Commodity production
Encyclopedia
Commodity production is the production of wares for sale. It is a type of production in which products are produced not for direct consumption by the producers, as in subsistence production, but are surplus to their own requirements and are produced instead specifically with the intention of sale in the market, usually to obtain income. In this case, production for use contrasts with production for exchange. In principle, the products traded as commodities could be goods or services sold as "products", but often the use of the term commodity production is restricted to the production of goods.
The word "commodity" came into use in English in the 15th century, from the French "commodité", meaning to benefit or profit. Going further back, the French word derived from the Latin commoditatem (nominative commoditas) meaning "fitness, adaptation". The Latin root commod- meant variously "appropriateness", "proper measure, time or condition" and "advantage, benefit".
Normally commodity production assumes the presence of a cash economy, i.e. goods and services are traded for money
and their value is expressed in money prices. Because commodity production is aimed at trading the products to obtain income, typically the organization of production itself and the technologies chosen to produce products are increasingly based on commercial
principles. In the first instance, that means that those products are produced for which there is a market demand, and which will sell, and that products for which there is no market are unlikely to be produced. Commodity producers aim to organize their production so that the sale of their products to others will occur, and try to reduce their costs, in order to increase their income from the sale of products. Thus, they aim to produce products in a way that meets the requirements of the consumers of those products. In turn, that often means that products are designed in the way that appeals to potential buyers, rather than designed according to the fancy of the producers.
by e.g. Adam Smith
, James Mill
, David Ricardo
and Karl Marx
. But it is also used nowadays in various social sciences, such as sociology
, archaeology
, economic history
and anthropology
. The relevance of the concept concerns particularly the transition of economic activities from non-commercial production to commercial production, i.e. the development and growth of a market economy or business economy. In sociology
, the term is used with a focus on the social relationships involved in producing things commercially, and how this affects the consciousness and values of members of society.
in modern economics
. Part of the reason is that in the modern economy, far more people are employed in the production of services than in the production of physical goods. Services can also be produced as "products", and may include the production of goods, and therefore the distinction between what is a good and what is a service may be not so easy to draw.
Modern national accounts
refer simply to market production which contrasts with non-market production, defined according to the purpose and destination of outputs produced. If products are produced only for own use, they are not regarded as part of market production, except if they are an aid to producing products for market sale. Market production is production for the main purpose of market sale of the products. Non-market production is the production of goods and services which are not distributed via market trade.
are national and international markets in which such commodities are traded, often with the aid of futures
contracts. In this case, the production of commodities refers specifically and exclusively to the production of primary products, and not just to any vendible commodity.
's analysis of the commodity form in the opening chapter of Das Kapital
. Marx follows but also modifies the classical distinction drawn between "value in exchange" (exchange-value) and "value in use" or utility (use-value), arguing that in commodity production this distinction maps onto the distinction between abstract labour and concrete labour
.
Marx considered capitalist production as "generalized commodity production" in which most production is organized for the purpose of trading the products. In Marxist theory and Marxian economics
the term commodity production continues to be widely used, and has a specific scientific meaning (see commodity (Marxism)
, commodification
, commodity fetishism
, and simple commodity production
). The production of goods "as commodities" or "in the form of commodities" then denotes that the products, their production and their valuation takes a specific social and economic form - people are related according to the trading value of their products.
A distinction is drawn by Marxists between commodity production "in general", and specifically capitalist commodity production. Production for market sale could occur in all sorts of ways, in all kinds of societies for all sorts of reasons, but capitalist commodity production involves specific relations of production
, specific private property rights as well as the motive of capital accumulation
or private profit
. In particular, it involves the employment of wage labour
by workers who do not own sufficient assets, skills or means of life that would enable them to run a business themselves, or make a living in some other way. These specifically capitalist characteristics arise out of the fact that in the capitalist mode of production
commodities are produced "by means of commodities", i.e. that both the inputs and outputs of the production process are traded commercially in markets, with the effect that the whole production process itself is reshaped according to commercial principles.
Thus, capitalist commodity production aims to utilize specific kinds of social organization, management and technology for the explicit purpose of reducing costs, increasing sales and increasing profit income, under conditions of generalized market competition. Another way of saying this is that production becomes a phase in the circuit of capital accumulation
, the process of "making money". As a corollary, capitalist commodity production tends to displace or destroy all forms of production which are not compatible with commercial motives - if production doesn't "make money" then, according to capitalist logic, it has no right to exist other than as a private household activity of consumers.
The word "commodity" came into use in English in the 15th century, from the French "commodité", meaning to benefit or profit. Going further back, the French word derived from the Latin commoditatem (nominative commoditas) meaning "fitness, adaptation". The Latin root commod- meant variously "appropriateness", "proper measure, time or condition" and "advantage, benefit".
Normally commodity production assumes the presence of a cash economy, i.e. goods and services are traded for money
Money
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...
and their value is expressed in money prices. Because commodity production is aimed at trading the products to obtain income, typically the organization of production itself and the technologies chosen to produce products are increasingly based on commercial
Commerce
While business refers to the value-creating activities of an organization for profit, commerce means the whole system of an economy that constitutes an environment for business. The system includes legal, economic, political, social, cultural, and technological systems that are in operation in any...
principles. In the first instance, that means that those products are produced for which there is a market demand, and which will sell, and that products for which there is no market are unlikely to be produced. Commodity producers aim to organize their production so that the sale of their products to others will occur, and try to reduce their costs, in order to increase their income from the sale of products. Thus, they aim to produce products in a way that meets the requirements of the consumers of those products. In turn, that often means that products are designed in the way that appeals to potential buyers, rather than designed according to the fancy of the producers.
Classical and social scientific usage
The term is used particularly in the classical writings of political economyPolitical economy
Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...
by e.g. Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
, James Mill
James Mill
James Mill was a Scottish historian, economist, political theorist, and philosopher. He was a founder of classical economics, together with David Ricardo, and the father of influential philosopher of classical liberalism, John Stuart Mill.-Life:Mill was born at Northwater Bridge, in the parish of...
, David Ricardo
David Ricardo
David Ricardo was an English political economist, often credited with systematising economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill. He was also a member of Parliament, businessman, financier and speculator,...
and Karl Marx
Karl Marx
Karl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...
. But it is also used nowadays in various social sciences, such as sociology
Sociology
Sociology is the study of society. It is a social science—a term with which it is sometimes synonymous—which uses various methods of empirical investigation and critical analysis to develop a body of knowledge about human social activity...
, archaeology
Archaeology
Archaeology, or archeology , is the study of human society, primarily through the recovery and analysis of the material culture and environmental data that they have left behind, which includes artifacts, architecture, biofacts and cultural landscapes...
, economic history
Economic history
Economic history is the study of economies or economic phenomena in the past. Analysis in economic history is undertaken using a combination of historical methods, statistical methods and by applying economic theory to historical situations and institutions...
and anthropology
Anthropology
Anthropology is the study of humanity. It has origins in the humanities, the natural sciences, and the social sciences. The term "anthropology" is from the Greek anthrōpos , "man", understood to mean mankind or humanity, and -logia , "discourse" or "study", and was first used in 1501 by German...
. The relevance of the concept concerns particularly the transition of economic activities from non-commercial production to commercial production, i.e. the development and growth of a market economy or business economy. In sociology
Sociology
Sociology is the study of society. It is a social science—a term with which it is sometimes synonymous—which uses various methods of empirical investigation and critical analysis to develop a body of knowledge about human social activity...
, the term is used with a focus on the social relationships involved in producing things commercially, and how this affects the consciousness and values of members of society.
Usage in economics
The term is also used in economic theory, but often considered archaicArchaism
In language, an archaism is the use of a form of speech or writing that is no longer current. This can either be done deliberately or as part of a specific jargon or formula...
in modern economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
. Part of the reason is that in the modern economy, far more people are employed in the production of services than in the production of physical goods. Services can also be produced as "products", and may include the production of goods, and therefore the distinction between what is a good and what is a service may be not so easy to draw.
Modern national accounts
National accounts
National accounts or national account systems are the implementation of complete and consistent accounting techniques for measuring the economic activity of a nation. These include detailed underlying measures that rely on double-entry accounting...
refer simply to market production which contrasts with non-market production, defined according to the purpose and destination of outputs produced. If products are produced only for own use, they are not regarded as part of market production, except if they are an aid to producing products for market sale. Market production is production for the main purpose of market sale of the products. Non-market production is the production of goods and services which are not distributed via market trade.
Investor usage
In modern investor usage, the term "commodities" also refers specifically to mass-produced primary products, such as agricultural products, forestry products, fishing products and mineral products (metals, oil, gas, ores). The commodity marketsCommodity markets
Commodity markets are markets where raw or primary products are exchanged. These raw commodities are traded on regulated commodities exchanges, in which they are bought and sold in standardized contracts....
are national and international markets in which such commodities are traded, often with the aid of futures
Futures contract
In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...
contracts. In this case, the production of commodities refers specifically and exclusively to the production of primary products, and not just to any vendible commodity.
Statistical usage
In statistical reports, the broad definition of commodity production is the mass-production of industrial goods, and a more narrow definition is the production of primary products. The United Nations Statistics Division offers an Industrial Production Statistics Database http://unstats.un.org/unsd/industry/ics_intro.asp from which a list of types of commodity production can be obtained in this sense.Marxian usage
The use of the term "commodity" in the sense of ware for sale or merchandise was made famous especially by Karl MarxKarl Marx
Karl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...
's analysis of the commodity form in the opening chapter of Das Kapital
Das Kapital
Das Kapital, Kritik der politischen Ökonomie , by Karl Marx, is a critical analysis of capitalism as political economy, meant to reveal the economic laws of the capitalist mode of production, and how it was the precursor of the socialist mode of production.- Themes :In Capital: Critique of...
. Marx follows but also modifies the classical distinction drawn between "value in exchange" (exchange-value) and "value in use" or utility (use-value), arguing that in commodity production this distinction maps onto the distinction between abstract labour and concrete labour
Abstract labour and concrete labour
Abstract labour and concrete labour refer to a distinction made by Karl Marx in his critique of political economy.- Origin :Marx first advanced this distinction in A Contribution to the Critique of Political Economy and is discussed in more detail in chapter 1 of Capital, where Marx writes:The...
.
Marx considered capitalist production as "generalized commodity production" in which most production is organized for the purpose of trading the products. In Marxist theory and Marxian economics
Marxian economics
Marxian economics refers to economic theories on the functioning of capitalism based on the works of Karl Marx. Adherents of Marxian economics, particularly in academia, distinguish it from Marxism as a political ideology and sociological theory, arguing that Marx's approach to understanding the...
the term commodity production continues to be widely used, and has a specific scientific meaning (see commodity (Marxism)
Commodity (Marxism)
In classical political economy and especially Karl Marx's critique of political economy, a commodity is any good or service produced by human labour and offered as a product for general sale on the market. Some other priced goods are also treated as commodities, e.g...
, commodification
Commodification
Commodification is the transformation of goods, ideas, or other entities that may not normally be regarded as goods into a commodity....
, commodity fetishism
Commodity fetishism
In Marx's critique of political economy, commodity fetishism denotes the mystification of human relations said to arise out of the growth of market trade, when social relationships between people are expressed as, mediated by and transformed into, objectified relationships between things .The...
, and simple commodity production
Simple commodity production
Simple commodity production is a term coined by Frederick Engels to describe productive activities under the conditions of what Marx had called the "simple exchange" of commodities, where independent producers trade their own products...
). The production of goods "as commodities" or "in the form of commodities" then denotes that the products, their production and their valuation takes a specific social and economic form - people are related according to the trading value of their products.
A distinction is drawn by Marxists between commodity production "in general", and specifically capitalist commodity production. Production for market sale could occur in all sorts of ways, in all kinds of societies for all sorts of reasons, but capitalist commodity production involves specific relations of production
Relations of production
Relations of production is a concept frequently used by Karl Marx and Friedrich Engels in their theory of historical materialism, and in Das Kapital...
, specific private property rights as well as the motive of capital accumulation
Capital accumulation
The accumulation of capital refers to the gathering or amassing of objects of value; the increase in wealth through concentration; or the creation of wealth. Capital is money or a financial asset invested for the purpose of making more money...
or private profit
Profit (economics)
In economics, the term profit has two related but distinct meanings. Normal profit represents the total opportunity costs of a venture to an entrepreneur or investor, whilst economic profit In economics, the term profit has two related but distinct meanings. Normal profit represents the total...
. In particular, it involves the employment of wage labour
Wage labour
Wage labour is the socioeconomic relationship between a worker and an employer, where the worker sells their labour under a formal or informal employment contract. These transactions usually occur in a labour market where wages are market determined...
by workers who do not own sufficient assets, skills or means of life that would enable them to run a business themselves, or make a living in some other way. These specifically capitalist characteristics arise out of the fact that in the capitalist mode of production
Capitalist mode of production
In Marx's critique of political economy, the capitalist mode of production is the production system of capitalist societies, which began in Europe in the 16th century, grew rapidly in Western Europe from the end of the 18th century, and later extended to most of the world...
commodities are produced "by means of commodities", i.e. that both the inputs and outputs of the production process are traded commercially in markets, with the effect that the whole production process itself is reshaped according to commercial principles.
Thus, capitalist commodity production aims to utilize specific kinds of social organization, management and technology for the explicit purpose of reducing costs, increasing sales and increasing profit income, under conditions of generalized market competition. Another way of saying this is that production becomes a phase in the circuit of capital accumulation
Capital accumulation
The accumulation of capital refers to the gathering or amassing of objects of value; the increase in wealth through concentration; or the creation of wealth. Capital is money or a financial asset invested for the purpose of making more money...
, the process of "making money". As a corollary, capitalist commodity production tends to displace or destroy all forms of production which are not compatible with commercial motives - if production doesn't "make money" then, according to capitalist logic, it has no right to exist other than as a private household activity of consumers.