Measuring the Labor Theory of Value

For a while, I've been trying to put the abstract labor time on the price (Y) axis of the standard economic graphs, such as the Marshallian Cross (supply and demand graph). But I think this view is not correct. I think, rather, that we should put abstract labor time on the quantity (X) axis. The Y axis then represents the "hidden" utility. Our interpretation, then, changes from what is the marginal utility (price relative, c. p., to the prices of all other goods) of the q-th commodity (1,000,000th coat, 17th airliner, etc.) to the utility of the q-th labor hour devoted to the production of that commodity.

We can do this, I think, because the quantity of a commodity produced is a relatively simple function of the actual hours used to produce it. It might not be strictly linear — there are declining returns to scale — but it's still going to be monotonically increasing for the most part: the more hours we spending producing something, the more of that something we'll produce. It avoids a whole division step (hours to produce one commodity divided by hours to produce another) in creating production possibility frontiers and calculating opportunity cost.

The opportunity cost calculation becomes a lot easier now. The supply curve now has a very natural, obvious reason for sloping upward: For low quantities of labor used to produce some commodity, we are "stealing" labor time from the least valuable alternative commodities; as the quantity of labor increases, we must steal labor time from increasingly valuable alternatives. The macroeconomic interpretation, usually interpreted with real GDP on the X axis, then becomes directly a measure of employment; a recession is underemployment; inflation is (more-or-less) over-employment*; and optimal GDP is optimal, "full" employment**.

*Not too many people employed, but rather people employed making too many things that are unwanted.

**Note that modern economists' observation of "full" employment being between 4-5% includes structural, politically-motivated and -enforced unemployment of minorities and other marginalized groups. I'm coming to believe that the true Non-Accelerating Inflation Rate of Unemployment (NAIRU) is below 1%. In other words, a "5%" NAIRU is basically 0.5-1% unemployment among privileged groups (mostly white men) plus much higher political unemployment in other marginalized groups.