Wednesday, March 27, 2013

Developing a Subjective Labor Theory of Value and Price

Recently, I have been spending time debating the so-called "anarcho"-capitalists on theories of labor, value and price. Through this debate, I have learned that one thing is absolutely certain, acting as an unshakable truth, is that labor is the creator of all value. Consider a hypothetical society wherein no entity, individual, collective, or automated, labors. Such a society would be doomed to wither away and die from thirst and starvation, unless this were a society of immortals. Naturally, in order to fulfill our senses of self-preservation, we must consume. What is necessarily consumed can be summed up into a few small categories: food, clothing, shelter. Because of these categorical items being necessarily consumed, they must be attained, which is impossible without a labor. We (the human race) aren't just born with houses already built, with crops and livestock already cooked and served in front of us on platters. They must be cultivated, grown, fed, harvested, cleaned, transported, and cooked to be eaten. And in order to be efficient, we create technologies that allow us to do exactly this with lesser labor, or equal labor with more reward. Expand this to desires, and now we have an entire economy, where not only needs are accounted for, but wants as well. Now we produce pleasurables as well as necessities. We also labor to facilitate production and the fulfillment of needs and desires.

How then, can we come up with a theory to lump all of these services, both production and labor/need/want facilitation? The answer lies at the root of all things: Labor. To labor is to create, modify, or destroy. And we can even group creation and destruction under modification because the laws of conservation of mass and energy explicitly state that matter cannot be created nor destroyed, only changed. The mass of our universe is finite. But I digress. Once a labor has been performed, it is either consumed by the laborer or exchanged in  hopes of attaining a product that is not or cannot be produced by the laborer. Any labor consumed by the laborer without exchange is a labor without social value. The labor is only evaluated in terms of fulfillment, unless it is being used in a cost-benefit analysis to determine whether or not it should be exchanged. Once a laborer decides on exchanging labor, or, more accurately under a capitalistic economy, once someone sells a labor, they evaluate the labor by examining its nature and quality. Is the labor producing a commodity, or is it a service? What of the quality of the commodity? What of the efficiency of the service? What of the market's demand for the supply?

The next logical step after all such questions have been asked is to translate one's sense of the labor's value into a price. Value is incommensurable, though. There is no "unit of value" to use where we can standardize the concept against other standards such as the dollar, for pricing. Thus, when translating value into price, we approximate the value in accordance to our evaluation of a given price expressed as a value. For example, a shirt may have a low amount of value placed on it by the capitalist selling it, so he needs to find a price that fits his evaluation of the shirt (or the labor that produced the shirt). He will come up with many different prices. $7.00, $13.00, $8.00, and so on and so forth until he comes up with an approximate translation. Say a capitalist evaluates the shirt and translates his evaluation to an even $8.00. This doesn't imply that the value translation is literally V = $8.00, but it means that the value is approximately translated to $8.00. The correct algebraic depiction would be V ≃ $8.00. Thus, when an exchange occurs, the values being traded (in this scenario, the values are within the shirt and the money amount of $8.00) are met by approximation.

This means something, though. If you are exchanging a labor for another labor (money, barter, etc.), you are also evaluating the labor you are receiving, thus, so if the other party evaluating the labor to be received from you. Both parties will arrive at the following conclusion is an exchange occurs willingly: The labor I am to receive is of greater value to me than the labor I am giving. Thus, even when we have an "exchange rate" of price to commodity or price to service, the price is not absolutely accurately depicting value, only an approximation of it. A basic summation of this is that $8.00 may have more value to you than it would myself, or on the contrary, it may have more value to myself than it does for you.

To formulate an argument for the theory proposed:
1) All value is created by labor
2) All labor is subjectively evaluated by the seller in order to price effectively
3) All labor is subjectively evaluated by the consumer in order to determine whether an exchange will occur
4) Any exchanges that happen occur on the basis that both parties are gaining something from their position, which is a value approximated just slightly above the value of the relinquished labor
5) No exchange is objectively definable in terms of value
6) A labor's cost is determined through a subjective translation of value to price
7) A labor's value is determined through internal questioning on the utility of the produced labor to the seller
8) All products and services are the embodiment of the labor that created them.
9)Utility is subjective
10) Labor as a value and price is subjective, and always creates social value when a potential exchange is eminent

To conclude, I have devised an explanation for the subjectivity of prices and value that relies on the notion that all value is created by labor, which is subjective in itself. Labor, while subjectively evaluated and priced, will objectively (that is, without fail) create a value when it is to be exchanged on the market. I believe this to be a Subjective Labor Theory of Value and Price.

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