Carson’s Rejoinder to Kuznicki

by Kevin Carson

I read, with appreciation, Jason Kuznicki’s thoughtful review of my book Studies in Mutual Political Economy.

He begins my noting that the book is, as the title suggests, a series of studies rather than “an exhaustive treatment.”

Given that the area I had to cover was so broad, and that the most recent previous attempts at systematically explicating mutualism or individualist anarchism were almost a century old, I attempted to suggest the rough outlines of a mutualist ideology without anywhere near fully fleshing it out.

It’s probably true that, in regard to the majority of practical problems, someone can’t answer the question of how a mutualist would solve them from simply reading my book. But I think I at least present a number of general principles that could be used as the basis for working out a solution (although any number of alternative solutions might plausibly be argued from the same principles — let a hundred flowers bloom and all that).

The Labor Theory of Value

Jason states the Labor Theory of Value in the form “All P are Q”: namely, “all commodities with market value have been labored on.” He then raises the objection that 1) there are goods with market value that doesn’t result from labor, and 2) there are goods that have been labored on but don’t have any market value.

These facts would be a telling objection against the classical Labor Theory of Value — if its own adherents had not themselves acknowledged them. Indeed, this is the subject of Section D of the first chapter of Mutualist Political Economy: “Exceptions to the Cost Principle: The Classicals in Their Own Defense.”

So if Smith, Ricardo, Mill et al recognize the existence of goods whose value exceeds or falls short of the labor embodied in them, it’s fair to assume that the Labor Theory of Value for them meant something more than a simple assertion that market value resulted from labor. A more accurate statement of the Labor Theory of Value, I would argue, is “The equilibrium price toward which reproducible goods tend over time reflects embodied labor, insofar as a free market is allowed to operate without artificial scarcities.”

Jason himself acknowledges that the classicals recognized these exceptions, but that they constituted “problems” of sufficient magnitude to cause the Austrians and neoclassicals to abandon the classical labor and cost theories of value.

He then goes on to raise a number of problems with my version of the Labor Theory of Value, like the question of how labor itself is to be valued. Most of his questions come down to the practical issue of the usefulness of such a labor theory of value as an empirical tool for describing the formation of actual prices.

In fact I’m not really interested in the LTV as an empirical theory of price. My main interest, in writing the book, was from the standpoint of what used to be called political economy; from this standpoint, the LTV is a tool for analyzing the effect of privilege as a source of artificial scarcity rents.

The important thing, from this standpoint, is that the equilibrium price of a reproducible good in a free market is the cost of producing it, and that the main real source of cost is toil and trouble. Non-reproducible goods, like collectibles and rare minerals, may permanently deviate from this law. Reproducible goods deviate from the equilibrium price naturally, when a lag in adjusting supply to demand results in producer rents. But such deviations are entirely legitimate and self-correcting, and are in fact the means by which the law of value operates. Long-term deviations from cost-price among reproducible goods, on the other hand, can exist only when some artificial barrier prevents free market entry and free competition in supplying the existing level of demand.

From this we get the fundamental principle of mutualism and individualist anarchism, and associated variants of market anarchism (e.g. Thomas Hodgskin, Eugen Duhring, Franz Oppenheimer): The natural wage of labor in a free market is its product, and economic exploitation is possible only when the state enforces privilege (artificial scarcity or artificial property rights). Consequently, we get the basic aim of mutualist policy: to remove all forms of artificial property and artificial scarcity, and allow the free market to eliminate rents to the privileged classes. We’re not interested in an empirical rule for predicting prices. We simply want to eliminate privilege and artificial scarcity, and cheerfully accept the prices that result — whatever they are — as legitimate.

If these things all hold good…

…if vacant and unimproved land is no longer held out of use by
absentee titles;

if artificial capitalization requirements for mutual banks issuing
secured loans against their members’ property are no longer used to
restrict free competition in the issue of credit;

if “intellectual property” is no longer used to inflate the price of
goods above their marginal cost of production;

if zoning, licensing, and safety laws are no longer used to
artificially inflate capital outlays and overhead costs for
small-scale production and raise the cost of
subsistence…

Then we cheerfully accept whatever prices prevail under these conditions as just, or close enough for government work.

Mutualist political economy is a theory of how artificial property rights serve to control access to natural opportunities, and to exact tribute for being allowed to apply one’s labor to the earth. The labor theory of value is a paradigm for describing how this works, not an empirical theory of price.

From this standpoint the “epicycles,” when they occur naturally, are not a problem at all. And when they occur unnaturally, they are the whole point of the theory! The point is not to estimate what the natural price would be without the epicycles, but to eliminate the epicycles.

From my standpoint the marginalist theory created as many problems as it solved. By taking all components of price at face value, it obscured — deliberately? — the whole question of the legitimacy of factor prices. Under the marginalist paradigm, the holder of artificial property rights who is in a position to obstruct production ipso facto contributes to production by failing to so obstruct. His failure to obstruct is a “factor of production.” The tribute he charges for not obstructing productive activity is the price of his “productive services.” And the component of final product price that results from the tribute paid to him is the “marginal productivity” of his “services.”

Finally, marginalist theory in my opinion is best understood, not as a replacement of the classical law of cost, but as an invaluable theoretical advance for describing the mechanism by which the classical law of cost worked. Polemical statements of marginal utility theory, in the form “value is determined by utility,” obscure more than they explain. At face value, with the terms taken in their ordinary sense, this is nonsense. A seller can price a good at its utility to the buyer only in a monopoly position (like charging a price for a glass of water based on its “utility” to a man in the middle of the desert). Properly stated, the law of marginal utility is that “prices reflect marginal utility, given the snapshot of spot supply and demand at any given moment.”

When changes in supply and demand over time in response to price are brought in as a dynamic factor, marginal utility describes something very much like the classical political economists’ old law of cost: the supply of reproducible goods will adjust to demand over time until the marginal utility of the last unit produced will equal the marginal disutility of supplying it.

Kevin Carson is a research associate at Center for a Stateless Society. He recently published The Homebrew Industrial Revolution: A Low-Overhead Manifest