Lucius has been poorly recently, which has required some trips to the vet and therefore a bill of a size that only David Davis could negotiate*. This has made me wonder: is there more to be said for the labour theory of value than we like to think?

For a long time, I’ve not really cared about this theory one way or the other. This is partly because I’ve not bothered much with questions of value; partly because, as John Roemer has shown, we don’t need (pdf) a labour theory of value to suggest workers are exploited; and partly because the main Marxian charges against capitalism – for example that it entails relationships of domination – hold true (or not!) independently of the theory.

As I approach retirement, however, I’ve begun to change my mind. I think of major expenses in terms of labour-time because they mean I have to work longer. A trip to the vet is an extra fortnight of work; a good guitar an extra month, a car an extra year, and so on.

When I consider my spending, I ask: what must I give up in order to get that? And the answer is my time and freedom. My labour-time is the measure of value.

This is a reasonable basis for the claim that workers are exploited. To buy a bundle of goods and services, we must work a number of hours a week. But taking all workers together, the hours we work are greater than the hours needed to produce those bundles because we must also work to provide a profit for the capitalist. As Marx put it:

We have seen that the labourer, during one portion of the labour-process, produces only the value of his labour-power, that is, the value of his means of subsistence…During the second period of the labour-process, that in which his labour is no longer necessary labour, the workman, it is true, labours, expends labour-power; but his labour, being no longer necessary labour, he creates no value for himself. He creates surplus-value which, for the capitalist, has all the charms of a creation out of nothing. This portion of the working-day, I name surplus labour-time.

For Marx, value was socially-necessary labour time: David Harvey is good on this.

From this perspective, exploitation and alienation are linked. Workers are exploited because they must work longer than necessary to get their consumption bundle. And they are alienated because this work is unsatisfying and a source of unfreedom.

Now, I’ll concede that many people hate the labour theory of value. One reason for this is that many discussions of it quickly become obscurantist – as if “value” is some mystical entity embodied in commodities.

This, though, certainly was not Marx’s intention. Quite the opposite. He intended his theory to be a demystification. He wanted to show how what looked like relations between things – the exchange of money for goods or labour-time – were in fact relations between people. And unequal ones at that.

What’s more, the charge of obscurantism against Marx is an especially weak one when it comes from orthodox economics. Much of this invokes unobservable concepts such as the natural rate of unemployment, marginal productivity, utility, the marginal product of capital and natural rate of interest – ideas which, in the last two cases, might not even be theoretically coherent.

In fact, the LTV is reasonably successful by the standards of conventional economics: we have empirical evidence to suggest that it does (pdf) a decent (pdf) job of explaining (pdf) relative prices – not that this was how Marx intended it to be used.

You can of course, think of counter-examples to the theory. But so what? in the social sciences, no substantial theory is 100% true.

I suspect that some of the animosity to Marx’s use of LTV arises because of a resistance to the inference that Marx drew from it – that workers are exploited. This issue, however, is independent of the validity of not of the LTV. For example, Roemer thinks workers are exploited without believing in the LTV, and Smith believed the LTV without arguing that workers were exploited.

By the (low) standards of economic theories, perhaps the LTV isn’t so bad.

* He seems to be recovering now. The vet is also expected to make a full recovery eventually.