Value versus exchange value

[Paul Cockshott]

I have noticed a persistent confusion among people who read Marx between his concepts of value and his concept of exchange value. People think that by value he means exchange value. Whilst this was true of previous economists like Ricardo, Marx views value as something that exists prior to and independent of exchange.

For bourgeois economists the value of something is simply the amount of money or other commodities it will exchange with. For them, value has no reality outside of exchange.
There is a school of economists today who call themselves value form theorists who interpret Marx in this way.

When I first read Marx as a student I made the same mistake of identifying value with exchange value. Then in my last year as a student I met Athar Hussain who had just made one of the first two translations of Marx's Marginal Notes on Adolf Wagner. He explained to me that exchange value was for Marx just the form of representation of value in commodity producing society.

These notes on Wagner are well worth reading closely.

Being told that by Athar Hussain was an ahah! moment for me. I suddenly realised what all that stuff in the first chapters on the form of value was about.

For Marx value is socially necessary labour time.

Exchange value is a way that this social necessity becomes visible to independent producers.

This explains why labour talks of commodities selling above or below their value. If value and exchange value were the same thing, the idea of things selling above their value would make no sense.

This has an important consequence - value continues to exist even if commodity production ceases. It is in this context that that his proposal to distribute goods using a system of labour accounts must be understood.

[Anderson]

How do you think capitalists use stock exchanges, to their benefit and to survive the crisis?

[Paul Cockshott]

That is not really appropriate to this thread, but I think you have to distinguish early stock exchanges from the contemporary one. In an earlier period the stock exchange probably did serve to channel funds from individual members of the rentier class to industrial and commercial companies who were expanding. Nowadays, whilst some funds are still raised this way, the great bulk of transactions are purely speculative. In the process the stock exchange and the institutions that trade in it - the merchant banks, insurance companies, fund managers have started to operate a vast collective Ponzi scheme. In the absence of net issues of shares by the industrial and commercial company sector, the question is where do the funds flowing into the stock market end up?

There is only one place - in the pockets of the dealers, bankers and fundmanagers. They pay themselves profits and bonuses on the basis of the monetary appreciation of the existing stock of equities. So excess funds flow in, cause stock appreciation, and are exactly matched by the bonuses ad costs of the banking and financial sector.

This has the effect that the stock market becomes a hidden means of transfering capital into revenue and thus into luxury consumption expenditure by the bankers, hedge fund managers etc.

[Rooster]

He actually says that in plain language in the first edition of Capital (as well in the most widely available edition in English) in the first chapter:

"Now we know the substance of value. It is labour. We know the measure of its magnitude. It is labour time. The form, which stamps value as exchange-value, remains to be analysed."

[u.s.red]

Three types of value, then.

1. use-value
2. exchange-value
3. value.

Use is utility, exchange value is price and value is necessary labor time?

Maybe it is time to re-define the three types of value. Utility, price and labor. As much as I worship at the altar of Karl Marx, I have to say that value is a tough nut to crack.

[NewLeft]

Three types of value, then.

1. use-value
2. exchange-value
3. value.

Use is utility, exchange value is price and value is necessary labor time?

Maybe it is time to re-define the three types of value. Utility, price and labor. As much as I worship at the altar of Karl Marx, I have to say that value is a tough nut to crack.
Price is separate from exchange-value, as the exchange-value exists before entering the market, while the price is from the cost of production and average rate of profit.
http://www.marxists.org/archive/marx/works/1894-c3/ch10.htm

[u.s.red]

Price is separate from exchange-value, as the exchange-value exists before entering the market, while the price is from the cost of production and average rate of profit.
http://www.marxists.org/archive/marx/works/1894-c3/ch10.htm

According to Marx price and profit (on average) both exist prior to entering the market. Or, as the capitalists say (in the BEA figures) non-labor cost + labor cost + profit = price. As Marx showed: labor + unpaid labor = price.

Or rather value is already in the product before it goes on the market. Price is then the monetary expression of value. Price may deviate up and down but always, on average, comes back to value.

[NewLeft]

According to Marx price and profit (on average) both exist prior to entering the market. Or, as the capitalists say (in the BEA figures) non-labor cost + labor cost + profit = price. As Marx showed: labor + unpaid labor = price.
The glossary does a better job explaining it:

Exchange-value differs from “price (http://www.marxists.org/glossary/terms/p/r.htm#price)” in two ways: firstly, price is the actualisation of exchange-value, differing from one exchange to the next in response to a myriad of factors affecting the activity of exchange; secondly, price is the specific value-form (http://www.marxists.org/glossary/terms/v/a.htm#value), measuring the value of the commodity against money (http://www.marxists.org/glossary/terms/m/o.htm#money).

Your formula is correct, wage + surplus = price.

[robbo203]

I have noticed a persistent confusion among people who read Marx between his concepts of value and his concept of exchange value. People think that by value he means exchange value. Whilst this was true of previous economists like Ricardo, Marx views value as something that exists prior to and independent of exchange.

This is not where the confusion lies. The real confusion, and it it is one that you yourself have succumbed to, lies with identifying or conflating "VALUE" as "socially necessary labour time" (SNLT) with the "LAW OF VALUE" which applies ONLY to a system of commodity production.

Value as SNLT can exist as an operational concept of sorts - at least in principle - in a system without commodity production but the "law of value" cannot. The law of value is the principle that specifically regulates economic exchange in a market system according to which commodities, on average, exchange in proportion to the amount of SNLT embodied in them. As such it is not a theory of prices since Marx fully allows for the fact that prices can diverge from value but value is the point around which prices fluctuate.

For Marx, SNLT cannot be directly observed or measured but only becomes apparent in the sale of the commodity itself . It is his answer to Adam Smith's "invisible hand"

There is a great little peice over on Kapiltalism101 which says it all. It also succinctly explains the difference between value and exchange value


In a society of private producers, coordinated indirectly through the market, the social relations between these people take the form of relations between things, of commodity relations. The relations between people become value relations expressed in commodity prices. Economically, people can only relate to each other through money prices, through value. This world of commodity relations takes an independent form, outside of the control of individuals, that acts back upon and directs the flow of human affairs. Adam Smith called it the “hidden hand of the market.” Marx calls it “the law of value.”
What is the law of value? It is the impersonal, blind forces of the economy exerting their influence upon society. It is unique to a society in which the dominant form of labor is production for market exchange. The relations between people become value relations between commodities. And these value relations become impersonal forces which have unexpected consequences for society. For instance, we get capital:
http://kapitalism101.wordpress.com/2010/04/28/law-of-value-introduction/

[Paul Cockshott]

Price is separate from exchange-value, as the exchange-value exists before entering the market, while the price is from the cost of production and average rate of profit.
http://www.marxists.org/archive/marx/works/1894-c3/ch10.htm
Not quite right, price is exchange value expressed in money, price of production is cost of production plus average profit. The point is that prices can exist without capitalist production. so we have


Use value - which Marx says is a matter of technology
Value - which is labour time
Exhange value - which is value expressed in the form of another commodity
Price - which is exchange value expressed in one particular commodity or token which acts as money
Price of Production - the specific form of price which operates if the rate of profit equalises between industries.


Robbo what do you understand by the Law of Value?

Where ( ie in what short passage ) do you consider Marx defines this law?

In my experience the term is used with multiple meanings by marxist writers.

[Paul Cockshott]

Smith does not use the phrase hidden hand. He does refer to an 'invisible hand' twice in his works, both in a rather apologetic manner.

It is to no purpose, that the proud and unfeeling landlord views his extensive fields, and without a thought for the wants of his brethren, in imagination consumes himself the whole harvest that grows upon them. The homely and vulgar proverb, that the eye is larger than the belly, never was more fully verified than with regard to him. The capacity of his stomach bears no proportion to the immensity of his desires, and will receive no more than that of the meanest peasant. The rest he is obliged to distribute among those, who prepare, in the nicest manner, that little which he himself makes use of, among those who fit up the palace in which this little is to be consumed, among those who provide and keep in order all the different baubles and trinkets, which are employed in the oeconomy of greatness; all of whom thus derive from his luxury and caprice, that share of the necessaries of life, which they would in vain have expected from his humanity or his justice. The produce of the soil maintains at all times nearly that number of inhabitants which it is capable of maintaining. The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species. ( Theory of Moral Sentiments )

But the annual revenue of every society is always precisely equal
to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as
he can, both to employ his capital in the support of domestic
industry, and so to direct that industry that its produce maybe of
the greatest value; every individual necessarily labours to render
the annual revenue of the society as great as he can. He generally,
indeed, neither intends to promote the public interest, nor knows
how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own secu-rity; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain;
and he is in this, as in many other cases, led by an invisible hand
to promote an end which was no part of his intention. ( Wealth of Nations)

The first passage is dubious, since it ignores the fact that the landlord's tenants will often go hungry. The landlord can not reduce them to absolute starvation if he wants to keep a tennantry, but he can certainly allow them less to eat than would be the case with an equitable land distribution.

The second one is also dubious since it assumes that every individual will endeavour to use his capital in support of domestic industry, but whilst that may have been true in the 1770s, it ceased to be the case once capital export became possible.

The way the phrase 'hidden hand' is projected back onto Smith in the sense that the Wikepedia page mentions “hidden hand of the market.”, is a complete myth perpetuated by modern neo-classical economists. Smith never talks about the hidden hand of the market.

[u.s.red]

The glossary does a better job explaining it:


Your formula is correct, wage + surplus = price.

Wow. I can't believe somebody on this site actually agrees with something I wrote.

[Vladimir Innit Lenin]

An important point in the OP regarding the form of value.

To the OP (or anyone else): if value = socially necessary labour time, then do non-extracted raw materials/natural resources have a 'value'? I.e. an apple on a tree?

[NewLeft]

An important point in the OP regarding the form of value.

To the OP (or anyone else): if value = socially necessary labour time, then do non-extracted raw materials/natural resources have a 'value'? I.e. an apple on a tree?
Labour goes in to harvesting apples, so it does have a labour time. If you were to sell that apple, you would have to sell it around this value, which also takes into account the amount of resources (including labour) available. Do you mean does the apple on its own have a value? If it proceeds production, then I'm pretty sure it doesn't. :unsure:

[Paul Cockshott]

non extracted minerals do not embody labour and have no value in Marx's sense, but if you own some land containing minerals that can be extracted at less than the socially necessary amount of labour, you can extract a rent from whoever operates a mine on the land.

[the zizekian]

For Marx value is socially necessary labour time.


I think that Marx was aware of the following dialectical paradox: “value” can be a social category ONLY in a society which wants to maximise SURPLUS value.

[Paul Cockshott]

I think that Marx was aware of the following dialectical paradox: “value” can be a social category ONLY in a society which wants to maximise SURPLUS value.

Would you care to substantiate your claim by saying where you think he wrote that.

[Rooster]

An important point in the OP regarding the form of value.

To the OP (or anyone else): if value = socially necessary labour time, then do non-extracted raw materials/natural resources have a 'value'? I.e. an apple on a tree?

Pretty sure that something can have a use-value without having a value.

[the zizekian]

Would you care to substantiate your claim by saying where you think he wrote that.

Marx was still somewhat Hegelian and he shows it most explicitly when he wrote that capitalists begun their accumulation well before their forceful transformation of age-old (artisan or cottage) work practices.

[u.s.red]

Not quite right, price is exchange value expressed in money, price of production is cost of production plus average profit. The point is that prices can exist without capitalist production. so we have


Use value - which Marx says is a matter of technology
Value - which is labour time
Exhange value - which is value expressed in the form of another commodity
Price - which is exchange value expressed in one particular commodity or token which acts as money
Price of Production - the specific form of price which operates if the rate of profit equalises between industries.




What then is surplus value? What is the difference between exchange value and price?

[the zizekian]

What then is surplus value? What is the difference between exchange value and price?

Since subsistence wage is insignificant in capitalism, surplus value is the entirety of workers’ production.

[u.s.red]

Since subsistence wage is insignificant in capitalism, surplus value is the entirety of workers’ production.

Not so. In the U.S. the median wage is about $25.00 per hour and the median production per hour is about $50.00.

[the zizekian]

Not so. In the U.S. the median wage is about $25.00 per hour and the median production per hour is about $50.00.

The actual wage has nothing to do with subsistence wage.

[cyu]

http://blogmaverick.com/2013/01/10/the-stock-market-2/

I knew which had products that worked, didn’t work, were selling or not. How these companies were marketed, and whether or not they were or would be successful.

I couldn’t believe that I would have an advantage in the market. I truly thought that the markets were efficient, that any available knowledge about a company was already reflected in its stock price. Yet I saw Raleigh using the information I gave him to make money for his clients.

At a dollar, I could make an argument that Gandalf could be attractive. But at $20, the company’s market value was close to $1 billion. The situation was crazy. People were buying the stock because other people were buying the stock.

To add to the volume, a mid-sized investment bank that specialized in technology companies came out with a buy rating on Gandalf. They reiterated all the marketing mishmash. The bank made up forecasts formulating revenue numbers at monstrous growth rates.

Unfortunately, the bank couldn’t attract enough new money to the stock to sustain its price. It didn’t have enough brokers to shout out the marketing spiel to entice enough new buyers to pay the old buyers. The hope among the “sophisticated buyers” was that one bank picking up coverage would lead to others doing the same. It didn’t happen.

So I did the only smart thing. I sold my stock, and I shorted it to boot. Then I told the same people who asked me why I was buying the stock that I had shorted the stock. Over the next months, the stock sank into oblivion. In 1997, Gandalf filed for bankruptcy. Its shares were canceled – wiped out – a few months later.

For years on end a company’s price can have less to do with a company’s real prospects than with the excitement it and its supporters are able to generate among investors. That lesson was reinforced as I saw the Gandalf experience repeated with many different stocks over the next 10 years. Brokers and bankers market and sell stocks. Unless demand can be manufactured, the stock will decline.

In 1998, my partner and I took our company public with Morgan Stanley. We had Morgan Stanley and others ask us every possible question they could think of so we wouldn’t look stupid when we sat in front of these savvy investors. Savvy investors? I was shocked. Of the 63 companies and 400-plus participants we visited, I would be exaggerating if I said we got 10 good questions about our business and how it worked. The vast majority of people in the meetings had no clue who we were or what we did. They just knew that there were a lot of people talking about the company and they should be there.

The lack of knowledge at the meetings got to be such a joke between Todd and I that we used to purposely mess up to see if anyone noticed.

What about fundamentals? Fundamentals is a word invented by sellers to find buyers. Even how profits are calculated is manipulated to give confidence to buyers. cash isn’t earned by holding a company and collecting dividends. It’s earned by convincing someone to buy your stock from you.