I’ve written a great deal about STV (Subjective Theory of Value, the theory of value used in capitalism), why it is logically absurd and leads to nonsense. Some people have noted to me that I have not really discussed the arguments for LTV in much detail, which is a fair statement.
The reason why I have not really addressed this is because I’ve never gotten that far with STV proponents. When I argue with them about reality being what it is regardless of our desires, they say things like “yes, I agree with that, but the worth of an object is the one thing in the universe that is based on our desires.” They then keep vehemently claiming that reality is what it is AND that the worth of an object is the one exception to that absolute rule. I simply give up when I realize that the person I’m talking to simply will never get out of that contradiction: the indoctrination has taken effect all too well.
This is also why this entry is NOT addressed to the proponents of STV, not because I don’t expect them to agree with it, but because I am not willing to take the debate beyond that. I am not willing to debate people who believe in magic. I know this is rather harsh, but that’s how I see it. That being said, it is relevant for people who are interested in LTV to discuss the basis for LTV.
In order for LTV to be true, it must be the case that labour is fundamental to the concept of economic value (that is to say, the prices of products). How can this be demonstrated?
First, we have to look at what a price is composed of. We can roughly say that a price has three parts: raw materials/capital/tools, wages, and surplus (profits and other forms of usury, taxes, and so on).
But all three categories are reducible to labour. This is more obvious in the case of wages, which is the result of labour, and surplus, which is the rest of the production which was not given back to the workers, therefore also the result of labour. As for the raw materials, they are all ultimately broken down into labour by the same process. The cost of a given material is reducible to the labour it took to make it, plus the remaining cost of the raw materials used to make that, and so on and so forth.
To put some numbers on this, assume that the repartition of costs is something like 30% wages, 20% surplus and 50% raw materials/capital/tools. Now take any raw material or tool used: for the sake of simplification, suppose that a given business only uses screwdrivers, which is made of steel wire, plastic, nickel, and chromium. The cost of the screwdrivers is therefore reducible to the labour used to make steel wire, plastic, nickel, and chromium, plus the raw materials used to make all of these. The 50% that was not explained by labour is therefore lowered to 25%, this representing the raw materials used to make the steel wire, plastic, nickel, and chromium. The businesses that made these things can do their own calculations, just as we did, which lowers our own unaccounted percentage to 12.5%, then 6.25%, and so on. If we keep going in this manner, we will find that ultimately everything can be reduced to some form of labour.
The inescapable conclusion is that price (and by extension economic value) is in fact solely composed of labour. The fact that prices are extremely variable is a result of the surplus value being variably appropriated by the ownership class (composed of business and government ownership, and enforced as profits, taxes, rent, and interest rates, as well as the indirect effects of a great number of laws); without capitalist privileges, surplus would be essentially non-existent and prices would be inexorably driven towards cost (labour+raw materials/capital/tools)
Muddling the issue is the fact that the prices of labour and the raw materials/capital/tools are subjectively established under our STV system. This is what pushes STV proponents to argue that “STV must be correct because that’s how prices are determined.” As I’ve pointed out, this is a circular argument: you can’t use the fact that we live under an STV system to prove that STV is valid, any more than a Christian is allowed to prove that God exists by arguing that we live in theistic societies. But the impulse remains obvious nevertheless.
At any rate, we can make the same exact calculation under an LTV system and arrive at the same conclusion that prices are reducible to labour; the same 50%-25%-12.5%-6.25%… sequence will logically obtain, the main difference being that there is theoretically no surplus and therefore a clean 50%/50% division.
We can now answer the question: what is the most important factor in determining economic value? This factor, in fact the only factor, is labour.
STV proponents usually reply that this position is contradicted by the fact that customers can still choose to buy or not buy any given product, and that an object which is unwanted cannot be a product. They say that this introduction of subjectivity proves that labour is not the whole story after all.
Let’s start with a simple example, in fact the example that capitalists always use to try to refute LTV, the mudpies. A person digs out mudpiles and then puts them back in the ground, over and over, spending so many hours of labour. And yet no one wants to pay him for doing this. Does this prove that labour alone is not the whole story?
But in saying so, we are confusing personal preference and economic value. Labour is still the whole story insofar as economic value goes; if people actually were buying the “service,” they would still have to pay in accordance with the labour expanded. But no one prefers to consume this “service,” and therefore the issue of economic value does not even enter the picture. This therefore proves nothing about economic value at all.
Here is another numbered example to illustrate the issue. Suppose that Tremblay Motors is producing small cars at a pace of 30 person-hours per car, and all the other inputs cost 120 person-hours per car. This means that a Tremblay, according to LTV, can be sold at a price of up to 150 person-hours, or whatever equivalent currency this amounts to.
Now, assume that a capitalist firm tries to sell a Tremblay knockoff for 800 person-hours (which is about the equivalent of a 12000$ car), while everyone else is selling them at 150 person-hours. Obviously they would fail and would have to dramatically lower their prices, simply because no one would buy at such over-inflated prices.
Does this prove that the labour of the workers in the capitalist firm is not the sole determinant of the economic value? No, not at all. In fact, as I’ve pointed out before, profit (like all surplus value) also originates in labour. This surplus of 650 person-hours per car is stolen from the workers and from the consumers. This price of 800 person-hours is a theft and a lie told by profiteers, pure and simple. It can therefore not be a reflection of actual economic value, any more than stealing someone else’s car proves that the car has no economic value.
I believe that, by these examples, I have amply defeated the point. The fact that people decide what is and is not a product does not introduce subjectivity in economic value.
Now imagine the post-scarcity scenario of a far future where factories are entirely automated and self-repairing. No human labour is necessary to produce any of the goods that man consumes on a daily basis. Since no work is necessary, no one makes any wage, or could make any wage. Obviously products must be shared, since no one can buy them; it would be absurd to maintain trading conditions in such a scenario. Price, and economic value, are then set to zero, and the absence of labour implies the absence of economic value.
This is merely the flip side of the first argument I discussed. In that argument, I showed how economic value can be reduced to the presence of labour. In this one, I show that the absence of labour entails the absence of economic value. Since economic value is nothing but the expression of labour in an exchange setting, this equation should not be surprising.