Practical political importance of LTV

Fred B. Moseley fmoseley at
Mon Nov 7 09:42:19 MST 1994

Louis Proyect challenged anti-LTVers to explain their views as clearly
as Huberman, and Justing Schwartz responed, in part, as follows:

> Huberman's statement is strictly not a version of the LTV but of the
> theory of exploitation, which depends on the theory of surplus value. The
> LTV in its technical form holds that aggregate commodity prices are
> proportional to their values, i.e. to the labor time socially necessary
> for their production. In the first pass at this Marx stipulates that
> commodities exchange at value, i.e., that price equals value (C, vol. 1),
> but he knows this isn't so and uses this model to make a different point,
> that profits are possible even on this assumption as long as some
> commodity can be "exploited"--he nominated labor power for the candidate
> commodity, and this is Huberman's point. (Although it turns out that Marx
> and Huberman are wrong that only labor power can be exploited. We can use
> corn or oil or steel or any commodity as the value numeraire, and thus get
> a corn, etc. theory of value. The choice of labor is indicated for several
> reasons, but not strictly demanded.) But prices do not equal values, as
> Marx knows, once we get branches of industry with varying capital
> intensity and different rates of profit. Since mobile capital seeks a
> higher rate of profit, capital tends to flee to where the rate is
> highest--for Marx, where capital intensity is lowest (since he thinks
> profits come only from exploitation of labor), and so profit rates tend to
> equalize across branches with different degrees of capitalization. We get
> what Marx calls prices of production, which are market-determined.

This paragraph seems to confuse the LTV as a "holistic" theory of
aggregate prices and as a theory of individual relative prices.  I argue
that the LTV is primarily the former.  The assumption that prices are
proportional to labor-time applies only to aggregate prices.  This
assumption is the basis of Marx's aggregate theory of surplus-value,
the main subject in Volume 1 of Capital, according to which the working
class as a whole is exploited because it produces more value than it is

Volume 3 is then concerned with the distribution of the total amount
of surplus-value (already determined by the Volume 1 analysis) into
individual parts, first across individual branches of production and
then further into the component parts of merchant profit, interest, and
rent.  Since the distribution of surplus-value is accomplished be means
of individual prices, this analysis of the distribution of surplus-value
is also concerned with individual prices.  Individual prices are in
general not proportional to labor-times.  (more on this below).

It is certainly true that one can assume that value is determined by
corn or oil or peanuts or whatever, and deduce from this asumption the
conclusion that e.g. peanuts are exploited.  However, what else can one
explain on the basis of this assumption?  By contrast, by assuming that
value and surplus-value are determined by labor, Marx is able to explain
such important phenomena of capitalism as:  conflict over the working
day, conflict over the intensity of labor, inherent technological
change, periodic crises, etc.  The case for the LTV over these other
contenders is not based on a purely logical argument - that labor is
the only possible source of value and surplus-value - but rather on the
greater explanatory power of the LTV compared to its rivals, especially
its silly versions such as the "peanut" theory of value (not mentioned
specifically by Schwartz, but the logic is the same as the "corn" theory
of value).

Schwartz continues:

> The so-called transformation problem is how to get values back into the
> picture, how to show that these prices are proportional to values. It is
> now known that Marx botched the argument because he lacked the requisite
> math--sorry!--but a Pole named Ladislaus von Bortkiewicz showed in 1907
> that the problem is soluble under certain restricted assumptions. Two
> problems arise: one is whether these assumptions are realistic enough for
> the solution be meaningful as an explanation of real-life economics, and
> there is a great deal of doubt about this. The second problem, perhaps
> deeper, is that as Bortkiweiz himself remarked, when the solution is
> written out the value magnitudes are superfluous, far from being primary.
> So you can calculate values from prices if you want to, but it isn't clear
> why you'd want to. And you can only do it sometimes.

I find it impossible to understand how the "transformation" problem can be
interpreted as an attempt to show that "prices are proportion to values", since the
point seems to me to be the opposite.

I have referred in a previous post to my argument that Bortkeiwicz was wrong, i.e.
that Marx did not "botch" the determination of prices of production.  Instead,
Bortkeiwicz misinterpreted the fundamental logic of Marx's theory.  Marx's "error"
occurs only within Bortkeiwicz's misinterpretation of Marx's logic.  If the logic of
Marx's theory is correctly interpreted, then
there is no "logical error" in Marx's determination of prices of
production in Volume 3.

Schwartz continues:

> Now none of this has much in any obvious way to do with theory of
> exploitation, which is what most Marxists who are not economists care
> about. Here the idea we want to defend is profit for the most part derives
> from the exploitation of labor rather than from capitalist smarts or
> abstinence or good market luck. And here value talk makes sense in just
> the terms that Huberman uses, setting aside the idea that "only" labor
> power produces more value than using a certain quantity of it consumes.
> What value talk does is to call attention to the fact that some people get
> rich selling stuff made by labor of others. For that to be exploitation
> something has to be wrong with their doing that, and value talk doesn't
> help there. We need a theory of freedom or justice which condemns labor
> under these conditions or the resulting distribution of wealth and
> property. But the point of value talk is that the labor market
> redistributes valuable things whose value is created OUTSIDE THE MARKET,
> in production, from the producers to the owners of productive assets, the
> employers of labor. (That is, their value is not a market artifact.) This
> is a deep and necessary and absolutely true thesis. And it has nothing at
> all to do with the "labor theory of value" as a price theory.

This brings us to the main issue of recent postings - can exploitation
be explained without the LTV?  Schwartz's suggested alternative is to argue that
workers produce a surplus (in physical terms) which is
appropriated by capitalists because they own the means of production.
However, this explanation of exploitation applies to all class
societies.  The LTV, on the other hand, explains the precise mechanism
through which exploitation takes place in capitalism - workers are paid
a money-wage and then produce value greater than this wage.  The payment
of the money-wage makes it appear as if there is an equal exchange
between capitalists and workers, and hence no exploitation.  The LTV
dispels this illusion and reveals the reality of exploitation beneath
the surface appearance of equality.  The alternative "surplus stuff"
theory of exploitation does not explain the specific mechanisms of
exploitation in capitalism, and hence cannot dispel this illusion of
equality, because it says nothing or implies nothing about the value
produced by workers in comparison to their money wage.

The alternative "surplus stuff" theory of exploitation also does not
provide a theory of profit, especially a theory of the quantitative
determination of profit.  The LTV explains both profit and exploitation,
i.e. it explains exploitation be providing a theory of profit.  This
theory of profit is in turn used to explain the important phenomena of
capitalism mentioned above.

Therefore, I conclude that the LTV, although much-maligned, remains
a superior theory compared to its rivals.

Fred Moseley


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