Certain discussions about my past articles have led me to address some of the debate in this week’s article. In particular I have been called to action by a few comments left on my “Socialism is Selfishism” article. These comments contain an old foe that has reared his head once again. This foe, the “labor theory of value,” has proven very resilient over the years – never quite seeming to fall despite all the blows laid against it. Again, I will try my hand at this duel.

All joking and poorly stated metaphor aside, the labor theory of value is one of the guiding principles of socialism. It is also one of the most infective and detrimental of the numerous economic fallacies that pervade modern thought. This theory produces two distinct, yet closely related ideas. First, that the wealth of a nation is solely a product of labor. Second, that labor is the source of the value of goods and represents “earned income” as opposed to the “unearned income” of capitalists and “employing oppressors.” The idea that the wealth of a nation is exclusively produced by labor – that a nation’s standard of living is solely a product of the farmers who feed us, the workers who cloth us, the machinists who give us transportation etc. – has been a part of economic thought for centuries. Karl Marx took this idea, ran with it, and concluded that the capitalists who create the structure in which the worker toils only exploit the worker and steal profits from the only people who perform a valuable task. Hence the phrase, “the labor theory of value,” or, stated another way, “find the labor, find the value.”

This topic must be discussed rationally if we are to find an answer. The first question that must be dealt with is a discussion of wealth – primarily what it is, and secondarily where it comes from.

What is wealth? Well, put most simply, wealth is stuff. Having stuff, using stuff, holding stuff; stuff to ride, watch, polish or horde. In other words, to say a man is wealthy is to say that he enjoys the amenities of stuff. Furthermore, it is also to say that he enjoys greater pleasures of stuff than most people around him. “Stuff,” however, is an incredibly broad category. What is clear, however, is that within this category some stuff is more valuable than other stuff. This is stuff that completes certain valuable tasks and allows higher levels of enjoyment and happiness.

For example, by most standards owning a car produced in 2001 creates a higher level of wealth than owning a car produced in 1955. This is because of the readily apparent difference in the quality of the cars. The car produced in 2001 most likely has a CD player. It also probably has air conditioning, anti-lock brakes, air bags, keyless entry and possibly other extravagant items such as GPS tracking and an on-board DVD player. These amenities constitute “stuff” that is more valuable to most people than the very sparsely equipped car of 1955. Furthermore, the car made in 2001 was produced with less labor – less “toil” – than the car made in 1955. Machines made and assembled a significant portion of the automobile – with the workers left to experience more leisure time, less toil, and greater overall productivity. Here is a clear example of a product having more value, and a higher level of wealth, produced with significantly less labor.

My point here is simple: that management, innovation, investment, product development, invention and, simply, ideas constitute a significant portion of the value of a product. Even the monumental ability for an average, or even “poor,” American to buy a car (obtaining a remarkable level of wealth) is rooted in an idea had by Henry Ford that allowed reliable cars to be mass produced with significantly little “toil.” What should be now clear is that the average American is certainly one of the wealthiest individuals to have ever lived. The accoutrements of the average American’s life are at levels of wealth that the majority of humans who have ever lived could never have dreamt about. We eat fresh fruit out of season that is shipped from all over the globe. We have mechanical pencils. We have indoor plumbing and heating. We often chose to pay over three dollars for a bottle of water. We sit at machines with unimaginable processing power and type columns for our websites. Clearly, however, we do not enjoy this standard of living solely because of our “toil.” Labor is not the only source, and not even the primary source, of our wealth. We enjoy this standard of living because of our ideas.

Ideas increase worker productivity and decrease toil. Ideas allow workers to work fewer hours, less strenuously, and produce more product. Ideas allow workers to produce new and innovative products that allow consumers to enjoy the pleasures of wealth. And finally, because higher pay follows from higher productivity, ideas allow workers to use their higher wages to purchase items of wealth and proceed to utilize their increased leisure time to enjoy such items.

One of the oddest tendencies of socialists is the arbitrary division between “laborers” – the people who actually “earn” their money, and managers, employers, (or just “oppressors”) – those who unjustly live off the earned money of the laborers and only serve to devalue labor and alienate the worker from their product. A clear, simple distinction is desired; with the oppressed on one side and the oppressors on the other. This distinction is far too facile. Anyone who employs another is often labeled as an “oppressor,” despite the fact that the managers in the upper echelons of businesses often work longer hours for which they are not directly compensated, and are directly accountable for the failings or success of the business. When an entrepreneur starts a business and begins to employ others it is often forgotten that the only person whose financial well-being is completely contingent is the owner. The workers are guaranteed, through law and government, compensation for the work they accomplish. No such guarantee exists for the owner; whose finances are free to fluctuate with the capriciousness of a competitive market – possibly all the way down to zero.

Often, the line between “laborer” and “employing oppressor” seems to fall simply with the identification of “toil.” The oppressed, unskilled laborer toils in their job. They get blisters, sore muscles, headaches and dirty fingernails. These were the working conditions that Karl Marx saw so clearly and called him to action. The work of the “employing oppressors” is not seen as equally toilsome. Hours spent at a desk trying to rectify payroll costs with costs of resources, create adequate work schedules, or produce accurate figures of expected revenue in order to entice a loan from banking institutions to avoid bankruptcy are not given equal value with “toil.”

The “toil” account of the value of labor is deeply problematic. A real world, personal example: In my current job as a waiter (yes the Philosophy majors get the big bucks) I am responsible for a large amount of tasks. Needless to say, I work with a number of other waiters whom all vary in their ability. Some are continuously overwhelmed by the amount of tasks they must perform. Others, however, when given the same number of tasks, are able to conquer them in less time, with less stress and higher efficiency. The reason is quite simple. The better waiters follow the old proverb of working smarter, not harder. They complete identical tasks in less time by applying efficient resource management of one of the scarcest of all resources – time. Waiting tables is not a difficult task for me. However, I have seen many who clearly do not agree and end up “toiling” at the job. However, if one draws abstract, ideological lines between “toil” and “easy work,” and values the former more, one must absurdly conclude that inefficient waiters produce a more valuable product.

In the end, simpler evidence can also help dispel the labor theory of value. Citizens of many, if not most, countries in the world work harder than Americans. That is, they toil. Third World countries feature workforces that work extremely hard for much longer than a forty-hour week. In fact, for most individuals in these nations a 40-60 hour week would constitute a vacation. This disparity of labor has not produced an equal disparity of wealth – with the harder working countries being wealthier countries. These countries are not wealthy. Their citizens have very little “stuff” to show for their backbreaking labor.

This is the fact that believers in the labor theory of value lament the most – citizens who have very little “stuff” to show for hours and weeks of backbreaking labor. Also, it is not a fact that I am particularly thrilled about. My great-grandpa went to work in the coalmines of Oklahoma when he was 12, spending twelve hour days in a four-foot seem – cramped and exhausted. However, forcibly reorganizing the actual value systems of society (see my “What Kind of World Will it Be” article) in order to value labor more is the quickest way to mire the citizens of the society in toilsome labor. The fact must be reiterated: the reason that twelve-hour days in a coalmine are a rarity in modern America is because of the growth and development of ideas. We didnÔø?t work our way out of the mines, we thought our way out of the mines.

It should be clear that the theme of this column is somewhat similar to last week’s column. The ideological values in one’s head may indeed hold labor in preeminent status. However, wrestling the economic system into line with this belief only serves to override other’s freedoms and beliefs and eventually collapses the society into poverty. Despite this, and other attempts to dispel the labor theory of value, this belief will not die. This is okay. I have no interest in convincing believers that their ideological values are skewed. If the values stay in their head, then no such argument is necessary. However, when those values produce actions designed to reorganize the structure of society (ala the Bolshevik Uprising) something must be done.