Notes on Value Theory

The starting point of Marx's investigation is the commodity. Why is this the case? The first thing to be noted is that this is how things appear to us “at first sight”¹. We begin on the surface, with the obvious fact, known to everyone, that capitalist production is, at least in the first instance, the production of commodities. And the result of the fact that capitalist production is the predominant mode of production, is that all the wealth of society appears predominantly in the commodity form, as an “immense accumulation of commodities.”²

The beginning here is something obvious, something which is self-evident to anyone living within capitalist society. This is a beginning which is undeniable, but at first it also seems to be somewhat trivial. And again we have to ask why? Why does Marx begin with the commodity, and not say, the concept of capital, which would appear to be much more essential and central to our understanding of capitalism.

Let us continue for now to follow Marx's train of thought. A commodity is in the first place “an external object, a thing which through it's qualities satisfies human needs of whatever kind.”³ As something external to us, which is an object of desire for us, the commodity constitutes what is referred to as a 'use-value'. This aspect of the commodity is realised in the process of consumption. The use-value of an apple, for example, consists variously in the energy it supplies to my body via it's calorie content, the nutrients it provides me, it's specific taste, texture and flavour. And the need which I have for the apple can only be satisfied if I eat it.

Use-value as such though is independent of the social process of production which produces it. Whether an orchard is tended by a serf, a slave or a modern wage-labourer makes no difference to the apple itself. But in capitalism, these objects which satisfy our needs become the “material bearers”⁴ of a specific social relationship. “Use-value is the immediate physical entity in which a definite economic relationship – exchange-value – is expressed.”⁵

This appears immediately as something peculiar. Why is it that a relationship between human beings should be expressed in a physical object? More precisely, this relationship is expressed as a relationship between objects. The relationship is what is referred to as 'exchange-value', the proportion in which one use-value exchange for another. The social relationship of exchange between persons appears as a relation between the products they produce.

The character that commodities have as being essentially interchangeable, such that a definite quantity of one commodity serves just as well as a definite quantity of some other commodity, which in terms of it's relationship to human wants and needs can be something completely different from the former, is a result of their reduction to a common substance. This common substance is value. And here we come to the primary difficulty.

An economist protests, the exchangeability of commodities is not due to their qualitative equivalence, but just the opposite. “When, therefore, in the case of exchange the matter terminates with a change of ownership of the commodities, it points rather to the existence of some inequality or preponderance which produces the alteration.”⁶ If I have a loaf of bread, for example, I don't exchange it for a bottle of wine because, for me, the wine is an equivalent for the bread, but just the opposite. I exchange because, for me, the loaf has no use, whereas the wine does, and vice versa for the person I exchange with. The bread for me is a not use-value, whereas the wine forms a use-value.

This is correct as far as it goes. In order to be a commodity, an object must be what Marx refers to as a social use-value. To produce a commodity, I have to produce something which is not a direct object of my needs, but rather forms the object of someone else's needs, just as their product is the object of my needs. Production for others is social labour. But social labour, the production of social use-values, is a characteristic of all societies, it is in fact, what makes them societies as such. If I can meet all of my needs through my own labour, or from the free gifts of nature, then I have no need of society.

But what has to be examined is a historically specific form of society. The form of society in which the products of social labour are exchanged for one another as equivalents. This is by no means inevitable. As Marx says in his A Contribution...

“...under the rural patriarchal system of production, when spinner and weaver lived under the same roof – the women of the family spinning and the men weaving, say for the requirements of the family – yarn and linen were social products, and spinning and weaving social labour within the framework of the family. But their social character did not appear in the form of yarn becoming a universal equivalent exchanged for linen as a universal equivalent, i.e., of the two products exchanging for each other as equal and equally valid expressions of the same universal labour-time.”⁷

The production of commodities assumes a specific form of social production, production by the “isolated individual.” The producers are “mutually indifferent individuals.” But despite this mutual indifference, there is still dependence. The producers labour is “private labour and his product the private product of a separate individual”, and yet this private character of labour produced by indifferent individuals has to be overcome. The act of exchange is precisely this overcoming in which the private labour of the isolated individual “becomes social labour by assuming the form of its direct opposite, of abstract universal labour.”

As Marx expresses it elsewhere:

“The reciprocal and all-sided dependance of individuals who are indifferent to one another forms their social connection. This social bond is expressed in exchange value, by means of which alone each individual's own activity or his product becomes an activity or a product for him.”⁸

In fact, once seen through this lens, it becomes obvious, tautologically so in fact, that the substance of value is labour in the abstract:

“Since the exchange-value of commodities is indeed nothing but a mutual relation between various kinds of labour of individuals regarded as equal and universal labour, i.e., nothing but a material expression of a specific social form of labour, it is a tautology to say that labour is the only source of exchange-value and accordingly of wealth in so far as this consists of exchange-value.”⁹

We see then that in a society based on the production of commodities, the products of the private labour of the mutually indifferent producers can only become social labour by becoming equivalents, interchangeable with one another, and as such, values. And the natural quantitative measure of labour is time. “The effect is the same as if the different individuals had amalgamated their labour-time and allocated different portions of the labour-time at their joint disposal to the various use-values.”¹⁰

By way of personal clarification, previously I had argued in favour of value theory, on the basis of the idea that the substance of value is social labour, and that since the products of private labour become social labour by becoming values, this is a tautological expression. This was close to Marx's argument, but I think slightly at variance. The substance of value is not actually social labour, but as Marx says, social labour in a particular form of society. A society in which the products of labour can only become social by becoming equivalents, by abstracting from their physical existence as use-values and reducing them in practice to products of labour in the abstract. Abstract labour is the substance of value, and this presupposes a definite form of society, with formal freedom and equality, a developed division of labour and in which relations between branches of the social division of labour take the form of exchange relations (Hopefully this clarifies to a certain extent where Böhm-Bawerk goes wrong in suggesting that the common property of commodities could just as well be that they are products of nature, or something absurd like the fact that gravity acts on them).

Böhm-Bawerk struggles against this. He is horrified that Marx's analysis of value does not proceed from purely empirical analysis of exchange, or an analysis of the psychology of the agents involved in exchange, but from a dialectical analysis of the social relationship of exchange. “Marx, instead of proving his thesis from experience or from its operant motives–that is, empirically or psychologically–prefers another, and for such a subject somewhat singular line of evidence–the method of a purely logical proof, a dialectic deduction from the very nature of exchange.”¹¹ Here he comes right to the heart of the problem, and identifies it as one of method. But he failed to inquire any further, he simply proclaims his method to be obviously superior.

In fact it is all together odd because Böhm-Bawerk himself admits that after the initial 'hump' of value theory, he finds Marx's exposition demonstrates logical acumen in a “truly masterly way.”¹² He gives us a picture of Marxism as a system of thought which is rigorously logical, except in the two places which it has to run up against the facts, namely the initial exposition of value, and in Volume III in the transformation of values into prices of production. Of course, Marx's system is not simply an exercise in neat logic, it meets 'reality' in numerous places, in the chapters on the working day, on relative surplus-value and the development of the factory system, in the historical exposition of primitive accumulation, and much more besides.

But we have to go deeper than this. It is not a question, for Marx, of ignoring completely the psychology of the individuals involved in a capitalist society. But it is a question of explaining this psychology, not as producing, but as being produced by, the social relations of production. “It is not the consciousness of men that determines their existence, but their social existence that determines their consciousness.” The way things appear to individuals caught up in the day to day existence of bourgeois society is quite different from how they actually are. And this is already posited in the analysis of exchange.

In the exchange of commodities, we saw that the social relationship between the producers appears as a relationship between their products. Of course here, in the most apparently simple relation of bourgeois society, it is still relatively easy to uncover the secret that this appearance does not correspond to the nature of the case (Although in fact, the analysis of the simple relationship of exchange and value posited by exchange is the rock upon which many readers of Marx have foundered). But once we make our way to the more advanced relations, everything appears, as it were on it's head.

On the surface of capitalist society, profit appears as something related to the total capital, rather than to the variable part which is it's origin, as something which arises just as much out of the constant as the variable part of capital, or equally arises from exchange rather than production. Wages appear as the 'price of labour', rather than the value of labour-power, rent makes it seem as if the products of nature alone had value in themselves and interest makes it seem as if capital was a self-acting automaton that generated a surplus of it's own nature. If we begin with these surface appearances, and stay within their realm, then all that can be generated in the nature of science is empty justifications, the pure ideology of the existing social relations.

It is only by seeking beyond this immediate appearance, life as it impresses itself in immediate consciousness, that inquiry becomes something scientific. Science cannot remain satisfied with it's material in the form in which it first appear to it, but through it's activity (Marx refers to science as 'universal activity') it has to appropriate the material for itself. This was done, in the first instance, by classical political economy up to Ricardo. But Ricardo's doctrines still contained both 'esoteric' and 'exoteric' elements. Marx took hold of Ricardo's true esotericism, while rejecting the exoteric. He expounds a truly scientific political economy, and this truly scientific political economy is at the same time a critique of political economy as the ideology and justification of the existing social relations of production. So much for this controversy.

It might be asked why we chose here to deal with Böhm-Bawerk and his charges of inconsistency rather than any later writers on the same topic. This is to a certain extent like asking why we chose to look at Marx's writings on value theory rather than later 'Marxist' writers. But Böhm-Bawerk expresses clearly the nature of the opposition to value theory and so we thought it most valuable to chose him as the object of our attack.

As a final note, we began by asking the question of why specifically it was that Marx began with the analysis of the commodity. In fact, this cannot be really properly understood until after the whole of the analysis of the production process has been understood. Marx himself had initially thought to begin with a 'general introduction', but scrapped this in his 'A Contribution...' for the now well known beginning with the commodity. This beginning is one suggested by the nature of the entire material itself. Once the analysis has been completed, what appeared initially as premise appears as result. We began with the commodity, and capitalist production is the form of production which makes the commodity into the general form of wealth. This is in the nature of the dialectic.

An addendum, I had wanted to address the question of the marginal theory of value. One line of attack against marginalism and neo-classical equilibrium theory is to point out that it's presuppositions are at variance with reality. The world envisioned by them is a static world of simple exchange, in which Say's law of the market ensures social freedom and harmony. Obviously this is not the case in reality. But pointing out the variance between theory and practice in itself is not enough. If Marx had merely pointed to the fact that capitalism did not present it's lauded ideals in practice, he would have gotten no further than Proudhon. Rather, he showed that on the basis of the exchange of equivalents, capital can only become capital through the production of surplus-value, which finds it's origin in the unpaid labour of the worker.

Paul Mattick really gets to the essence of things when he notes that the marginalists gradually had to abandon any actual attempt at calculating utility, and fell back into merely justifying what exists:

“...the marginal utility theory was finally boiled down to an identification of the economic realm with the domain of the price mechanism, the various attempts to substitute psychologically grounded marginal utilities for the objective value theory must be considered to have failed. They led only, to the elimination of the value problem from bourgeois economics.”¹³

Further study could be done, which might show that the Marxist theory of value is the only real value theory as such, that all other theories of value amount to non-theories, simply post hoc justifications of the existing relations. But this is by the by.

1 Marx, K. (1859). A Contribution to the Critique of Political Economy. [online] marxists.org. Available at: https://www.marxists.org/archive/marx/works/1859/critique-pol-economy/ch01.htm [Accessed 10 Jun. 2017].

2 Ibid.

3 Marx, K. (1976). Capital. London: Penguin.

4 Ibid.

5 Marx, K. (1859). A Contribution to the Critique of Political Economy.

6 Böhm-Bawerk , E. (1896). Karl Marx and the Close of Hs System. [online] marxists.org. Available at: https://www.marxists.org/subject/economy/authors/bohm/index.htm [Accessesd 11 Jun. 2017]

7Marx, K. op cit.

8 Marx, K. (1973). Grundrisse. London: Penguin.

9Marx, K. (1859). A Contribution to the Critique of Political Economy

10Marx, K. op cit.

11 Böhm-Bawerk , E. op cit.

12Ibid.

13Mattick, P. 1974 Economic Crisis and Crisis Theory [online] marxists.org Available at: https://www.marxists.org/archive/mattick-paul/1974/crisis/ch01.htm [Accessed 11 Jun. 2017]