Date: Thu, 21 Jul 1994 20:15:55 -0400 (EDT)
From: SCIABRRC-AT-ACFcluster.NYU.EDU
Subject: Labor Theory vs. Reality


     Thanks to Jon for suggesting that I've made "a noble
attempt at brevity and clarity."  I'm sorry that I haven't
answered all of your questions, and in the end, I probably
should just refer you to some of the relevant literature.
(See end of my post).  That said, however, I would just like
to respond to some of your points.

     You are correct to note that Marx took over the labor
theory of value from Smith and Ricardo.  However, Smith and
Ricardo offered both a labor theory and a "cost of
production" theory of value.  Marx developed the labor theory
components far beyond anything the classicals offered.

     Marx argues that commodities are exchanged according to
the "human labor [or labor-power] . . . embodied in them," or
according to the quantity of socially-necessary labor time
required for their production.  Socially-necessary labor-time
is that labor which is "required to produce an article under
the normal conditions of production, and with the average
degree of skill and intensity prevalent at that time."

     On a superficial level, there are all sorts of problems
with this formulation.  First of all, "socially-necessary,"
"normal conditions," "average degree of skill," etc., are
notions that can only be concretized within a specific
context.  Marx attempts to retain his contextual awareness,
but from a microeconomic standpoint, there are innumerable
contexts within the global economy.  Indeed, there are all
sorts of complexities which are simply obscured by any
attempt to construct an "average" or a "norm" or a "social"
standard.  Within each region, each industry, sometimes, each
firm (!), there are variations which cannot be simply reduced
to labor-time equivalents.

     On a more profound level, however, the labor theory
posits that "skilled labor," for instance, is merely a
multiple of average simple labor and is therefore
quantitatively reducible.  To view skilled labor as a purely
quantifiable factor is to completely ignore the QUALITATIVE
dimensions involved in skill proficiency and reproduction.
Creative skills and labor practices are not easily
quantifiable.  (They may not be quantifiable at all!)  They
are deeply dependent on a kind of inarticulate, "unorganized
knowledge," as Hayek puts it, the experiential "knowledge of
the particular circumstances of time and place," which is
tacit, practical, and ephemeral.  The labor theory, in
seeking to objectively quantify all of the components of
value, obscures these (unarticulatable?) factors.

     As for the tendency toward an equal average rate of
profit, or equal organic compositions of capital,
"contradicting" the reality of different rates and
compositions, let me say this:  Marx is making assumptions
about market supply and demand that are no different than
standard neo-classical assumptions about static equilibrium.
In the neo-classical model, all relative differentials are
compensated out of existence by the assumption of
equalization.

     It is HIGHLY debatable if there is a tendency toward
equilibrium in the market economy.  One Austrian economist,
Ludwig Lachmann, actually argued that there is a pronounced
tendency toward DISequilibrium.  In a market based upon
rivalrous competition, there is CONSTANT change brought about
by creative entrepreneurial action, an evolution of tacit
skills and `know-how', time-preferences, relative knowledge,
product quality, etc. that cannot be reduced to a simple
labor-time equivalent.  Marx's model, like the neo-classical
model, is fine for SOME expositional purposes.  But, like the
neo-classical notion of "perfect competition," it bears no
relation to the real world.

     I don't know if this has "enlightened" you, Jon.  I
confess that after a while, even the most enlightened among
us can be confused by the debates!  In any event, here are
some good sources on the "transformation problem":

Boehm-Bawerk, Eugen von.  THE EXPLOITATION THEORY OF
SOCIALISM-COMMUNISM:  AN EXTRACT.

Boehm-Bawerk/Hilferding exchange in Sweezy, Paul, ed.  KARL
MARX AND THE CLOSE OF HIS SYSTEM

Also of interest:

Emil Kauder:  "Austro-Marxism vs. Austro-Marginalism,"
HISTORY OF POLITICAL ECONOMY (Fall 1970)

Ronald Meek, STUDIES IN THE LABOR THEORY OF VALUE (1956).

Mises, Ludwig von.  SOCIALISM:  AN ECONOMIC AND SOCIOLOGICAL
ANALYSIS.

Hayek, F. A.  INDIVIDUALISM AND ECONOMIC ORDER.

 


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