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Quotation of the Day…

… is from page 227 of Deirdre McCloskey’s insightful 2024 paper “The Labor Theory of Value Is Mistaken,” which is chapter 18 in The War on Prices: How Popular Misconceptions About Inflation, Prices, and Value Create Bad Policy (Ryan A. Bourne, ed., 2024):

But, shockingly, against all this apparent common sense and ethical appeal, the labor theory of value is wholly mistaken as a matter of economics. It’s deeply screwy, scientifically, and evil in its ethics.

DBx: Oren Cass and other advocates of industrial policy that’s meant to sacrifice the welfare of individuals as spenders of the incomes they earn in order to protect (or resurrect) particular employment options and arrangements are proponents of the labor theory of value. Value, in the view of proponents of such industrial policy, inheres in the labor itself rather than in the output of the labor.

While this notion might appeal to clever sophomores, upon mature investigation it’s revealed as being – as Deirdre accurately describes it – screwy. How do we know it’s screwy? Easy! The very fact that Cass & Co. correctly understand that the only way to entice workers to hold the particular jobs industrial-policy proponents wish to protect (or to resurrect) is to have government coerce consumers to purchase the outputs of these particular workers.

Cass & Co. will protest, insisting that they, with their lawyerly training, realize what mere economists don’t – namely, that the market has no good way to reveal the actual, full value to workers themselves of holding particular kinds of jobs. But economists actually know more – much more – economics than do industrial-policy advocates. Economists know that the market does have a very good mechanism for revealing this value. It’s called a “labor market.” By refusing to work at wages low enough to maintain (or to resurrect) the particular kinds of jobs fancied by Oren Cass and other such proponents of industrial policy, workers themselves reveal that the value to them of these jobs is too low to justify maintaining (or resurrecting) these jobs. Workers, therefore, will hold such jobs only if other people are coerced into subsidizing them – thus the evilness of the labor theory of value in operation.

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