Socially necessary labour time
Encyclopedia
Socially necessary labour time in Marx's critique of political economy
is what regulates the exchange value
of commodities in trade
and consequently guides producers in their attempt to economise on labour.
Unlike individual labour hours in the classical labour theory of value formulated by Adam Smith
and David Ricardo
, the Marxian value is conceived as a fraction (or 'aliquot part') of society's labour-time.
Marx did not define this concept in mathematically exact terms, and he suggests it may be interpreted in various ways, because it connects average levels of labour productivity to social needs expressed as monetarily effective market demand for products. In addition, the precise ways in which labour costs determine product values may not be all identical, i.e. the specific mode of regulation of the values of different types of products may in fact vary somewhat, due to social, physical or technical circumstances.
, labour expenditures producing outputs and the market demand for those outputs are constantly adjusting to each other. This is a complex process, in which enterprises operating at varying levels of productivity
and unit-costs
compete with each other in responding to the expansion and contraction of total market demand for their output. In the third volume of Das Kapital
, Marx discusses how the market value (or "regulating price") of a commodity may be determined under different conditions of demand and productivity.
A given mass of new value is produced in a given time, but how this new value will be realised and distributed as income is finally established only after products are sold at specific market prices. If the market for a commodity
is oversupplied, then labour-time was expended in excess of what was socially necessary. If the market for a commodity is under-supplied, nearly all the labour-time expended on its production is socially necessary.
The simplest definition of socially necessary labour time is the amount of labour time performed by a worker of average skill and productivity, working with tools of the average productive potential, to produce a given commodity
. This is an "average unit labour-cost", measured in working hours.
If the average productivity is that of a skilled worker, and a skilled worker produces a commodity in one hour, and an unskilled worker produces a commodity in four hours; then, the unskilled worker will have only contributed one hour's worth of value in terms of socially necessary labour time. The excess hours worked by the unskilled worker do not produce social
value.
But the production of any commodity generally requires both labour and some produced means of production (or capital goods), like tools and materials. The amount of labour so required is called the direct labour input into the commodity. Yet the required capital goods have in their turn been produced (in the past) by labour and other capital goods; and so on for these other capital goods, and so on. The sum of all the amounts of labour, that were direct inputs into this backwards-stretching series of capital goods produced in the past, is called the indirect labour input into the commodity. Putting together the direct and indirect labour inputs, one finally gets the total labour input into the commodity, which may also be called the total embodied labour in it, or its direct and indirect labour contents.
However, it ought to be said that by "socially necessary labour" Marx refers specifically to the total labour-time which on average is currently required to produce an output. It is this current labour cost which determines the value of output. This may not be true for all commodities, and it may presuppose a developed market, but as a generalisation the Marxian value of a product refers to the average quantity of living labour which must currently be performed to produce a product.
of the labour force.
This can be done through higher exploitation, economising on costs and better equipment. The long-run effect is that it takes less and less labour-time to produce a product. Enterprises cannot do very much about reducing their fixed input costs usually, because these are rarely under their control. But they can always try to reduce their labour costs.
"Socially necessary labour" therefore refers to at least three economic relationships:
In other words, we have to distinguish between
The former determines the unit value of commodities, hence their production price
, and the latter determines the discrepancy between actual supply and effective demand, hence the discrepancy between market price and production price.
as an attribute of labour-products which exists by virtue of social relations of production
. Thus, value is a purely social characteristic of labour-products. The substance of the value of a commodity is a determinate quantity of social labour.
That is, the existence of value presupposes social relations between people organised into a society. 'Socially necessary labour time' encapsulates this essential 'relatedness' of value - it is labour time assessed in relation to social needs, not merely labour time performed.
This distinction demarcates Marx from other political economists, but is often overlooked in accounts of Marx's value theory. Marx understood that the casual reader might mistakenly treat his category as interchangeable with its Ricardian
predecessor, and in later editions and the Afterword to the Second German Edition implores readers to pay particular attention to the mediations between that old category and the one his own theory sought to establish. Marx's concept of value is not intended to be an equilibrium price.
He does not assume market equilibrium, but aims to explain how the process of convergence between supply and demand practically occurs.
:
"All that palaver about the necessity of proving the concept of value comes from complete ignorance both of the subject dealt with and of scientific method. Every child knows that a nation which ceased to work, I will not say for a year, but even for a weeks, would perish. Every child knows, too, that the masses of products corresponding to different needs require different and quantitatively determined masses of the total labour of society. That this necessity of the distribution of social labour in definite proportions cannot possibly be done away with by a particular form of social production but can only change the mode of its appearance, is self evident. No natural laws can be done away with. What can change in historically different circumstances is only the form in which these laws assert themselves. And the form in which this proportional distribution of labour asserts itself, in a state of society where the interconnection of social labour is manifested in the private exchange of the individual products of labour, is precisely the exchange value of these products" [Marx, letter to Dr Kugelmann, July 11, 1868, in Marx/Engels Selected Correspondence, p. 209 ].
Despite these comments, Marx has been criticised strongly for adding the "socially necessary" qualification to labour time by the libertarian philosopher Robert Nozick
, in his influential Anarchy, State and Utopia, for whom it is an unjustified 'bolt-on' aspect of Marx's theory.
One debate in Marxian economics
concerns the question of whether the product-values formed and traded include both direct and indirect labour, or whether these product-values refer only to current average production costs (or the value of current average replacement costs).
Mirowski (1989) for example accuses Marx of vacillating between a field theory (labour-time currently socially necessary) and a substance theory of value (embodied labour-time).
Marx's theory is probably best interpreted as a field theory, but modelling the determination of value by socially necessary labour time mathematically is admittedly a difficult exercise if not probably impossible.
http://ricardo.ecn.wfu.edu/~cottrell/OPE/archive/
Political 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...
is what regulates the exchange value
Exchange value
In political economy and especially Marxian economics, exchange value refers to one of four major attributes of a commodity, i.e., an item or service produced for, and sold on the market...
of commodities in trade
Trade
Trade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and...
and consequently guides producers in their attempt to economise on labour.
Unlike individual labour hours in the classical labour theory of value formulated by 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...
and 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,...
, the Marxian value is conceived as a fraction (or 'aliquot part') of society's labour-time.
Marx did not define this concept in mathematically exact terms, and he suggests it may be interpreted in various ways, because it connects average levels of labour productivity to social needs expressed as monetarily effective market demand for products. In addition, the precise ways in which labour costs determine product values may not be all identical, i.e. the specific mode of regulation of the values of different types of products may in fact vary somewhat, due to social, physical or technical circumstances.
Simplified explanation of the concept
In a market economyMarket economy
A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...
, labour expenditures producing outputs and the market demand for those outputs are constantly adjusting to each other. This is a complex process, in which enterprises operating at varying levels of productivity
Productivity
Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...
and unit-costs
Unit cost
The unit cost of a product is the cost per standard unit supplied, which may be a single sample or a container of a given number. When purchasing more than a single unit, the total cost will increase with the number of units, but it is common for the unit cost to decrease as quantity is increased...
compete with each other in responding to the expansion and contraction of total market demand for their output. In the third volume 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 discusses how the market value (or "regulating price") of a commodity may be determined under different conditions of demand and productivity.
A given mass of new value is produced in a given time, but how this new value will be realised and distributed as income is finally established only after products are sold at specific market prices. If the market for a commodity
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...
is oversupplied, then labour-time was expended in excess of what was socially necessary. If the market for a commodity is under-supplied, nearly all the labour-time expended on its production is socially necessary.
The simplest definition of socially necessary labour time is the amount of labour time performed by a worker of average skill and productivity, working with tools of the average productive potential, to produce a given commodity
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...
. This is an "average unit labour-cost", measured in working hours.
If the average productivity is that of a skilled worker, and a skilled worker produces a commodity in one hour, and an unskilled worker produces a commodity in four hours; then, the unskilled worker will have only contributed one hour's worth of value in terms of socially necessary labour time. The excess hours worked by the unskilled worker do not produce social
Social
The term social refers to a characteristic of living organisms...
value.
But the production of any commodity generally requires both labour and some produced means of production (or capital goods), like tools and materials. The amount of labour so required is called the direct labour input into the commodity. Yet the required capital goods have in their turn been produced (in the past) by labour and other capital goods; and so on for these other capital goods, and so on. The sum of all the amounts of labour, that were direct inputs into this backwards-stretching series of capital goods produced in the past, is called the indirect labour input into the commodity. Putting together the direct and indirect labour inputs, one finally gets the total labour input into the commodity, which may also be called the total embodied labour in it, or its direct and indirect labour contents.
However, it ought to be said that by "socially necessary labour" Marx refers specifically to the total labour-time which on average is currently required to produce an output. It is this current labour cost which determines the value of output. This may not be true for all commodities, and it may presuppose a developed market, but as a generalisation the Marxian value of a product refers to the average quantity of living labour which must currently be performed to produce a product.
Operation of the law of value
If producers produce products below the socially average labour-cost for those products, they obtain extra profit when those products are sold at the ruling market prices. A constant incentive therefore exists to reduce labour-costs by increasing the productivityProductivity
Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...
of the labour force.
This can be done through higher exploitation, economising on costs and better equipment. The long-run effect is that it takes less and less labour-time to produce a product. Enterprises cannot do very much about reducing their fixed input costs usually, because these are rarely under their control. But they can always try to reduce their labour costs.
"Socially necessary labour" therefore refers to at least three economic relationships:
- between the specific productivity of a producer and the average productivity in his branch;
- between the outputs of the branch of production and social needs expressed through monetarily effective demand; and
- between the output of a producer, and the output of the whole branch (that can be sold).
In other words, we have to distinguish between
- labourtime necessary for the production of a given amount of a commodity - this quantity defines the aggregate value of the output, arising from the nature of a commodity as a bearer of exchange-value;
- the quantity of labour time socially necessary to produce the appropriate amount of the product, i.e. the amount of a product which at the production pricePrices of productionPrices of production refers to a concept in Karl Marx's critique of political economy. It is introduced in the third volume of Das Kapital, where Marx considers the operation of capitalist production as the unity of a production process and a circulation process involving commodities, money and...
meets the effective demand for it - this quantity defines the correspondence between the total quantity of the commodity product as use-valuesUse valueUse value or value in use is the utility of consuming a good; the want-satisfying power of a good or service in classical political economy. In Marx's critique of political economy, any labor-product has a value and a use-value, and if it is traded as a commodity in markets, it additionally has an...
and the effective demandDemand- Economics :*Demand , the desire to own something and the ability to pay for it*Demand curve, a graphic representation of a demand schedule*Demand deposit, the money in checking accounts...
for those use-values.
The former determines the unit value of commodities, hence their production price
Prices of production
Prices of production refers to a concept in Karl Marx's critique of political economy. It is introduced in the third volume of Das Kapital, where Marx considers the operation of capitalist production as the unity of a production process and a circulation process involving commodities, money and...
, and the latter determines the discrepancy between actual supply and effective demand, hence the discrepancy between market price and production price.
Marx and Ricardo
Marxist value theory treats economic valueValue (economics)
An economic value is the worth of a good or service as determined by the market.The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods...
as an attribute of labour-products which exists by virtue of social 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...
. Thus, value is a purely social characteristic of labour-products. The substance of the value of a commodity is a determinate quantity of social labour.
That is, the existence of value presupposes social relations between people organised into a society. 'Socially necessary labour time' encapsulates this essential 'relatedness' of value - it is labour time assessed in relation to social needs, not merely labour time performed.
This distinction demarcates Marx from other political economists, but is often overlooked in accounts of Marx's value theory. Marx understood that the casual reader might mistakenly treat his category as interchangeable with its Ricardian
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,...
predecessor, and in later editions and the Afterword to the Second German Edition implores readers to pay particular attention to the mediations between that old category and the one his own theory sought to establish. Marx's concept of value is not intended to be an equilibrium price.
He does not assume market equilibrium, but aims to explain how the process of convergence between supply and demand practically occurs.
Criticism
Marx's interpretation of value from the point of view of a society as whole proved elusive for many critics. Marx tried to answer them, in a letter to a friend, Dr. Louis KugelmannLouis Kugelmann
Louis Kugelmann, or Ludwig Kugelmann was a German gynecologist, social democratic thinker and activist, and confidant of Marx and Engels. Kugelmann married Gertrud Oppenheim . They had a daughter Franziska Kugelmann Louis Kugelmann, or Ludwig Kugelmann (February 19, 1828, Lemförde - January 9,...
:
"All that palaver about the necessity of proving the concept of value comes from complete ignorance both of the subject dealt with and of scientific method. Every child knows that a nation which ceased to work, I will not say for a year, but even for a weeks, would perish. Every child knows, too, that the masses of products corresponding to different needs require different and quantitatively determined masses of the total labour of society. That this necessity of the distribution of social labour in definite proportions cannot possibly be done away with by a particular form of social production but can only change the mode of its appearance, is self evident. No natural laws can be done away with. What can change in historically different circumstances is only the form in which these laws assert themselves. And the form in which this proportional distribution of labour asserts itself, in a state of society where the interconnection of social labour is manifested in the private exchange of the individual products of labour, is precisely the exchange value of these products" [Marx, letter to Dr Kugelmann, July 11, 1868, in Marx/Engels Selected Correspondence, p. 209 ].
Despite these comments, Marx has been criticised strongly for adding the "socially necessary" qualification to labour time by the libertarian philosopher Robert Nozick
Robert Nozick
Robert Nozick was an American political philosopher, most prominent in the 1970s and 1980s. He was a professor at Harvard University. He is best known for his book Anarchy, State, and Utopia , a right-libertarian answer to John Rawls's A Theory of Justice...
, in his influential Anarchy, State and Utopia, for whom it is an unjustified 'bolt-on' aspect of Marx's theory.
One debate in 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...
concerns the question of whether the product-values formed and traded include both direct and indirect labour, or whether these product-values refer only to current average production costs (or the value of current average replacement costs).
Mirowski (1989) for example accuses Marx of vacillating between a field theory (labour-time currently socially necessary) and a substance theory of value (embodied labour-time).
Marx's theory is probably best interpreted as a field theory, but modelling the determination of value by socially necessary labour time mathematically is admittedly a difficult exercise if not probably impossible.
Further reading
- W. Paul Cockshott and Allin F. Cottrell, Value's Law, Value's Metric, September, 1994
- Ernest Mandel, Introduction to Marxist Economic Theory. Pathfinder Press.
- I.I. Rubin, Essays on Marx's theory of value.
- Anwar ShaikhAnwar Shaikh (economist)Anwar M. Shaikh is an American economist, and currently Professor of Economics at the Graduate Faculty of The New School in New York City. His work in political economy has focused on the economic theory and empirical patterns of developed capitalism. He has written on international trade,...
, Market value and Market Price
- Romand Rosdolsky, The Making of Marx's Capital. Pluto Press.
- Makoto Itoh, Value and Crisis; Essays on Marxian Economics in Japan. Monthly Review Press.
- Abelardo Mariña-Flores, Market price of Production: Articulation of Market Value and Production Price as a Way for a Structural Interpretation of Disequilibrium in the Framework of the Law of Labour-Value
- James Heartfield, The Economy of Time
- P. Mirowski, More Heat than Light. Cambridge: Cambridge University Press, 1989.
- Klaus Hagendorf, The Labour Theory of Value. A Historical-Logical Analysis Paris: EURODOS Publication; 2008.
- Harvey, D. 2008 Reading Marx's Capital, Reading Marx’s Capital - Class 1, Introduction (video)
Note
The concept of socially necessary labour time is discussed on the OPE-L list (Outline of Political Economy)http://ricardo.ecn.wfu.edu/~cottrell/OPE/archive/