Marx’s Theory of Value Refuted.
Karl Marx posited that the value of a commodity is derived from the labor expended in its production, anchoring value in the objective measure of labor time. This labor theory of value underpinned Marx’s economic framework, tying value to the collective effort of workers and framing economic systems as driven by class dynamics and exploitation. Marx’s perspective suggested that the intrinsic worth of goods is measurable through the labor they embody, irrespective of individual perceptions or desires.
In contrast, Carl Menger, a founder of the Austrian School, argued in his seminal work, Principles of Economics (1871), that value originates from individual subjective preferences, not labor. Menger’s theory of subjective value asserts that the worth of a good is determined by the utility it provides to an individual, which varies based on personal needs, circumstances, and scarcity. For instance, a violin holds immense value to a musician who cherishes its utility, yet it may be worthless to someone indifferent to music. Similarly, food is far more valuable to a starving person than to someone satiated, illustrating that value is not fixed but contingent on human desires and context.
Menger’s emphasis on subjective valuation directly refutes Marx’s labor-centric model by demonstrating that labor alone does not dictate a good’s worth. Instead, value emerges from the interplay of individual needs and the marginal utility of goods—how much additional satisfaction a person gains from consuming one more unit. This insight shifts the focus from collective labor to individual choice, undermining Marx’s framework by highlighting that economic value is a dynamic, human-driven phenomenon, shaped by personal priorities rather than an objective labor metric.
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3 comments
June 10, 2025 at 7:57 am
Steve Ruis
True if you think only in absolutes. I think Marx’s definition is better labeled “value added due to labor.” And how much someone values a thing is very subjective, so there are no absolutes. You may think a stock is worthless, say Tesla, but someone else values it highly. The price that stock sells for is negotiated between buyer and seller, not based upon some arbitrarty value assigned somewhere somehow. (Consider stock valuations by the so-called experts.)
Marx was right more than he was wrong, but “Marxism” has been painted as being “bad” so many of his ideas, although correct, are shied away from.
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June 10, 2025 at 8:32 am
Sumi
Neither Ricardo’s labour theory of value (which you’ve ascribed to Marx) nor Menger’s subjective valuation theory fully explain market value complexity. These 19th century economists capture different aspects of market value, and one theory doesn’t refute the other.
Contemporary economists tend use a combination of both labour and subjective theories. Alfred Marshall, for example, argues that prices are determined by both the objective costs of production (the supply) and the subjective utility to consumers (the demand). Market prices reflect the intersection of the supply and demand curves.
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June 10, 2025 at 8:54 am
The Arbourist
@Sumi
Your comment raises an important point about the complexity of market value and the interplay between labor and subjective valuation theories. However, there are some clarifications and historical context worth addressing to provide a more precise understanding of the theories attributed to Karl Marx, Carl Menger, and their relation to modern economic thought.
On the Attribution of the Labor Theory of Value you suggest that the labor theory of value is Ricardo’s, not Marx’s. While David Ricardo significantly developed the labor theory of value in On the Principles of Political Economy and Taxation (1817), Marx explicitly adopted and expanded it in Capital, Volume I (1867). Marx’s version emphasizes socially necessary labor time as the determinant of a commodity’s exchange value, distinct from Ricardo’s focus on labor as a primary cost factor. Marx writes, “The value of a commodity is determined by the total quantity of labour contained in it… measured by its duration” (Capital, Volume I, Chapter 1). Thus, attributing the labor theory of value to Marx is accurate, though he built upon Ricardo’s framework.
Menger’s Principles of Economics (1871) introduced the subjective theory of value, emphasizing that value derives from individual preferences and marginal utility, not labor input. Menger argued, “Value is nothing inherent in goods, no property of them, but merely the importance that we first attribute to the satisfaction of our needs” (Principles, p. 116). This directly challenges Marx’s labor-centric model, as it prioritizes individual perception over objective labor metrics. While you argue that one theory does not refute the other, Menger’s framework undermines Marx’s by rejecting the notion that labor time is the primary or sole source of value, instead grounding value in subjective human needs and scarcity.
Your reference to Alfred Marshall’s synthesis in Principles of Economics (1890) is well-noted. Marshall’s neoclassical approach integrates supply (costs of production, including labor) and demand (subjective utility) to determine market prices, often represented by the intersection of supply and demand curves. This is a fair point, as modern economics largely builds on this synthesis. However, it’s worth noting that Marshall’s work came later and was influenced by the marginalist revolution, of which Menger was a key figure alongside Léon Walras and William Stanley Jevons. This revolution shifted economic thought away from classical labor-based theories, including Marx’s, toward marginal utility and subjective valuation.
While you suggest that labor and subjective theories capture different aspects of market value, their foundational assumptions are largely incompatible. Marx’s labor theory of value is rooted in a class-based analysis of production, where labor is the objective measure of value and surplus value drives capitalist exploitation. Menger’s subjective theory, conversely, focuses on individual choice and marginal utility, dismissing labor as the sole value determinant. While modern economics may blend cost-based and utility-based perspectives, Menger’s theory was a direct critique of classical labor theories, including those of Ricardo and Marx, as noted by economist Joseph Schumpeter in History of Economic Analysis (1954, p. 590).
The debate between Marx’s labor theory and Menger’s subjective valuation highlights fundamental differences in their views on economic value. While contemporary economics, as you point out, often uses a combined approach (e.g., Marshall’s supply and demand framework), Menger’s work was a pivotal challenge to Marx’s labor-centric model. Both theories offer insights, but their core premises remain in tension, as Menger’s emphasis on individual subjectivity directly opposes Marx’s objective labor metric.
References
Marx, K. (1867). Capital, Volume I. Penguin Classics (1976 edition).
Menger, C. (1871). Principles of Economics. Ludwig von Mises Institute (2007 edition).
Ricardo, D. (1817). On the Principles of Political Economy and Taxation. Cambridge University Press (1951 edition).
Marshall, A. (1890). Principles of Economics. Macmillan (1920 edition).
Schumpeter, J. A. (1954). History of Economic Analysis. Oxford University Press.
Thank you for engaging in this discussion, and I appreciate your perspective on the complexity of market value.
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