As social science, the labor theory of value (LTV) has embarrassed both Marxists and marginalists alike. In the words of Jon Elster (1986), a sociologist committed to rationally working through the core tenets of Marxism, the LTV under close examination "becomes difficult to defend, or even to state coherently" (p. 64). It is not hard to understand Elster's reservations. In its many formulations, the LTV yields neither an objective account of nor a technocratic apparatus to explain the cause and the measure of value. Instead, classical and Marxian economics offered a series of complex arguments that each combusted when held to rational or empirical fires. It is no wonder, then, that the theory of marginal utility could so easily sweep the LTV aside in the late nineteenth century. Nevertheless, why such a seemingly wrong-headed idea persisted for so long remains a major question for both economists and rhetoricians. Why was (and is) the LTV persuasive?
We argue that the source of the LTV's deficiency results from efforts to distinguish social-scientific reasoning from political appeal. The LTV persuaded classical economists and Marxists not because of its logical rigor, though a good bit of logical argumentation contributed to its appeal. Following James Aune (2001, pp. 22-24) and Chaim Perelman and Lucie Olbrechts-Tyteca (1969, p. 194), we call such argumentation "quasi-logical modeling." The LTV persuades because it appeals to an ideal of justice. In the predominantly rhetorical analyses to follow, we trace the LTV's origins and its three major instantiations (in the works of Adam Smith, David Ricardo, and Karl Marx), each an effort to prove that capitalist society is (or is not) just because it does (or does not) uphold every person's right to the fruits of his or her labor. This appeal to justice is, in many ways, an appeal to a deeper ethical commitment to reciprocity. Justice-as-reciprocity is integral to the Marxian charge of exploitation (Cohen, 1981, p. 207). Smith, Ricardo, and Marx, while appealing to justice, employ some degree of wishful thinking (hope that capitalism will not violate a person's right to his or her labor), or some rational thinking (models to show that capitalism does or does not uphold a person's right to his or her labor). All are political thinking, rhetorical efforts to move the audience towards participation in or condemnation of free-market capitalism. Our analysis of three labor theories of value as arguments extends the project that Aune began with Selling the Free Market--that is, analyzing economic arguments as arguments, not as social science but as "the process of justifying decisions under conditions of uncertainty" (p. 4). Judged as political thinking, the writings of Smith, Ricardo, and Marx all retain some merit, if not as proven or valid social science, then as potent and tested public argument. Judged as rational thinking, the LTV looks like a failed effort at exploring objectively the cause and measure of value. When the rational and the political appeals combine, we can see why the LTV succeeded rhetorically.
PRE-HISTORY OF THE LTV: JOHN LOCKE AND WILLIAM PETTY
Two suppositions with a classical pedigree set the pre-historical stage for the LTV: an Aristotelian dissociation between value-in-use and value-in-exchange and a medieval association of use-value with labor (Spiegel, 1991, p. 32). Separating use-value from exchange-value not only dissociates the two "independent elements," bringing about what Perelman and Olbrechts-Tyteca (1969) called a "profound change in the conceptual data that are used as the basis of an argument"; but that separation also modifies "the very structure of those elements" (p. 412). If use-value and exchange-value are both associated, then a commodity's price undoubtedly reflects its worth. But if the two are dissociated, then the price appears unjust when it seems to veer wildly and dangerously away from use-value.
The writings of two seventeenth-century political economists exhibit key suppositions about use- and exchange-value. In many regards, there is no odder couple than John Locke and William Petty. Petty supported Oliver Cromwell's republican commonwealth, yet he later worked for the Restoration-era courts of Charles II and James II. Locke remained loyal to the monarchy during the commonwealth period but plotted against Charles II and was driven into exile by his brother James II. Petty is best known among economists as a proto-statistician who justified Cromwell's and Charles II's policies in Ireland. Locke is best known as a proto-monetarist who argued for property and contract rights independent of royal prerogative. What brings the two men together, in their disparate musings on various subjects, is a set of presumptions about labor, value, markets, and exchange.
In his Second Treatise of Government (1690) John Locke insisted that in a "just" civil society the market price for any commodity should reflect the labor embodied in its production. Locke wove a labor theory of property into his labor theory of value. (1) He postulated that "every Man has a Property in his own Person," and so "The Labour of his Body, and the Work of his Hands ... are properly his" (1988, pp. 287-88). According to Locke, divine right embodied in "Justice gives every Man a Title to the product of his honest Industry" (1988, p. 170). He also speculated that, in a market-based society, "'tis Labour indeed that puts the difference of value on everything ... For whatever Bread is worth more than Acorns, Wine than Water, and Cloth or Silk, than Leaves, Skins, or Moss, that is wholly owing to labour and industry" (1988, pp. 296-97). By weaving a labor theory of property and a LTV together, Locke appealed simultaneously to a belief about justice and a belief about causality.
Locke's contemporary, William Petty, however, argued that although labor may be the cause of value, it is not always the measure. In his Treatise of Taxes (1662), published a decade before Locke began musing on matters political or economic, Petty differentiated between the "natural" price and the "political" price of grain. In so doing, Petty harkened back to the distinction between use-value (associated with labor) and exchange-value. The "natural price" is the amount of labor-embodied in production--the hours spent ploughing, tending, threshing, and chaffing. The "political price" reflects the labor-commanded by the product's sale at market-the amount of work that can be bought with the proceeds. And, explained Petty, the labor-commanded (the measure of value) can be significantly lower than the labor-embodied (the cause of value), for an oversupply of laborers will reduce production costs without diminishing the hours spent tilling, seeding, and cutting (1899, pp. 89-90).
Petty's contention that the labor-commanded in exchange may not equal the labor-embodied in production troubles Locke's easy conflation of the LTV and the labor theory of property. It may be just for a person to get rewarded for the labor he or she embodies in a commodity, but the market may not give just rewards. Any assurance that free commerce is just without further explanation comes across as wishful thinking, a mode of cognitive distortion that Elster (1983) described as "the shaping of beliefs by wants, making us think that the world in fact is how we want it to be" (p. 26). Locke wrote to support the Whiggish belief that people's "natural rights," including the right to one's labor and its fruits, precede and supersede royal decree. His wish that labor-embodied in production will be rewarded with labor-commanded at exchange fits neatly into a larger political system that opposes absolutist monarchy. Petty's and Locke's political differences explain their differing positions. Petty, the Royalist, did not need to justify a natural right to labor, since the right to property depends on the commonwealth or the crown. As a result, Petty did not claim that labor-embodied in production would be rewarded by labor commanded at the market. Locke, the Whig, relied heavily on a theory of natural law to justify his belief in a robust civil society (including free marketplace) beyond the Crown's legislative reach. So he insisted that in the free, natural state of exchange, labor-commanded at the market would equal labor-embodied in production.
A century later, when this tension between Royalists and Whigs had abated, the economic problem remained. To uphold Locke's belief in the labor theory of property and his belief in the LTV, later political economists would have to wrestle with Petty's claim that value's cause is distinct from its measure. They did so by making "quasi-logical" arguments, "formal reasoning [that] results from a process of simplification which is possible only under special conditions, within isolated and limited systems" (Perelman & Olbrechts-Tyteca, 1969, p. 194). (2) Even before mathematical modeling came to dominate the discipline, political economy relied on such quasi-logical modeling--the presentation of abstract models to explain in ratified form the messy happenings of human sociality (Poovey, 2008, p. 143). Deirdre McCloskey (1990) has called such models "stylized facts," metaphors held to the "standards of logic" rather than the "standards of fact" or the "explicit standards of metaphor" (p. 23). When these models--which appeal more explicitly to reason than to hope-appear, the history of the LTV commences.
HISTORY OF THE LTV: ADAM SMITH AND DAVID RICARDO
Adam Smith wrote a century after Locke and Petty in historical circumstances marked by mercantilism, including the belief that a nation's wealth lies in its precious metals and the willingness to impose bounties, tariffs, and penalties to ensure a positive balance of trade. Against merchants seeking monopoly and parliaments considering trade restrictions-against those who would manage the economy so that exports exceed...