Labor (economic factor)
From Hobson's Choice
Human effort directed toward the fulfillment of a desire. In market economies, labor is compensated with wages.
Why Labor is Complicated
In economics, labor is usually perceived as being extremely simple: effort is used to achieve identifiable ends, and this results in the creation of value. Some labor is directed at future production, as through the production of tools or the hoarding of grain for future planting; this is the source of capital. Land is expropriated through the use of labor and capital, so land and capital can be described as "congealed" (solidified) labor. We could go so far as to say that all value may be expressed in units of labor, provided one could choose a benchmark for labor effectiveness.
A major controversy arose in the mid-19th century, as many economists (in response to Karl Marx) began to argue that there is no truth in the notion that capital represents "congealed labor." This spawned the utility theory of value, whose principle object was to dethrone labor as the font of all value. The main approach was to argue that value in exchange is the true and unique sense of "value," and this is determined by the utility of the thing being exchanged. This was closely related to the Marginalist Revolution, or transition to Neoclassical economics.
The quarrel over the theory of value may have been directed initially against theories of exploitation, since the object was to define labor as having no claim whatever on capital. However, another consideration was the desire to establish a general equilibrium: rather than merely describing the economy as responding to shifts in either supply or demand, the marginalists hoped to explain the existence of a unique optimal state that the economy was always in.
Labor as a Commodity
Labor is usually treated as a commodity by economic theory, the Clayton Act notwithstanding. This presupposes that labor (as an output of effort) can be reliably assessed in the same manner as other factors of production. This, however, is not only untrue, it has profound practical implications.
- Wikipedia post on Labour (excellent)
On the labor theory of value
- Albert C. Whitaker, "History and Criticism of the Labor Theory of Value in English Political Economy" , Stanford University (1904); for an introduction to the utility theory of value, I have to recommend William Stanley Jevons, The Theory of Political Economy (5th edition), IV (complete text). As you can see, Whitaker's work of 1904 was a piece of historical research; Jevons introduced the alternative "utility theory" in 1870. The whole issue of value theory is hence pretty antiquarian. Or so you'd think; but Joseph A. Schumpeter, in his History of Economic Analysis, III.6.2, seems to think it's the basis of any system of economic analysis. Polemically, it means a lot to him, although he argues that one should not draw any polemical conclusions from any theory of value!
Schumpeter is correct when he says one ought not to draw any polemical conclusions from one's theory of value; but the logical corollary is that one therefore ought to use theories of values like domain-specific programming languages, a proposition that would no doubt cause Schumpeter to turn several different shades of magenta.
James R MacLean (16:28, 18 September 2007 (PDT))