Econ class on value

[A Revolutionary Tool]

Well I knew when I got to economics class I would disagree with most of the bs that was being taught. The whole basis upon what we've been talking about up to now assumes that what is intrinsic in all commodities is that they are useful and that they are scarce. So basically what determines the value of everything is that it has a use and scarcity. How do I respond to this?

[Dean]

Well I knew when I got to economics class I would disagree with most of the bs that was being taught. The whole basis upon what we've been talking about up to now assumes that what is intrinsic in all commodities is that they are useful and that they are scarce. So basically what determines the value of everything is that it has a use and scarcity. How do I respond to this?

I don't think a basic debate on value is worth it in an economics class. It won't have too much consequence to any leftist paradigm short of very specific arguments you probably wont be engaging in there.

I took econ 201 or w/e and I have a whole set of notes critiquing the book and other readings in particular. You'll find that they get their facts wrong a lot because they don't really pay attention to the news, just their own theories and long-standing narratives on them.

Check out naked capitalism (http://www.nakedcapitalism.com/), it has a lot of good posts on macroeconomic issues.

[Dimentio]

Scarcity is only a constant in a world which either has less resources than the population base or has a system called "private property", which entails the right to exclude others from using utilities.

[A Revolutionary Tool]

I don't think a basic debate on value is worth it in an economics class. It won't have too much consequence to any leftist paradigm short of very specific arguments you probably wont be engaging in there.

I took econ 201 or w/e and I have a whole set of notes critiquing the book and other readings in particular. You'll find that they get their facts wrong a lot because they don't really pay attention to the news, just their own theories and long-standing narratives on them.

Check out naked capitalism (http://www.nakedcapitalism.com/), it has a lot of good posts on macroeconomic issues.
Well the basic debate on value is going to have to be made sooner or later. My conversations I've had with people about economics makes more sense now that I consider the bullshit that they teach us in school. If I'm not going to debate it in class ever I will have to debate it later on when I'm talking economics with friends who are conservative or just with people in general.

[ar734]

Well I knew when I got to economics class I would disagree with most of the bs that was being taught. The whole basis upon what we've been talking about up to now assumes that what is intrinsic in all commodities is that they are useful and that they are scarce. So basically what determines the value of everything is that it has a use and scarcity. How do I respond to this?

You might start with asking how does a commodity come to be useful? Commodities are useful because because human labour has been expended in their production. Although it is not true that all useful things are the product of human labor, for instance, natural produce hanging from a tree, like nuts and fruit.

Also, they never ask the question, How does usefulness and scarcity create value? For instance, an IPOD is useful and relatively scare; it costs $500, or so. Where does this $500, its value, come from? Their usual response is that the market place determines this price or value. How so? Well, its the magic of the market place.

Here is a section from Marx's Capital, Chapter 5:

Suppose then, that by some inexplicable privilege, the seller is enabled to sell his commodities above their value, what is worth 100 for 110, in which case the price is nominally raised 10%. The seller therefore pockets a surplus-value of 10. But after he has sold he becomes a buyer. A third owner of commodities comes to him now as seller, who in this capacity also enjoys the privilege of selling his commodities 10% too dear. Our friend gained 10 as a seller only to lose it again as a buyer. [11] The net result is, that all owners of commodities sell their goods to one another at 10% above their value, which comes precisely to the same as if they sold them at their true value. Such a general and nominal rise of prices has the same effect as if the values had been expressed in weight of silver instead of in weight of gold. The nominal prices of commodities would rise, but the real relation between their values would remain unchanged.

Let us make the opposite assumption, that the buyer has the privilege of purchasing commodities under their value. In this case it is no longer necessary to bear in mind that he in his turn will become a seller. He was so before he became buyer; he had already lost 10% in selling before he gained 10% as buyer. [12] Everything is just as it was.

Thus, the IPOD might be worth 500, but a smart retailer might sell it for 510. However, the retailer now must purchase a new IPOD. He would have to find a stupid retailer willing to sell the IPOD for 500; he must then buy the IPOD for 510, which means that nothing has changed.

The only way out of this is to understand that labor creates value. The IPOD is worth 500; 400 for non labor and 100 for labor. The capitalist pays, however, only 90 for the labor (that is another chapter.) When he sells the IPOD for 500 he pockets the extra 10.

This is why the IPOD is made in China. Labor there can produce a lot of value, but it costs Steve Jobs a lot less than it would cost in the U.S. He pockets the difference.

[ZeroNowhere]

Where does this $500, its value, come from?That would be its price. Price and value are quantitatively differentiated on the individual level.

In any case, you're really best not responding in class. That could at most fall to the level of oral debate, and oral debate in class is just pointless point-scoring that enlightens nobody and achieves nothing, inasmuch as there is really no time for any sustained theoretical development.

If it helps, though, I had gone into some detail on value in this post (http://www.revleft.com/vb/showpost.php?p=2066290&postcount=4) on Revleft, as well as this post (http://libcom.org/forums/theory/questions-concerning-marxs-capital-11032011#comment-421070) on Libcom (it's probably worth reading the first of those links first). There is also further elaboration on the concept of abstract labour here (http://libcom.org/forums/theory/abstract-labor-vs-concrete-labor-06042011?page=2#comment-423673).

To summarize, we don't mean what they mean (and think we mean) by 'value'.

[ar734]

That would be its price. Price and value are quantitatively differentiated on the individual level.



Price is the monetary expression of value. But regardless, where does value come from, say of an IPOD?

[KC]

How would you respond? You don't. You shut up and take the class and get a good grade because that's what you paid for.

[Jose Gracchus]

Price is the monetary expression of value. But regardless, where does value come from, say of an IPOD?

Value is socially necessary labor time to provide commodities. The price can change even while the value is constant. Over time and across commodities, price approximates value, but it is not true for each and every individual case at any given time.

[ar734]

Value is socially necessary labor time to provide commodities. The price can change even while the value is constant. Over time and across commodities, price approximates value, but it is not true for each and every individual case at any given time.

I think we can agree that value comes from labor. However, you seem to be saying that value is labor (socially necessary) time, and price is money. So, if the price of an IPOD is, on average, $500, what is the value of the IPOD? Isn't it $500?

[syndicat]

in classical economy, which Marx worked in, there was an idea of "natural price" and the price on any given occasion...the exchange value...varied from this but tended to hover around the natural price. Marx's theory of the natural price...value...is that depends on the society's investment of labor time in making it. It's really a social cost of production theory of prices. Effective demand or desire backed by money in itself can't account for the price because it might be that people would be willing to pay for an X at $100 but it might cost $150 to make it. In that case, no Xs will be made (not as commodities anyway).

[ar734]

in classical economy, which Marx worked in, there was an idea of "natural price" and the price on any given occasion...the exchange value...varied from this but tended to hover around the natural price. Marx's theory of the natural price...value...is that depends on the society's investment of labor time in making it. It's really a social cost of production theory of prices. Effective demand or desire backed by money in itself can't account for the price because it might be that people would be willing to pay for an X at $100 but it might cost $150 to make it. In that case, no Xs will be made (not as commodities anyway).

Doesn't that beg the question of what the value of the IPOD is? If the price is $500, what is the value?

As far as Xs at $100, capital would simply be shifted from Xs to Ys costing 100 and sold at 100. It the long run, or on average, as Marx pointed out, commodities are always exchanged at their true value: Xs or Ys for equivalent money.

Certainly demand cannot account for price; although all modern economics is based on that idea: that demand, or utility, is the source of price. So, wouldn't you agree that price is determined by the socially necessary amount of labor time contained (on average) in a commodity? Or, as Marx said, Price = Surplus Value (Profit) + Labor Costs + Non-Labor Costs (materials, interest, etc.?)

[syndicat]

Certainly demand cannot account for price; although all modern economics is based on that idea: that demand, or utility, is the source of price. So, wouldn't you agree that price is determined by the socially necessary amount of labor time contained (on average) in a commodity?

no. i think it's an obsolete theory. it's also a misleading use of the word "value" to say that the community's investment of labor time in making something is its "value." that leaves out evaluation, which has to do with how much people desire things.

costs are relevant for the reason I mentioned: things won't get produced if the desire for them isn't sufficient to motivate people to buy the thing at its cost-plus markup price.

it also leaves out environmental effects as an element of cost.

[ZeroNowhere]

Value is socially necessary labor time to provide commodities. The price can change even while the value is constant. Over time and across commodities, price approximates value, but it is not true for each and every individual case at any given time.
Price doesn't approximate value over time. That is the point of prices of production. Prices tend towards systematically departing from values. If prices are equal to values, then this is purely accidental and theoretically irrelevant, and in any case prices do not tend towards values. Price-value divergence cannot explain profit on a social level, however.


But regardless, where does value come from, say of an IPOD?Value is defined as the commodity's aspect of being a product of abstract labour. So presumably from the iPod's being a product of abstract labour, which is what makes it a value.

[ar734]

Price doesn't approximate value over time. That is the point of prices of production. Prices systematically depart from values. Price-value divergence cannot explain profit on a social level, however.

Value is defined as the commodity's aspect of being a product of abstract labour. So presumably from the iPod's being a product of abstract labour, which is what makes it a value.

Well, what is the value of an IPOD? Isn't the IPOD a product of specific human beings working in a specific place under specific, concrete conditions? There are real Chinese workers making $3.00 a day producing value of, say, $100 per day so that Steve Jobs can get fantastically rich.

Also, does anyone know of a publication, etc. which demonstrates how Wal-Mart decides to charge $1.25 for a screwdriver?

[Jose Gracchus]

no. i think it's an obsolete theory. it's also a misleading use of the word "value" to say that the community's investment of labor time in making something is its "value." that leaves out evaluation, which has to do with how much people desire things.

costs are relevant for the reason I mentioned: things won't get produced if the desire for them isn't sufficient to motivate people to buy the thing at its cost-plus markup price.

it also leaves out environmental effects as an element of cost.


Price doesn't approximate value over time. That is the point of prices of production. Prices systematically depart from values. Price-value divergence cannot explain profit on a social level, however.

Value is defined as the commodity's aspect of being a product of abstract labour. So presumably from the iPod's being a product of abstract labour, which is what makes it a value.

Thank you both for these outlooks. I find them very useful both from a Marxian and critical perspective.

[Dean]

You might start with asking how does a commodity come to be useful? Commodities are useful because because human labour has been expended in their production. Although it is not true that all useful things are the product of human labor, for instance, natural produce hanging from a tree, like nuts and fruit.

But the important fact here is that it requires human labor to bring them to market - and that rate of labor determines the value of the fruit. Marx makes this point with diamonds:


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. Jacob doubts whether gold has ever been paid for at its full value. This applies still more to diamonds. According to Eschwege, the total produce of the Brazilian diamond mines for the eighty years, ending in 1823, had not realised the price of one-and-a-half years’ average produce of the sugar and coffee plantations of the same country, although the diamonds cost much more labour, and therefore represented more value. With richer mines, the same quantity of labour would embody itself in more diamonds, and their value would fall. If we could succeed at a small expenditure of labour, in converting carbon into diamonds, their value might fall below that of bricks. In general, the greater the productiveness of labour, the less is the labour time required for the production of an article, the less is the amount of labour crystallised in that article, and the less is its value; and vice versâ, the less the productiveness of labour, the greater is the labour time required for the production of an article, and the greater is its value. The value of a commodity, therefore, varies directly as the quantity, and inversely as the productiveness, of the labour incorporated in it.

Further, you are dealing with another dichotomy - that of the labor versus the object of the labor. But value embodied in commodities is an amalgamation of the two. Marx explains it thusly:

The use values, coat, linen, &c., i.e., the bodies of commodities, are combinations of two elements – matter and labour. If we take away the useful labour expended upon them, a material substratum is always left, which is furnished by Nature without the help of man. The latter can work only as Nature does, that is by changing the form of matter.[13] (http://www.marxists.org/archive/marx/works/1867-c1/ch01.htm#13) Nay more, in this work of changing the form he is constantly helped by natural forces. We see, then, that labour is not the only source of material wealth, of use values produced by labour. As William Petty puts it, labour is its father and the earth its mother.

[Kotze]

Price doesn't approximate value over time. That is the point of prices of production.I believe whether this is true or not isn't demonstrated by reading Marx, but an empirical question, and IIRC a study by Dave Zachariah with data from Sweden showed that prices correspond very well to labour time.

I guess prices of production would be a good concept to explain prices if all capital was made of silly putty :P

[Rowan Duffy]

no. i think it's an obsolete theory. it's also a misleading use of the word "value" to say that the community's investment of labor time in making something is its "value." that leaves out evaluation, which has to do with how much people desire things.

The idea that subjective desire does not exist in Marxist theory is just wrong. Marxist theory of value does not leave out desire. Nothing is produced unless it has use-value, as nobody would purchase this in the market place. This is obviously true.

It is critical to understand that this subjective element - the use value - does not determine prices. Prices are determined instead by the labour required to produce them [to first approximation]. Indeed this is born out by empirical investigation.

The LTV requires the aspect of use-value and actors in the market purchasing those things that they desire and causing price signaling to work backward to the rate of profit in various industries to drive capital only into those industries in which profits can be made. This later imposition is what creates the emergent correlation between labour expended and price.

Use-value by contrast has no direct impact on prices. Take a substitution matrix for some human which includes oxygen. How much oxygen would you substitute for a grape. Clearly the number should be near infinite. Yet this has no impact on the price, and the price is zero.

One could claim that this is because oxygen supply exceeds the demand. Yet we can say the same for gold, if we include asteroids. Why is it that those asteroids don't meet the supply and instead a different value of gold dominates? It's because it requires labour to obtain the gold. The difference between the supply of oxygen and the supply of gold is simply in the labour that is necessarily expended for it's availability.


it also leaves out environmental effects as an element of cost.

This is totally irrelevant to a theory of a capitalist economy as the capitalist economy does not include externalised costs in price.

[Dean]

no. i think it's an obsolete theory. it's also a misleading use of the word "value" to say that the community's investment of labor time in making something is its "value." that leaves out evaluation, which has to do with how much people desire things.

costs are relevant for the reason I mentioned: things won't get produced if the desire for them isn't sufficient to motivate people to buy the thing at its cost-plus markup price.

it also leaves out environmental effects as an element of cost.

Marx discussed the basis of value and exchange. External and marginal cases are mentioned, however, but he focuses on their implications for labor solely. This is because labor is the basis of wealth.

For instance, critics might contend that a sudden run on brooms would make their value higher. In fact, this is only describing a minor aspect of value: the value it takes on in an extreme case, in one time and location in a market. At no point has our ability to create value been compromised. The same % of aggregate labor is still required to create 1 broom - but the labor wasn't allocated to meet unexpected demand.

Marx talks about these cases in Capital Vol. 1. It is not omitted that marginal changes in market conditions, including supply/demand functions, can skew price/value relations. That bodies of work have come about discussing marginalism doesn't diminish the value of Marx's theories and his inquiry into the nature of value.

[ar734]

That is an odd view of economics. If I produce something for $5.00, you mean you are going to be willing to pay $6.00 for it? If you believe that then I have some land in Florida you might be interested in.

[QUOTE]

it also leaves out environmental effects as an element of cost.

Cost for whom? You mean BP is paying for the cost of its environmental damage?