Debunking the so-called “myths of socialism”…

The so-called “anarcho-capitalist FAQ,” written by “Hogeye Bill” tries to usurp Anarchist ideas and positions in the name of economic exploitation, and promotes racist and sexist demagogues. Their section number nine, “What are the myths of socialism?”, should be of interest to all libertarian socialists (libsocs) who wish to argue their mental disease.

For the curious who may not know the libsoc counters to these rather simplistic points, I will examine them here one by one.

a. The just price doctrine and cost-price theories of value.
The medieval notion of just price permeates socialist thought. It holds that there is a God-given or intrinsic price of a good, regardless of people’s wants, needs, and desires, or supply and demand. In the industrial-era form of this doctrine, the value of a good is deemed to be equal to the cost of production, usually in terms of labor time expended (see labor theory of value below). This cost-price notion was refuted in the 1800s by the marginalist revolution in economics, but nevertheless many socialists remain mired in this creationism of the left.

There is no argument in any of this. Basically, this is a description followed by an insult. Only the last part of this point has any substance:

The marginalist economists, notably the Austrian School, consider value to be subjective. It depends on each person and his or her particular situation and values. In the desert, one may prefer a cup of water to a diamond.

As I’ve commented before on the FAQ By Libsocs For “An”caps in questions 4b and 4c, the idea of value being subjective is an equivocation on the term value, a confusion between moral values (i.e. what we desire) and economic value (i.e. how much something is worth). Obviously one may desire a cup of water more than a diamond in certain contexts, and vice-versa. But this has no relation whatsoever to the worth of the cup of water or the worth of the diamond.

The ironic thing is that the example doesn’t even apply to the capitalist’s subjective theory of value (STV). In our system (and probably not in the “an”cap system either), prices don’t fluctuate from person to person depending on how thirsty or hungry they are. We all pay the same price for the same goods from the same supplier. And that is because the supplier has far more power to set prices than the individual does, and thus does not have to take into account the desires of each individual, only aggregates.

b. The labor theory of value.
The labor theory of value (LTV) is the cost-price doctrine which holds that all value springs from labor. In other words, it purports that land, capital, and entrepreneurship are all non-productive, and can impute no value to a good (except insofar as they represent past labor.) The general invalidity of all just price doctrines has already noted. The modern (marginalist) thought is that value is not determined by cost at all, but by the subjective preferences of the buyers interacting with the available quantity of the good in question. This is known as the subjective theory of value.

Again, correct insofar as the descriptions go.

Even on it’s own intrinsic price terms, the LTV fails to account for factors of production other than labor. Standard counter-examples abound, e.g. No matter how much time you spend producing mud-pies, they are still worthless; A fresh bottle of wine gains value simply by aging; and so on. It is possible to formulate a purely descriptive LTV, which uses labor time as the measure of the productivity of land and capital, as Kevin Carson does in part 1 of his book Studies in Mutualist Political Economy, however the usefulness of this is dubious, and the temptation to slide into the prescriptive interpretation is enormous, as Carson does without justification in part 2 of the same book.

It is very interesting to see that the FAQ writer has both a nuanced grasp of both theories and such a simplistic idea of their flaws. The “if LTV is right, then useless things like holes or mud-pies would be very valuable if we spend a lot of time making them” argument is always the very, very first argument used by capitalists against LTV, and the most simplistic.

The actual answer, of course, is simple: as Proudhon himself has pointed out, an object which no one wants is not a product! If no one wants the mud-pies and considers them useless, then they cannot be a product, and therefore don’t have a price according to LTV. As an old blog entry from Anarchist Without Objectives points out:

It’s funny because it’s fairly basic Misesian premise that human action is purposeful action… It would seem to refute the Misesian premise of purposeful action to have people spend an afternoon making mudpies, not to mention it’s a strawman in the first place.

As for the wine example, it is circular, like all arguments or objections for STV. The fact that the bottle of wine “gains value simply by aging” in the capitalist system does not actually indicate that it has gained actual worth and is not an indication of its just price (also, as was pointed out in the comments below, there are plenty of costs associated with aging wine, which means that a rise in price is justifiable under LTV).

c. The exploitation theory.
An ”exploitation theory” is any theory which purports to justify the claim that one “class” exploits another. In socialist theory, the claim is that a capitalist class exploits a proletarian class. Most exploitation theories are based on the antiquated LTV notion described above. Other socialists realize the weakness of this argument, and base their exploitation theory on unequal negotiating positions. While this latter approach may explain outcomes of bargaining, it evades the relevant issue – whether the trade was voluntary. Thus this approach also fails to support the claim that (so-called) “exploitation” is undesirable or unethical.

There is no word that capitalists hate more than “exploitation,” and they will use all their energies to sweep it under the carpet, no matter how many atrocities and attacks against people’s rights are contained within. It’s all swept up by the broom of “voluntaryism.” All kinds of human rights abuses, from the smallest to the largest, can be rationalized with the excuse of “voluntaryism.” In this view, anything that people agree to, no matter what the context was, is ethical, and the contract or agreement is the absolute barometer of ethics, in the same way that law is the absolute barometer of ethics in the statist view.

The voluntary nature of an action or system is a necessary but not sufficient ethical condition. I have shown in a past entry that what the author glibly labels “unequal negotiating positions” (read: widespread poverty and gargantuan concentrations of wealth owned by hierarchies which we have no choice but to bargain with on a daily basis) necessarily nullifies the very possibility of consent, no matter how “voluntary” it might be.

Surely the crucial question is most definitely not whether exploitation is unethical or not, since by definition exploitation is unethical. The important question is rather whether the instances of alleged exploitation are really exploitation or merely “so-called.” But this must be done on a case-by-case basis: one cannot merely dismiss ALL cases of alleged exploitation against the workers and leave it at that, unless one has a universal argument against its existence. No such universal argument is presented here.

Note that even stipulating the “creationist” LTV, the socialist argument is insufficient for proving exploitation. It lacks an explanation of why workers voluntarily exchanging labor time for wages is exploitative. Bohm-Bawerk of the Austrian school of economics showed long ago (1884 in “Exploitation Theories”) that profit from wages could be explained by interest on advanced pay, i.e. workers getting paid prior to their produce being sold.

I don’t understand why the author thinks this is a good argument. Now, I don’t know the details of this theory of profit, but it sounds very much like an ad hoc rationalization. For one thing, there is no way to equate an employer taking away three-quarters or more of one’s pay with any reasonable percentage of interest over a period of hours or days. However you calculate it, it simply cannot accumulate that much. And for another thing, wage workers don’t generally get paid prior to their product being sold, but rather afterward (although it may have been otherwise in 1884, but that’s no excuse to use an outdated argument).

d. Denial of scarcity (property, money).
This is a favorite of utopian socialists. The purpose of property is to solve the scarcity problem – that man’s desires exceed available goods. This myth simply assumes away scarcity, as if this human condition was merely an effect of a particular property system rather than a fact of reality and human nature.

Of all the points, this is the weakest, because no justification is offered at all. This may be an improvement, since the justifications for their previous points are rather easy to knock down, but hardly the level of discourse that one expects from a FAQ. Nowhere is the only relevant question addressed: is it true that man’s desires exceed available goods? The only reply given is: “it’s a fact of reality.” But nay-saying is not an answer. One can merely play the same childish game and state that “it’s a fact of reality” that the available goods in the world exceed people’s desires. This leads us nowhere at all.

The socialist denial of the validity of property involves an internal contradiction and much resulting “double-think.” E.g. Proudhon writes that he’s against contract property, but for possession property; yet he refuses to acknowledge that his “possession” is a type of property.

This is a strange slander of Proudhon’s position (which was in itself rather fluid, and thus not easy to classify in such a glib way), especially since Proudhon, in What is Property?, is very clear in his definitions of property and possession. Property, for him, is the absolute control that a proprietor in our capitalist societies exerts on objects. Possession is the relationship between any individual in a society and his equal part of the resources produced by that society. Possession relates an individual to the society he depends on, property separates them.

[P]roperty, in its derivative sense, and by the definitions of law, is a right outside of society; for it is clear that, if the wealth of each was social wealth, the conditions would be equal for all, and it would be a contradiction to say: Property is a man’s right to dispose at will of social property. Then if we are associated for the sake of liberty, equality, and security, we are not associated for the sake of property; then if property is a natural right, this natural right is not social, but anti-social. Property and society are utterly irreconcilable institutions. It is as impossible to associate two proprietors as to join two magnets by their opposite poles. Either society must perish, or it must destroy property.
Pierre-Joseph Proudhon, What is Property?

And now, finishing this point:

Another naive denial of scarcity is the claim of some socialists that a modern society can get along without money. Hayek made a living by refuting that view: in short, an economy needs the informational function of money to balance supply and demand. Without the amalgamation of the desires and preferences of the producers and consumers into price, chaos results. Shortages and surpluses abound when the communication of preferences is prevented or co-opted by rulers. Money is simply and ultimately the most liquid commodity in a market. There will always be a most liquid commodity in any market; ergo, there will be something used as money.

I think the author here is trying to hint at what is called the calculation problem by Austrian economists. As Kevin Carson points out, corporations are equally guilty of bringing about calculation problems, for the exact same reasons. So it seems rather disingenuous to use this as an argument against socialism specifically.

I will not address the claim that it’s “naive” to think that modern society can get along with money, apart from saying that it manifests the same lack of justification that we saw earlier. Money is more than “the most liquid commodity”: it has to be a medium of exchange, otherwise it’s not money as we (including Austrian economics) understand it.

e. Human action and production can be planned or engineered.
Many statist socialists have plans and programs to transform society into their vision of community and the good life. Unfortunately, the nature of man is not infinitely elastic. These socialists tend to overestimate their ability to “mold the clay” of mankind, and underestimate his natural proclivities and the evolutionary nature any major advance in his moral faculties. In fact, as quasi-anarcho-capitalist Herbert Spencer pointed out, many of the statist schemes are counter-productive to human progress, and have results perverse even by the social engineers’ standards.

Before I address the main point, I want to point out the irony in the title of the position he’s refuting. Surely he realizes how much human production is planned and engineered in our capitalist system? Only the most staunch of primitivists believe that human production shouldn’t be planned or engineered in any way.

Anyway, and this seems to be the running theme here, the author completely fails to address the main issue, which is: is capitalism or socialism closer to the necessities and needs of human nature? The fact that capitalism is a very recent invention on the timeline of humanity seems to argue against capitalism. And as I’ve argued recently, all the evidence seems to show that hierarchies are not natural.

Since the point is addressed to statist socialists specifically, one may say that I shouldn’t answer it. Fair enough, but once again it demonstrates the mindset of the kind of people who wrote and reference this FAQ: they are not interested in “answering questions” as much as they are interested in “pushing a party line.” It’s one thing to have a position, but it’s another to simply ignore anything the opposition has to say.

In writing a FAQ on controversial topics, one should at least address basic controversies and objections. If “Hogeye Bill” really intended this section as more than a throw-away poo-pooing of socialism, he should have made himself familiar with the basic arguments in favour of LTV, for instance. “Hogeye Bill” has not even demonstrated that much knowledge. Then why include this topic at all? All it does is foster very basic misrepresentations about socialism, which seems to be the goal here.

28 thoughts on “Debunking the so-called “myths of socialism”…

  1. Derek January 11, 2010 at 00:26

    In regards to value theory, it is interesting that they view the LTV as antiquated when in fact it is the STV that is antiquated. Marginalism was debunked by Veblen and Sraffa long, long ago. A simple empirical observation shows that prices fundamentally depend on the costs-of-production. Of course, that is not a concern for most Austrians.

    • Derek June 13, 2011 at 15:07

      Hey Francois,
      This isn’t a comment so don’t publish it. I was just wondering if you could edit my name in the above comment I am replying to so that it just reads “Derek”? I would appreciate it. Thanks in advance.

  2. freemarketanticapitalist January 12, 2010 at 02:37

    Most of Bill’s arguments strike me as strawmen. Classical cost theories of value were not intrinsic, but were based on an implicit theory of utility-maximization (with price being driven toward production cost by people entering and leaving the market). And Marxist Ronald Meek argued that medieval “just price” theories were based on common sense observations of this phenomenon, along with contrasts between monopoly prices and the natural values that prices otherwise tended to.

    My own exploitation theory in the economic history section of MPE was explicitly based on the assumption that exploitation resulted from artificial scarcity and restricted bargaining power–along with a considerable number of instances.

    To say that exploitation theory doesn’t answer the question of why workers willingly accept labor contracts is itself an example of question-begging: it assumes that actual labor contracts, as they exist, are formed in a world of free competition. “Free” labor contracts are exploitative to the extent that the range of alternatives is restricted, and bargaining power is therefore shifted from workers to employers.

  3. Francois Tremblay January 12, 2010 at 04:20

    What’s MPE?

  4. freemarketanticapitalist January 12, 2010 at 13:10

    Mutualist Political Economy

  5. David Gendron January 14, 2010 at 13:42

    “But this has no relation whatsoever to the worth of the cup of water or the worth of the diamond.”

    In a capitalist (or proprietarian) point of view (with the profit maximization premise), I disagree. If more individuals prefer some good, his price (if the good is normal) will grow with the increasing demand (but not the real Labor Value!!!)

    But this is not an argument against LTV. If you have a moral objection against profit, why LTV should be invalid?

  6. freemarketanticapitalist January 14, 2010 at 14:09

    David: But what Ricardo et al argued was simply that if demand drove the price of the exisitng quantity above the embodied labor required in producing it, more suppliers would enter the market and increase the supply until the price fell down to labor value. Labor value is a norm that prices gravitate toward, when supply is elastic, because of human utility-maximizing behavior. Neither the LTV nor any other cost theory of value assumed *innate* value.

  7. Francois Tremblay January 14, 2010 at 14:18

    Well yes David, but your argument is circular. Price (generally, not always!) grows with increasing demand because that’s how STV works, therefore STV is valid. And so on.

    freemarket’s answer too. That’s the standard mutualist position. In a freed market with no hierarchies, prices naturally converge towards cost. It was the basis of just price doctrine during the medieval times.

  8. Khoi February 24, 2010 at 14:40

    “A fresh bottle of wine gains value simply by aging.”

    I can answer this using the LTV. First, the cost to bukld the cellar to preserve the wine, the cost of maintenance, ventilation, temperature; lastly, the cost of maintaining the owner of the wine. Surely the owner cannot survive without eating and drinking (unless he drink his own wine).

    STV theorists argument is also inconsistent. A tee-totaller would never pay for wine, however costly and aged it is.

  9. Khoi April 3, 2010 at 04:04

    Dave, Josiah Warren will surely oppose selling the products over or beneath its costs of production.

  10. Khoi September 22, 2010 at 13:24

    Carl Menger and his Followers merely CONFLATED use-value and exchange-value.

  11. Francois Tremblay September 22, 2010 at 15:34

    You mean “confused”?

  12. Khoi September 23, 2010 at 13:36

    No, Francois! I mean they purposefully conflated them two into one so as to fool lay-readers.

  13. Francois Tremblay September 23, 2010 at 15:48

    Oh. Really? Well, I prefer to give people the benefit of the doubt. Do you have any specific evidence that they did?

  14. Marxist Hypocrisy 101 July 2, 2011 at 11:57

    So, by “debunking” these so-called “myths”, what you really mean to say is, “An ill-argued reaffirmation of the self-defeating collectivist-totalitarian dogma and propaganda espoused by oligarchists and dictators”.

  15. Cory January 4, 2012 at 16:51

    Hi, I’m new to the anarchism scene, and I originally leaned towards forms of social anarchism like collectivist anarchism, social ecology, and mutualism, but I’ve been having doubts about collectivism and socialism all together, and have been leaning towards more individualist anarchism and market anarchism. I just have a few questions about social anarchism. 1) I think that both LTV and STV make some sense, and it’s undeniable that certain Individuals have their own subjectivity and values of their own, and I’ve been wondering how the collective ownership could possibly fulfill every individual’s subjective values. The only way I could see it working is the producers taking surveys and the generating some average among the population of what they desire, and I don’t think that that could ever fulfill the desires of say musicians that need recording equipment. Please explain to me a way that a social anarchist school of thought could possibly fulfill the specific needs of each individual. That’s important. 2) Im an individualist person by nature, and I used to think that collectivism would cause the least coercion over individuals, but I’m doubting that now. All of the individual’s in the collective woud have to submit themselves to the opinion’s of all of the other people in the collective. That’s coercion, and most of the communal Eco-villages I’ve seen have a subtle authoritarianism to them, because collectives usually have to have some sort of common goal. Please address the solutions to these perceived problems to me, it would be greatly appreciated. I want to restore my faith in social anarchism, and I really have much of an affinity for capitalism, so

    • Francois Tremblay January 4, 2012 at 16:59

      “1) I think that both LTV and STV make some sense, and it’s undeniable that certain Individuals have their own subjectivity and values of their own”

      That’s fine, but value and prices are not determined by subjectivity, is my point. Not in our system, anyway.

      “and I’ve been wondering how the collective ownership could possibly fulfill every individual’s subjective values. The only way I could see it working is the producers taking surveys and the generating some average among the population of what they desire, and I don’t think that that could ever fulfill the desires of say musicians that need recording equipment.”

      I’m not sure exactly what you’re asking. Obviously no economic system can align itself with “every individual’s subjective values.” It seems like you are asking for the logically impossible.

      “2) Im an individualist person by nature, and I used to think that collectivism would cause the least coercion over individuals, but I’m doubting that now. ”

      You do know I am an individualist, right? I’ve written about this many times… just write “individualism” in the search box to the right there and you’ll find plenty.

  16. Cory January 5, 2012 at 16:32

    I see what you mean by prices not being subjective, but I just don’t see how a centralized economy in socialism being able to produce products that say, musicians or car enthusiasts would want. That’s all. I think value determined by objectivity is a good thing, but I would like to know how specific products would be made when the means of production are owned collectively.

    • Francois Tremblay January 5, 2012 at 22:44

      Why would a socialist economy not be able to produce things for musicians or car enthusiasts? I’m not really following you there.

  17. Cory January 7, 2012 at 10:47

    Well, if the economy is run through democratic processes, like many social anarchists advocate, a one-size-fits all kind of product would be made. There is no variety, because most people don’t need digital recorders or certain cars. Without the private ownership of the means of production, how would small, or smaller markets be sustained?

    • Francois Tremblay January 7, 2012 at 14:10

      I don’t really have any knowledge of such democratic processes. I think democracy on the whole is a very inefficient way of doing things, only to be used if we don’t have anything better.

      • Cory January 7, 2012 at 19:51

        What do you propose then, if not democracy? Hopefully you’re not an authoritarian. And who determines the value of things if we were to use LTV, if individuals don’t.

        • Francois Tremblay January 8, 2012 at 00:40

          What I propose in economics? Well, I am a libertarian socialist, so you might want to look that up. I like the idea of time currencies a la Josiah Warren, as well.

  18. Jonny Shinigami July 4, 2012 at 00:28

    I’m curious. Why do you persistently hide behind labels rather than explaining your views? All I’m seeing here is a lot of equivocation and what seems to be general ignorance that could be relieved by a simple account of what you actually mean to say. Why not just say what you stand for without tactlessly shrouding yourself with labels?

    • Francois Tremblay July 4, 2012 at 01:16

      Can you point out any equivocation I’ve committed?

  19. Rob October 1, 2012 at 22:38

    Have you ever posted a reply to his rebuttal of this article? Not a challenge I was just wondering if you did in different article on your blog, elsewhere or were planning to in the future.

    • Francois Tremblay October 1, 2012 at 23:17

      Yea, I’ve seen it before. I didn’t think it had a lot of content. He handwaves away the arguments and is incredulous about the things I ask evidence for. I don’t really see what I would have to write about in response.

Comments are closed.

%d bloggers like this: