A Songwriter Destroys the Labor Theory of Value
I once released an album, and it taught me an important lesson about the labor theory of value. Whatever my feelings were, I learned that reality is relentless. Most of my life I've been involved in the music industry, at least at the local level. I have a degree in music business, I've performed in several local rock bands, and in 2013 I released an album of synth-pop songs under the name Hundred Year Dash. In hindsight, these experiences taught me a lot about how value is determined.
The labor theory of value indicates that the price of something is determined by the amount of work (labor) put into the production. This sounds reasonable at first glance, and even Adam Smith discussed this concept in his classic The Wealth of Nations. But the theory falls flat when the consumers have a say in what they want.
Suppose I work hours upon hours to record, mix, and release my own album, pouring my time and energy into the project. I may expect to earn a certain amount of money for all of my work, but what if my songs suck? What if I am not a good musician? What if people hate the music? The ugly truth is that those people won’t pay what I think my time is worth. Whatever price I set my album at might be far higher than what consumers want to pay. They will simply not buy the music.
As consumers—and we are all consumers—we are constantly deciding what we want to spend our money on. What things do we value? If I do not value something I am not going to buy it. If people do not like my music they won’t buy it, no matter how much labor I put in to create it.
Alternatively, some of the most popular hit singles on the radio were written by songwriters who spent an afternoon working on the basic structure to pitch to performers to record the songs. It's possible to make a very large sum of money from just a few hours of work. How can that be? The reason is that it depends on consumer preferences. An example from a Rolling Stone article claims that Dan Wilson and Adele together co-wrote her song "Someone Like You", which earned them a staggering $882,700 in just songwriting royalties. They earned almost a million dollars for writing one song.
This is why the labor theory of value is utterly flawed: the point is not necessarily how hard I work, but rather how useful or enjoyable the final product is to others. Is there a demand for the product I am selling? Will people value it enough to pay money for it? These are the questions that producers in all industries need to ask about their products and services. This will drive them to produce the most useful products and services, to earn them the highest profits, and in the long run through market competition, to raise quality and lower prices.
Consumers lead the way because value is subjective, so we should all try to push ourselves to make higher quality things for the people around us. It’s better for us and better for others. (And if my music makes your life a little happier, then all the better!)
The Wealth of Nations
Hundred Year Dash