The Labor Theory of Value | Marxist Economics

Apr 17, 2021 14:00 · 3083 words · 15 minute read

hi everyone in this video we’re going to discuss the Marxist approach to the labor theory of value we’ll explain different types of value including use value and exchange value different categories of labor including concrete labor and abstract labor and how we measure the value produced by labor that is embodied in each commodity by laying the groundwork here with the labor theory of value we’ll create a theoretical launching pad that we can use in future videos to analyze Marxian economics and critique capitalist society including in terms of how workers are exploited and alienated under capitalism one of the most fundamental aspects of life under capitalism is the fact that individuals must purchase commodities in order to meet various types of wants needs and desires that they might have we should note here that when we say commodity we just mean anything that is produced with the intention of selling it on the market rather than you know like using it for yourself or like giving it to somebody else without charging them money for it so exchange for money is the key variable here that defines whether or not something is a commodity the production of commodities for profit is one of the most important characteristics of capitalist society much of mainstream economic theory simply takes this behavior of market exchange for granted arguing that it’s just a basic feature of human nature humans have a natural tendency to truck barter and exchange in the words of adam smith but karl Marx was different Marx was interested in cultivating an economic analysis premised not on some assumed facts of human nature but rather on social and political factors that prop up markets and keep them operating Marx’s approach looks beyond the surface level of money and market exchange in order to understand the underlying social relations and conditions of production that make exchange and profit making possible in the first place and what he discovered was according to him an unjust social hierarchy in which workers were systematically denied a democratic say in how our economy operates including in their ability to retain ownership over the wealth that is produced at their hands in capital volume 1 Marx begins the analysis that ultimately takes him to this conclusion by analyzing the general properties of a commodity every commodity he argues contains what he called a use value and an exchange value use value refers to the usefulness of a commodity or in other words the ways that a commodity can fulfill some human need or desire when that commodity is put to use cars for example have the usefulness of providing transportation and bread has the usefulness of providing calories the second type of value exchange value determines the value that something has in exchange in the sense of how one commodity can be exchanged for another commodity a certain quantity of iron for example might exchange for a certain amount of corn or a certain amount of cloth might exchange for a given number of coats so exchange value refers to how much one commodity is worth in terms of another commodity notice that it doesn’t refer to market prices here because those were two different things remarks despite having diverse use values when commodities are exchanged for one another they are implicitly equated with one another which implies that they are equal in some way right a certain amount of cloth is equal to a certain number of coats for example or a certain amount of iron is equal to a certain amount of corn Marx’s puzzle here revolved around the following question if commodities were so divergent in their use values what is the underlying feature that they shared that allowed them to exchange as equivalent and stable ratios across time he answered if then we discard the use values of commodities only one property remains that of being products of labor in other words once we abstract away from the useful or tangible properties of a commodity the only factor remaining in common that can explain why commodities exchange the way that they do is the fact that they were created by human labor while Marx’s statement here is plausible enough it sets the stage for his ability to take his theory of capitalist society in a revolutionary direction because it allowed him to argue that while the working class produces all of the wealth in capitalist society they are simultaneously denied rightful ownership over it due to the structure of capitalist production In Marx’s theory labor refers to the act of production to purposeful and transformative material activity that constituted the basis of economic development and wealth creation in chapter 7 of capital volume 1 Marx states a spider conducts operations that resemble those of a weaver and a bee puts to shame meaning an architect in the construction of her cells but what distinguishes the worst architect from the best of bees is this that the architect raises his structure in imagination before he erects it in reality it was this ability to utilize our practical aesthetic and cognitive powers to create new things and transform our environment that for Marx was the source of all new value produced under capitalism something crucial to note is that value appears in the form of exchange value especially when we’re talking about the value of a final commodity and how that appears on the capitalist market so when we say that labor produces value what we’re really saying is that it produces the same common metric or measurement that serves as a foundation upon which commodities are traded in the market as mark stated in capital volume one exchange value is the necessary mode of expression or form of appearance of value whenever workers use their brains and their muscles to convert raw materials and the means of production the tools equipment and machinery that they use to produce something into finished products they produce value in the final commodity again quoting marks from capital volume one commodities are the products of labor there is nothing left of them in each case but the same phantom-like objectivity they are merely congealed quantities of homogeneous human labor in other words the exchange value of commodities is determined by the underlying quantity of labor that went into their production.

07:21 - Marx made the distinction between two different analytical categories of labor these distinctions were called concrete labor and abstract labor the first type of labor concrete labor is the actual labor that an individual performs in order to produce something including commodities it is a specific laboring activity undertaken with the aim of producing some specific and concrete end result such as the production of a given commodity so for example when we say that one person or a group of people set out to produce a given table they are expending concrete labor in order to create the table when you make a sandwich to eat you are expending concrete labor in order to produce it when a worker in a chinese factory sits on an assembly line and assists in the production of an ipad it is his or her labor in its concrete form that is being used in the act of production because we can point to some tangible or concrete output of the expenditure of labor in that particular instance so concrete labor is responsible for the production of use values because it is labor that is expended to produce some useful end result the level of analysis implied in concrete labor implies the presence of all sorts of idiosyncrasies since individuals performing the labor can vary in their characteristics their traits and their skills or because the means of production might vary slightly from workplace to workplace as a result the laboring processes involved in the production of some given end result or commodity can vary in multi-dimensional ways workers who are involved in the production of an ipad might have for example different skill sets work speeds psychological states of mind tools that they’re using or other characteristics that shape what their particular labor process might look like or how they might perform their labor no two people and no two factories are alike in other words and those differences have an impact on the qualitative characteristics of specific labor processes but confining our analysis of labor to the level of the individual alone doesn’t allow us to see the broader and more general patterns of how labor is performed across society as a whole which is what Marx was primarily interested in when it came to understanding the creation of value and exchange value the second level of analysis is called abstract labor name so because it abstracts away from the individual differences or the differences in the means of production that determine a particular form of labor in order to consider the broader and more general patterns of how labor is performed across society this is an important level of analysis because production occurs within a social and institutional context each productive industry transmits certain traditions tools and technical knowledge to its workers thus serving to create a sort of standard expectation of how much labor is required across workers on average to produce particular commodities as we might imagine the average labor process inherent to the production of a given commodity is shaped by historical and socially determined variables such as the average skill sets of workers in that economy typical conditions of production and the given state of technological development so while concrete labor might ask questions related to the production of a specific commodity such as how was that particular table or phone or house produced how many hours went into its production or what was the labor process like that went into the production of this commodity abstract labor asked the question what is the average time across society to create an average table or phone or house and mark’s believed that it was the level of abstraction that focused on the broad patterns of socialized labor involved in the production of a commodity that allowed labor to be valorized on the capitalist market in the form of exchange values so while labor time does determine the final value of a commodity it’s the specific property of labor that has been abstracted from its concrete form in order to measure this concept of the average time needed to produce a given commodity across society mercs introduced the term socially necessary abstract labor time or you might also hear it referred to just as socially necessary labor time he defined it in capital volume one as quote 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 and it was the magnitude of socially necessary labor time in particular needed to produce a commodity that we’re referring to when we say that labor is the source of new value production and capitalism so when we say new value production this is because like Marx did believe that nature was a source of value but not that it was capable of generating or producing new value that didn’t exist before um only labor is capable of doing that in Marx’s theory and that’s an important thing to keep in mind in future vid you know for future videos when we talk about the theory of exploitation so as such value production is a socially determined concept because the average labor time that goes into the production of a commodity is defined by social parameters so to give a couple of examples of how we can see this distinction um between concrete labor and abstract labor whenever worker productivity uh you know increases throughout society such as like for example with the advent of new technology that like speeds up the process of production the total amount of socially necessary labor time needed to produce a commodity will fall and thus so will the total amount of value embedded in the final commodity the concept of socially necessary labor time is also why it is the case that if person a took twice as long as person b to produce something that wouldn’t mean that the commodity produced by person a was twice as valuable as the commodity produced by person b that wouldn’t make sense because that would imply or that would mean that the market would reward those who were less efficient and had higher per unit labor costs in the production of commodities rather if one worker worked twice as slowly for whatever reason relative to the pace of work performed by the average worker in society that would mean that even if the slow worker spent two hours to produce something where it’s like the average worker would only need one hour the final commodity produced by the slow worker would still contain only one hour worth of value rather than two because it’s abstract labor as measured by socially average labor times that determines the value of a commodity not the concrete labor so to sum up thus far Marx’s labor theory of value states that the final value of a commodity is a reflection of how much labor it took to create while the socially necessary labor time spent producing a commodity is the unit of measurement that allows us to determine how much value the final commodity will have in the capitalist market this value produced by labor is observable in the form of a commodity’s exchange value if one commodity takes a greater amount of socially necessary labor time to produce it will have a higher exchange value and vice versa one last crucial thing to note here is that while we might think in this theory that the tools that the workers use to create commodities don’t create value because they are inner objects Marx had a different take on it for him the value of a final commodity was the sum of the socially necessary labor time imbued into it by two forms of abstract labor living labor and dead labor living labor like the name kind of sounds is the labor of the actual worker the living worker who actively uses the means of production to transform raw materials into a finished product however mercs argued that the tools that workers use to create a product are themselves a product of human labor they were produced by somebody at some point right and they themselves contain the value that went into their production in effect production reallocates a portion of that value that is used up in terms of depreciation of the means of production into the final commodity that it is used to create so to give a specific example let’s say that given the conditions of production that prevail throughout society a basic table takes on average three hours to create furthermore in the process of creating the table a worker uses a machine that has a value of 100 hours worth of socially necessary labor embodied into it and let’s say that the machine depreciates at a rate of one percent for every table that it produces that means that one hour of value embodied into the machine gets transferred to the final value of the table so the final value of the table will be three hours of living labor and one hour of dead labor for a total of four hours of socially necessary abstract labor time this introduction of living labor and dead labor is important because it shows that even in the case of capital equipment human labor is at the center of all value production capitalist society without the worker using his or her energy to use tools and machinery all of the potential values stored within them would lie dormant there is no inherent productivity of capital equipment without it being used by a worker in the first place so it takes the worker actively using the machinery in the process of production in order for that value to be transferred to the final commodity Marx’s approach here which understands capital goods as the product of human labor and whose productive potential can only be realized through labor allows him to retain integrity in his theory that labor is the source of all value regardless of which form it happens to take in the process of production living labor or dead labor and this sets the stage for him to argue that profits don’t represent the merited returns to capital but rather an unequal power relationship characterized by the capitalist class usurping a portion of value created by the working class and exploiting them in the process the labor theory of value is the backbone of all marxian political economy it demonstrates that production in capitalist society would grind to a halt were it not for the working class utilizing their physical and mental capacities to call into being the commodities that we see for sale on the market today the theory also shows us that underneath the façade of market prices lies the more fundamental ingredient of human labor that equates commodities and makes them capable of exchange on the market in the first place in particular socially necessary labor time is the standard unit of account that measures the value embedded within a commodity and determines how it can be exchanged with other commodities on the market but more so than analysis Marx had a political motive for formulating his labor theory of value by demonstrating that all of the wealth and capitalist society is produced squarely in the hands of the working class mark set the foundation to analyze how capitalism is at its core an exploitative system that systematically allows the capitalist class to rob the value and therefore the wealth created by workers in future videos we’re going to follow Marx’s train of thought in applying the labor theory of value to a study of how economic and social relations and capitalist society inherently disenfranchise the vast majority of people whose labor keeps the system running and why for Marx this meant that capitalism was fundamentally beyond reform it had to be abolished and replaced with a new system premised on democratic and egalitarian economic relations!.