Refuting Marginal Utility

Recently, a lot of so called “expert economists” have completely discredited the labor theory of value. Their basis is that the theory of marginal utility has accurately replaced it, and explains economics perfectly well. Such a notion is merely an attempt to denounce Marxist economics with no legitimate understanding of the labor theory of value.

Marginal utility as a theory, is in fact embedded with bourgeois economics which explain how prices are formed through primarily subjective estimates between members of the capitalist class who compete with one another. The theory itself was originated against Marxist theories in the late nineteenth century. The main adherents to this theory went on to create the Austrian school of thought, which is a prime example of bourgeois economists, whose followers are libertarians or those who were once Ayn Rand supporters, ironically enough.

These pro-free market economists base their analysis from utility, or use value, and the subjective understanding of it. Values are then determined from their “marginal utility” (the utility of the last unity that accounts for the least important requirement of the subject). As a result, exchange is no longer based around exchange value, but instead use value.

From there, supporters of the theory split. The more traditionalists, or the Cardinalists and the Ordinalists. Regardless, their theories still deny that value is the expression of socially required labor, and as a result, ignore the roles production has and instead substitute production relations by means of exchange. Therefore, the entire theory is reactionary because it attempts to minimize the exploitation of labor by capital, distorts the class structure of society, and doesn’t understand the nature of surplus value (which is unpaid labor for the working class).

Legitimate Marxists worldwide have already proven that the marginal utility theory is ridiculous, and furthermore doesn’t work in reality. The theorists continue to neglect social reality, and moreover, they continue to ignore criticisms of their theory by anybody seemingly left leaning.

So to conclude, marginal utility theory only mentions the increases or decreases in “fetishization” of items based on their consumption. It does practically nothing to actually explain how the value of such an item originated in any concrete, material basis. There is no true value without labor, as Marxism states correctly. Such a theory as marginal utility, which denies the importance of labor, is reactionary and counter-Marxist

For more information I advise you to read the labor theory of value FAQ. I furthermore advise all comrades to take on the issue of economics, as it is a key to our legitimacy and scientific accuracy. It is a difficult challenge, and it took me a little while to understand the nature of marginal utility for example, but it is well worth it if you do!

Written by Gl0wstick.

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This entry was posted in Capitalism, Communism, Economics, History, Leftism, Marxism, Philosophy, Politics, Theory, United States. Bookmark the permalink.

5 Responses to Refuting Marginal Utility

  1. Justin Lee says:

    I tried submitting this earlier, but here goes again:

    It does practically nothing to actually explain how the value of such an item originated in any concrete, material basis.

    I don’t know how much you have read of Mises or Menger, but they both made the point that economic value is rooted in the needs and desires of the acting individual and that valuations are based how well those thing be sought serve as means to satisfy his or her higher ends.

    • I apologize for any issues in submitting. Now onto the issue raised.

      That is simply marginalism, which was critiqued briefly in the article. I have not managed to read a whole lot of Mises or Menger, but from what I have, their theories are conflicting between practice and reality, and moreover, negate important issues such as class struggle, as demonstrated in this article. Marxists don’t follow marginal utility, we follow the labor theory of value. One of the fundamental aspects of the philosophy of those such as Mises was to critique the labor theory of value. Therefore your post is somewhat irrelevant. And finally, according to the LTV, the value of commodities are determined by the amount of socially necessary labor that goes into it, not the subjective approach of right leaning economists and others. It is also true that use value is important, but Austrian school economists misunderstood it, as well as the LTV.

      • Justin Lee says:

        That is simply marginalism, which was critiqued briefly in the article.

        As far as I understand, it is actually a doctrine of the theory of subjective value. Marginalism is simply the sub-branch of subjectivism, but the doctrine I explained actually applies to the theory of subjective value itself.

        In any case, I think I would better understand your point about marginalism not being of any practical significance if you could provide an example of a paradox or self-contradiction in the marginal theory of value.

      • The theory of purely subjective value is contradictory itself. But aside from that, the article was not to say that marginal utility is not significant, it was just to disagree with it.

        At any rate, the theory of marginal utility, as mentioned, was developed by those troubled by the Marxist economic theories of their time, such as the Austrian school, who critiqued the LTV extensively. This was primarily because Marxism actually managed to provide a solid understanding of price formation, as well as revealing how capitalist exploitation in surplus value works, and thus it furthermore illustrated the contradictory nature between the main classes of society. When marginal utility was created however, the historical conditions of the time were developed in accordance to new economic expansions to the primary capitalist nations. Their increased market strength overran price formation in production and led to idealizing market processes. Marginal utility’s subjective view on how the market works are based largely on agents of the market’s economy rather than the true processes which develop the actual thoughts and judgment of the market agents (i.e. buyers and/or sellers), counter to how Marxism operates.

        On the other hand, marginal utility also explains the forces behind price formations from the perspective of a consumers, which I will admit is unique to other forms of political economics the bourgeoisie utilizes. Since such previous economic theories failed to understand the source of value, marginal utility is indeed a step forward for them, so to speak. But is not enough to warrant support among Marxists, especially on the grounds that it is the “solution” to political economy. The theory of marginal utility is monistic in its beliefs that price formation is based off of consumption and utility alone. The theory also attempts to build itself trying hard not to contradict formal logic, but the methods it uses is flawed, and often doesn’t take material conditions into consideration.

        As far as the theory’s relation to the Austrian school goes, there is also the issue of Gossen’s laws. Those such Wieser and Menger attempt to describe how prices are established in regards to the market, as I’m sure you know. As I said, I have not read a whole lot on this, but from what I understand, their theories assume a lot on a smooth relation between buyers and sellers, and moreover, would inevitably lead to a circle of activity repeating itself. The fact of the matter is that utility and marginal utility are indeed elements of use value, but use value is not entirely comparable to this. They can only actually be compared to how far they hold their own values, in regards to their amounts of labor expressed via socially necessary labor time.

        I would strongly suggest taking a Google for the “Labor Theory of Value FAQ” if you are interested, as it can most definitely give you a better understanding. Myself, I am more of a history buff, so I would expect to “lose” this argument eventually in all honesty, good sir. Oh, these cursed economics will be the death of me, I swear. Ha!

      • Justin Lee says:

        I guess I misunderstood your point when you said the theory of marginal utility “doesn’t work in reality.” I took that to mean that the theory of marginal utility has no practical significance.

        I can appreciate that theories of value can be very complex subject, but for the sake of my understanding and time, I was more interested if you provide a hypothetical of a paradox or self-contradiction in marginal utility theory.

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