Use-Value, Exchange Value, Value
part 4 of the Law of Value series
This is one of many abandoned houses in my neighborhood. The slumlord owner let the property deteriorate until it became unlivable and doesn’t want to pay the money to make it livable again. There are thousands of abandoned houses in this city, and thousands of homeless people. Despite the urgent social need for houses these properties don’t fulfill a social use. Why not? Because the owners of these commodities are not interested in their use. They are interested in their exchange-value, the rent they receive from the property. For decades they collected rent while the use-value of the house deteriorated. And now these houses sit vacant, a testament to the contradiction between use-value and exchange-value.
This is not a contradiction restricted to housing. Every commodity contains this contradiction because every commodity is produced to be exchanged, not to be used by the producer. We have enough food on the planet to feed everyone, yet millions starve. Why? Because we don’t produce food directly for social need. We make food in order to sell it for money. Society has much of the technological ideas it needs to reduce greenhouse gas emissions, yet it isn’t acting fast enough to apply these ideas. Why? Because production is not undertaken to direct ly mediate our relation with the environment. We produce for profit.
The exchange of the products of labor in the market is just one of many possible ways that the private labors of billions of individuals can be coordinated. Some people think this is the best possible way to coordinate human productive activity. Marx saw that, despite all of the dynamism and technological wizardry of capitalism, there were fundamental social antagonisms at the heart of this means of coordination… that production for market exchange leads to all sorts of unexpected consequences including gross inequality, exploitation, and crisis. And for Marx all of these social antagonisms can’t be understood until we understand the contradiction within the idea of a commodity itself: the contradiction between use value and exchange value.
Use value vs. exchange value
A commodity has a use. This is its use-value. What does use-value tell us? It tells us how a commodity satisfies a social need. If we want to feed everybody we need a certain quantity of food. If we want to build everyone a house we need a certain quantity of wood and nails. Some use-values require no effort to attain: air, sun, gravity, etc. Others require effort to attain. There is a finite limit to the amount of labor that can be devoted to the production of use-values. Society must apportion this labor between the production of different use-values in some way. As technology changes the amount of labor required to produce some use-values decreases thus signaling a change in the apportioning of labor. As technology evolves to reshape what human labor is capable of producing so do our needs and desires evolve.
In different societies this labor is apportioned by different methods. In a market society it is the buying and selling of the products of labor in the marketplace that serves the purpose of allocating labor between the production of this use-value or that use-value. This creates a second type of value, unique to market societies: exchange-value.
Exchange value is the ratio in which one good exchanges for another. Perhaps one book exchanges for a loaf of bread… Or a new car exchanges for a thousand bottles of whiskey. These ratios are all exchange values. They say a book is worth this much bread; a car is worth this much whisky. In a developed market society one commodity eventually emerges as the primary commodity in which all other commodities express their exchange value. This is what money is. For most of the history of capitalism this commodity has been gold. By comparing the ratio of tomatoes or cars or baseballs to gold all commodities measured their exchange value in ratios to gold.
These two sides of the commodity, its use-value and exchange value, form two opposing, contradictory poles. Much of the social antagonisms of capitalism are rooted in this tension between use-value and exchange value. Of course, most of the time when we look at a commodity it doesn’t seem very antagonistic. This is because the antagonistic social relations behind the commodity are not visible. But when we look at a society organized around commodity exchange we can see lots of social antagonisms. To understand how these social antagonisms spring from the opposition of use-value and exchange-value we will need to take a closer look at both…
You can’t use it AND exchange it!
If I am selling a tomato this tomato has no use-value at all for me. Its use-value only exists for the person that buys it. I am only interested in the exchange-value, how much money I can get for it. Production in a capitalist society is not production for use, but for exchange. This means that we have no inherent interest in the usefulness of our labor outside of its ability to create exchange-value. Now, from a social perspective, it is very important what kind of labor we do: Do we make bombs or flowers? Oil or cupcakes? But as individuals we have no stake in this. We produce in order make money, to get exchange value.
Why do people produce for exchange and not for their own use? Because in a capitalist society the working class does not own the means of producing their own subsistence. The only way for working people to get the necessities of life is buy them in the market. And the only way to do this is to sell our labor to a capitalist for a wage. We spend our whole life making a profit for an employer so that we can spend this wage in the market to obtain our daily bread. Our job is not a means toward personal satisfaction. Our job is a means of making money so that we can buy our satisfaction in the market.
Bourgeois subjective value theory talks about a “double-inequality of exchange.” It says that the only reason exchange happens is that two people value the other person’s product more than the product they are giving up. Marx actually goes even further than this. He says that to the seller the commodity has no use-value at all, other than the fact that it can be exchanged.
Not only does this bourgeois theory of “double-inequality of exchange” give the mistaken impression that people produce for their own wants and then sell off the surplus in the market, but it also imposes the profit-maximizing logic of the capitalist onto the consumer. By claiming that consumers make a subjective profit from exchange it transposes the real, objective profit of a capitalist who pays his workers one sum of money and sells the products of their labor for a greater sum of money, onto a completely intangible and unquantifiable notion of subjective profit. But subjective preferences for commodities can’t be measured, divided, added to, or compared in a numerical fashion. By imposing the logic of capital onto consumers it effectively erases class from the scope of its analysis.
The mystery of exchange value…
One book= 1 car. What does that mean? What does it mean to say something is worth so much of something else?
Some people think that the usefulness of a commodity can answer this. But uses of things can’t be compared. You read books. You drive cars. They are two totally unrelated and incomparable uses. Maybe you like books more than cars. Does this mean that books are worth more than cars? (1)
What does it mean to say a book is worth so many jars of peanut butter, or so many cups of coffee? Clearly jars of peanut butter or cups of coffee are measuring something. And clearly any other commodity could be used to measure this something. A book could be worth so many pencils, so many kittens, so many tires… And each of these exchange values would be a different way of measuring the value of the book.
But this means that the book has a value independent of the particular commodity that we choose to measure it with. Whether we measure the book’s value in beers, beans or kittens it stays the same. Yet we can’t see this value. We only see the specific exchange ratios of the book as it is exchanged with other commodities. [The only thing that changes is the "form of appearance" of this value- the particular manifestation of this value.] But isn’t this what exchange value really is- the comparison of the value of one commodity with the value of another? These exchange-values only make sense, only work, because there is something called value that is being measured by them. Exchange value necessarily implies the presence of an underlying value. Marx uses the term “intrinsic value”. By this he doesn’t mean that value lies buried within the commodity, or that it is magically bestowed upon the commodity, but that it is impossible to compare commodities to each other in the market without a commodity having its own value. But what is this value?
What is the 3rd thing?
We have seen that exchange value implies that commodities have an intrinsic value expressed in different exchange ratios. This value is not use-value or exchange-value but a 3rd thing. What is this value? Where does it come from?
I know you are in a lot of suspense so I’ll just come right out and say it: Marx argues that it is the labor time that society devotes to the production of these commodities that accounts for this underlying value. Commodities that take more labor to create have more value than ones that take less labor. As labor becomes more productive, as it becomes easier to produce things, their value falls. But what is Marx’s justification for choosing labor as this 3rd thing?
Marx’s critic Bohm-Bawerk pointed out that there are lots of properties that are common to all commodities: Marx could just as easily have said scarcity or utility were this third thing. This, of course, is the approach taken by marginal utility theory which argues that it is our subjective desires for commodities in relation to their scarcity that determines their value. Why is it that Marx doesn’t take this route?
For one, scarcity and utility cannot be understood without reference to labor. The amount of a commodity that exists at any point in time is clearly related to the amount of labor that has been devoted to producing that commodity. And utility isn’t just some abstract, individual substance detached from the labor process. Subjective desire only counts economically when it is turned into real action, when we buy things in the market. The only way to enter the market as a purchaser is to also enter it as a seller. We must sell the products of our labor and then use this money to buy the commodities we desire. (More specifically, workers sell their ability to work, their labor power, to an employer. The employer sells the product of that labor in the market. Workers receive a part of this value in the form of a wage.) The only means of attaining our desires is the buying and selling of the products of labor. Not only does capitalism shape our desires, it determines how we go about attaining our desires.
But there is an even more important reason why Marx doesn’t choose scarcity and utility as the determinants of this underlying value. Utility and scarcity both describe the relation between individuals and objects. Marx is interested in the relations between people. If we think back to Marx’s argument about commodity fetishism we will remember that in a capitalist society the relations between people take the form of relations between things. Objects appear to have power and value, on their own. But this wold of appearance is not the full story. These value relations between commodities are actually relations between people whose work is coordinated indirectly through commodity exchange.
And this is where any social theory must begin: with a study of the productive activity of people as they work to create the world they live in. Not only is this the best starting place for an analysis of society, it is also the best starting point for a radical social theory whose aim is to investigate the possibility of changing the world. If we realize that human society is not the result of some natural or divine eternal logic but merely the creation of our own labor then that means that we have the power to mold and shape that society as we see fit. In a capitalist society these creative powers take the form of an external world of value and capital that acts back upon society, shaping it against the will of its creators. Yet, in the end the world of capital is nothing but the product of our own creation. If we truly want to change the world it is not up to nature, God, fate or experts, but up to us. This is the radical challenge of the law of value.
Let’s review and clarify:
1. The usefulness of a commodity is its use-value. Uses can’t be quantitatively compared.
2. The exchange-value of a commodity is the proportions at which it exchanges with other commodities.
3. Price is a specific type of exchange-value, the ratio at which a commodity exchanges with money.
4. The fact that commodities measure their worth against each other implies that they have an intrinsic value.
5. This intrinsic value is not a physical thing, nor is it magically bestowed upon commodities. It is not a timeless trait existing for all products of labor everywhere. Value, in the way Marx uses the term, is the means by which the labors of isolated producers are coordinated through commodity exchange. It is the social substance the binds together the labors of isolated, disparate individuals separated through the market.
Price and Value (a brief distinction)
We notice then that value and price are not the same thing. The value of a sandwich may be 1 hour of labor. Yet we don’t see this 1 hour when we buy a sandwich. All we see is its price. Prices are just the exchange value of commodities measured in money. The only way we see value is indirectly through these quantitative relations between commodities. Though value and price are indirectly linked, their connection is still strong. If demand rises suddenly causing the price of sandwiches to rise this will trigger an inflow of sandwich-making labor to meet demand. And once demand and supply have balanced, price falls back down to meet value. If the productivity of sandwich-making rises the time it takes to make a sandwich falls. The supply rises and the price falls. Prices and values fluctuate around each other, constantly codetermining each other.
The last thing we should note is that this concept of value is historically specific. Unlike bourgeois economic theory which projects its categories of utility and capital back in time to make all of history retroactively bend to the laws of capitalism, Marx’s theory of value describes a specific type of social organization unique to a society in which the dominant form of production is production for market exchange. When we don’t produce directly for use, but for exchange, we find that our productive activity is regulated by unconscious economic laws which Marx calls the “law of value”. Whereas before we said there was an antagonism between use-value and exchange-value we can now say that this is really an antagonism between use-value and value (since exchange value is an expression of value). As long as production is production to produce values instead of uses we will have to deal with the social antagonisms that spring from this contradiction: The logic of profit will dominate over society rather than the logic of usefulness. And the nature of work will be to maximize profit at all cost rather than to maximize the quality of the experience of work or of the life of the worker.
1. There have been attempts by neoclassical economists to reduce the usefulness of commodities to some common substance. Since there is no common substance that makes up usefulness they have to make up an imaginary substance called “utles”. These economists actually say things like, “A cup of coffee has 13 utles and a car has 3000 utles of utility”. But such attempts to invent imaginary substances with which to reduce utility to are generally thought to be pretty silly and misguided. In neo-classical economics this concept has been mostly replaced by the concept of rank preferences, or graded utility: A consumer has a ranking of demand preferences but these can’t be reduced to some common scale. In this way the question of value, in the sense that a commodity has a definite amount of value as determined by subjective social demand, is mostly abandoned: Commodities don’t have values, but consumers have preference rankings and these preference rankings result in prices. This approach conveniently eliminates many of the theoretical problems with earlier marginal utility theory (namely the unquantifiable nature of subjective utility), yet it has an inherent circularity: consumer preferences are not formed in a vacuum. They are formed on the basis of preexisting exchange ratios. As the prices of commodities change so do the preference rankings of commodities. So commodity prices must first be assumed in for marginalists to theorize the subjective processes of price formation. This is circular. The pink elephant in the room is the productivity of labor. As this productivity changes so do prices. There are a host of other criticisms lodged at Marginalism by Marxists. Perhaps sometime in the future I can write/produce more on the topic.