I point readers to this article by Ernesto Screpanti:
Ernesto Screpanti, “The Demise of Marx’s Labour Theory of Value and the ‘New Interpretation’: A Recap Note,” n. 708, March 2015.David Fields on the Naked Keynesian blog also refers to it here.
Screpanti wishes to show the following:
“Marx’s theory of labour value is flawed. This note summarizes the main reasons why this is so. At the same time, it claims that the theory of exploitation does not depend on a labour embodied valuation and can be expounded by resorting to the theory of production prices. Almost all Marxists have now accepted this truth. Most of them have been convinced by a ‘new interpretation’ which has been able to translate the price of net output into an amount of ‘living labour’ and the rate of exploitation into a ratio between unpaid and paid labour. What produced such a surprising result is the use of labour productivity as a numeraire.” (Screpanti 2015: 1).He then expounds a corn model economy in which he analyses the relationship between labour and output (Screpanti 2015: 2–4). Screpanti also notes that many Marxists have abandoned Marx’s theory of value for Piero Sraffa’s theory of production prices, yet the so-called “new interpreters” also distance themselves from Sraffa too, even though Screpanti apparently thinks they can be reconciled (Screpanti 2015: 7, 9).
Let Marxists argue over the merits of this paper, because ultimately I wonder why they even bother to continue calling themselves Marxist at all. If you repudiate major defining aspects of your Marxist economic theory (such as the labour theory of value or historical materialism), then why even cling to the name “Marxist”? Could it have something to do with the fact that what you belong to is actually a cult and you have profound difficulties escaping from your cult?
For I have no doubt that the central aspect of classical Marxism – the labour theory of value – is a mystical and metaphysical dogma that requires faith to believe in.
For Marx, money prices/exchange values are determined by the socially necessary labour-time occurring in production:
“The production of commodities must be fully developed before the scientific conviction emerges, from experience itself, that all the different kinds of private labour (which are carried on independently of each other; and yet, as spontaneously developed branches of the social division of labour, are in a situation of all-round dependence on each other) are continually being reduced to the quantitative proportions in which society requires them. The reason for this reduction is that in the midst of the accidental and ever-fluctuating exchange relations between the products, the labour-time socially necessary to produce them asserts itself as a regulative law of nature. In the same way, the law of gravity asserts itself when a person’s house collapses on top of him. The determination of the magnitude of value by labour-time is therefore a secret hidden under the apparent movements in the relative values of commodities.” (Marx 1982: 168).So money prices are determined and driven by a “magnitude of value by labour-time” and this is a type of anchor around which money prices might fluctuate, even though they are supposed to be driven back to the socially necessary labour-time anchor when they deviate from it.
Yet Marxists have devoted decades and dozens of books to attempting to solve their notorious transformation problem, and they have never solved it, because it is a complete pseudo-problem.
Missing in modern Marxism is hard empirical study of how most prices are actually determined in capitalist economies and the willingness to formulate theories based on the empirical evidence, not on a prior quasi-religious belief in the labour theory of value.
Nor will basing modern Marxism on Sraffian economics save Marxism, because Sraffian economics has serious problems, as outlined here and here.
Human labour has historically been required and is still required to engage in production and creation of output (though we will probably reach a time in the next 100 years when only minimal human labour is required to run an advanced capitalist economy). In this utilitarian sense, of course labour has value. Obviously it is a necessary factor of production, but then so are non-labour factor inputs too.
But the trouble is: this doesn’t take you very far. It is almost a trivial truth.
For example, without the sun and the energy it provides, there wouldn’t be any production either. Maybe we could even invent an economic cult based on a “sun theory of value”: we could argue that all commodities are just embodiments of the “physically-necessary sun energy” required to produce them. Therefore all prices must really just be reducible to and determined by “physically-necessary sun energy.” We could waste our lives desperately trying to solve our “transformation problem”: how is the quantity of “physically-necessary sun energy” transformed into money prices of goods on the market? We could also argue that we are all – workers and capitalists – ruthlessly exploiting the poor, oppressed and innocent sun!, and so on and so forth. The trouble is, it would all be a lot of nonsense.
Let us now return to the real world. Why is the labour theory of value wrong? Most prices in modern economies are mark-up prices. Fundamentally, there is no reason to think that some mystical “socially necessary labour-time” determines prices in modern capitalism. First, it is not labour time per se but average unit cost of labour along with the average unit cost of all other non-labour factors at a given quantity of output that is used to calculate most prices. Then businesses add a profit mark-up to this, nearly always.
There is no universal tendency towards cost of production prices and zero profits throughout a competitive capitalist economy. Even if there was, there is no reason to think that “cost of production” prices would embody socially necessary labour-time involved in producing them. Most mark-up prices do not gravitate towards cost of production (whether based on total average unit costs or marginal cost), and mark-up pricing and highly imperfect competition in any real world market economy therefore badly undermine the Marxist, Classical and Sraffian view that there exists a tendency towards zero or a uniform rate of profit throughout a competitive capitalist economy.
The labour theory of value is mystical nonsense and the whole Marxist project is just another example of how people on the Left have wasted their lives and careers on an utterly embarrassing cult, when they could have been doing constructive things with their time.
It is good news that economic Marxism has become a fringe movement. It is bad news, however, that the Left is still ridden with lots of other outrageous nonsense too, and large numbers of other modern left-wing people have also wasted their lives on cultural Marxism, Poststructuralism, and Postmodernism.
“Mysticism and the Labour Theory of Value,” May 7, 2014.
“Lavoie on ‘Should Sraffian Economics be dropped out of the Post-Keynesian School?,’” June 19, 2014.
“Sraffians versus Kaleckians versus Fundamentalist Post Keynesians,” June 17, 2014.
“Did Kalecki Accept the Labour Theory of Value?,” April 18, 2014.
“Automation and Robots in the News,” February 23, 2015.
“Adam Smith on the Labour Theory of Value,” April 20, 2014.
Marx, Karl. 1982. Capital. Volume One. A Critique of Political Economy (trans. Ben Fowkes). Penguin Books, Harmondsworth, England.
Screpanti, Ernesto. 2015. “The Demise of Marx’s Labour Theory of Value and the ‘New Interpretation’: A Recap Note,” n. 708.