ThoughtStorms Wiki

Context : OnEconomics, KarlMarx

Quora Answer : Why are there still so many Marxists if Marx's labour theory of value has been discredited?

Jul 15, 2015

When you say that the labour theory of value is "discredited" you have to be clear what you're really saying.

Modern economists don't subscribe to the labour-theory of value.

But that isn't because they discovered another, better "theory of value".

What it means is that they decided that "value" was too vague, and scientifically untestable a term. And so they decided to stick to talking about price.

Price is an objectively observable property in the market. You can graph it. You can put it into models and see if your predictions hold. You can compare two prices and see which is bigger. Etc.

When modern economists talk about value at all, they usually think of it as a completely subjective quantity (each person assigns different value to the same things). They might still be able to model it as, say, an ordering of a particular subject's preferences. But economists don't find it meaningful to talk about "objective value".

If that's "discrediting", it's more of a philosophical discrediting than a scientific one. It's an attempt to redefine the terms so that previous discourse no longer makes sense.

Now why would they want to do that?

Well, the traditional Marxist assertion is that the worker is "exploited" because the employer takes more of the value that his or her work generates than is deserved.

If the anti-Marxist can philosophically define "value" out of existence, then, of course, it's impossible to make that claim in that form. How would you know if the employer has taken "too much" of something that can't be objectively measured or experienced?

In this sense, if you've adopted the philosophical underpinnings of contemporary economic theory, where there is no such thing as objective value, then, indeed, the core assumption of Marxism, that the worker is exploited, seems to be infeasible. It's literally "contentless" in that it refers to meaningless terms.

In fact, one of the main thrusts of modern economics has been to try to strip any value judgements or moral opinions out of it and restrict it to plain description of the mechanisms. Labour theory of value is discredited because moral opinion has been disallowed. At least from the official economics text-books. Economies are still institutions that are created by and inhabited by humans and we're still allowed to make moral judgements of them. It's just that this particular field of modelling claims not to take sides or to give warrants one way or another.

However, if we're allowed to philosophically refactor our conceptual frameworks anyway, then there's nothing to stop a contemporary in the Marxist tradition from simply accepting that LTV was a failed formulation of the problem and looking for an alternative way to understand "exploitation".

Personally I think it makes a lot of sense to think of exploitation in terms of "risk" : a more respectable economic term. The hallmark of modern capitalism is the existence of markets for risk, ie. mechanisms to manipulate and manoeuvre it. The existence of such mechanisms inevitably allows the more powerful to push risk onto the less powerful; the weaker party ends up in more precariousness than the strong. The quintessence of capitalism is the limited liability corporation where the shareholders get the upside of the profits without the downside of sharing the debts. Private banks which get bailed out by governments are another example ... the strong get to benefit from speculative risk-taking that makes the economy less stable, but aren't punished in the ensuing chaos. Even the ordinary employment relationship is lopsided : each worker has usually one employer, but most corporations have several workers. The worker is more inconvenienced by the loss of the employer than the employer is by the loss of the worker. Etc. etc.

Maybe this understanding of exploitation will work. And we'll be able to give the concept of "exploited" sufficient rigour to be able to talk about, even measure it. Or maybe not. Perhaps "risk" itself is too vague and will be deprecated in favour of other concepts. However, the fact that Marx's attempts to define and understand exploitation are disallowed in the vocabulary of modern economics does NOT mean that exploitation itself or the other social phenomena have gone away. To think so is to mistake the map for the territory.

Update : tl;dr : To say that exploitation doesn't happen because we deprecated LTV is rather like saying that fire doesn't happen because we deprecated phlogiston.