Authored by Jeffrey Tucker via The Epoch Times,

New York’s incoming mayor has been transparent about his socialist thinking, and history has shown that the kind he subscribes to should be cause for concern.

To put it bluntly, we aren’t talking about a polite and fashionable Fabian socialism of the British upper class of 100 years ago, with its practical desire to construct cradle-to-grave welfare states. Rather it’s the one drawn from the older tradition of Karl Marx and his utterly mistaken attempt to trace all social evils to the existence of private capital. This view is ridiculously old-fashioned, kept alive entirely by the fake world of academia that is wholly shielded from any real-world experience in economics.

Part of that, of course, means not looking at the material world through the lens of objective reality and economics. This worldview imagines that the government can simply make all things free, lower and freeze rents, and deliver groceries by simply announcing it to be so, with some help from heavy taxes on the successful.

When the plan does not work, as it never does, in this worldview, leaders would have to resort to authoritarian measures. This is true everywhere it is tried. New York City is an awful state right now, and this path is guaranteed to make matters worse. One supposes we will see another round of exodus from Gotham in the coming months, not just fleeing capital but fleeing people.

It’s not just large enterprises and big corporations that should worry. It’s all businesses in the city. This point of view regards any surplus flowing to capital as an unjust flow from workers to owners; that is, from value creators to value exploiters.

It’s a relatively simple outlook that is rooted in a single error, one that seems plausible at first but collapses on closer look. It traces the very existence of economic value exclusively to the manifestation of physical toil. It’s called the labor theory of value. This is genuinely an empirical proposition.

In this view, the whole output of industrial production was equal to the value of manual labour and should be allotted accordingly. Any money deducted from labor—to pay owners of capital or for raw materials or new inventions or for marketing or to lenders—is robbery from labor. Ironically, in this view, those who do mental work (the intellectuals) are doing nothing. Except that the socialists came up with an escape hatch for that one: the intellectuals are the vanguard of the proletariat and therefore necessary.

Is it really the case that all toil generates economic value that should always and everywhere flow only to workers and never owners? Clearly not. Anyone anywhere is fully capable of doing anything and everything that is not regarded as valuable by anyone. Labor alone does not cause value to come into being; what generates value is the act of valuing.

The labor theory of value, however, has long roots in history, even hinted at in the works of Adam Smith and David Ricardo, points later adopted by socialists to argue for the nationalization of capital.

It was the rise of Marxian theory that provoked great clarity on value theory during the so-called Marginal Revolution of the 1880s. Three theorists—Stanley Jevons, Leon Walras, and Carl Menger—argued persuasively for what came to be known as the subjective theory of value as against the labor theory of value.

Among these works, my favorite is Carl Menger’s “Principles of Economics” (1871). It still makes for a compelling read and a good tutorial on economic basics. On the issue of value, he writes:

“Value is therefore nothing inherent in goods, no property of them, but merely the importance that we first attribute to the satisfaction of our needs, that is, to our lives and well-being, and in consequence carry over to economic goods as the exclusive causes of the satisfaction of our needs. ... It is a judgment economizing men make about the importance of the goods at their disposal for the maintenance of their lives and well-being. Hence value does not exist outside the consciousness of men.”

Once you understand this point, the entire theoretical structure of Marxism and even socialism falls apart. It is the unending process of cooperative exchange, driven by people’s perception of their own needs and nonstop working benefit from satisfying the needs of others, that generates value, which is something imparted by the individual minds.

It is not possible for any politicians, intellectuals, or bureaucrats to replicate this delicate system, much less replace it with a new and wholly externalized vision of what is valuable and what is not. Nor can outsiders slice and dice prices and accounting that results from the market process and say: this is too high, this is too low, and here is a plan to make it right. That kind of planning can only result in wild distortions.

There is a deeper point here that relates to the history of the United States. There is nothing about our history as a nation that has any roots in socialist theory. I cannot think of a single Founding Father who had any interest in pre-Marxian utopian socialist theory. Sure, there were anabaptist sects who held things in common and celebrated community. That’s not the same thing. There were plenty of utopian socialists around from the ancient world to the present but the Founders discussed them not at all.

Indeed, do you know the name of Thomas Jefferson’s favorite economist? It was not Adam Smith. It was the French physiocrat Anne Robert Jacques Turgot, Baron de l'Aulne (1727–1781). He was a champion of low taxes, property rights, small business, trade, and the commercial experience generally. It was he who warned the French monarchy to lower taxes and free prices to forestall revolution, a plea that went unheard.

Jefferson was a close reader of Turgot’s great book “Reflections on the Production and Distribution of Wealth” (1766), which pushed the market theory of value long before Menger. His book is meticulous and deeply empirical, laying out the formation of prices via supply and demand and discussing the origin and uses of money.

In his role as adviser to the court, he condemned industrial monopolies and intervention by the Crown into commercial affairs of small business. He was a brilliant innovator. Jefferson admired him so much that he had a bust of him made to display in the main portico of Monticello.

If there is an American economics, this is it: The celebration of private ownership, small business, low taxes, no industrial monopolies, agronomy, entrepreneurship, community service, independence, self-reliance, hard work, creativity, pride in a job well done, frugality, sound money, savings, long-term commitment, family and faith.

To be sure, America has had its debates over economics in the earliest years. The Jeffersonians battled it out with the Hamiltonians. Jefferson hated debt, taxation, was suspicious of banking empires, and opposed forced industrialism and tariffs. Hamilton liked business finance, industry, large banks and leverage, and favored the protective tariff. These are legitimate American debates, deeply rooted in our history. The idea of a national bank went through several rounds of controversy for over a century until the Federal Reserve Act and the income tax came along.

Even with all these disputes and debates, we have no history at all of Hegelian histrionics of the sort that have emerged on the left and sometimes on the right. Not even our earliest socialists like Eugene Debs were communists. His main passion was for free speech, individual rights, and peace not war. This is the long heritage of the American left from a century ago. Woke theory and mass redistribution and fundamental rejection of economic freedom are not really in our DNA.

It’s urgently necessary that Americans reacquaint themselves with the economic system that made this country great. It is inseparable from freedom and rights. What is moral is also practical from an economic point of view. What grants dignity also grants prosperity. That is the American belief and practice.