Marx's Labour Theory of Value is Superior to Subjective Value Theory

Marx holds that there are essentially three kinds of value: use-value, exchange-value, and value proper. Use-values, which it is "the work of history to discover", are the particular material qualities of objects which give them use to human beings. Something may have use-value, then, without being sold on the market, that is,without being a commodity (such as oxygen). All commodities, however, must have use-value; they must be socially useful in order to be sellable at all. Superficially, this seems quite similar to subjective value theory, since use-values can undoubtedly be subjective " I have a nut allergy, so nuts have no use-value to me, but quite a high use-value to others who enjoy them. The important point to stress here is that what Marx is seeking to explain, ultimately, are prices (since prices are what people normally mean when they talk about values; "how much is that ipad worth? "); people"s individual views on the use-values of objects are irrelevant to the question of value until that object is transformed into a commodity by being sold on the market. For example, I value oxygen very highly, but this does not automatically translate into a pricing scale for oxygen, since oxygen is not sold on a market. The same goes for human beings in a post-slavery society. So, what it is that occurs, aside from people"s individual preferences as regards use-values, that creates price once commodities are sent to market? Clearly, what is significant about prices is that they differ from one another; an apple is worth, say 50p, whilst a new laptop could be upwards of "1000. All commodities can be compared with each other in this way, and these quantitative differences are what Marx called "exchange values". Exchange-values indicate how much of one thing you would need to equal the value of another thing, for example, I would need 2000 apples to equal the value of one laptop given the prices above. In a barter society, then, we might imagine trades of this sort literally occurring " 2000 apples for one laptop and so on. But in modern society, of course, we use money as a universal equivalent (for various reasons I won"t go into until it"s necessary) " this means that we measure the value of all commodities against a certain quantity of some accepted currency, so instead of paying 2000 apples for a laptop, I pay "1000 pounds. This also suggests, of course, that an apple is worth half as much as "1, i. e. 50p (apologies for the UK units! ). But here a problem arises: what is the common denominator that makes all commodities, including the money-commodity (gold/silver) commensurable, that is, measurable against one another? If I wanted to measure the career successes of top athletes in different sports against one another,how would I do it? The very first thing I would have to do is to think of a common quantitative denominator (say, major competitions won), so that the achievements in qualitatively different sports could be made commensurable for the purposes of comparison (notice that the only reason I would need to do this is to compare the different athletes, just as the only reason I need to find a commensurable "something" in commodities is because they do, in fact, need to be compared on the market). This common "something", says Marx, is labour, but here we need to clear up some misunderstandings. Obviously it is true to say that a quantity of labour goes into the production of all commodities - it is a true common denominator. But critics of Marx will often use the "mud pie" objection, which objects to the labour theory of value on the grounds that labour used to create useless objects (like mud pies) will clearly not produce value. This is clearly true, but Marx has already countered this by saying that all commodities must have use-values in order to even be commodities. If a commodity cannot be sold, it is not a commodity, and we don't have to worry about its "value"; value is a term that only applies to commodities. But there is a second common objection. Marx held that the way we should measure labour is in "labour-time" - higher the labour time, the greater the value. But if this is true, why wouldn't it be the case that a lazy worker who takes twice as long as everyone else to make a chair would in fact be producing twice the value? Surely, if greater labour time equals greater value, fast and efficient workers, who produce things quickly, would be producing the least value and not the most! Well, here we have to introduce the absolutely fundamental difference between Marxian labour value and the labour value theories that preceded him. Previous theories advocated just such a flawed model as above, where lazy workers miraculously made things that were worth less, despite their higher labour-times. Marx's key adjustment was the notion of "socially necessary labour time"; it is not the individual or concrete labour embodied in the commodity (the two hours it took to make a particular chair) that produces its value, but the average amount of labour time it takes to make chairs of the same quality under average conditions. This works as follows: let"s say there are four factories, all making chairs of a similar quality (so that they will be directly competing in the marketplace). Initially, all four factories take 1 hour to produce 1 chair, and all four factories sell their chairs at "20 per chair. But then factory 1 discovers a way, be it new technology, division of labour or whatever else, to produce chairs twice as fast, at a rate of 2 per hour or 1 per half hour. Under a "naive" or pre-Marxian labour theory of value, that person should now be producing half the value per chair, since each chair requires half the labour time as before. But here the fact that the chairs sold by factory 1 are being sold on a market comes into play. There is no reason whatsoever for factory 1 to halve his prices - this would be economic madness. He could, if he wished, go on selling at the market price of "20. If he did so, his profits would soar, not because he is taking in more revenue, but because his costs have decreased substantially thanks to the greater efficiency of his workers. In reality, he will probably slightly lower his prices so as to undercut his competitors and gain market share - the fact remains that, whatever your production times and costs, you still get to/have to sell at the market price, the price determined by the average labour-times taken to produce similar products. We can imagine the opposite scenario, wherein factory 1 is twice as slow as the other factories, producing only one chair every 2 hours. Now, it would be great for him if he could follow naive labour value theory and double his prices to compensate, but the "law of value", the law that says that prices must reflect average labour times, disciplines him away from this option (since no-one would buy his chairs at the higher price! ). He must continue to sell at something like "20, and since his labour costs are so high due to inefficiency, he makes less profits that the other factories, or perhaps even losses. The other effect of the law of value is that it forces prices, over time, to closely orbit values. In the first scenario we thought of, we saw that factory 1 had halved his labour times and undercut his competitors, gaining both super-profits and greater market share. At this very temporary stage in the competitive process, wherein one firm has just recently gained an advantage, prices are actually differing from values a little, since the decrease in socially necessary labour-time effected by factory one has not yet fully "manifested" in market prices - chairs are still being sold at more or less "20 dollars, even though values fallen slightly. But the other companies won-t suffer factory 1"s advantage for long - they will strive to lower their own individual labour-times to at least meet factory 1's lower labour-times, so that they to can afford to lower their own prices to compete in the market. Over time, then, the other three factories will also halve their labour-times, with the simultaneous result that the socially necessary or average labour time will decrease to half of what it was before. At the same time, the other three companies will be lowering their prices to compete with factory 1 - eventually then, prices and values will converge at around half of what they were before - chairs will now cost 10 instead of "20, fully reflecting the halving of socially necessary labour times (values). Prices could not have remained artificially well above values, at around the "20 dollar mark, for the simple reason that companies are disciplined by the law of value to adjust prices to average labour times. If, say, factory 4, had continued to sell his chairs at "20 after the global fall in average labour times (for chairs) in the hopes of making very high profits indeed, he would go bankrupt, because customers will buy the cheaper chairs from the businesses whose prices were properly disciplined to fall in line with average labour times. There's obviously a lot more to say on this, but I"ll leave my discussion here for now and let Con respond. All of this information can be found in any edition of Vol. 1 of Marx's 'Capital' For some reason the text settings on this site have transformed all of my hyphens and pound signs into quote marks - please forgive!