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Why I find Marx's Law of Value Compelling as opposed to the Subjective Theory of Value

Submitted by PerfectSociety in economics (edited )

Here is the simplified logic behind why I find Marx's Law of Value Compelling as compared to Subjective Value Theory:

(i) The function of markets is to optimize supply and demand so that resources are allocated efficiently. An efficient allocation of resources enables future reproduction and growth of an economy. When the market suddenly undoes the very allocation of supply to fulfill demand that it had previously built up such that the economy subsequently shrinks, the previous build up can be thought of as a market failure. Hence the process by which prices plummet (along with all the subsequent effects) until the market can reorient to start growing the economy again, can be accurately called "correction". Given that prices can be incorrect such that they require "correction", price and value cannot be the same thing.

(ii) A bubble bursts in the economy when previously inflated prices are corrected. (Note that "correction" is not my own term, but a term frequently used to describe such phenomena in economics.)

(iii) The only way to make sense of this is that prices originally (prior to the bubble bursting) deviated from values too much.

(iv) If it is the case that prices can deviate too much from values while prices are derived from the interplay of various actors' marginal utilities, value cannot be subjective. There must be an objective substance of value around which prices can deviate (to an extent).

(v) Therefore, STV is invalid as a theory of value.

(vi) Having accepted this logic, it follows that we require an objective theory of value as opposed to a subjective theory of value. Now the question becomes: What should this objective theory of value be?

(vii) An objective theory of value must express value as being comprised of some definable substance(s).

(viii) Given that we have established value as something objective rather than subjective, it must be possible for commodities to be exchanged in such a way that there is equal Value on both sides of an exchange.

(ix) In order for things to have equal value, the substance of value must be some characteristic that all commodities share but also separates them from non-commodities.

(x) The only such characteristic is that they can all be produced by simple/"unskilled" human labor.

(xi) Therefore, expressing the value of a commodity must be done in units of simple/"unskilled" human labor.

Also: Some critics find Marx's Law of Value uncompelling as a result of the Transformation Problem. My response is to look into TSSI, which has made it clear that the Transformation Problem is a non-issue.

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