Here endeth the labour theory of value

Mr. Chakrabortty has a write up of an interesting little experiment on e-Bay.

Yet monetary cost and true worth are not the same thing at all, which is one reason why accountants, loss-adjusters and Alan Yentob all come in for such stick. It\’s also why Rob Walker and Josh Glenn were able to conduct one of the most life-affirmingly cheeky studies I have seen for ages.

Two American writers interested in how objects are valued, Walker and Glenn have spent the last couple of years flogging stuff on eBay. I say stuff, but what I really mean is utter tosh: an old Pez dispenser, an ugly mug that last saw light of day in 1976, an abandoned jam jar of marbles. This is the sort of loft-dwelling detritus your mum wouldn\’t even ask your permission before chucking away. Yet each item they put on sale on the internet was accompanied by a story meant to add a bit of context or interest.

Paired with their new biographies, here\’s what happened: a Utah snow globe that originally cost 99 cents fetched $59; an old shot glass was snapped up for $76, and even the jar of marbles took in $50. In all, 100 items that cost the authors $128.74 were sold for a total of $3,612.51.

The secret was that they attatched stories to these homely items and it was the story which raised the prices on offer.

Now it is an interesting story but of course Mr. Chakrabortty, being the economics leader writer for The Guardian, entirely misses the point of it.

This kills the labour theory of value stone dead, buries it at the crossroads, head cut off and a stake through its heart. It does the same to any theory of \”true value\”, from Plato through to Marx, by way of Thomas Aquinas and even Adam Smith\’s flirtations with the ltov.

And in the process it kills the major underlying moral justification for communism, many flavours of socialism and similar nonsense from the right (Poujadism for example) and even retail price maintenance schemes.

The exchange value of an item does not depend upon the labour that went into its manufacture. Nor the resources used to make it. Nor any other calculable absolute: it depends entirely upon the always subjective and often arbitrary value put upon it by the participant(s) in the exchange. And that\’s it, there is no other possible method of valuation.

Thus things are worth what they can get in a market. There is no other possible or achievable method of calculation.

And yes, this does mean the value of the environment, the value of life, the value of a nesting area for wading birds and so on. They are worth what people value them at, no more, no less. A statistical life in the US is worth $5-$8 million, because this is what, by their actions, people value such a statistical life at. A statistical life in DR Congo is worth less than that because that is what people value a statistical life in DR Congo at.

We can certainly say that the moral value of a life in the UK is equal to the moral value of one in DR Congo. But we cannot say that the economic value of such is: for by their very actions human beings do not place equal economic values on the two. Similarly we can say that, as many environmentalists do, that the value of publicly owned forests is huge, vast, far greater than any amount that could be paid for them. And that might even be true of said environmentalists. But it\’s not true of humanity in aggregate and thus is in fact not true.

For the value of an item is its exchange value: no more and no less.

11 thoughts on “Here endeth the labour theory of value”

  1. Hmm. If I sell some tat worth pennies for £100 is it ‘worth’ £100? More to the point can the person who’s just paid £100 sell it for similar? Most likely not, unless he can find a bigger idiot than himself.

    I would say that the true worth of an item is not what the biggest idiot will pay but a value at which you should always be able to find a buyer, should you wish to sell it.

    If you asked 100 people what something was worth, I reckon the true value would be around the 80th highest value.

  2. Jim, I disagree. If you ask 100 people for the value of an item, it has 100 different values.
    The value at which the exchange takes place is up to the seller and the vendor. When both parties agree, then the true value is determined.
    See Tim’s earlier articles on ‘installation art’ and sculpture, which have been valued at the price of their components.

    You may find it advantageous to ‘value’ your goods at 80% of the max valuation, but that is simply your choice in order to get you goods sold.

    The true value really is what the market will bear. Some items are stacked high and flogged cheap, others are unique and can command any price.

  3. Apologies that I mainly pipe up these days to disagree with you, Tim. But this evidence doesn’t prove anything of the sort (any more than it proves what Chakrabortty is saying). It certainly doesn’t prove that no other theories of value are possible.

    It is in fact entirely consistent, for example, with a theory of value which says that all things have the value that some stupid psychic squid attaches to them. It’s only inconsistent with theories of value that claim that while the ‘true’ value of something is not the market price, this value will always or mostly be similar to the market price. And there aren’t too many such theories around.

    In fact, the claim made by lefties who are interested in this sort of thing is that the true value of a thing is rarely reflected in the market price, which is why (or is another reason why) the state has to step in to control prices, so that the market price does better reflect the ‘true’ value.

    You don’t need this extreme claim that the only value a thing has is what someone is willing to pay for it ( a claim that PJ O’Rourke used to make a while back). You only need to say that its *monetary* value is just what someone will pay for it. (And also that there is no such thing as a ‘true value’.)

  4. “Thus things are worth what they can get in a market. There is no other possible or achievable method of calculation.”

    I’m not sure this is always the case as people are cash constrained. So they might value something very highly but not have enough money to pay for it.

    I’m very sceptical about valuing lives because of this. Most of us, most of the time, value our lives pretty near $infinite.

    Tim adds: No, we don’t. If we did we would never undertake an activity that increased our chances of dying, would we? And yet we do undertake such activities all the time. From rock climbing to eating chocolate, smoking cigarettes and working as trawlermen. That’s exactly how we get to the $5-$8 million valuations. By their actions, how do people value their lives?

  5. P.j. O’Rourke didn’t say a thing was worth only what someone was willing to pay for it, he merely pointed out how much misery has historically been entailed in behaving otherwise.

  6. Stephen: the criminal element adds radical chic, and thus makes it all seem terribly exciting to the kind of people who read the Guardian.

    William: the only way to value the labour that went into making up the stories is by what people were willing to pay for them, so it is still dependent on the subjective and arbitrary judgements of the buyers.

  7. “If we did we would never undertake an activity that increased our chances of dying, would we?”

    But this just shows that there’s not a stable valuation. Smokers smoke knowing it increases the chance of dying early, but I bet most patients with terminal cancer would pay all or nearly all of their savings if there was a drug that could cure them.

  8. If the made up story attached to each object is nothing more than what is in the description of each auction what is going on? The stories are given away (as you can read them without paying for them) but someone voluntarily puts a value on it.

    Is this along a similar line to Radiohead’s download walbum that shoppers could pay whatever value they thought appropriate?

  9. >P.j. O’Rourke didn’t say a thing was worth only what someone was willing to pay for it, he merely pointed out how much misery has historically been entailed in behaving otherwise.

    If he didn’t say it, PJ heavily implied that that’s what he believed, at least around that era.

    “Behaving otherwise” doesn’t distinguish various views, for the reasons I gave above. For instance, I don’t believe the value of item is just its exchange value, as I think an item can have various values. And I behave in ways that confirm that belief. But I don’t behave in the left-wing ways that PJ and Tim (and I) condemn. As I said, there’s a difference in thinking that an item has values other than its exchange price, and thinking that the price of an item must be set by some non-market mechanism, such as the state.

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