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Philosophy is a game with objectives and no rules.
Mathematics is a game with rules and no objectives.
Theology is a game whose object is to bring rules into the subjective.

Tuesday, December 30, 2008

Marx's Labor Theory Of Value

One of the commonly debated topics of Marxism is the concept of 'the law of value'. Marx developed many different theories and various aspects of those theories are controversial. This paper will focus, however, only on the most basic of his theories, namely that of 'the labor theory of value'. This theory took several alternative forms over the course of Marx's different volumes of publications. It was very often in the center of criticism, but because of the short length of this paper not much can be said about the critics of Marx's theory.
Marx's central theme is the importance of the 'commodity production'. Marx defines a commodity as anything which possesses both use and exchange value, and price as its monetary expression. Marx tried to say that trees, unmined metals, or barren land were not commodities but were merely gifts of nature. An exchange value had to come into play for something to be considered a commodity.
The most easily recognized aspect of commodity production is the use of labor. For a commodity to be produced a certain amount of labor must be involved in the production process. Marx put labor at such an important position that unless labor was used commodity had no value. By doing this he made it clear how important everyone's labor contribution is to the economy. " If he could establish the fact that human labor-and labor alone-was value creating, it could be made to follow that only those who worked were entitled to share in the resulting output."(Balinky,60). Marx believed that if he could maintain the importance of labor then his plan would succeed.
This is why Marx considered labor as the essential part of any production process. The value of a product is directly related to the amount of labor that is needed to produce that product. The more productive the labor is the more value it adds to the commodity. Marx believed that if two products needed the same amount of labor to produce them, then they contained the same value. " Commodities... that can be produced in the same labour time...have the same values, and that, on the other hand, differences in value find their measure in the quantitative difference in the labour time required for the production of commodities" (Kuhne,70). Labor is directly related to the price of the commodity. Some of Marx's ideas about the value were changed in his later writings.
One would probably ask how could Marx account for the importance of capital. He knew that critics would jump at the opportunity to discredit his theory by claiming that he downplayed other vital inputs to production. Marx claimed that machinery and other means of production had needed labor for their production. "He began with the simple proposition that a commodity is produced by utilization of some combination of labor and physical instruments, i.e., machinery, tools, equipment, etc. He referred to this combination as the means of production necessary to the creation of any commodity".(Balinky, 61). Marx distinguished between two different types of capital, variable and constant. Variable capital was the capital used to pay for the wages of labor. This was the only type of capital Marx considered relevant for creation of value. According to his reasoning constant capital needed labor before it could produce anything. Machines without the necessary labor to run them could not contribute to value in Marx's theory. They would sit there unused and useless. So although he downplayed its importance of the capital, Marx attempted to explain why he did so.
Marx needed a unit of measurement to consistently and accurately measure the value of labor. He came up with the most simple explanation: the time. He would use hours, days and weeks as the "pure and simple" way to measure the amount of labor that was used to produce a commodity. However, a specialized labor in producing a product was worth more than a 'simple' unskilled labor. Marx did not really explain how he came to this conclusion, he left it to the faith of his follower to believe in his theory.
Marx knew that there were many questions about his labor theory of value. He made two revisions to it after his original exposition. In his first model, exchange values were relative to the quantities of labor needed to produce commodities in question. This assumed that every firm in that industry had the same 'composition of capital', i.e. the same capital-labor ratio. In his revision of the labor-value theory "he was forced to admit that even in the long run--for technical as well as value reasons--the organic composition of capital did vary significantly from one industry or sphere of production to another" (Balinky, 82). The effect of this was different rates of profit in different industries. This fact was not acknowledged in the original model. In his third model he changed his stance about a link between supply and demand. This shows that Marx did see faults in his original theory and tried to fix some of its problems.
The labor theory of value's main premise is that the common way to measure value of commodities is through the amount of labor used. Marx acknowledged value for only something that used labor and could be exchanged. The idea of commodity production was a very central and important part of his theory. He emphasized the importance of value that comes from these commodities and how all these can be measured by the common element of labor.

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