Subjective Value Theory

“One of the lesser economic schools began in 1871 with the publishing of Grundsätze der Volkswirtschaftslehre by Carl Menger, a professor at the University of Vienna. Among his Principles of Economics, as Menger’s book is titled in English, was a new and significant theory of value that has become widely accepted in microeconomics although it is still not incorporated into macroeconomics. This new idea was that value was not objective, but rather entirely subjective, and based on the principle of marginal utility. This meant that value of a good was derived from the satisfaction that an individual user of the good obtained from its incremental use rather than an objective measure such as the quantity of labor required to manufacture the good.

“Menger’s theory had tremendous implications for socialist theory, particularly the dominant Marxian form. The concept of subjective value destroyed the economic basis of Marx’s holistic system, since in eliminating labor as the sole source of value, it also eliminated the surplus value that was the primary justification for the class struggle and the socialist redistribution of wealth that were central components of Marxist political policy. Without its foundation of the labor theory of value, the entire structure of Marxian economic theory was rendered irrelevant. However, as was seen later with Keynesian general theory, because the widespread acceptance of an economic theory depends on elements that have very little, if anything, to do with the actual science involved, this abstract undermining of the vast Marxian sociopolitical edifice had very little effect in the material world where politics, power, and personal ambitions tend to count more than mere logic and empirical evidence.”

Excerpt From: Vox Day. “The Return of The Great Depression.”

What amazes me is that one need only find and disprove the source of a theory for the entirety to unravel. There are miles of Marxian red tape through which to sift. The Labor theory of value is a prime target.

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