We collect and republish selected Working Papers and Journal Articles on Exploring Economics.
Introduction: Karl Marx was the greatest champion of the labor theory of value. The logical problems of this theory have, however, split scholars of Marx into two factions: those who regard it as an indivisible component of Marxism, and those who wish to continue the spirit of analysis begun by Marx without the labor theory of value. In the debate between these two camps, the former has attempted to draw support from Marx's concepts of value, while the latter has ignored them, taking instead as their starting point the truism that production generates a surplus. Nevertheless, a careful examination of the development of Marx's logic uncovers the profound irony that, after a chance rereading of Hegel, Marx made a crucial advance which should have led him to replace the labor theory of value with the theory that commodities in general are the source of surplus. Marx's value analysis is thus consistent, not with those who would defend the labor theory of value, but with those who would transcend it. Marx did not properly apply this analysis to non-labor inputs, while the cornerstone of Capital was his correct application of the same analysis to labor. This unjustified asymmetrical treatment of the labor and non-labor inputs to production is therefore the actual and unsound foundation of Marx's labor theory of value. Once that treatment has been corrected, the labor theory of value collapses.
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'The conclusion that labor cannot be the only source of value has long ceased to be novel,' writes the author himself; what was novel, though, was Keen's astute analysis that Marx failed to follow through on his own dialectic thinking when he singled out labour as the only possible source of surplus value in "Das Kapital". The key lies in the insight delivered by Marx himself, i.e. in the differentiation between the use value and the exchange value of any commodity. Keen goes on to demonstrate that then, logically, the labour theory of value cannot hold, because labour is not the exclusive source of surplues value, rendering Marx's central notion of a an ever-falling profit rate obsolete, too.