Does The Existence Of Wine Refute The Labor Theory Of Value?

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Robert Vienneau
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The above is one in a series (Richard Wolff versus "Destiny", Slavoj Zizek versus Jordan Peterson) in which the pro-capitalist/anti-socialist side is represented by somebody seemingly almost completely ignorant of the topic they are pretending to discuss. Magarino needs a better interlocutor. I can find some related debates on YouTube with a more level playing field.

That said, I think Magarino needs a better answer to the question in this post title. I do not think that this question is answered by pointing out that some work is needed to maintain the vats while wine is aging. J. R. McCulloch was supposedly extremely confused on this question when it was first(?) posed.

Wine illustrates two challenges to the LTV: the use of natural resources in limited supply and the effects of time. Land poses some difficulties for the definition of prices of production, but these difficulties do not lead the restoration of the marginalist theory of supply and demand. The latter challenge is addressed in the so-called transformation problem.

First, suppose that some high quality wine is made from varietal grapes grown on only certain lands of varying fertility, and these lands can be only used for these grapes. Oenophiles want a distinct terroir for this wine. If the amount of this wine that is in an economy's overall social product is taken as given, one can solve for prices of production with no problem. The rent of those lands fully under cultivation drops out of the price system. Labor values can also be calculated for the given production system, using the marginal land. Which land is marginal, however, is found endogenously with variations in the level and composition of final demand.

Now suppose lands of various qualities are not so rigidly specialized. Several production processes can be operated, in parallel, on different plots of land of a given quality, and some of these processes might produce different commodities. This is a problem of intensive rent. As I understand it some of the problems of joint production arise here. No system of prices of production might exist for a rate of profits of zero, even though a solution might exist for a range of postive rates of profits. The analysis of the choice of technique might yield a non-square Leontief matrix, and the system of prices of production need not be unique. The level and composition of final demand might enter into the determination of prices of production in a way that final demand does not matter for single production. I do not see any necessity, however, to address requirements for use by introducing unobservable utility functions.

I am not sure what these difficulties with intensive rent have to say about the LTV. As I recall, Ian Steedman's examples with negative labor values and positive prices arose in models of joint production.

But put these issues with land aside, and consider the issue of time. (I do not take this discussion to be about the time preferences of consumers.) First, the mere fact that some production process takes a long time to complete does not pose any difficulty for the LTV, in and of itself. Ricardo is quite clear on this in Section III, Chapter 1 of the third edition of his Principles. One way of understanding the LTV is as a theory of relative prices. Relative prices of production vary from relative labor values only if their capital-intensities (also known as the Organic Composition of Capital) vary from one another, in some sense. I gather that the point of the wine example is to suggest that here is a commodity that has a much higher OCC than the average. I agree that, in a simple analysis, this suggests that the LTV might not apply here. (In a full analysis, ranking commodities by the capital-intensities of their production methods poses some difficulties.) Once again, though, this analysis is fully consistent with a revived classical political economy. A much debated question is whether or not an analysis of prices of production receives support or needs to be supplemented by considering labor values.

One difficulty that I have with objections to the LTV based on this example of wine is that it is about an individual price of an individual commodity. The LTV is about the generality of produced commodities in a capitalist economy. Magarino tends to emphasize empirical results found from Leontief input-output matrices for empirical economies across specific countries and specific times. Whatever one might think of the level of aggregation, the methodologies of these investigations, the question of concrete versus abstract labor, and so on, this is the right setting for investigation. One might say it is a question of mesoeconomics. Based on my understanding of the transformation problem and of prices of production, I find surprising how well the LTV is supported empirically as a theory of relative prices.