Critics of the Labour Theory of Value attack it from the argument that it does not explain the value of natural commodities such as rocks and diamonds. This article explains how it ties in.
One common vector of argumentation that I see many critics of the LTV take, is to attempt to move the discussion away from commodities created via human labour and to commodities that are naturally occuring on Earth, and then claim that the LTV cannot explain how they can have value. They will bring up diamonds, rocks or simply breathable air to make their point and occasionally change to another commodity if their previous example didn’t work so well.
The obvious trend in all of this of course is that they will avoid using a human made commodity for their argument by any means necessary. Even when you specifically bring up cars or bicycles and other such examples, they will be summarily ignored and the discussion will be shifted once more to natural ones.
The critic then is attempting to use a strawman claim in order to make a Reductio ad absurdum and hopefully confuse the LTV proponent long enough to finish them off with Marginalism. What the critic here fails to grasp is that the LTV is explicitly related to commodities created through human labour. It was never intended to say that human labour is what creates the objective value in everything in the universe, but rather that it is what creates the objective value in everything human-made.
Now it is true that naturally occuring commodities do have a subjective value which occasionally facilitates their exchange. All of this ties perfectly to marginalism which is not at all incompatible with the LTV. However this only explains why something very useful (like air) does not need to be exchanged to get or why something useless to most people can have a far higher price than its cost (i.e. diamonds).
However it is also true that human labour does play a role in defining the exchange value of everything. Namely, since human labour is required to bring any natural commodity to the market, then the equilibrium price (around which the market prices move) is always equal to as much socially necessary labour time required to prepare a commodity for the market.
Lets get an example: The diamond which seems to be a favourite of marginalists of course.
The diamond generally has a very high exchange price which we will hear that the LTV cannot explain as no human labour went into creating a diamond. That is undeniably true. However that does not mean that no human labour went into bringing a diamond to the market. They are not just laying around you know.
The diamond has to be found and dug up (most likely in a horrible Congo mine). That requires quite a lot of labour time from people digging and searching all over the mine. Since this is generally done is inhuman conditions (to achieve low costs), this requires a strong security around the mine to protect against a miner’s uprising, defending against foreign warlords and making sure the workers cannot smuggle diamonds out. Then the gems needs to be transported to the developed nations and an expert needs to cut and prepare them for selling.
All of this is quite a substancial cost which tranlates directly to the price the diamond will fetch at the jeweler’s. This is the equilibrium price of the item around which the selling price will fluxuate depending on how high the demand for diamonds will be. Lacking passive or active coercion, the owner of a diamond will never sell one for less than this price.
We can see then, that while human labour does not play a role in the creation of the objective value of a natural commodity, it does still play a role in defining the exchange value it will achieve. When you have a natural commodity that is not abundant (like air), it is the socially necessary labour time that will define the cost of it and thus the minimum acceptable price.
There is one last point I’d like to raise. While it is true that human labour does not create the objective value in natural commodities, in an abstract sense we can consider that labour in general is what creates it. It’s simply not from humans. What I mean is that in order to have anything other than random collections of atoms in space, something needs to be happening to put them in a human usable form. That something can either be human labour or “natural labour” (Bear with me, this is a concept I am thinking of just now).
Now to give you an example let’s take human breathable atmosphere. One could say that this has a very high subjective value as everyone needs to breathe but this value can’t possibly be linked to the LTV as no human labour was extended to achieve it. And this is true. The zero human labour that is necessary to achieve a breathable atmosphere is precisely the reason why the air if free. If on the other hand our breathable oxygen was running low and we needed to run some kind of oxygen factory to increase it, then certainly all of us would be paying for it, at least via some kind of tax.
However, while the breathable atmosphere does not need human labour to get, does not mean it does not need any labour, as is obvious by looking at any planet other than the Earth. What happens in this case is simply that we have inherited as part of our ecosystem an “automated factory” in the form of plant-life that produces abundant oxygen for everyone. Unfortunately for the Capitalists, the nature of this “factory” and the atmosphere make it impossible to be capitalized (or homesteaded) and by necessity it is socialized.
Breathable air is provided to everyone according to his needs.
- The LTV is meant to explain the value of human-made commodities
- Nevertheless, LTV can ties directly to the exchange value of non-abundant natural commodities as well
- Even naturally occuring commodities require a form of “labour” to be created. This explains their objective value, even though this labour is not exerted by humans.
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- The commoditization of labor (barefootbum.blogspot.com)