Karl Marx and the “labor theory of value”

One of the central tenets of Marxism is the "labor theory of value," which is the idea that the economic value of something is determined by the number of hours that it took to make it. It should be acknowledged that labor really is (at least partially) relevant in determining the value of something. Nonetheless, it seems safe to say that Karl Marx takes this theory far beyond the evidence. It is his extreme form of this theory that will receive a response here. He introduces this theory early in his work, in the very first section of the very first chapter of "Das Kapital" (his longest book):

Karl Marx

Quote from Marx about "labor theory of value"

"A use value, or useful article, therefore, has value only because human labour in the abstract has been embodied or materialised in it. How, then, is the magnitude of this value to be measured? Plainly, by the quantity of the value-creating substance, the labour, contained in the article. The quantity of labour, however, is measured by its duration, and labour time in its turn finds it standard in weeks, days, and hours." (Source: Karl Marx's "Das Kapital," Part 1, Chapter 1, Section 1, as translated into English at Marxists.org)

Marx and Engels

Even Marx presented some qualifications to his theory ...

There are several problems with this theory, and much has been written describing the many flaws of using it to describe value. I will not touch on all of these problems, but only on one of them - the one that I find the most interesting. It can be demonstrated with a qualification that Marx himself made to this theory. Even Karl Marx, the greatest proponent of the labor theory of value, qualified his theory with the idea that only those labor hours that were "socially necessary" should be counted as adding value. Marx's concept of "socia[l] necess[ity]" is not very well-defined, but his definition's meaning is clear enough to show that it contradicts his labor theory of value, attacking its very basis as an explanation.

Iron and Coal, painting from 1855-1860 (during Marx's lifetime) about the Industrial Revolution

A review of Ken Burns’ “Thomas Jefferson” (PBS)

"We hold these truths to be self-evident: That all men are created equal; that they are endowed by their Creator with certain unalienable rights; that among these are life, liberty, and the pursuit of happiness ... "

- The Declaration of Independence (July 4, 1776), written by Thomas Jefferson

PBS's biography of Thomas Jefferson was the first Ken Burns biography I saw. I had seen some of his non-biographical things (like "The Civil War"), but I had never yet seen one of his biographies. After having watched virtually all of Ken Burns' films (many are available on Netflix), I still think that this is one of his best biographies; although I greatly admire his films about Benjamin Franklin and Mark Twain as well. I've seen a lot of other presidential biographies by other filmmakers, and I think this one is among the best I've seen.

Somewhat ironically, though, there isn't much focus on his presidency. That's not to say that his presidency is ignored here, but most of the film is about other parts of his life. This may actually be appropriate, though, because the presidency is not really the most important part of Jefferson's life. For most presidents, their administration stands front and center in the discussion of their legacy; but for Thomas Jefferson, he didn't even put his administration among his three most important accomplishments, which were the ones that he had listed on his gravestone. The first-listed was a piece of parchment he wrote in 1776 - a much-celebrated document that is none other than our Declaration of Independence. He was the chief author of this document, and I agree with him when he says that this, rather than his presidency, was his most important accomplishment.

John Trumbull's Declaration of Independence

A review of Ken Burns’ “The Civil War” (PBS series)

"Fondly do we hope, fervently do we pray, that this mighty scourge of war may speedily pass away. Yet, if God wills that it continue until all the wealth piled by the bondsman's two hundred and fifty years of unrequited toil shall be sunk, and until every drop of blood drawn with the lash shall be paid by another drawn with the sword, as was said three thousand years ago, so still must it be said that 'the judgments of the Lord are true and righteous altogether.' "

- Abraham Lincoln's Second Inaugural Address (March 4, 1865)

It was the bloodiest war in American history, with more American dead than World War II. It was a war that both sides thought would last ninety days, but which ended up dragging on for nearly four years. And it was a war that freed four million Americans from bondage, and brought some sweeping changes to American society.

Confederate dead at Antietam

Are monopolies really as dangerous as Marx said they were?

"Competition engenders misery, it foments civil war, it 'changes natural zones,' mixes up nationalities, causes trouble in families, corrupts the public conscience, 'subverts the notion of equity, of justice,' of morality, and what is worse, it destroys free, honest trade, and does not even give in exchange synthetic value, fixed, honest price. It disillusions everyone, even economists. It pushes things so far as to destroy its very self."

- Karl Marx, in "The Poverty of Philosophy," Chapter 2, Part 3 (as translated into English at Marxists.org)

Most people today know Karl Marx was an opponent of free markets, and that he gave all kinds of objections to them in his writings. But lesser-known is an objection he gave to free competition: that competition inevitably destroys itself - through monopoly.

Karl Marx

Quote from Marx about competition "destroy[ing] its very self"

In the words of Marx himself:

"Competition engenders misery, it foments civil war, it 'changes natural zones,' mixes up nationalities, causes trouble in families, corrupts the public conscience, 'subverts the notion of equity, of justice,' of morality, and what is worse, it destroys free, honest trade, and does not even give in exchange synthetic value, fixed, honest price. It disillusions everyone, even economists. It pushes things so far as to destroy its very self." (Source: "The Poverty of Philosophy," Chapter 2, Part 3, as translated into English at Marxists.org)

Is it true that competition inevitably destroys itself through monopoly?

The idea that competition needs to be watched - that monopolies need to be guarded against - is held by many today, who are otherwise in favor of free markets. Competition is a good thing, many say; but it needs to be monitored. But ... is it true that competition inevitably destroys itself through monopoly?

Capitol Dome

My own history with this idea

I once believed that this was true, and that there was a needful function for anti-monopoly laws, such as the Sherman Antitrust Law of 1890. This was one of the arguments that fascinated me; because if it was true, then that meant that competition could be dangerous if unfettered, which would undermine my faith in the free market if true. Thus, I had to know whether or not this argument held water; and whether competition was something to be celebrated or feared.

Senator John Sherman, the principal author of the Sherman Antitrust Act

My change of heart in this matter

But I have since come to the conclusion that monopolies are not something to be feared - that there are many forces in place to prevent their rise; and which ensure that if they do appear, that they will not have much power. This might seem to be a strange argument, and I acknowledge that I once saw it as strange myself. But I have come to the conclusion that competition doesn't really destroy itself through monopoly - that free-market forces prevent this from happening, and that Mr. Marx exaggerates their dangers and effects.

Pleas for an open mind in the reader

I will present arguments in this blog post to support this point of view, and challenge Mr. Marx's objection to free-market competition. If this seems counter-intuitive to you, I ask only that you entertain my arguments with an open mind; and refrain from judging them until after you've heard them. So with that in mind, I will now turn to my arguments about free-market competition, and use some quotes from Dr. Thomas Sowell to support them. These will show why competition being destroyed through monopoly is not something that we should worry about.

Thomas Sowell

The Marshall Plan: Helping the poor, keeping the peace, and stopping the communists

"If we aim deliberately at the impoverishment of Central Europe, vengeance, I dare predict, will not limp. Nothing can then delay for very long that final civil war between the forces of Reaction and the despairing convulsions of Revolution, before which the horrors of the late German war will fade into nothing, and which will destroy, whoever is victor, the civilization and the progress of our generation."

- John Maynard Keynes, in "The Economic Consequences of the Peace" (1919), Chapter VII, Section 1

There was never a "Marshall Plan" after World War One (like there should have been) ...

It might seem strange to begin a post about the Marshall Plan this way, but the end of the First World War a generation earlier was so poorly handled that a second war became necessary twenty years later, to finish the work of the first. Why did the second war happen? The debate is long and complicated, but there are two themes that often come up as explanations. One is the failure to obtain an unconditional surrender from the Germans, and change their system of government enough to make a second war less likely. The other is the imposition of reparations, or the plan to force Germany to pay for the damages that it had caused. This angered the Germans enough that they went to war again a generation later, largely as revenge for the impoverishment caused by the reparations.

Germans demonstrate against Treaty of Versailles, Reichstag 1919

... but there was a "Marshall Plan" after World War Two, and it may have kept the peace

No one will ever know for sure, but I think that it could have been prevented - that rebuilding Germany, instead of punishing it, would have been a better way to prevent a second war. In short, what they needed was a Marshall Plan; and the Marshall Plan following World War II (which was the plan to provide economic assistance, to rebuild postwar Europe) may have been a large part of the reason that the peace with Germany was kept after the war was over. The Allied troops did what they had to do to stop Germany; but after the war, the best thing they could have done for their countries was to turn their former enemies into friends, and win the hearts of the people so that they would not be likely to invade their neighbors again. They had won the war - now they needed to win the peace, and the Marshall Plan was a large portion of the reason why the peace has lasted as long as it has.

Devastation of postwar Berlin, June 1945

A review of “Reconstruction: The Second Civil War”

"The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations, and claims shall be held illegal and void."

- Fourteenth Amendment to the United States Constitution (ratified 1868), Section 4

It was the end of a civil war in which four million slaves were freed, but which failed to bring true freedom to the people on whose behalf it had largely been fought. It was called the "Reconstruction Era" because its purpose was to rebuild (and heal) a war-torn nation, but which saw almost as much violence and destruction as actual reconstruction. And it brought the vote and other rights to the former slaves of the South for a time, only to see those rights taken away almost overnight when the Reconstruction Era ended in a corrupt political deal, giving the White South almost everything it wanted.

Confederate capitol of Richmond, 1865 (the end of the war)

Reconstruction period characterized by anarchy, chaos, and even (at times) armed conflict

Much has been written about the military conflict called the "Civil War" (fought between North and South), but not as much has been written about the postwar Reconstruction period, which is perhaps even more complex politically than the war itself. Indeed, some historians have even called it the "Second Civil War," because it was characterized by anarchy, chaos, and even (at times) armed conflict. This was between former Union soldiers occupying the South, and former Confederate soldiers joining the Ku Klux Klan and other terrorist organizations, who were trying to undo all that the North had fought and died for.

Actually, communism HAS been tried (and it doesn't work)

Tiananmen Square, China 1989

"China isn't all that bad," some say ...

The critics of communism have long pointed out the failure of states like China and the Soviet Union, which all attempted to implement Marxist doctrine. The variety of liberal responses to this is rather interesting, and the shaky nature of the premises used is rather telling. Some contend that China isn't all that bad, and make grand proclamations about how "developed" it is, and how wonderful things supposedly are there. (Obama has made this argument before - see below.) Even the most cursory examination of the actual evidence shows how wrong this is - China is extremely poor, and their standard of living lags far behind anything in the industrialized West. There is economic development in China, it is true; but it seems to do little to raise the standard of living there; and it's not all that it's cracked up to be.

"China is bad," others say, "but that's because it's 'capitalist' ... "

Others admit that China is poor and miserable, but say that it is capitalist, and thus try to put the blame for its failures on capitalism. Again, even the most cursory examination of the evidence shows that this is not the case, and that China is vastly far removed from a capitalist society, possessing no freedom of the market like that found in the West. It's hard to decide which is more lame - the attempt to find a scapegoat, or their odd choice of which one to use; but regardless of the comparison in lameness, there is plenty of lameness to go around; and their attempt to shift the blame is ultimately illegitimate.