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The Labour Theory of Value

I shall refute it via the medium of interpretive dance.

I’m sure such dancers put a lot of effort into their dancing. Doesn’t mean it is of value to me because I wouldn’t cross the street to watch it.

Or possibly a refutation by carpet. In the Museum of Turkish and Islamic art in Istanbul there is a particular C17th Persian carpet. It is very beautiful and obviously had a lot of work put into it. I have no idea what it’s market value is but it would be worthless to me. It’s about 10×3 metres and I don’t have a room that size.

Which brings on the refutation by sock. Surely a sock is worth less than that carpet? I have seen the world’s largest sock factory on the telly and that is in China (it would be wouldn’t it) and they churn them out at a staggering rate. Obviously a higher rate than them old Persians crafted their carpets. But if you recall the movie Apollo 13 one of items need to fix the scrubbers on the spacecraft was a sock. Sometimes a sock is worth more than any carpet.

Or how about the refutation by late C19th comic novels? Harris or George (I forget which) in “Three men in a boat” gets a right strop on when the three of them picnic by the Thames and he unpacks the cold roast beef only to discover there is no mustard. He then says he would, “Give worlds for mustard”. Admittedly George (or Harris) apparently frequently said he’d give worlds for mundane items. Once on a walking holiday in Switzerland he’d said that about a bottle of beer after having developed a powerful thirst during an Alpine hike and then complained bitterly when charged sixpence for a bottle of Bass.

Or SF stories. Spoiler alert! Paycheck by Phil Dick is perhaps the best story I know about what you might call the “circumstantial theory of value”. Sorry I can’t say more here without giving the plot away too much and it’s a great little story.

So I will call on Commander Bond instead. Picture the scene. Bond has made love to beautiful women, fought baddies, wrecked the car (Q will not be pleased) and swapped wise-cracks with an evil genius. It is now the end of the movie and he alone can defuse the nuclear bomb planted in Trafalgar Square. You know the one encased in perspex with a seven-segment display countdown which is exactly how real nuclear bombs don’t look but whatever!

Now you know the routine. Bond clips the final wire just as the countdown gets to 007, cue the Bond theme, one more wisecrack, one more mild sex scene with Dame Judith looking on via the sat-link with that curious mix of motherly love and disapproval and roll credits.

But perhaps not. What if James Bond had had one too many dry Martinis (shaken, not stirred) the evening before and left his Leatherman on the bedside cabinet of a beautiful Russian spy (of course the Bond franchise not being averse to a hint of product placement we can imagine the lingering shot of it next to the model-turned actress almost showing her breasts). All for the want of a nail and all that! That tool is now the most valuable item on the planet even though it is something that can be bought for a few tens of pounds. But the ever resourceful Commander Bond mugs a Japanese tourist for his tool and this takes six seconds so the countdown stops at 001 and everyone breathes a sigh of relief (not least me because that 007 thing is a bit overdone). The Japanese tourist is handsomely recompensed, has tea with the Queen and the tool is exhibited in pride of place in, say, the British Museum. Even more Japanese tourists from this day on will flock to be photographed next to that because if the bomb had gone off all of the priceless stuff in that wonderful museum would have been scattered to ashes. A humble multi-tool had therefore earned it’s place. Because for one brief, critical, moment it had been in a very real sense more valuable than everything else in that museum.

So I refute this theory with a Persian carpet, a space mission, a Victorian novel, a SF short story and an action hero. Is that too schlocky for you? If so then how about the Bard himself? What was Richard III prepared to give a kingdom for again?


  1. Falco says:

    Great post.

  2. Lynne says:

    That Labour has values, even theoretical ones, is news to me.

    Jack traded his cow for some magic beans, shimmied up the resulting beanstalk and ended up rich. Gordon traded the cow he had stolen obtained by way of greenhouse gas tax from Joe Public, traded it for an axe and chopped down the beanstalk because only Labour has the right to redistribute wealth, or piss it up the wall, in any way it sees fit. Jack ends up in court charged with a hate crime against an unfairly reviled but otherwise harmess people eating minority. Meanwhile Jonathon Porrige praises Gordon’s destruction of the GM frankenstalk before lecturing starving peasants on why the legume must be destroyed rather than end up in the pot.

    For reasons of accuracy the terms ConDems and Labour are interchangeable…

  3. Peter Risdon says:

    This is a good read – and it includes a refutation by turd polishing:

  4. EndivioR says:

    I never leave home without my trusty Bohm-Bawerk.

  5. RAB says:

    A Swiss Army knife is always in my pocket too…

    Classy bit of writing there Nick, as was the piece you linked to Peter.

    It’s simple, Labour is a cost not a value, and it is only a cost if someone is prepared to pay for the goods or services that the labour produces.

    Quick example from my line of work…

    Two artists go into the same recording studio to make an album. Same recording costs, same time spent writing the material, same manufacturing costs of the CD’s, to all intents and purposes an identical product, yet one sells a million and the other ends up in the remainder bins. If those two artists are Elton John and Val Doonigan sings the Black Sabbath songbook, it isn’t hard to figure out who sold the million is it? Value is entirely in the eye of the consumer, not the labour put into producing it.

    It always pisses me off in terms of labour hours when I see some intricate piece of Ivory work on the Antiques Roadshow. You know the sort of thing where there are rings upon rings of consentric balls all inside one another. Must have taken hundreds of hours of painstaking and highly skilled labour to produce, but it’s worth a fiver, because it is ivory and… sob!… an elephant died for that! while a little brown jug from the Ming Dynasty which probably took half an hour to produce, goes for millions. But hey, that’s the Market innit!

    And it’s also why the minimum wage is so utterly wrong.

  6. Paul Marks says:

    One weird thing about the Labour Theory of Value is the history of the theory.

    For example Adam Smith (who is supposed to have invented the theory) understood that there is no “paradox of value” (the thing that supposedly leads to the labour theory of value) when he was young.

    The younger Smith (in his lecture notes) clearly understands that one does not buy “water” or “gems” in the sense of buying all of them.

    One buys a specific amount of water or gems (or whatever) in a specfic time and place – a certain amount of water is going to be worth more (to most people) than a gem if one is dying of thirst in adesert – but worth less if one is in Scotland within easy walk of a stream, and if in the desert the second wagon load of water (after one’s danger of dying from thirst has been taken away) is not likely to be fetch the same price as the first wagon load of water sold when people thought no other water was comming (this is the sort of thing that Carl Menger and others developed into formal theories of subjective economic value and marginal value – each bit of something and its same value).

    And trying to compare the total value of all water to all gems is just silly nonsense anyway (or even “water” to “gems”). However, Smith got very confused later in life.

    In any case David Ricardo (the real inventer of the Labour Theory of Value) was not uncontested.

    Indeed his theory was never accepted by most French economists (the Say family and so on) or by most German economists (not just Gossen – but the mainstream Rau rejected it) – Karl Marx used the theory because it was useful for his political desires (he never refuted Rau, Gossen or anyone else), or Ferrara in Italy or…. well the theory just did not gain much traction outside the English speaking world.

    Indeed even in the English speaking world Richard Whately (Oxford) tears the theory apart in his “Principles of Political Economy” and Bailey formally (and at length) refuted it utterly. By the late 1820s more English speaking economists opposed the labour theoruy of value than supported it – at least to judge by the writings.

    However, then comes John Stewart Mill and his “Principles of Political Economy” (1848) where he just baldly states that theory of value is “settled” – and the settled theory is?

    Why the labour theory of value of David Ricardo and John Stewart’s own dad (James Mill) of course.

    J.S. Mill presents no arguments against Whately and Bailey and the other English speaking anti labour theory of value (let alone the non English economists) he just says the matter is “settled” and lots of students just accepted that – and carried on accepting it in adult life.

    It makes me what to spit. Are people really so braindead than someone saying “this is settled” is good enough for them? Of course the same could be said of Mill’s “On Liberty” (1859) which is just accepted as a wonderful statement of liberalism (because Mill says it is) when it is, in fact, full of very dodgy stuff (such as regulations on what we buy being a violation of liberty, but regulations on what we sell not being a violation of liberty???????? and that “everyone accepts” that local government should provide X, Y, Z, services which was just a freaking lie – and J.S. knew perfectly well that lots of people did NOT agree).

    Anyway by the 1870s there was a recovery in economics – the so called “marginalist revolution” where varous economists (most noteably Carl Menger – founder of the Austrian School) tear the Labour Theory of Value to bits. They utterly refute it. If you doubt me then read “Principles of Political Economy” by Carl Menger (it is in good English translation now), if you can refute it then I will listen to you.

    And this time the vampire is dead – the stake driven through its heart.

    Accept…. (there always has to be that Hammer Horror sequel).

    The Marxists just carried on – as if the certral foundation of their “economics” had not been refuted.

    And some “libertarians” play along to – such as Kevin Carson and his pal Sean Gabb.

    Calling vampire hunters – your help is needed, the monster has risen from the grave.

  7. EndivioR says:

    “rings upon rings of consentric balls”

    Sounds like the work of a well-known hirsute 19th century political economist.

  8. RAB says:

    LOL Endivio!

  9. Stonyground says:

    Not quite shure that this is connected but does the way that electronic goods have become disposable rather than worth repairing depend on this? At one time electronic goods were very expensive to produce and were made from a large number of seperate parts that were bolted together in a very low tech way. That meant that if it stopped working someone with the required knowledge could sell his skills to the owner, identify the broken bit and bolt on a new one and this would cost considerably less than replacing the whole thing. I am actually old enough to remember the transitional period when it was still worth having stuff repaired, but only just, but experience tended to show that the repaired item didn’t stay repaired for very long and had to be replaced anyway. Now stuff is cheap to buy, very reliable and by the time it does expire is usually out of date. We have just thrown out two perfectly good CRT TVs, one has been replaced by a flat one and is just too big and numb to fit into any other room, the other is a portable and it was cheaper to buy a small flat one than to upgrade it for digital.

  10. NickM says:

    “Not quite shure that this is connected but does the way that electronic goods have become disposable rather than worth repairing depend on this?”

    I’m an IT tech. I will spare you the long answer but the short one is an absolute yes. Tech stuff doesn’t matter anymore. Hardware is the bottle the wine comes in, not the wine itself. Or to put it bluntly the list of contacts on your phone is almost certainly worth more to yo at least than the phone itself.

    Or here’s another one. What is the relative value of the pictures on an SD card compared to the digital SLR it is in? Very different if the camera is new and you’ve just been mucking around with it from if you’ve just got back from an honeymoon! But that is a value difference that will not occur to a mugger.

  11. Laird says:

    “I shall refute it via the medium of interpretive dance.”

    What a wonderful first line! I was smiling before I even got into the article proper. (A fine article, by the way.)

    It made me think of Samuel Johnson’s refutation of Bishop Berkeley: “I refute it thus.”

  12. Sam Duncan says:

    Woah! That’s spooky. I just read that bit in Three Men last night, and thought about doing a post. If it had been an hour earlier, I might have knocked off a quick one* and beaten you to it. I’m glad I didn’t; it wouldn’t have been as good. The pint cost five francs.

    (There’s a lot of good stuff in JKJ that I’ve thought of posting about, by the way; especially in the sequel, Three Men on the Bummel. I’ll have to get round to that.)


  13. Sam Duncan says:

    Come to think of it, Laird, it reminds me of Johnson and the coloratura singer. He was in the audience at a concert, squirming, making faces, and generally making it obvious to one and all that he wasn’t enjoying the performance at all, when the woman next to him asked, “Do you not like it, Dr.* Johnson? It’s very difficult, you know”. The great man turned to her and replied, “Would, madam, that it were impossible!”

    *Actually, possibly “Mr.” at the time, but what the hell…

  14. Kevin B says:

    As Paul states so well, this particular piece of nonsense has been refudiated so many times and so comprehensively that in a sane world anyone attempting to assert it would be laughed out of court.

    So why does it survive? Well, certain economic theories beloved of our betters, (academics, politicians and their media lap dogs), won’t work without it. Ergo, the labour theory of value is valid.

    It’s repeated return from the dead should be a warning to those of us who feel that countering repeated false assertions about , for instance, CAGW, by pointing out the facts will change our so called elite’s mind. In fact, confronting them with facts will only lead to louder and more aggressive assertions, and even, if they have the wherewithall, censorship.

    Truth by assertion. The socialist way.

  15. RAB says:

    Coloratura is one of the main reasons I can’t stand most opera Sam, but you’ve reminded me of a cartoon from NME back in the Prog Rock days of the early 70′s…

    A great white hunter, pith helmet, khakis and elephant gun in hand, with his faithful black bearer, pile of washing on his head, and the words Boom da da Boom, da da Boom… written across the top.

    The Great white hunter turns to his faithful bearer and says…

    Magambo, these interminable infernal drums! What do they mean? are they bad news?

    And the Faithful bearer replies…

    Very bad news Bwana. When drums stop… 30 minute guitar solo.

  16. NickM says:

    That nails prog rock for me. That is a post sir!

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  18. Fruitbat44 says:

    Bond would use a Swiss Army knife . . .

  19. NickM says:

    Bond would use whoever paid for the product placement…

  20. [...] The Labour Theory of Value – Counting Cats in Zanzibar [...]

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