Saturday, June 25, 2016

Does the Labor Theory of Value make sense today? Did it ever?

What determines the value of anything that is bought and sold in the marketplace?

According to the Labor Theory of Value, it's the amount of labor involved in producing the commodity. Here's one version of the LTV:

A commodity has a value, because it is a crystallisation of social labour. The greatness of its value, or its relative value, depends upon the greater or less amount of that social substance contained in it; that is to say, on the relative mass of labour necessary for its production. The relative values of commodities are, therefore, determined by the respective quantities or amounts of labour, worked up, realised, fixed in them. The correlative quantities of commodities which can be produced in the same time of labour are equal. Or the value of one commodity is to the value of another commodity as the quantity of labour fixed in the one is to the quantity of labour fixed in the other.
Karl Marx, Value, Price, and Profit, Chapter VI
Or there are other versions of the LTV which say essentially the same thing. E.g., supposedly Adam Smith and David Ricardo made similar statements describing what "value" is, and they made the quantity of labor the basic measure of the value.

But does this make sense? What about the value of a used item? What about an item like land, or a rock, or something not "produced" by human labor?

A used item might be more valuable if it is an antique, which might have nothing to do with the labor involved in producing it 200 years ago.

Shouldn't a real theory of "value" be one which takes into account ALL items bought and sold in the market, including antiques and objects owned but not produced by human labor?

Here's a different (and much older) theory of value which makes supply-and-demand the basic measure of value:
The Price of Wares is the present Value; And ariseth by Computing the occasions or use for them, with the Quantity to serve that Occasion; for the Value of things depending on the use of them, the Over-pluss of Those Wares, which are more than can be used, become worth nothing; So that Plenty, in respect of the occasion, makes things cheap; and Scarcity, dear. . . .
But the Market is the best Judge of Value; for by the Concourse of Buyers and Sellers, the Quantity of Wares, and the Occasion for them are Best known: Things are just worth so much, as they can be sold for, according to the Old Rule, Valet Quantum Vendi potest.
Nicholas Barbon, A Discourse of Trade, 1690
I.e, "It's worth as much as it can be sold for." 

Whatever someone's willing to pay. And what the seller is willing to accept. And supply/demand is what determines this.

Why isn't this the best definition of "value" -- (aside from the archaic language)? How does the Labor Theory of Value do any improvement to the above?

Barbon's definition of "value" explains why an antique might be more valuable than a recently-produced item which might work better and required costly labor to produce. It explains how the value of ANYTHING in the market is determined, whereas the Marx definition excludes anything that is not produced in a factory and is not new.

Isn't the correct definition the one which defines "value" in ALL cases of something being bought or sold?

Since the LTV, as Marx presents it, cannot account for "value" in ALL cases, doesn't it have to be rejected in favor of something like the Barbon, which covers ALL examples of anything bought/sold?