Marianna Mazzucato’s most recent book is a very good reading on the theory of value. Mazzucato starts by recapping theories of value throughout the history of economics, showing that what economists consider productive changed through the centuries.
Marx’s theory of value and capital is briefly described and some incoherences become apparent.
Marx postulated wages are the just reward necessary to replenish labour power, or the capacity to work. Workers would be paid a certain amount that affords their subsistence to continue working (literally their subsistence hence basic needs).
Marx further contends a class struggle ensues to distribute the surplus, that is, the excess output beyond subsistence that is typically exclusively captured by capitalists.
The inconsistency herein is that wages may not be both subsistence and surplus: if there is no value added beyond that of work as rewarded by wages, then there would be no surplus to redistribute. That is, Marx postulates the whole value added of a good or service is due to labour while describing a struggle is needed to redistribute that portion of value kept from workers by capitalists owning production means.
Then it must certainly be that a portion of value is retained in production means. It must certainly be that new production means invented by a specific person deserve the just reward of the value added by the production mean to a product or service, beyond that captured in subsistence wage paid to workers.
The struggle Marx is referring is most likely information asymmetry that prevents workers and capitalists from determining the accurate value of the worker’s input to a product.
This mismatch occurs as the moment of hiring precedes that of value finding (when the product or service is exchanged) if no method is in place to adjust worker remuneration after hiring (precisely because, even today, the value added of labour is considered stable and the only source of value added in a product – perhaps the most enduring of Marx’s concepts).
Remuneration structures that seek to address this mismatch between hiring and posterior input valuation use variable remuneration – and are typically attributed to management only (not only in finance) as workers are considered replaceable by machines, another remark by Karl Marx.
In a way, by imposing that labour is the only source of value added to a product, Marx established this replacement phenomena (that is, when a machine replaces a worker). In doing so, workers are considered to present constant returns – just like a machine, the worker produces a certain quantity and quality stable through the work-life and hence worker pay is constant.
As we know today, learning-by-doing and lifelong education improve a worker’s productivity. Furthermore, production means, the source of value denied by Marx (as seen above, in self-contradiction), are redesigned to better match workers’ abilities and address production challenges. For instance, it is irrefutable that modern day vehicles are far easier to use than early XX century vehicles – or a horse for that matter.
Finally, increasing value added has a cost – be it less leisure moments for labour or pollution for machines – that remains unassigned so long as the belief on labour as the sole source of value added prevails.
Read my post on the Regional Studies Association blog Embedding value chains to enhance Cohesion