Over the recent four-day bank holiday Easter weekend, what could potentially be the largest jewellery theft in history was carried out here in London. It was reported in the Metro newspaper today that the security guard for Hatton Garden Safe Deposit company heard an alarm from inside on Good Friday, but didn’t open up to investigate and instead merely looked in the windows and saw nothing untoward. This meant the robbers had 4 days to commit the crime and ended up taking 300 deposit boxes. When asked by a man who had goods stored in one of the company’s vaults why he didn’t open up to investigate, the security guard apparently said it was because “he wasn’t paid enough”. Take a bow labour theory of value!

The labour theory of value is a doctrine of value which argues that a good or service derives its value from the amount of labour required to produce it. In my experience, the vast majority of people in low paid jobs, such as security, hold this false belief. As the sulky security guard’s own comment reveals, he believed he was already giving ‘too much’ labour in return for his wage. Therefore he felt justified in not expending more labour by opening up to fully investigating the alarm. What a pity. He could have been famous for being the man who foiled the world’s largest attempted jewellery theft. Instead he’ll be infamous for being the world’s worst security guard.

Just as beauty is in the eye of the beholder, value is in the eye of the buyer. It is entirely subjective. The value of a good or service is not determined by any inherent property of the good or service, nor by the amount of labour required to produce the good or service, but instead value is determined by the importance an acting individual places on a good or service for the achievement of their desired ends.

The subjective theory of value is superior to other theories because it coherently explains that which the others cannot. I quote from the Mises Institute wiki:

“The development of the subjective theory of value was partly motivated by the need to solve the so-called value-paradox which had puzzled many classical economists. This paradox, also referred to descriptively as the diamond-water paradox, arose when value was attributed to things such as the amount of labour that went into the production of a good or alternatively to an objective measure of the usefulness of a good. Based on these measures how could a diamond be valued greater than water?

The measure of usefulness or “utility” failed to solve the paradox because water is obviously more useful to an individual than are diamonds. But the theory that it was the amount of labor that went into producing a good that determined its value proved equally futile because someone could easily stumble upon the discovery of a diamond while out for a hike, for example, which would require minimal labor, but yet the diamond could still be valued higher than water.

The subjective theory of value was able to solve this paradox by realizing that value is not determined by individuals choosing between entire abstract classes of goods such as all the water in the world versus all the diamonds in the world. Rather an acting individual is faced with the choice between definite quantities of goods, and the choice made by such an actor is determined by which good of a specified quantity will satisfy the individuals highest subjectively ranked preference, or most desired end.”

The labour theory of value sounds like dusty old economic-speak and of no importance to our everyday lives, but it’s not. False premises, particularly economic ones, can lead people to make bad decisions with awful consequences. It certainly did for this security guard, his employer and all those people who have lost their very expensive jewellery. If he had understood and accepted that his wage is not determine by his labour, but is actually ultimately constrained by the Hatton Garden Safe Deposit company’s clients’ preference to not pay more than they were for safe deposit, then he most likely wouldn’t have been so reluctant to fulfil his duties as a security guard.

Ultimately, the guard’s false belief and its corresponding bitterness cost some people a hell of a lot of money, his employer its entire reputation, and him most likely his livelihood.

However, I suspect that very soon various mainstream media intellectuals will put two and two together and make five, blame the company for the theft, and triumphantly declare “Ha! You see? This is what happens when you underpay your staff!”