I personally don't go with the labor theory of value, but there's idiots on every side of every debate.

I find it ironic when economic Austrians use the following examples to disprove it:

If you dig a ditch and then fill it back up...
If you spend all day making mudpies...
If you put mud into a bottle of wine...'ve done labor, but that hasn't created any value!

It's funny because it's fairly basic Misesian premise that human action is purposeful action. It's so elementary that he wrote a thousand page book titled "Human Action" after it. This book is, as I've heard it called, one of "the towering achievements of the Austrian School". It would seem to refute the Misesian premise of purposeful action to have people spend an afternoon making mudpies, not to mention it's a strawman in the first place.

1 comment:

FSK said...

You don't understand the Labor Theory of Value.

The Labor Theory of Value says that a worker's salary is proportional to the actual value of your work.

In the above example, the person who hired you to dig a ditch and fill it back up again is a stupid businessman. In a free market, he will soon go out of business.

The Labor Theory of Value fails to hold in the current economic system because the current system is not a free market. For example, lawyers do nothing useful, but they are paid a lot. The problem is that government violence creates an artificial demand for lawyers' services.

In a free market, there is a natural arbitrage process that raises the salary of underpaid workers and lowers the salary of overpaid workers. Don't confuse the current market with a free market.

My attitude on such theories is: "If mainstream economists uniformly and loudly discredit a theory, then it must be true." IMHO, that works every time.