"Ricardo, the head of the school which determines value by labor time, and
Lauderdale, one of the most uncompromising defenders of the determination
of value by supply and demand. *Both have expounded the same proposition...*"
-- Karl Marx, *The Poverty of Philosophy*
The proposition was that machinery which displaces labor does so by
diminishing the value (per given quantity) of the commodities produced. The
proposition itself may seem unremarkable but what is intriguing is its
uniform derivation by two presumably contentious schools of thought. Here
is what Lord Lauderdale wrote about the idea of using labour as a measure
of value:
The opinions [regarding supply and demand], that are here stated,
concerning the nature and the causes of the variation of value, are nowise
new. They have been hinted at by many; and by some they have been long ago
explained with tolerable accuracy. They do not, however, appear to have
been so clearly understood as to destroy the idea of any thing possessing a
real and fixed value, so as to qualify it to form a measure of value. After
this philosopher's stone, many have been in search; and not a few,
distinguished for their knowledge and their talents, have imagined that in
Labour they had discovered what constituted a real measure of value.
If labour does not possess a "real and fixed value," how is it that one can
conclude that introducing labour-saving machinery will *diminish* the value
of the commodities produced? My explanation for this uncanny convergence is
no doubt too "simple" and too "obvious" to be believed. A proper exposition
would lead the reader on a suspenseful and convoluted excursion to
interrogate all the historical opinions, detours, evasions and possible
objections,
But why bother? It is this simple: marginal utility theory of value is an
embodied-labour theory of value in disguise. The disguise consists of not
stating the obvious assumption and getting away with it because the
assumption is *so* obvious as to be taken for granted.
The assumption is that the two parties to an exchange have a legitimate
right to conduct that transaction.
I said it was simple but the legitimacy of the transaction is perhaps a
*bit* more difficult than it may seem at first. For two parties to
*legitimately* exchange goods, it is necessary for those goods to be their
property. But as John Locke pointed out, the private ownership of property
poses "a very great difficulty" given that God "hath given the world to men
in common."
Fortunately for us, Locke resolved that difficulty by concluding that 1.
"every man has a property in his own person..." 2. "The labour of his body,
and the work of his hands, we may say, are properly his..." and 3.
"Whatsoever then he removes out of the state that nature hath provided, and
left it in, he hath mixed his labour with, and joined to it something that
is his own, and thereby makes it his property."
Voila! The labour theory of property! Of course there are a few further
steps to get from Locke's legitimation of the private ownership of property
to the constitution of labour as a *measure* of value -- from the
qualitative to the quantitative. But the rationale is also there in Locke's
chapter, "Of Property," having to do with limited capabilities and
appetites (e.g., "no man's labour could subdue, or appropriate all; nor
could his enjoyment consume more than a small part...") and the injunction
against spoiling ("He was only to look, that he used them before they
spoiled, else he took more than his share, and robbed others. And indeed it
was a foolish thing, as well as dishonest, to hoard up more than he could
make use of."). For Locke, the *legitimacy* of private property was
explicitly constrained by its *measure*, which was -- directly or
indirectly -- derived from the expenditure of labour.
So "the school which determines value by labor time" and the "defenders of
the determination of value by supply and demand" expound "the same
proposition" in more ways than one! One group imagines they have discovered
the philosopher's stone, the other pretends they can perform the
transmutation out of thin air -- as long as no one peeks at the elixir of
life concealed behind the curtain.
Roll over Böhm-Bawerk and tell Carl Menger the news!
--
Cheers,
Tom Walker (Sandwichman)
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