|Here's a short interpretation of Marx's "labor theory of value," which I
wrote for the WIKIPEDIA:
Although the above interpretation dominates most discussions, there are
other views. In fact, one accepts the transformation problem's
demonstration that individual prices deviate from individual values as
its starting point. In this alternative view, Marx rejected modern
economists' concern with price theory (without denying a role for supply
and demand) and in some ways returned to Locke's questions about the
nature and origin of property rights and the origins of unequal
ownership of property under capitalism. That is, in this view, Marx was
not interested in developing a labor theory of price.
Marx argued that price phenomena (markets, competition, supply and
demand) create illusions that obscure the underlying social relations of
a capitalist society. He called this distortion of appearances
"commodity fetishism". If there were some easy-to-understand
mathematical relationship between prices and values, then property
income would clearly correspond to unpaid labor and the class nature of
capitalism would be obvious to almost everyone. To Marx, such clarity
would undermine capitalism's legitimacy. Commodity fetishism thus helps
maintain social stability.
To Marx, social relations are best understood in terms of value: who
works and who doesn't? And how do incomes received correspond to labor
done? These questions can apply just as easily to non-capitalist
societies as to capitalist ones: in volume III, ch. 47, of Capital, Marx
suggests that the
"specific economic form in which unpaid surplus-labor is pumped out
of direct producers" is the basis for the "entire formation of the
economic community," revealing "the innermost secret, the hidden basis
of the entire social structure ... the political form of the relation of
sovereignty and dependence ... [and] the specific form of the state."
These questions form a transhistorical theory of different types of
society (e.g., capitalism, feudalism, slavery, and the old U.S.S.R.).
However, it is only in a commodity-producing society that these
questions are stated in terms of values.
In this view, the LTV, as used in _Capital_, is a method for
understanding the nature of social relationships for capitalism as a
whole: the examples of workers producing value that Marx presents in
volume I are microcosms representing the totality of society instead of
being microeconomic analyses. They present the shared characteristics of
a large number of different relationships between capitalists and
In this view, the contrast between labor-values and prices is just as
important as their unity or connection. Values correspond to the
abstract labor-time socially necessary to produce commodities (the
contributions by workers to commodity-producing society), while prices
are set by supply, demand, and market institutions.
However, on the macro level, there is a clear relationship between price
and value. All commodities are produced by labor (using means of
production and technology); the commodity-producing segment of society
is nothing but a community of producers working for each other through a
complex division of labor mediated by markets. Thus, the total value of
the product (the total amount of labor done) corresponds to the total
price of the product (such as that measured by Gross Domestic Product).
That is, labor embodied equals labor commanded (production equals
demand) on the macro level.
In addition, the total surplus-value that workers produce limits total
property income (profits, interest, and rent) that all of the individual
capitalists together can receive. That is, to Marx, all property income
- income received due to property ownership rather than from one's labor
- is the result of exploitation.
Thus, there is redistribution of property income within the capitalist
class: given the state of class relations and thus the amount of
surplus-value produced, a capitalist who receives a high profit rate
will be benefiting partly at the expense of capitalists who receive low
profit rates. In this interpretation, markets and prices redistribute
surplus-value between capitalists so some can command more labor than is
embodied in the commodities they have had produced. Others can command
less labor than is embodied in their commodities. But in the end, the
total amount embodied is equal to the total amount commanded.
The contrast between the "macro" level of values and the "micro" level
of prices corresponds to the contradiction that Friedrich Engels posited
under capitalism, between the socialized production of wealth and the
individual appropriation of it. Although society as a whole organizes
production and exploitation, individuals are able to claim and use the
individual results of this process. Engels saw this contradiction as
resulting in class conflict and crises.
Even accepting this alternative understanding of Marx's LTV, a serious
criticism remains: now that Marx has explained the nature of capitalist
exploitation, why do we need the LTV? Why can't we explain exploitation
in other terms, as say John Roemer does in his 1982 General Theory of
Exploitation and Class (ISBN 0-67434-440-5)? Others argue that Roemer's
neoclassical general equilibrium approach hides more than it reveals and
is based on dubious assumptions. The debate continues.