(1) the a priori argument for the labour theory of value in volume 1 of Marx’s Capital is a non sequitur and later contradicts itself, as detailed here and here.These points together are devastating to the labour theory of value, but only one needs to be true to demonstrate that Marx’s theory as it stands in volume 1 of Capital is flawed.
(2) Marx faces the problem of reducing all heterogeneous human labour to a homogeneous abstract socially necessary labour time unit, but does not properly explain how this happens;
(3) even if Marx could overcome (1) and (2), he faces the problems of defining labour value in cases of joint production, where it is possible that the labour value of a commodity might be undefined, nil, or negative.
(4) there is no reason why free human wage labour should have a special power that animals, slaves or machines do not have, as I point out here.
(5) modern fiat money refutes Marx’s theory of money and also his labour theory of value, since money must be a produced commodity in Marx’s theory but has long since ceased to be, as I point out here and here.
(6) the empirical reality is that prices are not set by means of the abstract socially necessary labour time of commodities or of money as a produced commodity, and
(7) the problem that surplus labour value (if that concept could even be adequately defended) would not really explain money profits, since money profits can exist in a slave-based economy and very probably even in an economy where machines did most of the work.
I will review some of the more important problems below.
On point (1), it can be seen that Marx’s argument for the labour theory is a non sequitur. It is not obvious at all that commodity exchanges constitute an equality in the way Marx sees them. Marx actually admits later in Chapter 1 that in some human societies commodities may simply exchange as use value for use value (Marx 1906: 75), and in Chapter 3 that most commodities do not normally exchange at their true and equal labour values (Marx 1906: 114). Now there is an equality in exchanges in the sense in which, say, 2 sheep might exchange for 1 cow, and only two sheep and nothing more are exchanged, and vice versa. But this is a trivial sense of equality. It does not help Marx. Marx’s leap to the conclusion that there must be an additional, fundamental unit of homogeneous labour time in which both commodities can be measured quantitatively and by which they can both be shown to be equivalent simply does not follow. It is a non sequitur. It could be that labour value as Marx defines it is non-existent. Marx’s argument was shoddy and commits a straightforward logical fallacy. Later, Marx admits that labour value cannot be completely separated or “abstracted” from use value, so that the whole argument contradicts itself (for more details, see here and here).
On point (2), Marx argues that all skilled or experienced labour is a multiple of simple abstract labour, and that all labour is reducible to a meaningful, common homogeneous unit of labour. Marx does not adequately explain how to do this. First, Marx suggests that the reduction of skilled labour to a simple unit of abstract labour can be conducted in a physical or scientific manner by examining the “expenditure of human brains, nerves, and muscles.” But then Marx states that:
“Experience shows that this reduction is constantly being made. A commodity may be the product of the most skilled labour, but its value, by equating it to the product of simple unskilled labour, represents a definite quantity of the latter labour alone. The different proportions in which different sorts of labour are reduced to unskilled labour as their standard, are established by a social process that goes on behind the backs of the producers, and, consequently, appear to be fixed by custom.” (Marx 1906: 51–52).But since Marx admits that most commodities do not even exchange for their true labour values, this argument does not work. And what is more it contradicts his earlier approach: if the only actual way we can determine the value of skilled value is by looking at the actual market exchange of the products of skilled labour for products of unskilled labour, then why bother with explaining the difference in terms of “expenditure of human brains, nerves, and muscles”?
Furthermore, if exchange of the products of skilled labour for products of unskilled labour can be used to determine the value of skilled value as a multiple of simple labour, then the argument is circular. Exchange values determine labour values, but labour values are supposed to be a source of exchange values.
On point (3), the labour theory of value faces the problem of joint production: if a production process produces more than one commodity but two or several, then how does one calculate socially necessary labour time? (see Brewer 1984: 23; Nitzan and Bichler 2009: 101–102). In particular, Ian Steedman has argued that joint production leaves open the possibility that some labour values of commodities produced in joint production can be undefined, nil, or negative (Nitzan and Bichler 2009: 101).
On point (5), modern fiat money utterly refutes Marx’s labour theory of value, because money needs to be a produced commodity with a labour value for his theory to work. But money has long since ceased to be a produced commodity and is now fiat money. This is one of the devastating problems with Marx’s theory, and is sufficient in and of itself to refute the theory, as shown here and here.
For example, Marx thought that prices are determined by (at the least) (1) the long-run labour value of gold as determined by the abstract socially necessary labour time required for gold’s production and (2) as this relates in exchange to the labour value of other commodities (Marx 1906: 108). But this idea, if taken seriously, requires that the actual exchange value of gold as money against other commodities gravitates around the long-run value of the abstract socially necessary labour time needed to produce gold. This is an important point, and utterly undermines the Marxist apologists’ claims that Marx never meant labour value to be a determiner of individual commodity prices in volume 1 of Capital. But now in the modern world we have fiat money, and the theory is worthless: Marx’s theory of how labour values determine prices is utterly impossible.
All in all, one cannot take Marx’s labour theory of value seriously: it is flawed or under-determined in so many ways and stands refuted by the reality of modern fiat money.
“Fiat Money Destroys the Labour Theory of Value,” June 6, 2015.
“Marx on the Necessity of Money being a Commodity,” June 8, 2015.
“Karl Popper on the Labour Theory of Value,” May 30, 2015.
“A Devastating Contradiction in Marx’s Argument for the Labour Theory of Value,” May 19, 2015.
“Wicksteed on the Contradiction in Chapter 1 of Volume 1 of Capital on the Labour Theory of Value,” May 21, 2015.
“Marx’s Capital, Volume 1, Chapter 1: A Critical Summary, Part 1 (Updated),” June 21, 2015.
“Marx’s Capital, Volume 1, Chapter 1: A Critical Summary, Part 2,” June 26, 2015.
“Marx’s Capital, Volume 1, Chapter 3: A Critical Summary,” June 12, 2015.
Brewer, Anthony. 1984. A Guide to Marx’s Capital. Cambridge University Press, Cambridge.
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.
Nitzan, Jonathan and Shimshon Bichler. 2009. Capital as Power: A Study or Order and Creorder. Routledge, Abingdon, UK and New York.