The requirement that an object have utility is a necessary component of the labor theory of value, if it is to avoid certain objections. Suppose a person works on something absolutely useless that no one wants. For example, he spends his hours efficiently making a big knot; no one else can do it more quickly. Will this object be that many hours valuable? A theory should not have this consequence. Marx avoids it as follows: “Nothing can have value without being an object of utility. If a thing is useless so is the labor contained in it; the labor does not count as labor, and therefore creates no value.” Isn’t this an ad hoc restriction? Given the rest of the theory, why does it apply? Why doesn’t all efficiently done labor create value? If one has to bring in the fact that it’s of use to people and actually wanted (suppose it were of use, but no one wanted it), then perhaps by looking only at wants, which have to be brought in anyway, one can get a complete theory of value.
Even with the ad hoc constraint that the object must be of some use, there remain problems. For, suppose someone works for 563 hours on something of some very slight utility. This satisfies the necessary condition for value that the object have some utility. Is its value now determined by the amount of labor, yielding the consequence that it is incredibly valuable? No. “For the labor spent on them (commodities) counts effectively only insofar as it is spent in a form that is useful to others.” Marx goes on to say: “Whether that labor is useful for others, and its product consequently capable of satisfying the wants of others, can be proved only by the act of exchange.” If we interpret Marx as saying, not that utility is a necessary condition and that (once satisfied) the amount of labor determines value, but rather that the degree of utility will determine how much (useful) labor has been expended on the object, then we have a theory very different from a labor theory of value.
We can approach this issue from another direction. Suppose that useful things are produced as efficiently as they can be, but that too many of them are produced to sell at a certain price. The price that clears the market is lower than the apparent labor values of the objects; a greater number of efficient hours went into producing them than people are willing to pay for (at a certain price per hour). Does this show that the number of average hours devoted to making an object of significant utility doesn’t determine its value? Marx’s reply is that if there is such overproduction so that the market doesn’t clear at a particular price, then the labor was inefficiently used (less of the thing should have been made), even thought the labor itself wasn’t inefficient. Hence not all of those labor hours constituted socially necessary labor time. The object does not have a value less than the socially necessary number of labor hours expended upon it, for there were fewer socially necessary labor hours expended upon it than meet the eye.
“Suppose that every piece of linen in the market contains no more labor-time than is socially necessary. In spite of this, all the pieces taken as a whole may have had superfluous labor time spent upon them. If the market cannot stomach the whole quantity at the normal price of 2 shillings a yard, this proves that too great a portion of the total labor of the community has been expended in the form of weaving. The effect is the same as if each weaver had expended more labor-time upon his particular product than is socially necessary. (Marx, Capital, p. 120)
Thus Marx holds that this labor isn’t all socially necessary. What is socially necessary, and how much of it is, will be determined by what happens on the market! There is no longer any labor theory of value; the central notion of socially necessary labor time is itself defined in terms of the processes and exchange ratios of a competitive market!
– Robert Nozick, Anarchy, State, and Utopia