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The Labour Theory of Value is Commonly Misunderstood

Most right-wingers either haven’t studied the LTV, don’t understand it, or choose to deliberately misconstrue it. The typical right-wing misrepresentation of the LTV goes something like:

“Marx said that the value of a good is determined by how much labour was invested in producing it.”

In reality this is how the cost of production is determined.

The LTV is actually an amalgamation of the work of John Locke, Adam Smith, David Ricardo, and Karl Marx, all building upon the same line of thought. This becomes apparent when laid out in an order that’s arranged to make it more comprehensible rather than being strictly chronological.

LOCKE (embodiment of labour):

According to Locke’s Labour Theory of Property (LTP), capital, the original labour of the capitalist is embodied in their land and capital goods. This forms the basis of the LTV in that all goods are assembled from parts by labour, parts are manufactured from materials by labour, materials are produced from natural resources by labour, and natural resources are extracted and refined by labour. It’s ironic that the LTP underpins capitalist ideology yet capitalists get all hysterical denying the LTV, even though it’s just a logical extension of the LTP.

"Though the earth, and all inferiour creatures, be common to all men, yet every man has a property in his own person: this nobody has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property. It being by him removed from the common state nature hath placed it in, it hath by this labour something annexed to it, that excludes the common right of other men. For this labour being the unquestionable property of the labourer, no man but he can have a right to what that is once joined to, at least where there is enough, and as good, left in common for others."
John Locke, Two Treatises of Government

RICARDO (encapsulation and viability):

In order for a good to be commercially viable, the price it exchanges for must exceed how much it cost to produce. By cascading this reasoning recursively all the way back along the supply chain, including all the capital goods involved at every stage plus their own supply chains and also the various consumables such as fuel, this fixes the absolute bare minimum cost of any end product as whatever the encapsulated workers have been remunerated. Thus the minimum cost of any good equates precisely to the wages of the labour that produced it, and everything that went into it. If a good cannot exchange for at least that, then isn’t viable to produce said good.

"This difference in the degree of durability of fixed capital, and this variety in the proportions in which the two sorts of capital [fixed and circulating] may be combined, introduce another cause, besides the greater or less quantity of labour necessary to produce commodities, for the variations in their relative value - this cause is the rise or fall in the value of labour."
David Ricardo, On The Principles of Political Economy and Taxation

MARX (use value aka utility):
Another point that capitalists tend to gloss over is that the same workers who produce the world’s goods also constitute the vast majority of consumers.

According to the Subjective Theory of Value (STV), whether a consumer opts to purchase a particular good is contingent on marginal utility: does the consumer subjectively feel that the good (or service) is worth the price it can be obtained for? Guess what - Marx got there first!

".. 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."
Karl Marx, Capital

SMITH (subjective valuation):

The LTV also takes this one step further; whether the consumer subjectively feels that the good is worth the price it can be obtained for, depends on how many hours that consumer has to work in order to afford it. The STV opts not to draw attention to that connection.

In making this decision the worker-consumer is subjectively valuing their labour against the labour encapsulated in that product. This demonstrates that money is merely acting as a proxy for labour. If what the worker-consumer is prepared to pay, exceeds the cost of manufacture, then a profit has been generated by the production of said consumer good.

Anyone of reasonable intelligence can surely grasp that the above value judgement is predicated entirely on labour: does the consumer feel that the amount of labour they have to perform in order to obtain a particular good, is encapsulated by the utility of said good... utility that was manufactured by someone’s labour?

"The value of any commodity, therefore, to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labor which it enables him to purchase or command. Labor, therefore, is the real measure of the exchangeable value of all commodities."
Adam Smith, The Wealth of Nations

MARX (surplus value)

Aah but where does the profit come from? Well that’s actually where the LTV absolutely nails it; the premium that any good exchanges for over the cost of producing said good, arises as a consequence of the raw materials required for its production. This is particularly evident in goods manufactured from scarce resources.

"In order to effect a fall in the value of labour-power, the increase in the productiveness of labour must seize upon those branches of industry whose products determine the value of labour-power, and consequently either belong to the class of customary means of subsistence, or are capable of supplying the place of those means. But the value of a commodity is determined, not only by the quantity of labour which the labourer directly bestows upon that commodity, but also by the labour contained in the means of production."
Karl Marx, Capital

Viewed from this perspective the LTV is actually a more complete explanation of the STV, so why does the STV gloss over certain aspects? The issue for capitalists is that a more accurate explanation puts them in an awkward position, since the entirety of a good’s cost is underwritten by labour, the profit component (the so-called surplus value) must clearly stem from enclosure.

When confronted with what the LTV actually states, cappies immediately enter denial, because they’re only programmed to recognise their own strawman version of the theory, which presents a concept so ridiculous that no philosopher or economist would ever suggest it.

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