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What is at stake with the Labour Theory of Value

Image of Labour Bund campaign against child wage slavery.Marx has been getting a lot of media attention recently, with articles exploring his relevance in the New York Times, The New Yorker, Time Magazine, Forbes and many others. A quick search on Google trends for “was Marx right” shows a blip after the crisis but a stream of mentions since 2011.

As Marx is known as having given a powerful and substantive critique of capitalism, it’s natural that whenever it is suggested that capitalism may have endemic problems, that his name will be invoked.

Many economists, including Greenspan, were claiming that crisis was permanently a thing of the past. New Labour famously proclaimed on their advent to power in 1997 that they would put an end to the cycle of “boom and bust” capitalism, only to preside over the biggest bust since the Great Depression.

Marx’s critique, by contrast, held that in fact crisis is inherent to capitalism. With two centuries of periodic crisis it’s clear that any analysis which can claim to be predictive is going to have to account for these crises.

However, something which has not been examined very clearly is how Marx’s critique of political economy was capable of describing crisis, or of making any of the other predictions which it has done. It’s important that we take stock of the analytic tools which gave rise to these predictions so that we can evaluate if we should be using them again in order to understand our current situation.

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About Gavin Mendel-Gleason

An ex-patriate American living in the land of leprechauns. Former anarchist, present mass partyist, but always committed socialist. Has been accused of menshevik centrism and even *gasp* Bernsteinism.
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2 Responses to What is at stake with the Labour Theory of Value

  1. allan harris says:

    You mentioned the “collective” subjective valuation price theory of marginal utility (as well as other subjective theories of price.) It is well known that the marginal utility theory is based on the subjective valuation of a commodity by the consumer, but I have always thought that was the subjective valuation of the individual consumer, hence the focus on personal choice, freedom, etc.

    If the valuation is based on some kind of collective (or social, or group, or community, etc.,) understanding, then that sounds a lot like socialism, a kind of collective social consciousness. Do you have a quote on the “collective subjective” valuation?

    Everybody takes a kind of unconscious, collective vote on what they think the price of an item should be. I’m not saying I think that is a valid price theory; just a thought.

    Another question concerning the transformation of labor into price. Suppose tomorrow all of the ownership of all of the means of production in the U.S., Canada, and Western Europe were placed in the hands of the people of those countries. And, by direct election, the people could elect who would manage those industries, banks, etc. How would prices of individual items, say, a loaf of bread, be determined?

  2. Gavin Mendel-Gleason says:

    The collective subjective valuation that exists in Arrow-Debreu is given in detail in the paper linked in the footnote. The theory is very deeply flawed in a number of respects, assuming that the aggregation can be done at the level of preferences of the individuals and prior to the realisation of price which results.

    Neither is it a socialist way of looking at things. Scientific socialism has always been predicated on looking at what is realisable, not merely what I want. I can yearn for a holiday on Pluto more than life itself, but this doesn’t make any difference unless (a) it can be produced and (b) it can be purchased by me according to the amount of social labour I can command. If I’m a wage labourer the amount of labour I command will often be less than the total amount of social labour I perform.

    So yes a subjective collective price theory here could be modelled, and I contend that if it were, you would find it is precisely the types of prices we have now – those that are also very close to the labour times embodied in the production of the good. This is why the subjective value theory is essentially vacuous.

    The determination of allocation in a socialist society is outside the scope of the article, but I will write a subsequent article about what I think one way of doing this could be.

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