Tuesday, February 2, 2016

“Socially Necessary Labour Time is the only Source of Value”: What Does this even Mean?

The following proposition is asserted as true by Marxists (e.g., Foley 1986: 16):
Proposition 1: Socially necessary labour time is the only source of value.
Marx asserted this numerous times, though not necessarily in these words, and here are some examples:
“A use-value, or useful article, therefore, has value only because human labour in the abstract has been embodied or materialised in it. How, then, is the magnitude of this value to be measured? Plainly, by the quantity of the value-creating substance, the labour, contained in the article.” (Marx 1906: 45).

“Since the magnitude of the value of a commodity represents only the quantity of labour embodied in it, it follows that all commodities, when taken in certain proportions, must be equal in value.” (Marx 1906: 53).

“We see then that that which determines the magnitude of the value of any article is the amount of labour socially necessary, or the labour-time socially necessary for its production. Each individual commodity, in this connexion, is to be considered as an average sample of its class. Commodities, therefore, in which equal quantities of labour are embodied, or which can be produced in the same time, have the same value.” (Marx 1906: 46).
Sometimes Marx refers to the value of a commodity solely as the congealed or embodied socially necessary labour in it (Marx 1906: 59). Unfortunately for Marx even this assertion is contradicted by his own statements elsewhere in volume 1 of Capital, where he argues that a commodity cannot even have a proper labour value unless being an object of utility:
“Lastly, nothing can have value, without being an object of utility. If the thing is useless, so is the labour contained in it; the labour does not count as labour, and therefore creates no value.” (Marx 1906: 48).
But let us put aside this devastating contradiction (on which, see here), to focus on another issue.

What did Marx mean by the word “value,” and what meaning does the word “value” have in Proposition 1?

It might be understood in the following way:
Proposition 2: Socially necessary labour time is the only source of exchange value.
However, this is blatantly false. We know that prices and exchange ratios are not determined by Marx’s concept of socially necessary labour time.

In modern capitalism, we find (1) flexprice markets and (2) cost-based mark-up pricing. Flexprices tend to be strongly influenced by supply and demand, and can be seen in auction or auction-like markets. Demand is, then, a necessary source of the existence of an exchange value. Secondly, mark-up prices are based on average unit costs of a firm plus a profit mark-up and based on an estimated or target rate of output or sales volume. But once again demand is also a necessary source of the existence of an exchange value or price of this type.

Even Marx admitted that products with no labour value can fetch exchange value too, like uncultivated land or non-reproducible commodities (Marx 1906: 115; Marx 1906: 115; Marx 1991: 772), so that this in itself refutes Proposition 2.

So clearly Proposition 2 is false.

However, Proposition 1 might be interpreted or re-interpreted as follows:
Proposition 3: Socially necessary labour time is the only source of produced output commodities.

Proposition 4: Socially necessary labour time is the only source of money profits.
Again, these are false.

To produce an output commodity, we need more than labour. If a business wants to make bread, it needs wheat flour. It does not matter how much labour the business has, flour from wheat is a physically necessary condition to make bread, and is therefore a necessary condition for bread.

Machines are also very frequently indispensable capital goods in modern production, and without machines many output commodities would not be possible, no matter how much labour is available (e.g., an airline needs aeroplanes and a shipping service needs ships).

Marx himself in effect concedes this when he say that labour is not the only source of use values:
“The use-values, coat, linen, &c, i. e., the bodies of commodities, are combinations of two elements—matter and labour. If we take away the useful labour expended upon them, a material substratum is always left, which is furnished by Nature without the help of man. The latter can work only as Nature does, that is by changing the form of matter. Nay more, in this work of changing the form he is constantly helped by natural forces. We see, then, that labour is not the only source of material wealth, of use-values produced by labour. As William Petty puts it, labour is its father and the earth its mother.” (Marx 1906: 50).
That is, natural resources are a necessary source for the production of use values.

To turn to Proposition 4, it too is false. In order to get money profits, a business needs agents who will buy its output commodities with money and so there needs to be demand for the commodities and money to buy them at a price allowing the business to make a profit. Even worse, businesses can obtain money profits from the sale of products, which, as even Marx admits, have no labour value, such as uncultivated land or non-reproducible commodities. It cannot be that socially necessary labour time is the only source of profit.

So what, then, does Proposition 1 mean?

In reality, it ultimately reduces to this proposition:
Proposition 1a: Socially necessary labour time is the only source of embodied socially necessary labour time.
This is because Marx understands his concept of “value” merely as socially necessary labour time, embodied in commodities. While one might interpret this as an empirical proposition, it seems to be tautological or verge on tautology (and since, under Marx’s own theory, embodied socially necessary labour requires a physical commodity with a use value, it would seem that, even if defended as an empirical proposition, it is dubious, as argued here).

However, Proposition 1a can be further reduced to this statement as follows:
Proposition 1b: The concept of socially necessary labour time is contained in the concept of the embodied socially necessary labour time.
However, Proposition 1b is an empirically-empty tautology, an explicitly analytic a priori proposition which is tautologous, and Proposition 1a.

What use is that?

So we are left with the original proposition which can be reduced to this form:
Proposition 1b: The concept of socially necessary labour time is contained in the concept of the embodied socially necessary labour time.
As we have seen, this is an empirically-empty tautology.

It is of no use unless the Marxist can demonstrate that socially necessary labour time is an empirical concept in the sense Marx requires: that it can be properly defined as a homogeneous unit, and that all heterogeneous types of human labour can aggregated or compared using the unit.

This is clear from Marx’s statement as follows:
“The labour … that forms the substance of value, is homogeneous human labour, expenditure of one uniform labour-power. The total labour-power of society, which is embodied in the sum total of the values of all commodities produced by that society, counts here as one homogeneous mass of human labour-power, composed though it be of innumerable individual units. Each of these units is the same as any other, so far as it has the character of the average labour-power of society, and takes effect as such; that is, so far as it requires for producing a commodity, no more time than is needed on an average, no more than is socially necessary. The labour-time socially necessary is that required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time.” (Marx 1906: 45–46).
Marx states here that a unit of social necessary labour time is homogeneous and can be used to aggregate the labour values of all commodities.

But let us return to Proposition 1b (and by implication Proposition 1a). In reality, this proposition is as worthless as the following proposition:
Proposition 5: The concept of the Wicksellian natural rate of interest is contained in the concept of the equilibrium Wicksellian natural rate of interest.
A neoclassical might very well assert this proposition and defend it as a logical truth, that is, as an analytic a priori proposition. But what use is that? The neoclassical must prove that the Wicksellian natural rate of interest is not only a coherent and properly definable concept, but also a real and empirically proven phenomenon in capitalism that has causal power.

But both the Wicksellian natural rate of interest and Marx’s strict concept of labour value as socially necessary labour time are empirically irrelevant, and, even worse for Marx, socially necessary labour time cannot even be properly defined and measured, unless one can show exactly how to reduce all heterogeneous types of human labour to a common homogeneous unit.

Appendix: Marx in A Contribution to the Critique of Political Economy (1859) on Labour Value
In A Contribution to the Critique of Political Economy (1859), Marx made a statement even more extreme than in volume 1 of Capital:
“Since the exchange value of commodities is, in fact, nothing but a mutual relation of the labors of individuals – labors which are similar and universal – nothing but a material expression of a specific social form of labor, it is a tautology to say that labor is the only source of exchange value and consequently of wealth, in so far as the latter consists of exchange values.” (Marx 1904 [1859]: 31–32).
This is an extraordinary statement which, as far as I can see, is far beyond anything even in volume 1 of Capital, which at least acknowledged that exchange values are also affected by supply and demand.

Further Reading
“The Two Epistemological Ways to Interpret the Labour Theory of Value,” March 30, 2015.

BIBLIOGRAPHY
Foley, Duncan K. 1986. Understanding Capital: Marx’s Economic Theory. Harvard University Press, Cambridge, Mass. and London.

Marx, Karl. 1904 [1859]. A Contribution to the Critique of Political Economy. Charles H. Kerr & Company, Chicago.

Marx, Karl. 1906. Capital. A Critique of Political Economy (vol. 1; rev. trans. by Ernest Untermann from 4th German edn.). The Modern Library, New York.

Marx, Karl. 1991. Capital. A Critique of Political Economy. Volume Three (trans. David Fembach). Penguin Books, London.

19 comments:

  1. Acting man responds to incentives. Incentives are what a man acting responded to. Why after all these years do you not see this LK??

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    1. Could you explain how this is relevant to the post? No attack intended, just curious.

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    2. Both Marx and Mises are engaging in the same thing here. I am mocking them. Austrians take as an axiom that people respond to incentives, which sounds reasonable, but if you look closely you see what they mean is "people respond to what they respond to" rather than anything empirical, and the use of the term "incentive" is a prevarication. Their theory is nugatory.
      But I prefer my first formulation.

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  2. Your first proposition is better stated "labour is the source of all value."

    Then after that there's some obvious confusion about definitions. Moving from Proposition (P)1 to P2 suggests that "value" means the same thing as "exchange value." Moving next to P3 or P4 suggests value means the same thing as "commodities" or "money profits." You recognize that these are all wrong, but then you make a leap: "well," you say, "if value isn't any of these three things, it can't be anything at all except itself." This appears to be a false trilemma. Or tetralemma, depending on how you view that final turn.

    You wind up with P1a, which is, one supposes, trivially true, but entirely aside from the theory. It's a bit like saying: "F=ma? Well if ma is equal to F then we can say F=F, and Newton is revealed a tautologous thinker."

    No Marxist will find that convincing, and for good reason.

    In other words, you're not going to make a real contribution to this subject without considering what these things represent and how they fit together.

    Ken B has the right of it. This whole presentation has a rather Misesian flavor.

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    1. (3) "It's a bit like saying: "F=ma? Well if ma is equal to F then we can say F=F, and Newton is revealed a tautologous thinker."

      False. Your analogy is utterly invalid.

      Why? Because we have vast evidence that Newton's equations accurately model and empirically describe a real force and other phenomena in our universe.

      By contrast, Marx's SNLT is middle-headed concept that cannot be properly or meaningfully defined, since it involves a massive aggregation problem: the need to aggregate vastly different heterogeneous types of human labour with a meaningful homogenous unit of SNL:

      http://socialdemocracy21stcentury.blogspot.com/2015/05/marxs-abstract-socially-necessary.html

      (4) "No Marxist will find that convincing, and for good reason."

      Actually I not very interested in Marxists. This post is mainly for those with a critical interest in Marxism.

      As for actual Marxists, I find most of them to be indoctrinated cultists like religious fundamentalists. One is largely wasting one's time with them.

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  3. (1) "Moving from Proposition (P)1 to P2 suggests that "value" means the same thing as "exchange value." Moving next to P3 or P4 suggests value means the same thing as "commodities" or "money profits." You recognize that these are all wrong,"

    Correct. Do you also accept that Marx cannot defend any of those propositions?

    (2) ""well," you say, "if value isn't any of these three things, it can't be anything at all except itself." This appears to be a false trilemma.

    B.S. It is based on what Marx himself says:

    “A use-value, or useful article, therefore, has value only because human labour in the abstract has been embodied or materialised in it. How, then, is the magnitude of this value to be measured? Plainly, by the quantity of the value-creating substance, the labour, contained in the article.” (Marx 1906: 45).

    “Since the magnitude of the value of a commodity represents only the quantity of labour embodied in it, it follows that all commodities, when taken in certain proportions, must be equal in value.” (Marx 1906: 53).

    “We see then that that which determines the magnitude of the value of any article is the amount of labour socially necessary, or the labour-time socially necessary for its production. Each individual commodity, in this connexion, is to be considered as an average sample of its class. Commodities, therefore, in which equal quantities of labour are embodied, or which can be produced in the same time, have the same value.” (Marx 1906: 46).

    So all Marx means is that: socially necessary labour time is the source of embodied socially necessary labour time (= value).

    That comes very close to being an empirically empty tautology.

    Also, as I note here:

    http://socialdemocracy21stcentury.blogspot.com/2015/05/a-devastating-contradiction-in-marxs.html

    if defended as a serious empirical proposition, it quickly collapses because even in Marx's theory having a use value is a **necessary condition** for a product to have a real embodied labour value.

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  4. A year in and LK still doesn't know what "value" is.

    Wrap it up.

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    1. lol.. "Value" as used by Marx in vol. 1 often means the socially necessary labour time embodied or materialised in a commodity (as I have said above)

      Of course you can also argue he sometimes uses the word "value" in a simple sense of socially necessary labour time.

      How is that incorrect?

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    2. E.g., exactly as defined by Marx himself:

      “Commodities as values are nothing but crystallized labour. The unit of measurement of labour itself is the simple average-labour”
      Chapter 1 of the first German edition of Capital (1867)
      https://www.marxists.org/archive/marx/works/1867-c1/commodity.htm

      “A use-value, or useful article, therefore, has value only because human labour in the abstract has been embodied or materialised in it. How, then, is the magnitude of this value to be measured? Plainly, by the quantity of the value-creating substance, the labour, contained in the article.” (vol. 1; Marx 1906: 45, English trans. 1906).

      “Human labour-power in motion, or human labour, creates value, but is not itself value. It becomes value only in its congealed state, when embodied in the form of some object.” (vol. 1; Marx 1906: 59, English trans. 1906).

      “Value is independent of the particular use-value by which it is borne, but it must be embodied in a use-value of some kind. Secondly, the time occupied in the labor of production must not exceed the time really necessary under the given social conditions of the case.” (vol. 1; Marx 1906: 209, English trans. 1906).

      “The labour, however, that forms the substance of value, is homogeneous human labour, expenditure of one uniform labour-power.” (vol. 1; Marx 1906: 45–46, English trans. 1906).

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    3. Good rote. But as you are so wont to illustrate, parroting words from a book does not mean you comprehend them. Case in point: the post itself.

      Socially necessary labor time is the "substance" of value. Just as, say, wood is the substance of a toothpick. But the concept of "toothpick" is not exhausted by "wood"; it serves a function, a relation to the social world, that gives it a distinctive character.

      As such, while value is "made of" embodied socially necessary labor time, its relation to the world is as the abstract, quantitatively comparable property common to all commodities. (This is distinguished from the qualitative, incomparable aspect of a commodity as a concrete use-value. That's its dual nature in a nutshell.)

      To head off a possible criticism: This is not to answer the question "what allows commodities to exchange?" Böhm-Bawerk makes this error (among others), and argues that exchange involves inequality between the wants of the two owners — which is ironic, because Marx makes the same point in chapter 2.

      Rather, the question he's answering is: "As what do commodities exchange?"

      For yet more detail: Value 'belongs to' a commodity, rather than one it exchanges for; it is possessed, as such, prior to and independent of the act of exchange. It is objective, but not absolute insofar as it is a relative expression of a minute portion of the total social labor time, which itself is ever changing.

      But I'm sure you knew all this, yes? Shall I read your Proposition 1b as "implying" everything I've said?

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    4. Ironic that Anonymous should ask what the relevance of my snark was to this thread! Ludwig von Hedlund.

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    5. Correct. I understand all your whining points, obviously made in a spirit of frustrated inability to actually refute anything I said, and demonstrating your own insecurity about these issues, since you have been refuted time and again.

      Nice work, old chap.

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  5. If a person finds a rock and uses it as a door stop the rock has value but incorporates no labour.

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    1. If the person moved the rock, yes. If a slave moved the rock, no. Robot made cars have no value either. Nor does fruit that falls from trees without being picked. I never knew any of this until I read Marx!

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    2. You read Marx, Ken? Wow.

      Sure had me fooled.

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    3. What has you fooled Hedlund is that I read more than just Marx.

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    4. You're absolutely right; you had me fooled on that idea, too.

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  6. I'm not sure what the problem here is. The notion of "socially necessary labour time" simply means that the exchange value of a commodity reflects the average labour taken to produce it.

    So if there are three producers and one takes 2 hours and two takes 1 hour to produce, then the exchange value would be 1 hour. The first producer would sell at a loss and would have to invest in machinery, etc. to be competitive. In that sense, the first producer would not generate a surplus and so his competitors production costs are the base line for surplus value production.

    It is best to remember that "exchange value" is the means by which the market price is regulated. Different commodity producers bring goods with different costs to the market and those with the least costs sell more, make more profit, etc.

    This is what the "socially necessary labour time" is getting at -- nothing too difficult about it. Marx may be faulted for the use of jargon and thick language but he is describing is hardly strange.

    Iain
    An Anarchist FAQ
    http://www.anarchistfaq.org

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    1. "The notion of "socially necessary labour time" simply means that the exchange value of a commodity reflects the average labour taken to produce it."

      That is the view he took in vol. 1. By vol. 3 he rejected that for the view that prices are determined by prices of production.

      So can't you see that the vol. 1 law of value collapses on the theory of vol. 3?

      As for the very concept of labour value, I suggest you look at the devastating problems even with the very concept:

      http://socialdemocracy21stcentury.blogspot.com/p/the-labour-theory-of-value-as-presented.html

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