II. The Marxian Laboratory
The nature and function of the Marxian LTV is often mistaken by its critics, and even some of its proponents. Whenever you read that the LTV is supposed to account for the price or value of "an object", you know you've strayed onto the wrong path. There is a reason Marx does not immediately begin Capital with a discussion of labor, even though labor will become central to his analysis of the commodity later on. The reason is that before we can determine what gives a commodity value, we must know what a commodity actually is.
What the LTV analyzes is a very specific, historical thing: a commodity, defined by Marx as a thing produced by laborers working for a capitalist, solely for exchange. It presumes that these things are the result of definitely aimed economic activity. Above all, a commodity has a social existence. If an "object" does not meet this criteria, the LTV has little if anything to say about it. Oddities, exceptions, and the like may all exist – they may meet some of the criteria or none of it. The LTV does not need to account for everything to be applicable to the things it actually claims to be applicable to, such as practically everything you will find on a store shelf with a price tag on it or in a catalogue.
It is the commodity, and nothing else, that is the basic "cell" of the capitalist economy. As we know with modern physics, everything may be made up of atoms, but atoms themselves are made up of smaller components; protons and electrons, quarks, etc. One knows very little about matter if one only knows that it is a particular arrangement of atoms. The same applies to commodities; we know they are bought and sold every day, but what are they, actually? One knows very little about commodities if one only knows that they are bought and sold in a market place.
Since we cannot use a microscope to "see" a concept, we must use, as Marx says, "the lens of abstraction". The Marxian microscope is thus first applied to the commodity, the basic unit, atom, or cell of capitalist society. A word on "capitalist society" – some libertarians claim that "capitalism" is a phrase invented by Marx (though it was actually used earlier by Trugot). For Marx capitalism is simply the epoch of generalized commodity production. For instance, in earlier epochs, production was first aimed towards securing necessities, while surpluses may have been sold at the town market or to a traveling merchant. Thus most things were not commodities. They were immediately consumed or stored away. Capitalism is signified by production almost exclusively for exchange, or production for the sake of further production.
Returning to the Marxian microscope, when applied to the commodity, it is seen that they contain both use-value and exchange-value (or utility and value). The LTV accounts for value only, the proportions at which two commodities are exchangeable. Furthermore, "value" and "price" are not identical terms. How and why prices diverge from values is an interesting discussion that I will return to later. The central point is that, in Marx's words, "[T]he exchange of commodities is evidently an act characterised by a total abstraction from use value. Then one use value is just as good as another, provided only it be present in sufficient quantity."
As some critics point out, this seems to "defy common sense" and every day experience. That is why we must step back from the Marxian microscope and understand that we are really in the Marxian laboratory. In the laboratory we control the conditions of the experiment, not so we can obscure the fundamental operations of a process but so we can better understand them in their pure and untainted form. Unpredictability and chaos are replaced with some degree of predictability and control. The central findings of experiments under these controlled conditions can be extrapolated to the wild environment outside the laboratory when all of the variables are accounted and adjusted for, though I will admit that with economics this is theoretically possible but often practically impossible. Even most mainstream economists who have no love of Marxism take this basic scientific approach to economic phenomena; the phrase ceteris paribus was first introduced to me not in a "hard sciences" classroom but in a microeconomics class (see below for a definition and explanation of this phrase). It may be understood that the role of labor in the creation of value is much like the role of dark matter in the universe – we will never really "see" values become prices, but we know theoretically that it must take place.
In the Marxian lab, for instance, supply and demand are almost always assumed to be at equilibrium – that is, at the point at which they cease to account for the value of a commodity. No labor theoretician either before or after Marx has ever denied that the fluctuation of supply and demand ultimately determine price. The theoretical assumption rather is that – and this should be rather obvious - when supply and demand are in perfect balance, price cannot be explained by fluctuations in supply or demand, i.e. in terms of something that is no longer happening. The likelihood or unlikelihood of this cessation is totally irrelevant. It isn't impossible in the same way a square circle is impossible, that is a logical contradiction. It is theoretically possible. In fact it may happen regularly, if only for a second here and there. This is when price = value. It is this value we draw out of the darkness and chaos and put under the light in the Marxian laboratory.
As consumers we are of course always thinking about utility. But producers are interested in defeating the competition and capturing the largest share of the market they can. In many was this competition has fueled technological innovation, and this is one of the central themes of Marx's Capital. It is technological progress, and the effects this progress has on the productivity of labor, more than any other force, subjective or objective, that determines the value of commodities. Commonly we hear that the LTV determines commodity value in terms of labor-time spent on the production of a commodity. But what determines how much labor-time is spent in production? What takes a week to do with a hoe and a scythe might take a day with modern farming equipment. This was central to Marx's expanded definition of labor. Right after his definition of socially necessary labor-time, a concept I accuse many of not wanting to understand, Marx points to the role of technological development in determining this time. An extended quote from Capital vol. 1, chapter 1 states:
"Some people might think that if the value of a commodity is determined by the quantity of labour spent on it, the more idle and unskilful the labourer, the more valuable would his commodity be, because more time would be required in its production. The labour, however, 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. The introduction of power-looms into
In the Marxian laboratory, then, labor productivity is the primary variable for which we wish to control. When we think of competition, we normally think of two businesses slugging it out for market share. In a historical sense, competition also occurs between modes of production and levels of productivity. There is a reason why the shoe factory can defeat the shoe producing peasant family, or even a whole village of independent shoemakers in the open market; it can put out a much higher volume of equally useful but far less valuable shoes. In our laboratory at least, and probably at some point in the actual past, if we took the capitalist shoe and the peasant shoe and put them side by side, we may see only a few superficial differences, and in fact their subjective utility might be identical. You might get the exact same use out of the peasant shoe as you would the capitalist shoe. But which would you purchase? Chances are the capitalist can afford to sell you a pair of shoes at a much lower price than the peasant can. The peasant more than likely spent a few hours crafting the shoes he holds before you; the capitalist's workers and machines probably belched them out in under a minute. The peasant would probably have to sell his 10 pairs of shoes at 10 dollars a piece to even recoup his losses; the capitalist could sell his 1000 pairs at 1 dollar a piece and put the peasant out of business the next day.
All of this should seem rather self-evident. We know that, at least in some countries, the standard of living is far higher than anything imaginable in the past, and we know it is because of industrial mass production. We are very far removed from the struggle for daily existence, so far removed that the connection between labor and value has all but disappeared from our view. Thus it is important to remember that LTV has its roots not in Marx, for whom industrial capitalism was a reality, but in Locke and others, for whom the contrast between subsistence production and production exclusively for exchange was far more sharper and fresher, living as they did on the cusp of this development. There was no question for them that labor and value were intimately related. Where Marx diverged from the classical bourgeois economists, at least in the most important, fundamental respect, was his recognition of labor in the abstract. We have already seen it explained one way as "homogeneous human labour, expenditure of one uniform labour power". But in order to truly understand the significance of abstract labor, it must be contrasted with concrete labor, the labor with which Locke was concerned when formulating the original LTV, to which at least some libertarians, conservatives, and other defenders and apologists for capitalism still adhere to. The historical journey from the Lockean to the Marxian LTV is the journey from capitalism in its infancy, weak and forced to co-exist with other modes of production, to capitalism in the prime of its youth, standing victorious over the bodies of its slain opponents. It is debatable at least as to whether or not we are now living with capitalism in its old age (an old age I would say is wracked with violent spasms and malignant disease). What I hope will emerge is that the Lockean and Marxian LTV are complimentary, like a younger and older brother, and not mutually exclusive. Even conservatives and libertarians can embrace it, since on its own it does not imply or demand a command economy and massive state bureaucracy (an argument I will make later).
[From wiki: Ceteris paribus is a Latin phrase, literally translated as "with other things [being] the same," and usually rendered in English as "all other things being equal." A prediction, or a statement about causal or logical connections between two states of affairs, is qualified by ceteris paribus in order to acknowledge, and to rule out, the possibility of other factors which could override the relationship between the antecedent and the consequent.[1] A ceteris paribus assumption is often fundamental to the predictive purpose of scientific inquiry. In order to formulate scientific laws, it is usually necessary to rule out factors which interfere with examining a specific causal relationship.]
