Control, Scarcity, Expressed Want
If (1) we control something enough,
if (2) it is sufficiently scarce for such control to matter, and
if (3) it is something people want and are willing to offer something for that we want,
then we can trade-to engage in exchange (either implicitly or explicitly).
So the difference between something we simply use (such as the air we breathe) and something we also trade is controlling something sufficiently scarce that such control matters and having someone else wanting it such that they are willing to trade something they have (and we want) for it. Once trade starts occurring, there can begin to be trade in things that are wanted for their trade value. (Such as money: which can be controlled, is sufficiently scarce for such control to matter, people are willing to exchange for it and we can use it to exchange for what we want.)
So exchange is a matter of control, scarcity and expressed want. All three can vary from place to place, over time and from person to person: such variance is central to patterns of trade. In particular, things tend to move from where they are less scarce to where they are more scarce: that is, to where their exchange value is greater. (The exchange value of something being simply whatever you can get for it.)
Armed with this understanding, we can see just how bad is the reasoning by which Marx allegedly “establishes” the labour theory of value.
(All quotes are from Chapter One of Capital.)
The utility of a thing makes it a use value. But this utility is not a thing of air. Being limited by the physical properties of the commodity, it has no existence apart from that commodity.
Utility is utility to someone. The utility comes from its connection to their purposes. So, the utility of a thing does have existence apart from that commodity, it exists in the relation of the thing to the purposes of anyone who has a use for it. The key elements in Marx’s analysis miss this crucial point, no matter that he later tries to paper human valuation back in to his analysis.
… must, as exchange values, be replaceable by each other, or equal to each other. Therefore, first: the valid exchange values of a given commodity express something equal; secondly, exchange value, generally, is only the mode of expression, the phenomenal form, of something contained in it, yet distinguishable from it.
Variation in exchange value (between people, across time and space) is precisely what drives trade in the first place. Each person trades what they value less for what they value more: the exchange value is a point of intersection. There can be no trade without such variation. Indeed, much of commerce is finding people who put a intersecting valuation on things you want to exchange: hence gains from trade. If there was genuine indifference by both parties to each item (i.e. they both valued them equally), the exchange would not be worth the bother. Indeed, trade began operating across vast differences comparatively early in human history precisely because things increase in exchange value the more scarce they are-hence trade items moving from places of less scarcity to places of more, in a long chain of shifting intersections of different valuations. Marx’s finding of some “common quality” creating some equality in exchange does not define the nature of exchange, it abolishes its underlying reality and driver.
This is perhaps the most dramatic, and damaging, instance of Marx’s habit of abstracting away from reality in ways that disguise (rather than reveal) the underlying economic (indeed human) realities.
If then we leave out of consideration the use value of commodities, they have only one common property left, that of being products of labour.
Simply not true. Commodities also have the qualities of being made of materials (what economists call land) and by tools (what economists call capital): labour on its own produces little or nothing. And to be used [exchanged], such things have to be controlled by someone. All production involves economic property rights ( in Barzel’s sense): the question is what is the most productive form of such control.
Indeed, since land, labour and capital can be controlled, have sufficient scarcity that such matters and people will exchange things for them, instances of land, labour and capital each have exchange value. The average levels of such exchange values depend on their relative scarcity [plus some economies of scale and scope effects]. In capital-scarce societies, the land/labour ratio dominates the exchange value (average wages) of labour. As population increases, average wages fall: as population falls, average wages rise. In capital-plentiful societies, the capital/labour ratio dominates average wages. So, in contemporary economies, average wages are determined by the amount of capital backing them (including the efficiency of its use).
Not even the exchange-value of labour is determined by its labour content. (Marx, of course, explains this little difficulty away via his theory of exploitation and surplus value.)
Since denying the productive importance of land and capital would be too silly for words, Marx does puts them “back in” to his analysis later in Chapter One. This analytical sleight-of-hand does not, however, rescue the above crucial premise from its falsity.
Commodities, therefore, in which equal quantities of labour are embodied, or which can be produced in the same time, have the same value. The value of one commodity is to the value of any other, as the labour time necessary for the production of the one is to that necessary for the production of the other. “As values, all commodities are only definite masses of congealed labour time.”
Flatly not true. Which is why one got, for example, the Silk Road. It was the knowledge that silk had greater scarcity value the further West one travelled, and goods it was traded for more the further East one travelled, that drove the trade: trade goods had to be small and durable enough to travel. Labour-in-transport was a response to geography [and no guarantee--even leaving aside the risks in transit--since scarcities could shift].
Diamonds are of very rare occurrence on the earth’s surface, and hence their discovery costs, on an average, a great deal of labour time. Consequently much labour is represented in a small compass.
This attempt to reduce scarcity to labour time is just sad: not least because-at least prior to modern transportation and communication technology-diamonds, gold and silver’s scarcity value varied markedly according to their local scarcity. Scarcity does make diamonds worth controlling: but so does their smallness, lightness, brilliance, hardness, etc. That is, their utility as trade goods and thus stores of value. All these things make them worth the effort in a way that something equally scarce and equally hard to find but which had no attributes people wanted (or wanted sufficiently) would not be. Control, scarcity and willingness to trade are all necessary for exchange value.
One of the fundamental drivers of the world economy from about 1530 to about 1830 was that gold (and especially silver) were much less scarce in the Americas than they were in Europe and much less scarce in Europe than they were in Asia relative to goods and were used (particularly silver) as a medium of exchange in all three economic regions: hence the flow of bullion into China (until first opium and then industrial mass production gave Europe competitive goods to sell) in return for silk and other luxury goods. Silver was not a medium of exchange in Africa, hence the “triangular trade” of European goods to Africa, slaves to the Americas, silver, sugar, cotton, etc to Europe. Trying to tack some “labour time” story onto such patterns is not only an utterly unnecessary complication, it actively sabotages understanding.
Therefore, the common substance that manifests itself in the exchange value of commodities, whenever they are exchanged, is their value.
As should now be clear, there is no such common substance. Indeed, it is a profound misreading of exchange to think that there is.
With all these false premises, Marx’s main conclusion simply does not follow:
A use value, or useful article, therefore, has value only because human labour in the abstract has been embodied or materialised in it. How, then, is the magnitude of this value to be measured? Plainly, by the quantity of the value-creating substance, the labour, contained in the article.
Exchange value is a social construct driven by the expressed preferences of individuals over controlled items of sufficient scarcity. Any general price is a series of points of intersection of variations in control, scarcity and expressed preference. As circumstances change, so do those points of intersection. Even the “Walrasian auctioneer” of perfectly competitive markets with perfect information is a point of intersection. In most actual markets, there is not even such a single point as there is not a single price.
Neither does Marx’s attempt to abstract from the heterogeneous nature of actually existing labour to create some general “labour unit” work.
We see then that that which determines the magnitude of the value of any article is the amount of labour socially necessary, or the labour time socially necessary for its production.
Clearly, we see that this is precisely not the case. Moreover, the extent of variations in exchange values go beyond even the variations in labour.
Lastly nothing can have value, without being an object of utility. If the thing is useless, so is the labour contained in it; the labour does not count as labour, and therefore creates no value.
This is an admission that value is not embodied or congealed labour (or, as Marx has it, the [abstract] labour time socially necessary for its production). If labour can produce things without value, or of varying value between different workers (or between different times with the same worker), then the value does not reside in the labour. On the contrary, the expected value drives the application of the labour: to varying degrees of success.
Putting back in what has been taken out
Having “established” (sic) the labour theory of value in Section One, Marx then spends much of the consequent sections papering back in crucial elements that the above analysis wrongly leaves out or misleadingly abstracts from.
... useful labour, i.e., productive activity of a definite kind and exercised with a definite aim
Marx keeps putting human valuation back in, thus disguising the profound misrepresentation of how it is intersecting valuations, not equal ones, that drive exchange (and production and distribution for exchange).
But coats and linen, like every other element of material wealth that is not the spontaneous produce of Nature, must invariably owe their existence to a special productive activity, exercised with a definite aim, an activity that appropriates particular nature-given materials to particular human wants. So far therefore as labour is a creator of use value, is useful labour, it is a necessary condition, independent of all forms of society, for the existence of the human race.
The basic ways of getting hold of something we do not have are to take it, make it or trade for it. It is obviously true that all economic activity is human action. It is not true that all such human action is labour (essentially making things) in the sense Marx wants it to mean. There are all sorts of judgement, organization and search activities required in managing capital, land and labour for production, distribution and exchange. By conflating the full range of human action with his ultimately narrow sense of labour, Marx purports to cover everything while actually excluding a lot of vital, and distinctive, economic activity.
Skilled labour counts only as simple labour intensified, or rather, as multiplied simple labour, a given quantity of skilled being considered equal to a greater quantity of simple labour. Experience shows that this reduction is constantly being made. A commodity may be the product of the most skilled labour, but its value, by equating it to the product of simple unskilled labour, represents a definite quantity of the latter labour alone. The different proportions in which different sorts of labour are reduced to unskilled labour as their standard, are established by a social process that goes on behind the backs of the producers, and, consequently, appear to be fixed by custom. For simplicity’s sake we shall henceforth account every kind of labour to be unskilled, simple labour; by this we do no more than save ourselves the trouble of making the reduction.
A case of “let’s pretend” we can call it all one thing when actually we cannot. Skills are not merely embodied labour, as anyone who has tried to teach such skills knows. Some people get a skill easily, others with much greater difficulty. The skill is a thing itself, not a congealing of something else.
Tailoring and weaving are necessary factors in the creation of the use values, coat and linen, precisely because these two kinds of labour are of different qualities; but only in so far as abstraction is made from their special qualities, only in so far as both possess the same quality of being human labour, do tailoring and weaving form the substance of the values of the same articles.
Another laboured contortion to make Marx’s wrongheaded equalisation work.
If, however, we bear in mind that the value of commodities has a purely social reality, and that they acquire this reality only in so far as they are expressions or embodiments of one identical social substance, viz., human labour, it follows as a matter of course, that value can only manifest itself in the social relation of commodity to commodity. In fact we started from exchange value, or the exchange relation of commodities, in order to get at the value that lies hidden behind it.
This sociological gnosticism is simply pointless. There is no “value that lies hidden behind it”. There is control, scarcity and willingness to trade: and the variations in all of them that drive economic life.
Human labour power in motion, or human labour, creates value, but is not itself value. It becomes value only in its congealed state, when embodied in the form of some object. In order to express the value of the linen as a congelation of human labour, that value must be expressed as having objective existence, as being a something materially different from the linen itself, and yet a something common to the linen and all other commodities.
Again, this idea of some underlying equality existing in value is simply profoundly mistaken, as we have seen.
The elementary form of value of a commodity is contained in the equation, expressing its value relation to another commodity of a different kind, or in its exchange relation to the same. The value of commodity A, is qualitatively expressed, by the fact that commodity B is directly exchangeable with it. Its value is quantitatively expressed by the fact, that a definite quantity of B is exchangeable with a definite quantity of A. In other words, the value of a commodity obtains independent and definite expression, by taking the form of exchange value.
Marx again talks of a commodity having a single value, which it does not, and value as resting in equality, which it does not. Again and again, the variance of commercial life, its real driver, is abstracted out of existence at crucial points in his analysis. Particularly noticeable is how Marx goes on an on about commodities in a way which takes the human element out precisely because of his empty obsession with a non-existent equality.
Our analysis has shown, that the form or expression of the value of a commodity originates in the nature of value, and not that value and its magnitude originate in the mode of their expression as exchange value.
Yes, exchange value does come from what lies behind it: but Marx’s analysis does not capture that.
The linen, by virtue of the form of its value, now stands in a social relation, no longer with only one other kind of commodity, but with the whole world of commodities. As a commodity, it is a citizen of that world. At the same time, the interminable series of value equations implies, that as regards the value of a commodity, it is a matter of indifference under what particular form, or kind, of use value it appears.
One of the most striking things about Marx’s analysis of commodities is how much he takes the human element out. As in this passage, Marx “fetishises” commodities far more than people actually engaged in commercial life generally do.
A commodity appears, at first sight, a very trivial thing, and easily understood. Its analysis shows that it is, in reality, a very queer thing, abounding in metaphysical subtleties and theological niceties.
Clearly one of the great and enduring appeals of Marx’s analysis is the sense of having a hidden insight into the nature of things not given to lesser mortals. One, even better, that encourages both a sense of moral outrage and profound sense of moral animus. The latter is exactly the same set of sentiments that, for example, televangelists play on when they are denouncing the “enemies of God”.
… it is different with commodities. There, the existence of the things quâ commodities, and the value relation between the products of labour which stamps them as commodities, have absolutely no connection with their physical properties and with the material relations arising therefrom. There it is a definite social relation between men, that assumes, in their eyes, the fantastic form of a relation between things.
More sociological gnosticism, the sense of “hidden understanding”. Folk in business (that is, actually involved in making and selling things) usually understand perfectly well that it is all about people and what they want. Rather more than Marx does.
Having abstracted away from the underlying human realities in a way which is quite false and misleading, Marx then recasts them in congenial (to him) way. A way, moreover, that-having left out all sorts of inconvenient elements-can then reconstrue perfectly reasonable commercial behaviour in the most malign way precisely because key elements to put it in its full context have been taken out.
As a general rule, articles of utility become commodities, only because they are products of the labour of private individuals or groups of individuals who carry on their work independently of each other.
No, they become commodities (things exchanged) because someone controls them sufficiently, they are sufficiently scarce that such control matters and there is intersecting expression of wants. And that is true whether they were picked out of nature or laboriously constructed.
The determination of the magnitude of value by labour time is therefore a secret, hidden under the apparent fluctuations in the relative values of commodities. Its discovery, while removing all appearance of mere accidentality from the determination of the magnitude of the values of products, yet in no way alters the mode in which that determination takes place.
More sociological gnosticism along with Marx’s habit of putting things back in (variation in exchange value) after having erroneously analysed economic activity by taking such a central feature out.
Attributes and shifting values
Marx notes that Every useful thing is an assemblage of many properties. So commodities are also assemblages of … properties. Yet his analysis assumes commodities (however varied) are single things. This is unfortunate, given that people often trade in attributes, as Yoram Barzel also points out. For example, the attribute of a house “likely to catch fire” is one of negative value that one pays an insurance company to take on in an insurance contract: contracts with very specific constraints so as to restrain the behaviour of both parties. An analysis of any such transaction, of what is bought and sold-dominated as it is in its structure by risks and incentives: particularly in apportioning risk according to who controls what-in terms of some embodied “labour value” would hardly be sensible.
The bursting of various housing bubbles are an excellent example of the subjective nature of value. Houses were presumed to have ever-increasing value since people could control them, land-rationing by officials constricted supply (so the scarcity of urban houses continually undershot demand) and people were willing to pay those prices to own houses, partly in expectation of ever-increasing value. Control, scarcity, expressed want: hence lots of (apparently ever-increasing) exchange value. As soon as, however, people started not being able to afford their repayments in substantial numbers, those projections of ever-increasing value proved erroneous and prices tumbled-for the points of intersection shifted.
Similarly with financial derivatives based on those land-rationed asset bubbles: they had value based on what was believed about the derivatives’ risk levels. As soon as it became clear those risk levels had been badly underestimated, their value tumbled. Again, the points of intersection shifted. Economic value is not a quality of the natural world or of the social world, it is a projection within the social world and so subject to dramatic sudden shifts as people change their projections.
Marx views commodities as depositories of value, but they are only so because someone values them: it is precisely variation in such valuations which drive exchange. Hence it is better to think of them as depositories of expected value, expectations that could prove to be vindicated or not: and be true one day and false the next. In his standard “take it out, put it back in” way, Marx admits value is a social reality but then attempts to reduce it to a continuing substance based on spurious equality.
So, as we can see, Marx’s labour theory of value rests on profound misrepresentation of exchange (and economic activity generally).
if (2) it is sufficiently scarce for such control to matter, and
if (3) it is something people want and are willing to offer something for that we want,
then we can trade-to engage in exchange (either implicitly or explicitly).
So the difference between something we simply use (such as the air we breathe) and something we also trade is controlling something sufficiently scarce that such control matters and having someone else wanting it such that they are willing to trade something they have (and we want) for it. Once trade starts occurring, there can begin to be trade in things that are wanted for their trade value. (Such as money: which can be controlled, is sufficiently scarce for such control to matter, people are willing to exchange for it and we can use it to exchange for what we want.)
So exchange is a matter of control, scarcity and expressed want. All three can vary from place to place, over time and from person to person: such variance is central to patterns of trade. In particular, things tend to move from where they are less scarce to where they are more scarce: that is, to where their exchange value is greater. (The exchange value of something being simply whatever you can get for it.)
Armed with this understanding, we can see just how bad is the reasoning by which Marx allegedly “establishes” the labour theory of value.
(All quotes are from Chapter One of Capital.)
The utility of a thing makes it a use value. But this utility is not a thing of air. Being limited by the physical properties of the commodity, it has no existence apart from that commodity.
Utility is utility to someone. The utility comes from its connection to their purposes. So, the utility of a thing does have existence apart from that commodity, it exists in the relation of the thing to the purposes of anyone who has a use for it. The key elements in Marx’s analysis miss this crucial point, no matter that he later tries to paper human valuation back in to his analysis.
… must, as exchange values, be replaceable by each other, or equal to each other. Therefore, first: the valid exchange values of a given commodity express something equal; secondly, exchange value, generally, is only the mode of expression, the phenomenal form, of something contained in it, yet distinguishable from it.
Variation in exchange value (between people, across time and space) is precisely what drives trade in the first place. Each person trades what they value less for what they value more: the exchange value is a point of intersection. There can be no trade without such variation. Indeed, much of commerce is finding people who put a intersecting valuation on things you want to exchange: hence gains from trade. If there was genuine indifference by both parties to each item (i.e. they both valued them equally), the exchange would not be worth the bother. Indeed, trade began operating across vast differences comparatively early in human history precisely because things increase in exchange value the more scarce they are-hence trade items moving from places of less scarcity to places of more, in a long chain of shifting intersections of different valuations. Marx’s finding of some “common quality” creating some equality in exchange does not define the nature of exchange, it abolishes its underlying reality and driver.
This is perhaps the most dramatic, and damaging, instance of Marx’s habit of abstracting away from reality in ways that disguise (rather than reveal) the underlying economic (indeed human) realities.
If then we leave out of consideration the use value of commodities, they have only one common property left, that of being products of labour.
Simply not true. Commodities also have the qualities of being made of materials (what economists call land) and by tools (what economists call capital): labour on its own produces little or nothing. And to be used [exchanged], such things have to be controlled by someone. All production involves economic property rights ( in Barzel’s sense): the question is what is the most productive form of such control.
Indeed, since land, labour and capital can be controlled, have sufficient scarcity that such matters and people will exchange things for them, instances of land, labour and capital each have exchange value. The average levels of such exchange values depend on their relative scarcity [plus some economies of scale and scope effects]. In capital-scarce societies, the land/labour ratio dominates the exchange value (average wages) of labour. As population increases, average wages fall: as population falls, average wages rise. In capital-plentiful societies, the capital/labour ratio dominates average wages. So, in contemporary economies, average wages are determined by the amount of capital backing them (including the efficiency of its use).
Not even the exchange-value of labour is determined by its labour content. (Marx, of course, explains this little difficulty away via his theory of exploitation and surplus value.)
Since denying the productive importance of land and capital would be too silly for words, Marx does puts them “back in” to his analysis later in Chapter One. This analytical sleight-of-hand does not, however, rescue the above crucial premise from its falsity.
Commodities, therefore, in which equal quantities of labour are embodied, or which can be produced in the same time, have the same value. The value of one commodity is to the value of any other, as the labour time necessary for the production of the one is to that necessary for the production of the other. “As values, all commodities are only definite masses of congealed labour time.”
Flatly not true. Which is why one got, for example, the Silk Road. It was the knowledge that silk had greater scarcity value the further West one travelled, and goods it was traded for more the further East one travelled, that drove the trade: trade goods had to be small and durable enough to travel. Labour-in-transport was a response to geography [and no guarantee--even leaving aside the risks in transit--since scarcities could shift].
Diamonds are of very rare occurrence on the earth’s surface, and hence their discovery costs, on an average, a great deal of labour time. Consequently much labour is represented in a small compass.
This attempt to reduce scarcity to labour time is just sad: not least because-at least prior to modern transportation and communication technology-diamonds, gold and silver’s scarcity value varied markedly according to their local scarcity. Scarcity does make diamonds worth controlling: but so does their smallness, lightness, brilliance, hardness, etc. That is, their utility as trade goods and thus stores of value. All these things make them worth the effort in a way that something equally scarce and equally hard to find but which had no attributes people wanted (or wanted sufficiently) would not be. Control, scarcity and willingness to trade are all necessary for exchange value.
One of the fundamental drivers of the world economy from about 1530 to about 1830 was that gold (and especially silver) were much less scarce in the Americas than they were in Europe and much less scarce in Europe than they were in Asia relative to goods and were used (particularly silver) as a medium of exchange in all three economic regions: hence the flow of bullion into China (until first opium and then industrial mass production gave Europe competitive goods to sell) in return for silk and other luxury goods. Silver was not a medium of exchange in Africa, hence the “triangular trade” of European goods to Africa, slaves to the Americas, silver, sugar, cotton, etc to Europe. Trying to tack some “labour time” story onto such patterns is not only an utterly unnecessary complication, it actively sabotages understanding.
Therefore, the common substance that manifests itself in the exchange value of commodities, whenever they are exchanged, is their value.
As should now be clear, there is no such common substance. Indeed, it is a profound misreading of exchange to think that there is.
With all these false premises, Marx’s main conclusion simply does not follow:
A use value, or useful article, therefore, has value only because human labour in the abstract has been embodied or materialised in it. How, then, is the magnitude of this value to be measured? Plainly, by the quantity of the value-creating substance, the labour, contained in the article.
Exchange value is a social construct driven by the expressed preferences of individuals over controlled items of sufficient scarcity. Any general price is a series of points of intersection of variations in control, scarcity and expressed preference. As circumstances change, so do those points of intersection. Even the “Walrasian auctioneer” of perfectly competitive markets with perfect information is a point of intersection. In most actual markets, there is not even such a single point as there is not a single price.
Neither does Marx’s attempt to abstract from the heterogeneous nature of actually existing labour to create some general “labour unit” work.
We see then that that which determines the magnitude of the value of any article is the amount of labour socially necessary, or the labour time socially necessary for its production.
Clearly, we see that this is precisely not the case. Moreover, the extent of variations in exchange values go beyond even the variations in labour.
Lastly nothing can have value, without being an object of utility. If the thing is useless, so is the labour contained in it; the labour does not count as labour, and therefore creates no value.
This is an admission that value is not embodied or congealed labour (or, as Marx has it, the [abstract] labour time socially necessary for its production). If labour can produce things without value, or of varying value between different workers (or between different times with the same worker), then the value does not reside in the labour. On the contrary, the expected value drives the application of the labour: to varying degrees of success.
Putting back in what has been taken out
Having “established” (sic) the labour theory of value in Section One, Marx then spends much of the consequent sections papering back in crucial elements that the above analysis wrongly leaves out or misleadingly abstracts from.
... useful labour, i.e., productive activity of a definite kind and exercised with a definite aim
Marx keeps putting human valuation back in, thus disguising the profound misrepresentation of how it is intersecting valuations, not equal ones, that drive exchange (and production and distribution for exchange).
But coats and linen, like every other element of material wealth that is not the spontaneous produce of Nature, must invariably owe their existence to a special productive activity, exercised with a definite aim, an activity that appropriates particular nature-given materials to particular human wants. So far therefore as labour is a creator of use value, is useful labour, it is a necessary condition, independent of all forms of society, for the existence of the human race.
The basic ways of getting hold of something we do not have are to take it, make it or trade for it. It is obviously true that all economic activity is human action. It is not true that all such human action is labour (essentially making things) in the sense Marx wants it to mean. There are all sorts of judgement, organization and search activities required in managing capital, land and labour for production, distribution and exchange. By conflating the full range of human action with his ultimately narrow sense of labour, Marx purports to cover everything while actually excluding a lot of vital, and distinctive, economic activity.
Skilled labour counts only as simple labour intensified, or rather, as multiplied simple labour, a given quantity of skilled being considered equal to a greater quantity of simple labour. Experience shows that this reduction is constantly being made. A commodity may be the product of the most skilled labour, but its value, by equating it to the product of simple unskilled labour, represents a definite quantity of the latter labour alone. The different proportions in which different sorts of labour are reduced to unskilled labour as their standard, are established by a social process that goes on behind the backs of the producers, and, consequently, appear to be fixed by custom. For simplicity’s sake we shall henceforth account every kind of labour to be unskilled, simple labour; by this we do no more than save ourselves the trouble of making the reduction.
A case of “let’s pretend” we can call it all one thing when actually we cannot. Skills are not merely embodied labour, as anyone who has tried to teach such skills knows. Some people get a skill easily, others with much greater difficulty. The skill is a thing itself, not a congealing of something else.
Tailoring and weaving are necessary factors in the creation of the use values, coat and linen, precisely because these two kinds of labour are of different qualities; but only in so far as abstraction is made from their special qualities, only in so far as both possess the same quality of being human labour, do tailoring and weaving form the substance of the values of the same articles.
Another laboured contortion to make Marx’s wrongheaded equalisation work.
If, however, we bear in mind that the value of commodities has a purely social reality, and that they acquire this reality only in so far as they are expressions or embodiments of one identical social substance, viz., human labour, it follows as a matter of course, that value can only manifest itself in the social relation of commodity to commodity. In fact we started from exchange value, or the exchange relation of commodities, in order to get at the value that lies hidden behind it.
This sociological gnosticism is simply pointless. There is no “value that lies hidden behind it”. There is control, scarcity and willingness to trade: and the variations in all of them that drive economic life.
Human labour power in motion, or human labour, creates value, but is not itself value. It becomes value only in its congealed state, when embodied in the form of some object. In order to express the value of the linen as a congelation of human labour, that value must be expressed as having objective existence, as being a something materially different from the linen itself, and yet a something common to the linen and all other commodities.
Again, this idea of some underlying equality existing in value is simply profoundly mistaken, as we have seen.
The elementary form of value of a commodity is contained in the equation, expressing its value relation to another commodity of a different kind, or in its exchange relation to the same. The value of commodity A, is qualitatively expressed, by the fact that commodity B is directly exchangeable with it. Its value is quantitatively expressed by the fact, that a definite quantity of B is exchangeable with a definite quantity of A. In other words, the value of a commodity obtains independent and definite expression, by taking the form of exchange value.
Marx again talks of a commodity having a single value, which it does not, and value as resting in equality, which it does not. Again and again, the variance of commercial life, its real driver, is abstracted out of existence at crucial points in his analysis. Particularly noticeable is how Marx goes on an on about commodities in a way which takes the human element out precisely because of his empty obsession with a non-existent equality.
Our analysis has shown, that the form or expression of the value of a commodity originates in the nature of value, and not that value and its magnitude originate in the mode of their expression as exchange value.
Yes, exchange value does come from what lies behind it: but Marx’s analysis does not capture that.
The linen, by virtue of the form of its value, now stands in a social relation, no longer with only one other kind of commodity, but with the whole world of commodities. As a commodity, it is a citizen of that world. At the same time, the interminable series of value equations implies, that as regards the value of a commodity, it is a matter of indifference under what particular form, or kind, of use value it appears.
One of the most striking things about Marx’s analysis of commodities is how much he takes the human element out. As in this passage, Marx “fetishises” commodities far more than people actually engaged in commercial life generally do.
A commodity appears, at first sight, a very trivial thing, and easily understood. Its analysis shows that it is, in reality, a very queer thing, abounding in metaphysical subtleties and theological niceties.
Clearly one of the great and enduring appeals of Marx’s analysis is the sense of having a hidden insight into the nature of things not given to lesser mortals. One, even better, that encourages both a sense of moral outrage and profound sense of moral animus. The latter is exactly the same set of sentiments that, for example, televangelists play on when they are denouncing the “enemies of God”.
… it is different with commodities. There, the existence of the things quâ commodities, and the value relation between the products of labour which stamps them as commodities, have absolutely no connection with their physical properties and with the material relations arising therefrom. There it is a definite social relation between men, that assumes, in their eyes, the fantastic form of a relation between things.
More sociological gnosticism, the sense of “hidden understanding”. Folk in business (that is, actually involved in making and selling things) usually understand perfectly well that it is all about people and what they want. Rather more than Marx does.
Having abstracted away from the underlying human realities in a way which is quite false and misleading, Marx then recasts them in congenial (to him) way. A way, moreover, that-having left out all sorts of inconvenient elements-can then reconstrue perfectly reasonable commercial behaviour in the most malign way precisely because key elements to put it in its full context have been taken out.
As a general rule, articles of utility become commodities, only because they are products of the labour of private individuals or groups of individuals who carry on their work independently of each other.
No, they become commodities (things exchanged) because someone controls them sufficiently, they are sufficiently scarce that such control matters and there is intersecting expression of wants. And that is true whether they were picked out of nature or laboriously constructed.
The determination of the magnitude of value by labour time is therefore a secret, hidden under the apparent fluctuations in the relative values of commodities. Its discovery, while removing all appearance of mere accidentality from the determination of the magnitude of the values of products, yet in no way alters the mode in which that determination takes place.
More sociological gnosticism along with Marx’s habit of putting things back in (variation in exchange value) after having erroneously analysed economic activity by taking such a central feature out.
Attributes and shifting values
Marx notes that Every useful thing is an assemblage of many properties. So commodities are also assemblages of … properties. Yet his analysis assumes commodities (however varied) are single things. This is unfortunate, given that people often trade in attributes, as Yoram Barzel also points out. For example, the attribute of a house “likely to catch fire” is one of negative value that one pays an insurance company to take on in an insurance contract: contracts with very specific constraints so as to restrain the behaviour of both parties. An analysis of any such transaction, of what is bought and sold-dominated as it is in its structure by risks and incentives: particularly in apportioning risk according to who controls what-in terms of some embodied “labour value” would hardly be sensible.
The bursting of various housing bubbles are an excellent example of the subjective nature of value. Houses were presumed to have ever-increasing value since people could control them, land-rationing by officials constricted supply (so the scarcity of urban houses continually undershot demand) and people were willing to pay those prices to own houses, partly in expectation of ever-increasing value. Control, scarcity, expressed want: hence lots of (apparently ever-increasing) exchange value. As soon as, however, people started not being able to afford their repayments in substantial numbers, those projections of ever-increasing value proved erroneous and prices tumbled-for the points of intersection shifted.
Similarly with financial derivatives based on those land-rationed asset bubbles: they had value based on what was believed about the derivatives’ risk levels. As soon as it became clear those risk levels had been badly underestimated, their value tumbled. Again, the points of intersection shifted. Economic value is not a quality of the natural world or of the social world, it is a projection within the social world and so subject to dramatic sudden shifts as people change their projections.
Marx views commodities as depositories of value, but they are only so because someone values them: it is precisely variation in such valuations which drive exchange. Hence it is better to think of them as depositories of expected value, expectations that could prove to be vindicated or not: and be true one day and false the next. In his standard “take it out, put it back in” way, Marx admits value is a social reality but then attempts to reduce it to a continuing substance based on spurious equality.
So, as we can see, Marx’s labour theory of value rests on profound misrepresentation of exchange (and economic activity generally).