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Labor Theory of Property


DP Veteran
Jun 23, 2005
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Many people, I am sure, are aware of the concept of "Labor theory of Value." A concept Marx, socialist/communists, and even Adam Smith wrongly held. Hhowever many novice socialists still hold to the idea, even though it's been theoretically and empircally discredited.

What appears has happened though, is a slight confusion. Labor is not the originator of value, rather it is the originator of Property, and thus property and labor rights.

A person turns a stick into a spear. That persons labor created a peice of property called the spear. That person's labor (and time) has been expended, never to be "recouped" other than by recognition that the laborer is also the property owner of the thing produced.

However, NO VALUE can be assigned to the spear, based soley on the labor expended. The spear may have taken 10 hours to turn, yet may be very fragile. Another spear, made by the same person, may take 2 hours to turn, and be sturdy and fly straight.

The more "valuable" spear (to OTHER PEOPLE) comes from the other people's percieve utility of the spear. (If the spear is NOT for trade, the issue of it value is generally not of concern. The spear may have sentimental value to the spear maker, and therefor the spear maker may never trade it for any other good, service, or money. This means, to the spear maker, that spear, or all spears even, may be more valuable to the spear maker that any or every other thing. This is usually not the case however.)

So, labor is the source of property, property rights, and labor rights. But subjective perception of utility is the source of value, in all areas, but especially trade. Utility is always of course ordinal and never really quantifiable, and can only be deduced from the actions of individuals.

Labor theory of value, seems to be a failed synthesis of the origin of property, value and prices. However, there are three separate mechanism involved, that can not be effectively synthesized into one concept.

Labor being the source of property seems pretty obvious, and the labor theory of value adherents rather than stopping at the origin of property, carried on to the next stages, value and price, without realizing the processes involved in determining value and price. They did this becuase they seemed to be part of the same process, yet they are not. Subtle and almost invisible processes were happening that the Labor theorists did not take into account at the time.

In skipping over proeprty and value, they draw the false conclusion that value and price are the same. Which is of course NOT true. A person who trades a thing, would actually ONLY engage in volutary trade, if the trade is beneficial compared to the non-trade state. A person with 50 cents trade for a newspaper because they newspaper is actually MORE valueable than the 50 cents. If the paper and the 50 cents were of EQUAL value, why would someone trade one thing, for another, and have the same level of utility. The Newspaper seller only parts with the newspaper, because the 50 cents is more valueable than the newspaper. So each benefits and values the thing trade for, than the thing given in trade. Mutually beneficial exchange.

Labor theory of value

Austrian view

Labor creates property
Individual subjective assesments creates value
Relative values in aggregate based on supply and demand creates prices.
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