What is value?

[blackwave]

How does one judge the value of any commodity? I know that according to the 'labour theory of value' one judges the value of something by the labour required to produce it, but how does one measure this? Is it to be measured by hours of labour, complexity of labour, bit of both, or what? So, hypothetically, if a unit of a particular product took 10 minutes to produce, and it was decided that 1 dollar represented 10 minutes of labour, then would that unit be worth 1 dollar?

[Zanthorus]

How does one judge the value of any commodity?

You don't since the law of value works behind the backs of the producers and is not dependent on their own individual subjective judgements or on the aggregate or average of these judgements. If we could judge the value of a commodity in advance then that would mean that the capitalism is actually a planned economy. In fact for individual judgements to be relevant to value capitalism would have to be socialism!

What happens is that when you take the product of your specific labour as a watchmaker say onto the capitalist marketplace and mark it up with a price you instantly put the product of your own specific labour in a relation with the product of the specific labour of others. This specific labour is represented by money as merely abstract social labour. But this process can't be fulfilled without putting your product in relation to other people's products on the marketplace and making it an equivalent. It can't be worked out or planned in advance. It is worked out in the marketplace.

[blackwave]

I can't say I understand that. So try and put it in a simple terms for me... the price of a commodity is dictated by what?

[Zanthorus]

the price of a commodity is dictated by what?

Socially necessary abstract labour time.

[mikelepore]

How does one judge the value of any commodity? I know that according to the 'labour theory of value' one judges the value of something by the labour required to produce it, but how does one measure this? Is it to be measured by hours of labour, complexity of labour, bit of both, or what?

Time is used because an assumption of the theory is that averaging makes it useful to speak of labor as being a homogeneous rate.

Copied from Marx, _Capital_, chapter 13:

"The labour realised in value, is labour of an average social quality; is consequently the expenditure of average labour-power. Any average magnitude, however, is merely the average of a number of separate magnitudes all of one kind, but differing as to quantity. In every industry, each individual labourer, be he Peter or Paul, differs from the average labourer. These individual differences, or 'errors' as they are called in mathematics, compensate one another, and vanish, whenever a certain minimum number of workmen are employed together. The celebrated sophist and sycophant, Edmund Burke, goes so far as to make the following assertion, based on his practical observations as a farmer; viz., that 'in so small a platoon' as that of five farm labourers, all individual differences in the labour vanish, and that consequently any given five adult farm labourers taken together, will in the same time do as much work as any other five. But, however that may be, it is clear, that the collective working-day of a large number of workmen simultaneously employed, divided by the number of these workmen, gives one day of average social labour."


So, hypothetically, if a unit of a particular product took 10 minutes to produce, and it was decided that 1 dollar represented 10 minutes of labour, then would that unit be worth 1 dollar?

To use the dollar as in your statement is the way a society translates value into a money form, but something more basic comes before that. It's the ratio of two different quantity measurements of two different commodities; for example, the same labor time is socially necessary for three barrels of crude oil and fifty bushel baskets of wheat. Value gets its meaning from such comparisons between the industrial output rates of two or more commodities. To speak of the value of any one commodity is a brief way of speaking of that set of relativities that it has with other commodities.

[BAM]

Socially necessary abstract labour time.

that's a tautology. You don't need to say "socially necessary abstract labour time", "socially necessary labour time" is sufficient.

[ZeroNowhere]

I had gone into value here (http://www.revleft.com/vb/showpost.php?p=1749966&postcount=7). However, my account there may not clarify things for you, as it is fairly similar to that used in Capital, and I would presume that you had read at least the first chapter before asking about it here.

[blackwave]

Hmm, I'm still a little confused (let's be honest, it's a confusing issue). Was my opening post ultimately explaining how it would work in a planned economy, whereas under a market system value is to an extent dictated by competition and demand?
One thing I don't understand is how 'use-value' is relevant, nor how it differs from labour-value. Does something have more use-value if it is more wanted? How would that effect price?
Perhaps it would not be too complicated for someone to explain what factors dictate value now, and what would dictate them under socialism.

[ZeroNowhere]

In that case, perhaps you should try the first chapter of Capital.

Suffice it to say that value would not exist under socialism, and a 'use-value' is "something useful", which a commodity must be as well as having a value. I believe that I had also addressed this in the link above, so it would not be of much value to repeat it.

[mikelepore]

Hmm, I'm still a little confused (let's be honest, it's a confusing issue). Was my opening post ultimately explaining how it would work in a planned economy,

How we think things should be done in the planned economy of the future is a topic that many of us here are constantly arguing about, so I would be lying to you if I were to answer you about it as though there is one right answer.

As for the subject of capitalism's exchange value, that's something that everyone in the Marxian tradition has studied a certain theory about.


whereas under a market system value is to an extent dictated by competition and demand?

If you want to be consistent with Marxian terminology, be careful not to confuse value with price.

The price of a commodity is a rapidly wiggly trend. The price responds to numerous signals in society that may change every day.

The value of a commodity changes more gradually, because it only changes due to historical revisions in the production methods, such as automation in the production of computer memory causing it to become cheaper relative to other things.

The price is an expression of the value with a lot of daily random noise superimposed on top of it. It's like asking where you are standing now? I'm right here. That point is like a value. But where are you standing if you're in the middle of a hurricane? Right here, sort of, plus a lot of random fluctuations. That's like a price.


One thing I don't understand is how 'use-value' is relevant, nor how it differs from labour-value. Does something have more use-value if it is more wanted? How would that effect price?

There is no meaning to saying "more" use value. Use value isn't a relative quantity, it a yes-or-no test. To have use value means that the article is confirmed to be the kind of thing that people have established a market for, and people will follow some procedures to conduct trade in it, unlike such things as air or garbage which are not commodities in any markets. Does corn has some use to someone that has resulted in the existence of a marketplace for it? Yes; in other words, it has use value. Given that, the article has passed one of several tests for being the kind of article that is suitable for applying an economic theory to it. That's all the use value means in Marx's theory.


Perhaps it would not be too complicated for someone to explain what factors dictate value now,

The value of a commodity is a more stable level. The rapidly fluctuating price generally moves above and below the value.

The value is determined by the amount of labor required in all of the steps to produce the product by the methods and the kinds of tools that are typical in that society. Society's methods require more labor to make this car than that pencil, and that explains why there is more exchange value in this car than in that pencil.

But on top of that contrast in the values of various articles, there is an unpredictable price trend based on fads, fashions, moods, the daily news, etc. If there is a flood, stores raise the prices of dry blankets. The conditions for production haven't changed, only a temporary and random variable.


and what would dictate them under socialism

As for the workings of socialism, you will have to make up your own mind about what you want to happen in the future, because the future hasn't happened yet. Everyone who gives any answer about "how socialism would work" is giving you their personal preference about what they would like the future system to be, including myself, although each of us usually pretends that there is a definite answer. You can't trust our word.

[mikelepore]

that's a tautology. You don't need to say "socially necessary abstract labour time", "socially necessary labour time" is sufficient.

I don't see a tautology there.

To be "social necessary" means that we're talking about the historical situation -- in this century, these are the best tools and methods that have been invented.

To be "abstract" means that labor time is being treated as a homogeneous rate, unlike the critic who like to harp on the thought that "one of my hours of labor is more productive than one of yours", "sometimes a worker is given no work to do and gets told to wait around", etc.

[BAM]

I don't see a tautology there.

To be "social necessary" means that we're talking about the historical situation -- in this century, these are the best tools and methods that have been invented.

To be "abstract" means that labor time is being treated as a homogeneous rate, unlike the critic who like to harp on the thought that "one of my hours of labor is more productive than one of yours", "sometimes a worker is given no work to do and gets told to wait around", etc.

No, it's simpler than that: because when we talk of socially necessary labour time, we're also/already talking about labour in the abstract. To say "socially necessary abstract labour-time" is basically the same as saying "socially necessary socially necessary labour-time".

[mikelepore]

"Neither can it any longer be regarded as the product of the labour of the joiner, the mason, the spinner, or of any other definite kind of productive labour. Along with the useful qualities of the products themselves, we put out of sight both the useful character of the various kinds of labour embodied in them, and the concrete forms of that labour; there is nothing left but what is common to them all; all are reduced to one and the same sort of labour, human labour in the abstract." -- Marx, Capital, chapter 1

"In other words, we abstract labour from its concrete reality, and we strike an average. We lump together the labour of the carpenter, tailor, toolmaker, tanner, etc., into homogenous social labour in the abstract." -- John Keracher, Economics for Beginners, 1935

[S.Artesian]

"Neither can it any longer be regarded as the product of the labour of the joiner, the mason, the spinner, or of any other definite kind of productive labour. Along with the useful qualities of the products themselves, we put out of sight both the useful character of the various kinds of labour embodied in them, and the concrete forms of that labour; there is nothing left but what is common to them all; all are reduced to one and the same sort of labour, human labour in the abstract." -- Marx, Capital, chapter 1

"In other words, we abstract labour from its concrete reality, and we strike an average. We lump together the labour of the carpenter, tailor, toolmaker, tanner, etc., into homogenous social labour in the abstract." -- John Keracher, Economics for Beginners, 1935

Yes, but socially necessary is already abstract; is derived from the abstraction of labor into general social labor.

I think what BAM is getting at also means we don't lump together that particular labor, we reduce those particular labors to what all particular labors have in common in their social expression, which is time.

So talking about socially necessary abstract labor, since the social root for evaluation of necessary is time, and since abstract labor is the social organization of labor time, is a triple redundancy.

Socially necessary labor time cannot exist without being an abstraction. Abstract labor time cannot exist without being social. It simply gets too jumbled up, and implies a false distinction between the two if you string them together.

This isn't semantics, it's an attempt to not introduce an implied distinction or differentiation where there is none.

[mikelepore]

There is overlap, but it's not a tautology. A tautology is to say the identical thing by definition, perfect equivalence. Here different emphasis is being made.

The term "socially necessary" emphasizes the point that the modern tools and skills are used, so that any use of methods that are now obsolete will fail to add the amount of value to the product that corresponds to the labor time. "The labour-time socially necessary is that required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time." (Marx in chapter 1) Marx goes on to explain his meaning by giving the example of a person who made cloth with a hand loom after the power loom had already been invented. Due to the use of an outdated method, the person was unable to recuperate the applied labor in the value of the product.

However, the term "abstract" is used to emphasize that there is no distinction between one worker and another worker. "We put out of sight ... the various kinds of labor, the concrete forms ... reduced to one and the same sort of labor."

[S.Artesian]

There is overlap, but it's not a tautology. A tautology is to say the identical thing by definition, perfect equivalence. Here different emphasis is being made.

The term "socially necessary" emphasizes the point that the modern tools and skills are used, so that any use of methods that are now obsolete will fail to add the amount of value to the product that corresponds to the labor time. "The labour-time socially necessary is that required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time." (Marx in chapter 1) Marx goes on to explain his meaning by giving the example of a person who made cloth with a hand loom after the power loom had already been invented. Due to the use of an outdated method, the person was unable to recuperate the applied labor in the value of the product.

However, the term "abstract" is used to emphasize that there is no distinction between one worker and another worker. "We put out of sight ... the various kinds of labor, the concrete forms ... reduced to one and the same sort of labor."


Not to belabor [!]this, but abstract and social labor are exactly the same thing. The "necessary" is the variable, dependent upon the overall development of the means of production. Abstract and social are constants, qualities of the organization labor. You cannot get socially necessary labor without labor already being organized, exchanged, as an abstraction, as a capacity, a power.

But that's the last I want to say on this part of the issue.

[blackwave]

Uuh. So what is the point of the concept of use-value if nothing is said to have 'greater' use value than anything else? Can it be ignored?

So, is the word 'value' being used in a particular way to describe something objective, that is to say, something inherent in any commodity, as an aggregate of the labour required to create it? But price is not purely objective, having subjective factors added on, such as demand, additions for the sake of profit, and so on, and hence the price of a commodity is not necessarily the same as its value?

But if the term 'value' is being used in that way, then I don't understand the notions of 'exchange-value' and 'surplus-value' - or am I just identifying why Marx rubbishes these.

[S.Artesian]

Uuh. So what is the point of the concept of use-value if nothing is said to have 'greater' use value than anything else? Can it be ignored?

So, is the word 'value' being used in a particular way to describe something objective, that is to say, something inherent in any commodity, as an aggregate of the labour required to create it? But price is not purely objective, having subjective factors added on, such as demand, additions for the sake of profit, and so on, and hence the price of a commodity is not necessarily the same as its value?

But if the term 'value' is being used in that way, then I don't understand the notions of 'exchange-value' and 'surplus-value' - or am I just identifying why Marx rubbishes these.


Use values are different, subjective, and cannot be exchanged on an equivalent basis as determined by their use. Hence widespread exchange, the world market, is a fundamental condition for capitalist exchange.

Marx uses the example [among others] of yards of linen and coats-- what makes 5 yards of linen = 1 coat? The use value of the linen? The use value of the coat? The use value of each is independent of its exchange with the other as coats can be made out of anything and linen can be made into anything else.

But usefulness of the coat and the linen exists. The can be exchanged for each other, on a wide scale, and exchanged for all other use values to the degree that they share a common medium, mediation, of their use value, which is labor time-- exchange value. Exchange value is embedded in the commodity through production, and in turn, use-value is transported throughout the circuits of capitalism by exchange value.

A locomotive is a locomotive; it is capital only when its production and reproduction is based on the valorisation, on the accruing of value in the production process.

Another example:

A railroad crew consisting of 1 driver and 1 conductor move 100 cars containing 100 tons each of coal 300 miles in 10 hours. The coal, and moving the coal is use-value.

Another crew made up of 1 driver 1 conductor and 1 assistant take the same 100 cars 40 miles, place 50 loaded cars inside a power plant; make up a second train of 50 empty cars released from the power plant and bring those 50 empty cars back, 40 miles to the freight yard.

How do we reconcile those use values? Which crew does the more useful work? How do we exchange, mediate, those use-values through utility alone? We don't. We do that through labor time. Capitalism does it through expropriation of surplus value, surplus labor time.


Socialism, in that period of transition to communism, might do it through simple vouchers for labor time as Marx suggested in Critique of the Gotha Program

[mikelepore]

Uuh. So what is the point of the concept of use-value if nothing is said to have 'greater' use value than anything else? Can it be ignored?

The reason for mentioning use value is because the critics of the theory keep thinking they are onto something profound when they point out that labor time wasted on something that isn't a commodity wouldn't add anything to value. We had someone here in April who thought that he had demolished Marx's theory of value when he noticed that he might waste his time making mud pies but then his product wouldn't have value. Answering that objection in advance, Marx pointed out that labor time expended wouldn't result in value if the article isn't a commodity.


So, is the word 'value' being used in a particular way to describe something objective, that is to say, something inherent in any commodity, as an aggregate of the labour required to create it?

I guess that's okay, although personally I would say "inherent in the commodity's manufacturing process" rather than say "inherent in the commodity."


But price is not purely objective, having subjective factors added on, such as demand, additions for the sake of profit, and so on,

The price IS objective, because the meaning of the word "objective" is that something is an undeniable reality, it's not a state of mind or a matter of taste. However, subjective factors CAUSE the price. No problem there -- many physical facts are like that. The present location of my car is an objective fact, but my mental state has caused it.



and hence the price of a commodity is not necessarily the same as its value?

That's true.

I copied a few related paragraphs from the literature in this other topic:
http://www.revleft.com/vb/showpost.php?p=1729982&postcount=63

For generic commodities that are in continuous production, I think it's helpful to visualize the value as the center line that the price oscillates around, the way an ocean wave oscillates around sea level, or a pendulum oscillates around the center position. There are some important exceptions to that, for example, land is not a product of labor, so it's value is zero, it's price is a permament positive offset from that zero line, and there is no oscillation at all on the negative side.


But if the term 'value' is being used in that way, then I don't understand the notions of 'exchange-value' and 'surplus-value' .

When ever Marx says "value" with no adjective in front of the word, he means the same thing as when he says "exchange value." That's what I discussed above.

Surplus value is Marx's term for that part of the value of the product that exceeds the capitalists investment in labor, materials and tools. The capitalist recovers this amount by selling the product, but then the workers don't receive it in their wages. The employer's profits, the employer's expenses for advertising, lawsuits, etc., the taxes paid by the employer, and the taxes paid by the worker, are all parts of surplus value.


or am I just identifying why Marx rubbishes these

I don't understand that last part of your question.

[blackwave]

Right, so price is not equivalent to exchange-value, I understand that.
But is labour-value equivalent to exchange-value? Or is the whole point that it should be, but because the capitalist adds surplus value onto labour value, exchange value is out of whack, so to speak.

Once I've got the jargon deciphered, I'm sure I'll be fine with this.

[mikelepore]

I'm not aware of Marx ever using a term similar to labour-value. He discusses exchange value throughout. He makes the claim that the source that determines the product's exchange value it is "the labour time required for its production." The ratio of exchange IS the value. The labor time is what DETERMINES that value.

[mikelepore]

because the capitalist adds surplus value onto labour value

That wording doesn't quite correspond to Marx. There are two values associated with labor. The lower amount is is value of the "ability" to work or the "capacity" to work, called "labor power", which is what the worker initially owns and sells to the capitalist. The higher amount is the value of labor as performed during production, which the capitalist already owns because it was already purchased from the worker. Therefore the value of labor as a capital investment is called "variable capital" because it undergoes "expansion." Marx says that this expansion is what causes surplus value.

In other words, the labor as a process during production time adds more value to the product than it's own value as a previously purchased resource. Labor is the only commodity that ever does this. All other resources purchased by the capitalist merely transfer their own value to the product, without any expansion in value, therefore all other resources purchased by the capitalist are called "constant capital."


******************

Please see my answer to another writer a few weeks ago about the value added to the product when variable capital expands:

http://www.revleft.com/vb/showpost.php?p=1752196&postcount=2t


******************

Summary of the three things that the capitalist has to invest in, according to Marx's final explanation as developed by the 1870s:

Constant capital, fixed type: These are the tools, machines, buildings - they remain whatever objects they are until they wear out and get scrapped. No value expansion occurs.

Constant capital, circulating type: Thee are the materials, chemicals, fuel - they get used up gradually by quantity. No value expansion occurs.

Variable capital: This is the labor power, and later the labor. An expansion of value occurs when the worker's ability to work becomes the act of performing work.

[syndicat]

The usefulness of something to somebody is always relative. for example, i could use a knife to sharpen a pencil, but i'd rather use a mechanical pencil sharpener because it provides a more even point and is less likely to waste pencil and takes less time to sharpen the point. this is a subjective evaluation of the pencil sharpener by me.

but subjective evaluations of this sort cause buying behavior by people. this is objective. and this is one of the things that shapes prices. of course it isn't just relative preferences that do this because buyer behavior presupposes they have purchasing power. a person who is broke might prefer all kinds of things but this will have no effect on prices.

more generally market power will effect prices. so a company that is a relative monopoly has more power to raise prices than a firm that has no such power.

the labor theory of value can be regarded as a kind of cost of production theory of prices. i think it's misleading to call it a theory of value because value presupposes evaluation, and thus the actual preferences that people have.

[mikelepore]

the labor theory of value can be regarded as a kind of cost of production theory of prices.

Yes, it is. In the pamphlet 'Wage-Labour and Capital' Marx says "cost of production" as his main term. Years later, when he stopped using that term, it was mainly that he had begun to like some new words, but the same concept of cost of production was still there.


i think it's misleading to call it a theory of value because value presupposes evaluation, and thus the actual preferences that people have.

People discussing economics on the internet seem to feel that the word "value" implies preference. More generally a value is a number. The distance from the earth to the moon is some value. The electric charge on the proton is some value.

The same is true of German "wert" that Marx used. For example, Marx said Mehrwert for what we translate as "surplus value." Academic economists in Germany today still say "Merhwert" to mean the thing that economists in America call "added value." In another field, say engineering: the "physische wert" or the physical size of a mechanical part. The 'hex wert", the hexidecimal value of a number stored in a computer.

[S.Artesian]

Yes, it is. In the pamphlet 'Wage-Labour and Capital' Marx says "cost of production" as his main term. Years later, when he stopped using that term, it was mainly that he had begun to like some new words, but the same concept of cost of production was still there.

.


I'm not aware that Marx ever stopped referring to the costs of production. He uses those words in vol 3 of Capital, in Theories of Surplus Value, in the Economic Manuscripts which form the basis for both of those and for further explorations of capital.

[syndicat]

People discussing economics on the internet seem to feel that the word "value" implies preference. More generally a value is a number.

"value" here being used in its mathematical sense. yes, it's a number. but "evaluation" has a different meaning, as this can refer to something that people do. prices can be said to result from buyer/seller evaluations. now, in fact the two meanings can come together. a price is obviously a number. prices are also created through human interactive behaviors, in the context of economic systems where power is highly unequal. positing preferences helps to explain the behaviors.

in neoclassical, AKA bourgeois, economics, there is a tendency to abstract the preferences from the structural context of unequal power. thus they say that prices simply fall out of preferences. preferences play a role but so do structural differences in power, such as the difference in power between capitalist and working classes.

thus someone buying something can reflect the person's highly limited options, not what they would really prefer. but in neoclassical language, this is simply "revealed preference."

[BAM]

the labor theory of value can be regarded as a kind of cost of production theory of prices. i think it's misleading to call it a theory of value because value presupposes evaluation, and thus the actual preferences that people have.

Are we talking about Marx's theory of value? Becuase if so, what you write is not quite correct. First off, a commodity is a use-value and an exchange-value, if it has no use-value it cannot have a value - that is the subjective part. [That's also even on page one of Ricardo's Principles of Political Economy, actually.] So the "evaluation" aspect is already there in the theory and this relates to use-value. You are not going to buy something if it is of no use to you. In this way, we can see that Marx was overcoming the subjective/objective dualism.

For sure, I do feel that it is a drawback that Marx simply puts this aside in his analysis, probably to have come back to it later on in the (unwritten) book on the world market and the realm of consumption, although in Vol II of Capital, for instance, it's clear that capitalist society needs to produce the right use-values in order to reproduce itself and grow.

Neo-classical and Austrian subjective theories of value (STV) are not theories of value in the Marxian sense: they are theories of use-value. Proponents of STV do not even need a theory of value because supply and demand sets prices and that's all. But for Marx, supply and demand as the economists told it don't explain anything as such. He wants to know why when supply and demand are in equilibrium, the price is set at this rather than that level for the commodity in question.

When we get to Vol III Chapter 10, a new dimension of "socially necessary labour" is added. Marx reveals that he was assuming in Vols I and II that the quantity of commodities produced in the given production period corresponded to the level of effective demand for that commodity. If, as in the real world, supply and demand do not coincide, "if this commodity has been produced in excess of the existing social needs, then so much of the social labour-time is squandered and the mass of the commodity comes to represent a much smaller quantity of social labour in the market than is actually incorporated in it." And vice-versa.

So we now see that "socially necessary labour" has two component parts: supply (the amount of labour needed to produce the given quantity of commodities using the best available techniques of production) and demand (the amount of labour needed to satisfy social needs).

We can now say that, following Marx, value is determined by the quantity of labour that society as a whole, via the mechanism of the market, has decided on the basis of all its transactions (ie, agent preferences) to devote to the production and consumption of such-and-such a good.

As Zanthorus wrote at the beginning of this thread:


What happens is that when you take the product of your specific labour as a watchmaker say onto the capitalist marketplace and mark it up with a price you instantly put the product of your own specific labour in a relation with the product of the specific labour of others. This specific labour is represented by money as merely abstract social labour. But this process can't be fulfilled without putting your product in relation to other people's products on the marketplace and making it an equivalent. It can't be worked out or planned in advance. It is worked out in the marketplace.

The exchange of products of labour in the market (and the production process involved with this too) equalises all human labours to labour-in-general (abstract labour) necessarily because all different kinds of commodities are being exchanged. It is a process of "real abstraction" - ie, it actually takes place.