“The labour theory of value (LTV) is an economic theory of value that states that the economic value of a good or service is determined by the total amount of socially necessary labour required to produce it.”There are two ways in which, epistemologically speaking, we could interpret this proposition, as follows:
(1) as a synthetic a posteriori proposition (= an empirical proposition), orIf we interpret it as (1) an empirical proposition, then the LTV is not necessarily true, but contingent and known as true only a posteriori by experience, empirical evidence, and inductive argument. As a matter of historical fact, Marx took the LTV from Ricardo, who in turn took it from Adam Smith, and these men seem to have taken it as an empirical statement.
(2) as an analytic a priori proposition.
But now any Marxist who defends the LTV as an empirical proposition faces the demand to prove by experience, empirical evidence, and inductive argument that such a type of value really exists. They have to show us how abstract socially necessary labour time (SNLT) can be actually and meaningfully defined as a real measure of heterogeneous labour. They have to show how to calculate the abstract socially necessary labour time (SNLT) unit values of commodities. They need to show how these SNLT values map onto, or correspond to, the “natural” or “true” exchange values or prices of commodities, and identify real world prices that are direct examples of such SNLT values.
Alternatively, if we interpret the LTV as (2) an analytic a priori proposition, then the LTV is necessarily true and known a priori (not by any empirical evidence), but strictly speaking as a proposition it is a mere definition or tautologous statement. It is an analytic statement like:
(1) all bachelors are unmarried.Even if there were actually no bachelors in the world, this proposition would still be necessarily true, but it is a mere analytic truth, that is, a mere definition or tautologous statement.
Experience teaches us of course that there are things in the world that are men who are not married, and so can be classified as unmarried men or bachelors.
But we make a deep mistake if we do not scrutinise analytic statements carefully to see if they are coherent, consistent, meaningful and useful, and – above all – whether they actually refer to things that have real existence and empirical relevance. The analytic proposition “all bachelors are unmarried” fulfils these criteria. It is a coherent and useful analytic proposition that can be used to classify objects in the real world into a class.
But we could for example propose the following analytic statements:
(1) all unicorns have horns.It is obvious that the real world does not contain unicorns or dragons (at least we have no rational reason to think so). But these are still valid and true analytic propositions because there are worlds of human fiction where these things are imagined to exist, e.g., the dragons in the Lord of the Rings novels and films. Now an imaginary world is analogous to a highly artificial model that does not explain or relate to anything in the real world.
(2) All dragons are able to fly and breathe fire.
The propositions above about dragons and unicorns are only useful and relevant as analytic statements referring to a purely imaginary or hypothetical world in our minds – say, the world of human fiction or fantasy writing.
If the Marxists wish to interpret the LTV as analytic a priori proposition, then they could defend it as a merely empirically-empty and tautologous definitional statement. But they would still face the tremendous hurdle of proving that their analytic definitions are something more than analytic statements referring to a purely imaginary or hypothetical world in our minds, on a par with “All dragons are able to fly and breathe fire.”
That is to say, they still face the same severe empirical challenges that they would face if they choose to interpret the LTV empirically.
If Marxists cannot do this, and they retreat to a defence of the LTV as an analytic truth, it seems to me the only sensible way to treat the LTV is as a purely imaginary or hypothetical, useless proposition that adds nothing to economic knowledge. It has no explanatory power in the analysis of a real world economy. As a postulated phenomenon, it cannot be found in the real world and has no discernible causal power as a factor in a real world economy, unlike real higher-level emergent properties like the general state of expectations or aggregate demand.
And, finally, what would even be the point of asserting the LTV as some analytic concept? It would be nothing but a pointless and worthless idea, with no explanatory or causal power, tacked on to real economic science, which is at least a body of empirical truths and defensible, empirically-tested theories.
The LTV is, quite simply, on a par with the Austrian and neoclassical concept of the “natural rate of interest” or Milton Friedman’s “natural rate of unemployment”: we are dealing with concepts only conceivable in wholly higher-level abstract models that are so unrealistic and so remote from, and so irrelevant to, the real world that they are nothing but fictions.