From Essays in Socialism New & Old (1907), pp.57-62.
The conception of Value has always been regarded as the corner-stone of economic science. By Value in economics is meant the common measure or standard regulating the exchange of commodities. It is our purpose to-night to confine ourselves exclusively to the discussion of the theory of Value as a fundamental principle of economics, without entering into its applications, which may naturally be made to range over the whole ground of political economy. The first sense of the word “Value” sense not peculiar to economics, is what is called “Use-Value.” Value in-use, or utility, denotes the pleasure derived from, or the pain or discomfort obviated by, the use of any article. As just said, this may or may not be a conception entering into economic science; thus we have the familiar illustration of “air” as affording an instance of a Use-Value which is extra-economic, that is to say which is outside the scope of the science dealing with the production and circulation of wealth. The conception of Value, which, on the other hand, belongs exclusively and specifically to the science of political economy, is that of Exchange-Value. Use-Value may exist in an object considered by itself, but Exchange-Value presupposes a relation between Use-Values as commodities, or between their equivalents.
In the simplest form of Exchange-Value, or barter, the Value of a given commodity is expressed in the substance of another commodity. In this primary phase of Exchange-Value, quantity and quality are undifferentiated; in the second or more advanced phase, the given commodity is placed over against the whole world of commodities remaining, i.e., which are not the commodity itself. Homer, for example, expresses the Value of an object by enumerating a long string of other objects. In the seventh book of the Iliad, wine is mentioned as exchanged for brass, iron, cattle, slaves, skins of beasts, and other things. Here we may see the beginnings of the differentiation of quantity and quality in Exchange-Value. The Value of the wine is conceived as expressed in a number of things of different qualities, so that quality can no longer determine the general expression. The element in which it can be expressed must be, therefore, something considered quantitatively.
At a later stage still, the Value of all commodities is expressed no longer in all other commodities, but in one specific commodity, as their equivalent, which in the course of time becomes gold or silver. This is the transition to the complete expression of Exchange-Value in coined money, or as price. In this final, or completed form, the Exchange-Value of all commodities, or Use-Values created for exchange, is expressed in a tertium quid, which has practically no Use-Value in itself, but which becomes, by convention, the recognised equivalent of all exchangeable Use-Values or commodities.
Now, it is evident that the specific utilities being eliminated in the process of exchange, and the Value being expressed in terms of quantity, it must be a quantum of something, and the question remains, what common element do all these qualitatively-different exchangeable Use-Values contain? A thing is not constituted a commodity by mere Use-Value itself, as witness the case of “air,” alluded to already. The obvious answer is that the only common element contained in all these exchangeable Use-Values, in other words, in all commodities, is that of expended human labour. They represent, as Marx expresses it, “congealed human labour.” Hence the only measure of their exchangeability is the quantum of this human labour contained in them, which can obviously be determined only on a time basis, i.e., by the average amount of average labour which in a given society is expended within a given time. To constitute an object, a commodity, or an economic thing, in the strict sense of the word, there must be a synthesis of human labour and Use-Value. Either element taken by itself is, viewed from the standpoint of economics, an abstraction. Use-Value that does not embody labour in its procurement has no Economic-Value. On the other hand, labour, to become the measure of Value, must be embodied in an object which has a social utility. The synthesis of these two elements issue in Exchange-Value, which, in its most perfect expression, constitutes Economic-Value in the concrete, or (as realised in the world of the production and distribution of wealth which we see around us), its price.
To sum up this argument, the concept Value as used in political economy may be viewed under three aspects. It is a synthesis of three elements. We have first that primary element which all Economic-Value presupposes at all times and places, either actually or ideally, namely, a determinate quantum of human labour. This we may call Economic-Value in the abstract. Secondly, it is not enough to have an article merely embodying human labour, but of no use to any one, for that article must supply a social want. Thus the simple embodiment of labour, taken per se, and the simple Use-Value, taken per se, are quoad the subject-matter of political economy, that is the actual world of production and exchange, pure abstractions. But their synthesis supplies us with the unit of economic reality – the commodity. Use-Value merely concerns quality, whereas, Value per se, that is embodied human labour, possesses economically nothing but quantitative difference. We have finally the concrete expression of Value, that is to say, the Value of a commodity against the whole world of commodities, itself excepted. This latter, in its developed or completed form, is represented by a universal equivalent, money, and is called its price. This conventional representative of Exchange-Value, coined money, has no utility in itself, and is merely the embodiment of a determinate amount of human labour. That gold and silver should have been chosen by social selection to serve the purpose of the universal equivalent is owing to more than one cause. First and foremost, because the relatively great amount of labour required to procure them makes a small portion serve the purpose in view. Secondly, because they can be melted and re-coined, while precious stones, which would answer equally well to the first condition (that of portability), cannot be so treated. In other words, they embody a proportionately greater amount of labour, as regards commodities in general, than other articles that have also been used at different times and places as the universal equivalent, as, for example, cattle (pecus), iron, possibly salt, and other things, which, owing to their bulk, are inconvenient.
In the same ratio in which the transformation of labour into commodities is accomplished, the commodities are transformed into money. Hence the proper Value of money is, like that of any other commodity, the amount of labour embodied in it. Old Sir William Petty saw this point as he saw many others, and well expressed it in his Treatise on Taxes and Contributions, published in 1667. He there says:
“If a man can bring to London an ounce of silver out of the earth in Peru, in the same time that he can produce a bushel of corn, then the one is the price of the other; now, if by reason of new and more easy mines a man can procure two ounces of silver as easily as he formerly did one, the corn will be as cheap at ten shillings the bushel as it was before at five shillings, caeteris paribus.”
I may observe in this connection, that the point that currency cranks have invariably forgotten, from Law downwards, is that precious metals embody a determinate amount of human labour like every other commodity, and that it is only by virtue of this that they can serve in the long run as the material for instruments of exchange. As Marx says:
“The money-crystal is a necessary product of the process of exchange, wherein various products of labour are actually equated with each other, and hence are actually transformed into commodities. The historical breadth and depth of exchange develops the opposition of Value and Use-Value, which opposition slumbers in the nature of commodities. The necessity of representing this opposition in a tangible shape, for the purposes of trade, forces on to an independent form of Commodity-Value, which does not rest until it finally reaches the doubling of the commodity into commodity and money.” (Das Kapital, vol.i. p.65.)
We must always bear in mind that, in the concrete, i.e., in any given case of exchange, the Standard of Value, namely, the equation between the quanta of human labour embodied in the commodities, is liable to be disturbed by accidental circumstances which are foreign to economic science proper, and which it is pure quackery to attempt to include therein. But this, of course, does not invalidate the accuracy of the principle, any more than the definitions of geometrical figures – circles, straight lines, points, angles – are invalidated by the fact that such ideally perfect figures are not to be found in nature, and hence, viewed from the standpoint of common sense, might be called inaccurate. The geometrical line or circle may not exist in nature, but geometrical figures constitute nevertheless the standard or norm in the configurations of matter.
The immediate fact that generally strikes one most prominently in any given phenomenon of exchange as that which directly determines the Exchange-Value, or the price of a particular commodity, is the relative amount of the desire for possession on the part of the buyer and his power at the moment of acquiring the article in question. In other words, the relation between supply and demand is the element which seems to determine the price of the article. Monopoly-price, that is to say, the power of exchange inherent in those commodities absolutely limited in number or amount, seems to some persons to be the central principle of Value altogether. Accordingly we have a school of economists which, basing its Theory of Value upon “supply and demand,” would deduce all Value from what it terms “final utility,” that is, the relative quantity of utility embodied in different commodities, abstraction being made from their specific quality. This point is so plausible that it demands a little consideration. It is quite clear that “final utility,” that is, the last article that comes into the market, may for the moment acquire an increased price owing to the special circumstances of the case. De Quincey’s illustration of the musical-box in the backwoods of America is a good instance. But this is a matter which is altogether extra-economic. The price given for the musical-box would vary with each individual. If two individuals equally desired it, the price would of course be higher. But this does not affect the intrinsic Value of the musical-box, irrespective of the circumstances mentioned. Apart from the latter, its Value will be always approximately determined by the amount of labour embodied in it.
The same applies to what we may term “unique Values,” a Stradivarius, a Raphael, a Caxton, a skeleton of a dodo, a great auk’s egg. But these are things which are outside economics, as it is assumed that no possible amount of human labour could reproduce them. They are not like simply rare things, as, for instance, diamonds, which can always be procured by the expenditure of an amount of labour, considerable it may be, but yet on the average ascertainable. These “unique Values,” on the contrary, have a fancy price bearing no relation to the amount of labour originally embodied in them, but depending entirely upon the psychological peculiarities of the buyer. Anyone may see this illustrated by consulting catalogues of the different sale-prices of the same rare book. The price is here regulated by convention, caprice, fashion, and other accidents, altogether incommensurable and irreducible to rule. The mere general and elastic principle of “supply and demand,” that the competition for an article raises its price, is the only rule or law under which such cases can be brought, and this is so, precisely because the element of Economic, Value, that is, a definite quantity of labour as embodied in a utility, is eliminated. You have Use-Value and Exchange-Value confronting each other without that regulative element of Economic-Value in the abstract which is necessary to constitute a thing a commodity, in proper sense of the word. The price at a given time and place, and under given circumstances, is obviously variable. It is something extraneous to the commodity itself. This element, then, of “final utility,” as it is sometimes termed, is plainly not the element which at once enters into the substance of commodities, and at the same time, determines the degree of their exchange-power all times and places.
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“When we have nothing else to wear |
But though the relative exchange Value of shoddy and of cloth of gold may, under these circumstances be reversed, that reversal will not long continue. It will only obtain until the economic centre of gravity, the relative amount of labour embodied in the cloth of gold and in the shoddy, has had time to re-assert itself. Price is, in short, often adventitious to the commodity qua commodity, and may vary indefinitely from day to day, perhaps from mile to mile and from person to person. It is, in other words, in no sense a constitutive attribute of the commodity, but simply its concomitant, an unknown quantity on which we can seldom reckon, unless we have the complete details of an actual case. But this superficial element of “supply and demand” which determines the price at a given time and place is always tending to become extinguished in what may be termed the natural price of the commodity, namely, the equivalent in coined money of the amount of labour which it embodies. When supply and demand balance one another, it becomes completely absorbed in the natural price, which is nothing more than the equivalent expression of equal quanta of labour. Exchange-Value and Price merely obtain as a relation between commodities, whereas true Economic-Value exists in the commodity per se, as the ground-principle of its exchangeability.
There are plenty of instances of things having a price, but a price really extra-economic, as not being reducible to the fundamental laws which regulate the production and exchange of wealth in a commercially free society. For instance, there is the conscience of a candidate for Parliament, which is very often offered for a price, and very often sold for a price. But this transaction obviously lies outside the scope of economics.
The most important example of an object possessing Exchange-Value, as expressed in its adequate form, namely as price, which nevertheless has here no Economic-Value, is land in its natural state. Uncultivated land, though not the embodiment of any human labour, may be bought and sold like a true commodity. The price is acquired by the mere arbitrary act of appropriation. The individual who has the appropriated land in his possession is a monopolist pure and simple. The price he exacts does not represent any Economic value, but it has been arbitrarily imposed from without. Political economy makes abstraction from these temporary and disturbing factors, and assumes a society, commercially free, that is a society free from arbitrary interference with the laws governing the production and distribution of wealth. Now, whatever may be historically the case, it is obvious that the monopoly of land is not a necessary condition of the production or distribution of wealth in the modern, or any, condition of society. While we can assert that, where exchange takes place at all, an hour’s labour will not in the long run be exchanged for less than an hour’s labour of the same degree, we can see that land may be free or it may be monopolised by individuals. This does not, of course, alter the fact that when the monopoly of land and its arbitrary treatment as a commodity has been once conceded, the law regulating its rent and price can be dealt by economic science. On being arbitrarily thrust into the arena of commodities it takes on their colour. The appropriator of uncultivated land or virgin soil says in effect “let it be assumed that this land is a commodity having a Value as though it were a product of human labour”; and thus from being the πρώτ ΰλη the formless matter of things economic out of which the Έντελεχεύα of human labour creates values, but without any Economic-Value in itself – it is treated as though it were in itself an embodiment of human labour, and, therefore, as though it had such a Value.
In Economic-Value, the differences of quality in labour are eliminated. The abstract human labour that determines Value is that labour which on an average exists in the capacity of any ordinary individual. “Simple average labour,” as Marx says, “varies in character in different countries and at different times, but in a particular society it is given. Skilled labour counts only as simple labour intensified, or rather multiplied, a given quantity of skilled being considered equal to a greater quantity of simple labour. Experience shows that this reduction is constantly being made. A commodity may be the product of the most skilful labour but its value by equating it with the product of simple labour represents a definite quantity of the latter labour alone. The different proportions in which different sorts of labour are reduced to unskilled labour as their standard are established by a social process that goes on behind the backs of the producers and consequently appears to be fixed by custom.”
By the economic-labour that constitutes the immanent measure of Value in commodities is to be understood, then, a definite amount of the average labour in a particular community requisite to produce or to procure a given article. If in any individual case the labour should all below this average amount, the article will not be therefore cheaper, and if it should rise above it, the article will not be therefore dearer. A clever workman able to produce some commodity in less time than the ordinary workman will still be able to command the same price as that given for other similar commodities that have taken a longer time and greater labour to produce. On the other hand, a clumsy workman who takes double the time will not, therefore, be able to command double the usual price of the article he produces.
The tendency, however, of the great Machine-Industry of modern times, which is rapidly extending itself over all departments of production, is to actually equate all kinds of labour by reducing them to the average of unskilled labour. The skill required to tend a machine is comparatively slight at most, and approximately the same for one machine as for another. The trend of this modern “great industry” is, therefore, to reduce abstract Value to the sole determinant of price in the real world, by eliminating the possibility of these extra-economic differences of skill, disposition, and other factors already indicated as hitherto modifying the economic principle in its actual manifestations.
Thus it is that the expression of economic categories changes with the changing conditions of society. In primitive tribal society, exchange virtually did not exist. In order that a system of exchange may obtain it is necessary that individuals should be independent holders of property, and this reciprocal independence of the individual did not exist in primitive times. Such exchange as took place at all was between different communities or social groups, not between individuals. As civilisation has advanced, the group (tribe, clan, etc.) has increasingly tended to disappear and individual autonomy to supplant it. But modern industrial and commercial conditions are in their turn tending more and more to break down individual autonomy, and to prepare the way for a form of society in which exchange shall again disappear with its individualistic basis. But this time it must disappear for ever, since there will be no germ of economic individualism, such as was supplied by the exchange between limited groups, which germ, if it existed, might serve as the starting-point for a new development of a similar kind. Civilisation has accomplished its work in the destruction of autonomous groups, and that work is not likely to be undone. We are never likely to revert to the old independent group as a unit. But the autonomy of the individual can no longer maintain itself under the complicated conditions produced by its child, the capitalist system. This system, as we see it to-day, demanding the co-operation of vast bodies of workmen and the delicate adjustment of a highly complex world-market, negates on one side the principle of individualism, and this must completely disappear in a society, which, though the immediate outcome indeed of Capitalism, is yet at the same time a re-affirmation on a higher plane of that principle of Communism whereon the relations of early man were based, and within which neither Exchange nor Exchange-Value had any meaning.
Last updated on 13.1.2006