by 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).
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Marx asserted this numerous times, though not necessarily in these words, and here are some examples:Proposition 1: Socially necessary labour time is the only source of value.
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:“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).
But let us put aside this devastating contradiction (on which, see here), to focus on another issue.“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).
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:
However, this is blatantly false. We know that prices and exchange ratios are not determined by Marx’s concept of socially necessary labour time.Proposition 2: Socially necessary labour time is the only source of exchange value.
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:
Again, these are false.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.
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:
That is, natural resources are a necessary source for the production 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).
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:
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).Proposition 1a: Socially necessary labour time is the only source of embodied socially necessary labour time.
However, Proposition 1a can be further reduced to this statement as follows:
However, Proposition 1b is an empirically-empty tautology, an explicitly analytic a priori proposition which is tautologous, and Proposition 1a.Proposition 1b: The concept of socially necessary labour time is contained in the concept of the embodied socially necessary labour time.
What use is that?
So we are left with the original proposition which can be reduced to this form:
As we have seen, this is an empirically-empty tautology.Proposition 1b: The concept of socially necessary labour time is contained in the concept of the embodied socially necessary labour time.
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:
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.“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).
But let us return to Proposition 1b (and by implication Proposition 1a). In reality, this proposition is as worthless as the following proposition:
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.Proposition 5: The concept of the Wicksellian natural rate of interest is contained in the concept of the equilibrium Wicksellian natural rate of interest.
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:
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.“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).
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.