I am going through capital, volume 1- and I have a problem. Marx states that the value of a commodity is equal to the socially acceptable labour time necessary to produce that commodity. And that the exchange value, or relative value is the menifestation of that particular value in the use- value terms of the equivalent commodities. INow that we have money, I think that we have a common equivalent commodity, with a particular use vale attached to it (However, there is a chapter on Money following the chapter I am on, so about that I’m not too sure. that’s not relevant to the point in hand).
My question is - How would Marx explain the heterogeous price of the same commodity? The same commodity at Archies, for example, is 10 times the price of the commodity if it were at a roadside vendor. One could say that the price increases because Archies guarantees a good quality product, but that does not increase the socially acceptable labour time required to produce the good, does it? Is this a contradiction to his theory on value?
In my short career as a student of economics I have yet to run across a justification of Marx’s LTV that didn’t amount to a subjective value judgement or groundless assertion.
Hopefully this thread will provide some clarification.
The way I would approach this scenario is to ask whether or not the explanation given fits the world you experience in reality. Now before I go on, I hold that the subjective theory of value is, a priori, the right explanation of value, so you might think I’m biased. I think Marx is a dumbass, but that doesn’t mean I’m right and he’s wrong. But one would expect the proof to be self-evident.
Let’s do a thought experiment. So let’s think about the value of water in different places according to his theory and then according to a “user” of that water.
If I live on the bank of a fresh-water stream relatively high in the mountains. Water is not scarce for me. The labor to produce it is relatively cheap. I walk to the river and I put it in a container and carry it where I need it. If you bring me water from a stream 2 mountains over, it will take a lot more labor to convert that water into a consumer good for my use. But the value to me will be no different than the value of the water in front of me at my stream. You may want to sell it to me for 5$, but I’m guessing I won’t pay more than a penny for it. You’re only saving me a trip to the river bank.
Now, put me in the middle of a desert and I’m dying of thirst and I have $2million in a suitcase. How much of that money do you think I’d be willing to part with in order to drink some water? Let’s say I have a 2 carat diamond. Do you think I’d trade it for a gallon of water? Now let’s say the labor costs to get the water to me in the desert were $1000. Would that change how much I’m willing to spend to get that gallon of water? No, due to scarcity and need, I’ll pay whatever I have to to survive.
Part of the flaw in Marx’s theory starts with a basic misunderstanding of exchange. Any exchange is a mutually beneficial exchange of value. Meaning that each party to the exchange is getting something they value more than they value what they are giving up. This is not something one can argue about it’s axiomatic. They would not participate in the exchange if there wasn’t a higher valuation of what they’re getting, than what they’re giving up. Note this difference in valuation originates in the human mind.
The second flaw is a misunderstanding of the role of time preference in consumption and production. The Robinson Crusoe explanations make it clear, that to consume one must produce, even at the most basic level. The idea of capital is the investment of productive effort in converting natural resources into higher order goods(capital goods) that allow higher levels of production. So when crusoe converts a rock into a basic blade for cutting the skin off of an animal more efficiently than biting through it, he’s invested labor and time into making his production of food from an animal carcass into a more efficient process. He expects to get time back from that effort which he can invest in other ways (ultimately in leisure :)).
Now, he is accurately understanding that a good produced (in order for the market to produce it) as a market good must provide a return back that is deemed valuable to the producer. If Crusoe, finds that one of his attempts at making his food production more efficient doesn’t work, he ends up losing that investment.
In the example of a capitalist vs. the laborer above. The capitalist assumes the risk that the end products when exchanged in the market will not cover his the costs of labor and resources invested in bringing that good to market. In exchange the laborers get a guaranteed income and are not exposed to that risk. But that labor is bought at a discounted rate. Dollars now are worth more than dollars later. This is a feature of time preference. Any good now in hand ready to be consumed is worth more than that same good at a later time.
I hope this helps to explain why Marx had it so wrong. He didn’t understand that value exists on both sides of any transaction, and that goods now are worht more than goods later, the capitalist expects to earn at minimum a return on the investment of capital up front, and in addition will bear the risk of a loss on that investment and a profit on that investment. The best capitalists will be those who make wise investments, and generate profits for themselves. They must provide services which are valued sufficiently to generate such a profit in the market.
They bear the speculative risk of the productive effort, the “laborers” don’t bear this risk, they get cheaper dollars now at a discounted rate and avoid both the risk and the reward of the speculation.
I don’t know of any roadside stands that sell things for 1/10 of the normal price. Where are these? But given that there are some price differences, one must ask why people don’t buy the cheaper one. It must be because they perceive them to have a different use-value, in which case Marx would say that they can have a different value. I don’t see how this objection applies to Marx’s theory of value any more than it applies to marginal utility. Marginal utility says that price is determined by the utility of the marginal unit. Given that both stores sell the same marginal unit for the buyer, why is the buyer willing to pay more for one than the other?
David B: If I live on the bank of a fresh-water stream relatively high in the mountains. Water is not scarce for me. The labor to produce it is relatively cheap. I walk to the river and I put it in a container and carry it where I need it. If you bring me water from a stream 2 mountains over, it will take a lot more labor to convert that water into a consumer good for my use. But the value to me will be no different than the value of the water in front of me at my stream. You may want to sell it to me for 5$, but I’m guessing I won’t pay more than a penny for it. You’re only saving me a trip to the river bank.
This actually supports Marx’s theory of value. The reason that the water isn’t scarce (or nearly isn’t) is because it takes so little labor for you to get it. That’s what scarcity generally refers to–how much labor something takes to get. Thus, if someone were to sell you water, it would have to be for a very low price. Marx’s theory is about socially necessary labor not the actual labor that it takes for any given commodity.
Now, put me in the middle of a desert and I’m dying of thirst and I have $2million in a suitcase. How much of that money do you think I’d be willing to part with in order to drink some water? Let’s say I have a 2 carat diamond. Do you think I’d trade it for a gallon of water? Now let’s say the labor costs to get the water to me in the desert were $1000. Would that change how much I’m willing to spend to get that gallon of water? No, due to scarcity and need, I’ll pay whatever I have to to survive.
Marx’s theory is supposed to explain a market economy where things are produced on a regular basis and where competition exists. He wouldn’t deny that certain one-off situations might follow other rules. It’s a theory not a tautology. The existence of airplanes doesn’t invalidate the theory of gravity. The seller in the scenario you give has a monopoly. Nevertheless, you can see that labor still has an effect. It’s because you can’t obtain (produce) the water on your own that you’re willing to pay anything.
Part of the flaw in Marx’s theory starts with a basic misunderstanding of exchange. Any exchange is a mutually beneficial exchange of value. Meaning that each party to the exchange is getting something they value more than they value what they are giving up. This is not something one can argue about it’s axiomatic. They would not participate in the exchange if there wasn’t a higher valuation of what they’re getting, than what they’re giving up. Note this difference in valuation originates in the human mind.
As this is a tautology, Marx surely wouldn’t dispute it. The question is why are people willing to pay more for one thing but less for another? And why does everyone pretty much pay the same price for a given type of commodity? This is what Marx’s theory seeks to shed some light on.
First of all, I would seriously recommend tackling Capital with the aid of a study guide. David Harvey’s ‘A Companion to Marx’s Caputal’ is a good one, and he has free online lectures to go with it.
How would Marx explain the heterogeous price of the same commodity? The same commodity at Archies, for example, is 10 times the price of the commodity if it were at a roadside vendor.
Marx is talking only of the price when supply equals demand. In other words, of the equilibrium price of a commodity. As far as I understand, Austrians do not even accept the notion of an equilibrium price, so this is an area that may be open to an Austrian critique.
Part of the flaw in Marx’s theory starts with a basic misunderstanding of exchange. Any exchange is a mutually beneficial exchange of value.
Marx makes a distinction between use-value, exchange-value, and value. Of use-value he makes the following comment:
His commodity possesses for himself no immediate use-value. Otherwise, he would not bring it to the market. It has use-value for others; but for himself its only direct use-value is that of being a depository of exchange-value, and, consequently, a means of exchange.[3] Therefore, he makes up his mind to part with it for commodities whose value in use is of service to him. All commodities are non-use-values for their owners, and use-values for their non-owners.
So whilst Marx says there must always be a double inequality of use-value for an exchange to take place, when it comes to exchange-value, he claims that the exchanged commodities must be equal. So for example, if I sell a day of my labour-power for $100 and exchange that $100 for a fancy meal, then it is fair to say that one day of my labour-power is equal to one fancy meal. In terms of use-value, however, it would be true that the fancy meal was of higher value to me than the days work.
Marginal utility says that price is determined by the utility of the marginal unit. Given that both stores sell the same marginal unit for the buyer, why is the buyer willing to pay more for one than the other?
Who says that they do? Location in itself is a differentiating characteristic for a good from the POV of the consumer.
First of all, I would seriously recommend tackling Capital with the aid of a study guide. David Harvey’s ‘A Companion to Marx’s Caputal’ is a good one, and he has free online lectures to go with it.
Already on it. He’s awesome.
Marx is talking only of the price when supply equals demand. In other words, of the equilibrium price of a commodity. As far as I understand, Austrians do not even accept the notion of an equilibrium price, so this is an area that may be open to an Austrian critique.
I thought it had something to do with my inability to completely understand the term- ’ Socially acceptable labour time’. Even Prof. Harvey skips over it in the initial lectures. Did anyone understand the term.
I don’t know of any roadside stands that sell things for 1/10 of the normal price. Where are these? But given that there are some price differences, one must ask why people don’t buy the cheaper one. It must be because they perceive them to have a different use-value, in which case Marx would say that they can have a different value.
The problem being, Marx doesn’t relate the use value to its value. He says that the value of a commodity is equal to the socially-expected labour time expended on the product. And the value menifests itself in the exchange value of the product. They don’t relate the use-value to the exchange value, which is why the problem arose in the first place. I was looking for someone calling me out on my inadequate understanding of ’ socially acceptable’.
And I know of many such roadside stands. In fact, Archies, in my area at least, is known to be pricey but a quality buy.
I want to make clear, if you look at the history of Economic thought, you find Marx attempting to resolve some classical economics issues with some interesting ideas. But that doesn’t make him right. Karl Menger was a contemporary who solved the value problem differently and his student Bohm-Bawerk
I do see kids with Lemonade stands occassionally selling a cup of Lemonade for 1$, which is about 30-50% cheaper than in a restaurant, and 75-80% cheaper than at an amusement park.
Because in reality they’re different goods. You have multiple issues. Trust, Location, relationship with the seller, shipping costs, already at the location buying other goods, so transportation costs and time are reduced factors. If all things are in fact equal, then the consumer would buy the cheaper one. If he doesn’t, you’ll find there is some other aspect to the transaction that changes the way he values the two “identical goods”.
What does “socially necessary labor” mean?
Then you’re missing the point, if a theory explains MORE phenomena (on in this case all exchange phenomena and in fact all human action) in a more satisfactory and cleaner way, doesn’t that constitute a superior theory?
There’s a difference between paying similar or identical prices and valuing a good the same as another person. As Austrian Economics states, the price paid in the market APPROACHES the equilibrium between supply and demand. In fact, with money you have two different supply and demand curves interacting, supply and demand for money, and supply and demand for the good. The price paid is never at the equilibrium point. Every transaction, every action in the market place changes the way things are valued.
The way that value changes is important to marginal utility. What we have to explain is when a person has money to exchange for a specific good, and he’s willing to buy x units of that good, why doesn’t he buy x+1? When you say, “why does everyone pretty much pay the same price for a given type of commodity?” you already have an answer, it’s so clear in the supply/demand graph. We know that people value them differently, that’s why exchanges happen. The buyers (demand side) are seeking the lowest price and the sellers are seeking the highest price. They are doing so with incomplete knowledge and satisfying an end with slightly different goods, cost, location, etc. But those prices approach an equilibrium which is never found. The equilibrium is a fictional point which can never be found and is always moving. It’s the balance point at which the supply and demand are equal.
The part marginal utility explains is why a purchaser stops buying after he’s purchased a certain quantity, even though he COULD BUY MORE! Marginal utility explains that the second quantity is valued less than the first quantity.
If these explanations fit, and do so cleanly, what’s the problem with this explanation? It’s cleaner? Value is subjective, time is a component, it doesn’t try to break value into different components, it explains the different behaviors without introducing a different type of “value”.
Bear in mind, that Austrian Economics, especially Menger, Bohm-Bawerk, and Mises, appears after Karl Marx wrote his works. He was objecting to real issues introduced by classical economists, he rightly identified problems that existed. But that didn’t mean he got the right answers. Menger solved the value problem, Bohm-Bawerk added time and marginal utility, and Mises solved the Money problem and the Business Cycle, thus binding Micro and Macro Economics together. Marx was unable to do this, and to this day mainstream economics has the micro/macro split that they can’t bridge with their mathematical models. Austrian Economics has these answered.
No one has refuted any of these Austrian theories. In fact his various works, Mises answered all of the Epistemological objections that he knew of to a logical science of Human Action, including socialist/marxist critiques. His works Human Action and The Ultimate Foundation of Economic Science are to my mind the most important works in philosophy and social science that have been written. I agree that the Ancient Greeks laid the groundwork for modern science, and developed many of the tools we use today. However, in these works Mises binds us into an Epistemological framework that embraces our use of logic as THE basis for knowledge, that without the use of Logic there is no knowledge. And moreso that behind the use of logic and formation of knowledge, there is this fundamental given of purposeful action from which we cannot divorce ourselves. The logical categories of purposeful (human) action are fundamental to all of our sciences, there is no way out of that box. And thus he embraces it. In doing so, he restores our tools to us. Logic is the right tool. Mathematics does have value and meaning even though it is purely theoretical. Economics can be understood, and is not an empirical science, but a science of logic, the logic of human action. The categories we form in the creation of knowledge are our tools, and our success in action is predicated on their accuracy and applicability to the world we encounter.
The problem with modern economics and politics is that we have these incompatible jury-rigged concepts and theories that need to be wiped out, OR recovered within the logical categories of human action.
Marx’s theory of value fails, because it predicts things which are not true, and because it denies or ignores or fails to explain the fundamental category of human action and it’s role in all economic and social (including political) human existence. IF there is anything in Marx’s work that needs to be recovered or valued and kept, then the way to do so is via Praxeology, if it can be done.
This is what Mises gave us:
There is no way out of the Praxeological box. It’s who we are, and it’s where we operate from.
Marx treats use-value and value as entirely separate. Furthermore, he treats exchange-value as an expression of value, not use-value. He didn’t talk about this explicitly, but I think his theory can be extended if we take into account that money prices represent the exchange-value of the money commodity vis-a-vis the other commodity. In other words, money prices ideally reflect the ratio between the amount of socially necessary labor-time needed to produce the money commodity and the amount of socially necessary labor-time needed to produce the other commodity. This is essentially an elaboration of Marx’s law of value.
Why then does the same commodity have different prices? For one thing, different people may expend different amounts of labor in producing the same commodity. If so, and assuming that each person would want to be compensated for the labor he did expend, the prices of each person’s commodities will be different even though the commodities are the same. But many times, the identity of commodities only goes so far. You can say that a hut and a mansion are both houses, but they’re hardly identical beyond that. Likewise, a Commodore 64 and an iPad are both computing devices, but their capabilities are vastly different.
What commodity do you have in mind when you compare its price at Archies vs. a roadside vendor?
Why then does the same commodity have different prices? For one thing, different people may expend different amounts of labor in producing the same commodity. If so, and assuming that each person would want to be compensated for the labor he did expend, the prices of each person’s commodities will be different even though the commodities are the same. But many times, the identity of commodities only goes so far.
Marx focusses on a kind of common societal homogeneous labour. He distuingishes it from the individual labour, and correlates the value of the labour, and consequestly the price of the commodity, to the socially acceptable labour time that objectively menifests itself in the product.
I quote:
Some people might think that if the value of a commodity is determined by the quantity of labour spent on it, the more idle and unskilful the labourer, the more valuable would his commodity be, because more time would be required in its production. The labour, however, that forms the substance of value, is homogeneous human labour, expenditure of one uniform labour power. The total labour power of society, which is embodied in the sum total of the values of all commodities produced by that society, counts here as one homogeneous mass of human labour power, composed though it be of innumerable individual units. Each of these units is the same as any other, so far as it has the character of the average labour power of society, and takes effect as such; that is, so far as it requires for producing a commodity, no more time than is needed on an average, no more than is socially necessary. The labour time socially necessary is that required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time.
You can say that a hut and a mansion are both houses, but they’re hardly identical beyond that. Likewise, a Commodore 64 and an iPad are both computing devices, but their capabilities are vastly different.
Yes, I agree. Then, even Marx contends we’re talking about different products. The SA labour time is different, hence the value is different.
What commodity do you have in mind when you compare its price at Archies vs. a roadside vendor?
Particularly, the commodity that triggered the question was a teddy bear, which costed Rs. 1500 from Archies, and the same- identical product, albeit with poor stitching and fur quality was brought by me from a roadside vendor at Rs. 100. Everything was same, except the fact the the roadside buy was inarguably of poorer quality.
But I think there are a lot of commodies that fall into this category, the brand rip- offs for one, Levi’s shades and all those products have a vast differentiation of prices.
The dominoes pizza vs a pizza from a local bakery has differentiated price. A levi’s bag and a normal unbranded bag of similar quality will show differentiated prices, won’t they?
With all due respect, I think that kinda talks past my point. My point was that, regardless of that analysis, people who expend labor on things will want to be compensated for that labor, not simply the average labor that’s expended on those things. So that can affect the prices that people ask for in an economy with general commodity exchange (using Marx’s terminology here).
Yes, and that’s a big part of it too. Some people might actually say that a Commodore 64 and an iPad are the same commodity because they’re both computing devices. But they’d be ignoring the obvious qualitative differences between the two.
For one thing, the two teddy bears aren’t actually the same, even if they look the same on first glance. It would be like comparing a Commodore 64 with a computer that looked like a Commodore 64 on the outside, but had state-of-the-art processing hardware inside. For another, differences in the raw materials can affect the price of the finished product. A simple example can suffice:
The same amount of time is used to make two different teddy bears. However, one is made with fur and stitching that took 10 times as long to create as the fur and stitching for the other. Since each teddy-bear maker had to purchase the raw materials on his own, the first teddy-bear maker paid 10 times as much for his fur and stitching as the second teddy-bear maker paid. In order to recover his costs, the first teddy-bear maker should thus charge 10 times as much as the second teddy-bear maker.
The fact that brand-name products command higher prices than off-brand products is actually a piece of evidence against Marx’s entire analysis, if you ask me. From what I understand, there are often no appreciable differences in the labor it takes to manufacture name-brand products as opposed to off-brand products. Why, then, the differences in price? They have to do with differential demand. People demand name-brand products more than off-brand products, to the point that they’re willing to pay more for the former than the latter. That goes to show you that prices are in no way necessarily determined by labor-values.
Finally, keep in mind that Marx’s law of value doesn’t say that commodity prices must be proportional to their labor-values - it only says that commodity prices will tend to be so.
And this is where Marx’s law is inferior to Austrian Economics, because it identifies a correlation of one (supply in terms of labor costs) to the price of the commodity without explaining the correlation of demand to price. It assumes that the commodity price is determined by labor invested, when it’s the desirabillity of the commodity (subjective value) that determines the price by creating a pressure to bring that commodity into the market. The fact that a commodity price tends to correlate with the value of the labor required to bring it to market is caused by the fact that production methods which require a higher input of labor costs AREN’T PROFITABLE, and thus are not pursued. If the demand for the commodity rises (subjective valuation of the end products by consumers) THEN more labor intensive production methods become profitable at the new higher price; the new “equilibrium” price will accomodate more expensive production methods. But this is a side effect of a change in the demand.
Other possible effects are that less labor intensive methods of producing the good become possible through technological advances and suddenly the supply increases due to new less expensive methods of producing the good, the equilibrium price will begin to drop and seek a new equilibrium. Demand will not change, but as the price drops, more demand can be accomodated. Some production methods will become unprofitable at this new equilibrium price, and will cease generating supply. The price will normalize out at a new level.
Austrian Economics explains all of it via subjective value. Marxism only points at part of the overall supply and demand phenomena and argues the phenomena of labor costs IS therefore the explanation of value. But it can’t be because it doesn’t explain the demand phenomena… It can’t.
Oh, I thought you were donning the Marxian hat and explaining the discrepancy in my understanding of his work. Yeah, but then- how does one measure the amount of labour he expends on the product? Wouldn’t he measure HIS labour in relation to the general value of his concrete labour? Why would he assume that the value of his labour is greater than the value of the labour expended by others of the same kind? A person is a small unit in the market system, an insignificant unit in the market operations.
Yeah, that’s what I thought. To be honest, I was expecting people to say how the question is ridiculous and how Marx very clearly addreses that analysis.
Wouldn’t that just make the whole analysis kind of redundant?
And this is where Marx’s law is inferior to Austrian Economics, because it identifies a correlation of one (supply in terms of labor costs) to the price of the commodity without explaining the correlation of demand to price. It assumes that the commodity price is determined by labor invested, when it’s the desirabillity of the commodity (subjective value) that determines the price by creating a pressure to bring that commodity into the market. The fact that a commodity price tends to correlate with the value of the labor required to bring it to market is caused by the fact that production methods which require a higher input of labor costs AREN’T PROFITABLE, and thus are not pursued. If the demand for the commodity rises (subjective valuation of the end products by consumers) THEN more labor intensive production methods become profitable at the new higher price; the new “equilibrium” price will accomodate more expensive production methods. But this is a side effect of a change in the demand.
Other possible effects are that less labor intensive methods of producing the good become possible through technological advances and suddenly the supply increases due to new less expensive methods of producing the good, the equilibrium price will begin to drop and seek a new equilibrium. Demand will not change, but as the price drops, more demand can be accomodated. Some production methods will become unprofitable at this new equilibrium price, and will cease generating supply. The price will normalize out at a new level.
Austrian Economics explains all of it via subjective value. Marxism only points at part of the overall supply and demand phenomena and argues the phenomena of labor costs IS therefore the explanation of value. But it can’t be because it doesn’t explain the demand phenomena… It can’t.
I think how a Marxist would answer this question would be that Marx assumes that every individual unit in a market is a producer. Capital is basically looking at a capitalist economy from a producer’s point of view. What a producer is looking for is finding the exchange value of his product. The abstract nature of labour is what equates the different commodities, and the socially acceptable labour time is what becomes the quantitative value of the labour. When you say that the demand of the commodity increases, in Marxian tongue, it’s not the demand, but actually the VALUE of the commodity that is increasing, the social desirability of the labour enpending on the product that’s increasing, hence leading to an increase in it’s value, hence price. In fact, Marx actually addresses the concerns raised by you in one of his footnotes, he stated that the common problem with such an argument is that it vulgarises the economics, focusses on the appearances rather than the actuality- the underlying reasons for the changes in the prices, for example. For him, prices are merely a symbolic representation of values of the product.
When the productivity increases, for example, the price falls because the socially acceptable labour time falls. The value falls. That isn’t actually contradicting what you’re saying, there is just a difference in approach.
And this is where Marx’s law is inferior to Austrian Economics, because it identifies a correlation of one (supply in terms of labor costs) to the price of the commodity without explaining the correlation of demand to price. It assumes that the commodity price is determined by labor invested, when it’s the desirabillity of the commodity (subjective value) that determines the price by creating a pressure to bring that commodity into the market. The fact that a commodity price tends to correlate with the value of the labor required to bring it to market is caused by the fact that production methods which require a higher input of labor costs AREN’T PROFITABLE, and thus are not pursued. If the demand for the commodity rises (subjective valuation of the end products by consumers) THEN more labor intensive production methods become profitable at the new higher price; the new “equilibrium” price will accomodate more expensive production methods. But this is a side effect of a change in the demand.
Other possible effects are that less labor intensive methods of producing the good become possible through technological advances and suddenly the supply increases due to new less expensive methods of producing the good, the equilibrium price will begin to drop and seek a new equilibrium. Demand will not change, but as the price drops, more demand can be accomodated. Some production methods will become unprofitable at this new equilibrium price, and will cease generating supply. The price will normalize out at a new level.
Austrian Economics explains all of it via subjective value. Marxism only points at part of the overall supply and demand phenomena and argues the phenomena of labor costs IS therefore the explanation of value. But it can’t be because it doesn’t explain the demand phenomena… It can’t.
I think how a Marxist would answer this question would be that Marx assumes that every individual unit in a market is a producer. Capital is basically looking at a capitalist economy from a producer’s point of view. What a producer is looking for is finding the exchange value of his product. The abstract nature of labour is what equates the different commodities, and the socially acceptable labour time is what becomes the quantitative value of the labour. When you say that the demand of the commodity increases, in Marxian tongue, it’s not the demand, but actually the VALUE of the commodity that is increasing, the social desirability of the labour enpending on the product that’s increasing, hence leading to an increase in it’s value, hence price. In fact, Marx actually addresses the concerns raised by you in one of his footnotes, he stated that the common problem with such an argument is that it vulgarises the economics, focusses on the appearances rather than the actuality- the underlying reasons for the changes in the prices, for example. For him, prices are merely a symbolic representation of values of the product.
When the productivity increases, for example, the price falls because the socially acceptable labour time falls. The value falls. That isn’t actually contradicting what you’re saying, there is just a difference in approach.
Do you support Marx’s position? I don’t mean that as invective or as a criticism just for clarification. I support looking closely at his position and understanding what he is saying.
I guess my point is that Marx’s economic theories don’t explain all of the phenomena we see in the market, but Austrian Economics theory does explain all of the phenomena. I think that’s the normal standard for replacing one theory with another. The more important point about doing so is that a faulty theory may come up with conclusions that are demonstrably not true. Now the critiques I’ve heard of Marx, especially Mises, argue that in order for his class theory conclusions to be valid, he must assume things about human beings which are not true. Namely polylogism.
I need to go read Marx’s works so I get a better first hand understanding of what he actually has to say rather than second hand (not meaning you, but later socialists) accounts of what he “meant”. For example, most public discussion focuses on his class struggle arguments, as does most Austrian Criticism that I’ve read (in Mises, Hayek, and Rothbard). But there are other critiques also.
But, in particular here, I’d like to point out that labor value and exchange value were, if I understand correctly, already in place prior to Marx. Classical Economics didn’t understand how to unite these differing and both apparently real views of value. I like to think of this as the difference between wave and particle views of electromagnetic forces in physics. The subjective theory of value explained both phenomena. Marx didn’t explain the difference or unify both into one overarching explanation. If I understand correctly he used class theory as an explanation for the different phenomena, and classified exchange value where it differed from labor value in terms of exploitation of one class by the other.
But to be sure I’m right, I need to go back and look.
This is clearly an inferior solution, mainly because of phenomena it cannot explain without invoking various deus ex machina. Now, one thing we ought to do is make it clear that Marx tried to find a solution because he knew there was a problem. That doesn’t make his solution right. Karl Menger found the right answer for this specific flaw in Classical Economics. Unfortunately, probably due to the political implications of the various Economic theory out there, Austrian Economics is not en vogue yet.
In the end, it’s superiority(or not) as a mechanism for understanding and predicting economic phenomena will be the deciding factor as to whether or not it thrives and succeeds.