[bluekeybox]

It could have something to do with what we mean by "value". Apparently Marx derived his thinking from an assumption that value of something is more or less proportional to the amount of labor put into producing it [1]. What he missed is that if you're putting labor into making something nobody wants (the classic example being toothless combs for bald men), you are not only failing to producing any value, you're arguably reducing the overall wealth present in the market. The labor theory is no longer a part of mainstream economics, replaced by marginal theory [2], but I suppose many people still imagine value of things as equal to the labor put into them.

[1] http://en.wikipedia.org/wiki/Labor_theory_of_value

[2] http://en.wikipedia.org/wiki/Marginalism

[xlpz]

> What he missed is that if you're putting labor into making something nobody wants (the classic example being toothless combs for bald men), you are not only failing to producing any value, you're arguably reducing the overall wealth present in the market. The labor theory is no longer a part of mainstream economics, replaced by marginal theory [2], but I suppose many people still imagine value of things as equal to the labor put into them.

Uh, what? Why do people that have never read Marx think they can get away with this kind of thing? You only have to read the same wiki page you have linked to to see that what you claim Marx never thought about is in fact very much so part of the theory. According to Marx commodities under capitalism have different kinds of "values"; one of them is their "use-value", which measures whether the item is in fact useful for a given purpose for anyone. In a market economy a commodity only realizes its value (usually seen in the monetary expression of its exchange-value, or price) when it is actually sold: ie, value is realized at the point of sale, not production. Thus no matter how much labor you put into something, if nobody actually wants it for anything it has no value at all. This kind of misunderstanding or misrepresentation of the LTV is so popular it has its own nickname: the mud pie fallacy, see for example http://kapitalism101.wordpress.com/2010/05/13/law-of-value-3...

This whole thing is explained, plain as day, in all of Marx's works on this topic, including the most famous one, Capital. Why people that have never bothered to even read one paragraph of it like to pretend it says things it does not say? Beats me.

[bluekeybox]

I just read the article you linked. It's full of utter nonsense; it is not serious economics. One example: it talks at length about how there are different forms of value, namely individual value (which any normal economist would call production cost), and social value (the actual amount the commodity sells for). It then goes on to say, "there are two basic forces that govern the way individual values become social values" [emphasis mine]: (A) average productivity, and (B) interaction of supply and demand. The first is described mostly correctly. When describing the second, the article says, "We only learn how much labor society has put into widget making when we enter the market and compare the products of our labor with the rest of society." Okay, but that is not the only thing we learn from the market price. We also learn whether the society needs our commodity at all. Since the article talks about "social value" it almost implies that our commodity will always have some value to the society (it's called "social" after all), but that is often not the case at all.

But here is where the article is most clearly wrong:

> But most important to the MudPie theory, demand doesn’t create the social value of a commodity. It only helps determine if labor has been apportioned to the right tasks. Labor is creating the value

First, the article is contradicting itself. It reduces everything to "labor is creating the value" -- if that were the case, why mention "governing" force (B) above at all? Also note, which value are we now talking about? Individual or social? (I assume the latter). Second, it conveniently presents the MudPie argument as "belief that demand is creating value". No, that is not what the MudPie argument says at all. It is the recognition of demand (which is an intellectual process) that is creating value, and that value can be (although not always is) wholly separate from the labor cost (or the "individual value").

Consider the following example. I buy a used or antique piece of furniture from someone who used to own it and who now believes the piece is quite useless since it is old. In addition, the owner does not mind selling me the piece at a low price since he had got out from the 20 years of using it all the "value" he believed he could get out of it. On inspecting the piece, I determine that the piece was made by a known designer. I resell the piece for ten times the amount I paid for it, and for three times its retail purchase price when it was new. Where is the labor here (ignoring transportation cost)? The answer is that the "labor" here is in me recognizing the potential value of the piece either from the appearance or through matching the label through a catalog (about 5 minutes of work). Now exactly the same process will occur when a reseller of a commodity finds a more profitable way to sell it. The reseller is creating value.

TL;DR There is also intellectual labor involved after the item is made but before it is sold, ignored by Marx entirely and purposefully.

[xlpz]

> Since the article talks about "social value" it almost implies that our commodity will always have some value to the society (it's called "social" after all), but that is often not the case at all.

Seriously? Again? My goodness. Listen, we have already established you are the kind of person that goes around pretending to discredit an entire branch of economics without having the slightest clue about what that branch even claims to say. Fine. But repeating the same nonsense after being told that it is nonsense is just too much. The entire freaking idea revolves around how individual labor which under capitalism is done by private initiative is converted to social labor, which is through market mechanics accepted as socially necessary. Of course that whether or not that labor was in fact desired, has some value for society, is a factor, and that is a fundamental aspect of the LTV. The Wikipedia article explains this, the article I linked to explains it, I explained earlier that value under the LTV is realized at the point of sale, ie, when someone actually goes through and establishes the usefulness of the labor invested by exchanging something (usually money) for it.

The rest of your post conflates price with value, which are different things according to Marxian thought, so again it is pretty useless as far as "debunking Marx" goes. Again, this is even explained in the Wikipedia article you linked to but that obviously haven't read.

Now, do you want to believe the LTV and everything Marx wrote is wrong without having any actual idea of what that is? That's cool. Just don't try to have a conversation with someone that has bothered to read it and think you can get away with it.

[Andrew_Quentin]

An extreme example does not disprove the whole theory. The people inventing stuff are usually the enterprenours who have the means of production and labour in their own hands.

Most people employed produce things which are valuable. Most things produced are valuable.

[bluekeybox]

> Most people employed produce things which are valuable. Most things produced are valuable.

Sure, but my point was that, at its basic, value can be thought of as the following function:

    Val(demand, supply) = const * demand / supply.

Only the second parameter (supply) is a function of labor (the higher the labor cost, the more difficult it is to produce a large quantity of something) and a few other things (for example, availability of materials necessary for production, availability of process, etc). So value is only a partial function of labor. This is both good and bad, the good part being is that it is possible to generate large amount of value with relatively little labor.

Another point is that by "labor" we usually mean either physical labor or time spent, not mental effort exerted. If we add the mental effort exerted (multiplied by intelligence of the knowledge worker) to the definition of value, we will see a closer relationship between labor and value.

Something you spend a lot of time working on may have a lot of value to you (as in: it aided development of your skills, for example), but it doesn't mean that it will have a lot of value to everyone else. We ought not to mistake what we value with what an average individual from a large group of people values.

This has an important consequence. If you're smart, you ought to position yourself where you can have a lot of leverage. That would be somewhere away from being a labor provider and closer to being one who makes decisions on the basis of demand and supply. Also, you can have a lot of leverage if you're willing to incur risk. Labor providers usually don't incur a lot of risk (in worst case, they get nothing). In entrepreneurship, on the other hand, risk can mean losing a lot of money. By moving towards making demand/supply decisions and by willing to incur risk, you can generate not only more value for yourself, but more overall value, since in voluntary transactions both sides benefit.