1. Jevons: Value is decided by marginal utility.
Marx: Value is the average social labour-time embodied in a commodity.
Arguments:
M: Average social labour-time is the only measure by which we can compare commodities as representing simply more or less of the same substance.
J: Commodities can embody lots of labour without having any value - for example, a book which has cost a lot of labour to write but no-one wants to read.
M: I said social labour-time. That means labour-time used to produce something that a section of society wants.
J: Some things can have value without having taken any labour to produce - for example, a lump of gold found by accident.
M: I said average social labour-time. On average it takes immense labour of prospecting, mining, and refining to produce gold.
J: But commodities do all have greater or lesser utility.
M: But the utilities can't be measured on the same scale. You can't wear an apple or eat a coat.
J: In fact you do compare utilities every day. Marginal utilities, anyway. It may be that you can't compare the utility of apples in general with coats in general; but when you buy a coat you also decide not to spend that money on more apples - or pears, or books, or pens, or CDs, or whatever. You actually do make the comparison.
M: Yes, we make choices with money. We make choices with all scarce resources. With limited time available to us for reading, we choose to spend a certain amount of time reading Marxist theory, and a certain amount of time reading trash fiction. When we choose to read a volume of Marxist theory, we are also choosing not to spend that time on reading trash fiction. You could say we are comparing marginal utilities. But in the first place, it's not true that we make these comparisons in the rational 'economic man' way that later marginal economists have assumed in order to work out their sophisticated mathematical theories. If we prefer A to B, and B to C, we still may not prefer A to C... In the second place, these comparisons can very well be made without a system of money and prices. You haven't explained how money and prices emerge as social relations. In the third place, what actually determines the price, on your theory, is the cost of production. The 'marginal utility' just determines how much of the commodity will be demanded at that price (a large enough amount that the 'marginal utility' of one extra unit has fallen to a level equal to the cost of production, and demand equals supply).
J: Yes, but the cost of production is the total of the marginal costs of the extra inputs of land, labour and capital necessary to produce one extra unit of product. That takes us on to the next point...
2. Jevons: The production of wealth needs land, labour and capital, not just labour.
Marx: 'Labour is not the only source of material wealth, of use-values produced by labour... Labour is its father, and the earth its mother'. But social labour is the only source of added value.
J: Workers can't produce just by labour alone. They need land and capital - raw materials, tools, machines.
M: Leave land aside for now. If private individuals get ownership of especially fertile or well-situated plots of land, then they can grab a proportion of the surplus value produced on that land. It's obvious there that this is no question of laws of nature, but of particular social relations allowing particular people to monopolise natural resources. As for capital - the raw materials, tools and machines are just products of labour. They come to represent capital only in certain social relations.
J: Nonetheless, the owner of capital and the owners of labour make different contributions to the production process, and gain different rewards, according to the laws of supply and demand.
3. Jevons: The owner of each factor of production - land, labour, or capital - must be paid for his factor's contribution to production. How much they are paid is determined by supply and demand, not by any process of exploitation.
Marx: All value is produced by labour. The surplus value - the excess of what labour produces above the value of labour-power - is distributed in complicated ways among industrial capitalists, bankers, landlords, the state, etc.
M: Owners of labour? You mean owners of labour-power. You assume that both capital and labour are 'things' which people own and sell. In fact, when workers sell their labour-power, they give up their own creative activity, not just one of the 'things' they may own. The capitalist owns both capital (dead labour) and living labour. Unquestionably it is a fact that capitalists gain a reward. All your theory adds is the moralistic idea that they should get that reward because of their thriftiness (investing for the future rather than spending wealth immediately) and so on. 'A manager has to undergo great anxiety and mental fatigue... [he] should receive a considerable share of the produce... A capitalists must have some inducement for running into these disagreeable risks...' and so on.
I could reply that workers abstain and go without immediate consumption much more than capitalists; that production managers generally get paid much less than finance managers or sales managers; and that workers in unsafe or insecure jobs run much bigger risks than bosses who can be sure of a 'golden handshake' if they fail. But the basic point is that moralising explains nothing. I do not moralise. I do not say that workers should get the full value produced by their labour; in fact, in the Critique of the Gotha Programme, I specifically argue against that idea. I analyse the historically transitory set of social relations that enable the capitalists monopolising the means of production to appropriate the surplus value produced by labour.
My approach has the advantage of explaining why capitalists gain 'rewards' generally in proportion to their capital, not in proportion to their thriftiness, anxiety, risk-running, or moral virtue.
J: I do not just say that capitalists should get a reward. I say that they must get one by the laws of supply and demand, which arise in any situation of scarce resources. 'If they furnish something requisite for producing, they can make a bargain and ask for more or less of the produce'.
M: You can argue, up to a point, that the rate of interest is determined by relations of supply and demand between money-capitalists offering funds to invest in production, and industrial capitalists wanting to expand their production beyond the scope of their available cash. The money-capitalist gets a bigger or smaller share of the extra surplus-value which the industrial capitalists are able to gain because of the extra funds they have borrowed. Actually the reality is more complicated even there; but in any case this does not explain where the surplus-value comes from. To say that it is the money-capitalist's thriftiness explains nothing. Even if you assume thriftiness is a virtue, what is your economic explanation for why virtue is rewarded?
Where does the industrial profit come from, over and above the interest which the industrial capitalist has to pay to the bank?
J: Wages of management and recompense for risk.
M: In which case no capitalist would ever have extra profits above that to invest in expanding their business! Moreover, you wrote that: 'If they furnish something requisite for producing, they can make a bargain and ask for more or less of the produce'. Excuse me, but who is the capitalist supposed to be making a bargain with? Himself? No wonder he thinks he deserves high wages of management and generous recompense for risk. That is hardly an economic theory, though.
J: Hmmm. Maybe later marginal economists, working to clarify my theory, will sort this one out.
M: Not this one. Read William Baumol, writing 100 years later than you. 'In the long run under perfect competition prices will settle towards levels at which there is nothing left over for the payment to the entrepreneur in excess of his managerial wage and interest on his capital' (Economic Theory and Operations Analysis, p.578). My theory is still the only one that can explain profit as an economic fact.
For a much more sophisticated (but very mathematical) version of Jevons' arguments, read Christopher Bliss, 'Capital theory and the distribution of income', North-Holland 1975. For further criticism of academic economics, the best starting point is Francis Green and Petter Nore (eds), 'Economics: an anti-text', Macmillan 1977, especially the essays by Sue Himmelweit and Ben Fine.