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Help on exchange value and sale of a commodity
I was wondering if someone could help me on this: A commodity has a use value and an exchange value. The exchange value is created by abstract social labor in the amount socially necessary for its production.
Assume the price of the commodity is $10. When I pay the ten dollars and take the commodity, I am taking possession of its use-value.
But what happens to the exchange-value? Is it absorbed in some way in the money which changes hands, or does it somehow disappear due to its abstract nature, or does the exchange value re-enter the production process as part of the profit of the seller, who then reinvests the money which is used to buy additional use-value in the form of labor?
If the exchange value of the sold commodity (now represented as a money-value) is not immediately, or as soon as possible. re-converted into the capital process, then, obviously, the system can break down.
Thank you for any help.
The exchange value is realised at the point of transaction. No transaction - no exchange value. This exchange value, in monetary form, with a certain amount of money added or subtracted due to various factors that make the price different from the exchange value, goes to the seller, usually to be used as capital (when the price of the reproduction of workers' labour is subtracted). So the monetary form of the exchange value plus or minus some small sum goes into the M' of the M-C-M' cycle.
So, when a commodity comes off the production line, it has no exchange-value? Or would it be more accurate to say, No transaction = no realized exchange value? When, exactly, is exchange-value created?
If the commodity isn't exchanged, it's not a commodity, is it? A commodity is at least potentially exchangeable, but if the object that was a commodity had been forgotten, for example, in an inaccessible warehouse, it's been taken out of circulation and doesn't participate in capitalist exchange. I'm not sure it makes sense to talk about the point where a commodity gets an exchange value - the exchange value is something we use to describe the process of commodity production.
Commodities show their commodity form in the market - so asking when a commodity gets its exchange-value is looking at the question upside down. A product is errr, produced by applying human labour to something. This product is then traded against other products in the market. These products are 'commodities'.
The value it trades at is related to the average (socially-necessary) labour-time (so if it it takes me a year to hand-make a chair, it's not going to sell for much more than one made in minutes in a factory: the socially-necessary time to make a chair is 20 minutes).
The labour, which determines its exchange value, goes in before it becomes a commodity. But it is only when it is traded that it becomes a 'commodity'. I could after all take a year to make a chair, then sit on it for 30 years. So it isn't a commodity.
Critique of the Gotha Programme, Pt IV: http://www.marxists.org/archive/marx/works/1875/gotha/ch04.htm
No War but the Class War
Destroy All Nations
Lucius Accius (170 BC - 86 BC): "A man whose life has been dishonorable is not entitled to escape disgrace in death."
Marx, in Chapter One, Capital:
So, don't we have value as created by socially necessary labor and exchange value as the expression of value? Value could only be produced during the process of production, by definition. ( Although it doesn't follow that this value remains constant as production can become more efficient, or the product no longer in demand, etc.)
So. We have three "things." Use-value, value, and exchange-value, the expression of value.
AT the point of sale, the buyer takes possession of the use-value, the seller takes possession of the exchange-value, money. Since "value" is abstract social labor, then doesn't this imply that when the commodity is removed from the market its value is also removed from the market? Which doesnt seem to make sense.
But if exchange-value is the expression of value, then doesn't this mean that value remains with the exchange-value, i.e. with the money. Thus, when linen is exchanged for a coat, then the use value of the linen is exchanged for the use value of the coat. But, in fully developed commodity production, money is exchanged for the coat. Which can only mean that the exchange-value and value are separated from use value.
From the point of view of sale of labor, the capitalist buys labor from the worker with money. The worker keeps the money and the dead, abstract social labor. The capitalist then uses the use-value of the worker. Since labor is the only commodity which can produce more value than it uses, then a surplus/profit is produced.
I would think that money, exchange-value, is essentially dead labor but not capital yet.
Wouldn't this mean that abstract social labor is expressed or manifested in money as soon as the commodity is sold? This might explain why bourgeois economists concentrate so heavily on money, they follow the money, so to say. It is nothing but social labor with no use-value, because it has not been converted into capital.
Does anybody know if say, Richard Wolff or Andrew Kliman, et al., teach this kind of problem in their economic classes?
But isn't this because you made the chair for your own personal use rather than for sale to others, and because it was not made with socially necessary labor? (If you made it for sale and you were a master furniture maker then it would be a commodity.)
What about this? Socially necessary labor is the value of the commodity, which value is then expressed by exchange-value, its price in money. So, when a new car comes off the assembly line, it is a fully produced commodity (except maybe for transportation to a dealer.) It even has a price tag, the MSRP, its exchange-value. which, within limits is negotiable.
Of course, the owner, say, GM, has to sell it as soon as possible, otherwise its use-value and its value begin to depreciate. The use value disappears because of just sitting on the lot, and the exchange value begins to disappear because new cars are being made more cheaply than the one just made.
So, this is something that has always interested me about the pricing expressions of exchange value and value itself, and their relationship:
If exchange value is a mere reflection of value (that is, socially necessary labor time), then how do you count for certain marketing techniques that inflate the pricing expression of exchange value. Say, an artisan makes a "hand-made" chair that may be different in design, but not much in quality compared to a factory made counterpart. The fact that it is hand-made and advertised as such often inflates its exchange value on the market and people will buy it, out of a fetishism for "hand made" stuff.
I've noticed this same dynamic in other industries. Guitars: a Mexican made Fender Telecaster, like one I used to have, is often sold for less because it doesn't have the aura of being an "American, hand-made" guitar and it's made in a different manufacturing process. But I've played my Telecaster against American-made telecasters, and they're about the same quality at a much more inflated price.
Also, as my wife has gotten into fashion design, I've been poking around that industry to take a look and see why clothing prices are so ridiculously inflated: it has to do with a couple of things: clothing houses tend to price their items to make it attractive to rich people to buy (there is this really fucked up thing that happens, which I guess could be coined as a "Veblen effect" or whatever, where rich folks are less likely to buy a commodity if it's priced low, compared to when that same item is priced way high.)
There's an article I read that said, in addition to that, there are "middle-man" costs that inflate the price, such as retailer mark-up and what not. But at the base: in this article, I read about a pair of cargo shorts that were made from some cotton fabric that is priced high for its particular pattern design (I couldn't make out what made it so much more sought after, other than aesthetic appeal) and the fact that the designer had people in his factory using archaic methods.
This 'hand-stitched' thing added to its appeal... even though it's probably, in all practical purposes, looks like and is the same quality as a pair of cargo shorts you'd pick up at WalMart or something. But even if I were to assume that this cotton is super-special, what really seemed to drive up the exchange value was this "hand-made" factor to it.
I think Marx tried grappling with this transformation from value into final price form in Vol. III of Capital, but it was unfinished, and so an undeveloped there. I've never heard this part of the value form being developed really well. This really isn't some kind of rebuttal to your summary or anything, just something that I've always felt has been unresolved when thinking about prices and value of a commodity. I'd suppose this becomes less of an issue if you take Marx's law of value as a general rule, rather than something that explains the totality of commodity's prices or final exchange value.
There may be a temporary inflation but people will realize the "artisan" is selling junk.
That could be an issue of personal taste. A brief review of the guitars on the internet shows a lot of people liking one or the other. Some people even like the Chinese and Japanese made ones.
I don't know. My wal-mart cargoes are already beginning to fall apart after six months.
That's the thing, though... they're not selling junk. It's often selling high quality furniture. It's just that it is made by hand by a small group as opposed to it being more mass produced, which are often of the same or similar quality. It's not the quality that people are buying necessarily, but there is a pervading idea that "hand made" = "quality." This is partly why some food manufacturers will slap "Homemade" on their labels and see it for a premium, when it's really just the same damn thing as any other canned food.
Well, when it comes to Telecasters, the only thing I noticed, as far as quality goes, is the difference between a Squire Telecaster and a Fender Telecaster. There's obvious differences in the quality, which mostly come from the materials used in the product, which are reflected in the price. When you take an American-made, Mexican-made or Japanese-made Telecaster and hook them into the same amplifier, the tone is the same, the feel of the fretboard is the same. The only real difference is the American-made Telecaster stayed in tune better, but that has to do with the tuning machine and those aren't worth the often hundreds-of-dollars price difference between the two guitars. The only other actual difference that is made tone-wise is what kind of wood is used and the different woods used to make Telecasters don't really vary. In fact, I think they're all made with Ash and Alder, which are comparably priced woods, last I checked.
The only non-negligible difference between the guitars, that I noticed anyway, is where it comes from and the manufacturing process that is used to make it. American Fenders (that aren't Squires) are made, mostly, in smaller shops with smaller teams, while they are done with larger production teams in other countries, for mass-manufacture. Sometimes the accessories -- mainly in the price of which ever brand of pick-ups are used -- will make a bump in price, but, again, not the hundreds-of-dollars difference that is often expressed in the final price.
There are a multitude of other things that would change the value of a guitar, depending on the parts you got to make it. But if you're doing a strict comparison of comparable guitars for quality and tone and the only thing that is really a difference is the origin of production, then there isn't a lot of difference. At least, there isn't any that should significantly impact the final price in the way that it does. A lot of guitarists in the U.S. exhibit the same attitude toward their guitars as car enthusiasts exhibit toward U.S. made cars vs. foreign made cars. It is "personal taste" but a lot of it is tied into some nationalistic feelings or nostalgia.
Clothes tend to do that, depending on their wear. Poor folks will probably wear the shit out of some $200 - $500 cargo shorts and have them fall apart just a short time later; whereas rich folks probably have enough money to have an expansive set of clothes and trade them out often.
Last year, for the first time in my life, I was able to afford what I thought were a "decent" pair of work boots compared to what I was wearing -- usually whatever I could get at Walmart or Target or something. They would usually last me about a year before they're falling apart, after constant wear. With these boots that I bought last year, it's about a year and they're starting to fall apart, too (the soles are getting torn up and there's some exterior damage that is going to get worse if I don't do anything about it.) So, really, the quality has been about the same, at double the cost. The advantage to the boots I have now is that I could go and get them repaired at the factory store for about as much as I could buy a new pair of boots from Walmart, but the company makes so much damn money that I can't see why it would even be double the cost in the first place, other than for the fact that they also have a smaller team who cobbles the boots together and dummies like me will fall for their quality schpiel every once in a while.
Technological changes that bring down the socially necessary labor time for a commodity are obviously less about quality of the commodity and more about how much capitalists can crank out to stay profitable against each other. With that said, the quality of many commodities really don't change that much, with some major exceptions. TVs, for example, have gotten a whole lot better, as have computers. But aside from tech commodities (and even then, improvements in quality are often few and far between), there's nothing to objectively say that the quality of a commodity has gotten worse with new innovations in the means of production.
Well, the exchange value is not equal to the price anyway - the money-equivalent of the exchange value is the number around which the price oscillates. People often think they can charge anything for "hand-made" goods, but in fact unless their prices are near the exchange-value they will be forced off the market.
Sure.Originally Posted by rednoise
But also consider that the exchange value is higher here as more socially-necessary labour time needs to go into making that type of chair.
Alright, but quality doesn't have anything to do with exchange value.Originally Posted by rednoise
But isn't "quality" the use-value of a commodity? And since use-value is combined with value (expressed by exchange-value) in a commodity by definition, there would have to be some kind of connection between quality and exchange value.
Why does a BMW have a higher exchange value than a Ford?
Does it now? I don't really drive so I can't comment.
Anyway, it is a mistake to treat use-value as some sort of number that quantifies how useful a commodity is. Use-value is something a commodity either has or has not - i.e. uranium does not have use-value in a society that has not discovered nuclear fission.
I understand that, which is why I continually separated "price" from "exchange value" in my post.
This is kind of my point, though. This isn't necessarily true. Any Veblen good that has been around for a long time seems to make this exception (but I also noted at the end of my post that this could be an exception, not a disproving of the generality.) But it exists and the mechanisms for making the final price far outstrip its exchange value is what is interesting to me.
I'm not sure this is the case, even for Veblen goods. Luxury commodities are often manufactured using processes that consume a lot of socially-useful labour time, often deliberately. Thus while their price is high, so is their exchange-value, even though they might not offer any additional functionality over equivalent non-luxury commodities.
I mean, the Veblen effect has its limits - you can't sell water for thousands of euros per litre, for example, no matter how luxurious it is seen as.
I think first of all exchange value of a commodity which is like the price that the thing sells or is bought for is not theoretically the same as the as its value.
The two can be different because of oscillations in supply and demand; even if the laws of supply and demand tend to return or drive the exchange value back to equality to its value.
However the supply and demand of a commodity can be in perfect equilibrium and commodities will not exchange at their value, in fact they don’t in capitalism.
As commodities systematically exchange at above and below their value in capitalism due to the varying amounts of (fixed and constant) capital required in the relevant ‘spheres of production’.
It is a lamentable and common mistake that the ‘law of value’ operates on its own as the sole determinant of exchange value in capitalism.
The fact is that the ‘law of value’ only operates purely as a determinant of exchange value in the simple commodity production, C-M-C, as described in the opening chapter on volume one.
And that is the ‘starting point of capitalism’.
Exchange value in capitalism is systematically regulated by the average rate of profit and the socially necessary labour time required to make something.
On the other issue
There is a quote from Karl somewhere early on were he totally dismisses as a relevant argument whether or not a commodity is ‘really’ useful or not and whether or not the buyer is insane in thinking it is.
He of course, probably to illustrate that point, uses the bible as one of his commodity exchange examples.
What matters is how much labour time it takes to (re)produce a commodity not what it does or why some people might think it is useful.
You can take perhaps an instructive example of branded clothing eg T-shirts and two products one with Nike printed on it that sells for $50 and an ‘identical’ one without the label that sells for $5.
I actually think both must sell at their value; unless Nike makes an average rate of profit significantly above the average.
The premium or excess price for the Nike product is the ‘significant’ cost of advertising.
In fact the brand is a product of and the expenditure of capital investment.
This kind of advertising deludes the buyer into thinking he is just like and has something in common with the heroes of our age like Tiger Woods or whatever.
And provides the use value of making him feels better about himself and somebody more important than he really is in society etc.
I mean you can do that by buying and consuming a couple of bottles of wine, as if that kind of thing can’t make people feel like Batman as well; so who am I to criticize buyers of Nike T-shirts?
There is obviously a growing market for mind altering commodities that make us feel better about ourselves whether or not they are tangible or concrete things of themselves or not.
And there is fancy hand made furniture as well; the stuff that fetches by far the highest prices, with a chair going for $150,000 say, was made by the free access communist Shakers.
Very useful post indeed, Dave. The impact of the process of the averaging of the rate of profit on the exchange value of commodities is often overlooked
On the question of use value and exchange value there is an interesting quote from Marx which kind of anticipates the objections later rasied by the subjectivist school of value. Here it is
With reference, therefore, to use-value, there is good ground for saying that “exchange is a transaction by which both sides gain.” It is otherwise with exchange-value...If therefore, as regards the use-values exchanged, both buyer and seller may possibly gain something, this is not the case as regards the exchange-values. Here we must rather say, “Where equality exists there can be no gain.” It is true, commodities may be sold at prices deviating from their values, but these deviations are to be considered as infractions of the laws of the exchange of commodities, which in its normal state is an exchange of equivalents, consequently, no method for increasing value. We have shown that surplus-value cannot be created by circulation, and, therefore, that in its formation, something must take place in the background, which is not apparent in the circulation itself. ( Capital Vol 1, Ch 5)
For genuine free access communism
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Missed this before.
No. You misunderstand what a commodity is. A cheap chair produced for the market is still a commodity; a master-crafted chair that isn't sold is not a commodity.
I think you also misunderstand what socially-necessary labour is. The chair was made with 'socially-necessary labour' - and then, with some extra.
Let's stick to chairs. There is a finite number of chair-making machines in the world, and there are a few artisan master furniture-makers.
It is not possible for the demand for chairs to be filled by either of these sources alone. Most chairs are machine-made in factories, some by hand in workshops. Both kinds of production are necessary to fill the demand for chairs.
Chairs take 1 hour of production on a machine, and 100 hours by hand.
1 million chairs are produced every month. The master furniture-makers produce 100 of these chairs, the chair factories produce 999,900.
The socially-necessary labour-time to make one chair is total time on chair production (999,900x1)+(100x100) divided by the number of chairs (1,000,000).
That's 1,009,900/1,000,000 or 1.0099 hours. In other words the average time to make a chair is a little more than the time to make a chair by machine.
If there were only a couple of machine capable of producing 1,000 chairs a month in total, and thousands of master furniture makers, the numbers would be (1000x1)+(999,000x100)/1,000,000 and the socially-necessary labour-time for one chair would be 99.901 hours - just below the time necessary to hand-craft one.
In the first case, the master furniture-makers need to do a lot of convincing that their chairs are 100 times better than the machine-made chairs.
I suspect in the second case, people might take some convincing that the machine-made chairs were as good as hand-made chairs.
Either way, prices will gravitate towards (but are rarely equal to) the 'socially-necessary labour-time' expressed in terms of the cost of labour. If a chair takes just over an hour to make, then the value will be equivalent to other things that take just over an hour to make; if it's nearly 100 hours, then the cost will approximate other things that also take nearly 100 hours to make.
Critique of the Gotha Programme, Pt IV: http://www.marxists.org/archive/marx/works/1875/gotha/ch04.htm
No War but the Class War
Destroy All Nations
Lucius Accius (170 BC - 86 BC): "A man whose life has been dishonorable is not entitled to escape disgrace in death."
Are you saying that the master-crafted chair would become a commodity if it were sold?
But isn't exchange value the amount which one commodity can be exchanged for another? As in, 10 yds of linen can be exchanged for 1 coat.Originally Posted by Dave
It may be regulated (i.e., be brought back to its average, normal price) by the average rate of profit, while being determined by socially necessary labor time.
Does Marx say anywhere specifically that exchange value is determined by the average rate of profit as well as by the socially necessary labor time? It seems fairly basic that, say, a commodity which sells for $10, i.e. $10 is the monetary expression of the value of the commodity, and the capitalist paid $5 for the socially necessary labor-power, then the profit is $5 and the rate of profit is 100%. In other words, profit and ultimately the average rate of profit, seem to be determined by the socially necessary labor extracted by the capitalist.
In the illustration of the exchange of linen-money-bible, are you sure that he dismisses the question of the real utility of the bible for the linen-weaver? He may ridicule it, but the exchange is nevertheless an exchange of real commodities, of use-values combined with exchange values.
