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Old Monday, October 25, 2010
manahill manahill is offline
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Marx's Labor Theory of Value: A Summary judgment

Much has been written on Marx's labor theory of value, but, in my view, much of that writing is not essential to Marx's central argument for two major reasons. First, Marx was not primarily interested in questions concerning the allocation of resources and the formation of prices; he wanted to develop a theory that would explain the dynamic changes taking place in the economy of his time. In this sense it is proper to regard Marx as a macroeconomist rather than a microeconomist. Second, the labor theory of value could be replaced in the Marxian system by other theories of value without changing either Marx's essential analysis or his conclusions. Similarly, Ricardo's doctrine of comparative advantage is not dependent upon a particular value theory. Thus, although the ideological force of Marx's system is certainly weakened by a refutation of the labor theory of value, he could raise the ethical questions that concerned him—namely, the serious inequities in the distribution of income under capital*ism—without reference to this particular theory.

From the uses to which Marx put his labor theory of value, our view is that its primary role was ethical, or ideological. He wanted to show that the source of property income was exploitative, or unearned, incomes. He accomplished this by assuming that labor is the only commodity that creates surplus value. He maintained this position consistently throughout his analysis. One could, in principle, say that capital was the sole creator of surplus value and thus develop a capital theory of value, though it would come as no surprise to discover that a capital theory of value would contain some of the same inherent inconsistencies as a labor theory of value. As long as labor-capital ratios vary among industries, a capital theory of value cannot measure relative prices correctly. Although the ethical issues Marx raised concerning the proper distribution of income are important, he was mistaken in believing that he had demonstrated objectively and scientifically, by means of a labor theory of value, that the proletariat was being exploited by the capitalists. It may indeed have been exploited, but that conclusion involves an ethical judgment.
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