Groucho Marxism

The labour theory of value (henceforth LTV) posits that the exchange value of a commodity is proportional to the socially necessary labour time required to produce it. In a recent (2021) article, the economist Blair Fix criticised the LTV on the grounds that: 1) most proponents of the LTV simply define it to be true and do not bother to check it empirically; 2) all attempts to validate the LTV empirically so far are fatally flawed; and 3) proponents of the LTV do not pay sufficient attention to what it implies about human nature. In this blog post, I will argue that claim 1) is disingenuous, claim 2) is true, but does not imply that the LTV is false, and claim 3) is based on a conflation of use value and exchange value and is therefore irrelevant.

Fix begins his polemic with an attack on Marx, stating that ‘Marx proclaimed that value is proportional to labor time’, but ‘never bothered to check if this was correct.’ This is disingenuous, as Marx had no data available to him with which to empirically test the LTV; instead, Marx argued at length that the LTV was true on logical grounds. Fix goes on to state: ‘Beaten back by contradicting evidence, Marxists have largely abandoned the idea that the price of a commodity is proportional to labor time.’ It is not clear what ‘contradicting evidence’ he is referring to here; regardless, it is not true that Marxists have ‘largely abandoned the idea that the price of a commodity is proportional to labor time’ (although it is certainly true that some have).

Smith and Ricardo are next in the firing line: ‘Both men claimed that prices were proportional to labor time. But neither economist bothered to check the data.’ Again, this is disingenuous, as neither had data available to test the LTV, and the implication that if they had ‘bothered to check the data’ they would have found the LTV to be false is unfounded. Next, Fix sets his sights on economic historian E. K. Hunt: ‘Hunt argues that the labor theory of value can’t be evaluated in the normal way (say, by testing its assumptions). Instead, we must judge the theory by asking whether it gives ‘insight’ into the nature of capitalism.’ But Hunt is simply arguing that the usefulness of the LTV is based on its explanatory power, and explanatory power is what makes any scientific theory useful.

Fix begins his attack on the empirics of the LTV by claiming that the theory has many exceptions: ‘If the labor theory of value were true, one would expect a striking correlation between prices and labor time. The trouble is, this correlation has always been strikingly absent.’ However, it is not true that ‘this correlation has always been strikingly absent’; it would be more accurate to say that the correlation has not (yet) been convincingly demonstrated. He goes on: ‘Everywhere we look, we find exceptions.’ Fix then provides what he considers such an exception: the fact that art goes up in value after the painter has died. But this can be explained by recourse to the concept of socially necessary labour time, which is central to the LTV.

Once an artist has died, it obviously becomes much more difficult to replicate one of their paintings. Hence, the socially necessary labour time embedded in the painting, and therefore its exchange value, goes up. Fix follows up his example with another disingenuous claim: ‘Marxists have largely given up trying to test Marx’s claim that commodity prices are proportional to labor time. Instead, they’ve switched to a far weaker test of the labor theory of value. Instead of looking at individual commodities, Marxists look at sectors of the economy.’ It is true that Marxists have not yet attempted to test that commodity prices are proportional to labour time; but this is a reflection of the fact that it is difficult to do this, rather than that Marxists no longer believe that the LTV applies at commodity level.

As Fix correctly points out: ‘Any correlation between sector value added and sector labor time could easily be spurious – the result of sector size correlating with itself.’ However, whilst this is true, it does not mean that the correlation is necessarily spurious, just that further tests are required. Fix next critiques the Marxist economist Paul Cockshott’s explanation for why we need to test the LTV at sector level, which is that it is invalid to compare the labour times of different commodities as they have different dimensions. But Cockshott’s claim is clearly nonsensical. Commodities are not physical quantities and therefore do not have dimensions. (If you want a physical analogy, it is better to think of different commodities as defining different axes within the same ‘commodity space’.)

Fix suggests a link between the LTV and human nature by posing some rhetorical questions: ‘If Marx’s theory is true, why do humans judge value in terms of labor time? Do we possess some universal value-judging faculty? If so, how did it evolve? Marxists rarely ask these questions, probably because the answers are uncomfortable.’ It is important to point out that the LTV is a theory about capitalism, not about human nature. Humans clearly do not judge value in terms of labour time. This is why use value and exchange value are incommensurate. Fix continues: ‘Scientists are not allowed to put boundaries on how others should test their theory.’ This is true, but scientists are allowed to put boundaries around the domain of applicability of their theories. In fact scientists do this all the time.

In conclusion, although Fix makes some valid criticisms the empirical work that has been done in an attempt to validate the LTV, the remainder of his article is full of holes. There is certainly nothing in his article which invalidates the claim that, as a general rule, the exchange value of a commodity is proportional to the socially necessary labour time required to produce it.