This is Richard Wolff from Democracy at Work responding to another Ask Prof Wolff question
from our Patreon community. This one comes from Scott Eagles and asks an often-asked question
about Marx's labor theory of value. He wants me to respond to criticisms of Marx's labor theory
of value which, by the way, are as old as that theory of value, and in particular, a modern one,
which also is as old as the theory itself, namely, that ideas are important
in economic production, and that the idea lying behind the production of any good [or] service
is somehow more important than the labor that goes into it, and therefore, it justifies giving
an outsized portion of the rewards of producing something to whoever had the idea of doing it.
Well, let me respond as follows: there are so many ways to show the mistakes that this
kind of criticism makes that it's a little embarrassing to list them all,
but not for me, but for those who believe them. So let me try.
First of all, into every production of anything lots of ideas are constantly at play. The idea
of the person who came up with the product, sure. But then there’re also the idea or ideas
of the people who came up with all of the tools, and equipment, the machines, and all the rest of
it, that go into production. They all had ideas that were important to all of this as well. Then
there are the workers at work right now with all those tools and machines. They're full of ideas,
too, about how to do the work, how to improve the work, and all the rest of it.
Ideas are something human beings generate all the time, in all the things that they do,
production of goods and services included. How you would go about
dividing the output among all the different people whose all different ideas came together to
make this production possible, that's a mystery I'll leave to the people who reason like this.
We all know what they're doing. They don't like the notion that the production of goods
and services is done by workers, you know, the people who use their brains, and ideas,
and their muscles, to transform nature into finished products that human beings want.
You know, like taking a tree and working on it so it ends up as a chair
that we can sit on. The people who do that kind of work, as you all know, are the people who we
call the workers, or the working class, and they don't get the big bucks ever,
anywhere. Those go to other people. You know, the ones that own the shares of stock,
or the ones that came up with the idea of that particular product which, of course, made use of
all the other ideas that made that product possible as an idea in any given individual.
But they need to justify how much they get because they get the big bucks, and it's a little
difficult. And this notion of the idea occurred to them. It's an idea they had about the importance
of the idea that they contribute, and that's going to be enough, they hope, to justify the profits
that they get into their own hands from the goods and services produced by other people's labor.
You know, this reminds me of another one of these kinds of efforts to justify the rewards
taken by the employer, and the rich people, and the shareholders, and all of that.
It was the idea of risk. Here's how it went. And, by the way, this is just as alive today
as is the notion of the importance of ideas. Here's the argument.
The capitalist who undertakes a business could have used the money that he throws into this
business, that he invests in the business, he could have used it instead to go to the Bahamas,
lie on the beach, and have lovely drinks presented to him all day long.
But he didn't. He didn't do that. Instead, here we go, he took a risk,
you see. He invested the money in producing something rather than gobbling it up in enjoyments
for himself. And therefore, you see, because he took this risk,
he's entitled to the disproportionate share of the output that he regularly snatches for himself.
Here's the problem with this rationalization. Everybody involved in production takes a risk.
All those employees that our risk-taking capitalist hired, they're all taking a risk,
too, because our employer may have made the wrong decision about what product to produce, the wrong
decision about what technology to use, or where to do the production, or where to try to sell it.
And if he makes a mistake, and it's big enough, then the business will go out of business.
And here comes the risk of all the employees. They moved into this area and took a job with
this company in the hopes that that would be an income that could be secure.
They took a risk signing up with this employer. They could have signed up with another one.
But now this one went belly up, so they've lost their job, they've lost their income,
they can't maintain the payments on the mortgage of their home, they have to yank
their teenage children out of the school they love and have become accustomed to.
Lots of people took risks in any line of production, not just the employer. The
workers only ask to be paid for the work they do. They don't ask to be paid for the risk they took.
The employer invented not only the notion of risk, but arrogated it all to himself,
as if no one else was involved. But there is a big difference. When the employer takes a risk,
he maintains his control over what he took a risk investing in, because he's the boss.
The risk taken by the worker is much more dangerous because the worker takes the risk
for the welfare of a company that's controlled,
and whose decisions are in the hands of, everybody but the workers who took the risk of a job there.
Let me turn now to the labor theory of value itself, because the criticisms are mostly silly.
Marx was not interested, the way Smith and Ricardo were, in using the labor theory of value to
explain why prices are what they are. I'm sure the critics are brilliant, but Marx was smart enough
to know that labor is not the only thing that goes into producing goods and services. You need nature
to give you the raw materials. You need lots of ideas in people's minds about how to transform the
raw materials into finished products. Karl Marx, read him if you haven't yet, smart guy, he knew
that, as most people who aren't smart also know that, and they don't need critics to point it out.
So, what was Marx doing? Reducing all the shapers of a price of bananas on
the market to just the value in raising and cultivating the banana plants? Of course not.
He didn't want to explain prices because that was not his issue. His issue was how labor gets
organized in any economy, and particularly the capitalist one, because he was clear in his mind,
as he makes clear in Das Kapital and his other writings on economics, he was clear that in the
production process, the way labor is performed, those who do the work produce more than they get
for their own consumption, and that “more,” what he called the “surplus,” is taken by a different
group of people. We call them employers. And he wanted to work out how that works.
So, he was interested in labor. So, when he begins by talking about commodities, he wants to take us
from the goods and services we see exchanging in the market to the labor that happened earlier in
their production, because it's in the labor that he thinks the secret of modern capitalism is. So,
he connects commodities that exchange in markets to the labor involved in their production.
The value of something, for Marx, is the amount of labor that the community has devoted to that
particular commodity, which is different from the labor devoted to other commodities.
And he wants to begin with that differentiation to get at the more interesting question, for him,
when he gets to it a few chapters into volume one of Capital, about how there's a surplus produced,
who's doing it, who gets it, and how does the whole economy get shaped by the arrangement of
who does the work and produces the surplus, and who doesn't do that work but draws the surplus
into their hands. The first group are the employees, and the second group are the employers.
That's Marx's project. That's what you have to analyze. To criticize Marx, as if he were a dunce
who thought that only labor explains why things are what they are, is to make Marx
as silly and underdeveloped as these critics clearly are.
This is Richard Wolff, for Democracy at Work.