Does Price Express Invested Labor Time?

[Comrade-Z]

In Das Kapital, Volume I, Chapter 3 (http://www.marxists.org/archive/marx/works/1867-c1/ch03.htm), Marx discusses the following (bolding and underlining mine):


Price is the money-name of the labour realised in a commodity. Hence the expression of the equivalence of a commodity with the sum of money constituting its price, is a tautology, [14. just as in general the expression of the relative value of a commodity is a statement of the equivalence of two commodities. But although price, being the exponent of the magnitude of a commodity’s value, is the exponent of its exchange-ratio with money, it does not follow that the exponent of this exchange-ratio is necessarily the exponent of the magnitude of the commodity’s value. Suppose two equal quantities of socially necessary labour to be respectively represented by 1 quarter of wheat and £2 (nearly 1/2 oz. of gold), £2 is the expression in money of the magnitude of the value of the quarter of wheat, or is its price. If now circumstances allow of this price being raised to £3, or compel it to be reduced to £1, then although £1 and £3 may be too small or too great properly to express the magnitude of the wheat’s value; nevertheless they are its prices, for they are, in the first place, the form under which its value appears, i.e., money; and in the second place, the exponents of its exchange-ratio with money. If the conditions of production, in other words, if the productive power of labour remain constant, the same amount of social labour-time must, both before and after the change in price, be expended in the reproduction of a quarter of wheat. This circumstance depends, neither on the will of the wheat producer, nor on that of the owners of other commodities.

Magnitude of value expresses a relation of social production, it expresses the connexion that necessarily exists between a certain article and the portion of the total labour-time of society required to produce it. As soon as magnitude of value is converted into price, the above necessary relation takes the shape of a more or less accidental exchange-ratio between a single commodity and another, the money-commodity. But this exchange-ratio may express either the real magnitude of that commodity’s value, or the quantity of gold deviating from that value, for which, according to circumstances, it may be parted with. The possibility, therefore, of quantitative incongruity between price and magnitude of value, or the deviation of the former from the latter, is inherent in the price-form itself. This is no defect, but, on the contrary, admirably adapts the price-form to a mode of production whose inherent laws impose themselves only as the mean of apparently lawless irregularities that compensate one another.

The price-form, however, is not only compatible with the possibility of a quantitative incongruity between magnitude of value and price, i.e., between the former and its expression in money, but it may also conceal a qualitative inconsistency, so much so, that, although money is nothing but the value-form of commodities, price ceases altogether to express value. Objects that in themselves are no commodities, such as conscience, honour, &c., are capable of being offered for sale by their holders, and of thus acquiring, through their price, the form of commodities. Hence an object may have a price without having value. The price in that case is imaginary, like certain quantities in mathematics. On the other hand, the imaginary price-form may sometimes conceal either a direct or indirect real value-relation; for instance, the price of uncultivated land, which is without value, because no human labour has been incorporated in it.

At first Marx says that price expresses the labor time invested in a commodity. Then he talks about certain "circumstances" (what circumstances?!) being able to alter the price independent of invested labor time. Then he says that, on the other hand, price can cease to express value, i.e. invested labor time, and that prices can become imaginary in certain circumstances. I don't get it. Am I missing something here?

[KC]

Price is the money-name of the labour realised in a commodity.

Price is the value of the commodity expressed in terms of money. Since money is a commodity, this is a relative value. So, as we can see, price is a relative value; it can rise and fall when the ratio between the commodity and money changes, which brings us to the next quote:


If now circumstances allow of this price being raised to £3, or compel it to be reduced to £1, then although £1 and £3 may be too small or too great properly to express the magnitude of the wheat’s value; nevertheless they are its prices

Why is this no longer its value? Because value is measured in the amount of labour time contained in the commodity. The value of one quarter of wheat we can say is "x" labour time units (since Marx didn't give a concrete value, we can just use "x"). The value of £2 is also "x" labour time units. Therefore, we can determine the price of one quarter of wheat to be (on the average) £2.

If the amount of labour time units went up (or down) in either commodity - the wheat or the gold - this value would change because it is a relative value.

Why would the price change and not remain the commodity's value? What would have to happen is that the change in price has to not equal the value of the commodity. In other words, the price would have to rise, not as a result of a change in the ratio between the value of the gold and the wheat, but as a result of other factors. The ratio of values would be the same (one quarter of wheat = x labour time units and £2 = x labour time units), but the price wouldn't (one quarter of wheat = x labour time units and £1 = x/2 labour time units). Since we are talking about one particular commodity we could cite a rise in demand as an example (or rather, a shortage in supply relative to the rising demand).


The price-form, however, is not only compatible with the possibility of a quantitative incongruity between magnitude of value and price, i.e., between the former and its expression in money, but it may also conceal a qualitative inconsistency, so much so, that, although money is nothing but the value-form of commodities, price ceases altogether to express value.

What Marx is talking about here is the deviation of price to such an extent from value that it no longer expresses value at all. Basically what happened above in my example but on a much larger scale and deviations to such an extent where the price is no longer representative of the value.

[Comrade-Z]

This might be a piece to the puzzle.


The leap taken by value from the body of the commodity, into the body of the gold, is, as I have elsewhere called it, the salto mortale of the commodity. If it falls short, then, although the commodity itself is not harmed, its owner decidedly is. The social division of labour causes his labour to be as one-sided as his wants are many-sided. This is precisely the reason why the product of his labour serves him solely as exchange-value. But it cannot acquire the properties of a socially recognised universal equivalent, except by being converted into money. That money, however, is in some one else’s pocket. In order to entice the money out of that pocket, our friend’s commodity must, above all things, be a use-value to the owner of the money. For this, it is necessary that the labour expended upon it, be of a kind that is socially useful, of a kind that constitutes a branch of the social division of labour. But division of labour is a system of production which has grown up spontaneously and continues to grow behind the backs of the producers. The commodity to be exchanged may possibly be the product of some new kind of labour, that pretends to satisfy newly arisen requirements, or even to give rise itself to new requirements. A particular operation, though yesterday, perhaps, forming one out of the many operations conducted by one producer in creating a given commodity, may to-day separate itself from this connexion, may establish itself as an independent branch of labour and send its incomplete product to market as an independent commodity. The circumstances may or may not be ripe for such a separation. To-day the product satisfies a social want. Tomorrow the article may, either altogether or partially, be superseded by some other appropriate product. Moreover, although our weaver’s labour may be a recognised branch of the social division of labour, yet that fact is by no means sufficient to guarantee the utility of his 20 yards of linen. If the community’s want of linen, and such a want has a limit like every other want, should already be saturated by the products of rival weavers. our friend’s product is superfluous, redundant, and consequently useless. Although people do not look a gift-horse in the mouth, our friend does not frequent the market for the purpose of making presents. But suppose his product turn out a real use-value, and thereby attracts money? The question arises, how much will it attract? No doubt the answer is already anticipated in the price of the article, in the exponent of the magnitude of its value. We leave out of consideration here any accidental miscalculation of value by our friend, a mistake that is soon rectified in the market. We suppose him to have spent on his product only that amount of labour-time that is on an average socially necessary. The price then, is merely the moneyname of the quantity of social labour realised in his commodity. But without the leave, and behind the back, of our weaver, the old-fashioned mode of weaving undergoes a change. The labour-time that yesterday was without doubt socially necessary to the production of a yard of linen, ceases to be so to-day, a fact which the owner of the money is only too eager to prove from the prices quoted by our friend’s competitors. Unluckily for him, weavers are not few and far between. Lastly, suppose that every piece of linen in the market contains no more labour-time than is socially necessary. In spite of this, all these pieces taken as a whole, may have had superfluous labour-time spent upon them. If the market cannot stomach the whole quantity at the normal price of 2 shillings a yard, this proves that too great a portion of the total labour of the community has been expended in the form of weaving. The effect is the same as if each individual weaver had expended more labour-time upon his particular product than is socially necessary. Here we may say, with the German proverb: caught together, hung together. All the linen in the market counts but as one article of commerce, of which each piece is only an aliquot part. And as a matter of fact, the value also of each single yard is but the materialised form of the same definite and socially fixed quantity of homogeneous human labour.

So here Marx details how the labor theory of value and supply & demand merge. Basically, if labor time spent on something not socially necessary (if there's superfluous supply of the resulting products over and above demand), then that labor will not produce value.

For example, let's say there are 15 shirt-makers. These 15 shirt-makers produce 6000 shirts in 10 hours each (in total, 150 labor hours). However, there is only social demand for 4000 of these shirt (in other words, only the manufacture of 4000 shirts, 2/3 of the total, was socially necessary). That means only 2/3 of the labor time, 100 hours, was socially necessary. 50 hours of labor was not socially necessary, and thus did not produce any value. That means the 150 hours of labor time amongst all the shirt-makers gets valued as if they had only labored 100 hours amongst themselves. Since the value of the labor going into the shirts decreased to 2/3, the value of the shirts themselves would decrease to 2/3, and the average price would decrease to 2/3 of the original price.

Likewise, we would probably see 1/3 of these shirt makers move out of the shirt-making business and venture into something socially necessary (something with more demand, where the labor actually produces value). Supply & demand.

As I've said before, labor is constantly adapting itself to maximum utility.

So this would seem to buttress the argument that (average?) price is a reflexion of the socially necessary labor that went into the product. (The phrase "socially necessary" ensures that supply & demand play a role).

[Comrade-Z]

What would have to happen is that the change in price has to not equal the value of the commodity.

But why would this ever happen? People just not behaving rationally?


In other words, the price would have to rise, not as a result of a change in the ratio between the value of the gold and the wheat, but as a result of other factors. The ratio of values would be the same (one quarter of wheat = x labour time units and £2 = x labour time units), but the price wouldn't (one quarter of wheat = x labour time units and £1 = x/2 labour time units). Since we are talking about one particular commodity we could cite a rise in demand as an example (or rather, a shortage in supply relative to the rising demand).

You still don't detail what these "other factors" might be. Maybe irrationality, or maybe inaccurate information/perception of the labor-time going into the product? The example you give relating to supply & demand doesn't work because rising demand raises real value and the price, as Marx (and I) explain above. There is no disharmony between the price of the product and socially necessary labor-time invested in the product in this circumstance when supply & demand come into play.

Thanks for your help, though. :)

Also, I guess we should clarify that this stuff only applies when dealing with commodity production--products produced with exchange value in mind, rather than use-value for the original owner. Right?