent of 8 average labor-hours, but is getting paid for essentially renting out their productive faculties for that period of time. (This is of course assuming the labor market is perfectly competitive.)
The value of laboring power is determined by the value of all the socially-necessary labor (childcare/education/training, food/housing/healthcare, etc.) needed to build that laboring power, to sustain it as it depreciates from aging/exhaustion, and to reproduce it from one generation to the next, measured the same way the value of any other commodity is measured according to LTV.
Marginalism, meanwhile, operates on the basis that all people are utility-maximizers in addition to businesses being profit-maximizers. Utility - which is entirely subjective, is only indirectly observable based on either stated or "revealed" preference, and deals with wants and not needs (and even then, requires both willingness and ability to pay) - is maximized by each individual by purchasing a combination of commodities which equilibrates the marginal utility w.r.t. each commodity with the given price of that same commodity, for a given level of income. The marginalist model says that demand arises from consumer preferences through every buyer unconsciously doing this cost-benefit calculation, with little regard for what's a necessity and what isn't.
Marginalism also states that each business maximizes profits by utilizing a combination of labor and capital inputs for which the marginal revenue from the sale of each commodity equals the marginal cost of producing that commodity, corresponding to wages for labor inputs and rents for capital inputs (Note: Marx states that capital is "dead labor", i.e. that capital inputs are lagged labor inputs.) Supply arises from this cost-revenue calculation. In a perfectly competitive market, the price, which is the marginal revenue, is exogenously set to equal the marginal cost.
The main conflict between marginalism and LTV is that marginalism suggests value is completely subjective and rooted in utility, while LTV suggests value can actually be objectively measured according to the required labor input. Marginalism is idealist, while LTV is materialist.
Correct me if I'm wrong but I don't see a conflict between LTV and marginalism, or that the former is materialist where the latter is idealist. It seems to me like they're both independently sound concepts that aren't really interchangeable, or in competition with one another except in that they're both called "value."
If marginalism is idealist, how could there even be a materialist analysis of the demand side of the economy? After all, individual preference is both pretty important and pretty inscruitable, and while the marginalist sort of value might be subjective in that it varies from person to person, for a particular person or over a large population of people it's pretty concrete, or no less so than the labor theory of value. Just like how you could call the LTV "subjective" because it takes different people different amounts of labor to produce the same thing, but it really isn't, because the concept of socially necessary labor takes care of this.
This is basically how I see it as copied from something I wrote farther down:
And, when most modern economists use the word “value,” they mean something closer to this second one where it’s entirely subjective and refers to how much a given person is willing to give up to get a specific thing. When people use the mud pie argument they’re, mistakenly or maliciously, calling the labor theory of value wrong because it’s not the same as a different theory of value.
That makes this a very important distinction, but you can still see the connection between the two concepts. Since the point of an economy is to deal with the fact that resources are finite and you can’t just have everything you want, it makes sense to ask “how much do I have to give up to get x thing?”. The labor theory of value says how much labor must be given up by society to get something, and the second, individual conception of value says how much currency (which is just labor by proxy) one person is willing to give up to get something. They both have their merits but fundamentally they’re just different things that happen to both be called “value.”
Amazing explanation thanks. I’ll have a read of those chapters. Like @Liberalism below I can’t really see a strong conflict between the two, but maybe significant differences arise in practice?
Looking at an econ101 graph of MR=MC, couldn’t you just say that any marginal increase in production cost is basically all labour cost, with the profit area between the two curves being the surplus labour/exploitation? The blue on this graph for example: https://friedmanseconomy.files.wordpress.com/2013/01/picture4.jpg
Meaning you could argue that capitalism is inherently exploitative and steals surplus labour using both analytical methods.
Doesn’t Marx describe it as supply-side? The example he gives is the invention of looms reduced the socially necessary labor time of weavers such that what a weaver could do in one hour a loom could do in half an hour, making the weaver’s hour worth only half. I think?
Edit: I have not finished Capital yet but am currently making my way thru it
Yea I guess that’s what I’m getting at. He mostly addresses it from supply-side, but the addition of “socially necessary” or “social value” seems like a demand-side add on.
An example being: if a weaver makes a bunch of flouro green fabric that no one wants then they are deemed to have created no value as their labour was not socially necessary labour (I think, could be misinterpreting here). But aren’t you then actually saying the value is determined by the use to the consumer, which is basically the same as the marginalists right?
Or is it more about how the quantity of value is determined that is different between the two theories? Labour time vs aggregated marginal responsiveness to price changes?
I see what you’re saying. I think on the whole Marx isn’t really interested in “supply and demand” being a factor in value. My understanding of the “socially” in “socially necessary” is more along of the lines of, given the tools available in general (I.e. “socially”), how long should it take an individual to produce a commodity.
Yea that’s a good point, I suppose he is more looking at a societal, long term set of prices/values. Where supply and demand aren’t as relevant as they tend to bounce around a fairly consistent average
Yep, tfw trying to actually #readtheory and getting lost at the first chapter
I’m in the first chapter too... David Harvey’s companion is really helpful. You can find it on libgen. fwiw the first chapter is notoriously difficult. Apparently Che didn’t understand any of it his first go through.
I believe "socially necessary" is just there because it takes different people different amounts of labor to make things. So, you could have someone who doesn't know how to weave and would take forever to make the fabric, or you could have the greatest weaving prodigy in the world, but neither of them is really representative of how much work goes into the cloth.
So, the socially necessary labor would be the amount of labor generally necessary to make some good.
edit: It's not the good that's "socially necessary/unnecessary," it's a question of how much labor is "necessary for the good, socially"
Don’t you need it to negate the classic mud pies argument from libertarians though? If I spend labour time making mud pies they still don’t have any value because they aren’t useful to anyone.
The value in question is value in exchange, if there's no exchange then it's irrelevant. So, obviously no one is interested in trading mud pies, but if all of a sudden mud pies became a hot commodity, their value would be proportionate to the work put into them.
When you say "they aren’t useful to anyone" you're referencing a separate, use value that doesn't have to do with socially necessary labor.
And, when most modern economists use the word "value," they mean something closer to this second one where it's entirely subjective and refers to how much a given person is willing to give up to get a specific thing. When people use the mud pie argument they're, mistakenly or maliciously, calling the labor theory of value wrong because it's not the same as a different theory of value.
That makes this a very important distinction, but you can still see the connection between the two concepts. Since the point of an economy is to deal with the fact that resources are finite and you can't just have everything you want, it makes sense to ask "how much do I have to give up to get x thing?". The labor theory of value says how much labor must be given up by society to get something, and the second, individual conception of value says how much currency (which is just labor by proxy) one person is willing to give up to get something. They both have their merits but fundamentally they're just different things that happen to both be called "value."
That’s a great breakdown thanks.
It still seems a bit circular: So if society values a commodity a particular amount it will dedicate a certain amount of labour time to producing it, which shows its value.
But at the same time the concept of labour being the only way to produce value makes sense intuitively. That’s really the only thing we can use to improve or modify our products or surroundings.
It also makes sense to avoid using money or prices as the indicator of value, especially as you point out above: the ability to pay varies wildly person to person.
Society's judgment does play a role; it determines whether a thing's exchange value is actually realized, and it affects what the exchange value is through industrialization. But, the exchange value still exists and can be calculated whether or not there's actual demand for a good.
Also, when you say "dedicate a certain amount of labour time," it's important to remember that this is labor per unit; so, if it takes 1 hour of labor to make 10 widgets that's the same as if it took 2 hours to create 20. How much of a thing is produced isn't a (direct) determining factor of the value in exchange.
