This is the third in a sporadic series on economic theory, prompted by questions and answers on earlier posts.
How is the Labour Theory of Value affected by the Economics of Robots ?
A discussion has been burbling away on my post about How is wealth destroyed and where does wealth come from written last October, in a month when the world financial systems were exposed as being hopelessly overstreched and fell into an unprecedented destructive cycle of collapse, bailouts, bankruptcy and state takeover.
In September I had asked “Where does money come from?” answering from the basics in terms of primitive barter systems and early trade. The October post explained the Labour Theory of Value, which states that the market value of a commodity is ultimately determined by the total amount of socially necessary labour time that went into it’s production and delivery.
The comments have been really great. Conrad Taylor provided insights about early coinage and banking systems in 9th century Arabia. We discussed the price of fish. And then in the big wide world this happened:
The argument between two strands of capitalist ideology has just shifted enormously in the past weeks from monetarist to Keynsian economic theory – AR
Peter Childs proposed that all the problems stem from an error in the way stock market valuations are calculated.
Then David N asked cunningly:
Suppose I have a shop that is completely robotic…my shop has created wealth without the use of labor, hasn’t it?
This is a good attempt at rebutting the labour theory, but in reality it doesn’t really matter if there is only one person left minding the shop and supervising the robots, or even nobody at all. The final product still embodies labour power from other parts of the overall process including the production and transport of raw materials and energy. Yes, there may even be some human accounting, management and marketing tasks which prove to be socially necessary to make the product worth bringing to market, or maybe not.
A robot at a TV Factory in Mexico CC pic by Avram Cheaney
Aurino explains that the newly equipped robot powered shop has only a temporary opportunity to make super profits.
as soon as your competitors discover the same thing, the market price of your widgets will be determined by the price of your raw materials plus the amount of labour required to design, manufacture, operate and maintain the robots.
Mark Rowe’s suggestion takes this line of reasoning further:
If labour is the key – with the robot scenario wouldn’t you need to consider all the labour that contributed to the design, manufacture, operation and powering of the machines
Yes indeed. We can also differentiate between the one-off efforts involved in design and manufacture of the robots, and the ongoing requirement for some labour to operate, power and maintain these machine tools. As far as the value of the items produced by this newly automated labour-efficient factory is concerned, the initial investment will sooner or later be disregarded, and both the perceived and actual value of the items once brought to market will drop to match the lower amount of human labour power involved in the production process.
Machine Labour Hours?
Now then, McDudeqq’s answer is so far away from any previously existing theory that it’s quite hard to take onboard, but worth making the extra effort to consider. All he says is
It is machine (labour) hours
As if machine running hours can be considered in the same way as, or perhaps on a par with human labour hours. Well the robots are consuming a certain amount of energy for each hour of production, and will require a scheduled maintenance after certain fixed periods which could be divided into the hourly rate, so why not.
Is there a fundamental difference between machine hours and human hours?
Well humans have certain needs which if not fulfilled will not make them very useful workers. Sleep for example! In order for your worker to be able to work at making profits for your on a regular basis, she also needs to be able to take a minimal amount of time off for rest and everything else necessary to keep body and soul together, as they say. Of course we all need to eat, just as the robots consume energy, so the provision of food, shelter, warmth and even the production of future generations of workers needs to be factored into the total labour costs of buying each human labour hour.
Driving down the cost of labour is what profitability is all about, which is why corporations will sometimes invest millions in order to lay off just a handful of workers. As long as it reduces the total wages bill, the profitability will be seen to have inreased, thus pushing up the stocks value which can then be used to borrow and invest in yet more labour reduction, as long as things are going well.
So let’s continue our discussion about wealth, labour and recession . How do you think new technologies such as robots fit in to existing economic theory such as the labour theory of value? Is this something that should benefit from national and international stimulus packages?