Why Ask Why – Labor as the Sole Source of Value

In relation to the previous post, which considered the idea of labor as the sole creator of value, a reader provided a link to an interesting lecture by Steve Keen. Although I had not seen the lecture prior to posting, broadly speaking I have been aware of Keen’s developing perspective on Marx’s theory of value since reading the first edition of Debunking Economics and have followed his work with interest since then. Although it may not have been evident to most readers, partly I had Keen’s critique in mind when writing the post. It seems to me that his analysis highlights a need for those of us who defend Marx’s theory to explain why it is correct to consider labor the sole creator of value. In entertaining one possible rationale, the previous post was not intended as a proof of anything. Otherwise, I would have titled it a proof rather than a musing. But now it might be worth backtracking a little to provide some background on the rationale for that post.

Consider two statements:

1. Labor is the sole creator of value.
2. Labor is the sole creator of surplus value.

The most effective way to establish the truth of the two statements would be simply to prove 1. If 1 is true, then obviously 2 is trivially also true.

Having established 1, and hence 2, we could then go on to consider explanations of how surplus value actually comes about. That is, the way would then be clear to explain how it is possible for labor to create more value than is required for its own reproduction.

But if instead we first try to establish the truth of 2 without having established the truth of 1, we could succumb to various logical conundrums. For instance, it would be logically possible for 2 to be true without 1 being true if, somehow, there were creators of value other than labor that, though creators of value, could not create value greater than themselves.

Since Marx was arguing that only labor creates value, whereas machines merely transfer their preexisting value, he was actually trying to establish the truth of both 1 and 2 and so it would have made sense for him to start with 1. (He did do this – see below – but perhaps not satisfactorily.)

A strategy that starts with 2 could fall victim to what might be called the ‘Keen critique’.

What am I calling the Keen critique?

To the best of my understanding, there are at least a few key points in the Keen critique. These can be briefly considered in turn. Hopefully not too much violence will be done to his basic argument. According to Keen:

FIRST, the use value of labor to a capitalist is that it creates more value than it costs to reproduce the worker. But it is the same for a machine. The use value of a machine to a capitalist is that it creates more value than it costs to reproduce the machine.

At first glance, a Marxist might be inclined to say that this critique confuses value and use value. A physical surplus does not necessarily imply surplus value. While it is equally true that it takes less use values to reproduce a worker or a machine than the use values a worker or a machine can produce, this ensures only a physical surplus, not surplus value.

But the Keen critique appears to address this:

SECOND, in production, neither a worker nor a machine directly produces value. Rather, they create use values in the form of commodities, produced for exchange on the market. Both labor and machines produce commodities that capitalists can subsequently convert into value. Marx’s argument requires that the use values created by workers are greater than the value of labor power but that, in contrast, the use values created by a machine are merely equal to the value of the machine. It is this divergence between use value and value in the case of labor but not in the case of a machine that supposedly proves for Marx that labor is the sole source of surplus value. But how can this be justified? Marx does not establish this claim. He fudges that the use value and value are the same in the case of a machine but not labor.

Now, if it has not already been established, in a prior step, that labor is the sole source of value (statement 1 above), then I think Keen’s critique may well stand. If machines could create value, just not surplus value, Marx would need to show that the value created by machines cannot exceed the value represented in machines. If, instead, it has already been established that labor alone creates value, then Marx’s insight about the use value of labor exceeding the value of labor power serves as an *explanation* of surplus value, given the prior understanding that labor alone creates value, rather than opening up a can of worms about machines possibly being able to do the same.

At this point, a Marxist might be inclined to say that Marx did indeed establish labor as the sole creator of value in the opening pages of volume 1 of Capital. The argument there is that it cannot be use value that all commodities have in common, because their use values are diverse and incommensurable. It must therefore be “the only property remaining” – the abstract labor that goes into producing the commodities.

To this, Keen might respond:

THIRD, it is not solely labor but a more general property, energy, that is required for the production of all commodities. Energy is expended not only through the exertion of labor power but also through the operation of a machine or the depreciation of plant. Why single out labor alone as the property common to all commodities?

All this is why, in my previous post, I started from statement 1. I think, as a prior step, the truth of this statement needs to be established, or at least given solid plausibility as a valid working assumption.

My suggestion – which I would say is really Adam Smith’s suggestion – is that in a human society organized in such a way as to reward self-interested behavior (capitalism) it will be human effort that counts. This is not because it should be all that counts. Even to the extent that it should count, it is not counted under capitalism in the way that it should be counted. Many socially destructive activities are valued positively. Many socially beneficial activities are valued at zero. Many activities that destroy the environment are valued positively. And so on.

Again, this is just a suggestion. I am putting it out there because I am interested like many others in ascertaining whether there is a strong reason to consider statement 1 to be true.

At this point, it may be relevant to make a passing observation about the motive for defending Marx’s theory of value.

In his lecture, Keen suggests that the commitment to Marx’s value theory of Marxists and Marx himself has been driven by ideology rather than logic. Now, no doubt ideology does play a big and sometimes excessive role for many economists across the theoretical spectrum. But I don’t think this is a necessary motive for adhering to Marx’s theory of value. For what it’s worth, I do not feel especially ideologically wedded to the idea of labor as the sole creator of value. If the expenditure of energy as such turned out to be the basis of commodity value, I would be fine with that. I don’t consider Marx’s theory to have some of the political implications that it is commonly considered to have. For instance, is our sense of social justice meant to be grievously offended when individual workers who engage in socially harmful – but profitable – activities receive less than the “value” they produce? Are we meant to be terribly upset that ‘unproductive’ public sector workers in health, education, social services, and so on, are paid out of the surplus labor of ‘productive’ workers? There are many things about capitalism that upset me, but personally, these things are not among them.

In my opinion, the main benefit of Marx’s theory of value, *if* it is correct, is that it helps to explain capitalist behavior. It does not help us measure living standards, for instance. We need use value measures for that. It does not help us evaluate the true value of things. The usefulness of the theory, if correct, is in understanding what drives capitalist commodity production, to the extent that society permits this mode of activity to occur, and to understand the way this behavior may have a tendency increasingly to impinge, over time, on other spheres of social and economic activity. If Marx’s theory of value happens to be false and capitalists are guided by energy requirements more generally, rather than expenditure of labor power specifically, then Marx’s theory would not serve this purpose as well as an available alternative. It would be more useful to consider an energy theory of value, instead, to understand what motivates capitalists.

But let’s suppose, even if just for the sake of argument, that the truth of statement 1 can be established as a prior step. Maybe the “human effort” story suggested in the previous post is part of the answer. Maybe not. But, however it is achieved, suppose we can establish that labor is the sole creator of value, or can at least provide a convincing rationale for why this is most likely to be the case and the best working assumption.

If so, then I think the Keen critique can be answered in a fairly simple fashion. In particular, it then becomes possible to explain why the use value of labor can exceed the value of labor power while the use value of a machine merely equals the price of the machine.

Granted statement 1, the use value of labor is that it creates value. Of course, it is not just any labor that is regarded by Marx as creating value. It is abstract (and socially necessary) labor. Labor as such. The expenditure of labor power. The expenditure, perhaps, of human effort. It is not the use value of concrete labor (melding, mining, engineering, managing, etc.) that is value creating. It is the use value of abstract labor. If it has already been established that labor actually is the sole source of value, then surplus value will arise to the extent that workers create more value through the expenditure of labor power than it costs to reproduce their labor power. In that case, the use value of labor (the value created by workers) will exceed the value of labor power (the cost of reproducing the workers), and we arrive at Marx’s explanation of surplus value.

The analogous argument applied to a machine would have to introduce the concepts of ‘machine power’ and ‘abstract machine’. We would be considering machinery as such, and the expenditure of machine power without regard to its diverse concrete properties. The use value of the abstract machine, according to the thrust of Marx’s argument, would be its capacity to preserve and then transfer its preexisting value (the value it represents upon entering production) to the new commodity. In that case, the use value of the machine (the value it transfers) will merely equal the value that the machine represented upon entering the production process. The machine will represent an amount of abstract labor but itself will not perform abstract labor. It will only pass on its preexisting value to the new commodity. Since it can only pass on value it possessed prior to production, there is no need to distinguish machine power from abstract machine, or to compare quantitatively the use value of the abstract machine (its capacity to transfer preexisting value) to the amount of preexisting value represented in the machine. These two magnitudes are necessarily one and the same.

How do we know this? We don’t, unless it can be established, as a prior step, that labor is the sole source of value. This explains the focus of the previous tentative, exploratory post.

Lastly, it should perhaps be mentioned that even if Marx’s theory can be regarded as valid (and I am of course inclined to think that it can be), that would not mean that another theory – say an energy theory of value – could not also be a valid theory. Only if statement 1 can be proved – rather than merely strongly motivated – would this render all other positive theories invalid, or at least inferior, as explanations of capitalist behavior. Even then, these other theories might be useful for explaining something else (e.g. the physical surplus) or answering a normative question about how things should be valued.