This is the draft of the script for my next video in the Law of Value series. I am posting it because I would love to get feedback, criticism, suggestions, etc. before I start making the video. I am particularly interested in people’s opinion of the “3rd thing” argument: of the argument that exchange-value implies the existence of an intrinsic value that is being expressed through exchange value. I want to make sure that this is a logically rigorous presentation of the argument and that it is simple and clear. Any thoughts?
Use-Value, Exchange Value, Value
(picture of a house)
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 in order to be exchanged, not in order 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 directly 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, if left to itself, production for market exchange led to all sorts of unexpected consequences including gross inequality, exploitation, and crisis. If we are to learn how this coordination works we need to start by analyzing these two sides of the commodity: its 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. But 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. [image of buying beer or entertainment. focus on gluttony]
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= a case of beer. 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 drink beer. They are two totally unrelated and incomparable uses. Maybe society spends 10,000 hours making books this month and 20,000 making beer. Does this mean the beer is more useful than the book? No. It just means that different amounts of labor were required in proportion to the amount that society demanded. (1)
We can’t compare uses yet commodities are compared with each other all the time in the market in the form of exchange ratios. That’s what exchange value is: a comparison of the value of one commodity to the value of another. When I say that a book is worth a case of beer I am expressing the exchange value of the book in beers. The book is worth six beers. But a book can have an infinite amount of exchange values. A book can form an exchange ratio with toothbrushes, beans, kittens… anything. Each of these exchange values is just another way of measuring the exchange 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. The only thing that changes is the “form of appearance” of this value- the particular manifestation of this value. This independent value is a real thing, implied in the very notion of exchange-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.
Over time one commodity emerges as the primary commodity that all other commodities measure their value in. This commodity is money. Money can trade for any commodity and thus becomes the universal measure of the intrinsic value of different commodities.
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. But what is this value? Where does it come from?
We have already seen that it can’t come from use-value because use-values are not comparable and use can’t be measured in any quantitative sense. The logical place to look is the very place that we began our investigation of human society: with the creative power of human labor. Society is not something imposed upon us by nature or some divine power. It is the product of our own creation, of our creative action in the world. The study of society is the study of the organization of this purposeful action.
In a capitalist society this creative activity takes the form of commodities. The relations between laborers take the form of commodity exchanges. Labor takes the form of value. (Issac Rubin suggests that instead of calling it a labor theory of value we might better call it a “value theory of labor”) When we say a commodity has a certain amount of value we are saying that society has devoted a certain amount of its labor time to the production of that commodity.
So when before we said that there was an antagonism between the use-value and exchange-value of a commodity, not we can refine this to say that a commodity has an antagonism between its use-value and value. Exchange value is just the way we express value. Remember, we can’t directly see the relations between workers. We don’t have a direct way of seeing how much labor has gone into a commodity. We only see the relations between commodities, relations called exchange values. Exchange value is the way value is expressed.
(We still haven’t explored the full significance of this antagonism. This will be covered in other videos.)
In his famous critique of Marx, Eugene von Bohm-Bawerk argued that Marx’s argument that labor creates value was unjustified. He said that there are many other things we could posit as this “3rd thing” behind exchange-value and use-value. Why not color? Weight? Scarcity? Utility? Marx had no logical justification for holding labor above other common qualities of commodities.
Yet Bohm-Bawerk’s criticism misses the entire point. If Marx’s goal was to play intellectual parlor games then perhaps it would be fun to theorize about a color-theory-of-value or a weight-theory-of-value. But Marx’s point was to explain the social relations that make up a capitalist society. Identifying labor as the substance of value is the only logical choice if we are to explain the organization of human activity through commodity exchange.
That was a lot of information. Let’s some up a few key points:
1. In a capitalist society we don’t produce for immediate use. We produce to exchange.
2. The products of our labor become commodities in the market with both use-value and exchange-values.
3. Exchange-values are ratios of how much of one commodity exchanges for another. Exchange value implies that there is a 3rd thing, an intrinsic value that is being measured by this or that exchange ratio.
4. This 3rd thing is social labor.
When Marx says “value” he is not talking about subjective preferences, or even price. He is talking about labor-time. Value is labor-time. Price is the way we measure value. Subjective preferences are shaped, in part, by this world of commodity values.
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.
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 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. 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.