How do we know value is socially necessary labor time?

[Jacob Cliff]

This is probably a simple question, but I haven't found what I'm asking on any thread, or no answer was clear enough.

I understand the idea that a commoditys value is equal to the socially necessary labor time to create it, but how do we know that? Does value just exist within the owners head? What makes the value of A shoes equal to B corn? It all varies in accordance to supply and demand, does it not? Or is this connected to the labor theory?

Sorry for sounding dumb, but I need to tackle this basic question

[Jacob Cliff]

I'm basically asking for proof for that value = socially necessary labor time

[Blake's Baby]

It's connected (indeed dependent on) Marx's exposition of the law of value, yes.

When commodities trade in the market, they trade against other commodities. We can buy A or B - shoes or corn.

The price they trade at is related to the cost of production, which ultimately is the cost of the labour involved in getting them to market. Marx specifically says in looking at the source of profit that in his examination neither buyer nor seller can unduly influence the market. So no, value doesn't just 'exist in the owner's head' nor is it about 'supply and demand'. Price may be about supply and demand, but not value. The value of a given amount of corn represents the effort involved in producing it. The value of some shoes represents the effort in producing them. The quanta of effort are equal, and therefore the value is equal, for specific quantities of shoes and corn.

Socially-necessary labour-time is the average time it takes to produce a commodity. If society can fulfill the demand for shoes for example with a combination of a large number of factory-produced shoes taking 1 hour per pair and a small number of hand-made shoes taking 20 hours per pair, then the average time taken to produce a pair of shoes is 'slightly more than an hour'. This is the 'socially-necessary labour time' to produce a pair of shoes. Let's call it at 1hr 15 mins. All else being equal (ie the shoes are of the same quality) then the value of the shoes is the same - it would, on average, take 1hr 15mins to replace those shoes in the market, and the value of labour on the market is 1hr 15mins - even if the shoes actually took 20 hours to make.

Is that any help?

[Jacob Cliff]

Very much so, thank you. But another minor question: does this mean the gold equivalence is equal to a commodity based on how much socially necessary labor time it takes to obtain A gold and B commodity?

[Blake's Baby]

I don't know why you're expressing that as the notion that gold is 'equal to' a commodity. Gold is a commodity in itself that takes time and effort to acquire. If gold were easily-available, it would be no use as a standard; it's comparatively hard to get hold of (there is finite amount of it, it's only found in certain places, the stuff that we know about takes digging and refining when it isn't already owned by someone) and therefore, a given quantity of gold has a specific socially-necessary labour-time to prodduce and therefore a certain value, just like any other commodity.

The price of gold may be more due to the sellers being able to control the market more than, say, the sellers of bread; but the value of a gramme of gold is, in the end, derived from answering the question 'what is the socially-necessary labour-time involved in getting 1g of gold onto the market?'

[Alan OldStudent]

This is probably a simple question, but I haven't found what I'm asking on any thread, or no answer was clear enough.

I understand the idea that a commoditys value is equal to the socially necessary labor time to create it, but how do we know that? Does value just exist within the owners head? What makes the value of A shoes equal to B corn? It all varies in accordance to supply and demand, does it not? Or is this connected to the labor theory?

Sorry for sounding dumb, but I need to tackle this basic question


I'm basically asking for proof for that value = socially necessary labor time

Hey MarxianSocialist,

Comrade, you don’t sound dumb to me. Yours is a perfectly good question.

What is value? Something is of value if it satisfies human wants or needs. That's it! It's nothing convoluted or complicated. The question is how does something become valuable?

Socially necessary labor does not produce everything that has value. Sunshine has value, as does air. These are not the product of labor. But most everything you want or need is the product of labor, hence most anything of value is the product of labor.

Labor is the application of human brain or muscle power to raw materials to produce a good or service that satisfies a human want or need. It is socially organized labor power that produces your food, housing, medical care, clothing, educational opportunity, entertainment, and so on. Socially organized labor power is involved in providing you with basic goods and services. If you did not obtain these basic goods and services, you could not exist for very long.

We can say that humanity as a species can exist only because humans organize socially to apply brain or muscle power to raw materials. These provide us most everything necessary for us to live.

But note, for labor to confer value, the product of that labor has to be able to satisfy human wants or needs. Otherwise, the labor is not socially necessary. So the labor power of someone who works very hard at producing mud pies does not confer value to the product of their labor. Nobody wants to eat baked mud. Mud pies do not satisfy a human want or need, no matter how much work goes into producing them.

Most everything you need comes into existence because of socially organized labor power. Labor confers value because labor makes human existence possible.

At this point, we need to consider the difference between “use value” and “exchange value.” We have been speaking of “use value” when we talked about goods and services that satisfy a human want or need. But we need to understand “exchange value.” Exchange value applies to goods and services produced for trade instead of immediate consumption.

Not everything produced is created to trade. If you cook a lovely meal for your lover, you put in work, applying labor power to raw materials. You’re not trading that for money. You’re producing that for immediate consumption. But in our capitalist society, most everything is produced for trade, hence for its exchange value. It goes on the market. That’s what we call a “commodity.” Under capitalism, a commodity is a good or service produced for sale, not immediate consumption.

Let’s look at our mud pies again. If I make mud pies and try to sell them, I will get very low prices for them, if I’m lucky. The market is a mechanism that helps the seller find out how socially desirable the commodity is. If instead, I sell mincemeat pies on the market, I’ll sell loads more, because they will actually satisfy a human want or need. I will need to set the price as close as I can to the value, that is the cost of labor and other factors of production. If somebody can produce those pies at half the price because of superior machinery, I’ll be forced to lower my prices or not recoup my investment.

How will I set my prices? I’ll want to set them for as high as the market can bear, but not so high that the competition will prevent me from making sales. I’ll also want to cover my production costs, which include rent, cost of raw materials, tools, and cost of labor. The cost of raw materials incorporates the labor involved in producing them. I buy sugar, eggs, flour, and other materials necessary for making mince pies from the farm, and labor is involved in that. The tools I get from somewhere, and labor is involved in bringing them into existence. Rent also includes the labor costs involved in owning and keeping up the facilities. And, of course, there are the wages. As technology increases, the percentage I spend on wages goes down and my production goes up. But my competitors also come up with technology. That puts a downward pressure on what I can charge as my competitive advantage decreases.

These are some of the considerations one must take in determining the relations between price and value, supply and demand.

I hope all this helps bring a bit of clarity into this complicated and complex subject. “Modern” bourgeois economists discount the role of labor in creating value and claim value consists of whatever the market will allow a good or service to be sold for. This tends to equate price with value. Price and value are related, but they’re not the same.

Bourgeois economists also have a lot of unscientific and unrealistic axioms, such as the “rational consumer,” the “insatiability of human wants,” and many others. It’s not that everything they come up with is pointless, and they do collect some sophisticated data. But the basic axiomatic assumptions are what some call “PADOOMA” (pulled it directly out of my tokhus). :grin:

Marx does not clutter up his theories with all sorts of rigid dogmas carefully balanced into some kind of unstable edifice.

As I mentioned in another post addressed to you, you should read “Value, Price and Profit” by Marx. My advice is to read it aloud. It’s not very long, but you’ll need to read it 3 or 4 times. Some of the sentences seem overly long in the English translation.

In the meantime, you can ask for clarifications here. Unfortunately, some posters here treat newbies or others who ask intelligent but elementary questions like they’re some kind of shmuck. Others pontificate, engage in intellectual posturing, or just plain talk through their hats. However, some here are quite knowledgeable and like to explain. So you’ll also get a lot of good information by asking. Just examine it all in a spirit of critical thinking. It’s up to you to dig the wheat grains out of the straw pile.

Regards,
Alan OldStudent

[Jacob Cliff]

Thanks for your explanation, it helped me understand this concept a lot better:grin:

[RedMaterialist]

Thanks for your explanation, it helped me understand this concept a lot better:grin:

The labor theory of value has been 99.99% suppressed in university economic courses. And for good reason. Once it is admitted that commodities have value only in terms of labor, then capital becomes secondary, subservient to labor. Here is my take on the question, for what it is worth.

If all commodities have a "value" then they all must have a single property in common. As Marx says:
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. Capital, Ch. One, Section One.

So, in your example 1 pr of shoes = 1 bushel of corn = 10 yds of silk = 1/5 oz of gold = 1 ipod = 5 lbs of steel, etc. etc. It's impossible to ever fix a definite, single exchange value for any commodity in terms of a commodity.

But if you agree that all commodities have one thing in common, social labor, then all commodities are "worth" or are equal to: X minutes of labor time. And the time has to be socially necessary otherwise the commodity has no social value and cannot compete as a commodity.

Modern bourgeois economists claim that no commodity has an objective, independent value, but, rather, that every commodity can only be "valued" in terms of what each individual consumer subjectively values each commodity in terms of price. Thus, their fetish for monetarism.

But, also, it is well known that the gigantic, monopolistic corporation does not price its products by competition in a free market. Apple, for instance, does not set its Iphone price at its cost of production. Apple probably could not tell you exactly what the cost of production of an Iphone is. So, how is the "price" determined? It seems like Apple charges what it thinks its customers will pay, which has no necessary relation to any cost of production, labor time or otherwise.

This issue of monopoly pricing had already been discussed by Marx in The Poverty of Philosophy quoting Ricardo:


“Commodities which are monopolized, either by an individual, or by a company, vary according to the law which Lord Laudersdale has laid down: they fall in proportion as the sellers augment their quantity, and rise in proportion to the eagerness of the buyers to purchase them; their price has no necessary connexion with their natural value; Ch. One, Section Two. emphasis added.

Marx apparently did not believe that monopoly pricing was possible in a competitive, commodity producing economy. We obviously now live in a monopolistic economy.

If there is no longer any connection between value (labor time or otherwise) and price, then what is the point of the argument about labor value? We should concentrate on demanding that society take control of the international, monopoly corporation and increase production of commodities, within environmental limits, until they are too cheap to sell.