In any Capital course, the question of whether the labor theory of value is still valid is a much discussed issue, one that extends to the third volume, as the transformation problem (which I won’t go into at all) shows. The point of departure for my elaboration is a podcast that is currently popular in Germany that deals with Marx’s Capital, and the reaction by listeners in a Twitter thread. I wanted to keep my response short, but my two observations are too long for Twitter.
In my opinion, Marx does not formulate a substance theory,  because that which is referred to as substance, value, is purely social. He also does not intend to prove that labor underlies value (see his letter to Kugelmann); rather, he poses the question of why labor, under the reign of the capitalist mode of production, takes on the forms of value. In the Contribution to the Critique of Political Economy (an earlier work from 1859), he makes it more explicit by writing that he only examines commodities that are products of labor (and not those that aren’t products of labor – which means conversely that he must be able to explain how something that is not a product of labor obtains a price, such as untilled soil).
Marx is often readily placed in the tradition of Adam Smith and David Ricardo. Yes and no, I’d say. Smith may be the one who wanted to investigate value in abstraction from utility, but he is much closer to a subjective theory of value than Marx’s theory. That’s why the neoclassical mainstream regards Smith as much better than Ricardo. Ricardo is the first one to break with all that. He no longer accepted the then-prevailing circular argument that the value of commodities is, among other things, whatever is paid for wages, whereby the follow-up question must of course be how the value of the means of subsistence is determined. Ricardo is the first economist who traces value back to the expenditure of labor-power, but he got entangled in many contradictions (which not only Marx struggled with, but which Samuel Bailey pointed out with relish; Bailey was a harbinger of the theory of marginal utility, whose elaborations forced Marx to refine his analysis of the value-form). Although Ricardo remained a dominant figure for a long time after his death, his theory would soon enter a crisis – and the “journey backwards” began. Modern neoclassical economics is not interested in value theory, only in price formation. Its predecessor, the theory of marginal utility, at least still attempted a theory of value, but fell behind Smith, ending up right back at use-value. Even John Maynard Keynes could not evade the questions that plagued Marx. Although Keynes was not interested in value theory, he agreed with classical political economy (which he called “pre-classical”) that the “basis” of value was labor (thus distinguishing himself from neoclassical economics): “I sympathise, therefore, with the pre-classical doctrine that everything is produced by labour.”  Keynes even touched upon the question of the possibility of the homogeneity of labor and its measure, but – like the classical political economists – could not solve the problem. Keynes’ break with classical political economy (which he sees in the constitutive relevance of money) thus remains at least ambivalent.
According to an often-formulated accusation, Marx’s theory of value is “unscientific”: it can’t be “experienced” or “measured.” “Unscientific” is a harsh judgment – and one can formulate the question of why this applies to Marx, but not to physics, since no theoretical concept of physics can be observed either. We can observe the movement of bodies and then conclude that certain forces are at play. When this way of viewing things becomes predominant, it is then said that such forces can be observed and measured, which, strictly speaking, is not at all true. Only the movement of bodies is measured, not the forces. With the differing notions of what constitutes these forces, what can be measured also changes: for example, Einstein cleared away Newton’s concept of gravitational force. Something that was previously measurable suddenly no longer existed. Instead of a spectral long-distance effect (Newton), the force is now explained by the curvature of the four-dimensional space-time continuum (Einstein) – not exactly directly accessible to human imagination either, but: if Marx’s value theory is accused of not being scientific, then that should also apply to physics. But the opposite is the case: we need the concepts in order to understand the interrelations. As in physics – where the various paradigms that have asserted themselves as the predominant explanations for certain phenomena represent scientific progress – so in political economy: whereby the neoclassical school is only capable of laughing at Marx (and Keynes constitutes an additional third paradigm).
The replacement of a social theory, or a change in its significance, has much to do with social relations or conflicts, and little to do with scientific progress. Thus Ricardo remained a dominant figure for a long time after his death, but his theory soon entered into a crisis – and the “journey backwards” began, sometimes driven by circles that had no interest in Ricardo’s theory being used by socialists to denounce the exploitation of workers and claim a right to the entire product of labor. At the time, the idea that there were socialist implications to Ricardo’s theory sounded politically transparent, if one listens to what contemporary economists or publicists were saying. It is, according to the economist Samuel Read, a “mischievous and fundamental error” that labor is the source of wealth, and only expresses a hostility to entrepreneurs. Ultimately, according to the geologist and economist Poulett Scrope in 1833, it does not recognize how much time the owner of capital sacrifices for its application. The North American economist Thomas Cooper wrote in 1830: “If these be the proposals that the mechanics combine to carry into effect, it is high time for those who have property to lose, and families to protect, to combine in self-defense.” The economist Mark Blaug, writing from the perspective of the history of theory, summarizes: “It is significant that the writers who attacked the views of the ‘labour theorists’ – Scrope, Read and Longfield – were also among the first to advance the abstinence theory of profit [according to which profit can be traced back to saving]. In this sense, the theoretical innovations of the ‘neglected British economists’ were not unrelated to the nature of the class struggle after 1830.” So the polemics of neoclassical economists against Marx’s theory of value – that it’s ideology, not science – can be confidently held up as a mirror to their own tradition.
Conversely, however, it is also my opinion that a certain reading of Marx does not recognize the break that Marx – albeit insufficiently – marks with classical economics when he is simply placed in the lineage of Smith/Ricardo, and the claim is made that value and abstract labor can be quantified. I would dispute that. Concrete labor can be measured with the stopwatch, not abstract labor. Neither can value. That brings us back to physics and the concepts that make it possible to measure something. In the case of force fields, for example, in order to measure field potential, something like a calibration value has to be determined (for example, how the height of a mountain is determined by the arbitrary assumption that sea level is zero). In order to be able to “measure” value, what is required is: money. Money is the only tangible form of value (the objective form of money also marks a difference from physics, in which concepts do not take on objective form); through money, “the individual carries his social power, as well as his bond with society, in his pocket.”  Unlike Marx, neoclassical economics is only interested in price formation, not in what a price actually is, and why in capitalism money must exist alongside commodities (why not directly measure labor?).
For the economic mainstream and everyday common sense, supply and demand play the central role: if a commodity is in great demand or very scarce, the price is high, since the market quickly indicates how much can be demanded for it. Industrially manufactured products, however, are anything but scarce under capitalism. They are only scarce in terms of money, i.e., in terms of who is able to pay, not as a state of nature, as the mainstream assumes. Value “regulates” social production, and Marx demonstrates that the market authorizes the conditions in which commodities are produced, which is why prices are so important under capitalism: those who pay wages that are too high, or allow work to be performed in too unproductive a manner, will not survive on the market for long. Accordingly, value can indeed be experienced – as a compulsory social nexus. The price form, according to Marx, is the appropriate form for a mode of production “whose laws can only assert themselves as blindly operating averages between constant irregularities.”  The movement of prices of commodities on the market thus assumes very specific social relations, interconnections, and economic mechanisms that make prices necessary in the first place, and determine their movements. Commodity-producing labor is a central determining factor, which was clear to Marx, but which neoclassical economics wants to know nothing about, and which Keynes prevented himself from understanding.
– Translated by Alexander Locascio
- For an overview of substance theories, see Philip Mirowski, More Heat Than Light: Economics as Social Physics: Physics as Nature’s Economics (Cambridge: Cambridge University Press, 1989), 139-192.
- John Maynard Keynes, The Collected Writings of John Maynard Keynes Volume 7: The General Theory of Employment, Interest and Money (Cambridge: Cambridge University Press, 2013), 213.
- Karl Marx, Grundrisse: Foundations of the Critique of Political Economy, trans. Martin Nicolaus (New York: Penguin Books, 1993), 157.
- Karl Marx, Capital: A Critique of Political Economy Volume I, trans. Ben Fowkes (New York: Penguin Books, 1990), 196.