This is how I see these matters (which is not the same as me asserting that what I see is true). The aggregation problem indeed brings crude Marxist theory to its knees. However, Marx was a considerably more intelligent and subtle thinker than his more dogmatic followers. It is worth reading “The Fragment on Machines” from “The Grundrisse” (pp. 690-712).http://thenewobjectivity.com/pdf/marx.pdf
Reading this fragment attentively we can see that the labor theory of value (LTV) is NOT put forward as a transhistorical verity. That is to say, the SNALT is not put forward by Marx himself as a universal quantum. It is not asserted as true for all societies in all epochs. Rather, it is asserted as true, to at least a first-order approximation, in the historical epoch of early capitalism. This was the era where crude industrialisation actually intensified labor. Men, women and children became wage-slaves and slaves to crude machines; the “dark, satanic mills” of Blake, and the blacking factories and counting houses of Dickens. The working day was lengthened, conditions made worse and new forms of poverty instituted. I mean slum living as opposed to “mere” vagrancy and imminent starvation, although unemployment and eviction could soon enough reinstate those conditions.
In this historical situation is it any wonder that labor appeared to the classical thinkers, after the Physiocrats, as the source of all production and hence the source of all value, outside the free gifts of nature? Is it any wonder that tools, machines and factories appeared quite clearly as congealed or embodied labor; wearing out (depreciating) in the course of production almost before one’s eyes, with the stages of production being relatively few and the crude machines frequently breaking down, clogging up and needing endless tinkering and attention to keep running? It (labor as the sole or main source of value) appeared so to the classical economists and also appeared so to Marx… at first. However, as Marx investigated and theorised further, “dialectical contradictions” arose to his view. We now call this arising of dialectic contradictions in a system, rational or real, “emergence”. The philosophical terminology changes, but the core concept remains the same. Marx makes all this clear when he imaginatively runs the clock forward to envision what history will bring and specifically how it will render obsolete the labor theory of value itself. I will come back to this point.
In the early industrial capitalist era, the LTV is instituted and socially instantiated in praxis by the very modes of wage labor AND value accounting by price founded by early industrial and finance capitalism and operating as a compounded socioeconomic or political economy whole. Labor IS creating most (use) value in that situation and is thus creating both reproduction value (for the reproduction of labor) and surplus value. It is the accounting by price, founded in turn on the laws of ownership, which is used as a control (capital as control or power) to apportion surplus real stuff (surplus to the subsistence and reproduction needs of labor) to enable a gross profit via sale of manufactured goods. Gross profit in turn may be apportioned to creating a fixed capital investment or to the creation of fictional capital (via capitalisation as CasP identifies) or to expenditure on elite, luxury consumption.
The LTV was not invented by the classical economists and Marx, it was discovered by them. It was instantiated in practice by the overall practices and systems of early industrial and financial capitalism. Labor was indeed creating all use value (to a first-order approximation and excluding free value from nature) as “measured” by price. A false, nominal or qualitative measure or belief (price in this case) nevertheless can inform real behaviour, as we know. People may act as if its true. People line up for the Eucharist, acting as if it is true. People line up for money, and with money, acting as if it is true in some way. In the case of money, no value is “but thinking makes it so” to reappropriate Shakespeare’s words.
The LTV is constructed immanently in functioning early industrial capitalism. Human labor at that time still makes most stuff directly or through machines as congealed labor. Price supposedly measures things but actually controls allocation. While the construction of prices varies in detail from the highly arbitrary (via the exercise of power), to the very rough heuristics of “general expected utility”, in terms of the prices allocated to myriads of items within the broad categories of labor, materials, fixed capital inputs, fictitious capital and owner/rentier “rights”, there are some real limits at the boundaries of some categories. Labor cannot be allocated less, via prices, than what the majority of labouring humans will tolerate in practice. This tolerance is highly variable but it has lower bounds set by the failure to socially reproduce labor (feed, house, rear and educate the next generation of labor) and even limits set finally by imminent starvation as a physiological bound.
The LTV was descriptive of real observables in the era of early industrial and financial capitalism. That is my contention here. The extant observables in turn were created by a complex amalgam of real processes and prescriptive rules (of ownership etc.) of the socioeconomic system itself. The LTV is however a general qualitative theory of one epoch. It is not a strict quantitative theory and it is not an epochally universal theory. In turn, the neoclassical utility theory of value is far more abstracted and removed from reality (of any and all eras) than is LTV when LTV is applied to its appropriate era.
Now, to get to the final crux of this post. How does Marx run the clock forward and predict the negation of the labor theory of value (hence demonstrating that he did not see the LTV as a transhistorical verity)? Consider these quotes:
“Once adopted into the production process of capital, the means of labour passes through different metamorphoses, whose culmination is the… automatic system of machinery… set in motion by an automaton, a moving power that moves itself; this automaton consisting of numerous mechanical and intellectual organs, so that the workers themselves are cast merely as its conscious linkages.”
“Rather, it is the machine which possesses skill and strength in place of the worker, is itself the virtuoso, with a soul of its own in the mechanical laws acting through it; and it consumes coal or oil just as the worker consumes food to keep up its perpetual motion.”
“Labour no longer appears so much to be included within the production process; rather, the human being comes to relate more as watchman and regulator to the production process itself… As soon as labour in the direct form has ceased to be the great well-spring of wealth, labour time ceases and must cease to be its measure.”
The above leads to:
“… the general reduction of the necessary labour of society to a minimum, which corresponds to the artistic, scientific etc. development of the individuals in the time set free, and with the means created, for all of them. Capital itself is the moving contradiction, [in] that it presses to reduce labour time to a minimum, while it posits labour time, on the other side, as sole measure and source of wealth.”
The last phrase above commencing with “while it posits” is open to several interpretations. In what sense does capital (or capitalism) posit labor time as the sole source and measure of wealth? In the eyes of the classical economists it posits it. In my eyes (and probably Marx’s) it instantiates it in practice in one historical era. In the eyes of neoclassical economics something else is posited, namely the utility theory of value; a theory clearly meant to be transhistorical (axiomatic for all eras).
In the remainder of the Fragment, Marx almost retreats somewhat from the apotheosis of prediction he achieved in the above quotes. The conclusions seem almost too radical even to him as a dialectical thinker. He seems to be having trouble holding on to such a clarity of vision which portended the historically imminent overthrow of his earlier and laboriously derived theory. It perhaps proved hard to disavow LTV at a higher level of thinking when the rank and file “orthodoxy” had latched on to it for revolutionary justification and praxis. One could say that by the time Marx discovered and analysed the LTV (with its strangely composite objective/normative historically conditioned nature) it was already in the process of generating new emergent phenomena which would negate and obsolete it.