Debunking the Labor Theory of Value in 5 Arguments

In this video I give you 5 arguments debunking the Labor Theory of Value. Make sure to LIKE COMMENT and SUBSCRIBE!

Timecodes
0:00 - Intro
0:30 - What is the Labor Theory of Value?
1:38 - What is the Subjective Theory of Value?
3:42 - Argument 1: Subjective Value
4:13 - Argument 2: The Law of Diminishing Marginal Utility
5:40 - Argument 3: Internal Contradictions
8:30 - Argument 4: Other Problems Regarding the LToV
9:20 - Argument 5: The Surplus Value Fallacy
11:03 - Closing

#Debunked #Capitalism #Socialism #austrianeconomics #labortheoryofvalue #marxism #marxismleninism #richardwolff #hakim

[HarbingerofLiberty]

Make sure to go to my Discord Server! Link in BIO.
also, here are timestamps
0:00 - Intro
0:30 - What is the Labor Theory of Value?
1:38 - What is the Subjective Theory of Value?
3:42 - Argument 1: Subjective Value
4:13 - Argument 2: The Law of Diminishing Marginal Utility
5:40 - Argument 3: Internal Contradictions
8:30 - Argument 4: Other Problems Regarding the LToV
9:20 - Argument 5: The Surplus Value Fallacy
11:03 - Closing

[bernardmandaville]

Having been looking into this question for a while I think that Böhm-Bawerk’s critique is both the most devastating and the most poorly understood.

The typical rebuttal you will hear is that it is not a contradiction as volume 3 elaborates on the more abstract version in volume 1. But what this fails to take into account is that the one of the critical assertions, that only labour power can create new value is only necessarily true if the version in volume 1 is true. That is to say if socially necessary labour forms centers around which prices move, then only changes in the amount of socially necessary labour can change average prices. Under this model labour is the only factor that can move average prices and therefore it follows that it is the creator of value, where value is defined as the center around which prices move.

However in volume 3 the model changes to ‘prices of production’ in which these centers are offset by the capital required, the more capital a given commodity requires to produce the greater the average price of the commodities. Under this model value is transferred from labour intensive industries to capital intensive industries. The problem is we have now acknowledged that the centers around which prices move are not set by labour alone but by capital as well, in effect there is no longer any reason to assert that labour is distinct from any other cost of production. It is that realisation that is devastating to the Marxist project as once labour can no longer be given the special role of value creation many of its conclusions can no longer be supported.

I think it is also worth noting that I think that defining value as the centers around which prices move has some significant flaws. For example it treats the oscillations around these centers as noise to be averaged out and discarded, which completely neglects the role of those movements as signals to agents acting in the system, creating a blind spot to all the Hayekian knowledge mechanisms at work.

[rainerlippert]

Part 2/2
In addition to my comment on the labor theory of value - the teaching of the Austrian school of economics is also flawed:

● Is the value subjective?
what is the value It is a relationship that people enter into with each other for the exchange of goods that are not freely available, in order to exchange them with an equivalent value.
Such a relationship must, without question, include subjective elements, because it is about a relationship between people, specifically between their consciousness processes.
But how are they supposed to trade with each other without something that affects them both in the same way for the exchange, i.e. without something objective?
In a department store, the interested party (hereinafter referred to as (potential) buyer) values a TV set at EUR 1, 400, the offering party (hereinafter referred to as (potential) seller) offers it for EUR 1, 100.
Then it will not happen that the buyer buys it for 1, 400 euros and the seller sells it to him for 1, 100 euros.
There is no question that a need, more specifically it is a weighted need, definitely something subjective, leads to the purchase of the TV set.

● The objective share of the value
For the exchange, both exchange partners must agree on a common value (at the ÖSN the market price).
In the bazaar this happens in dialogue, in a department store the buyer has to adapt to the seller's specifications in order to be successful. The common value is reflected in the market price or purchase price. This can match the asking price, which expresses the expected value, but does not have to.
The purchase price (which reflects the real value) acts between the bartering partners, but also between each of the bartering partners and society. It is on the purchase contract or the invoice. The purchasing power transfer takes place in precisely this agreed amount from the buyer to the seller. The goods are transferred from the seller to the buyer in return for precisely this purchasing power.
For both bartering partners, this transfer of purchasing power reflects the same value – the buyer could objectively only acquire the same amount of goods and services with his valuation of 1, 400 euros as the seller with his 1, 100 euros, at which the goods were exchanged, i.e. in the amount of 1, 100 Euro, no matter how he evaluates it subjectively.
In society, the transfer of purchasing power is noticeable at precisely this level - through the tax, through different purchasing behavior of different people/companies, etc. for the amount of money exchanged and regardless of how the individual bartering partners subjectively evaluate it.

If the buyer and seller cannot agree on a common value (which corresponds to the same scope of entitlement to goods and services for both bartering partners, i.e. the same value), no exchange will take place: On the purchase contract/on the invoice, a sales price and an of this different purchase price cannot be stated.

● Is the economic exchange based on different valuations?
According to the ÖSN, that should be the case. But is it really like that?
A potential buyer strolls through a department store, sees an espresso machine, which he values at 400 euros, it is being offered for 300 euros. But he doesn't buy them. Then he sees a TV set that he rates at 2, 000 euros, it's on sale for 1, 500 euros, but he doesn't buy it either.
Then he sees a washing machine, which he rates at 700 euros and which is being offered for 1, 000 euros. But he buys this. This could be the case if he urgently needs a washing machine but doesn't like the other washing machines he sees (the others might be front-loading but he would like a top-loading one).

Obviously, it is not valuations that lead to purchase or non-purchase (such a thing would lead to a monstrous collection of goods, but one of the functions of value is to counteract the waste of resources), but weighted needs. These cannot be quantified, only compared in terms of strength: the weighted need for a TV set that costs 1, 500 euros, which the potential buyer values at 2, 000 euros, is not strong enough for the purchase. However, the weighted need for this one washing machine, which he values at 700 euros but costs 1, 000 euros, is stronger than his commitment to the 1, 000 euros.
So buying the washing machine is a win-win situation even under this rating.

● An economic exchange is an exchange of equivalent value
A product is exchanged for an equivalent value, e.g. a washing machine for 1, 000 euros.
With the exchange, the value is formed and assigned in the same amount both to the goods and to the value equivalent.
The term value equivalent already makes it clear that what is exchanged for the desired good is something that is equivalent in value to the good.
However, as I described it above:
Money corresponds to a right to a percentage of all goods to be distributed economically. The size of the share corresponds to the amount of money.
A washing machine is objectively exchanged for the sum of 1, 000 euros for both exchange partners, i.e. for the buyer and the seller. This means that the purchasing power is transferred from the buyer to the seller at exactly this value. For the seller, the right to a percentage of all goods to be distributed economically is objectively just as high as it was for the buyer or what he waives with the purchase.
For the buyer, the washing machine corresponds exactly to the value of 1, 000 euros, because he is giving up a right to goods of exactly this value, no more and no less, while the seller hands over the complete washing machine to him, but also no more, i.e. he does not have to add a bottle of champagne.

● Diamonds for a bottle of water
Even if five diamonds are exchanged for a bottle of water in an emergency, it is an exchange of equal value. The buyer does not have to give their desert shoes for the bottle of water and the seller does not have to give a hat with the bottle. Both exchange partners objectively exchange the 5 diamonds for a bottle of water, each no more and not less. The buyer of the water can subjectively think that he should only hand over a ground glass body for the water, but in practice this would not be possible for him.

Conclusion:
An economic exchange takes place on the basis of weighted needs and is always of equivalent value.

[The_Schizoid_Man]

Ha you put Jorge in the thumbnail lmao. Awesome video.

[mainhalo]

High quality, looking forward for more uploads 👍

[EvanWells]

Marx also breaks down the utility value of a commodity. Since utility value and labor value are both inherent, the use, or utility value is preceded by the labor value because labor would not labor to produce a commodity if the utility value were not already anticipated by the laborer, which, for all intents and purposes, means utility is already established. Otherwise we would be talking about a commission, which is a categorically different type of exchange.
Nor is utility-value a concept that wavers based on subjective need or want, because Marx also breaks down the difference between relative value and equivalent value, which are components of market, or exchange value. In other words, Marx is not addressing a type of value that is haggled or negotiated between an individual buyer and individual seller at a trade stall. Marx is addressing the exchange value in an open market, which, since this theory allows for fluctuations to happen over the course of time in that universal market, means that these fluctuations over time do not contradict the reality of an agreed upon exchange rate during a given time, i.e. relative value between two commodities, any more than an individual sale would contradict market value. It is the basis of the value, not the permanence of the values of equivalency between commodities, that drives the labor theory of value. In these terms, although someone may be particularly hungry, and pay an apple seller at a market a higher price, the basis for the price is still understood by the buyer to be labor, and the willingness of the buyer to pay is still understood by the seller to be utility. All of the preceding sales of apples at that market or in that region at that period in time, will still set a ceiling and a floor to the competing incentives of buyer and seller in the purchase of that one apple, just as a wildly misplaced bulk trade on the stock market by a very wealthy individual doesn't obliterate the existence of a market price for that stock. Marx's labor theory of value still holds, in that 20 yards of linen may be equivalent to 1 coat today, and 40 yards of linen to 1 coat tomorrow, but the point is that both rates of equivalent value are equivalent based on the labor it takes to produce the linen and to produce the coat which is socially mediated, societally speaking. The terms of social mediation are not constant, the basis of their expression is.
As to the phenomenon of high-value commodities based on trends, or branding, again, the labor theory of value does not hold that there is an objective center to what the equivalent value between commodities are, and that labor is of a definite value at that center, it merely holds that the value of labor is expressed in the exchange value. The labor that it takes to produce a jacket with a logo may be the same as the labor it takes to produce a cheaper jacket without a logo. The point is that this difference in labor compensation is the difference in social mediation of society itself, no less than if the sewer of each different coat gets the same compensation, while the owners of each company make vastly different profits: This, as well, is a socially mediated phenomenon. Slavery is also a socially mediated phenomenon, but in this an explanation for how high quality things can be so cheap becomes clear, and from which the concept of surplus value, where it goes, and where it should go, is one of the central points of Marxist theory.

[kiwichippie]

While it's true that you won't personally "value" the 4th or 5th apple as much as the first the price of the apples stays constant. Or their natural price does. Why? Because of the costs of production which is objective. Supply and demand fluctuate around the values (natural prices) of commodities.
Both theories of value are correct in a sense.

[franzupet]

No you ain't right, have you ever considered that getting natural diamonds is extremely labor-intensive? It is also labor-intensive to get a bottle of water to the middle of the Sahara desert. That's why it's empty. Diamonds are not necessary useful, but they can satisfy a human worth (worth can become a need). A thing can be wonted, and that's why it's “useful” to someone. Marx did not say making nice or for example decorative thing is pointless because they are not useful. Also is a STM32F401RCT6 microcontroller useful to you, commodity doesn't need to be useful to everyone. Synthetically produced diamonds are extremely cheap, you have them on cutting disks or chains for stone and similar hard materials. Meanwhile, natural diamond which is mined by sometimes almost a slave which is guarded by a private military and letter smuggled to be sold at the luxury boutique…
Just because something is useful to you does not necessarily imply that you assign it value in terms of its inherent worth or its role in the social relations of production. Utility in this context can be seen as a reflection of its use-value, but this does not equate to the exchange-value or the social recognition of its value, which is shaped by the capitalist mode of production. In simpler terms, the usefulness of an object or resource might only reflect its practical application or immediate function, while its value in the Marxist sense is determined by how it fits into the broader system of labor, production, and exchange. Value, in this sense, isn't merely a matter of personal utility but is shaped by social and economic structures. Also, if you eat 3 apples, and you are full of them :=) that does not imply there is no one else on the market who want them. If you ate 3 apples, and you go to the store, you don't just steal them because you think that they are now valueless. You don't stop seeing their exchange value, they are still 50c a per apple (example). If you ate 3 apples, no one will stop you from buying 1T of apples to make juice from them to later sell on the market.
About market selling below and above value, Marx acknowledges this discrepancy. He said that exchange value of a commodity can fluctuate above or below its value, these fluctuations do not alter the fact that value is ultimately determined by labor power and socially necessary labor time. In the short term: commodities may be exchanged at prices above or below their value due to factors like monopolistic tendencies or to sell below and undercut competition and later make bigger profits with same labor power or market imperfections…
You clearly do not understand what is commodity fetishism. Supreme thirst price inflated because some consumers think that object has hidden value to it… This distorts social relations, making the T-shirt appear valuable for its brand symbolism rather than for any real use or material cost, concealing the exploitation embedded in its production. That is also rear! in real economy, imagine seeing that in every commodity…
I won't even start talking about argument 5 it is absurd.

Isn't your ideology of “being against Labor Theory of Value” a bit pointless when you put it inside a real industrial economy based on commodity production. When you look up at input output production table of actual countries industries and see that yes, prices are ended following the labour times. You do not understand abstract labour and don't have experience of knowing how an actual economy or just industry work. To understand that is to have real experience, or to reed a book, but if you don't want to read, listen to it is free online.
Marginalist and subjectivist theories are attempts to obscure the labor theory of value, which is central to Marx’s analysis of exploitation. Despite classical economists like Smith and Ricardo acknowledging labor as the source of value, bourgeois economists today distort this to protect the exploitative foundations of capitalism. By shifting focus to subjective preferences and marginal utility, they conceal the true nature of exploitation in capitalist economies.

[rotkehlchen]

"Marxism has been the greatest cause of death and suffering in our world"? Ever heard of religion, colonialism, capitalism, racism, or nationalism before?

[arthur.greenwood]

what's up man? sorry i'm late to comment but i have some thoughts. I agree that labor is not the only cause of value. Rarity, age, and subjective preference obviously play a role (but I doubt any Marxist would seriously deny that). Obviously, better products have more value, even if they take less time to produce.

However this doesn't defeat the actual beliefs of socialism: (A) the workers should control the means of production (B) commodification is often necessary (C) state regulation of production is often necessary. Your arguments were solid until you reached the question of surplus value.

You are correct that workers are choosing to work, because they see more value in working than in not working. In other words, they are agreeing voluntarily in order to obtain a good they desire.

HOWEVER, just because a choice is better than the alternative does not mean it's the best possible choice. Imagine if you will that I offer a homeless boy twenty dollars to suck me off. He would rather not starve, so he takes the deal. But a better situation is possible- I could just give him the twenty dollars, no prostitution required.

The problem with that exchange is that, even though it is technically 'voluntary' (not under threat of direct violence), the power I hold over him prevents the deal from being very fair. The same goes with capitalism. Whoever owns the means of production has more bargaining power, and thus can hire workers at much lower wages than their work is worth.

Yes, the worth of their work is somewhat subjective and fluctuating, but the value of a product is generally PREDICTABLE. Otherwise business would be impossible, right? And the predicted value of what I produce at my job, the value my boss reaps, is much higher than what I actually end up getting paid. And that's a problem for many reasons which I will explain in my next video lol

[KingSithis]

Great video. Very easy to understand and not too long either

[jorgethevanguard]

you should respond to the unlearning economics video on value

[rainerlippert]

Part 1/2
Absolutely right, the labor theory of value is wrong, at least according to its classical interpretation. This can be deduced from Marx's Capital:

Marx described his thoughts on value formation with a formula:
W = c + v + s.
W value of a product
c constant capital (proportional costs per product for raw materials, supplier products, buildings, with Marx also machines, etc.)
v variable capital (proportional values, i.e. costs of the labor force, with Marx only those of the human ones)
s surplus value

Marx applies this formula to the production side of commodity society – the market has no meaning for him in terms of value formation.
But on the production side of commodity society there is still no surplus value. On the production side, there are only costs c + v and an expected surplus value.
Even if an angel handed money down to the entrepreneur in the amount of "m", that would not be an surplus value because it would only compensate part of the costs c + v.
Since surplus value is part of value, there can only be one expected value.
This expected value is made visible to potential buyers as an offer price.

If a buyer in the market buys the product at the expected value (W|expected = c|cost factor, expected replacement + v|cost factor, expected replacement + s|expected; s – an surplus value estimated by the entrepreneur as possible), this surplus value is paid and the value formed.

This makes it clear that the value of work products is not formed with the expenses, but with the reimbursement of expenses, i.e. as appreciation of them. By other things, value is formed as a recognition of separation from ownership.

Marx's value formula, even if it is not exact, can be interpreted as a statement of how value must be formed if the production of goods is to be continued, improved and, if possible, expanded. In this respect, it has an important meaning!

Many other statements can be derived from the value formation on the market, e.g. about labor forces and the self-destruction of the socialist economic system.

[greythax]

This video: "Marx has a theory about commodities and not individual items. But see this individual item doesn't work like marx said Commodities do! DEBUNKED! I like apples a little, so here's an example where I am the only person on earth that eats apples, DEBUNKED!" It should be super obvious to you that just because you don't want a third apple, that doesn't lower the price of apples at the grocery store, and that just because you personally don't like gala apples, it doesn't drop the price of all apples everywhere. The only way your tastes, or ability to pay, or subjective preferences can matter in any way at all is if they are averaged into the entire market of consumers because I can always sell to someone else who doesn't share your subjective barriers. And since all of those other consumers have different concerns when it comes to apples, and many many producers to buy from, we can't talk about things like brand preference, because for every apple snob there will be plenty who don't care. What we are trying to figure out is why shirts cost what they cost, not why THIS shirt costs what it costs. Hopefully that demystifies things a bit for you.

[RKC]

Great video but you are factually incorrect, John Locke developed a separate unique theory called the labor theory of property which is separate but often confused with the labor theory of value.

[Betweoxwitegan]

A) Your desert analogy is nonsensical and actually reaffirms Marxian theory, it is clearly not a subjective valuation on the water bottle if the price is determined by material conditions, i.e. being in the middle of a desert, the water is worth more because in that reality materialistic framework the water takes much more time to acquire than the median of exchange value, which you have in your personal possession in sufficient quantity, this median of exchange value is also worth less under the material conditions of being in a desert, this means that you would trade all of your capital for the water provided that the water was in sufficient quantity.

B) Again Antiques are valued highly due to time labour, the good is unique and old and under your future material conditions itll thus be worth more as the time passes due to the labour time spent on its production increasing, this is why antiques gain in value other time.

C) Your also applying Marxian economics to capitalist economics and whilst there is overlap, due to the minimization of market speculation under communism it is different.