Of course, the same problem plaguing Menger has to be a nuisance to Smith, Ricardo, or anyone who wishes to posit the origin of economic value in labor. That problem, briefly, is that, when looked at from the practical, everyday point of view, the objects we use and buy have qualitatively distinct ends, so they are incommensurate. In appealing to the usefulness of everyday things as the source of their equality, Menger appeals to just that aspect of things that is in principle and hence necessarily unequal. Yet to say that labor is the source of their economic equality just pushes the problem back a step.

According to Smith’s and Ricardo’s labor theories of value, the economic value of the commodity is determined by the labor that goes into it. So the value of a bed comes from the labor of bed-making, and the value of a pair of shoes comes from the shoe-making. But making beds and making shoes have different ends. The end of the first is shoes, the end of the second is beds. Any two actions that aim at different things are really different actions. Therefore, bed-making and shoe-making are different actions. Apart from a mere expenditure of energy, sweat, etc., they have nothing in common in and of themselves. But if they have nothing in common, they can’t be the reason we say x beds = y shoes. So the labor that makes the useful thing can’t be the source of the economic value of the thing any more than its intrinsic usefulness can be.

This is Marx’s critique of the labor theory of value. Marx does not just believe there are problems with Smith’s and Ricardo’s labor theories of value. He doesn’t just think they’re magical or arbitrary. He thinks they’re flat out contradictory—and not in the pretty Hegelian sense. They’re just nonsense. Marx does not believe there is something special or exalted in cobbling or floor-sweeping that transfers a substance called “value” to a thing. All Marx sees in cobbling is the repair of shoes. All he sees in floor-sweeping is a dirty floor becoming clean. Anyone who thinks otherwise either has not read Marx or hasn’t bothered to read him carefully.

So what is Marx’s theory of value? Marx believes value is necessarily connected with labor, so Marx holds a labor theory of value as economists understand the definition of the word. Further, Marx believes there is a necessary connection between value and market price, and so there is a necessary connection between labor and market price. The connection Marx draws between labor, value, and price is, if not foundational, then at least essential to his analysis of the capitalist mode of production. So if what Marx says about the connection between these things is wrong, his theory about capitalism must be wrong, too. There is no Marxism without Marx’s labor theory of value.

Taking the aforementioned problematic of the commensurability of labors as our starting point, we can categorize Marx’s labor theory of value in very broad outline in the following way:

  1. If labor is the matter of exchange-value, then it cannot be labor in the form of “natural” labor, labors as we understand them in the everyday, practical sense as activities directed toward unique ends. The only type of labor that can play that kind of role is a labor that is in some sense metaphysically unique: it has to be homogeneous, uniform, and without quality. This is the requirement any labor theory of value must meet if it is to make sense. Smith’s and Ricardo’s do not meet this requirement.
  2. Marx believes there is such a homogeneous, uniform labor without quality, and pace Smith and Ricardo, he believes this, not natural labor, is the matter of exchange-value. Marx’s name for this type of labor is abstract labor.
  3. At no point do any of us perform abstract labor simpliciter. Each of us has different jobs. Some of us write computer programs, some of us make music, some of us wash dishes. No one has the job of doing abstract labor in and of itself apart from particular natural labors. So if abstract labor really exists—and Marx believes it does—then we must be performing it at the same time that we’re performing natural labor.
  4. No natural labor contains abstract labor in and of itself. Bees building a hive and making honey are not producing exchange-value, so they are not engaged in abstract labor. A chattel slave working his master’s olive orchard in 5th century Athens was not producing exchange-value, so he was not engaged in abstract labor, either. There is no quality of labor in and of itself that is abstract and produces exchange value. There is no material substance of value that olive-picking generates the way a gland produces a tear. So if abstract labor becomes incorporated into natural labor so that exchange-value is produced, it is only because a metaphysical transformation of that labor has taken place so that it is transformed from a qualitative thing distinguished by species into something purely quantitative which is now undistinguished by species.
  5. According to Marx, systematic exchange brings about this metaphysical transformation of labor. Abstract labor and natural labor get tied together by virtue of a specific social interaction between people, viz., the adjustment of prices in a market economy.

That’s the outline. I’ve said nothing about the specific way in which abstract labor is related to concrete labor, i.e., whether abstract labor “belongs” to concrete labor somehow, whether it’s a “property” of it, whether and how natural labor is treated as abstract labor despite the concrete differences, etc. Nor have I said anything about how a social relation can change the metaphysical character of something (we normally think of metaphysics as being independent of society). Nor have I said anything about why this particular social interaction (systematic exchange) has this particular power to transform labor in this particular way. One has to have answers to all of those in order to fully understand Marx’s labor theory of value. All I wanted to do in this post was to show what one has to understand in order to comprehend Marx. It turns out to be very different from what many people believe they have to understand in order to understand Marx. It involves more than thinking that labor is the source of value (in fact, in an important sense, labor is not and cannot be the source of value). And it involves solving a metaphysical, non-economic problem about the essence of labor itself.

I would draw the reader’s attention to one aspect of Marx’s labor theory of value which is not quite at the core of it but which follows from it. If under conditions of systematic exchange, qualitatively distinct natural labors with different ends (production of use-values) are treated as qualitatively undifferentiated with the same end (production of exchange-value), then the metaphysical transformation of labor brought about by conditions of systematic exchange introduces a metaphysical contradiction into labor. Labor aims at two exclusively contradictory ends: the production of use-values and the production of exchange-value. At the core of Marx’s understanding of capitalism is the idea that capitalism is a mode of production that aims first and foremost at the production of profit (a kind of exchange-value). Meeting the concrete needs of humans (to say nothing of their desires and the things that would allow them to flourish) is secondary. This contradicts the bourgeois understanding of capitalism, according to which it is a system that aims at allocating scarce resources. This is an ideological difference, for sure, but it is more importantly a metaphysical difference. Aristotle might have been the first to recognize that exchange-value and use-value are contradictory ends, and that one cannot pursue both in equal measure by means of the same action. And even if one does it to produce a use-value more than he does it to produce an exchange-value (i.e., if a person practices medicine first because he loves medicine and second because he must make a living by doing it), the true and natural aim of the activity (e.g., curing people) will suffer from the presence of the ulterior motive (making money). According to Marx, there are many “contradictions” inherent in capitalism, all of which make it a system perpetually and necessarily prone to multiple kinds of crises. We can see one of these potentials for crises in the outline we have given of Marx’s labor theory of value: capitalism is ostensibly a system for delivering goods to people, and yet it aims at an end which is radically different. Were it not for the fact that capitalism must deliver the goods (i.e., sell them) in order to exist, this wouldn’t be a problem. But if capitalism cannot deliver the goods at all, it cannot make a profit, and so it goes into crisis. The end capitalism pursues, therefore, contradicts the necessary means of fulfilling that end. Capitalism perpetually and necessarily undermines itself. By pursuing exchange-value at the cost of use-value, it contradicts itself. But this necessary contradiction immanent to the capitalist mode of production itself is invisible if one does not start from the appropriate metaphysical perspective on labor and goods.

Sources/Additional Reading
Aristotle, Politics, Ch 1
Marx, Karl, Capital, Ch 1, Sec 1
Meikle, Scott, Aristotle’s Economic Theory, Ch 3 and 9