What’s wrong with Marx’s concept of Surplus Value? Explaining how Marx's knowledge of value is wrong.

Everyone with a brain knows Marxism has many problems in itself. From it being an incomplete ideology to how its theory of historical materialism is flawed to the assumption that human nature is completely determined by the environment, it does not hold up to its criticisms. Yet still many believe in Marxism because it supposedly provides the true analysis of capitalism. One of the biggest criticisms championed by Marxists is surplus value, but is it right?

‘Value’ is a subjective perception from an individual based on their own personal needs/wants/goals. It’s not a quality of an object that is inherent in that object. It is not in the price of the object nor is it something that is ‘injected’ into the object by the worker or whatever.

The ‘source of value’ is something that economists struggled with for hundreds of years. None of these ideas that Marx uses is unique to him or originated with him, he just puts his own spin on things. In his case, he assumed that the source of value is the human labor that goes into the good. Thus if you are a ‘factory owner’ making profit from workers then that is because you are ‘stealing’ the labor since that is the source of your profits. Something like that.

It was as good a theory as most people had going all the way back to people like Smith, but it’s really nonsense. And, unfortunately, it’s turned out to be very dangerous nonsense.

This causes Marx to make all sorts of egregious errors in judgment. Since he saw in commodity markets that two sets of goods could have the same price or profit potential or be exchanged for one another then that must mean that they had the same value. This is wrong.

If items are being exchanged in a commodity market then it is because they have very different values to different people. If they had the same value then there would be no point in exchanging them. There would be no gain to this sort of economic activity. Why bother putting in the effort in exchanging goods if all you end up with is the same as what you had in the first place?

And, of course, like most people, Marx wanted to put all of this value and economic activity in some sort of quantitative unit so that you could make economic calculations and thus he created the concept of the ‘labor power’.

So in the example was wages vs labor power. So since, in Marx terms, the factory owner wants to profit from the laborer’s ‘labor power’ he must force the laborer to work for less money then the value the laborer produces. Thus the owner can skim the profits from extra labor power that the laborer loses by working for him.

However, as I mentioned before, value is not derived from labor. Value is a subjective thing based on the individual’s perceptions and desires.

Assuming that the transaction is voluntary: The reality is that the laborer would never work for money unless he valued the money more than his own time. The factory owner values the laborer’s time more then he values his money. So, in this case, nobody loses anything. There are only winners. By engaging in the economic activity of working for the factory owner the laborer is wealthier than he otherwise would have been. And so is the owner. They both profit.

Say you bought a loaf of bread. Does it matter to you if somebody worked 10 hours to make it or if somebody worked for 10 minutes? Not really… You want the bread due to its chemical makeup or nutritional value or how well you think it’s going to fill you up. If 10 hours of work goes into it or just 10 as long as the bread itself is the same then the value as far as you are concerned is the same. Certainly to the store owner it’s not the same nor to the guy that made the bread (if they were different people), but their wants and desires pale in comparison to you, the consumer. You set the prices, really. If you think the cost of the bread is too high you will walk away from it regardless of how much time, effort, or money that goes into producing the bread. The bread could be made from a star trek replicator or be made from hand-grown wheat and it wouldn’t really matter much to you (except in so much that everybody is irrational and the idea of paying for something that can be made instantly and with no effort rubs you wrong).

I understand that Marx knew that goods had some sort of ‘inherent value’ to them. But in his eyes, these inherent values were nullified since they could be exchanged for other goods in a commodity market. Thus, in his view, this meant that the physical properties of the goods were really irrelevant since they could be exchanged equally. And, as such, he was very wrong. They would be exchanged because they are NOT equal in value. The only point in exchanging them would be because they have very different values to different people, because of what those people could do with those goods… which is inherent to the individual’s ideas about how those goods would be useful to further that individual’s own goals in relation to the various physical properties those goods possess.

Marx was at a severe disadvantage compared to us. When he wrote his book you are looking at 1850’s and up. In his area of the world, the industrial revolution was only around since the early 1800’s. Compared to him we have several times more history and experience dealing with the complexities of market economies in a post-industrial world.

And since he ideas about value are wrong then so also area any conclusions he draws from them like the theory of surplus value.

He was still living in a world that was still coming to grips with new technology, new approaches, new relationships between workers and property owners. The Europe he saw was still in the grips of the medieval caste systems from feudal government and he conflated the conflicts that were present from the dissolving political and social institutions with some sort of economic class system between the haves and the have-nots caused by capitalism.

It’s much easier to see how value is completely subjective, it is relative and not quantifiable. Also, it’s much easier for us to understand now that it’s consumers that control pricing and control production, not the business owners and it is now more obvious that laborer’s bosses are actually the laborer’s clients.