(What follows is a draft. Citations and footnotes are incomplete.)
[cite Kliman’s paper on Intrinsic Value as helping me to understand the importance of the concept.]
Throughout the opening chapter of Capital Marx jousts with many intellectual opponents, not all of whom are immediately named. One of these is Samuel Bailey. (cite Rubin, Kliman.) In Bailey’s “Critical Dissertation”, published in 1825, he sets out to clear up the mess of confusion associated with the concept of value in economics. He does so by arguing against any notion of an intrinsic value possessed by commodities. Rather, for Bailey, value is nothing more than the fleeting and temporary exchange value a commodity has when it finds itself being exchanged for another commodity. Following Adam Smith Bailey defines value as “the power of purchasing other goods.” (p.11)
“According to this definition, it is essential to value, that there should be two objects brought into comparison. It cannot be predicated of one thing considered alone, and without reference to another thing. If the value of an object is its power of purchasing, there must be something to purchase. Value denotes consequently nothing positive or intrinsic, but merely the relation in which two objects stand to each other, as exchangeable commodities.” (Bailey p. 11)
Bailey is setting up a clear dichotomy between a notion of intrinsic value in which value is something belonging to the commodity in isolation from other commodities, apart from and prior to exchange, and a relative notion of value in which value is only something that exists through the relation of one commodity to another. Since in everyday life we measure the values of commodities in their relation to one another (so much of A is worth so much of B) Bailey advocates for this second, relational notion of value and rejects the intrinsic notion.
This leads to some interesting conclusions. Because value is only relational for Bailey, not intrinsic to the commodity, the value of A is whatever it is exchanged with. If today A exchanges for 2B then 2B is the value of A. If tomorrow A exchanges for 4B then 4B is the value of A. An intrinsic theory of value would say that perhaps the value of A has stayed the same while the value of B has changed or that the value of A has changed while the value of B has stayed the same, or even that both values have changed. But for Bailey this makes no sense. There is no intrinsic value of A or B that can stay the same or change. The value of A is only its exchange value with B at the moment of being exchanged. It has no value of its own before or afterwards.
Examining how this might relate to the classical labor theory of value Bailey asks the reader to consider a quantity of corn, the value of which is determined by the labor time required to produce it. What happens if the labor time required to produce the corn stays the same while the labor time of all other commodities changes? Even though the corn’s labor time has remained the same it will exchange for a different quantity of other commodities. It will form new exchange ratios every time the labor time of other commodities change. Thus its “value” changes even though the labor time that it takes to make the corn has not changed. Here Bailey is attempting to prove that value is not an intrinsic aspect of commodities because exchange ratios are inherently relational. Since a ‘value’, as he defines it, is nothing more than a relation between two commodities, it cannot, by definition be the property of one commodity outside of this relation. [This is a repetition of the previous paragraph, but perhaps still helpful.]
Marx sets out to argue the exact opposite of Bailey. Marx argues that value is an intrinsic property of commodities and, at the same time, its also a relative concept. How is this possible?
The key theoretical move that makes this possible for Marx is to distinguish between value and exchange value. Value is intrinsic to commodities. It is the amount of labor time society requires to produce the commodity. If a widget takes 2 hours to produce then its value is two hours. Exchange value is the ratio in which one commodity exchanges for another. If a widget exchanges for 3 apples then 3 apples is the exchange value of the widget. If the widget exchanges for 30 pencils then 30 pencils is the exchange value of the widget. What then is the relation between value and exchange value?
Similar to Bailey’s conception each different pairing of the widget with a different commodity produces a different exchange value. However where Bailey sees in this nothing but random, fluctuating, relativist values, Marx argues that each of these exchange values is a reflection, a measure of an intrinsic value.
Marx’s argument is quite simple actually. If we say that commodity X is equal to commodity Y this means, by definition, that they both contain quantities of a common substance/property. Just as the comparison of physical properties like weight, volume and height is only possible if both objects share the same property, the comparison of economic value is only possible if both commodities possess an intrinsic value. [footnote: there are debates as to the validity of Marx’s argument. Kliman provides a stellar defense of Marx in his paper “The 4th thing on the 3rd Thing”. I will not repeat those arguments here.]
When we say that commodity X is equal to commodity Y this implies that they are both made up of the same substance, value, and that their values are of the same magnitude. We cannot see the value of X by looking at it in isolation. Commodities do not walk around with their values ‘stamped on their heads.’ Instead we only see the value of X when it stands in relation to Y. Y measures the value of X. X is worth so much Y. The same is true if we measure the weight of an object. A piano has a weight of its own that does not depend on other objects. But we can only measure the piano’s weight in relation to some standard unit of weight, a pound or kilogram. This unit of weight, the pound, is always defined in relation to an actual object, arbitrarily chosen to be the standard.
Bailey had argued that the value of X cannot change without also meaning a change in value for Y. Look at how Marx’s distinction between value and exchange value allows us to see the problem differently. Both X and Y have an intrinsic value. Let us imagine that the value of Y changes while X stays the same. This variation in the value of y produces different exchange values (x=y, x=2y, x=3y, etc.) The intrinsic value of X does not change but its exchange value does change! Various quantities of Y are expressing the value of X.
I believe that this way of understanding value is much more intuitive and inline with common sense. Consider the effect of inflation on the value of a widget. If I sell widgets for $10 and a decade later the value of the dollar falls by 50% I will adjust the price of the widget to $20. Has the value of the widget changed? Are widgets worth more to society? Not at all. All that has changed is the value of the unit by which we measure the value of the widget.
Marx’s argument that commodities have an intrinsic value is immediately followed by his argument as to what this value is and what determines the magnitude of this value. His answer is that value is objectified human labor and that living labor determines the magnitude of this value. Often discussion/debate immediately jumps to this issue of whether or not labor is the substance of value, skipping over the important implications of the notion of intrinsic value. We will deal with the notion of labor as substance of value in the next chapter. For the remainder of this chapter we will examine some of the important implications of Marx’s notion of intrinsic value.
Intrinsic Value is Relative
Bailey had established a dichotomy between intrinsic value and a notion of value as something relative. As we have seen, Marx shows that the relative aspect of value that Bailey is talking about is actually exchange value, not value, and that exchange value is an expression of something intrinsic to commodities, their value. However Marx also holds that this intrinsic value is also relative. [cite Kliman]
Intrinsic value is not relative in the way exchange value is. As we have seen, exchange value can change while intrinsic value does not. To understand how intrinsic value is relative we have to fast-forward to the topic of a future chapter, ‘socially necessary labor time’. Marx does not hold that the value of a commodity is determined by the individual labor time it happens to have been created with. Rather, value is determined by the amount of labor time necessary for society to create the commodity at a given place and time. It is the average labor time required for a commodity’s production that defines its value. Thus the value of a commodity is not the product of one isolated laborer. Rather it is relative to the average productivity of an industry. Socially necessary labor time is also constantly changing as productivity increases. If a toaster took 2 hours to make in 2013 but only takes 1 hour to make in 2014 this doesn’t meant that a toaster from 2013 is worth more than a toaster from 2014. The 2013 toaster is revalued at the current socially necessary labor time. It is relative to current levels of productivity.
“as value it appears as something merely contingent, something merely determined by its relation to socially necessary, equal, simple labour-time. It is to such an extent relative that when the labour-time required for its reproduction changes, its value changes, although the labour-time really contained in the commodity has remained unaltered.” [Marx, Economic Notebooks 1861-63]
Thus socially necessary labor time determines the magnitude of the (intrinsic) value of the commodity. Exchange value is the means by which this value is expressed through its relation to other commodities.
value is not exchange value or use-value
Marx’s argument about intrinsic value is often referred to as ‘the 3rd-thing argument’ because Marx is arguing that in addition to commodities having a use-value and an exchange value that they also have a 3rd thing, value.
Despite the clear distinction between value and exchange value it is quite common in the literature to see instances of the two concepts being confused and/or conflated. To make matters more confusing Marx himself did not make the distinction clearly in his writings prior to the publication of vol. 1 of Capital. He also often asks us to assume, for the purpose simplifying an argument, that commodities sell at their values, in other words, that commodities have exchange-values that are quantitatively equal to their values.
Use-value refers to the specific utility or value-in-use that a commodity has. Because use-value is determined by the physical body of the commodity (Hammers are for pounding nails because they have handles and hard heads; Knives are for cutting bread because they have handles and sharp blades, etc.) Marx also refers to the physical body of the commodity as a use-value. When we equate commodity X to commodity Y we are measuring the value of X in the body of Y. The use-value of Y becomes the unit by which we measure the value of X. Y can perform this function because both X and Y are commodities with values.
Marx is very clear that the value of commodities does not come from their use-value. We will discuss this further in the next chapter. Since commodities measure their value in the use-value of another commodity it sometimes appears as if value is arising from the particular nature of the use-value rather than due to social production relations. We usually see this confusion arise when discussing money. Money is the commodity in which all other commodities measure their value. As such it is a representation of value in general. Throughout history this has produced the illusion that money’s power comes from its use-value, from some mystical property of money itself, rather than from the social relations of production which give rise to money. [footnote on money commodity and MELT and paper money….]
Marx’s distinction between value and exchange value also allows us to theorize unequal exchange. What happens if commodity A worth 1 hour of labor exchanges for commodity B worth 2 hours of labor? Obviously the owner of commodity A wins out! We have two different sums of value, 1 hour and 2 hours. The exchange value of A is 2 hours and the exchange value of B is 1 hour. The exchange values are different than the values. When A trades for more than its value the owner of A receives a greater sum of value in exchange. The opposite happens for the seller of B who receives a lesser sum of value. We could not theorize unequal exchange without a concept of intrinsic value. For Bailey an exchange ratio is just an exchange ratio and it cannot be more or less equal or unequal because there is no intrinsic value being measured in the exchange process.
This distinction comes in handy later when we discuss deviations of price from value. Price after all is just the exchange value that a commodity has when it exchanges with money. Just as a commodity is a sum of value, so is money. [Footnote on money commodity and MELT] If a commodity’s price is greater than its value then the seller receives a greater sum of value in exchange than she parts with. Sometimes critics of Marx point to price-value divergences as if such divergences prove that value is being created by something other than the labor that created the commodity. But, as we have seen from the simple example of unequal exchange in the previous paragraph, labor has created the value of A and B. Whatever social forces have caused the exchange to be unequal (monopoly, imbalance in supply and demand, dishonesty, etc.) are not creating value. They are merely causing an unequal exchange to take place. This unequal exchange is still an exchange of two sums of value value created by labor. Such a distinction would not be possible with Bailey’s notion of relative value. But with Marx’s clear division between value and exchange value we can easily theorize how an exchange value can be different from a commodity’s intrinsic value while still holding to the idea that labor is the sole source of value.
Quality and Magnitude of Value
This points us to an important distinction. When we say that X is equal to Y it means that they are of the same magnitude of something, the same quantity of some substance. This substance must be the same substance, the same quality, in order to be of the same magnitude/quantity. The weight of two objects can be the same (or different) because they both have weight. But we can’t compare the weight of a piano to the height of a chair because weight and height are different qualities.
The fact that we can make quantitative comparisons between commodities means that they share the same quality, the quality of having an intrinsic value. But commodities do not have to have identical magnitudes in order to share the same quality of being values. We can compare the weight of a piano to a chair because they both share the quality of having weight not because they have the same magnitude of weight. In other words, commodities have the same quality of having value regardless of whether of not they have the same magnitude of value. This clarification is important because many, such as Bohm-Bawerk, have assumed that Marx is arguing that intrinsic value can only be deduced in the case of the exchange of equivalent magnitudes.
This common quality, value, is of much more interest to Marx than the question of the magnitude of value. An investigation into the forces which affect the magnitude of value is, of course, also of critical importance to Marx’s theory. But the investigation of the question of why commodities have the same quality of having values leads Marx to an understanding of the specific social nature of capitalist production. It is the exploration of this intrinsic quality which drives much of the investigation in the first chapter of Capital, allowing Marx to unlock important categories like abstract labor and to understand the nature of money. What is interesting and unique to capitalism is that the private labor of individuals takes on a uniform social substance embodied in objects. This is a curious form of social production, unique to capitalist society. It imbues capitalism with its fetishistic character in which objects have social power and the relations between objects express social relations between people.
How exactly does the private labor of an individual take on a general, universal social form, the form of undifferentiated, homogenous value? It is a question we will have to explore in greater detail in the chapters on Abstract Labor and Socially Necessary Labor Time. However, a basic outline can be dealt with here. In order for the private labors of different individuals to have the same social character there must be a process which reduces their labor to a common standard and quality. Imagine a fictional society in which everyone produced the same widget in the same amount of time. Here it would be easy to see how one person’s labor was just as good as another’s. It would be easy to see that all individual labors shared the same quality.
What if we took this one-commodity society and dropped the assumption that all workers produced widgets at the same level of productivity? Here the value of each widget would not be the individual amount of labor it contained. Rather, value would be determined by socially necessary labor time. Thus, though individual productivity varied, each commodity would still be stamped with a social character. Each individual’s labor would only count as a fraction of the social whole, no one persons’ labor having any different quality than any others’.
What if we then imagine a society in which workers produced either widgets or pears? How could we claim that the labors of widget-makers and pear-pickers were of the same social substance, of the same quality? There must be some social force that reduces both types of labor to a common expenditure of effort, the same level of productivity, so that one hour of pear-picking is of the same value as one hour of widget-making. What else could this social force be but, again, socially necessary labor time, which disciplines labor to ensure that production time revolves around a common standard? Once this is understood it is easy to move from our two-commodity society to the real world of billions of commodities. Although these labors take many different concrete forms they are also all expenditures of equal labor in the abstract, an abstraction imposed upon them by a society which conditions and disciplines labor to a common level of efficiency.
The examination of the qualitative nature of value, that it is an embodiment of abstract human labor conditioned by socially necessary labor time, allows Marx to theorize value in direct relation to the unique character of the labor process in a capitalist society. Whereas the classical political economists before Marx had been focused on establishing the causal relation between labor time and prices Marx’s analysis of the qualitative nature of value gets to the heart of the distinctive way in which labor is organized in a capitalist society. This approach not only theorizes the alienation, exploitation and domination of capitalist labor but also allows us to understand the historical specificity of value relations and capitalist labor, allowing us to understand that such conditions are not universal and inescapable. They are not universal conditions of all human labor. They are socially created conditions and they can be socially transcended.
Bailey’s notion of relative value allows no room for comparing the value of a commodity over time. Since commodities don’t have their own value apart from their exchange value he holds that it is impossible to say that the value of a commodity has changed. Commodities, for Bailey, don’t have a value which can change or stay the same. We are left in a nihilistic state of not being able to say anything about anything. In contrast, Marx’s notion of intrinsic value allows us to compare changes in value over time. Of course, in everyday life we constantly compare changes in the value of a commodity over time. A Steinway piano appreciates. An iPhone depreciates. Profit is a measure of the change in value over time. We cannot theorize credit without a notion of value changing over time.
Intrinsic Value is a product of Production Relations and not Exchange Relations
In various debates around Marx’s theory of value there is often tension over how much influence and power to ascribe to market forces in relation to production. As always, the devil is in the details, in the specific claims being made and their implications. Rather than opening the various hornets nests involved it may be more appropriate here to point out the way that the concept of intrinsic value allows us to frame the general issue.
In the equation 1 coffee= 1 apple the apple expresses the value of the coffee. Exchange value expresses intrinsic value. This implies that value is present in the coffee prior to exchange. The coffee gets its value in production. It realizes this value when it is exchanged for the apple. If we deny that value is intrinsic to commodities then we end up with a Bailey-ish conception of value in which value appears to be created in exchange. Money too would also only acquire a value in exchange. Hence commodities and money would enter the market valueless and exit with values. Value, for Bailey, is a product of exchange, of the market.
Marx’s theory of value is a theory about production relations. Value expresses the relation between the worker and her product. It also expresses the relation between the worker’s labor and all of the other labors in society since it is the socially necessary labor time that determines the value of the commodity.
How then does exchange fit into this theory? How do the relations of buyers and sellers fit into the picture? Exchange is a process whereby sellers attempt to ‘realize’ the values of commodities. Sometimes they realize more or less value than that embodied in the commodity. But, as demonstrated in our discussion of unequal exchange, no new value is being created in exchange. Value is just being moved around, reapportioned. This reapportioning of value is not unimportant. When commodities sell above their value this attracts investment into that line of production, reapportioning labor. When commodities sell below their value this triggers outflows of labor and capital and a disciplining of labor in that industry.
These fluctuations in price are an important part of the way production is disciplined and organized. Producers do not always know the socially necessary labor time or the market demand for their commodities. They discover these things after production has taken place. They then use these discoveries to alter future production plans.
The term “realize” is quite apt. When we realize an idea we are discovering something that already exists. When we realize the value of a commodity we are not creating anything. We are not changing anything. We are merely allowing something that already exists to come to fruition, to take the form of exchange-value. Not only is the individual commodity value realized in exchange but the entire spectrum of production relations is realized in exchange. Exchange finishes the work of production.
immanent measure vs expression of value/measure of value
“The external measure of value already presupposes the existence of value. For example, gold can only measure the value of cotton if gold and cotton—as values—possess a common factor which is different from both. The “cause” of value is the substance of value and hence also its immanent measure.” [marx 1861]
A commodity’s value is determined the the labor time required to produce it. Labor time is the immanent measure of the value of the commodity. This value is expressed in the exchange relation when the commodity’s value is measured in the use-value of another commodity (the book is worth so many apples.) The apples express the value of the book. This means that there are two ways of measuring the value of the commodity. One is by labor time (it’s immanent measure) and one through its exchange-value (its external measure).
Because commodities have two means of being measured Marx often moves with ease back and forth between them. We can say that a commodity is worth 5 hours of labor or worth 50 dollars. If an hour of labor equals 10 dollars then both expressions are correct. Of course, in the market place commodities are only measured in their exchange values. This does not mean that the immanent measure of value is only theoretical. The capitalist workplace has developed the measurement of labor time into a science. The scientific study of productivity has resulted in rigorous systems of the measurement of labor time relative to commodity output. [cite Braverman]
It doesn’t need to be exchanged to have a value… or an exchange value!
“it is a matter of indifference…whether, as in the case of the seed in agriculture, a part of the product is directly re-employed by the producer himself as a means of labour, or is first sold and then converted afresh into a means of labour. Whatever their role as use values in the production process, all the means of labour that have been produced now function at the same time as elements in the valorisation process. To the extent that they are not converted into real money, they are converted into money of account, they are treated as exchange values, and the value element they add to the product in one way or another is precisely calculated.” p. 952 in Capital 1 Penguin, Resultate
In other words, the act of exchange only formally realizes the value of a commodity. But this value still exists even if the commodity is never exchanged. In the case Marx cites of the farmer who uses part of his seed crop to replant, the farmer takes the value of the crop into consideration when planning his production even though this seed never enters the market. And, as Marx says, he not only considers the value of the seed but he considers the exchange-value, its price, even though the seed is never sold. The seed has an ideal exchange-value. It is treated as an accounting unit in production without ever actually taking the form of an actual exchange value.
If this sounds surprising consider that we all own commodities whose exchange-values we are aware of regardless of whether or not we are actively selling the objects. I am aware of the exchange-value of my piano but I never plan to sell it. If I sold the piano I would realize its price. But it has the price before I sell it. [cite Kliman 4th Thing on 3rd Thing]
Because the value of a commodity is expressed in the use-value, the body, of another commodity this gives rise to the illusion that value is something that comes from the “thing-ness” of the commodity. Such an impression makes value seem like a natural property of things and not a socially determined force.
One reflection of this fetish is the fact that economic analysis, before and after Marx, often orients itself around the question of what determines exchange-values, the relations between objects. While we are perfectly capable of theorizing the determination of prices from within Marx’s value theory it would be a mistake to treat this as the most important question. Exchange-values express object-object relations. Capital however is a social relation. It’s economic categories are expressions of these social relations. The object-object relation that is exchange-value is nothing more than an expression of value relations. These value relations are the focus of Marx’s analysis.
“it is characteristic of labour based on private exchange that the social character of labour “manifests” itself in a perverted form—as the “property” of things; that a social relation appears as a relation between things (between products, values in use, commodities). This appearance is accepted as something real by our fetish-worshipper, and he actually believes that the exchange-value of things is determined by their properties as things, and is altogether a natural property of things. No scientist to date has yet discovered what natural qualities make definite proportions of snuff tobacco and paintings “equivalents” for one another.” [Marx economic manuscripts 1861-3]
“…Bailey is a fetishist in that he conceives value, though not as a property of the individual object (considered in isolation), but as a relation of objects to one another, while it is only a representation in objects, an objective expression, of a relation between men, a social relation, the relationship of men to their reciprocal productive activity.”
Hopefully the reader will find the above points useful in clarifying the unique contours of the concept of intrinsic value. Our next task, in the following chapter, is to ask what this value is, what it consists of, and what determines its magnitude.
Money Commodity and MELT