Valuing work

Markets vs. morals

Who does more valuable work — a firefighter or a drug dealer? Most people would say the firefighter. Why then does the drug dealer earn a higher income?

What determines how much money people make? What should determine how much money people make?

These questions have vexed philosophers, economists and others for many centuries. They are vexing not least because they involve competing conceptions of value: market value and moral value. In doing so they highlight different ideas of what an economy is and what it is for.

We live in an age when market value — also called exchange value — reigns almost supreme. The drug dealer makes more than the firefighter because people are willing to pay more for what the drug dealer provides. Many countries express their disapproval of the drug dealer by outlawing drugs. But the economies of most countries operate on the basis of other laws, starting with the law of supply and demand. The effect of the anti-drug laws is often to drive up the price — exchange value — of the drugs by restricting demand. In such countries, markets are allowed to trump morals.

This needn’t be so. It would be possible to increase the penalties for violation of drug laws to such an extent that no one would use them. Certain countries, including China, Saudi Arabia and Singapore, have recently executed drug dealers. If the laws were extended to mandate execution of drug users then the markets would dry up quickly. But this is farther than most people are willing to go.

In the largely capitalist world in which we live in the 21st century, markets are allowed to determine prices. Markets are efficient in signaling who wants what and how badly they want it. But they are agnostic about the content of those wants. In a market, a dollar spent on drugs is no different from a dollar spent on life-saving equipment for firefighters. Defenders of capitalism judge that the advantages of efficiency outweigh the disadvantages of agnosticism.

It hasn’t been lost on critics of capitalism that its defenders often benefit from capitalism, even when — or especially when — they are engaged in morally dubious practices. Among the sharpest of the critics have been Karl Marx and his 19th-century followers, who condemned the industrial capitalists of their day for profiteering at the expense of industrial workers.

Marx and others proposed an alternative measure of value to that of the market. Their “labor theory of value” put workers at the center of calculations. The value of a manufactured good was measured by the amount of labor that went into its production. Something that required more labor to produce was worth more than something that required less.

The Marxists observed that the market value of a good was typically greater than the labor value. The difference was the profit captured by the capitalist owner of the means of production, and it was fundamentally illegitimate, they said. The more sophisticated Marxists allowed that the managers of a company, who were sometimes the owners, did work, which should be factored into the labor value of the product. But the profit that remained, remained illegitimate.

The Marxists’ proposed solution to the profit-as-theft problem was the overthrow of capitalism and its replacement by socialism, which operated by mandates rather than markets. Yet this didn’t make the calculation of value any easier. If anything, it made the calculation harder. Now some commissar had to determine the relative value of different kinds of labor. If an hour of labor by a machine operator was designated as one unit, how many units was an hour of labor by the engineer who designed the machine? Surely more, since it required training and experience, both of which represented labor. But how many more? How many units was the work of a farm laborer? How many units was the work of the labor commissar?

Much depended on getting the answers right. If some occupations were insufficiently valued, they would attract insufficient numbers of workers. Necessary work wouldn’t be done. Shelves in stores would go empty.

This is precisely what happened in the Soviet Union, the most elaborate and enduring attempt to run a large economy on the Marxist model. The Soviet system finally broke down, leading to the collapse of the Soviet Union and the adoption by the successor states of various approximations to capitalism.

China hewed to the Marxist line for nearly three decades after the 1949 establishment of the People’s Republic. But following the death of founder Mao Zedong, China’s leaders turned to the market to set prices and motivate activity, and the Chinese economy boomed.

The labor theory of value hasn’t disappeared. The agnosticism of markets and their contribution to economic inequality continue to trouble many people. But no one has figured out how to make the labor theory work in practice. Man does not live by bread alone. But without bread he doesn’t live at all.