Law of Value- the series
Though most use the term “Labor Theory of Value” Marx never did. Instead he referred to the “Law of Value”. Either way, that is the subject of this video series, which you can find linked below. The series will hopefully be around 15 videos long in the end. At the moment I’ve only completed the first few videos. You can see an initial draft of the scripts for all of them here.
An economic crisis is also a time of ideological crisis. It’s a time when people start to reevaluate their ideas about the world, questioning some of the most basic assumptions they once had. Every capitalist crisis in history has brought about a rethinking and regrouping of mainstream economic thought. Interestingly this rethinking has always happened within the context of some sort of radical challenge to the economic order.
Marginal Utility theory, which still serves the basis of modern mainstream economic theory, emerged from the Great Depression of the late 1800s (yes there was another Great Depression prior to 1929) as an answer to the challenge of Karl Marx’s thorough critique of capitalism. Keynesianism emerged from the Great Depression of the 1930′s as a response to the failures of liberal economics, the challenge of a successful Bolshevik revolution and strong worker movements in the Western world. Neoliberalism emerged from the crisis of the 1970′s both as a backlash against the failures of Keynesianism to manage crisis and as an assault against the growth of large popular left-movements like the anti-war, student, civil-rights and women’s movements and the power of entrenched labor.
“Remember that what an ideology is is a conceptual framework with the way people deal with reality. Everyone has one… to exist you need an ideology. The question is whether it is accurate or not. And what I’m saying to you is: Yes, I’ve found a flaw- I don’t know how significant or permanent it is but I’ve been very distressed by that fact.”
With such admissions of failure from the neoliberal establishment we can’t help but begin to question the dominant economic ideas of our time. Yet it is not clear that we are entering this ideological crisis in the context of any viable challenges to the economic order. The failures of centrally-planned Soviet-style economies have largely purged the idea of alternatives to capitalism from the popular consciousness. At such a time in may be useful to re-exmine the ideas of Karl Marx, to see what exactly he was trying to say in his critique of capitalism- not because we have some desire to repeat the political experiments of Lenin, Mao, Stalin or any of the others who claimed to embody the ideas of Marx, but because Marx presents a systematic, and thorough critique of capital that is wholly different, wholly unique in the history of economic thought. Such radical ideas are crucial in our search for a new understanding of our present condition and possibilities for social transformation. A society without the ability to critique itself is a dangerous society to live in, especially as it enters a long period of crisis.
There is a crucial difference between all the great bourgeois economists and Marx. They all saw crisis (except Keynes maybe) as something that came from outside of capitalism, disturbing the natural equilibrium of the market. When confronted with the reality that capitalism was prone to inequality, exploitation and crisis- that is, when it becomes apparent that there is a discontinuity between their theories and reality- bourgeois economists always blame reality for not conforming to their models. Reality has been poisoned by invading external forces, they say, in the form of state intervention, labor-movements, human greed, etc. We see this same reactionary approach today in rising right-wing populism which blames the invasive influence of foreigners, left-intellectuals, homosexuals, non-Christians, and black presidents for the problems of society.
Marx takes the opposite approach. He sees the social antagonisms of capitalism as internal to the system. These social antagonisms are so basic to the system that they drag all other parts of society into their gravitational field.
Bourgeois economists have always seen the market as a realm of great freedom and equality. The fact that there is so much inequality, crisis and unfulfilled freedom in market societies is seen as an imperfection in reality, not theory. Contrary to what some lay people think, Marx does not start with an analysis of these social bads and then proceed to a critique of market relations. Marx doesn’t begin by talking about monopoly, poverty, exploitation, or state violence. He begins with this same realm of market freedom that his bourgeois critics are so enamored with, and then shows how all of these social antagonisms spring out of this basic productive relation. For Marx it all starts that the fact that capitalist production is production for market exchange. This basic form of production takes on law-like properties that he calls “The Law of Value”.
The Law of Value
What did Marx find so interesting about capitalist societies? It wasn’t just the freedom to buy or sell anything you wanted. It was the fact that in order to participate in the social life of a market society one has to buy and sell things. In order to survive, in order to participate in society, one has to enter the market to buy things and to sell the products of their own labor. This is a distinctly different organization of society than previous societies where working people largely supported themselves with their own labor- that is, they labored to make things for their own use. (Or more specifically, laboring classes supported themselves with their own labor and supported the ruling class.) In a capitalist society people don’t make things that have any use for themselves at all. They produce things in order to exchange them. Thus the coordination of the social labor process happens indirectly through exchange.
In a society of private producers, coordinated indirectly through the market, the social relations between these people take the form of relations between things, of commodity relations. The relations between people become value relations expressed in commodity prices. Economically, people can only relate to each other through money prices, through value. This world of commodity relations takes an independent form, outside of the control of individuals, that acts back upon and directs the flow of human affairs. Adam Smith called it the “hidden hand of the market.” Marx calls it “the law of value.”
What is the law of value? It is the impersonal, blind forces of the economy exerting their influence upon society. It is unique to a society in which the dominant form of labor is production for market exchange. The relations between people become value relations between commodities. And these value relations become impersonal forces which have unexpected consequences for society. For instance, we get capital:
People have always used tools and other resources in their labor. These are called “means of production”. In a capitalist economy means of production become capital. Tools, machines, materials, and even workers are all commodities with values. This makes it possible to buy means of production in the market and sell the products of those means of production for a profit. That is, a person can invest money in production merely for the sake of getting more money. The pursuit of value as an end in itself becomes the dominating force in the society. This is what capital is, the expansion of value for its own sake, regardless of the social cost. Capital takes the form of a class that owns the means of production and another that must produce the profit for capital.
Capital is inherently asymmetrical, great poles of wealth and poverty spreading out from it in geographical and economic space. Capital is also self-negating. Although it represents an impersonal force above society, dominating the worker, it also relies on the worker to create profit for it. There is a social antagonism at it’s root. This social antagonism leads to periodic crisis and constant instability.
All of these radical implications and many more are part of Marx’s theory of value.
This video series will cover various topics in Marx’s theory of value: The difference between use-value, exchange value and value, the relation of supply, demand and price to value, abstract labor, exploitation, crisis, socially necessary labor time, and even what an understanding of value can tell us about changing the world. It is hoped that they can contribute to a better appreciation of the importance of value theory to radical movements today as they seek ideas with which to articulate their demands and strategies.
How much do you know?
Many people, supporters and opponents of Marx, think that they already know all there is to know about Marx’s theory of value. Let’s take a brief quiz to find out how much you know. Here are 10 True or False questions. Take out a paper and pencil and keep track of your answers. I’ll give the answers at the end.
True False Quiz:
1. Marx’s theory of value holds that any human labor creates value.
2. Marx’s theory of value is intended to be a theory of market prices.
3. Marx’s theory of value is the same as his predecessor David Ricardo.
4. Marx didn’t believe the forces of supply and demand were relevant to explaining value.
5. Marx’s theory of value is a theory of what workers should get paid.
6. Marx’s theory of value was a theory about how a communist society should be run.
7. Marx didn’t think consumer demand played a role in prices, value or other economic phenomena.
8. Marx’s theory of value doesn’t work in free markets.
9. Marx’s theory of value can’t explain why useless things like mudpies don’t have value.
10. Marx hated babies.
The answer to all of these questions is “FALSE”! If you answered “True” to any of them then perhaps you don’t know enough about Marx’s theory of value to actually make an informed judgement about it. If you are interested in understanding one of the most thorough theoretical critiques of capitalism ever created then perhaps this video series might be a good starting point. If you already know that you are going to hate Marx’s analysis then perhaps watching this video series would be a good starting point in educating yourself so that you don’t sound like a total idiot when you go mouthing-off all over the internet.
How you should watch these videos
The internet has given us access to more information than any generation before us. It has allowed for a great leveling of our access to information, allowing everyone to contribute to the sharing of information. But this hasn’t necessarily made our culture better informed, more intelligent, or better at critical thinking. In our rush for instant information we are losing our ability to properly contextualize information, to synthesize ideas, and to discern what sources of information we can trust. Let’s face it- in our consumer-culture we are conditioned to want instant gratification for no effort. We want easy answers that don’t require any personal sacrifice. (Neo, matrix, downloading information into his brain.)
You can’t learn everything you need to know about capitalism from a YouTube video. On the internet any fool can and will explain their inarticulate and half-formed personal theories into a web cam. These videos are not like that. They don’t represent my ideas at all. I am trying, to the best of my ability, to explain a complex body of intellectual work that spans a long history of debates as people grappled with these ideas. By acquainting ourselves with the history of ideas we can make sure that we don’t repeat the mistakes of the past, and that we are aware of the implications of our arguments.
But a video or a blog cannot substitute for the real thing. I am dealing with complex, difficult ideas and I am not perfect. I may make mistakes. I may leave things out. If you really want to understand Marx you must go to the source.
We should also be aware of the ability of video to manipulate us on an emotional level. Images, tone of voice and background music can all be helpful in helping us understand things. But they can also evoke emotional responses that are not necessarily rational. We should be aware of the way media effects our understanding of material and not let this get in the way of rational intellectual thinking. There is already enough of a shortage of rational thinking in our society.
There are a lot of ideas in each of these videos. One viewing may not be sufficient to absorb everything. That’s why I post the full text on my blog. The blog sometimes also contains tangents and side-arguments that were cut from the video as well as references and suggestions for future reading. I hope that the references on my blog might be a good starting point for people who are interested in learning more.
As we move through these different topics in the Law of Value our understanding of the Law of Value will deepen. At the end of each video there is a summary of the new layer of meaning we have added to the law of value. It would be wise to keep returning to this basic question as we progress through these videos: What happens when the relations between working people take the form of value relations between commodities?
2. The Fetishism of Commodities.
There are a lot of people that are really powerful in the world: Presidents, CEO’s, bankers, leaders of movements… But there is an object, a thing, that is more powerful than any of them. This object is money.
Money is really powerful. It makes people, societies, and countries do all sorts of things. The pursuit of money, as and end in itself, occupies many people’s lives and is the driving force of economic growth. And all over society money acts as a symbol of status, prestige and social power.
The funny thing about money is that it is just an object. Nowadays its not even a valuable object like gold. It’s just pieces of paper, or digits on a computer screen. It has all of this power and influence yet it needs no will, weapons, or words.
This phenomenon where objects have social power, in which things act as if they have a will of their own, is what Marx sought to unravel with his notion of “the fetishism of commodities.” When Marx talked about fetishism he wasn’t talking about whips and chains and leather outfits. He was talking about the way the relations between producers in a capitalist society take the form of relations between things.
The word “fetishism” originally was used to describe the practices of religions that attributed magical powers to objects like idols, or charms. If the Israelites of the Old Testament won a battle with the Philistines they attributed it to the powers of the ark of the covenant that they carried around. If they lost it was because they had pissed off the ark. Of course in reality it was their own actions that caused them to win or lose. Attributing their own powers to an object is fetishism. For Marx, money and commodities are much like this. We think that they have mystical powers, yet their powers really come from us, from our own creative labor.
Let’s take a look inside a workplace. It could be any workplace- a capitalist factory, a peasant commune, a family farm, whatever. Here the relations between different workers are direct. I make a widget and I hand it to the next person. If something needs to change about the labor process a manager brings the workers together and says, “Now we will organize things differently.” Whether it is a democratic or hierarchical form of organization it is an organization that happens directly between people.
Now let’s look outside the workplace at the market. In the market things are different. The organization of work, the division of labor, doesn’t happen through direct social relations between people. In the market the products of labor confront each other as commodities with values. These interactions between things act back upon production. They are what send signals to producers to change their labor, to produce more, produce less, go out of business, expand business, etc.
Coal miners, bakers, carpenters and chefs don’t directly relate to each other as workers. Instead the products of their labor, coal, bread, cabinets and pasta, meet in the market and are exchanged with one another. The material relations between people become social relations between things. When we look at coal, bread, cabinets and pasta we don’t see the work that created them. We just see commodities standing in relation of value to each other. A pile of coal’s value is worth so many loaves of bread. A cabinet’s value is worth so much pasta. The value, the social power of the object, appears to be a property of the object itself, not a result of the relation between workers.
[Money is the god of commodities. Through money all other commodities express their value. The amount of social labor that goes into a pencil becomes 20 cents. The portion of the social labor that goes into making a grand piano becomes 20 grand. As the god of commodities money becomes the ultimate expression of social power. It can be anything, buy anything, do anything. Yet money is just a scrap of paper, a pile of shiny rocks, a digit in a computer... It only has this power because it is an expression of social relations.]
We are atomized individuals wandering through a world of objects that we consume. When we buy a commodity we are just having an experience between ourselves and the commodity. We are blind to the social relations behind these interactions. Even if we consciously know that there is a network of social relations being coordinated through this world of commodities, we have no way of experiencing these relations directly because… they are not direct relations. We can only have an isolated intellectual knowledge of these social relations, not a direct relation. Every economic relation is mediated by an object called a commodity.
This process whereby the social relations between people take the form of relations between things Marx calls “reification”. Reification helps explain why it is that in a capitalist society things appear to take on the characteristics of people. Inanimate objects spring to life endowed with a “value” that seems to come from the object itself. We say a book is worth 20 dollars, a sweater worth 25 dollars. But this value doesn’t come from the sweater itself. You can’t cut open the sweater and find $25 inside. This $25 is an expression of the relation between this sweater and all of the other commodities in the market. And these commodities are just the material forms of a social labor process coordinated through market exchange. It is because people organize their labor through the market that value exists.
The illusion that value comes from the commodity itself and not from the social relations behind it is a “fetish”. A capitalist society is full of such illusions. Money appears to have god-like qualities, yet this is only so because it is an object which is used to express the value of all other commodities. Profit appears to spring out of exchange itself, yet Marx worked hard to explain how profit actually originates in production through the unequal relations between capital and labor in the workplace. Rent appears to grow out of the soil, yet Marx was adamant that rent actually comes from the appropriation of value created by labor. We see these fetishistic ideas in modern day mainstream economic theory in the idea that value comes from the subjective experience between a consumer and a commodity, and that capital creates value by itself.
Yet the theory of commodity fetishism isn’t just a theory of illusion. It’s not that the entire world is an illusion, reality existing somewhere far below the surface, always out of sight. The illusion is real. Commodities really do have value. Money really does have social power. Individual people really are powerless and material structures really do have social power. There is not a real world of production existing below the surface in which the relations between producers are direct. Relations between producers are only indirect, only coordinated through the mystifying world of commodities.
The theory of commodity fetishism is central to Marx’s theory of value and it’s one of the things that sharply distinguishes him from his predecessors. Adam Smith and David Ricardo both held that prices were explained by labor time. But Marx’s value theory is much more than a theory of price. It is a theory of the way the social relations between people take on material forms that then act back upon and shape these social relations. Labor takes the form of value embodied in commodities. Money price becomes the universal expression of this value. The pursuit of money as an end itself dominates society. Means of production become capital. Money, commodities and capital, as representatives of social value, become independent forces in their own right out of the control of society. The law of value is the law of these forces. Attempts to exert some control over these forces through monopoly or the state always become enmeshed in the social antagonisms of value.
Das Capital vol 1. by Karl Marx: The theory of commodity fetishism is laid out in the end of chapter one.
Essays in Marx’s Theory of Value by Issac Rubin. This is a great book about many aspects in Marx’s value theory. In many ways this video series is intended to be a modern take his book. The opening chapters are about commodity fetishism.
Also see the beginning of this article from Endnotes about value-form theory.
3. Das MudPie (on what it means for private labor to become social labor)
A Spectre haunts the face of Marxist theory: the spectre of the mudpie argument. It was this central conundrum that Marx devoted his momentous work “Das MudPie”. It has since haunted Marxist theorists of all persuasions. How can Marxists theory go on in light of this devastating theoretical problem?
If you spend any time reading about Marx’s theory of value on the internet you probably will come across some version of this asinine excuse for a critique called “the mudpie argument.” The basic style of the mudpie argument is similar to many advanced by those who know nothing about Marx’s theory of value: one constructs a ridiculous strawman argument that has nothing to do with Marx and then proceeds to knock it down with “devastating” brilliance, moral outrage, and a few clever asides about Stalinism. The MudPie argument goes something like this:
Marx claimed that labor is what gives all commodities value. But what if I make a mudpie? This is a product of labor yet nobody will buy it. It has no value. So Hah! Take that Karl Marx!
The problem with this argument is that Marx was very clear that labor has to be useful labor to create value. Yet he didn’t think that is was this usefulness that creates value. Labor has been doing useful things for millennia. All societies are made up of useful labor. Marx calls this useful labor that makes up a society “social labor”. The organization of this social labor differs from society to society. In a capitalist society this social labor is organized through the commodity exchange: the products of labor are assigned market values and the fluctuations of these values coordinate the social labor process. This is a way of organizing social labor unique to capitalism and it has all sorts of unique properties that other forms of social labor don’t have. The usefulness of labor is not what is specific to capitalism. Value is. Hence, usefulness is not what Marx interested in talking about. Value is.
In video 4 we will look at why usefulness can’t explain the amount of value a commodity has. For now we will look at this more fundamental question: What does it mean for useful labor to take the form of commodity exchanges?
What is a society?
The key difference between humans and animals, for Marx, is in the way they create their own worlds. Humans aren’t slaves to their own evolutionary destiny, repeating the same patterns of survival over and over for millennium. Instead humans actively shape the world in which they live. There is a certain creative aspect to human labor in which we imagine the product of our work in our mind before we go about the work:
“But what distinguishes the worst architect from the best of bees is this, that the architect raises his structure in imagination before he erects it in reality.”
-Das Kapital, Karl Marx
This world which we create forms the structure of our lived experience: we live in, wear, eat and think about the products of our own creation. The structure of our social relations, from the way we relate in cultural and family groups, to the organization of production, to ideas about the world we live in, constitute a created universe powered by the creative power of human labor. Yet this world of our creation also acts back upon us. It structures both our desires and our means of attaining these desires. In much mainstream economic thinking human desires and the means of attaining them are treated as universal, timeless things. Marx says the opposite: What we desire and how we go about getting the things we desire changes as the organization of our society changes. In this sense, “Men make their own history, but they do not make it as they please” (The 18th Brumaire of Louis Bonaparte, Karl Marx)
In different times and different places this organization of human activity has been radically different. The level of technological development, the organization of production, the organization of classes, and the shared conceptions about the world have all changed radically over time. It is the organization of these different “modes of production” and the way the organization of production effects the other aspects of a society that was of interest to Marx. In essence Marx is asking what this organization of production can tell us about a society. [This mode of inquiry is called "historical materialism" because it is interested in the way the production of our own material conditions of existence has changed over time. It is different than theories of history that treat human society as a progressive evolution of disembodied ideas, or of abstract psychological states (bourgeois economics.) Ideas and psychology are important but they can't be understood apart from the basic organizational structure of the social relations of society.]
This means that Marx is not just interested in any labor. He is interested in “social labor”- labor that is part of this mode of production, labor that goes into the make-up of a society. Useless labor, like that of the mudpie maker, is not social labor. The first step then, in looking at a particular historical mode of production, is to ask how the private labor of an individual becomes social labor in that society.
If you were a medieval peasant working a plot of land with your family you would be laboring directly for your own use (or the use of the landlord.) There would be no mystery about whether the labor you were doing had use to your social group or whether the right amount of labor was being allocated to the right tasks. The private labor you did on your land would be “directly social.”
In a capitalist society we don’t produce things in order to use them ourselves. We produce things in order to exchange them in the market. We don’t care about the usefulness of the things we are producing. We only care about receiving money in exchange for our labor. We then use that money to enter the market and buy the things we need for our own personal use. The production of a commodity and the use of it are separated in space and time. They are separated by value. They are linked by value. In order for our private labors to become social they must first take the form of value.
This is a very different type of social labor than in pre-capitalist societies. Rather than being directly social, capitalist labor is indirectly social. People don’t directly decide what to produce. Instead these decisions are made through the fluctuations of market signals, a constant back and forth of buyers and sellers. But these market signals aren’t some autonomous power. They are composed of the aggregate individual labors of millions of separated producers. This separation of production and consumption means that our labor has both an individual value and a social value. The individual value is the amount of work that actually goes into making something. The social value is the actual amount of value the commodity sells for when it enters the market.
Because producers are separated from each other by the market, because we have no collective control over production, we have no way of knowing, for sure, how much labor time society requires of us and what sort of labor it should be. We don’t know what the demand will be for our product. We don’t know how much of the product other producers are making. We have to guess these things. We only find out once the products of our labor meet the products of everyone else’s labor in the market. This means that the individual value, the amount of time an individual puts into making a commodity, and the social value, the amount of time society requires go into it, can differ.
If individual value and social value diverge what does this mean? Some people think that Marx held that individual value had to equal social value, that if I spend 15 hours making a sandwich then this has to be the value of the sandwich. But this is not at all what Marx argued. Marx wanted to show how individual values become social values in a market society. Unlike other forms of production in which we labor directly for use, in a capitalist society we labor to produce value. Yet society must still use the products of our labor. We can’t all make the same thing or all make useless things. Labor must be apportioned between the right tasks in the right proportions. Value is the mechanism that does this since value is the only connection between individual laborers. Marx sought to explain how value acted as a force for the regulation of individual labor, turning individual labor into social labor.
[The fact that social value differs from individual value is not a defect to Marx's analysis. It is the mechanism by which value asserts itself. How else could labor be apportioned between tasks in a society where labor is only indirectly social? The very fact that we have a field called economics in the first place is because the transformation of private labor into social labor is a mysterious, invisible one, it's law-like properties hidden behind constant fluctuations of market prices.]
The fact that we discover the social value of our individual labor in the market creates the illusion that it is the market itself which is creating value. We bring the objects of our labor to market and there they are turned into money, making it seem like the subjective decisions between buyers and sellers are what create these money prices. This is what is being insinuated by the Mudpie argument: that it is the subjective valuation of the usefulness of a commodity that determines its value, not the labor that goes into it. Yet this is an illusion, a fetish created by the fact that our labor is indirectly social.
Yet contrary to what some vulgar economists want you to believe individuals are not free to buy and sell commodities at any price they want. This is because exchange is not just a fleeting, isolated contract between two individuals. Each exchange is part of a vast web of exchanges which unites the productive labors of society. [close-up of two people exchanging, zoom out to their other hands being exchanging with others (duplicate image), zoom out to reveal of vast network of the same images all linking hands..] This is what it means for an individual’s labor to become social. When this happens, society acts back upon the individual, disciplining their labor to make sure that they are doing socially useful labor at something near average productivity.
Thus the transition from individual value to social value isn’t a random one. It has law-like properties that govern the connection between the private laborers of millions of individuals and the aggregate social labor process. These law-like properties that link our private laborers to their social value is what Marx calls the “law of value.” There are two basic forces that govern the way individual values become social values:
1. The first is average productivity. Let’s say the average widget maker takes 1 hour to make a widget. This social average is the social value of the commodity: the amount of time society requires to make a widget. But I am old and slow. I take 3 hours. This is the individual value. My individual value is higher than the social value. But that doesn’t mean I can sell my widget for more. I must sell at the social average. Marx calls this “socially necessary labor time”. In this case the determination of social value is made not by my individual labor time, but by the average productivity of society. If the socially necessary labor time changes due to changes in productivity then the individual value and social value will change too.
2. The second factor is the interaction of supply and demand. Supply is determined by the total amount of labor that goes into making widgets and the productivity of that labor. But when we go to the widget factory to work we do not know how much labor as a whole society is devoting to making widgets. There could be a million other people making widgets or only a few. We only learn how much labor society has put into widget making when we enter the market and compare the products of our labor with the rest of society. If too much labor goes into widget making then there is an over-supply of widgets. Their social value falls below their individual value. [The private labor of widget makers counts as less social labor.] If not enough work has gone into widgets there is an under-supply and their social value rises above the individual value. [The private labor of widget makers counts as more social labor.] This fluctuation of social value around individual values is what allows labor to be apportioned.
But what of demand? Isn’t demand a random subjective element in the equation? As we will see later on the video on Supply and Demand, demand traces its power back to the labor process as well. Demand isn’t just an abstract psychological substance. It is a definite amount of purchasing power made of of worker’s wages and capitalist profits. Even the things demanded, be they inputs for the production process, or subsistence goods for maintaining the worker are needs generated by the structure of production. People’s demand for things change as the value of those things change. When the average productivity of widgets rises, their value falls and the demand for them rises because now they are cheaper. So rather than demand existing in some subjective vacuum, it is is always dependent on a preexisting world of values. But most important to the MudPie theory, demand doesn’t create the social value of a commodity. It only helps determine if labor has been apportioned to the right tasks. Labor is creating the value. Labor is doing the work. Demand tells us if this labor has been socially useful. But demand can’t create commodities, nor can it be separated from the web of social labor.
You might notice when you go to the grocery store that there isn’t a mudpie aisle filled with unsold mudpies. Though capitalist production involves this element of guessing, this uncertainty of transforming private labor into social labor, this doesn’t mean that production is totally random and absurdist. If exchange was random and sporadic then there would be no way for the division of labor to be coordinated. But exchange is not random and sporadic. It is constant. Every act of exchange links the buyer and seller in a complex network of buying and selling that connects all buyers and sellers everywhere. This constant interaction of production and exchange means that most of the time we have a pretty good idea of what social labor is. We don’t go around making mudpies, or bicycles with square wheels, or hip-hop polka records.
Sellers are constantly saying, “This is how much labor went into this commodity and so this is what we think it is worth”. Buyers are constantly saying, “Less labor should go here, more labor should go there.” The constant interaction of buyers and sellers apportions labor to the right tasks. This is only made possible by the fact that there is a correspondence between the labor that goes into something and its price. But this correspondence is loose, constantly fluctuating. The fluctuations are what allow labor to be reapportioned. As productivity changes values change.
Underlying these fluctuations of demand and supply lies a more basic observation about human society. We only have so much time as a society to devote to the production of our needs. If we are to have food, houses, clothes, DVD’s, and beer we are going to have to devote work to these things. Some things take a lot more labor to produce than others. They cost society more in terms of its expenditure of the total social labor. In a market society this cost isn’t decided by a committee, it’s decided by prices in the market. And this is what value is. Labor becomes social when its products obtain a price in the market. And these prices coordinate the social labor process.
What have we learned about value in this video. Value the way the social labor process is coordinated in a capitalist society. The relation between workers takes the form of relations between commodities in the market, each with a market value. Because producers are separated from each other in time and space this coordinating process is indirect, marked by fluctuations of individual values and social values. The thesis of the MudPie argument is that these deviations of individual from social value is some sort of flaw in Marx’s theory. But this display’s a profound ignorance of Marx’s theory of value. For Marx this divergence is one of the most important part of the theory of value. This divergence is the mechanism by which labor is apportioned in a society of atomized, isolated individuals competing in the market.
Frontiers of Political Economy, Guglielmo Carchedi
4. Use-Value, Exchange-value and Value
This is one of many abandoned houses in my neighborhood. The slumlord owner let the property deteriorate until it became unlivable and doesn’t want to pay the money to make it livable again. There are thousands of abandoned houses in this city, and thousands of homeless people. Despite the urgent social need for houses these properties don’t fulfill a social use. Why not? Because the owners of these commodities are not interested in their use. They are interested in their exchange-value, the rent they receive from the property. For decades they collected rent while the use-value of the house deteriorated. And now these houses sit vacant, a testament to the contradiction between use-value and exchange-value.
This is not a contradiction restricted to housing. Every commodity contains this contradiction because every commodity is produced to be exchanged, not to be used by the producer. We have enough food on the planet to feed everyone, yet millions starve. Why? Because we don’t produce food directly for social need. We make food in order to sell it for money. Society has much of the technological ideas it needs to reduce greenhouse gas emissions, yet it isn’t acting fast enough to apply these ideas. Why? Because production is not undertaken to direct ly mediate our relation with the environment. We produce for profit.
The exchange of the products of labor in the market is just one of many possible ways that the private labors of billions of individuals can be coordinated. Some people think this is the best possible way to coordinate human productive activity. Marx saw that, despite all of the dynamism and technological wizardry of capitalism, there were fundamental social antagonisms at the heart of this means of coordination… that production for market exchange leads to all sorts of unexpected consequences including gross inequality, exploitation, and crisis. And for Marx all of these social antagonisms can’t be understood until we understand the contradiction within the idea of a commodity itself: the contradiction between use value and exchange value.
Use value vs. exchange value
A commodity has a use. This is its use-value. What does use-value tell us? It tells us how a commodity satisfies a social need. If we want to feed everybody we need a certain quantity of food. If we want to build everyone a house we need a certain quantity of wood and nails. Some use-values require no effort to attain: air, sun, gravity, etc. Others require effort to attain. There is a finite limit to the amount of labor that can be devoted to the production of use-values. Society must apportion this labor between the production of different use-values in some way. As technology changes the amount of labor required to produce some use-values decreases thus signaling a change in the apportioning of labor. As technology evolves to reshape what human labor is capable of producing so do our needs and desires evolve.
In different societies this labor is apportioned by different methods. In a market society it is the buying and selling of the products of labor in the marketplace that serves the purpose of allocating labor between the production of this use-value or that use-value. This creates a second type of value, unique to market societies: exchange-value.
Exchange value is the ratio in which one good exchanges for another. Perhaps one book exchanges for a loaf of bread… Or a new car exchanges for a thousand bottles of whiskey. These ratios are all exchange values. They say a book is worth this much bread; a car is worth this much whisky. In a developed market society one commodity eventually emerges as the primary commodity in which all other commodities express their exchange value. This is what money is. For most of the history of capitalism this commodity has been gold. By comparing the ratio of tomatoes or cars or baseballs to gold all commodities measured their exchange value in ratios to gold.
These two sides of the commodity, its use-value and exchange value, form two opposing, contradictory poles. Much of the social antagonisms of capitalism are rooted in this tension between use-value and exchange value. Of course, most of the time when we look at a commodity it doesn’t seem very antagonistic. This is because the antagonistic social relations behind the commodity are not visible. But when we look at a society organized around commodity exchange we can see lots of social antagonisms. To understand how these social antagonisms spring from the opposition of use-value and exchange-value we will need to take a closer look at both…
You can’t use it AND exchange it!
If I am selling a tomato this tomato has no use-value at all for me. Its use-value only exists for the person that buys it. I am only interested in the exchange-value, how much money I can get for it. Production in a capitalist society is not production for use, but for exchange. This means that we have no inherent interest in the usefulness of our labor outside of its ability to create exchange-value. Now, from a social perspective, it is very important what kind of labor we do: Do we make bombs or flowers? Oil or cupcakes? But as individuals we have no stake in this. We produce in order make money, to get exchange value.
Why do people produce for exchange and not for their own use? Because in a capitalist society the working class does not own the means of producing their own subsistence. The only way for working people to get the necessities of life is buy them in the market. And the only way to do this is to sell our labor to a capitalist for a wage. We spend our whole life making a profit for an employer so that we can spend this wage in the market to obtain our daily bread. Our job is not a means toward personal satisfaction. Our job is a means of making money so that we can buy our satisfaction in the market.
Bourgeois subjective value theory talks about a “double-inequality of exchange.” It says that the only reason exchange happens is that two people value the other person’s product more than the product they are giving up. Marx actually goes even further than this. He says that to the seller the commodity has no use-value at all, other than the fact that it can be exchanged.
Not only does this bourgeois theory of “double-inequality of exchange” give the mistaken impression that people produce for their own wants and then sell off the surplus in the market, but it also imposes the profit-maximizing logic of the capitalist onto the consumer. By claiming that consumers make a subjective profit from exchange it transposes the real, objective profit of a capitalist who pays his workers one sum of money and sells the products of their labor for a greater sum of money, onto a completely intangible and unquantifiable notion of subjective profit. But subjective preferences for commodities can’t be measured, divided, added to, or compared in a numerical fashion. By imposing the logic of capital onto consumers it effectively erases class from the scope of its analysis.
The mystery of exchange value…
One book= 1 car. What does that mean? What does it mean to say something is worth so much of something else?
Some people think that the usefulness of a commodity can answer this. But uses of things can’t be compared. You read books. You drive cars. They are two totally unrelated and incomparable uses. Maybe you like books more than cars. Does this mean that books are worth more than cars? (1)
What does it mean to say a book is worth so many jars of peanut butter, or so many cups of coffee? Clearly jars of peanut butter or cups of coffee are measuring something. And clearly any other commodity could be used to measure this something. A book could be worth so many pencils, so many kittens, so many tires… And each of these exchange values would be a different way of measuring the value of the book.
But this means that the book has a value independent of the particular commodity that we choose to measure it with. Whether we measure the book’s value in beers, beans or kittens it stays the same. Yet we can’t see this value. We only see the specific exchange ratios of the book as it is exchanged with other commodities. [The only thing that changes is the "form of appearance" of this value- the particular manifestation of this value.] But isn’t this what exchange value really is- the comparison of the value of one commodity with the value of another? These exchange-values only make sense, only work, because there is something called value that is being measured by them. Exchange value necessarily implies the presence of an underlying value. Marx uses the term “intrinsic value”. By this he doesn’t mean that value lies buried within the commodity, or that it is magically bestowed upon the commodity, but that it is impossible to compare commodities to each other in the market without a commodity having its own value. But what is this value?
What is the 3rd thing?
We have seen that exchange value implies that commodities have an intrinsic value expressed in different exchange ratios. This value is not use-value or exchange-value but a 3rd thing. What is this value? Where does it come from?
I know you are in a lot of suspense so I’ll just come right out and say it: Marx argues that it is the labor time that society devotes to the production of these commodities that accounts for this underlying value. Commodities that take more labor to create have more value than ones that take less labor. As labor becomes more productive, as it becomes easier to produce things, their value falls. But what is Marx’s justification for choosing labor as this 3rd thing?
Marx’s critic Bohm-Bawerk pointed out that there are lots of properties that are common to all commodities: Marx could just as easily have said scarcity or utility were this third thing. This, of course, is the approach taken by marginal utility theory which argues that it is our subjective desires for commodities in relation to their scarcity that determines their value. Why is it that Marx doesn’t take this route?
For one, scarcity and utility cannot be understood without reference to labor. The amount of a commodity that exists at any point in time is clearly related to the amount of labor that has been devoted to producing that commodity. And utility isn’t just some abstract, individual substance detached from the labor process. Subjective desire only counts economically when it is turned into real action, when we buy things in the market. The only way to enter the market as a purchaser is to also enter it as a seller. We must sell the products of our labor and then use this money to buy the commodities we desire. (More specifically, workers sell their ability to work, their labor power, to an employer. The employer sells the product of that labor in the market. Workers receive a part of this value in the form of a wage.) The only means of attaining our desires is the buying and selling of the products of labor. Not only does capitalism shape our desires, it determines how we go about attaining our desires.
But there is an even more important reason why Marx doesn’t choose scarcity and utility as the determinants of this underlying value. Utility and scarcity both describe the relation between individuals and objects. Marx is interested in the relations between people. If we think back to Marx’s argument about commodity fetishism we will remember that in a capitalist society the relations between people take the form of relations between things. Objects appear to have power and value, on their own. But this wold of appearance is not the full story. These value relations between commodities are actually relations between people whose work is coordinated indirectly through commodity exchange.
And this is where any social theory must begin: with a study of the productive activity of people as they work to create the world they live in. Not only is this the best starting place for an analysis of society, it is also the best starting point for a radical social theory whose aim is to investigate the possibility of changing the world. If we realize that human society is not the result of some natural or divine eternal logic but merely the creation of our own labor then that means that we have the power to mold and shape that society as we see fit. In a capitalist society these creative powers take the form of an external world of value and capital that acts back upon society, shaping it against the will of its creators. Yet, in the end the world of capital is nothing but the product of our own creation. If we truly want to change the world it is not up to nature, God, fate or experts, but up to us. This is the radical challenge of the law of value.
Let’s review and clarify:
1. The usefulness of a commodity is its use-value. Uses can’t be quantitatively compared.
2. The exchange-value of a commodity is the proportions at which it exchanges with other commodities.
3. Price is a specific type of exchange-value, the ratio at which a commodity exchanges with money.
4. The fact that commodities measure their worth against each other implies that they have an intrinsic value.
5. This intrinsic value is not a physical thing, nor is it magically bestowed upon commodities. It is not a timeless trait existing for all products of labor everywhere. Value, in the way Marx uses the term, is the means by which the labors of isolated producers are coordinated through commodity exchange. It is the social substance the binds together the labors of isolated, disparate individuals separated through the market.
Price and Value (a brief distinction)
We notice then that value and price are not the same thing. The value of a sandwich may be 1 hour of labor. Yet we don’t see this 1 hour when we buy a sandwich. All we see is its price. Prices are just the exchange value of commodities measured in money. The only way we see value is indirectly through these quantitative relations between commodities. Though value and price are indirectly linked, their connection is still strong. If demand rises suddenly causing the price of sandwiches to rise this will trigger an inflow of sandwich-making labor to meet demand. And once demand and supply have balanced, price falls back down to meet value. If the productivity of sandwich-making rises the time it takes to make a sandwich falls. The supply rises and the price falls. Prices and values fluctuate around each other, constantly codetermining each other.
The last thing we should note is that this concept of value is historically specific. Unlike bourgeois economic theory which projects its categories of utility and capital back in time to make all of history retroactively bend to the laws of capitalism, Marx’s theory of value describes a specific type of social organization unique to a society in which the dominant form of production is production for market exchange. When we don’t produce directly for use, but for exchange, we find that our productive activity is regulated by unconscious economic laws which Marx calls the “law of value”. Whereas before we said there was an antagonism between use-value and exchange-value we can now say that this is really an antagonism between use-value and value (since exchange value is an expression of value). As long as production is production to produce values instead of uses we will have to deal with the social antagonisms that spring from this contradiction: The logic of profit will dominate over society rather than the logic of usefulness. And the nature of work will be to maximize profit at all cost rather than to maximize the quality of the experience of work or of the life of the worker.
1. There have been attempts by neoclassical economists to reduce the usefulness of commodities to some common substance. Since there is no common substance that makes up usefulness they have to make up an imaginary substance called “utles”. These economists actually say things like, “A cup of coffee has 13 utles and a car has 3000 utles of utility”. But such attempts to invent imaginary substances with which to reduce utility to are generally thought to be pretty silly and misguided. In neo-classical economics this concept has been mostly replaced by the concept of rank preferences, or graded utility: A consumer has a ranking of demand preferences but these can’t be reduced to some common scale. In this way the question of value, in the sense that a commodity has a definite amount of value as determined by subjective social demand, is mostly abandoned: Commodities don’t have values, but consumers have preference rankings and these preference rankings result in prices. This approach conveniently eliminates many of the theoretical problems with earlier marginal utility theory (namely the unquantifiable nature of subjective utility), yet it has an inherent circularity: consumer preferences are not formed in a vacuum. They are formed on the basis of preexisting exchange ratios. As the prices of commodities change so do the preference rankings of commodities. So commodity prices must first be assumed in for marginalists to theorize the subjective processes of price formation. This is circular. The pink elephant in the room is the productivity of labor. As this productivity changes so do prices. There are a host of other criticisms lodged at Marginalism by Marxists. Perhaps sometime in the future I can write/produce more on the topic.
Marx is always talking about contradictions in the law of value. But these aren’t logical contradictions like “round square” or “military intelligence”. They are contradictions inscribed into the very heart of the social relations of a capitalist society. Some prefer to use the word “antagonisms”.
We are all painfully aware that modern society is full of social antagonisms. There’s poverty amidst great wealth, over-work alongside massive unemployment, banks taking away homes, gentrification, racial tensions, violence against women, labor struggles, environmental apartheid, police brutality, gang violence, hate groups, massive dislocations of populations, and lots of war. Marx was interested in explaining all of these antagonisms, but he doesn’t start his analysis with any of them.
Instead he begins with what at first seems a rather innocuous thing: the commodity. Why? Because the commodity is the most elemental piece of the social relations of capitalism. The productive relations between people take the form of commodity exchanges. The commodity is the basic organizer of social relations. So if we want to understand how all of these different social antagonisms relate to one another we need to start with the commodity.
As we’ve already seen, the commodity contains a contradiction: it has a use-value and a value. (As we saw, value lies behind exchange value. So while at first we said the contradiction was between use-value and exchange-value, we later refined this to use-value and value.) At first glance this does not seem all that antagonistic. Yet as we start to look closer we see more significant antagonisms emerge.
Property, exchange and violence
Why is it that people must sell their labor in the market for exchange value, for money?-Because they can’t produce their own means of subsistence for themselves. This is a distinct aspect of a capitalism. In previously existing modes of production the majority of people had use of some sort of means of production for themselves which they used to make most of the things they needed. (Note that I say “had use of” and not “owned”. This is because much of feudal production happen on common land. This collective use of land has been part of many other pre-capitalist societies.) People sometimes bartered for things but they did so by selling part of the surplus they had created for themselves. (Selling off your surplus product is very different than producing exclusively for exchange.) Over the course of a very long, violent, historical process called “Primitive Accumulation” these means of production were privatized and became the possession of a group of people called capitalists. Whereas before people labored directly for their own use, now they have to enter the market in order to attain their subsistence.
So already the fact that we produce for exchange and not directly for use expresses a social antagonism between the propertied and the propertyless. There is an underlying coercion already at work in the “free market”. And this coercion requires some threat of violence to enforce it whether it be a state, private military, or hired thugs. Violence was necessary to privatize the means of production and it remains necessary to enforce all of the legal aspects of property.
In order for people to buy their subsistence in the market they have to sell something else. Since the means of production are privately owned the only thing they have to sell is their labor. But of course labor can’t really be sold. Instead we sell our ability to labor: our labor power. We sell a definite amount of working time, whether it is measured in hours, weeks or years. This is why value is an expression of labor time.
Our own creative working ability, the very thing that makes us human and links us to society, becomes a commodity that we sell to someone else, a commodity called “labor-power”. Labor power, like any other commodity, has a use-value and an exchange-value, and… you guessed it- there is a contradiction between them. The exchange value is the money paid for our working time, the wage. Wages are set by the cost of our subsistence. They depend on the cost of food, housing, clothes, transportation, etc. But the use-value of our labor power is that it can produce value. These are the two opposing sides of labor-power: On one hand it costs a wage, on the other it produces value. This makes it possible to produce more value than we are paid for.
You could be paid $5 an hour yet produce $20 worth of commodity value an hour. (1) If this happened you would be being exploited. In fact your rate of exploitation would be 400%. Exploitation is made possible by the contradiction between the use-value and exchange-value of labor power.
Exploitation explains a puzzle about capitalism: the existence of profit. Capitalists start off the day with a sum of money which they invest in production. At the end of the day they have a quantity of commodities which they sell for more money than their initial investment. It would seem that they have made a profit just by buying and selling things. Yet profit can’t be made through mere buying and selling. This is because buying and selling is a zero-sum game. When we exchange commodities we are just moving commodities from one place to another. This process does nothing to change the total amount of value in society. Sure it might be possible to rip someone off, to over-charge someone, to charge a monopoly price, etc. But a win for one person in the market is a loss for another. There can be no aggregate profit just be moving commodities around. Yet profit is something that does exist in the aggregate. The total amount of value in society grows each year (GDP) through this expansion of value called profit.
So we seem to have a puzzle, or a contradiction, on our hands. On one hand the market is a realm of equality and symmetry. Market exchange conserves the value of commodities: the total value of commodities is not changed merely by transferring ownership. Any loss by one person is offset with a gain by another so that there is an inherent symmetry to commodity exchange. Yet profit is a phenomenon where value expands through the buying and selling of commodities. Profit is asymmetrical. More comes from less. How is this possible?
To solve this puzzle Marx tells us we must look beyond the market into the mysterious realm of production. It is in production where value is expanded through the exploitation of labor. Exploitation does not break any of the rules of market exchange because it doesn’t happen in exchange. Labor power is bought at its value. The products of that labor are sold at their value. No profit has been made through these exchanges. The profit is not from the market at all but from the labor process. It is the amount of labor preformed over and above the value of wages that determines the amount of profit. While the market remains a realm of equality and symmetry, production is a realm of asymmetry and exploitation. Thus there is a contradiction between production and exchange. And this contradiction is made possible by the contradiction between the use-value and exchange-value of labor power.
This antagonism between the use and exchange value of labor power expresses a social antagonism between capitalists and workers. Capitalists and workers have opposing interests. Workers want their means of subsistence: housing, food, clothes, beer. They want use-values. Capitalists aren’t interested in use-values. They are after exchange-value. They want to expand the size of their capital by making a profit. In order for either class to get what the want they need the other. The workers must sell themselves for a wage in order to survive. The capitalist must hire workers in order to exploit them for profits. Yet despite this codependence their interests are entirely antagonistic. The more the workers are paid in wages the less profit the capitalist makes. The more profit the capitalist makes the more impoverished the working class. (This isn’t because capitalists are bad apples. It’s because they personify the interests of capital.)
Clearly the struggle between capital and labor has always been present in capitalist societies whether it takes the form of day to day struggles over the amount of work we consent to, or long-term battles for better wages and working conditions. But even outside of the workplace the class antagonisms of capitalism are clearly ever-present. The distribution of the value created by the working class into wages, profits, rent, interest and taxes has everything to do with the standard of living we are able to enjoy, the kinds of neighborhoods we live in, the type of life-chances we have, and the quality of our lives. In a society structured to maximize profit for one class rather than produce use-values for social need the quality of our lives is inversely proportional to the needs of capital. In the past 30 years, as neoliberalism broke down barriers to the free flow of capital, massive sums of wealth have been consolidated into the hands of a smaller and smaller class of uber-capitalists, while the standard of living for the rest of the world has steadily worsened.
Society has enough food, housing and technology that the entire world’s population could work a lot less and still have all of the basic amenities of life. (Maybe we couldn’t all have mansions, fancy cars, and all the expensive cocaine we wanted, but we could live comfortable lives.) And they’d probably be more fulfilling if we didn’t spend our whole life working for someone else. But we don’t have such a society because our labor is not aimed at creating use-values for society but at creating profit for capital. The constant revolutions in technology and productivity are not aimed at making work easier or improving the quality of our lives, but in creating more profit by submitting labor to greater control. Thus the workplace becomes increasingly dominated by machines, assembly lines and computers all designed to discipline labor to its task of creating more value.
The Labor Process
As the knowledge of work is removed from the worker it is placed into the machine. The worker loses control over the labor process, becoming just a minor cog in the machine, easily replaceable. Another contradiction is revealed: that between the conception and execution of work. Our own knowledge of the labor process is taken away from us and placed in a machine which dominates us, reducing our work to a job- the carrying out of routine tasks with no meaning to us except that they are a means to a wage. This is a contradiction which fascinates popular culture: man vs. machine. But behind the machine lies a social relation between ourselves and our own creative powers that have been taken from us, alienated from us, standing over us, dominating our work.
And with this steady accumulation of capital in the form of machines comes another contradiction, this one between the capital invested in dead labor like machines and raw materials, and the capital invested in living labor. Though an increase in machinery allows capitalists to better exploit workers (and to appropriate value in competition as super-profit) machines can’t create value. As more and more capital is reinvested in machines and raw materials and less and less on labor, the actual value-creating substance of society is crowded out. This is the starting point for Marx’s theory of crisis. As the mass of capital that must be constantly reinvested in expanding production grows it becomes increasingly invested in dead labor rather than living labor. This sets the stage for massive crisis that require the destruction and devaluation of capital in all of its forms.
All of Marx’s model of a capitalist society is derived from his basic starting point: the analysis of the commodity. From this basic idea of value as the organizing principle of a commodity producing society he establishes the contradiction between the use-value and value of a commodity. And then, over the course of multiple volumes he shows how the unfolding of this contradiction reveals all of these other contradictions: contradictions between classes, between society and itself, between people and machines, and between the conception and execution of work. What begins as a seemingly innocuous distinction between use and exchange becomes the substance of class struggle and crisis.
This doesn’t mean that every problem in society is directly explained by the law of value. Yet, how can we really understand any discussion of inequality without first understanding the way in which social wealth and power is created and distributed? How can we understand violence without understanding the coercive nature of the market, the deep inequalities generated by commodity exchange, and compulsion of capital to accumulate at all costs? How can we discuss a solution to the environmental crisis without discussing the way the productive relations of a capitalist society are organized? The problem with the left is not that there are not enough people who care about these things. It is that not enough people have the theoretical tools to think about these things in terms of the basic structure of our society. That is why the law of value is so important to understand today. If we want to overcome the antagonisms of society we need to understand how these antagonisms are related and to do this we must start at the beginning with an analysis of the commodity.
1. Of course the price of a commodity is more than just the immediate labor that goes into it. There is also the past labor that went into the raw materials and the instruments of production like machines. The price of the commodity is the sum of the money laid out for dead labor (raw materials, machines and other products of past labor) and living labor (wages for workers) plus the amount of surplus value, unpaid labor, performed by workers.
6. Socially Necessary Labor Time
Alone on his tropical island Robinson Crusoe can take as long as he wants to build a cabin for himself. It’s up to him. We don’t have that luxury when we produce for market exchange. When Wonder Bread makes bread they are competing in the market against Pepperidge Farm, Arnold and White Rose. If their workers are less productive, if they take longer to make bread, that doesn’t mean they can sell their bread for more money. The social value of bread is not set by individuals but by the average amount of time it takes to produce bread. This is called the “Socially Necessary Labor Time”. (SNLT)
In neo-classical economic theory there are all sorts of concepts that, though mathematically elegant on paper, have very little descriptive power in the real world. When was a capitalist society ever in General Equilibrium? When was there ever Pareto Optimality? When did consumers ever measure their desires in utils?
SNLT is not like that. SNLT is something very real that we can observe at work everyday. The private labor that goes on behind factory doors will not know for sure what its social value is until the products of that labor enter the market to be compared to the products of other workers. In the market these private labors become social. Socially necessary labor time is asserted. This SNLT then acts back upon production. It disciplines what goes on in the factory. Factories that were spending more labor than was socially necessary are considered inefficient. They must change their production methods or else go out of business. Factories that were producing under the socially necessary time, that were more efficient than average, are rewarded.
Let’s say that the average television takes 1 hour to make. 1 hour is the SNLT for televisions. But the owner of the ACME TV factory invests in some fancy new machines that make his workers twice as productive. They can now make a television in 30 minutes. They are producing way below the SNLT. This allows ACME to produce twice as many televisions in the same amount of time.
Now if ACME sold their new TV at half the old price they wouldn’t make any more money than before and there would have been no point in investing in all that new stuff. Rather than sell them at their individual value (30 minutes) they continue to sell them at the SNLT (1 hour), or perhaps just under the SNLT in order to out-sell their rivals. Because the price of TVs hasn’t changed significantly there is still the same demand from consumers for TVs, but now there is a giant surplus of TVs on the market because ACME has been making twice as many TVs. ACME’s rivals won’t be able to sell all of their TVs. Part of their product will go unsold. Meanwhile ACME will sell most of their TVs at the SNLT, making not just their normal profit, but an additional “super-profit” because they sold their TVs above their individual values by selling at or near the SNLT.
Profit vs. super-profit
Profit comes from exploiting workers. The only way to turn money into more money is to invest it in workers, or to be precise, in labor power, the only commodity which can produce more value than it costs. (This is all covered in the video “Law of Value 5: Contradictions”.) When ACME sells TVs at under the SNLT they don’t just reap their normal profits from exploiting workers. They also get super-profits: profit appropriated in exchange because their TVs are made at under the SNLT.
It is this race for super-profits that drives much of the technological dynamism of a capitalist society as capitalists compete to constantly lower SNLT. By doing so capitalists don’t just exploit value from workers. They also appropriate value in exchange.
Physical vs. Value Productivity
A superficial look at the ACME TV factory might give one the impression that ACME is making more profit because they are creating more value. But this is not the case. The same amount of workers are doing the same amount of work as before. The same amount of labor time is being performed, spread out over a greater number of commodities. Thus the amount of value they create is not increasing merely because the physical output is increasing. It is extremely important to understand this difference between physical productivity and value productivity. As it becomes easier to make TVs their prices fall. Thus, just because we can make more of something doesn’t mean we have created more value. If other firms were to adopt technology similar to ACME’s we would see the SNLT of TVs fall to half of its former value and ACME’s super-profits would disappear.
Appropriating Value in Exchange
What does it mean to say that ACME makes a super-profit by appropriating value in exchange? If you trade one commodity for another of greater value then you have appropriated value in exchange. There are lots of ways this might happen. One of these ways of appropriating value is to produce a product at less than the SNLT but to sell it at the SNLT. Thus we get back more in exchange than we put into exchange. But where does this appropriated value come from?
At first glance it appears to come from the consumers that buy the commodities. But these consumers are buying a commodity at its value, at the SNLT. They are not losing value in exchange. They pay $50 for a TV and they get a TV worth $50. The people that do lose value are all of the other capitalists who are still producing at the SNLT. They are not able to sell all of their product. They lose out. ACME is able to lure more consumers away from them.
Exchange is a zero-sum game. Whenever one person wins another must lose. There are only so many people willing to buy TVs at the SNLT. When ACME appropriates value in exchange this doesn’t mean that they are stealing money from the coffers of their competitors. It means that they are filching away sales from their rivals. More value comes to ACME than it actually created, less goes to its rivals. (1)
SNLT and the Labor Process
This process goes on everyday in a capitalist society. We have an obsession with time and efficiency. Everything from the working day, to the motions of workers are timed and rationalized. From the moment the alarm clock rings you are checking train schedules, punching time cards, and working as efficiently as possible. There is an entire field of industrial engineering which is devoted to decreasing SNLT in society. Some of the most influential minds of the last century have been people like Henry Ford and Frederick Taylor who made substantial contributions to the reduction of SNLT, all in the quest for a super-profit.
This drive to produce a super-profit does not mean that less and less labor is happening in society. It means that the same amount of labor is producing more output. We are often told that machines will make life easier, reducing the need for work. But this has never been the case in a capitalist society. Machines just create more output per hour worked. Often times machines are used to get more work out of workers because the machine can dictate the pace and intensity of work. SNLT is a force that presses down upon us, disciplining our motions, driving us to produce value merely for the sake of producing value, rewarding us when we can produce above the average productivity and punishing us when we fall behind.
SNLT and the centralization and concentration of capital
Capitalists compete to lower the SNLT by investing in fancier equipment. The better the machines the more efficient the labor process the higher the output the lower the prices the more super-profit the more money available to invest in new machines… Competition for SNLT means that more and more equipment is needed in order to stay competitive. This makes it harder and harder for small firms to stay in the market. The size of the firm gets larger and larger and the amount of firms in an industry shrinks. The winners gobble up the losers and capital is consolidated into fewer and fewer hands. If firms become powerful enough they may even take measures to blunt competition so that nobody can produce more efficiently than them. (2)
SNLT and Market Socialism
The tools we use to critique capitalism determine how we envision an alternative to capitalism. Models for market socialism that talk of worker-owned cooperatives coordinated by market exchange clearly see that production for the enrichment of the capitalist class must be done away with if we are to overcome capitalism. Yet any society coordinated by market exchange is still disciplined by SNLT.
This means that workers in such a society would still have to discipline their actions to the social average. Cooperatives that worked at under the SNLT would appropriate value in exchange. Cooperatives would compete to modernize their equipment so as to lower the SNLT. And how would co-ops obtain the money to invest in better, labor-saving equipment? They would have to exploit themselves. That is, the more money that workers want to plow back into making their labor competitive, they less they can pay themselves. Not only would the workers be disciplined by SNLT, they would also find themselves disciplined by the need to amass surplus value so as to stay competitive. What happens to the workers in firms driven out of business by the centralization of industries? Where do they get the capital to start new firms? Do they have to sell their labor in the market?
Production of surplus-value for its own sake, fierce competition over super-profits, the disciplining of the labor process to the whims of impersonal market forces… sound familiar? Now perhaps one might be of the opinion that it is impossible to do away with SNLT, with market coordination. If this is the case then our best option is do debate what type of market socialism would be least exploitative, least alienating. But why not challenge ourselves to imagine a world without these things?
A world without What?
This seems to be the big question whenever we critique capitalism. Surely labor will always take time and we must have a way of coordinating labor to produce all of the goods society needs. Surely this labor must not just produce immediate goods but also surplus goods, as well as invest in long-term projects like infrastructure and machines that will make work better in the future. So we can’t say that we want to produce a society without work, without time, without surplus product, or without machines. (4)
What is unique about capitalism is that labor time, surplus and commodities are all measured in value. The types of commodities created, the types of assets the surplus is invested in, and the quality of the life of those who do the labor are not important. What is important is this endless expansion of value for its own sake. This is capital’s defining substance.
But if we are to coordinate human labor, the production of surpluses, innovation, distribution, etc without value production then what other method are we to use? It is not within the scope of this series evaluate different proposals for alternatives for capitalism. But it is the place to talk about how Marx’s analysis of SNLT might help us evaluate these different proposals.
We’ve probably all heard Marx’s famous description of the higher phase of communism: “From each according to his ability, to each according to his need.” Marx didn’t actually come up with this phrase but he quotes it in one his rare commentaries on communism. Here an hour of one person’s work is equal to an hour of anyone else’s, creating a basis for real equality throughout society, regardless of the productive abilities (or privileges) of individuals. In the Critique of the Gotha Program Marx describes the lower phase of communism as a system in which, after an hour of labor, all workers receive a certificate entitling them to a certain amount of consumption goods in proportion to their working time, not their level of productivity. There is no SNLT, and no inequality, because everyone’s work has the same social power. Obviously this is not a robust plan for how a communist society should be run. But it gives us a glimpse into the sort of radical questions we should be asking ourselves when thinking about communism. (5)
Our private labor doesn’t immediately become social. It must become value in order to be social. But in becoming value it is disciplined by socially necessary labor time. SNLT acts as an external force which disciplines our private labor, constantly compelling us to work more efficiently, yet never actually making our work easier or more fulfilling. SNLT creates the possibility for super-profits when one produces under the SNLT, and the search for super-profits drives much of the mad, chaotic development of the productive forces of a capitalist society, generating all sorts of unforeseen consequences.
In a society not producing for competition or capital, but for communal ownership, there would not be a SNLT in this same sense. This means that work would not exist in order to make value. Work would exist in order to both provide use-values for society and to better the life of the worker. In our culture we have an intense fascination with those rare people whose work is fulfilling and challenging. Great musicians, athletes, artists, etc inspire us because these are people whose work has challenged them to become the best possible person they can be. Perhaps in a world without SNLT such an experience of work could become more universal.
1. Here is another example of the way in which individual value and social value diverge. Many times lay-critics of Marx (like the trolls often found stalking this blog) think they can “disprove” Marx’s theory of value by pointing to instances where the individual value of a commodity (the amount of time an individual put into making it) diverges from its social value. But as we can see such deviations are a central part of Marx’s theory. In fact it is these deviations of individual value from social value that create the dynamism and disequilibrium that Marx was so intent on theorizing. It is important to constantly point this out as many lay objections to Marx’s theory of value come form the misconception that social value and individual value must always coincide.
2. On the other hand, there are counter-acting forces that sometimes exert pressures to decentralize capital. The opening up of new, labor-intensive lines of production is one.
3. From Marx’s Critique of the Gotha Program:
“T]he individual producer receives back from society…exactly what he gives to it…He receives a certificate from society that he has furnished such-and-such an amount of labor…and with this certificate he draws from the social stock of means of consumption as much as the same amount of labor costs. The same amount of labor which he has given to society in one form, he receives back in another.”
4. No doubt many viewers are familiar with the ramblings of the “Zeitgeist Movement”. These folks believe that technology can liberate us from all work, establishing a labor-free, money-free paradise where robots do everything for us. These folks also believe, in some form or another, than the liberating potential of machines is being kept from society by the conspiring powers of bankers and other elites tied to “the money system”. As much as I share their desire for a society with out money, bankers, elites, over-work, etc, I am very critical of many of their explanations of the way capitalism works (they don’t use the word capitalist much actually) and the solutions these critiques point them towards. Chief amongst these complaints of mine is their notion of work. They have essentially projected the capitalist experience of work onto the entire experience of work for all time and space, implying that the universal nature of work is evil, something to be avoided. In contrast Marx sees work as the very substance of society, the thing that binds us together as it shapes our social life. The organization of our work effects how we understand our selves individually and collectively. I think that radicals need to recast the nature of work in a potentially liberating way. Similarly the Zeitgeist folks are entirely saturated by the contradictory experience of machines in a capitalist society. On the one hand machines fascinate us with their amazing, seemingly-liberatory potential. On the other hand the reality of the machine is that it is a tool for control of the labor process at the expense of the worker and that the consequences of technology are often socially, environmentally biologically, and psychologically degrading. The Zeitgeist folks make the assumption, then, that if we just had more machines then the problem would be solved. They share the bourgeois romance of the machine as liberator. Without going into an argument as to the ability of machines to replace all human labor, I would question what we would do without some sort of social labor. What would be the point of anything? As well, I wonder that if machines could really do everything that people could do, including much of our creative labor as the Zeitgeist folks claim, would they not be conscious entities of some sort capable of refusing work, of withholding labor, of claiming some sort of juridical rights in society? I believe that in posing alternatives to capitalism we should aim to heal the separation of conception and execution in the capitalist labor process, not to carry that separation to a further level of alienation.
5. One of the crucial aspects of such a method of organization is that without productivity-based labor certificates there is no chance of these certificates circulating as money. Indeed this is Marx’s objection to some of the labor-money schemes advanced by his contemporaries. What would keep such labor-notes from circulating as money, merely replicating commodity production? Wouldn’t they just make labor indirectly social again? In Marx’s scheme all labor is directly social and therefore there is no reason to exchange labor notes on any black markets. For more on this point see Andrew Kliman’s “The Transformation of Capitalism into Communism in the Critique of the Gotha Program.”
Marx, Proudhon and Alternatives to Capital by Seth Weiss
Limits to Capital by David Harvey – chapter 5 on centralization of capital
Andrew Kliman “The Transformation of Capitalism into Communism”
7. Production and Exchange
Production- Exchange script
We get into trouble anytime we try to understand something in isolation. The true meaning of things exist not buried inside them but in their relation to other things. Take money for instance. The meaning of this rectangular piece of paper covered in strange hieroglyphics can only be understood when we look at the role money plays in the complex coordination of modern capitalist production. Take away capitalist production and this rectangular piece of paper loses its meaning. If we take away this context of social relations it is impossible to understand what money really is. If we view money in isolation we end up treating all of its social power as if it is a natural property of rectangular pieces of paper. This meaning and power appear not to be specific to a given time and place but universal qualities that exist in all places and all times.
Of course this would be ridiculous. Yet the failure to see things and concepts relationally is par for the course when dealing with bourgeois ideology.
This video examines the relation between exchange and production. It argues that exchange and production only derive their meaning from their relation to each other and that we have to understand the specific nature of this relationship if we are to really understand the full meaning of common concepts like freedom, equality, utility, scarcity and value. Attempts to understand these concepts without looking at the picture relationally end up being “one-sided”. Meaning appears as internal to the object/concept itself and not something coming from a relation. Because there is no way to account for the specific context in which a meaning appears the meaning seems to be a natural, eternal truth.
We will examine the relation of production to exchange through 3 different, inter-related topics/windows/vignettes. Each one will give us a different perspective on the same problem. 1. Freedom and Equality; 2. Scarcity, Utility; 3. Value
1. Freedom and Equality
Where do the notions of individual freedom and equality so deeply ingrained in our modern consciousness come from?
They come from the realm of exchange. Here in the world of buying and selling all individuals are free to buy and sell their labor and the products of this labor as they chose. Nobody forces anyone to buy or sell anything to anyone else. The path of an individual’s life appears as a series of free choices and with this comes the notion of personal responsibility. People appear only to have themselves to blame for their personal state of affairs. This freedom to buy and sell presupposes the legal relations of individuals to own property. Thus individuals have legal rights, the same rights for everybody, establishing a basis of legal equality for all.
This generates a notion of freedom and equality IN GENERAL. We talk of the inalienable rights of the individual, of human rights, of individual freedom, etc. These are seen as universal properties of humans, and market exchange is seen as the natural expression of these properties.
…already we have clues that there may be something one-sided about our analysis. It appears that the individual has been assigned universal traits, traits that are not due to a specific set of social relations it falls within, but due to its basic nature. The individual is being understood in isolation, one-sidedly. Rather than a social structure generating a particular type of individual, a universal type of individual is seen as generating a specific social system. Whenever we see the particular masquerading as the universal, whenever we see claims as to the universality of a concept, we have clues that our analysis is one-sided.
Such clues demand that we interrogate our notion of market freedom. What kind of society is required to have a world where buyers and sellers are free to sell labor (labor power to be specific) and commodities as equals? We need more than just money, markets and bourgeois states. We need a particular type of production relation.
Though individuals are free to choose whom they buy from and sell to they are not free to not buy and sell. This is because we can only access our subsistence through the market. Such a situation does not occur naturally. It presupposes a specific type of relation between producers.
In order for individuals to have to enter the market to buy their subsistence they can’t be able to create their subsistence on their own. They must be deprived of means of production. Means of production must be a private commodity owned by the few, compelling the majority to enter the market to sell their labor and buy their subsistence. In contrast to the perspective of the market where all actors meet as legal equals, in production we see the division of people into classes, workers and capitalists. The world of market equality presupposes a world of inequality in production.
This implies a specific type of production: production for exchange. In production for exchange products are not created for the use of the laborer. They are produced to fetch a price in the market. And because the means of production are owned by the capitalist class the goal of production becomes not meeting the needs of humans, but generating profit for the sake of profit, at the expense of the laborer. The more work that can be squeezed from the worker, the greater the profit of the capitalist.
Yet when worker and capitalist meet in the market to buy and sell commodities and labor-power they meet as free, consenting, legal equals. There is a contradictory relationship between the freedom of the market and the despotic plan of the factory, between the equality of the market and the asymmetry of class. Yet though the two sides contradict each other they also depend on one another. We can’t have market freedom without class and the inequalities of capital. If we just said that bourgeois freedoms are an illusion draped over a real world of coercion and inequality we would be venturing too far into a one-sided analysis of production. We can never forget that capitalist production is production for exchange, inherently linked to the freedom of the market. Market freedoms are real. But they contradict their own material base.
This contradiction between freedom and coercion, between equality and inequality is what allows us to have a critique of our society in the first place. It is only because we are promised a freedom that we cannot have, because we see ourselves as equals in a world of inequality, that we can form an internal critique of the society we are in. It is the movement of this contradiction that allows us to posit a possible exit from such a society, inspiring us to imagine a world where freedom and equality could stand on a non-contradictory basis, where individuals truly could be free to choose the path of their lives.
2. Scarcity and Utility
If you were to open a standard economics textbook today you would read that economics is the study of how the autonomous decisions of utility-maximizing individuals allocate the use of scarce resources. The optimal allocation of resources is reached naturally when individuals are free to make autonomous decisions in the market. But this doesn’t mean that we can have everything we want. We live in conditions of scarcity. We always want more than is possible for us to have. Therefore we always have to make trade-offs. So our textbook reminds us that the fact that we may want more from the current state of affairs, that we aren’t happy with the world, is just part of life: we will always want more than we can have.
Thus economics defines its aim and focus quite narrowly. It is focussed on the decisions that individuals make in the market. Its focus is on exchange. That doesn’t mean it doesn’t say anything about production. But its observations about production are based on the basic principles it learns from its analysis of exchange. Production is also just a realm of individuals making choices between scarce resources, nothing more, nothing less.
And with this framework neoclassical economics is able to justify all of the central ideological claims of capitalism: that people can only be understood as individuals not classes, that we can only blame ourselves for our lot in life, that free markets are the best route to maximizing everyones utility, and that the current state of affairs is not only the best one but also the natural expression of universal human nature.
…here too we have clues that our analysis may be one-sided. As in our previous example there is a conflation of the universal and the particular. Particular aspects of the individual’s market behaviour under capitalism are held to be universal, innate properties of all human behaviour for all of time. The particular types of choices we make in the market are considered universal choices. Scarcity is seen not as a product of a certain organization of production but as a universal, timeless condition. These are our clues. Let us interrogate these notions of utility and scarcity to see how we might situate them within their actual social context.
Who is this calculating, egoistic, utility-maximizing individual? A closer inspection shows that her existence as an individual is dependent on her existence as a social creature. It is only through a certain type of society that we have a particular concept of the individual.
For one, we do no form our desires in a vacuum. We are taught what to desire. We are also taught how to pursue the objects of our desire. In different societies people carry out these intents/purposes quite differently. In a capitalist society we purchase our desires. But this requires that we sell our labor in the market. Thus our utility-calculating isn’t just an abstract measure of how much we want things. There is a social context that structures these calculations. We have to consider our incomes and the social values of commodities. Neither one of these things (wages and prices) can be explained solely by the world of exchange. They both require an analysis of production.
The logic of production does not follow the same logic of utility maximization. Capitalists don’t invest in production in order to maximize utility. They invest in order to make profit, in order to gain value in the abstract. The pursuit of money for its own sake is not a pursuit of utility. It is a separate logic, a blind, calculating logic that pursues its own interest, transforming the capitalist into a mere personification of this logic. (1)
The profit-maximization of capitalists forms the bulk of the economic activity in our society. Yet it is easy to fall under the illusion that the economy is just made up of individuals maximizing their utilities. This is because the social links between all individuals, be they capitalists or workers, always take the form of market transactions. Our social relations are mediated through value-relations between commodities. But this appearance is one-sided. The presence of the utility-maximizing individual presupposes the social organization of a capitalist society (private property, wage-labor, markets, and the capitalist state.)
As we will discuss more in the next video (Subject Object) we can have no individual without a society. The type of individual, and our understanding of what it means to be an individual, changes with the type of society. When we inquire into the conditions necessary for our calculating, utility-maximizing individual we see that it is not a universal individual. It is a particular individual nestled in a particular set of social relations.
In our textbook the individual walks by shelves of commodities to compare and evaluate. We don’t need to know where they came from or how they got to the shelf. Supply is given- a static, preexisting quantity of stuff on the shelves- economics assumes it into existence as it does the isolated, hedonistic consumer.
When we interrogate our textbook and ask for a theory of what creates supply we are given a familiar answer: there is a given amount of scarce resources. We must make choices between them. We are shown a static, preexisting world of resources to choose from, as if we were shopping in the market.
Cleverly our focus has been diverted from any activity that actually brings commodities into being. But how can we actually understand scarcity without understanding the production process? How do we compare the scarcity of coal to wood without an understanding of the fact that wood merely requires the cutting of a tree while coal requires an elaborate mining process? (How do we understand the scarcity of intellectual work without realizing that a Mozart CD can be duplicated an infinite amount of times at the click of a button while a Van Gogh can never be painted again?) Scarcity is only an inversion of production. It is the work of people that produces things in given quantities. Our “choices between scarce resources” are actually choices between different distributions of labor.
conclusion to part 2:
Thus we have seen that our economics textbook is lacking. None of its central claims make any sense unless they are contextualized in a mode of production: a social organization of working activity that produces a certain type of individual and a certain way of pursuing our interests. Our textbook has done a clever thing. It has abstracted away all social context from individuals and the objects they confront. It has made society the result of the individual, not the other way around. It has assigned social powers to objects. The particular organization of capitalist production becomes universal human nature confronting a preexisting world of valuable objects.
3. Exchange Value
Marx was interested in interrogating the notion of exchange-value to get to the heart of what it was really all about. It led him to a conception of an intrinsic value given to commodities by labor. We’ve already followed this argument in video 4 (Value). Here I will review the argument in order to demonstrate how it functions as an interrogation into the one-sidedness of the concept of exchange-value.
Exchange value is an observable phenomenon in our world. Commodities exchange in certain ratios. A commodity’s exchange value is the ratio at which it exchanges with another commodity. At first glance exchange-value can seem random, accidental. But we observe that in reality exchanges are not accidental and random. Stocks of commodities are replenished, creating a regularity to exchange ratios. What could this process be that takes away the accidental nature of exchange and replaces it with a social regularity?
When I say one book equals 30 pencils I am comparing magnitudes. But magnitudes of what? To compare magnitudes you have to have some substance/essence that you are comparing! This leads Marx to conclude that commodities have an intrinsic value. All of these different exchange-values are just different ways of expressing this intrinsic value. We never see the intrinsic value, we only see the various commodities that are used to measure its magnitude.
We are still in the world of exchange. All we have done is to analyze the nature of exchange-value which leads to this idea of intrinsic value. But here is where we have to leave the world of exchange in order to ground our concept further. Intrinsic value is a pivot concept that forces us to move to the world of production.
What is the substance that intrinsic value is made up of? It can’t be the use-value of commodities because use-values can’t be quantitatively related. You can’t compare the use of an apple to the use of a car quantitatively. The only logical place to look is the labor process, the process whereby individuals create the world in which they live.
This answer to the question of intrinsic value was not accepted by Marx’s critic Bohm-Bawerk. Bohm-Bawerk argued that there are many other things that could make up this intrinsic value like scarcity or utility. Yet, as we have seen already, scarcity and utility are incomplete, one-sided concepts that can’t be understood unless they are grounded in a theory of production. (2)
Only through an understanding of the activity of people as they shape their world and the way in which the particular mode of that production shapes the individual can we understand scarcity and utility. This makes labor the obvious focus point for our investigation into the value relations that make up a capitalist society. Labor is the way we create the objective world we encounter and the way we create ourselves.
It makes sense that this notion of value might not be intuitive for some to accept. In a capitalist society we are separated from our labor. Our working power is a commodity that we sell to a capitalist. The capitalist owns our labor and the product of that labor. We don’t have a sense of our labor as a purposeful activity, or a social activity. Our labor must take the form of a commodity with a market value before it becomes social labor. Value obscures the social nature of our labor.
As you may know Marx’s bourgeois predecessors, Adam Smith and David Ricardo amongst others, subscribed to a labor theory of value. You might think then that this means that they too had a proper dialectical understanding of the relation between production and exchange. But this is not the case. Marx reproaches both Smith and Ricardo for reducing form to content. The distinction turns out to be crucial.
The content of value is labor. By this we mean that the “social substance” that makes up value is labor. (Later on Marx will have to examine what kind of labor this is, socially necessary abstract labor, and what kind of society produces it.) But we don’t see this content when we examine a commodity. No matter how we may poke, prod, smell it or take it apart, we can’t see its social content. That’s because this content takes a material form. This form is exchange-value. When we say it takes a material form we mean this literally. The value of the book takes on the form of pencils or tires or baritones. So Marx makes a distinction between the content of value, labor, and the form of value, exchange-value.
This means that value and exchange-value are different. And since price is just a special form of exchange-value, price and value are different. Prices are just the surface appearance of value. But this value has no fixed, physical form independent of its material expression in pencils, tires or money. We only see the form of value, not the content.
For Smith and Ricardo price is immediately identifiable with value. This is what Marx means when he says they reduced form to content. They treated the content of value, labor, as it it immediately had an exchange value. They failed to understand that value is a process whereby labor takes on the material form of exchange value. But these exchange ratios are not value. They are merely the expression of this 3rd thing, called intrinsic value. This allows Marx to examine the ways in which prices fluctuate around values which allows him to solve some theoretical problems that alluded his predecessors. (3)
It also leads him ask an important question that Smith and Ricardo had never asked: What type of labor produces value? Because Smith and Ricardo saw labor and price as identical they assumed all labor, in all times, created value. As we know, these sort of appeals to universality and eternal concepts are problematic. It is only a specific type of labor that produces value: labor for exchange. Thus only a specific type of society, in which there is a regular, predictable, disciplining of labor to the needs of market exchange, can be a society ruled by the law of value.
Rather than seeing value as a universal aspect of human labor. Marx sees it as something unique to a specific form of labor: production for exchange. Thus in distinguishing between content and form Marx is able to also distinguish between the universal and particular, to show that the properties of the market are specific to a certain type of production: capitalist production.
In case it is not obvious there is a central ideological issue at stake in this distinction between particular and general/universal. It’s quite simple. Things that are universal can’t be changed. There is no use organizing, struggling, studying, complaining or reading about them. If human beings are always a certain way then that’s just how it is. But if we want to change the world we need to know what aspects of our reality are not universal, what things are merely a product of the organization of our social relations, what things might change under a different type of organization.
In a capitalist society much of the world of appearances comes from our experience in the market, in the realm of exchange. But from this one-sided perspective we aren’t able to see the historic specificity of these market experiences. Without a perspective of the type of productive relations that underly the freedom, equality and individuality of the market we end up making universalizing and inadequate generalizations about human nature. Such a one-sided perspective makes it seem as if we are trapped in the present, as if the problems of today are universal problems of all time, unable to be transcended.
1. Now one might argue that all these commodities must still be sold to consumers and that therefore the satisfaction of utility still lies at the end of all production. But a great deal of the demand in society is not demand from consumers at all. It is demand from capitalists for productive inputs. A great deal of the value in society never resolves itself to consumer products. Instead it consists of products sold back and forth between capitalists.
2. One might identify several strands of response to Bohm-Bawerk’s critique of Marx’s argument for labor as the content of value. There are those that defend the specific approach of Marx’s argument in Chapter 1 of Vol. 1 of Capital. Off the top of my head the names Rudolph Hilferding, Andrew Kliman, and Guglielmo Carchedi come to mind in this category. Then there are those that say that it is wrong to thing of Marx’s argument in this chapter as an analytical proof. Rather, the argument for abstract labor as the content of value must be understood within the context of Marx’s method (that he takes the mode of production to be the fundamental organizing principle for all human society). I.I. Rubin takes this approach. In a third approach there is the recent work of Nicole Peppereli, whose blog Rough Theory I have recently been checking out, who argues that the structure of the first chapter of vol. 1 of Capital is quite peculiar. She argues that Marx starts off with a simple analytic proof, divorced from social context, one-sided, in order to draw the reader in via a mockery of bourgeois method. But by the end of the chapter he has turned the tables on this simplistic analytic formula with his fetishism argument…. An interesting approach. I have tried to combine some of each of these approaches at times.
3. For instance, this allows Marx to have a theory of socially necessary labor time which explains all of the things detailed in video 6 of this series. It also allows Marx to create his theory of Prices of Production which solves the problem of average profits, a conundrum that eluded Ricardo. This is explained in my “What Transformation Problem” video. The other key distinction hinted at here (I felt I didn’t have time to go into it here) is between labor power and labor. This is covered in some of my earlier/awkward videos like “what is capital” and “where does profit come from?”
From Political Economy to Economics, by Fine and Milonakis
This is a great history of economic theory, discussing the methodological evolution of all of the different tendencies within political economy, and the long historical process whereby bourgeois economics excluded all contrary tendencies in order to constantly redefine itself as a narrower, specialized, mathematical science.
Dialectical Phenomenology;Marx’s Method, by Rosolyn Bologh
I really like this book. It is probably the clearest and most convincing explanation I’ve read for why we need dialectical analysis to understand capital.
The New Dialectic and Marx’s Capital, Chris Arthur
Probably the most important point that I gleaned from Arthur’s work is the necessity of understanding all of the steps in the analysis of value as steps existing within the context of capitalism. Arthur has good critiques of the attempt to develop certain aspects of value theory from merely exchange in the abstract. He has especially good critiques of the notion of “simple commodity production”. I have tried to keep this perspective in this series. That is, I have tried to make it clear, at all times, that I am dealing with capitalism and not some abstract pre-capitalist form of exchange.
Dance of the Dialectic, Bertell Ollman
very good intro to dialectics
Essays in Marx’s Theory of Value, II Rubin
this is especially good on production/exchange, and content/form/substance
Marx’s Concept of Intrinsic Value, Andrew Kliman
A very detailed defense of Marx’s logical steps in the derivation of intrinsic value and labor as the content of value.
9. Abstract labor
10. Simple Labor-Complex Labor (why skilled labor creates more value than unskilled labor)
11. Supply and Demand
12. Value and Price
13. Why Machines/Animals can’t create Value (Machines and animals create use-values and those use-values have prices. Why don’t they create value?)
14. Imaginary Value and Rent (Why do land and other things that aren’t the product of labor have a price?)
15. The Challenge of the Law of Value (What does an understanding of value tell us about movements to change the world?)