There is a remarkably common misconception about the Marxist Labor Theory of Value. It goes something along the lines of "the value of a commodity is determined by the amount of labor necessary for its production." The ensuing logic is that labor intensive commodities are more valuable and therefore cost more than easily produced commodities. This is simply false.
The Labor Theory of Value begins at the assumption that the value of labor is equivalent to the value of the product of that labor, and assigns comparative value to other commodities according to the comparative value of the product of their production. When one value is decided, the other is equivalent. An example will help, even if the values themselves are unrealistic.
Let's say it takes 9 hours to paint a house and 30 minutes to kill and butcher a chicken. The labor theory of value says that painting a house is equivalent to the butchering of 18 chickens. Note that the labor is equivalent, not the price (there is no price at the moment). We assume the cost of materials will be radically different based on the comparative values of the tools and materials needed to perform that labor. Let's say the paint and brushes and things cost $100, and the painter wants $15 an hour for his labor. 15×9=135. Therefore, the butchering of 18 chickens should be worth 135, so the cost of labor to butcher 1 chicken should be $7.50 + whatever the chicken cost to raise (a number derived from the inherited cost of raising them). Let's just pretend it's $5 (that's a guess based on my own fuzzy memory of the last time i actually calculated it 5 or 6 years ago).
So, we can say that having your house painted costs $235 whereas buying a chicken for dinner costs $12.50. Those specific numbers might seem wrong to you personally in real life, and that's totally fine, all we really care about is the relationship. Compared to each other, this relationship seems completely agreeable: the commodities themselves represent reasonable proportions, the equivalence between disparate labors is fair. If all of a sudden that guy who paints houses wants $400, you'll reply "i'd have to charge $22 per chicken, GTFO of here with that nonsense!"
Conversely, let's look at how the comparative value of painters works if the price stays the same. A painter who can do the same job in 7 hours will make more money in a year because they can do more gigs, a painter who takes 12 hours will earn much less. This isn't some nefarious scheme by the way, this is the chicken butcher's perception of value based on a days work. So long as the painter is charging $135 for the labor of painting the house, plus or minus an hour is fairly irrelevant. Now, if you're painting the house in 5 hours and therefore charging me $27 an hour, we might need to renegotiate before i call shenanigans with a shotgun, and if you're painting the house in 12 hours at a measly 11-something an hour, then maybe house painting is not a productive use of your time and energy. But notice, the time factor is its own penalty. You can get ahead within reason, and you can grind away if necessary, but either way my house gets painted, so i don't really have to care.
You are intimately familiar with Marxist labor value if you have ever taken your car to a mechanic. It monetarily rewards the exceptional and punishes the lackadaisical, so long as they provide equivalent quality.
For contrast to the labor theory of value, we look to the Austrian School theory of Marginal Utility. If labor is the mindset of production, utility is the mindset of consumption. Keep in mind this is not the same as referring to demand-side or supply-side economics. This is about the psychology of the participants, not the analysts.
The theory says that the value of a commodity is determined by its most trivial usage. As supply increases, people find new and creative ways to use that commodity, resulting in higher steady demand and lowering the overall cost of production.
It's harder to give a good example, but we can look at corn. It is a labor intensive staple that requires processing to be viably nutritious, but at high levels of production we use it to make corn syrup, animal feed, ethanol, etc. Mining silicon is another example. We use silicon for all sorts of ingenious things from potholders to microchips. These commodities, then, get their value in terms of their most trivial usage, their marginal value, and when we zoom out to the macro level we can see that the result is a relatively stable commodity value over long periods of time. That phenomenon is the basis of sociopolitical systems like the "gold standard," and prioritizing investment over savings.
What we need to understand is that both theories exist at the same time, both theories are in essence true for their own descriptive values, but both theories fail to describe real world phenomena when they collide. That is the conflict between the US and OPEC, two capitalists arguing about the nature of value. Oil producing countries want an equivalent exchange of labor value, American consumers want cheap gasoline at the expense of its producers. The end result is a lot of war because neither side agrees about what is or isn't fair.
I think the source of this problem is the misinterpretation of the theories themselves as not simply descriptions of psychological states, but as ready-to-wear policy making decisions. They can't be. It is certainly true that people tend to respond to certain situations en masse, but no person is actually bound by any analytical construct. People tend to make what they think is the best choice for themselves, and that includes intentionally sabotaging their own goals and doing the opposite of what authority suggests. Any authority, a person, a book, conventional wisdom, mom and dad, etc. Policy has to equally address both sides of that coin.
So, to continue on from my previous explanation about the labor theory of value, we need to understand an important structural aspect of Marx's definition of Capitalism. Keep in mind that i'm not picking one side or the other to defend or bash, i'm simply describing the misconception.
In my example i showed where surplus value is created by performing the same job in less time, or what we would colloquially call "working hard." Marx is primarly concerned with where that surplus goes and how it is used.
Again with the caveats, but we have to use Marx's definition of Capitalism, not yours. If you call this structure something else, fine, but you are responsible for translating the terms for yourself. We are also using Bottle's reading of Marx, which is pointedly different from Lenin, Stalin, Mao, Bordiga, and on and on and on. If you haven't read my books or 3 years of facebook posts, you are at a bit of a disadvantage. I can't do anything about that except tell you to read my books (4th one coming out soon).
What is this surplus thingamabob that capitalists exploit? It's the additional value created by doing the same job faster and/or more efficient than another person producing identical results. Pretend most people can produce 40 a day (of whatever it is). Dudelady can produce 60 of equal quality in the same amount of time, but if you try to make everyone else do 60 the quality of their output decreases. Dudelady is generating surplus value. If Dudelady cuts corners to accomplish it, that's cheating and Dudelady gets demerits or slapped with a wet noodle or something, but in this essay we'll say the situation is legitimate.
Capitalism is any system where someone other than Dudelady owns that surplus as profit. Communism as Marx vaguely describes it (not the political parties or the Soviet Union like you're thinking about), is the absence of that structure, so it does not actually exist in the real world. Communism is the afterparty after we all watch Capitalism eat its own tail.
Marxist Thought is a bunch of people trying to make the structure of Capitalism disappear, but Marx specifically says you can't make it disappear, you can only redistribute the surplus, and by the way the whole thing is stupid. That's Marx's assessment, and i happen to agree that for the most part the whole thing is stupid. That's my bias, and i'm sticking to it.
Now, most people would say that Dudelady's surplus should rightfully be redistributed back to Dudelady. Trouble is, Dudelady sold that surplus during the agreement to be an employee. Yes, even if Dudelady is a sole proprietor, Dudelady is 2 different legal entities and must account for the actions of both of them; you cannot spend the same dollar twice, even though it looks like that on paper. That's not my definition, that's Capitalism, and no one has ever proven that it isn't.
Now, some people will be tempted to argue that Marx's conception of Capitalism is wrong, but will almost inevitably use fundamental theories of Classical Economics to prove it. That's a problem because Marx's description of Capitalism is Classical Economics, so you end up rejecting your own argument. The inverse is also true, you might recognize it as the evolution from Structuralism to Post-Structuralism, or the Post-Modern Apocalypse. It's all the same extra-dimensional twist because economics is nothing more than a theoretical description of human behavior using counting. That's tough because we're bad at behaving and my goodness do we fight about it like Marx says we do.
To be clear, my official opinion is that we need to stop using abstract economics as the decision making factor in our lives. It's a zero-sum game where both the winners and losers die having never received a trophy or a medal or even a "thanks for playing." It might be entertaining to watch on the weekend for some people, you might even make a career out of it, but i think you'll be hard-pressed to find anyone who can honestly say it's fun.
But back to compounding the problem. Marx advocates a Stateless global society, then quite confusingly seems to think that the State can be used to eliminate itself. We know that's not true, the state becomes a capitalist enterprise, and a lot of people end up selectively choosing who can or can't be a Capitalist. Same problematic twist there as well because you're arguing for taking away the private property of the people who you think are trying to take away your private property.
Property is another one of those problematic terms, because as i outlined above, if you think you own what you produce you are by your own definition Marxist. Yet again, i didn't make those rules, i'm just climbing up/down the Escherian staircase so you can see what it looks like.
As always, I both apologize and you're welcome?
