The labor theory of value was a basic part of classical political economy, especially in the work of Adam Smith, David Ricardo, and then, Karl Marx. Ideologically, it had been a useful weapon when deployed against the pretensions of landlords and aristocrats. But by the mid-19th century,socialist writers were starting to use it to critique capitalism. Karl Marx was the most notable example of this, but in Britain there were a number of other writers doing much the same thing, if not quite so well, the so-called Ricardian socialists. So on an ideological level, the labor theory of value was losing its appeal for pro-capitalist economists and ideologues. Hence, the appeal of marginalism to pro-capitalist economists. However, to complicate things a bit, some of he early marginalists, like Walras, were themselves socialists too, so it was quite possible to reject the labor theory of value and still be a socialist. And in the 20th century there were quite a number of economists who rejected the labor theory of value but were still good socialists. People like Oskar Lange, Joan Robinson, Pierro Sraffa, and John Roemer, to name just a few.
Joan Robinson BTW viewed both the labor theory of value and the marginalist conception of value as both being "metaphysical" and, hence, not science. She rejected both, while still embracing much of the Marxist critique of capitalism. In her view both the classical economists' labor theory of value, and marginalism, were based on untestable, unverifiable assumptions. Since most neoclassical economists have been avowed positivists, this criticism ought to bite.
On the other hand, just to keep things interesting, it should be noted that the Polish socialist economist Oskar Lange considered himself to be both a Marxist and a neoclassical economist. In his view both Marxism and neoclassical economics were necessary if we were to get a full picture of economic reality. He thought Marxism provided the key to understanding the historical evolution of capitalism (including its eventual ultimate displacement by socialism), but he regarded traditional Marxist economics to be inadequate in several ways. He rejected the “labor theory of value” as being unscientific, and held that a Marxian concept of exploitation could be restated without it. He made statements like
“If people want to anticipate the development of Capitalism over a long period, a knowledge of Marx is a much more effective starting point than a knowledge of [Friedrich von] Wieser, [Eugen von] Bohm-Bawerk, Vilfredo Pareto or even [Alfred] Marshall (although the last-named is in this respect much superior). But Marxian economics would be a poor basis for running a central bank or anticipating the effects of a change in the rate of discount.”
and
“[I]n providing a scientific basis for the current administration of the capitalist economy ‘bourgeois’ economics has developed a theory of equilibrium which can also serve as a basis for the current administration of a socialist economy. It is obvious that Marshallian economics offers more for the current administration of the economic system of Soviet Russia than Marxian economics does, though the latter is surely the more effective basis for anticipating the future of capitalism." At the same time, Lange, among other things was able to show how neoclassical economic reasoning could be used to argue on behalf of socialism and socialist economic planning,
Over time in eastern Europe, views, similar to Lange's, became popular among many economist there during the 1950's and 1960's and they provided the theoretical basis for reform proposals in Hungary, Poland, Czechoslovakia, and the Soviet Union. Even though many contemporary neoclassical economists would concede Lange's abilities as an economist, few would would be willing to follow him in combining neoclassical economics with Marxist analysis. In other words, they are willfully committed to keeping their discipline "autistic."
The young Sidney Hook in his 1933 book, Towards the Understanding of Karl Marx, took an interesting Hook's 1933 defense of the labor theory of value contrasts with the more orthodox defenses that had been offered by people like Hilferding and Bukharin.to the issue of the LTV versus marginalism. He argued that from the standpoint of pure logic one cannot prove or disprove any theory of value. He drew an analogy with theories of geometry. Just as physical space can be described in terms of multiple systems of geometry (Euclidean, Lobachevskyian, Riemmanian etc.), so the same is true for the description of economic phenomena in terms of multiple theories of value. Experience cannot disprove any given geometric system, only make description in terms of a system, more or less complex. For the physicist, that geometric system, will be "true," to the extent that it in combination with other physical hypotheses, yields the simplest description of his experimental findings. However, to the extent that experimental control is not in question, the physicist can always save the appearances by introducing subsidiary assumptions and ad hoc hypotheses so that he can describe physical reality in terms of any geometric system that he chooses. Hook contended that the same was true for theories of economic value as well.
He argued that economic reality can be described in either marginalist terms or in terms of Marx's LTV. In either case, the economist must necessarily rely upon subsidiary hypotheses, such that it is not possible to refute either Marxian value theory or marginalism on the basis of empirical observations. And Hook argued that Marx in *Capital* anticipated all of the major objections to LTV. In any case, LTV can with sufficient tweaking of subsidiary hypotheses, always be saved from refutation. And in any case, neither LTV nor any other alternative theory possesses any predictive power . But then Hook asks, if it is the case that we can always save LTV from empirical refutation, why would we want to save it. And his answer was because LTV is ultimately not a Sorelian myth or an ideology but is "the self-conscious theoretical expression of the practical activity of the working class engaged in a continuous struggle for a higher standard of living - a struggle which reaches its culmination in social revolution. . . To the extent that economic phenomena are removed from the influences of the class struggle, the analytical explanations in terms of the labor theory of value grow more and more difficult. The labor theory of value is worth saving if the struggle against capitalism is worth the fight."
Hook's 1933 defense of the labor theory of value contrasts with the more orthodox defenses that had been offered by people like Hilferding and Bukharin.
Rudolf Hilferding, Böhm-Bawerk's Criticism of Marx https://www.marxists.org/archive/hilferding/1904/criticism/
Nikolai Bukharin, Economic Theory of the Leisure Class
https://www.marxists.org/archive/bukharin/works/1927/leisure-economics/
Jim Farmelant http://independent.academia.edu/JimFarmelant http://www.foxymath.com Learn or Review Basic Math
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