Marx, Abstract Labor, and AbsurdityTags Production TheoryValue and Exchange
Many readers will be familiar with Robert Paul Wolff’s In Defense of Anarchism, a brilliant criticism of the state’s authority that arrives at conclusions similar to those of Lysander Spooner. Wolff is probably best known for his work on Kant, but he has published penetrating accounts of Marx and Rawls as well. He thinks that Marx offers an analysis of capitalism that is largely correct, and in a recent series of posts on his blog, The Philosopher’s Stone, he offers a characteristically incisive way of looking at Marx’s labor theory of value. I’ll try to show that, however ingenious it is, Wolff’s interpretation does not rescue Marx from absurdity.
Wolff lets us know his high opinion of Marx’s Das Kapital here:
I have devoted extended periods of time to the study and interpretation of the writings of two great thinkers: Immanuel Kant and Karl Marx. To the thought of each I devoted two books and a number of lengthy essays. Kant was my first love and my first great challenge. When I had come to terms with his thought, I was sure I would never encounter another thinker as difficult to master or correctly to interpret. However, when I plunged into Das Kapital three years after publishing my second book on the philosophy of Kant, I found myself confronted with a task even more demanding and multidimensional than that posed by the Critique and the Grundlegung [Groundwork of the Metaphysics of Morals].
As Wolff explains, Marx took over from Adam Smith and David Ricardo the notion that supply and demand aren’t fundamental in determining the price of commodities, i.e., goods produced in mass quantities and sold on the market. Changes in supply and demand will cause prices to fluctuate to restore equilibrium, but this equilibrium is determined by a “natural price” that underlies supply and demand and acts like a Newtonian gravitational force in drawing market prices to it. This natural price is the cost of labor: commodities will tend in equilibrium to exchange in proportion to the labor time needed to produce them. To the objection that capital goods are also costs of production, Ricardo replies that capital goods can be considered “stored-up” or frozen labor, so it remains true that labor costs determine price. There’s a complication involving rent that I won’t go into here. Rent according to this theory isn’t a cost of production; it is a payment capitalists make out of their profits to landlords.
As Wolff notes, there are severe problems with this theory:
In the simple case to which Marx [ha]s restricted himself in volume 1, commodities according to Ricardo exchange in proportion to the quantities of labor required directly or indirectly for their production, or what came to be called “embodied labor.” But if we think about that for a moment we realize there is a very elementary problem. Suppose that we are talking about the exchange of 10 yards of woolen cloth for a wooden chair. The labor required to produce the woolen cloth is quite different from the labor required to produce the chair. Making the woolen cloth involves shearing sheep, washing and drying wool, carding the wool, spinning it into thread, weaving the thread into cloth, and cutting the cloth into a piece 10 yards long. Making the chair involves sawing wood, turning it on a lathe, sanding it, nailing it or joining it with pegs, and so forth. Clearly if we are to compare the labor that produced the cloth with the labor that produced the chair we must abstract from all of these differences. So at the very least, we must be claiming that the wool and the chair exchange in proportion to the quantities of abstract labor required for their production…. But even this is not enough to capture what is mysterious about Ricardo’s seemingly transparently clear theory. For not all abstract labor counts when we are comparing boots and linen or wool and chairs. Suppose that a chair has been made by an apprentice carpenter who has not yet learned the trade. That young man … might spend 10 hours making a chair that a master carpenter could make in five. The buyers of chairs in the market would laugh at a carpenter who charged a higher price for chair because it had taken his apprentice longer to make. Only such labor as is “socially necessary” at any given stage in technological development counts when calculating the relative price of goods in the marketplace. Indeed, the problem is more complex even than I have suggested. Suppose that the carpenters making the chairs are averagely expert in their woodworking skills but find themselves under the direction of a novice manager who has not yet mastered the technique of combining the labor available to him in an averagely efficient manner. The time spent by the carpenters making the chairs may be devalued not because of any lack of skill on their part but because of problems elsewhere in the firm.
Thus, when Ricardo says that in the simple case (remember, we are still in volume 1[of Das Kapital] goods exchange in proportion to the quantities of labor directly and indirectly required for their production, he must be interpreted as actually meaning (although he himself failed to recognize this fact) that goods exchange in the market in proportion to the quantities of abstract socially necessary labor embodied in them.
You might think that this is sufficient to show that Marx is using the wrong theory. Wolff does not think so. He points out that the first few chapters of Das Kapital are written ironically, in a dense and difficult style. Marx is fully aware of the difficulties involved in “abstract labor,” but it is precisely the absurdity of capitalism that it compels capitalists and workers to look at value in this way:
Such talk is, Marx argues, thoroughgoingly mystified but, he insists, we must not commit the error of supposing that it is therefore mistaken. Quite to the contrary…. Marx writes “the categories of bourgeois economy consists of such like forms. They are forms of thought expressing with social validity the conditions and relations of a definite historically determined mode of production, viz., the production of commodities. The whole mystery of commodities, all the magic and necromancy that surrounds the products of labor as long as they take the form of commodities, vanishes therefore, so soon as we come to other forms of production.”
What does Marx mean when he says that this absurd form of thought has social validity? His meaning is profound and goes to the heart of his critique of capitalism. The form of thought whose absurdity he has just revealed has social validity both on the side of the capitalist and on the side of the worker. This mode of thought has social validity for the capitalist because only by conforming his thought and action to it can he function in a competitive marketplace and earn the going rate of return on his investment. If he makes the mistake of thinking of these commodities actually as useful objects made by the labor of real men and women and designed to satisfy human needs, he may become distracted by the reality of the factory or workplace and find himself lavishing more labor on a fabric than will be justified in the market by the price he can get for it…. On the side of the workers, the necessity that they stifle their natural desires, instincts, and creative efforts in their labor in order to work steadily, efficiently, and in a fashion that produces an adequate profit for their employers will of course have a severely destructive effect on their human being.
Though this is ingenious, it rests on a mistake. It isn’t the capitalist market that compels capitalists and workers to think absurdly in units of abstract labor. It is the false labor theory of value that does this. Without the assumption of a natural price that explains what is “really” going on beneath the veil of supply and demand, there is no mystification involved in capitalist production. As Murray Rothbard says, “[V]alues always fluctuate, and there is no invariable fixed base of value from which other value changes can be measured.” (Classical Economics, p. 91) In the Austrian theory of subjective value, there is no resort to this wrong assumption. Wolff at one place suggests that the notion of equilibrium price that modern economists use shows that natural price has not been abandoned, but this isn’t correct. The use of equilibrium concepts, such as Mises’s evenly rotating economy, doesn’t introduce anything other than subjective values in determining prices.
Marx, and Wolff following him, has projected the absurdities of the labor theory of value into the capitalist system of production and on that basis declares capitalism absurd. We should bypass this tangle and instead accept the clear analysis that Austrian theory provides. Austrian economics, to anticipate a rejoinder, does not rest on the unrealistic assumptions of neoclassical economics about which Wolff has elsewhere complained. He would no doubt respond that Austrian theory disguises the realities of capitalists’ exploitation of workers, but it is the false labor theory, not capitalism, that generates an “exploitation” that doesn’t exist.