Being a major area of Austrian economics, the idea of subjective value is regularly used by libertarians to disprove labour theory of value and subsequently believe they’ve refuted anti-capitalist arguments[1]. Frankly it’s all fanciful word games. Little evidence is really produced out of this, outside a thin justification for modern capitalist economies (which is ironic coming from supposed anarchist capitalists). However, the LTV crowd don’t exactly help their cause, holding to Marxian arguments that provide little evidence themselves. Rather, subjective theory of value is simply a lens to understand multiplicitous decisions in heterogeneous circumstances, thus subsuming different forms of valuation made by autonomous individuals and institutions. Further, empirical evidence shows continued increases in profits and capital gains and the continued stagnation of wages (particularly in the United States). In the end, taking subjective theory of value to its ultimate conclusion, we see the ability for price arrangements to develop in a multitude of different institutional settings, including planned economic relations, moral economies and markets.

Solow has documented in the United States the continued stagnation of wages, combined with significant increases in profit margins and capital gains[2]. Now the subjectivists of the Austrian school would say this is because capital investors and entrepreneurs have contributed more to the deal than labour has. However, productivity has increased overall, and this cannot be pinned down to simple investment. Further, global growth since that time has fallen overall, and governments have continually been running deficits and high debts to simply cope with the capital misallocation and surplus product created by globalised industries and sectors[3]. Modern globalisation has in fact relied on forms militarism by the United States as well as dictators in the developing world. Cheap labour isn’t available due to the choices of the workers who have become reliant upon it. Rather the expropriation and privatisation of community services and the stealing of land by governments has simply created a landless proletariat, who have no other source of income than that of sweatshop wage labour[4]. In the West, the increasingly post-industrial character of the economy has meant labour is used in a temporary manner, with little job security or permanency. Opportunities outside of this are usually reliant on very high skill. Thus university applications have increased massively, leading to an oversupply of skilled labour in certain sectors and a lack of jobs or opportunities to take this labour surplus. Wages can be easily compressed as workers are competing for jobs.

The productivity increases that have resulted have then been blatantly expropriated by managers and investors. To put it in Marxian language, the surplus of workers has been used as profit for capitalists. And as can be seen, its being perpetrated by governments in collusion with corporations. Thus the idea of surplus expropriation and labour exploitation is not simply disproven by STV. Labour-capital relations are massively skewed toward the latter, with surplus used for increasingly higher profits and capital being reliant on massive subsidisation. The real question then becomes not what theory of value is correct, but rather under truly free market conditions what forms of economic organisation come to the fore relative to subjective valuation.

Taking into consideration the levels of subsidy currently provided to modern corporations, such as transport and communication subsidies, planning laws that artificially overprice land, entry barriers for a huge range of sectors and large subsidy of inputs, including energy and labour (the latter usually through laws in developing countries that illegalise organising unions). We have to further take into consideration the fact that corporations are subject to the same calculation and knowledge problems as nations. Seeing this, it’s easy to extrapolate firms would be much flatter and smaller, with large scale competition making it difficult for profits to be maintained. Labour as a force could easily become much more independent and form its own firms (with evidence suggesting that labour-ownership and profit sharing provide higher productivity than hierarchical firms[5] [6]) as access to capital becomes unlocked, allowing for new banks to enter the market (such as mutual credit clearing systems and P2P lending[7]) and for new stock markets to be developed (such as the local stock exchanges that existed before the New Deal era[8]). Land becomes much more accessible, with forms of common/community ownership allowing for accessibility by wannabe entrepreneurs. Finally, the economies of scale that currently exist would be much more difficult to attain. Without intellectual property laws, domestic producers could produce a wide range of consumer products (such as Nike trainers or smartphones) for domestic/regional markets, with labourers being able to take their surplus away from international companies. Varied economies of scale develop, with raw materials and certain resources being maintained on international economies of scale (with networked production and distribution chains potentially governing it through forms of negotiated coordination) while production and consumption are maintained at local and regional economies of scale.

Its not as if these systems don’t already exist. The Emilia-Romagna and Shenzhen small-scale, demand-pull production systems are already making profits and appropriating their surplus under the current system of profit-based subjective valuation. On land ownership, 50% of land is owned in common, and the success of commons has been historically documented, as is the case of Torbel, Switzerland and Spanish irrigation systems[9], among others.

Further, taking the subjective theory of value to its natural conclusions, we would see economic valuation become extremely variable. There would be multiple different economic institutions encoded with different values. Social values, as well as economic ones, would become important for different consumers and producers[10]. We would see the development of what Douglas calls “primitive rationing”[11]. Things like simple commodity production, as has existed in tribal communities such as First Nations tribes and the Khoikhoi[12]. The development of moral economies, with theories of a just price may emerge for certain goods, particularly in peasant economies of Africa and Southeast Asia. Planned economies for public goods, as seen with the Gram Shabhas of India, also become likely.

By valuation being subjective, the ability for multiple forms of value creation and value systems becomes much more likely, and under freed market conditions smaller, flatter firms owned by workers or via forms of profit-sharing would be able to outcompete larger hierarchical firms who are reliant on subsidised inputs and surplus. Subjective valuation creates the conditions for capitalism’s downfall.

[1] https://fee.org/articles/were-still-haunted-by-the-labor-theory-of-value/

[2] Solow, R. (2015). The Future of Work. http://www.psmag.com/business-economics/the-future-of-work-why-wages-arent-keeping-up.

[3] Carson, K (2010). The Homebrew Industrial Revolution. United States: BookSurge.

[4] https://thelibertarianideal.wordpress.com/2015/11/05/leviathan-and-behemoth-the-corporate-state-nexus/

[5] http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2014/07/why-not-worker-control.html

[6] http://left-liberty.net/?p=356

[7] Carson, K (2010). The Homebrew Industrial Revolution. United States: BookSurge.

[8] http://www.frbsf.org/community-development/files/schuman.pdf

[9] Ostrom, E. Governing the Commons

[10] https://thelibertarianideal.wordpress.com/2015/02/06/the-limits-of-economic-action/

[11] Douglas, M. Primitive Rationing

[12] https://therealmovement.wordpress.com/2014/10/24/part-2-how-the-khoikhoi-taught-the-labor-theory-of-value-to-european-merchant-capital/