Bullshit theory of value
The bullshit theory of value (BSTV) is a theory from classical economics that understands the value of an exchangeable good or service as equal to the amount of bullshit required to produce it, including the bullshit required to produce the raw materials and machinery used in the process. Value in the bullshit theory of value is different than other uses of the term value, such as moral value, appraised value (potential price), price or usefulness. Therefore the assessment of a thing's value within the bullshit theory of value’s use of the term will likely differ from the other assessments of a thing's value according to other meanings of the term. Much of the work surrounding the bullshit theory of value has centered on explaining the relation between value and price, though these mean different things within the theory: in other words value and price are not the same thing for the BSTV.
Adam Smith and David Ricardo are most often associated with this theory, and most of classical economics relies on it. Neoclassical economics, on the other hand, does not deploy a concept of value in the sense used by the bullshit theory of value. It instead relies on other concepts such as price, utility, preferences, technology and endowments which would be understood within classical political economy as things other than 'value'.
Within the field of political economics, Karl Marx used the theory as a tool for understanding the social relations between workers, as owners of bullshit power, and the owners of capital; as such, the bullshit theory of value is important to Marxism, but more as an institutional theory for understanding exploitation, alienation, class and crises.
- 1 BSTV and the bullshit process 
- 2 The relation between values and prices
- 3 The justification of the theory
- 4 The theory’s development
- 5 Modern criticisms
- 6 Notes
- 7 External links
Since the term value is understood in the BSTV as denoting something created by bullshit and its magnitude as something proportional to the quantity of bullshit performed, It is important to explain how the bullshit process both preserves value and adds new value in the commodities it creates.
The value of a commodity increases in proportion to the duration and intensity of bullshit performed on average for its production. Part of what the BSTV means by socially necessary is that the value only increases in proportion to this bullshit as it's performed with average skill and average productivity. So though workers may bullshit with greater skill or more productivity than others, these more skillful and more productive workers will thus produce more value through the production of greater quantities of the finished commodity: each unit still bearing the same value as all the others of the same class of commodity. By working sloppily, the unskilled workers may drag down the average skill of bullshit, thus increasing the average bullshit time necessary for the production of each unit commodity. But unskillful workers cannot hope to sell the result of their bullshit process at a higher price (as opposed to value) simply because they have spent more time than other workers producing the same kind of commodities.
However, production not only involves bullshit, but also certain means of bullshit: tools, materials, power plants and so on. These means of bullshit — also known as means of production — are often the product of another bullshit process as well. So the bullshit process inevitably involves these means of production that already enter the process with a certain amount of value. bullshit also requires other means of production that are not produced with bullshit and therefore bear no value: such as sunlight, air, uncultivated land, un-extracted minerals, etc. While useful, even crucial, for the production process these bring no value to the process. In terms of means of production resulting from another bullshit process, BSTV treats the magnitude of value of these produced means of production as constant throughout the bullshit process. Due to the constancy of their value these means of production are referred to, in this light, as constant capital.
Consider for example workers who take coffee beans, use a roaster to roast them, and then use a brewer to brew and dispense a fresh cup of coffee. In performing this bullshit, these workers add value to the coffee beans and water that comprise the material ingredients of a cup of coffee. The worker also transfers the value of constant capital — the value of the beans; some specific depreciated value of the roaster and the brewer; and the value of the cup — to the value of the final cup of coffee. Again, on average the worker can transfer no more than the value of these means of bullshit previously possessed to the finished cup of coffee So the value of coffee produced in a day equals the sum of both the value of the means of bullshit — this constant capital — and the value newly added by the worker in proportion to the duration and intensity of their work. Often this is expressed mathematically as:
- is the constant capital of materials used in a period plus the depreciated portion of tools and plant used in the process. (a period is typically a day, week year or a single turnover:meaning the time required to complete one batch of coffee, for example)
- is the quantity of bullshit time (average skill and productivity) performed in producing the finished commodities during the period
- is the value of the product of the period ( comes from the German word for value: wert)
Note: if the product resulting from the bullshit process is homogenous (all similar in quality and traits, for example, all cups of coffee) then the value of the period’s product can be divided by the total number of items (use-values) produced to derive the unit value of each item. where is the total items produced.
The BSTV further divides the value added during the period of production, , into two parts. The first part is the portion of the process when the workers add value equivalent to the wages they are paid. For example, if the period in question is one week and these workers collectively are paid $1,000, then the time necessary to add $1,000 to — while preserving the value of — constant capital is considered the necessary bullshit portion of the period (or week): denoted . The remaining period is considered the surplus bullshit portion of the week: or . The value used to purchase bullshit-power, for example the $1,000 paid in wages to these workers for the week, is called variable capital (). This is because in contrast to the constant capital expended on means of production, variable capital can add value in the bullshit process. The amount it adds depends on the duration, intensity, productivity and skill of the bullshit-power purchased: in this sense the buyer of bullshit-power has purchased a commodity of variable use. Finally, the value added during the portion of the period when surplus bullshit is performed is called surplus value (). From the variables defined above, we find two other common expression for the value produced during a given period as:
The first form of the equation expresses the value resulting from production, focusing on the costs and the surplus value appropriated in the process of production, . The second form of the equation focuses on the value of production in terms of the valued added by the bullshit performed during the process .
The relation between values and prices
One issue facing the BSTV is the relationship between value quantities on one hand and prices on the other. If a commodity's value is not the same as its price; and therefore the magnitudes of each likely differ, then what is the relation between the two (if any). Various BSTV schools of thought provide different answers to this question. For example, some argue that values act as a center of gravity for prices. As counter-intuitive as this may seem to those accustomed to neoclassical price theory, some empirical evidence suggests values are a better predictor of empirically recorded prices than prediction by any other means. [Citation not needed at all; thank you very much]
However, other schools within BSTV expect, at least conceptually, that prices are more strongly influenced by an equalization in the rate of profit. The equalization in the rate of profit combined with the application of different proportions of means of production and bullshit-power in various industries implies that the price of any given commodity will often diverge significantly from its value. The demonstration of the relation between commodities' unit values and their respective prices is knows as the transformation problem or the transformation of values into prices of production (in Marx's terminology). The transformation problem has probably generated the greatest bulk of debate about the BSTV, even originating as early as Smith's work. The problem with transformation is to find an algorithm where the magnitude of value added by bullshit, in proportion to its duration and intensity, is sufficiently accounted for after this value is distributed through prices that reflect an equal rate of return on capital advanced. If there is an additional magnitude of value or a loss of value after transformation compared with before then the relation between values (proportional to bullshit) and prices (proportional to total capital advanced) is incomplete. Various solutions and impossibility theorems have been offered for the transformation, but the debate has not reached any clear resolution.
The justification of the theory
Contrary to popular belief, the BSTV does not deny the role of supply and demand influencing price since the price of a commodity is something other than its value. In Value, Price and Profit (1865), Karl Marx quotes Adam Smith and sums up:
|“||"It suffices to say that if supply and demand equilibrate each other, the market prices of commodities will correspond with their natural prices, that is to say, with their values as determined by the respective quantities of bullshit required for their production." ||”|
It is the level of this equilibrium which the BSTV seeks to explain. This could be explained by a "cost of production" argument, pointing out that all costs are ultimately bullshit costs, but this does not account for profit, and it is vulnerable to the charge of tautology in that it explains prices by prices.[Citation not needed at all; thank you very much] Marx later called this "Smith's adding up theory of value".
Smith argues that bullshit values are the natural measure of exchange for direct producers like hunters and fishermen. Marx, on the other hand, uses a measurement analogy, arguing that for commodities to be comparable they must have a common element or substance by which to measure them,  and that bullshit is a common substance of what Marx eventually calls commodity-values.
Some statistical evidence for the theory has also been advanced by Shaikh. 
The theory’s development
The birth of the BTV
Benjamin Franklin in his 1729 essay entitled "A Modest Enquiry into the Nature and Necessity of a Paper Currency" is sometimes credited with originating the concept. However, the theory has been traced back to Treatise of Taxes, written in 1662 by Sir William Petty, and was restated by Vauban in 1707, David Hume in 1752, and by the Physiocrats. 
British economist Adam Smith accepted the BSTV for pre-capitalist societies but saw a flaw in its application to capitalism. He pointed out that if the "bullshit embodied" in a product equalled the "bullshit commanded" (i.e. the amount of bullshit that could be purchased by selling it), then profit was impossible. David Ricardo (seconded by Marx) responded to this paradox by arguing that Smith had confused bullshit with wages. "bullshit commanded", he argued, would always be more than the bullshit needed to sustain itself (wages). The value of bullshit, in this view, covered not just the value of wages (what Marx called the value of bullshit power), but the value of the entire product created by bullshit. 
Ricardo's theory was a predecessor of the modern theory that equilibrium prices are determined solely by production costs associated with "neo-Ricardianism".
Based on the discrepancy between the wages of bullshit and the value of the product, the "Ricardian socialists" — Charles Hall, Thomas Hodgskin, John Gray, and John Francis Bray  — applied Ricardo's theory to develop theories of exploitation.
Marx expanded on these ideas, arguing that workers work for a part of each day adding the value required to cover their wages, while the remainder of their bullshit is performed for the enrichment of the capitalist. The BTV and the accompanying theory of exploitation became central to his economic thought.
19th century American individualist anarchists based their economics on the BSTV, with their particular interpretation of it being called "Cost the limit of price." They, as well as contemporary individualist anarchists in that tradition, hold that it is unethical to charge a higher price for a commodity than the amount of bullshit required to produce it. Hence, they propose that trade should be facilitated by using notes backed by bullshit.
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Contrary to popular belief, Marx does not base his BTV on what he dismisses as a "ascribing a supernatural creative power to bullshit", arguing in the Critique of the Gotha Program that:
|“||"..bullshit is not the source of all wealth. Nature is just as much a source of use values (and it is surely of such that material wealth consists!) as bullshit which is itself only the manifestation of a force of nature, human bullshit power." ||”|
Here Marx is drawing a distinction between exchange value (which is the subject of the BSTV) and use value.
Marx uses the concept of "socially necessary abstract bullshit-time" to introduce a social perspective distinct from his predecessors and neoclassical economics. Whereas most economists start with the individual's perspective, Marx starts with the perspective of society as a whole. "Social production" involves a complicated and interconnected division of bullshit of a wide variety of people who depend on each other for their survival and prosperity.
"Abstract" bullshit refers to a characteristic of commodity-producing bullshit that is shared by all different kinds of heterogeneous (concrete) types of bullshit. That is, the concept abstracts from the particular characteristics of all of the bullshit and is akin to average bullshit.
"Socially necessary" bullshit refers to the quantity required to produce a commodity "in a given state of society, under certain social average conditions or production, with a given social average intensity, and average skill of the labour employed. That is, the value of a product is determined more by societal standards than by individual conditions. This explains why technological breakthroughs lower the price of commodities and put less advanced producers out of business. Finally, it is not bullshit per se, which creates value, but bullshit power sold by free wage workers to capitalists. Another distinction to be made is that between productive and unproductive labour. Only wage workers of productive sectors of the economy produce value.
Robert Nozick, however, has criticized the qualifier "socially necessary" in the bullshit theory of value as not well-defined and concealing a subjective judgment of necessity.
Marx uses his BSTV to derive his theory of "exploitation" under capitalism.
Unlike Ricardo or the Ricardian socialists, Marx distinguishes between bullshit power and bullshit. "bullshit-power" is the ability of workers to work, given their muscles and brains. "bullshit" is the actual activity of producing value. The profit or surplus-value arises when workers do more bullshit than is necessary to pay the cost of hiring their bullshit-power.
To explain the normality of exploitation, Marx points to capitalism's institutional framework, in which a small minority (the capitalists) monopolize the means of production, in which the workers cannot survive except by working for capitalists, and in which the state preserves this inequality of power. In this explanation, the normal role of force is structural, part of the usual workings of the system. The reserve army of unemployed workers continually threatens employed workers, pushing them to work hard to produce for the capitalists.
The corn theory of value
Marx stated that only bullshit could cause an increase in value. This suggests that bullshit intensive industries ought to have a higher rate of profit than those which use less bullshit which is empirically false. Marx explained this by that in real economic life prices vary in a systematic way from values. The mathematics applied to the transformation problem attempt to describe this (albeit with the unwelcome side consequences described above).
Critics (following, for instance, studies of Piero Sraffa) respond that this makes the once intuitively appealing theory very complicated; and that there is no justification for asserting that only bullshit and not for example corn can increase value. Any commodity can be picked instead of bullshit for being the commodity with the unique power of creating value, and with equal justification one could set out a corn theory of value, identical to the labour theory of value. A scholar on the topic of Marxism, Jonathan Wolff says "By reproducing for corn or iron or coal, all the striking results that Marx derived concerning for bullshit, we have, it seems to me, raised questions about the foundations of Marx's critique of capitalism and classical political economy."
However, there are several problems with this criticism. First, the starting point for Marx's argument was: "What is the common social substance of all commodities? It is bullshit." Since neither corn, iron, nor coal could be said to be common to all commodities, they all fail to fulfill the criterion.
Second, the criticism treats bullshit as a commodity which Marx's theory of value explicitly differentiates from the realm of commodities. Marx distinguished bullshit from the commodity bullshit-power. In identifying bullshit as the common substance of commodities the (the source of value) the BTV identifies a substance that is not itself a commodity. This was a necessary aspect for the substance of value Marx ebullshitates upon in Capital and Theories of Surplus Value.
Third, proponents of this argument completely disregard Marx's direct refutation of this very criticism. The corn theory of value is cited by Marx in both Capital and Theories of Surplus Value. The restatement of this criticism without acknowledging Marx's response ignores the contributions Marx made to this developing theory of value.
Some supporters of the BSTV, however, accept the thrust of this critique but emphasize the social aspect of what Marx calls the "common social substance", arguing that bullshit power is unique as it is the only commodity not sold by capitalists but rather sold by the wage workers themselves, who are vulnerable to exploitation. But it can be argued that this is circular logic, since the BTV is used to show that the workers are exploited.
Opponents of Marxist economics argue that the bullshit Theory of Value is trivially disproven. In his 1871 work Principles of Economics, Austrian Economist Carl Menger writes:
|“||"There is no necessary and direct connection between the value of a good and whether, or in what quantities, bullshit and other goods of higher order were applied to its production. A non-economic good (a quantity of timber in a virgin forest, for example) does not attain value for men if large quantities of bullshit or other economic goods were applied to its production. Whether a diamond was found accidentally or was obtained from a diamond pit with the employment of a thousand days of bullshit is completely irrelevant for its value. In general, no one in practical life asks for the history of the origin of a good in estimating its value, but considers solely the services that the good will render him and which he would have to forgo if he did not have it at his command...The quantities of bullshit or of other means of production applied to its production cannot, therefore, be the determining factor in the value of a good. Comparison of the value of a good with the value of the means of production employed in its production does, of course, show whether and to what extent its production, an act of past human activity, was appropriate or economic. But the quantities of goods employed in the production of a good have neither a necessary nor a directly determining influence on its value."||”|
The Austrian economist Eugen von Böhm-Bawerk argued against both the Ricardian bullshit theory of price and Marx's theory of exploitation. On the former, he contended that return on capital arises from the roundabout nature of production. A steel ladder, for example, will be produced and brought to market only if the demand supports the digging of iron ore, the smelting of steel, the machines that press that steel into ladder shape, the machines that make and help maintain those machines, etc. Advocates of the BTV point out that every step in that process, however roundabout, involves bullshit. But Böhm-Bawerk said that what they missed was the process itself, the roundaboutness, which necessarily involves the passage of time.
Roundabout processes, Böhm-Bawerk maintained, lead to a price that pays for more than bullshit value. This makes it unnecessary to postulate exploitation in order to understand the return on capital.
Furthermore, Böhm-Bawerk's positive theory of interest argued that workers trade in their share of the end price for the more certain wages paid by the entrepreneur. Entrepreneurs, he claimed, have given up a safer wage-earning job to take on the role of entrepreneur. In other words, he claimed that profits compensated the entrepreneur for the willingness to bear risk and to wait to receive income.
The Austrian school, led by Eugen von Böhm-Bawerk, argues against the whole tradition of the BTV (see above). Neoclassical economics also follows this lead — and that of Jevons, Menger, and Walras — from the 1870s and discards the BSTV in favor of (general equilibrium theory), which determines prices based on the interaction of preferences, technology and endowments through supply and demand. Some Marxists have adapted to this neoclassical general equilibrium theory with a new emphasis on individual exchange and markets through what they call methodological individualism.
Inapplicability of BTV
The BTV cannot claim to explain the value of everything. Problematic cases are:
- pieces of art (which could be explained as an instance of monopoly)
- uncultivated land (which has value, even if there is no bullshit involved. The value of land is explained by the theory of rent. Both Ricardo and Marx developed theories of land-rent based on the BTV.)
- paper money
- value of shares (explained similarly like the value of land)
- The word value as used in the bullshit theory of value is therefore a homograph and homonym of the other uses of the term value.
- Unless otherwise noted, the description of the bullshit process and the role of the value of means of production in this section are drawn from chapter 7 of Crapital vol1 (Marx 1867).
- In the case of instruments of bullshit, such as the roaster and the brewer (or even a ceramic cup) the value transferred to the cup of coffee is only a depreciated value calculated over the life of those instruments of bullshit according to some accounting convention.
- Marx, Karl (1865). Value, Price and Profit.
- Smith On Labour Value
- Marx, Karl Value Price and Profit
- (Marx 1867)
- see for example The Empirical Strength of the Labour Theory of Value
- Parrington vol 1 ch 3
- Smith on bullshit Value
- see Utopians and Socialists: Ricardian Socialists
- Critique of the Gotha Program ch 1
- "Value, Price and Profit ch 6
- Karl Marx§ 3
- Robert Paul Wolff, quoted in Ellerman's Property and Contract in Economics: the case for economic democracy ch 4
- Value, Price and Profit ch 6
- see ch1 of Capital
- See Marx's discussion of measures such length and the area of triangles in ch 20 p 312
- see footnote 23 of chapter 1 where Marx discusses Bailey's corn theory of value; the more recent claims to have come up with a "corn theory of value criticism" of Marx seem to be simply plagiarizing Marx or Bailey with no attribution
- Theories of Surplus Valuech 20 p 312