Labor theory of value
The LTV is central to Marxist theory, which holds that capitalists' expropriation of the surplus value produced by the working class is exploitative.
"[9] While the LTV posits that value is primarily determined by labor, it recognizes that the actual price of a commodity is influenced in the short-term by the profit motive[10] and market conditions, including supply and demand[11][12] and the extent of monopolization.
[13] Adherents to the LTV conceptualize value (i.e., socially necessary labour time) as a "center of gravity" for price over the long-term.
[14][15] In Book 1, chapter VI, Adam Smith writes: The real value of all the different component parts of price, it must be observed, is measured by the quantity of labour which they can, each of them, purchase or command.
[20][21] In his Summa Theologiae (1265–1274) he expresses the view that "value can, does and should increase in relation to the amount of labor which has been expended in the improvement of commodities.
"[22] Scholars such as Joseph Schumpeter have cited Ibn Khaldun, who in his Muqaddimah (1377), described labor as the source of value, necessary for all earnings and capital accumulation.
Karl Marx himself credited Benjamin Franklin in his 1729 essay entitled "A Modest Enquiry into the Nature and Necessity of a Paper Currency" as being "one of the first" to advance the theory.
Marx expanded on these ideas, arguing that workers work for a part of each day adding the value required to cover their wages, while the remainder of their labor is performed for the enrichment of the capitalist.
19th century American individualist anarchists based their economics on the LTV, with their particular interpretation of it being called "Cost the limit of price".
They, as well as contemporary individualist anarchists in that tradition, hold that it is unethical to charge a higher price for a commodity than the amount of labor required to produce it.
"[30] In this connection Ricardo seeks to differentiate the quantity of labour necessary to produce a commodity from the wages paid to the laborers for its production.
[31] For example, he said "I cannot get over the difficulty of the wine, which is kept in the cellar for three or four years [i.e., while constantly increasing in exchange value], or that of the oak tree, which perhaps originally had not 2 s. expended on it in the way of labour, and yet comes to be worth £100."
(Quoted in Whitaker) Of course, a capitalist economy stabilizes this discrepancy until the value added to aged wine is equal to the cost of storage.
Adam Smith theorized that the labor theory of value holds true only in the "early and rude state of society" but not in a modern economy where owners of capital are compensated by profit.
"[35] Pierre Joseph Proudhon's mutualism[36] and American individualist anarchists such as Josiah Warren, Lysander Spooner and Benjamin Tucker[37] adopted the labor theory of value of classical economics and used it to criticize capitalism while favoring a non-capitalist market system.
[41] Cost the limit of price was a maxim coined by Warren, indicating a (prescriptive) version of the labor theory of value.
[45] Mutualism is an economic theory and anarchist school of thought that advocates a society where each person might possess a means of production, either individually or collectively, with trade representing equivalent amounts of labor in the free market.
[46] Integral to the scheme was the establishment of a mutual-credit bank that would lend to producers at a minimal interest rate, just high enough to cover administration.
"Social production" involves a complicated and interconnected division of labor of a wide variety of people who depend on each other for their survival and prosperity.
[55] 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.
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).
[63][64] 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[note 4] 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, 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.
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.
[65][66] 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.
[69] For example, 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.
[71] Additionally, economist Joseph Schumpeter pointed out a couple of issues he believed undermined the validity of the labor theory of value.
Joan Robinson, who herself was considered an expert on the writings of Karl Marx,[73] wrote that the labor theory of value was largely a tautology and "a typical example of the way metaphysical ideas operate".
[76] 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.
