Scarcity-need vs labor cost of production
Source Jim Devine
Date 06/06/05/10:36

On 6/4/06, Jon Baranov wrote:
> I am having troble deciding between two theories of value: scarcity need and
> labor cost of production. I found by accident a long, long thread on this
> list about the labor theory of value where B. DeLong said "a commodity has
> (exchange) value if it's scarce regardless of whether there is wage labor. M
> Perelman replied "a commodity has value if it embodies labor even if it is
> not scarce".

The basic neoclassical "theory of value" is identical to the NC
"theory of price," i.e., supply and demand. Thus, for BDL (no relation
of OBL), an item has a "value" if it has a price (exchange value)
because its supply isn't of infinite elasticity at zero price (but is
instead above zero -- i.e., the commodity is scarce) and because
people want it and are willing and able to pay for it.

On the other hand, for Marxian political economy, there's a
distinction between "value" and "price" (as sketched in volume III of
CAPITAL). The values of commodities stand behind and help us
understand and explain prices. Thus, values play a role a little bit
like constrained utility-maximization and production functions in NC
theory (which stand behind and help us understand prices). Of course,
the _way_ in which values help to explain prices is different from
that of util-max and prod-funs. The latter are simply a matter of
microeconomics: the individual decisions and the individual
productions explain individual prices. But values are part of a
macro-societal explanation, seeing capitalism as a system of
exploitation and then the distribution of the loot among competing

MP is right that a commodity need not be scarce to have a value. For
example, during a recession or depression, labor-power and other
productive inputs are far from scarce. That means that many products
aren't scarce. According to NC economics, they thus should have zero
price, as should labor-power and other productive inputs. The NC
explanation for why these prices aren't equal to zero is essentially
frictions: it takes time for prices to adjust.

> But marginalists since Jevons have claimed that the labor affects the value
> of a commodity only to the extent that the commodity becomes scarce - a
> commodity that can be produced in 5 days will be more scarce that one
> produced in 1 hour. Neoclassical economic theory claims to discover
> universal economic rules and thus diregards whether the costs of production
> are born by labor or some natural force.

In NC economics, the costs of production are basically rooted in
subjective decision. The labor done depends on invidivual
labor-leisure decisions, while the amount of fixed means of production
available depends on individual decisions about how much to consume
now vs. how much to save. However, it's true that natural scarcity
(i.e., the availability of land and natural resources) is more than
just subjective.

> What for Marxism only appears as a
> relationship between things [people?] is really a relationship between things for the
> Marginalist because natural scarcity not a social relation. What is
> Marxism's objection to this characterization of value? (Here's what Lionel
> Robbins says economics is about:
> "Human behavior as a relationship between ends and scarce means that have
> alternative uses". cit in Sweezy, Theoy of Capitalist Development.)

the main objection to the NC world-view (and the characterization of
economics as the decision of how to deal with scarcity, with the
allocation of scarce goods among competing ends) is that it totally
ignores the social dimension, including the way in which our decisions
are determined by our biographies in society.

> Could anyone suggest works (preferably from Marxian perspective) that deal
> with this issue very plainly? (I'm reading the hilferding/bohm-bawerk debate
> - difficult for the amateur. Where does Marx deal with this in Capital? )

the B-B/H debate is a response to the fact that Marx didn't present
his views very clearly in CAPITAL. He died before he could finish
volumes II & III and the THEORIES OF SURPLUS-VALUE. If he had
finished, I believe, it would have been clearer. Perhaps the clearest
books I've seen on this subject are John Harrison's MARXIST ECONOMICS

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