Editing Labor theory of value (section)

== Criticism of the Marxist labor theory of value ==
{{main article|Criticisms of the labour theory of value}}
The Marxist labor theory of value has been criticized on several counts. Some argue that it predicts that profits will be higher in labor-intensive industries than in capital-intensive industries, which would be contradicted by measured empirical data inherent in quantitative analysis. This is sometimes referred to as the "Great Contradiction".<ref name="ReferenceA">Böhm von Bawerk, "Karl Marx and the Close of His System" [[Karl Marx and the Close of His System]]</ref> In volume 3 of ''Capital'', Marx explains why profits are not distributed according to which industries are the most labor-intensive and why this is consistent with his theory. Whether or not this is consistent with the labor theory of value as presented in volume 1 has been a topic of debate.<ref name="ReferenceA"/> According to Marx, [[surplus value]] is extracted by the capitalist class as a whole and then distributed according to the amount of total capital, not just the variable component. In the example given earlier, of making a cup of coffee, the constant capital involved in production is the coffee beans themselves, and the variable capital is the value added by the coffee maker. The value added by the coffee maker is dependent on its technological capabilities, and the coffee maker can only add so much total value to cups of coffee over its lifespan. The amount of value added to the product is thus the amortization of the value of the coffeemaker. We can also note that not all products have equal proportions of value added by amortized capital. Capital intensive industries such as finance may have a large contribution of capital, while labor-intensive industries like traditional agriculture would have a relatively small one.<ref>{{cite book |last1=Ekelund |first1=Robert B. Jr.|first2=Robert F. |last2=Hebert |date=1997 |edition=4th |title=A History of Economic Theory and Method |pages=239–241}}</ref> Critics argue that this turns the LTV into a macroeconomic theory, when it was supposed to explain the exchange ratios of individual commodities in terms of their relation to their labor ratios (making it a microeconomic theory), yet Marx was now maintaining that these ratios must diverge from their labor ratios. Critics thus held that Marx's proposed solution to the "great contradiction" was not so much a solution as it was sidestepping the issue.<ref>{{cite journal |last=Temkin |first=Gabriel |date=1998 |title=Karl Marx and the economics of communism: anniversary recollections |journal=[[Communist and Post-Communist Studies]] |volume=31 |pages=303–328 (321–322) |doi=10.1016/S0967-067X(98)00014-2 |number=4}}</ref><ref>{{cite book |last=Sesardić |first=Neven |title=Marxian Utopia |date=1985 |publisher=Centre for Research into Communist Economies |isbn=0948027010 |pages=14–15}}</ref>

Steve Keen argues that Marx's idea that only labor can produce value rests on the idea that as capital depreciates over its use, then this is transferring its exchange-value to the product. Keen argues that it is not clear why the value of the machine should depreciate at the same rate it is lost. Keen uses an analogy with labor: If workers receive a subsistence wage and the working day exhausts the capacity to labor, it could be argued that the worker has "depreciated" by the amount equivalent to the subsistence wage. However this depreciation is not the limit of value a worker can add in a day (indeed this is critical to Marx's idea that labor is fundamentally exploited). If it were, then the production of a surplus would be impossible. According to Keen, a machine could have a use-value greater than its exchange-value, meaning it could, along with labor, be a source of surplus. Keen claims that Marx almost reached such a conclusion in the ''[[Grundrisse]]'' but never developed it any further. Keen further observes that while Marx insisted that the contribution of machines to production is solely their use-value and not their exchange-value, he routinely treated the use-value and exchange-value of a machine as identical, despite the fact that this would contradict his claim that the two were unrelated.<ref>{{cite journal |first=Steve |last=Keen |url=https://keenomics.s3.amazonaws.com/debtdeflation_media/papers/Jhet_use.PDF |title=Use-Value, Exchange Value, and the Demise of Marx's Labor Theory of Value |journal=[[Journal of the History of Economic Thought]] |volume=15 |number=1 |date=Spring 1993 |pages=107–121|doi=10.1017/S1053837200005290 |s2cid=18950248 }}</ref> Marxists respond by arguing that use-value and exchange-value are incommensurable magnitudes; to claim that a machine can add "more use-value" than it is worth in value-terms is a [[category error]]. According to Marx, a machine by definition cannot be a source of ''human'' labor.<ref>{{cite book |last=Marx |first=Karl |author-link=Karl Marx |title=Capital |volume=I |page=141 |edition=Penguin}}</ref><ref>{{cite magazine |last=D'Arcy |first=Jim |url=https://www.marxists.org/archive/darcy-jim/1974/socecon4machines.htm |title=Socialist Economics 4: Do Machines Produce Surplus Value? |magazine=Socialist Standard |date=1974 |via=[[Marxists Internet Archive]]}}</ref> Keen responds by arguing that the labor theory of value only works if the use-value and exchange-value of a machine are identical, as Marx argued that machines cannot create surplus value since as their use-value depreciates along with their exchange-value; they simply transfer it to the new product but create no new value in the process.<ref>{{cite book |last=Keen |first=Steve |title=Debunking Economics |publisher=[[Zed Books]] |date=2011 |pages=436–438 |isbn=978-1848139923}}</ref> Keen's machinery argument can also be applied to [[slavery]] based modes of production, which also profit from extracting more use value from the laborers than they return to laborers.<ref>{{cite book |last=Kara |first=Siddharth |date=2008 |title=Sex Trafficking – Inside the Business of Modern Slavery |publisher=[[Columbia University Press]] |isbn=978-0-231-13960-1}} {{page?|date=July 2024}}</ref><ref>{{Cite web |url=http://eh.net/encyclopedia/slavery-in-the-united-states/|title=Slavery in the United States |website=eh.net |access-date=30 January 2020 |archive-url= |archive-date=}}</ref>

In their work ''[[Capital as Power]]'', Shimshon Bichler and Jonathan Nitzan argue that while Marxists have claimed to produce empirical evidence of the labor theory of value via numerous studies which show consistent correlations between values and prices, these studies<ref group=note>Examples of such studies include: Wolff, Edward N. 1975. "The Rate of Surplus Value in Puerto Rico". ''[[Journal of Political Economy]]'' 83 (5, October): 935–950. Ochoa, E. 1989. "Values, Prices and Wage-Profit Curves in the U.S. Economy". ''Cambridge Journal of Economics'' 13 (3, September): 413–430. Freeman, Alan. 1998. "The Transformation of Prices into Values: Comments on the Chapters by Simon Mohum and Anwar M. Shaikh". In Marxian Economics. A Reappraisal. Volume 2: Essays on Volume III of Capital: Profit, Prices and Dynamics, edited by R. Bellofiore. London: Mcmillan, pp. 270–275. Cockshott, Paul, and Allin Cottrell. 2005. "Robust Correlations Between Prices and Labour Values: A Comment". ''[[Cambridge Journal of Economics]]'' 29 (2, March): 309–316.</ref> do not actually provide evidence for it and are inadequate. According to the authors, these studies attempt to prove the LTV by showing that there is a positive correlation between market prices and labor values. However, the authors argue that these studies measure prices by looking at the price of total output (the unit price of a commodity multiplied by its total quantity) and do these for several sectors of the economy, estimate their total price and value from official statistics and measured for several years. However, Bichler and Nitzan argue that this method has statistical implications as correlations measured this way also reflect the co-variations of the associated quantities of unit values and prices. This means that the unit price and unit value of each sector are multiplied by the same value, which means that the greater the variability of output across different sectors, the tighter the correlation. This means that the overall correlation is substantially larger than the underlying correlation between unit values and unit prices; when sectors are controlled for their size, the correlations often drop to insignificant levels.<ref name="bnarchives.yorku.ca">Cockshott, Paul, Shimshon Bichler, and Jonathan Nitzan. [http://bnarchives.yorku.ca/308/2/20101200_cockshott_nitzan_bichler_testing_the_ltv_exchange_web.htm "Testing the labour theory of value: An exchange."] (2010): 1-15.</ref><ref name="Nitzan, Jonathan 2009, pp.93-97">Nitzan, Jonathan, and Shimshon Bichler. [http://bnarchives.yorku.ca/259/2/20090522_nb_casp_full_indexed.pdf ''Capital as power: A study of order and creorder'']. Routledge, 2009, pp. 93–97, 138–144</ref> Furthermore, the authors argue that the studies do not seem to actually attempt to measure the correlation between value and price. The authors argue that, according to Marx, the value of a commodity indicates the abstract labor time required for its production; however Marxists have been unable to identify a way to measure a unit (elementary particle) of abstract labor (indeed the authors argue that most have given up and little progress has been made beyond Marx's original work) due to numerous difficulties. This means assumptions must be made and according to the authors, these involve [[circular reasoning]]:<ref name="bnarchives.yorku.ca"/><ref name="Nitzan, Jonathan 2009, pp.93-97"/>
{{Blockquote|The most important of these assumptions are that the value of labour power is proportionate to the actual wage rate, that the ratio of variable capital to surplus value is given by the price ratio of wages to profit, and occasionally also that the value of the depreciated constant capital is equal to a fraction of the capital’s money price. In other words, the researcher assumes precisely what the labour theory of value is supposed to ''demonstrate''.<ref>{{cite book |last1=Nitzan |first1=Jonathan |last2=Bichler |first2=Shimshon |url=http://bnarchives.yorku.ca/259/2/20090522_nb_casp_full_indexed.pdf |title=Capital as power: A study of order and reorder |publisher=[[Routledge]] |date=2009 |page=96 |archive-url= |archive-date=}}</ref>
}}
Bichler and Nitzan argue that this amounts to converting prices into values and then determining if they correlate, which the authors argue proves nothing since the studies are simply correlating prices with themselves.<ref name="bnarchives.yorku.ca"/><ref name="Nitzan, Jonathan 2009, pp.93-97"/> [[Paul Cockshott]] disagreed with Bichler and Nitzan's arguments, arguing that it was possible to measure abstract labour time using wage bills and data on working hours, while also arguing Bichler and Nitzan's claims that the true value-price correlations should be much lower actually relied on poor statistical analysis itself.<ref>{{cite journal |last1=Cockshott |first1=Paul |last2=Cottrell |first2=Allin |last3=Valle Baeza |first3=Alejandro |title=The Empirics of the Labour Theory of Value: Reply to Nitzan and Bichler |journal=Investigación Económica |date=2014 |volume=LXXIII |issue=287 |pages=115–134 |hdl=10419/157802 |hdl-access=free }}</ref> Most Marxists, however, reject Bichler and Nitzan's interpretation of Marx, arguing that their assertion that individual commodities can have values, rather than prices of production, misunderstands Marx's work.<ref>Hansen, Bue Rübner. "Review of ''Capital as Power'', p. 151. "For Nitzan and Bichler, the concept 'abstract labour' is materialist in a way most Marxists
would consider vulgar, and a positive concept that can be understood in isolation from
monetary relation".</ref> For example, [[Fred Moseley (economist)|Fred Moseley]] argues Marx understood "value" to be a "macro-monetary" variable (the total amount of labor added in a given year plus the depreciation of fixed capital in that year), which is then concretized at the level of individual [[prices of production]], meaning that "individual values" of commodities do not exist.<ref>{{cite book |doi=10.1163/9789004301931 |date=2016 |isbn=978-90-04-30193-1 |last1=Moseley |first1=Fred |title=Money and Totality |publisher=BRILL }}{{pn|date=March 2025}}</ref>

The theory can also be sometimes found in non-Marxist traditions.<ref group=note>Confer: {{cite journal |last1=von Weizsäcker |first1=Carl Christian |title=A New Technical Progress Function (1962) |journal=German Economic Review |date=August 2010 |volume=11 |issue=3 |pages=248–265 |doi=10.1111/j.1468-0475.2010.00512.x }}; {{cite journal |last1=Weizsäcker |first1=C. C. |last2=Samuelson |first2=P. A. |title=A new labor theory of value for rational planning through use of the bourgeois profit rate |journal=Proceedings of the National Academy of Sciences of the United States of America |date=June 1971 |volume=68 |issue=6 |pages=1192–1194 |doi=10.1073/pnas.68.6.1192 |doi-access=free |pmid=16591926 |pmc=389151 }}</ref> For instance, [[Mutualism (economic theory)|mutualist]] theorist [[Kevin Carson]]'s ''[[Studies in Mutualist Political Economy]]'' opens with an attempt to integrate [[marginalist]] critiques into the labor theory of value.<ref>{{cite book |first=Kevin A. |last=Carson |author-link=Kevin Carson |url=http://www.mutualist.org/id112.html |title=Studies in Mutualist Political Economy |archive-url=https://web.archive.org/web/20110415135834/http://www.mutualist.org/id112.html |archive-date=15 April 2011 |chapter=1–3}}</ref>

Additionally, economist [[Joseph Schumpeter]] pointed out a couple of issues he believed undermined the validity of the labor theory of value. Firstly he wrote that labor theory of value failed to take into account the intrinsic differences in labor quality between individuals (a difference that, he believed, could not be properly encapsulated through the use of a value multiplier). Furthermore, he claims that labor theory of value, both in its Marxist and Ricardian formulations, would entail that labor be the sole input in an economy alongside all labor being homogenous in nature, a thesis which Schumpeter dismisses as unrealistic and one that could be resolved by Marginalism anyway. Schumpeter goes on to divert his attention towards the supposed self-contradictory nature of how labor theory of value allows for the justification of the Marxian exploitation thesis, highlighting that labor itself could not be valued since it was not itself produced by any labor and that the accumulation of surplus value described by Marx could not occur in a static, perfectly competitive market. Thus, although giving Marx the credit for seeing the need for change inherent in capitalist markets, Schumpeter nonetheless concludes that labor theory of value and its consequences remain problematic theories.<ref>{{cite book |last1=Schumpeter |first1=Joseph |title=Capitalism, Socialism, and Democracy |date=1949 |publisher=Harper Perennial Modern Thought |pages=24–30 |edition=Third}}</ref>

Some [[post-Keynesian]] economists have been highly critical of the labor theory of value. [[Joan Robinson]], who herself was considered an expert on the writings of Karl Marx,<ref>{{Cite web|title=Joan Robinson|url=https://spartacus-educational.com/Joan_Robinson.htm|access-date=2020-07-01|website=Spartacus Educational}}</ref> wrote that the labor theory of value was largely a tautology and "a typical example of the way metaphysical ideas operate".<ref>Joan Robinson, "Economic Philosophy" p. 39</ref>

In [[ecological economics]], the labor theory of value has been criticized, where it is argued that labor is in fact energy over time.<ref>Anson Rabinbach, "[https://books.google.com/books?id=e5ZBNv-zTlQC&dq=Rabinbach,+A.,+1990.+The+Human+Motor:+Energy,+Fatigue+and+the+Origins+of+Modernity.+Basic+Books,+New+York.&pg=PR11 The human motor: Energy, fatigue, and the origins of modernity]"</ref> Such arguments generally fail to recognize that Marx is inquiring into social relations among human beings, which cannot be reduced to the expenditure of energy, just as democracy cannot be reduced to the expenditure of energy that a voter makes in getting to the polling place.<ref>Rubin, Isaak Illich ''Essays on Marx's Theory of Value'', Ch. 14</ref> However, echoing Joan Robinson, Alf Hornborg, an environmental historian, argues that both the reliance on "energy theory of value" and "labor theory of value" are problematic as they propose that use-values (or material wealth) are more "real" than exchange-values (or cultural wealth)—yet, use-values are culturally determined.<ref>Jean Baudrillard, "[http://www.gumilla.org/biblioteca/bases/biblo/texto/COM19751_23-25.pdf Pour une critique de l'économie politique du signe] {{Webarchive|url=https://web.archive.org/web/20160304054808/http://www.gumilla.org/biblioteca/bases/biblo/texto/COM19751_23-25.pdf |date=March 4, 2016 }}"</ref> For Hornborg, any Marxist argument that claims uneven wealth is due to the "exploitation" or "underpayment" of use-values is actually a tautological contradiction, since it must necessarily quantify "underpayment" in terms of exchange-value. The alternative would be to conceptualize unequal exchange as "an asymmetric net transfer of material inputs in production (e.g., embodied labor, energy, land, and water), rather than in terms of an underpayment of material inputs or an asymmetric transfer of 'value'".<ref name="sciencedirect.com">{{cite journal|title=Ecological economics, Marxism, and technological progress: Some explorations of the conceptual foundations of theories of ecologically unequal exchange|journal=Ecological Economics|volume=105|pages=11–18|doi=10.1016/j.ecolecon.2014.05.015|year=2014|last1=Hornborg|first1=Alf|bibcode=2014EcoEc.105...11H }}</ref> In other words, uneven exchange is characterised by incommensurability, namely: the unequal transfer of material inputs; competing value-judgements of the worth of labor, fuel, and raw materials; differing availability of industrial technologies; and the off-loading of environmental burdens on those with less resources.<ref name="sciencedirect.com"/><ref>{{cite journal|title=Weak comparability of values as a foundation for ecological economics|journal=Ecological Economics|volume=26|issue=3|pages=277–286|doi=10.1016/S0921-8009(97)00120-1|year=1998|last1=Martinez-Alier|first1=Joan|last2=Munda|first2=Giuseppe|last3=O'Neill|first3=John|bibcode=1998EcoEc..26..277M }}</ref>