A labor theory of value is any theory according to which the economic value of a commodity is related to the labor required to produce it. Labor theories of value—like all theories of value—attempt to explain that by virtue of which we can exchange commodities in certain proportions, e.g., x beds = y houses = z dollars, where x, y, and z are numbers, and the “=” means “is worth”. While the specific sense in which labor is meant to explain value varies across different labor theories of value, Marx argues in the first chapter of Capital Volume 1 that the substance of value is what he calls abstract labor, and the measure of value is what he calls socially necessary labor time. Yet there have been many critics of Marx’s labor theory value, amongst them Carl Menger who, in his 1871 work Principles of Economics, writes:

There is no necessary and direct connection between the value of a good and whether, or in what quantities, labor and other goods of higher order were applied to its production. A non-economic good (a quantity of timber in a virgin forest, for example) does not attain value for men if large quantities of labor or other economic goods were applied to its production. Whether a diamond was found accidentally or was obtained from a diamond pit with the employment of a thousand days of labor is completely irrelevant for its value. In general, no one in practical life asks for the history of the origin of a good in estimating its value, but considers solely the services that the good will render him and which he would have to forgo if he did not have it at his command…The quantities of labor or of other means of production applied to its production cannot, therefore, be the determining factor in the value of a good. Comparison of the value of a good with the value of the means of production employed in its production does, of course, show whether and to what extent its production, an act of past human activity, was appropriate or economic. But the quantities of goods employed in the production of a good have neither a necessary nor a directly determining influence on its value.

Yet Menger’s critique in this particular quote fails. Where he does not beg the question against Marx’s labor theory of value, Menger misrepresents the theory he is attempting to refute. But not only that, his own account of value falls short of the requirement any theory of value must meet, namely, to explain that by virtue of which commodities exchange in certain proportions. All this is evident from examining the quote piece by piece.

Menger begins his criticism by flatly denying his opponent’s position:

There is no necessary and direct connection between the value of a good and whether, or in what quantities, labor and other goods of higher order were applied to its production. A non-economic good (a quantity of timber in a virgin forest, for example) does not attain value for men if large quantities of labor or other economic goods were applied to its production.

It may be true that “there is no necessary and direct connection between the value of a good and … labor”, yet this is precisely what a refutation of the labor theory of value must prove. Assuming it from the start begs the question in an obvious way.

Menger clarifies his objection when he claims (again without argument) that the way in which a particular natural object is brought from the earth has no bearing on its economic value:

Whether a diamond was found accidentally or was obtained from a diamond pit with the employment of a thousand days of labor is completely irrelevant for its value.

As is, this statement is correct, though it has no bearing on Marx’s labor theory of value. Marx never argues that the value of a (particular) diamond is determined by the way in which it is found or produced. On the contrary, Marx argues in Section 2 of Chapter 1 of Capital that the value is determined by the socially necessary labor time required to acquire or produce the type of thing under consideration. So it makes no difference to Marx how much particular labor is involved in acquiring this one particular thing, but rather how much labor is required on average, given the average means of production of the entire society, to acquire or produce objects of that type. So indeed, Menger is right to assert that the value of a diamond is indifferent to whether it is found by the side of the road or dug from a pit, but Marx never claimed anything to the contrary anyway, so this is a blatant straw man.

In the remainder of the sentences of this section, Menger goes on to introduce his own positive theory of value which he claims comes from the “services that the good will render”:

In general, no one in practical life asks for the history of the origin of a good in estimating its value, but considers solely the services that the good will render him and which he would have to forgo if he did not have it at his command…The quantities of labor or of other means of production applied to its production cannot, therefore, be the determining factor in the value of a good. Comparison of the value of a good with the value of the means of production employed in its production does, of course, show whether and to what extent its production, an act of past human activity, was appropriate or economic. But the quantities of goods employed in the production of a good have neither a necessary nor a directly determining influence on its value.

The first sentence has an element of truth in it. It is true that in “practical life”—in ordinary, day-to-day experience in which the majority of us use things or go to the store to purchase things that we can use—none of us takes into account the “history of the origin” of the things we use or buy when considering the “services” such “goods” render us. It is worth pausing for a moment to consider the sorts of “goods” we encounter in “practical life”. They are really distinct objects, and they are really distinct objects because they possess really distinct qualities and so serve really distinct ends. A truck is a truck and not a swimming pool because a truck has wheels, a large engine, an exhaust system, etc., and a swimming pool has concrete walls, a diving board, and water in it. Because a truck has a large carrying capacity and a powerful engine, we use it to haul loads, but because a swimming pool can hold water, we swim in it. By virtue of these vastly different qualities, we use trucks and swimming pools to pursue vastly different ends. If two things have the same qualities and serve the same ends, they’re either in fact the same thing or they are two of the same sort of thing, in which case it makes sense to say they are equivalent. But if they have different qualities and serve different ends, it makes no sense to say they are equivalent from the practical point of view, because we do not incorporate them in the same way in the same sorts of practices, nor can we. They have different “values” for our practical activities. Marx called this type of value “use-value”. He meant the value things possess by virtue of having in themselves distinct qualities and ends. Since from the practical point of view, things are really distinct in their beingness by virtue of their qualities and ends, we might say, following Marx, that such things do not just possess use-value but are in fact use-values.

Menger claims labor plays no role in our estimation of use-value, i.e., value when conceived from the point of view of practical life, but this is not entirely accurate. It is true that under ordinary circumstances we do not think of the maker of a car while we’re driving it to the grocery store any more than we consider the maker of a cup when we are enjoying drinking the tea from it. However, if the product is defective or breaks at some point during its use, we do consider the maker of the thing, usually in a negative way. This is because the maker of the thing—whether it be a person, a machine, or a company—is in some sense a cause of the usefulness of the thing. (Aristotle designated this the “efficient” cause of the thing, as distinct from the formal, material, and final causes.) It might sound odd to our modern ears to hear the labor that goes into a thing be called its “cause”, but if we keep in mind that the skill or lack thereof with which a thing is produced has a direct bearing on whether or not the thing is useful and can fulfill its appointed task, and if we keep in mind that, from the practical point of view, the beingness of a thing is directly tied up with its ability to fulfill its ends, then it sounds less strange when we say that the labor is in some sense directly responsible for the intrinsic practical worth of the thing. Perhaps this is what Menger has in mind by “appropriate” when he says, “Comparison of the value of a good with the value of the means of production employed in its production does, of course, show whether and to what extent its production, an act of past human activity, was appropriate or economic.” Either way, we are clearly justified when we claim that, even from the practical point of view, labor often plays a large role in our estimation of the use-value of a thing.

The most serious problem occurs when in the same passage Menger conflates the serviceability of an object in practical life with economic value. You will recall that economic value is that property possessed by qualitatively distinct things by virtue of which we equate them. It is that thing possessed by beds, shoes, and houses by virtue of which we are allowed to say that x beds = y shoes = z houses = some amount of money. Marx claims that that which these things have in common which makes them commensurable is the socially necessary labor time required to produce each of them. Against this theory Menger argues that the service these things render us in practical experience determines their value. Yet we have just seen that the services rendered by really distinct things are themselves really distinct, and that in fact this distinction between the ends they serve constitutes their differences from one another. Were these things to have identical ends and so be commensurable in virtue of them, they would be the same thing or the same sort of thing. But we do not exchange beds for beds, we exchange beds for houses, etc. But beds and houses, insofar as we consider them from the perspective of practical life, have really distinct ends. To claim as Menger does that they’re commensurable in virtue of the ends they serve in practical life is bald contradiction.

This is a metaphysical problem, not an economic problem. The kinds of things Menger wishes to equate cannot be equated, because if they could be equated, they could not be what they are. Economic value is, if nothing else, a quantity. Its ultimate expression is as an amount of money, a price. The price is supposed to measure the quantity of value possessed by really distinct things like beds and houses. There is nothing in principle stopping us from applying the category of quantity across qualitatively different things. We do so whenever we measure the mass of a body. But in those cases we abstract away from the qualitative features of the thing and consider it just in terms of its bare corporeality. The problem with Menger’s assertion that the (qualitative) serviceability is the source of the (quantitative) economic value is that he is not abstracting from the really distinct qualitative features of the things that differentiate them from one another but is instead insisting that these qualities themselves make them commensurable. The thing by virtue of which they are really distinct is the same thing by virtue of which they are really the same. Unlike massive bodies which are commensurable only when we abstract from their differences, economic goods, according to Menger, are commensurable only if we attend to their intrinsic differences. This is a move no philosopher living or dead would condone, and neither should we.

So the sense in which these things are commensurable (if they’re commensurable at all) does not have its cause in the things themselves or their qualities, considered from the “practical” or everyday point of view. And since the being of a thing, considered practically, is inseparable from its end, the usefulness of the thing for this or that cannot determine its value, either. So whatever Menger is trying to say here about the labor theory of value—and I don’t profess to know exactly what he is trying to say—he’s going about it the wrong way by appealing to how we relate to objects in our everyday, practical activities. The use of something can never determine its economic value, because the use is directly tied up with the qualities that belong to the thing, whereas economic value expresses a quantitative relationship between things that leaves out of consideration the qualities or ends of the things that define their usefulness.

Sources/Additional Reading
Marx, Karl, Capital: Volume 1, Chapter 1
Meikle, Scott, Aristotle’s Economy Theory, Chapters 1 and 9

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