An exchange I had with someone regarding my draft of a Socially Necessary Labor Time (SNLT) script has made me think that I should probably do this video first before discussing SNLT. Here is the reason: Since SNLT is a fairly simple concept I wanted to expand on the topic and talk about the way capitalists get a super-profit by producing under the SNLT. But talk about super-profit before talking about profit in general might be confusing. So I think I will make the 5th video in the series this one on “contradiction” since there is a bit about exploitation and profit in this video. This is a draft and, as always, all comments are much appreciated, especially criticism.
Contradictions and the Law of Value
Marx is always talking about contradictions in the law of value. But these aren’t logical contradictions like “round square” or “military intelligence”. They are contradictions inscribed into the very heart of the social relations of a capitalist society. Some prefer to use the word “antagonisms”.
We are all painfully aware that modern society is full of social antagonisms. There’s poverty amidst great wealth, over-work alongside massive unemployment, banks taking away homes, gentrification, racial tensions, violence against women, labor struggles, environmental apartheid, police brutality, gang violence, hate groups, massive dislocations of populations, and lots of war. Marx was interested in explaining all of these antagonisms, but he doesn’t start his analysis with any of them.
Instead he begins with what at first seems a rather innocuous thing: the commodity. Why? Because the commodity is the most elemental piece of the social relations of capitalism. The productive relations between people take the form of commodity exchanges. The commodity is the basic organizer of social relations. So if we want to understand how all of these different social antagonisms relate to one another we need to start with the commodity.
As we’ve already seen, the commodity contains a contradiction: it has a use-value and a value. (As we saw, value lies behind exchange value. So while at first we said the contradiction was between use-value and exchange-value, we later refined this to use-value and value.) At first glance this does not seem all that antagonistic. Yet as we start to look closer we see more significant antagonisms emerge.
Property, exchange and violence
Why is it that people must sell their labor in the market for exchange value, for money?-Because they can’t produce their own means of subsistence for themselves. This is a distinct aspect of a capitalism. In previously existing modes of production the majority of people had use of some sort of means of production for themselves which they used to make most of the things they needed. (Note that I say “had use of” and not “owned”. This is because much of feudal production happen on common land. This collective use of land has been part of many other pre-capitalist societies.) People sometimes bartered for things but they did so by selling part of the surplus they had created for themselves. (Selling off your surplus product is very different than producing exclusively for exchange.) Over the course of a very long, violent, historical process called “Primitive Accumulation” these means of production were privatized and became the possession of a group of people called capitalists. Whereas before people labored directly for their own use, now they have to enter the market in order to attain their subsistence.
So already the fact that we produce for exchange and not directly for use expresses a social antagonism between the propertied and the propertyless. There is an underlying coercion already at work in the “free market”. And this coercion requires some threat of violence to enforce it whether it be a state, private military, or hired thugs. Violence was necessary to privatize the means of production and it remains necessary to enforce all of the legal aspects of property.
Labor Power
In order for people to buy their subsistence in the market they have to sell something else. Since the means of production are privately owned the only thing they have to sell is their labor. But of course labor can’t really be sold. Instead we sell our ability to labor: our labor power. We sell a definite amount of working time, whether it is measured in hours, weeks or years. This is why value is an expression of labor time.
Our own creative working ability, the very thing that makes us human and links us to society, becomes a commodity that we sell to someone else, a commodity called “labor-power”. Labor power, like any other commodity, has a use-value and an exchange-value, and… you guessed it- there is a contradiction between them. The exchange value is the money paid for our working time, the wage. Wages are set by the cost of our subsistence. They depend on the cost of food, housing, clothes, transportation, etc. But the use-value of our labor power is that it can produce value. These are the two opposing sides of labor-power: On one hand it costs a wage, on the other it produces value. This makes it possible to produce more value than we are paid for.
You could be paid $5 an hour yet produce $20 worth of commodity value an hour. (1) If this happened you would be being exploited. In fact your rate of exploitation would be 400%. Exploitation is made possible by the contradiction between the use-value and exchange-value of labor power.
Profit
Exploitation explains a puzzle about capitalism: the existence of profit. Capitalists start off the day with a sum of money which they invest in production. At the end of the day they have a quantity of commodities which they sell for more money than their initial investment. It would seem that they have made a profit just by buying and selling things. Yet profit can’t be made through mere buying and selling. This is because buying and selling is a zero-sum game. When we exchange commodities we are just moving commodities from one place to another. This process does nothing to change the total amount of value in society. Sure it might be possible to rip someone off, to over-charge someone, to charge a monopoly price, etc. But a win for one person in the market is a loss for another. There can be no aggregate profit just be moving commodities around. Yet profit is something that does exist in the aggregate. The total amount of value in society grows each year (GDP) through this expansion of value called profit.
So we seem to have a puzzle, or a contradiction, on our hands. On one hand the market is a realm of equality and symmetry. Market exchange conserves the value of commodities: the total value of commodities is not changed merely by transferring ownership. Any loss by one person is offset with a gain by another so that there is an inherent symmetry to commodity exchange. Yet profit is a phenomenon where value expands through the buying and selling of commodities. Profit is asymmetrical. More comes from less. How is this possible?
To solve this puzzle Marx tells us we must look beyond the market into the mysterious realm of production. It is in production where value is expanded through the exploitation of labor. Exploitation does not break any of the rules of market exchange because it doesn’t happen in exchange. Labor power is bought at its value. The products of that labor are sold at their value. No profit has been made through these exchanges. The profit is not from the market at all but from the labor process. It is the amount of labor preformed over and above the value of wages that determines the amount of profit. While the market remains a realm of equality and symmetry, production is a realm of asymmetry and exploitation. Thus there is a contradiction between production and exchange. And this contradiction is made possible by the contradiction between the use-value and exchange-value of labor power.
Class
This antagonism between the use and exchange value of labor power expresses a social antagonism between capitalists and workers. Capitalists and workers have opposing interests. Workers want their means of subsistence: housing, food, clothes, beer. They want use-values. Capitalists aren’t interested in use-values. They are after exchange-value. They want to expand the size of their capital by making a profit. In order for either class to get what the want they need the other. The workers must sell themselves for a wage in order to survive. The capitalist must hire workers in order to exploit them for profits. Yet despite this codependence their interests are entirely antagonistic. The more the workers are paid in wages the less profit the capitalist makes. The more profit the capitalist makes the more impoverished the working class. (This isn’t because capitalists are bad apples. It’s because they personify the interests of capital.)
Clearly the struggle between capital and labor has always been present in capitalist societies whether it takes the form of day to day struggles over the amount of work we consent to, or long-term battles for better wages and working conditions. But even outside of the workplace the class antagonisms of capitalism are clearly ever-present. The distribution of the value created by the working class into wages, profits, rent, interest and taxes has everything to do with the standard of living we are able to enjoy, the kinds of neighborhoods we live in, the type of life-chances we have, and the quality of our lives. In a society structured to maximize profit for one class rather than produce use-values for social need the quality of our lives is inversely proportional to the needs of capital. In the past 30 years, as neoliberalism broke down barriers to the free flow of capital, massive sums of wealth have been consolidated into the hands of a smaller and smaller class of uber-capitalists, while the standard of living for the rest of the world has steadily worsened.
Society has enough food, housing and technology that the entire world’s population could work a lot less and still have all of the basic amenities of life. (Maybe we couldn’t all have mansions, fancy cars, and all the expensive cocaine we wanted, but we could live comfortable lives.) And they’d probably be more fulfilling if we didn’t spend our whole life working for someone else. But we don’t have such a society because our labor is not aimed at creating use-values for society but at creating profit for capital. The constant revolutions in technology and productivity are not aimed at making work easier or improving the quality of our lives, but in creating more profit by submitting labor to greater control. Thus the workplace becomes increasingly dominated by machines, assembly lines and computers all designed to discipline labor to its task of creating more value.
The Labor Process
As the knowledge of work is removed from the worker it is placed into the machine. The worker loses control over the labor process, becoming just a minor cog in the machine, easily replaceable. Another contradiction is revealed: that between the conception and execution of work. Our own knowledge of the labor process is taken away from us and placed in a machine which dominates us, reducing our work to a job- the carrying out of routine tasks with no meaning to us except that they are a means to a wage. This is a contradiction which fascinates popular culture: man vs. machine. But behind the machine lies a social relation between ourselves and our own creative powers that have been taken from us, alienated from us, standing over us, dominating our work.
Crisis
And with this steady accumulation of capital in the form of machines comes another contradiction, this one between the capital invested in dead labor like machines and raw materials, and the capital invested in living labor. Though an increase in machinery allows capitalists to better exploit workers (and to appropriate value in competition as super-profit) machines can’t create value. As more and more capital is reinvested in machines and raw materials and less and less on labor, the actual value-creating substance of society is crowded out. This is the starting point for Marx’s theory of crisis. As the mass of capital that must be constantly reinvested in expanding production grows it becomes increasingly invested in dead labor rather than living labor. This sets the stage for massive crisis that require the destruction and devaluation of capital in all of its forms.
Conclusion.
All of Marx’s model of a capitalist society is derived from his basic starting point: the analysis of the commodity. From this basic idea of value as the organizing principle of a commodity producing society he establishes the contradiction between the use-value and value of a commodity. And then, over the course of multiple volumes he shows how the unfolding of this contradiction reveals all of these other contradictions: contradictions between classes, between society and itself, between people and machines, and between the conception and execution of work. What begins as a seemingly innocuous distinction between use and exchange becomes the substance of class struggle and crisis.
This doesn’t mean that every problem in society is directly explained by the law of value. Yet, how can we really understand any discussion of inequality without first understanding the way in which social wealth and power is created and distributed? How can we understand violence without understanding the coercive nature of the market, the deep inequalities generated by commodity exchange, and compulsion of capital to accumulate at all costs? How can we discuss a solution to the environmental crisis without discussing the way the productive relations of a capitalist society are organized? The problem with the left is not that there are not enough people who care about these things. It is that not enough people have the theoretical tools to think about these things in terms of the basic structure of our society. That is why the law of value is so important to understand today. If we want to overcome the antagonisms of society we need to understand how these antagonisms are related and to do this we must start at the beginning with an analysis of the commodity.
Footnotes
1. Of course the price of a commodity is more than just the immediate labor that goes into it. There is also the past labor that went into the raw materials and the instruments of production like machines. The price of the commodity is the sum of the money laid out for dead labor (raw materials, machines and other products of past labor) and living labor (wages for workers) plus the amount of surplus value, unpaid labor, performed by workers. Etc, explain v+c+s…
Kapitalism101 
“Yet profit can’t be made through mere buying and selling. This is because buying and selling is a zero-sum game. When we exchange commodities we are just moving commodities from one place to another. This process does nothing to change the total amount of value in society.”
Isn’t value a workable concept only when it’s analyzed on a case by case basis? Suppose I produce pens by employing 1 person and ordering him to assemble the parts. He works 10 hours a day for 10 dollars an hour. He produces on average 100 pens a day. We bargain that he will do this indefinitely.
Do we not mutually benefit each other? He values his 100 dollars a day more than he values his free time during those 10 hours. Value has been created for him. And I value his pen assembly more than I value the 100 dollars I’m paying him per day. Value is created for me. This is not a 0-sum game; this is how value is created. If it were a 0-sum game, no one would bargain, barter, or otherwise freely exchange because mutual benefit would be impossible.
And the exchanges go on and on. I am able to sell the pens to a wholesaler
for 2 dollars a piece. W values the pens more than the $200 per day they spend on them, and I value the $200 a day more than the 100 pens which I own.
W ships them out to a chain of stores a $3 a pen, because he values the $3 more than the pens he owns and the chain values the pens more than the $3 they pay for them etc… etc… All the way to the consumer.
Where have I gone wrong?
“Where have I gone wrong?” You have defined value as a mysterious subjective quantum, in the modern bourgeois fashion, which can be somehow quantified. There are a host of theoretical problems with this approach: it creates circular logic where we have to assume prices in order to explain the subjective valuations that form them, the differing subjective motivations of capitalists and workers are conflated into the identical motivations of mere buyers and sellers, objective economic forces are mistaken for personal subjectivities, individuals are theoretically isolated from their social context, individuals are assumed to be utility maximizing individuals (which they are not), subjective “value” categories are imposed after-the-fact onto an exchange (ie because an exchange happened then their must have been a subjective profit), subjective preferences can only be theorized with an artificial ceteris paribus condition, historical differences in the organization of production are swept under the rug- reducing all of human history to a teleological vision of the capitalist consumer, and this approach is quite useful in spiriting away all notions of class, exploitation or inequality (we can basically argue that anything is fair because it resulted from a free action.)
I am not using subjective value categories but an objective one. This allows me to make observations about economic laws, to quantify social/economic relationships, etc.
First, I’m not quantifying prices. The market does that. Prices emerge naturally from the market; quantifying them is not something I need to do. There is no circular logic here. And why are capitalists and workers not mere buyers and sellers, if the Capitalist is merely buying the seller’s time and labor? Inserting the word “mere” does not devalue what is happening in reality, which is a global marketplace full of emergent prices, values, motivations, etc… And when you say “objective economic forces”, are you talking about Marx’s notion of “full value” or thoroughly definable “day’s labor”. Objectivity is not the goal; free exchange is.
No one is imposing subjective value on transactions after the fact, as evidenced by the buyers and sellers, who created the terms of the transaction before the fact. And if we can argue that anything is fair because it resulted from free action, then why don’t we? Are you calling the actions of the parties free (and if so, where is the moral problem?), or will you back-pedal and say that in a world of class, exploitation, or inequality, there can be free action on the part of the employee?
What is objective value? Is it the time spent working, and if so, how do you objectify things like that? And why do you try? Why would one not naturally do what Capitalists do, like charging the maximum price that the market will bear?
“First, I’m not quantifying prices.” You most definitely are. You are claiming that the differing subjective motivations of buyers and sellers forms a mutual subjective profit and that this subjective experience is all that is necessary to explain prices and all other phenomena related to them. The circular logic lies in the fact that we must first assume a world of prices in order to form a “preference scale” that supposedly explains prices.
re. Marx’s notion of “full value” I have no idea what you are talking about…. probably some Austrian misunderstanding of Marx. “objectivity is not the goal”- yes we all know that the goal of Austrian economics is to apologize for the status quo.
“And if we can argue that anything is fair because it resulted from free action, then why don’t we? ” yes this is probably the fundamental problem with the austrian school. It defines, via praxeology, its own conditions before it it begins its investigation so that all of its ideological claims are the justified by this fundamental theorem. But isn’t it obvious that the fundamental notions of freedom are socially specific, ideological notions entirely inscribed into the historically specific experience of bourgeois society? These “market freedoms” are in fact an extremely limited concept of freedom and the concept entirely papers over all of the actual social contradictions of commodity production. Rather than actually face any of Marx’s critiques of the social antagonisms of capitalism the Austrian school just assumes them away with its mystical “praxeology”.
“What is objective value? Is it the time spent working, and if so, how do you objectify things like that?” With a stop-watch like every work-place in the world does.
“Why would one not naturally do what Capitalists do, like charging the maximum price that the market will bear?” Is this concept of “what the market will bear” not the essence of the economic question which is evaded by the subjective theory of value? The market has its own objective logic that determines the behaviours of economic actors. Subjective preferences are formed by it, not vice-versa. This is the substance of economic laws. The law of value is the most fundamental these laws.
You don’t need to assume a world of prices, you merely need to assume a world of exchange, which is only as circular as any human logic. You might as well say, “Your logic only works when you assume a world that uses logic. That’s circular.” As soon as someone trades item A for item B, they’ve shown a preference. By trying to examine the world with devices like preference scales misses the fundamental point that prices are always in flux depending on the desires and circumstances of the people participating in the transaction. Prices are not set in the general way you describe; they are merely the result of an offer and acceptance by the people in the transaction.
Regarding full value, in Kapital, Marx gives an example of a baker who unlike the other 3 in the town, discounts his bread at 25% (if memory serves). Marx of course, offers no explanation. Perhaps his bread is not of the same quality; maybe his bakery is in a bad neighborhood; maybe the baker is rude and has no friends… etc… He is at a loss as to why this baker isn’t able to charge full value for his labor. The answer is of course, that there is no such thing as full value or “objective value”.
That is why a home in Houston which took 300 hours to build might cost half as much as a home in Portland which took the same labor and is the same house. The hours involved in building is not relevant; the only relevant factor is whether or not the buyer and seller can agree on a price. So suppose you wish to work with your objective value theory and attempt to sell the home you spent 300 hours building in Houston for the same price you just sold the home in Portland, a place where people are far more willing to pay high prices for homes. Will you just sit there forever wondering why the home won’t sell? Or will you lower the price? And in lowering the price, aren’t you admitting that your 300 hours might be very important to you, but is irrelevant to a potential buyer, who is only concerned with the result of your labor (whether 300 hours or 30 seconds) and the price at which a bargain may be found?
The market does not determine the behaviors of the actors. The individual behavior of the actors gives a general picture which we call the “market”. Subjective preferences are not formed by it; if they were, they would not be subjective. And if they were objective in the way you assume, you’d be able to chart my preferences, despite my ability to discriminate and choose to give up something in order to gain something else, or even radically change my desires overnight.
Protip: Like the future, prices are not set. When you see a price tag, just think of it as a bargaining starting point.
Ah, I see what you mean by “full value”. You just mean value. Your discussion of the baker and the house both fail to understand the basic starting point of Marx’s theory of value: the question of how private labor becomes social in a market society. Marx’s whole point is that this labor is not immediately social, that it must be mediated through a process of averaging in the market where the products of all labors are compared. In Marx’s theory private labor’s don’t equal their social value all of the time. This is precisely the point. This is the mechanism by which labor is apportioned- the constant differences between private and social labor. See my video “Das Mudpie” and “The Fetishism of Commodities” for more.
In regards to objective/subjective… The only way for one to attain their means of subsistence is to sell their labor or the product of that labor in the market and then to use this money to buy their subsistence. How could anyone deny that the productivity of labor is the ultimate regulator of the exchange ratios of these commodities? The entire process begins and ends with labor. The market is just the place where these labors are compared.
On top of that the entire notion of a rational utility-maximizing consumer is a historically specific notion, specific to a world in which private labors are measured in exchange value. These objective laws determine the preferences of individuals: no, not in the sense of which kind of toothpaste they like, but in the sense that they want to maximize the use-values they consume relative to the amount of labor they contribute to society.
The notion of a preference scale is entirely circular since preferences are based on pre-existing prices. The only way out of this circle is to reach for something outside of subjectivity. To this we turn to the productivity of labor which determines how much of a commodity exists at one time. By saying “As soon as someone trades item A for item B, they’ve shown a preference.” you just end up in a tautological meaningless statement. The preference is not what needs to be explained. The long-term movement of prices, not in the individual, isolated, theoretical-vaccuum, but in a real society in which the mass of labor is labor for commodity production- this is what needs to be explained.
And nowhere in Marx do you get the idea that prices are set. So please don’t paste that notion on me. Marx’s theory of price is a dynamic, non-equilibrium model of price which contrasts strongly with the notion of static equilibrium price in the neo-classical tradition.
So I’m watching your Mudpie video and once again, you make the same argument that fails reality. It is clear that you’re talking out of both sides of your mouth in order to maintain your labor theory of value. You say that labor must be useful in order for it to be valuable. Fair enough. And then you say that prices are the result of the aggregate social labor process. They aren’t. “Even though I spent three hours working on a widget, I must sell it at the same price those who spend 1 hour do.”
No you don’t. This is why the home builder in Portland may offer a home at double the price of his equal home in Houston. You may attempt to sell your widget at 3 times the average market price. And someone might buy it. In an economy of freedom, there is always the possibility that someone will pay more for your product that even you believe it is worth. And do you know why? They value it more than the money they are parting with. Until you explode this, Das Kapital is dead in the water.
And you can’t say that you’ve already dealt with preferences because what you’ve done is called my statement tautological, without it actually being so. I didn’t say that “As soon as someone trades item A for item B, they’ve traded item A for item B.” I said that when they trade, they show preference. This is neither circular, nor tautological. Buyers and sellers are not judging labor. They are simply making preferences. Indeed I would say that neither you, nor I, nor most anyone involved really knows how much labor goes into making … say… a computer. What computer buyers do know is that they prefer having a computer over the amount of money they paid for it, which is the reason they purchased it in the first place. The fact that this happens over and over is what explains the long-term movement of prices.
If your entire focus is on isolated exchanges devoid of any macro, social context then you can never have any social or economic theory. The reality is that you can not continuously receive higher-than-average profits from a sale of a commodity without attracting competitors. And consumers will not continuously pay more for a commodity when they can get the same thing cheaper. Yes someone “might buy it”, but an isolated exchange is not the focus of a social theory. We are interested in what happens after the exchange: can you continue to sell at this price? What happens to competitors when you do? How is labor reapportioned by these price movements? These movements of prices and profits will apportion the investment of capital and labor as I’ve explained in my video on socially necessary labor time. The only way your example works is by positing an isolated exchange devoid of context. Curiously it also involves 2 different commodities: houses in completely different places! Real estate values involve much more than the labor that goes into making the house because now we are dealing with rent as well as a host of complicated factors involving the movement of capital through land, speculation, etc.
“Buyers and sellers are not judging labor. They are simply making preferences” Duh! I’m saying that that doesn’t matter. Stating that people have preferences when they buy things doesn’t meant that those preferences solely determine prices or that that constitutes a theory of value. Thinking that such a statement somehow refutes Marx is to entirely misunderstand Marx’s theory of value.
But if individual exchanges happen as I describe them, why are you so concerned with the macro economy? And if value is really just a matter of preference, not a matter of labor, why cling to a labor theory of value by stating that prices are not solely the result of preference.
On the contrary, the price of each individual transaction is the result of preference and preference alone. You’ve already agreed that it’s not labor, and if it isn’t preferences that determines prices, what is it?
The utility of marginal utility theory gets lower everytime you use it.
Considering that I never mentioned marginal utility theory, your non-sequitur is neither witty, nor relevant to the discussion. Please leave the thinking and typing to the adults.
Bla bla bla.
You have no knowledge on Marx. Why bother discussing Marx if you have never read one full page of Marx his capital volumes?
If you write nonsense like
“What is objective value? Is it the time spent working, and if so, how do you objectify things like that? And why do you try? Why would one not naturally do what Capitalists do, like charging the maximum price that the market will bear?”
This says enough. It is you who has nothing to add to a discussion on Marx. You’re recycling old irrelevant straw man arguments. Next idiot please.
It should be clear from my prior posts that I’ve read a great deal of Volume 1 of Kapital. I stopped for the time being because I became bored of the rambling examples of child labor and unprincipled critiques of “Moneybags.”
And I asked about objective value because the adults were discussing value in general and Marx’s misguided (in my view) attempt to tie value to labor time.
This should have been clear when the response I got was not at all similar to yours. On the contrary, Kapitalism101 said that you objectify things like that with a clock and doing so helps to build general economic theories. If you think that discussion has nothing to do with Marx, I suggest you take it up with him, because he is probably more of an expert on it than either of us.