Letter to a late Marxist

How "Labor Theory of Value" doesn't fix anything

In the wake of our most recent election, I think we, as a society, are going to be "getting over" a lot of fanciful notions that have established (but unpopular) refutations. Instead of wasting this effort making Twitter posts, I think I will just write them out in brief blurbs, or “letters”, for reference, since I think they might come up in the future.

So now, fresh from emergency-birthday-cake baking, I am back at my computer to address an idea that is long long past its expiration date: the economics of Karl Marx as found in Das Kapital.

Like many posts, this is an extension of a Twitter disagreement where I claimed that no one sincerely liked Marx's magnum opus, as its arguments depended on a crude notion of the "LTV"  ("Labor Theory of Value")  which no modern people believe in anymore. I got some pushback on that last point and decided to oblige with an extended explanation of where I think Marxism and the LTV ideas fail.

I think that a lot of young people don't understand the issues with the “Labor Theory of Value”, why people attack it so viciously, and why it always comes up in the context of Karl Marx. After all, lefties will say, many early economic theories like "supply and demand" originally appeared in the language of the LTV but are perfectly respectable today in most micro/macroeconomic contexts.

Why do people single out Marx and his work when they criticize the LTV?

The answer to this question begins with what the LTV actually is and what Marxism actually was at its inception.

First, I think it's pretty obvious, historically speaking that the LTV does not come from a modern economic understanding of the world. Instead, the LTV is a carry-over from pre-modern folk notions about the value of products and the corresponding workers' wages that you might recommend in a medieval understanding of fair transactions, e.g.:

"Ye laborer in the fields shall receive in proportion of his toil, the money equal to purchase the quantity of wheat plowed by the average churchman in a single day."

Pretty much everyone thought this way in pre-modernity. And there is nothing wrong with this understanding as part of a general "folk-knowledge" way of understanding "fairness". The problems come in when we try to hammer this notion into a rigorous theoretical framework which is exactly what Marxism tried to do. 

Though it might surprise some readers, Marx was not the first thinker to describe the creation of a revolutionary utopian socialist society. These types of socialist philosophies had been popular since the end of the French Revolution. And, in fact, as Freddie DeBoer likes to remind us, egalitarianism wasn't even a part of Marx's original vision (even though it certainly was an element of their later propaganda). Instead, what gave Marxism its notoriety was that it was supposedly a method for modeling human social organization that was completely scientific and rational. It avoided the teleological and moralistic approaches that you would find in religious outlooks, yet it still arrived at a humanitarian moral understanding of a type of fairness relatively absent in many post-industrial societies with incredible resource abundance.

Marx performed this task by using the LTV to claim that workers OBJECTIVELY earned an easily computable portion of wealth through their labor which was robbed from them through capitalist exploitation. Subsequently one could OBJECTIVELY PREDICT that the asymmetries between the value workers produced and the value they were paid would lead to run-away inequality and a cascading collapse of profit-driven economies. This is the main result found in Marx's Das Kapital.

To be fair, this perspective is quite a neat ‘one-two-punch”. It completely reconstructs our MORAL instinct about fairness and good social organization without ACTUALLY appealing to all those messy teleological and religious concepts that the Enlightenment wanted to get rid of. Better yet, it was completely materialist! It even had a strange sort of eschatology just like a religion, but better because it was, you know, RATIONAL.

But this is just where problems begin., because the LTV was never meant to be used in this way. At the most fundamental level, as any modern person can easily see, the labor committed to a task DOES NOT correspond OBJECTIVELY to the value that it generates. Mud pies do not have OBJECTIVELY the same value as cherry pies even if they OBJECTIVELY take the same labor to make. On the surface, this makes the LTV a silly concept to use in the context of any rigorous application.

But is there a way to save the LTV? Well yes, but not in a way that preserves the utility of Marx's theory.

The first solution, as Marx himself toys with, is to retreat to a folksy understanding of the LTV: "Value isn't simply labor-time + labor-effort, it has to be conditioned on the amount of SOCIALLY ACCEPTABLE work that is directed towards SOCIALLY DESIRED ends". But notice here, that the "socially acceptable/desired" prefix is doing all the work. This updated definition of the LTV is 100 percent subjective and just comes down to "we should pay people what is socially acceptable for their jobs”. This is a pre-modern notion of fairness that is practically useless inside a large-scale highly dynamic technological society.

The second solution is to go in the opposite direction and broaden the horizon to maintain the objective material basis of the LTV: "The value of labor is the TOTAL utility that is derived across the entire system of production, in proportion to the useful labor-time the worker has committed within that system". This is objective hypothetically, but it is completely imponderable. It requires an impossible calculation of determining utility across all possible probabilistic states in a supply chain and relies on an undefinable notion of utility. This preserves the objectivity of the LTV in the abstract but removes any possible utility it might have to the Marxist who relies on an OBJECTIVE quantification of value to be easily definable and calculable.

Finally, there is the return of the moralistic/teleological understanding of the LTV: "The value of the labor isn't the utility the labor generates, but the reward a worker OUGHT to receive ideally for his work". This, IMHO, is the best way to understand the LTV in a useful way. However, this understanding of the LTV was almost uniformly rejected by classic Marxists since it brought back the teleology and moralism that they were trying to escape. It also destroyed Marxism’s prediction of a necessary collapse of "Capitalism" as a result of its objective contradictions, a core part of 19th-century Marxism’s appeal to intellectuals.

Much later, in the 20th century, many philosophers tried to resurrect Marxist ideals as a normative criticism of capitalist inequality. However, these thinkers got wrecked by the simple, quite Randian, problem that natural inequality combined with economies of scale commended a moral state of extreme inequality where the Elon Musks and Whilt Chamberlains of the world might morally horde their wealth over the masses of starving loafers. As outlined in Joseph Heath’s article, this quandary eventually converted all Marxists to Rawlsian liberal egalitarianism. This is why Marxism, actual Marxism, is more or less a LARP in the 21st century, and no one sincerely loves Das Kapital.

The great irony is that this entire churn, from liberalism to Marxism to Rawlsianism solved nothing. The Rawlsians still have the same ideological problems justifying their preferences for equality without moralism. The new popular perspective replaces the crude LTV with another set of abstractions that pose egalitarian imperatives as the natural consequence of a liberal free choice made from behind a Rawslian veil of ignorance which has never existed and functions only to smuggle the adherents’ pre-determined moral preferences in through the back door. This of course creates similar problems as the new Rawlsians are required to fetishize a twisted version of free choice just like the classic Marxists were forced to fetishize a twisted version of labor value.

At a foundational level, we are just dealing with the same problem over and over again. The Enlightenment project of trying to do away with moralism and "teleological" understandings of the world (in order to be more like Scientific fields) always runs directly up against the moral/aesthetic desire of the philosopher to pursue aspirational ends (usually egalitarianism) that are simply not found in humanity's (or nature's) material state. This is a common enough human problem, but because of their pseudo-scientific pretensions, post-Enlightenment thinkers can’t directly appeal to morality or say something like “the material world is evil”, which is what they really mean, underneath it all.

Or as an essay by Daniel Addison put it:

“When moderns mistakenly abandoned teleology, they were left with only the conception of our untutored nature through which to justify the moral rules they’d inherited. This was impossible, for those moral rules were originally designed to lead us away from that natural state and towards our telos. It was only through the reference to our telos that the moral rules had authority over our untutored nature and its desires.”

The perennial issue remains that there is a fundamental disconnect between the limitations of our material condition and the qualities of our moral aspirations. Technology cannot solve this problem. Nor can endlessly reformulating the issue with new "theories" get the contradiction to go away. The problem keeps returning. And humans have to develop moral and religious ways of interacting with this world that take these eternal problems seriously.

My great frustration in this process is that all of these windy theories from Marxism to Rawlsianism obscure more than they enlighten. If thinkers could honestly just say what they mean and say what they want about equality, dignity, and men's relationship with each other we would get further than this endless ideological silliness, trying to convince ourselves that we are going to develop an amoral-moralism, an anti-teleological teleology, and an egalitarian system of government for creatures who are not, and do not want to be, equal.

We need a better way of talking about these issues, and egalitarian or not, I don’t think Marxism is helping.