Q about Marxism: Exchange value & Supply and demand

[sdavio]

I'm still new to researching and understanding Marxism. I am trying to understand this quote:

"The term "exchange value" has been used, because this is the basis of the whole analysis. But in actual life things hardly ever sell at precisely their exchange value. Whether material products or human labour power, they are bought and sold on the market at a price, which may be either above or below the correct exchange value. There may be a surplus of the particular product on the market, and the price that day may be far below the correct exchange value; or, if there is a shortage, the price may rise above the value. These fluctuations in price are, in fact, influenced by "supply and demand," and this led many capitalist economists to think that supply and demand was the sole factor in price. But it is clear that supply and demand only cause fluctuations about a definite level. What that level is, whether it is one penny or a hundred pounds, is clearly not determined by supply and demand, but by the labour-time used in producing the article."

(From Emile Burns' "What is Marxism?")

This seems to say that the exchange value of a commodity is like a concrete level (based upon the amount of labour required to create it,) and then supply and demand is like a layer over the top, causing fluctuations in price. However, it seems to me that 'supply' must be actively involved with the labour itself. If the materials to create a commodity are in short supply, then it might require more labour to get them, as with gold, which although it has very little use value (compared to other commodities of similar price,) gains value because it is rare, and therefore requires a large amount of labour to attain. Also, even if the material is not rare, if the commodity is very difficult to create (requires a lot of labour) then that would necessarily reduce the 'supply' of it, since it would take longer to supply a small amount, and therefore the price would go up.

So I do not understand the distinction between the exchange value and supply and demand in the way Burns characterizes it. Am I missing something?

[Anglo-Saxon Philistine]

First of all, use value can't really be quantified. A commodity is a use-value, it doesn't have some quantitative use value.

Second, the labour theory of value connects the exchange value of a commodity to the average socially-necessary labour time needed to produce a commodity. Short-term and local fluctuations in the actual time needed to produce a commodity might impact the price (the formation of prices is a complex affair; "supply and demand" is a notoriously idealised model that doesn't correspond to the real state of affairs at all), but it doesn't impact the exchange value.

Also, the equation "difficult to produce = rare" doesn't really hold, because the number of economic units producing the commodity is not constant; if a branch of industry that produces commodities that require a large expenditure of labour-power has a high associated rate of profit, capital will flow into it, resulting in more economic units being opened in that branch of industry. Eventually this results in crises of overproduction.

[RedMaterialist]

This seems to say that the exchange value of a commodity is like a concrete level (based upon the amount of labour required to create it,)

I don't think it is correct to say that exchange value is a "concrete level" because exchange value changes over time depending on many factors.

If a commodity can be produced with cheap materials but requiring a lot of labor it would not force a rise in price unless there was a demand for it. That's why exchange value is based on socially necessary labor. A silicon chip is produced with a very common material, sand. Twenty years ago it also required a huge amount of time and skill to produce the chip, and they were very expensive. But today, millions of chips can be produced by machine and the cost has dropped to almost nothing. The socially necessary labor required to produce the computer chip has fallen.



However, it seems to me that 'supply' must be actively involved with the labour itself.

I'm not sure what you mean by this. A capitalist believes there will be a demand for, say, 1 million cars. So he has his workers produce 1 million cars. Once the cars are produced the workers don't have anything more to do with supply. They get involved on the demand side, but if they lose their jobs then no cars are bought and the system crashes.

Also, labor is a commodity and therefore its price, wages, fluctuates with supply and demand. But the determining value of the labor is still the cost of producing and reproducing the labor (food, housing, clothing, etc.)

[tuwix]

So I do not understand the distinction between the exchange value and supply and demand in the way Burns characterizes it. Am I missing something?

I wouldn't care so much about it. It's just his free consideration. And they aren't particularly brilliant. So just don't care about it and read further. You can assume that supply and demand are major forces for an exchange-value.

[Anglo-Saxon Philistine]

No, tuwix, you can't "assume that supply and demand are major forces for an exchange-value", since Marx's point was precisely that exchange value is determined by the socially-necessary labour time needed to produce a commodity. Although I can't say I'm surprised to see you uphold a notion that even bourgeois economics doesn't really think is true.

[Vladimir Innit Lenin]

No, tuwix, you can't "assume that supply and demand are major forces for an exchange-value", since Marx's point was precisely that exchange value is determined by the socially-necessary labour time needed to produce a commodity. Although I can't say I'm surprised to see you uphold a notion that even bourgeois economics doesn't really think is true.

It depends on the social system, though. It is inarguable that in a capitalist economy, supply and demand (or expected supply and demand, in the case of financial instruments) do have a real impact on price, amongst other factors.

I have always interpreted Marxian economics to be that, in a post-capital, post-money society, the exchange-value of a product would be determined by the socially-necessary labour time (i.e., in Marx's eyes, this is the way that a post-monetary economy should be run).

[Anglo-Saxon Philistine]

It depends on the social system, though. It is inarguable that in a capitalist economy, supply and demand (or expected supply and demand, in the case of financial instruments) do have a real impact on price, amongst other factors.

I have always interpreted Marxian economics to be that, in a post-capital, post-money society, the exchange-value of a product would be determined by the socially-necessary labour time (i.e., in Marx's eyes, this is the way that a post-monetary economy should be run).

They have an impact on the price, but it isn't as prominent or simple as simple models like the one due to Marshall posit. I think the overwhelming majority of bourgeois economists recognises that.

Marx pretty explicitly argued against the interpretation you advance in the second paragraph, calling it "Ricardian socialism". Exchange-value doesn't exist in socialism, since no commodities are exchanged on the market.

[Vladimir Innit Lenin]

They have an impact on the price, but it isn't as prominent or simple as simple models like the one due to Marshall posit. I think the overwhelming majority of bourgeois economists recognises that.

I think the great problem is being able to measure all the variables that affect price. Due to geographical and currency considerations, as well as the heterogeneity of most markets let alone the products that make up individual markets, it is pretty impossible to construct a general theory that would say one way or the other anywhere near the exact effect individual factors have on price.

Sadly, there is a trend to be more scientific within economics and it is what has led to economics becoming so detached from reality; instead of accepting economics as a rough yet intellectually rigorous derivative of the old academic branch of political economy, the many bourgeois economists today seem hell-bent on proving that neoclassical economic theory is fully scientific, fully rationalised by mathematical proofs, and immune to impassioned argument, common sense, and real-world variation.

I mean, I don't know if you've taken any economics classes, but some of the bullshit I had to live through in lectures at uni was laughable. Like, really unbelievable shit...."if we ignore everything that happens in the real world, then this bullshit theory we know doesn't ACTUALLY work but we are going to study for the next 10 weeks makes mathematical sense..."!


Marx pretty explicitly argued against the interpretation you advance in the second paragraph, calling it "Ricardian socialism". Exchange-value doesn't exist in socialism, since no commodities are exchanged on the market.

oh yeah true that. Probably need to invest some time reading up on Marxian economics a bit more.