Mises Wire

The Labor Theory of Value Refuted: Nobody Cares How Hard You Work

Except when they do.

Self-help business writer Oliver Burkeman noted last week that customers and employers may not care how much you work.

It’s doubly hard to avoid the Effort Trap because our culture so strongly reinforces its deceptive message: Hard work is ultimately what matters. From childhood, parents and teachers drum into us the moral virtue of effort, and the importance of “doing your best”. Numerous approaches to productivity—even the best ones, like David Allen’s Getting Things Done—encourage a “cross-it-off-the-list” mindset: They’re so preoccupied with clarifying and keeping track of your to-dos, you forget to ask if they’re the right tasks to begin with.

And too many workplaces still subtly communicate to employees the idea that intense effort, usually in the form of long hours, is the best route to a promotion. In fact, though, if you can do your job brilliantly and still leave at 3 p.m. each day, a really good boss shouldn’t object. And by the same token, you shouldn’t cite all the effort you put in when making your case for a raise. Why should a results-focused boss even care?

In a situation where value is measured almost strictly in dollars (i.e., as in the case of profits measured by a large company) an employee that brings in the most revenue or a manager that oversees a profitable division will be rewarded, regardless of how many hours he works. When analysis is done with numbers, “coffee is for closers“  you might say, and not for people who just put in long hours.

As Burkeman notes, American workers, like so many others, mistakenly think that work has economic value in itself, and not the product of the work.

But when value is calculated somewhere other than on a ledger, things start to get more complicated. Burkeman writes:

The behavioral economist Dan Ariely tells the story of a locksmith, who, as he got better at his work, started getting fewer tips, and more complaints about his prices. Each job took him so little time or effort that customers felt cheated—even though, pretty obviously, being super-fast is an asset in a locksmith, not a fault. Each job took him so little time or effort that customers felt cheated.

In 2011, a study [pdf link] by the Harvard Business School researchers Ryan Buell and Michael Norton found that people using a flight-search website actually preferred to wait longer for search results—provided they could watch a detailed progress display to see the site “working hard” to canvas each airline’s database.
So, managers and workers aren’t the only ones who think that more work brings more value. Your customers might mistakenly think that also. As a result of their poor education in economics, the customers end up actually giving value to work because they like to watch people work harder. So, as in the case of the locksmith, the customer isn’t actually valuing the product of the locksmith’s work alone. The customer is also valuing the process of seeing the locksmith work. They might not realize this is what it going in, but it makes sense that people might feel they get more bang for their buck after decades of indoctrination into the idea that more work equals more value. 

But, in this case, the work being performed by a slower, more labor-intensive  locksmith is not more highly valued because he produces a higher quality job than the faster locksmith. The slower one’s labor produces more value because it produces certain feelings in the customer that the customer likes. At that point, the labor no  longer has anything to do with unlocking a lock.

When behavioral economists like Ariely point out these facts, they often think they are making some kind of novel death-blow against classical economics. But all they are doing is illustrating how value is subjective. Moreover, cases like these also illustrate how central planning must always be impossible since people will value everything, including locksmithing, in unexpected and even bizarre ways. If we can’t even guess how people wish to consume their locksmith services, how can we guess how they’ll want to consume transportation services or grocery services?

The same conceit about thinking we can calculate value for others stems largely from the labor theory of value itself. The labor, it is thought, provides us with some external proof of the “real” value of something. But this has never been true. The cultural bias in favor of labor runs deep, though.

Burkeman further notes the role of the old Protestant work ethic:

In America and northern Europe, the roots of the Effort Trap may well lie in the “Protestant work ethic,” the old Calvinist idea that being a hard worker was evidence that you’d been pre-selected for Heaven.

I think Burkeman’s theological definition here rather oversimplifies matters, but the connection to the Protestant work ethic was something that Murray Rothbard investigated more than once. In Rothbard’s work on the history of economic thought, he concluded that the fixation on labor as the measure of value stemmed at least partially from Smith’s obsession with quasi-Calvinist views on the spiritual value of labor. James Mill, Rothbard believed, suffered from some similar prejudices. This lead to centuries of economic error, of course, and apparently continues today in the workplace.

Economically speaking however, labor is only as good as the value it creates for the consumer at the end stage of production, and has no value in itself (unless the worker himself takes pleasure in the work). On the other hand, if you have a supervisor who thinks that long hours are more important than the amount you produce, you may try delicately introducing him to the work of the Austrian economists.

Image source.


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