why is it rejected today in Economics academia…
when esteemed economists like Adam Smith and David Ricardo agreed with it…and Marx
Don’t be confused by the similarity in names. Smith and Marx did not have the same Labor Theory of value. Marx claimed the value was the total cost of all the labor required to produce something. Smith said the value was the labor the thing would save someone else or the labor it wold “command” from them. Smith’s notion is quite similar to the utility valuation of a thing which is the common view now among most economists.
do you think Marxism is rejected today because mainstream economists want to protect the interests of capitalists and capitalism and the bougeois
that’s what i was told?
How does Marx arrive at the value of labour? It seems pretty circular.
There was a time when Marxian economics had some following in the U.S. and other western cultures among academics. It seems to have much much less now. I think the primary reason is that communist economies have mostly failed. Even the Chinese economy is becoming less communist. We pretty much only have Cuba and North Korea now and neither of those economies is a good example of how to succeed.
You don’t need to arrive at the value of labor. Labor is the numeraire. Just like you don’t need to arrive at the value of a dollar. It’s the units that other things are measured in. Now if you want to say not every hour of labor is the same as every other hour, I agree with you, but that just means it’s not a good numeraire, not that it can’t be one.
If Marx says that the value of a thing is the labor required to produce it, doesn’t that imply that the waste rock from a mine has the same value (per unit mass) as the ore? It takes the same amount of labor to dig them up.
Or more pointedly, you can ask if digging a mine where there is no gold has the same value as digging a mine where there is gold. Both require the same amount of basic labor. But choosing the location where there is gold to be found requires the services of a skilled geologist - a few hours of his work will matter more to the outcome than all of the work done by the diggers. This was one of Marx’s failures - he didn’t recognize that not all labor is equal in value.
I think you are confusing Marx with the economist who said
That of course was John Maynard Keynes rather than a socialist.
Marxism is rejected for a number of reasons. One of which is that Marxism places the collective above the rights of individuals.
More importantly, and as it pertains to your question, it ignores the wants and needs of the people in determining the value of a product or service. For example, it takes about as much labor to build a 1100 sq ft house in rural Arkansas as it does to build the same house in Greenwich, CT. So why would the home in Connecticut be worth more?
In capitalism, that disparity in value would be reflected in the price. Since it the price would presumably be the same under Marxism, you would have a long waiting list of people looking to buy a home in Greenwich. Perhaps more importantly, you wouldn’t have those higher prices signaling to developers that there is value in building more homes in close proximity.
Which doesn’t have much to do with the economics, so I’d gently suggest laying that aside in this discussion.
This is deceptive in that there are factors completely unrelated to labor involved - the same house in a dying mining town in Colorado and on a bluff overlooking Monaco would have enormously different valuation as well.
The quality of labor is the one thing Marx never quite addressed - the sweaty, chimp-like pounding of a miner and the delicate craftsmanship of a watchmaker were equal. So let’s make that two houses pretty much anywhere you choose, but one built by your average 2000-unit subdivision builder and one built by master craftsmen. They won’t be valued the same even though they are functionally identical.
Or make it a Camry and a BMW 7-Series, or rings made by your average hippie jeweler and Tiffany, or… whatever. Labor is not a fixed valuation, no matter how you add it up.
so why is it rejected by the vast majority of economists then?
it is rejected by economists because it is not a theory that has held up to empirical tests and is a failure in the describing or the modeling for any cases exxcept there the inputs to a good are homogeneous and there are the constant returns to scale. Here the proportions of the labor input will operate like the model, and be proportional to the price. But this is not the case in very many cases.
this theory or model fails on many levels. It is simply wrong for a majority of applications.
the only reason anyone talks about it is from clinging for political reasons to an outdated mode of economic analysis, and an incorrect thinking that their left political inclination requires this.
thank you…
but what about the people that say economists deny it because they want to keep “capitalists interests and elite interests”?
What about them? They are making excuses and are ignorant, confusing the modern economics in general for a particular tendency. that does not make the labor theory of value correct. they are simply making excuses for their ignorance.
That does not express a labor theory of value. The value of the banknotes in the scenario is independent of the amount of labor used to dig them up.
Keynes gets a lot of flack for that quotation, but I’m not sure why. There may be some context I’m missing. What he says in that quote seems clearly true to me. More people would be employed in that town, and that town would have more wealth than it did before. Of course, this would be at the expense of wealth elsewhere. (The treasury notes came from somewhere… or else were printed up for this very exercise which would lead to wealth loss elsewhere due to inflation.)
I can’t quite tell–is what you wrote intended as a partial defense of the labor theory of value?
“So why would the home in Connecticut be worth more?”
Because you are buying land in Greenwich which is far more expensive than land in rural Arkansas.
That’s easily disproved. Buy a lot of land in Arkansas and a lot of land in Connecticut. Let’s assume, for the sake of argument, that the Arkansas lot costs $10,000 and the Connecticut lot costs $200,000. Now build identical houses, using identical amounts of labor on both lots. Then put them on the market.
Let’s say the Arkansas house sells for $80,000. Minus the value of the land, that means the house is worth $70,000. So the value of the Connecticut house, according to your argument, should be $270,000 - $200,000 for the land and $70,000 for the house that’s identical to the Arkansas house.
But you’ll find that it doesn’t work like that. Even though the houses are identical, their values will be proportional to the value of the land. If the Arkansas house sells for around eight times the cost of its lot, the Connecticut house will do the same and will sell for around $1,600,000. So two identical houses, each produced with identical amounts of labor, have widely divergent prices.