First post on Marx's Capital. Why he should have chosen supply and demand instead of labor.

Marxism. Capital Book 1 Part 1

This is the first part of two of my examination of Karl Marx's Capital Book 1, comprising the chapters 1 - 3. It is an inquest into his thinking and especially into his exchange value. Parts I do not find interesting will be summarily dealt with or excluded.

When referring to Marx's text, I do as a rule give part summaries, not direct quotations. These summaries are set apart. They have a different font. They are a different color. They are left aligned: that is the right side is not straight. They start a bit further to the right. They are like this paragraph.

If you do not trust my summaries, it should not be difficult to find an exemplar of Capital to check them.

CAPITAL VOLUME 1. THE PROCESS OF PRODUCTION

PART 1. COMMODITIES AND MONEY.

Chapter 1. The commodity

"Use value" and value

Let us see what Marx says.

A commodity is, in the first place, an object outside us, a thing that by its properties satisfies human wants of some sort or another. If this need stems from the stomach or from fancy does not matter, neither, if the satisfaction is direct, like from food, or indirect like from the saucepan you use for cooking.

The utility of a commodity gives it a use value independent of the labor involved in manufacturing. At the same time, in today's society the commodity has an exchange value.
The exchange value is normally presented in money, as a price. For example, 10 kilos of wheat can have the same exchange value as 50 kilos of iron which in turn has the same exchange value as the money £1. This can be written as an equation, 10 kilos of wheat = 50 kilos of iron = £1.
What does this equation say? Because you can equalize these values, there is something they have in common that is the same size. There exists an exchange value that can only be the apparition of an inner value.
All closed geometric figures have something in common, they have an area. In the same way all commodities have something in common, they have an exchange value. This exchange value cannot be any geometric, physical or other natural property, these qualities are only part of the use value.

A geometrical figure, no matter how it looks, has an area that can be expressed as a certain number of square feet. A commodity, no matter how it looks, has a price that can be expressed as a certain number of £. Why must there be some sort of secret value that is not the price? It is like claiming that a geometrical figure must have a secret area that is not the area.

And when Marx says that "natural" properties are part only of the use value, not of exchange value, he does not consider the possibility that the commodity has an exchange value because it has a use value. He does not see the world as changing, living, with interactions and contradictions. He does not consider the possibility that people pay for something because they can use it for something.

If you disregard use value, the commodity has only one property left, it is a product of labor. But when we disregard the use value, we disregard the tangible object and the human labor becomes an abstraction. And from this abstraction, the value is crystallized. Thus, this is the thing they have in common. We will show that this is the exchange value, for now we will disregard it.

If we look at the beginning of the chapter, we see something interesting:
"A commodity is, in the first place, an object outside us, a thing that by its properties satisfies human wants". So: a commodity is not in the first place a product of labor. Further: "a commodity is... a thing"; a commodity has the abstract property supply. And: "a commodity... satisfies human wants"; a commodity has the abstract property demand.

What to Marx is the primary thing of the commodity, what he first of all emphasizes, is thus that it has the abstract property supply, that it has the abstract property demand. If he is right, he is thus wrong when he says that the commodity has only one abstract property, that of being a product of labor. If he believed in himself, he really should have chosen supply and demand instead of labor for his value.
Of course you can ask yourself what the exchange value of a commodity without its use value is. In the book Alice in Wonderland a cat disappears, leaving nothing but its smile. An exchange value without a use value is something just as illusory as a smile without a cat.

Marx assumes that a certain result always has the same cause. If something has a value, a price, it must always be because of the same thing. This is wrong. Already Aristotle observed that it is wrong to reason from result to cause: if it is true that every man who drinks too much will get impoverished, then it is not necessarily true that all impoverished men drink too much. If it is true that labor creates value, it is not necessarily true that all value is created by labor.
Besides, we will soon find Marx explaining that it is not necessary true that labor creates value.

Marx says it has to be value. Like God said Let there be light, and there was light, in the same way Marx says Let there be value, and there is value. If we look at classical proofs of God's existence, we find that they use the same "there must be"-arguments as Marx:
Because things move, there must be somebody who started the movements.
Because things are more or less perfect, there must be an absolutely perfect origin.
If something exists, there must be an absolutely necessary being. Because I exist God must exist.
Because the universe shows such order, there must be an ordainer.

An object thus has a value only because it contains labor. The value is measured in the amount of labor, that is in the time used to manufacture the object.
This does not mean that a lazy and bad worker needing much time to produce something creates an object of extra high value; the value is decided by the average social time needed for production.

The value does not always stay the same. In a good year a farmer might get 10 kilos of wheat for the same amount of labor that in a bad year gives 5 kilos. The value is also influenced by changes in production; improvements in machinery can make the value lower because the time needed for production decreases.

If an object does not comprise any labor but still can be used, it has use value but not exchange value. This applies to air, virgin soil, untouched woods and similar things.

When Marx believes that you do not pay for using untouched woods, I believe he is wrong. Already in the Icelandic Saga of Njal, about 1000 years old, there was fighting about tree rights, supply and demand setting a value to the untouched woods. I do not think it was different when Marx wrote his books.

To the Greek philosopher Plato there exists, in some supernatural way, a world of Forms. In this world, every concept, man, justice, bed, has its own Form, a Form more "real" than what we perceive. Every bed you see is a representation, more or less true, of the bed's Form. When the artist makes a drawing of a bed, he makes a representation of a representation.
In a similar way, maybe not as permanent, there exists to Marx a more "real" value. The price of a commodity is a representation, more or less true, of this "real" value.

When Marx invents a value depending only on labor, he leaves out of account a world that is changing, living, where different parts interact; a world filled with contradictions.

What is a value? It depends on what you mean by the word. To me, this is a truism. There is nothing wrong with constructing a value that is only depending on labor. In the same way, there is nothing wrong with constructing a value that is only depending on weight. We can reason like Marx: the commodities must have something in common. This has to be something physical, it cannot be something else than the weight.

An object cannot have a value without having use value. No matter how much you work, the object has no value if nobody wants it.

Here Marx demonstrates his method, as simple as it is ingenious, to solve the problem with the reality that does not agree with his theory: he disregards reality. First he says it has to be this way. Then he points out, in passing, that he is wrong. First he says that the important thing behind the value is labor. Now he says that even if there is supply, if there is no demand there is no value.

The two kinds of labor

The commodity has two characters, as use value and as exchange value. In the same way, labor has two characters, as producer of use value and as producer of exchange value. The use value is the amalgamation of two elements, raw material and labor. Thus, labor is not the only source of use value.

An object only gets its value through the socially necessary amount of labor. This is measured by measuring the time a worker of average skill needs to produce the object. Complicated labor counts as intensified or rather multiplied simple labor, a given amount of complicated labor counting as a bigger amount of simple labor. The relative amount of labor producing the same value is established by a social process. To simplify things, we do in the future assume that no labor is more complicated than any other.
Observe that we are talking of value produced, not of wages. Wages will be dealt with later.

It is possible to form a theoretical complication factor for labor. You could for example assign it a complication factor depending on the length of the necessary education. You could take into account other factors.
This is not what Marx does. When he says that more complicated labor produces more value, he does not look at the labor. Instead, he looks at the value produced, depending on this he calculates how complicated the labor is. For him, it is the value produced that decides how complicated the labor is. When he says that more complicated labor produces more value, it is just a tautology.

We could instead of labor use weight to determine the value. If we argued like Marx, we would see that gold is more expensive than silver. Then we would explain this by saying that the weight of gold counts as intensified or rather multiplied silver weight.

Marx could also use another method. In Book 3 of Capital, every time price and value do not agree the commodity is just sold over or under its value, it is just the sum of all prices that equals the sum of all values. The value is just some sort of average price. He could have used this method here too. He could say that all labor creates the same value, if some workers are better or worse paid than others, then they are paid over or under the value of their labor.

In his book Anti-Dühring, Engels berates Herr Dühring for the idea that for one hours work, all labor creates the same value. He says that Dühring is lucky that he is not a manufacturer as that way of fixing the value would force him into bankruptcy.
It is price, not value, that decides profit. If Marx is permitted an indeterminate value different from price, then Dühring should be permitted it too. In fact, Marx is proud over his discovery that his value can not be used for commercial trade.

The Equivalent Form

The value of any commodity can be expressed in any other commodity. For example 20 yards of linen = 1 coat or 1 coat = 20 yards of linen. The first commodity (the left side) I call the relative form, the second (right side) I call the equivalent.
You can use any commodity as equivalent, for example:
1 coat = 20 yards of linen
10 lb of tea = 20 yards of linen
2 ounces of gold = 20 yards of linen

For relative form and equivalent, there are always two separate commodities, I cannot express the value of linen in linen. The equation 20 yards of linen = 20 yards of linen only says that 20 yards of linen is nothing else than 20 yards of linen.

Of course this is nonsense. Of course if the commodity linen is used as equivalent, then the commodity 20 yards of linen has the value 20 yards of linen. If not, it would not be possible to use linen as equivalent.

Among all commodities, there is one that has attained the privilege of being selected as equivalent. This commodity is gold. When gold has attained this function, the equivalent form becomes the money form. If we call one ounce one pound, we get the value expressed as money: we get the price. Money is just a commodity that has been assigned the role as equivalent. The value of money is given by the gold content, like any other commodity gold has a value given by the amount of labor needed to produce it.

The Fetishism of Commodities

As use value, the commodity is not strange. A table is just a piece of machined wood. When it steps forth as a commodity, it is more mysterious, it transforms into something with supernatural powers.
How does the commodity get this mysterious form? Obviously it is the commodity-form itself. That all human labor is of the same nature is demonstrated in values of the same nature.

The secret of the commodity form is simply that it exhibits the product of labor as a tangible object. Thus it also exhibits the relationship between the producers and their labor as a relationship between things independent of the producer. Through this substitution, the products of labor become commodities, at the same time perceptible and imperceptible.
In the same way, the light from an object is perceived by us as an object outside the eye, not as an excitation of the optic nerve. But there is a difference. In the act of seeing there is something physical, the light that affects something else, the eye and the optical nerve. The commodity form on the other side has nothing to do with the physical nature of the commodity. It is just a relation between humans which to them is perceived as relation between the things.
Within religion, the products of the brain get life and independent existence. In the world of commodities with its products of the human hand, it is the same.
This is what I call the Fetishism that clings to the products of labor when they act as commodities.

Here Marx explicitly tells us that his ideas are on par with those of religious people: that his concept of value is something as real as the concepts of religion. He does not tell us if there is any difference.

People do not award their products of labor a value because they see them as receptacles of human labor. On the contrary, when they award different products comparable values they equate their different kinds of labor. They do not know it but they do. It is a modern scientific discovery that the products of labor, as far as they are values, are only material expressions of human labor. This makes an epoch in the history of the human race, but it does not disclose the material guise of the labor behind the tangible product.

An epoch in the history of the human race? That you assign to the commodity a value depending on labor? So if I assign the commodity a value depending on weight it will also make an epoch in the history of the human race? Not that I find it very plausible but if Marx says so, who am I to object?

Chapter 2. The Process of Exchange

The exchange of commodities started in the primitive society when people changed things they did not need for something somebody else did not need. At first, these were casual transactions, concluded when somebody found somebody else willing to do business. With time, this exchange grew more extensive and organized. With increased commerce, there was a need of an equivalent. At first, temporary equivalents were used, after some time replaced by something else. Gradually, the precious metals assumed this function as they had qualities making them practical to use.

Chapter 3. Money, or the circulation of commodities

The Measure of Values

The price is the money-name of the labor spent on the commodity. The commodity and the quantity of money given by the price have the same value, this however does not necessarily mean that the price is the same as the value.
We assume that the amount of labor needed to produce 10 kilo of wheat is the same as is needed to produce gold worth £2. The circumstances might permit the seller to get £3 or force him to sell for £1 per 10 kilo. In this case, £3 or £1 is not the value of the commodity because the amount of labor needed to produce it has not changed. Still, it is the price of the commodity because the price is in the first place money and in the second hand the exchange proportion with money.

So if supply and demand makes the price for wheat change, the value does not change.

That the price is not the same as the value does not mean there is something wrong with the price-form. On the contrary, it makes the price-form a very suitable form for a way of production where the intrinsic laws can only manifest themselves as averages of apparently lawless irregularities compensating each other.

Not only can the price differ from the value, it can cease being an expression of value. Things like conscience and honor can be sold for money and thus get the form of commodities, the price expression becomes imaginary like certain mathematical quantities. On the other hand, the imaginary price-form can conceal a real value-relation. This is for example the case when uncultivated soil gets a price although it has no value because no labor has been invested in it.

Now, if you look back, you will see this: it is because you can equalize values that some inner value must exist. If you pay £100 for honor or for uncultivated soil, you can equalize this with £100 for iron or £100 for wheat. Thus, according to Marx, honor and uncultivated soil does have an inner value.

Marx is using the "No true Scotsman" argument: Hamish McDonald reads about how the "Brighton Sex Maniac Strikes Again". Shocked, he exclaims "No Scotsman would do such a thing". Next day he reads about an Aberdeen man even more brutal. So he says "Well, no true Scotsman would do such a thing".
Marx: There is no value without labor.
Doubter: There is no labor in honor and uncultivated soil.
Marx: Well, there is no true value without labor.

Medium of Circulation

Let us follow a weaver to the market. His commodity, 20 meters of linen, is sold for £2. This money he uses to buy a family bible.
The exchange process can be described in the following way:
Commodity - Money - Commodity.

Now let us see what can befall our weaver. His commodity, 20 meter of linen has the price £2, he has only used the socially necessary amount of labor.
But if society's need of linen is already fulfilled, our weaver's commodity will be superfluous and thus unnecessary. What was yesterday socially necessary labor is no longer so. Even if every piece of linen on the market contains socially necessary labor, the sum of all these pieces can contain superfluous labor. If the market cannot absorb all linen at the normal price of £1 per 10 meter, this proves that too much labor has been used for linen weaving. The effect is the same as if the weaver had used more than necessary labor for his product: the value of the commodity will be lower.

If the value is given by the amount of necessary labor, the effect of using more than necessary labor will not be that the value of the product will rise. Instead, circumstances force the seller to sell his commodity at a lower price. If we compare that with what Marx said about wheat, we can see an important difference between wheat and linen: If you have to sell wheat to a lower price, the value of the wheat will not change. If you have to sell linen to a lower price, the value of the linen will change.

What Marx demonstrates, although he does not say so, is that it is supply and demand that sets the value. The amount of labor only sets his value on condition that it is not changed by supply and demand.

© Anders Floderus