Value-form
Encyclopedia
The value-form or form of value is a concept in Karl Marx
’s critique of the political economy
. It refers to a socially attributed characteristic of a commodity
(a product traded in markets) which contrasts with its tangible use-value or utility
(its "useful form" or "natural form").
The concept is introduced in the first chapter of Das Kapital
where Marx argues economic value becomes manifest in an objectified way only through the form of value established by the exchange of products. In other words, what something is economically "worth" can be expressed only relatively, by relating, weighing, comparing and equating it to amounts of other tradeable objects (or to the labour effort or sum of money which those objects represent).
The question that Marx's value-form analysis intends to answer, is essentially how the value of products is expressed in ways which acquire an objective existence in their own right (ultimately as money), and how these product-values can change, quite independently of the valuers who trade in them. Marx argued that neither the classical political economists nor the vulgar economists who succeeded them were able to explain satisfactorily how that worked, resulting in serious theoretical errors. Marx's idea can be traced back to his 1857 Grundrisse
manuscript where he contrasted communal production with production for exchange. Marx notes in Das Kapital
that:
Similarly, in vulgar (or vulgar Marxist) economics, the commodity is simply a combination of use-value and exchange-value. That is manifestly not Marx's own argument at all. As he explains in Capital, Volume III
, business competition among producers centres precisely on the discrepancies between the socially established value of commodities and their particular exchange-value. Marx believed that correctly distinguishing between the form and content of value was essential for the logical coherence of the labour theory of value, and he criticized Adam Smith
specifically because Smith:
The value-form is often regarded as a difficult, obscure or even esoteric idea by scholars, and there has been considerable debate about its real theoretical significance. In his "Preface to Capital Vol. 1," the French philosopher Louis Althusser
asserted:
Althusser's suggestions have misled many people. Marx not only very deliberately and explicitly made an effort to state his interpretation of commodity trade with absolute clarity in his first chapters; it is also essential to understand all the rest, and that is exactly why Marx stated it at the beginning. It is not so difficult, provided one reads Marx himself, not Althusser.
The theory of the forms of value is the basis for Marx's concept of commodity fetishism
, which concerns how the independent power acquired by the value of tradeable objects is reflected back into human thought, and more specifically into the theories of the political economists about the market economy.
(in German: Kaufware, i.e. merchandise, ware for sale) as being simultaneously:
The “form of value” (a reference to phenomenology in the classical philosophical sense used by Hegel) then refers to the specific ways of relating through which “what a commodity is worth” happens to be socially expressed in trading processes, when different products and assets are compared with each other. Practically speaking, Marx argues that the product values cannot be directly observed and can become observably manifest only as exchange-values
, i.e. as relative expressions, by comparing their worth to other goods they can be traded for. This causes people to think value and exchange-value are the same thing, but Marx argues they are not; the content, magnitude and form of value must be distinguished, and according to the law of value
, the exchange value of products being traded is determined and regulated by their value.
Marx argues that the form of value is not "static" or "fixed once and for all", but rather, that it develops logically and historically in trading processes from very simple, primitive expressions to very complicated or sophisticated expressions. Subsequently he also examines the various "forms" taken by capital, the "forms" of wages, and so forth. In each case, the "form" denotes how a specific social or economic relationship among people is expressed or symbolized.
Initially, in primitive exchange, the form that economic value takes does not even involve any price
s, since what something is "worth" is very simply expressed in (a quantity of) some other good (an occasional barter
relationship). In the earliest forms of exchange of goods, Marx says,
But at the most abstract, developed level, the value form is only a purely monetary relationship between objects, or an abstract earnings potential or credit provision based on some assumptions, which may not even refer to any tangible object of trade anymore at all.
By analyzing the value-form, Marx aims to show that when people bring their products into relation with each other in market trade, they are also socially related
in specific ways (whether they like it or not, and whether they are aware of it or not), and that this fact very strongly influences the very way in which they think about how they are related. It influences how they will view the whole human interactive process of giving and receiving, taking and procuring, sharing and relinquishing, accepting and rejecting - and how to balance all that. For example, Marx writes a bit theatrically:
Thus, the value-form of products does not merely refer to a “trading valuation of objects”; it refers also to a certain way of relating or interacting, and a mentality, among human subjects who internalize the value-form, so that the manifestations of economic value become regarded as completely normal, natural and self-evident in human interactions (a "market culture" which is also reflected in language
use). Marx's slightly surreal description of what goes on in commodity exchanges highlights not only that value relationships appear to exist between commodities quite independently of the valuers, but also that people accept that these relationships exist even although they do not understand exactly what they are, or why they exist at all. They often participate in markets without knowing much at all about how they work.
Marx’s argument is that in order to be able to trade, people must objectify (objectively express) the value of goods produced, but it turns out that, in doing so, they are actually also objectifying and comparing the value of their own labour-efforts. Most abstractly, the quantities of money for which products are traded express claims to quantities of society's labour in general, or “abstract labour
”. So by equating and comparing the value of their products in exchange, people at the same time equate and compare the value of their labour efforts, even if they are completely unaware of that; and what a product is worth becomes dependent on, and changes according to, what other products are worth, even regardless of subjective evaluations of what the product is worth.
This objectification process has two main effects:
The combination of (1) and (2) mean that regardless of how one happens to think or choose, one must necessarily conform to the structure of value relations which exists in capitalist society, quite independently of one’s will or awareness. It is not that value relations are “only objective” or “only subjective” (value relations obviously could not exist at all, without humans making and accepting valuations, whether explicitly or implicitly) but rather that the objectification of value becomes a tangible, practical reality that one simply cannot get away from. A relationship is established between things which, although it originates in human valuations, escapes from the control of individuals, groups and nations.
manuscripts, and in ideas expressed his 1859 book A Contribution to the Critique of Political Economy
, which failed to sell many copies. It is already clearly evident in his manuscript of Theories of Surplus Value (1861–63). Marx first explicitly described the concept in an appendix to the first (1867) edition of Das Kapital
, but this appendix was dropped in a second edition, where the first chapter was rewritten to include a special section on the value-form at the end.
In a preface to the first edition of Das Kapital, Marx stated
Marx gives various reasons for this, but the main obstacle seems to be that trading relations refer to societal relations which are not necessarily observably manifest, and therefore can only be inferred or analyzed with the aid of highly abstract ideas. The quote clarifies that Marx thought that the value-form of commodities is not simply a feature of capitalism, but is associated with the whole history of commodity trade.
According to Marx, the Greek philosopher Aristotle
had already described the basics of the value-form when he argued) that an expression such as "5 beds = 1 house" does not differ from "5 beds = such and such an amount of money", but according to Marx, Aristotle's analysis "suffered shipwreck" because he lacked a clear concept of value. By this Marx meant that Aristotle was unable to clarify the substance of value, i.e. what exactly was being equated in value-comparisons, or what was the common denominator commensurating different goods. Aristotle thought the common factor must simply be the demand for goods, since without demand for goods that could satisfy some need or want, they would not be exchanged. According to Marx, the substance of product-value is human labour-time in general, labour-in-the-abstract or "abstract labour
". This value exists quite independently of the particular forms that exchange may take, though obviously value is always expressed in some form or other.
Marx argues that only when market production is highly developed, that it becomes possible to understand what economic value actually means in a comprehensive and theoretically consistent way, separate from other sorts of value (like aesthetic value or moral value). He states:
He discusses the notion of the formal equality of market actors more in the Grundrisse
. Marx admitted that the value-form was a somewhat difficult notion but he assumed “a reader who is willing to learn something new and therefore to think for himself.” In a preface to the second edition of Das Kapital
, Marx said that he had “completely revised” his treatment, because his friend Dr. Louis Kugelmann
had convinced him that a “more didactic exposition of the form of value” was needed.
These forms are different ways of symbolizing and representing what goods are worth, to facilitate trade and cost/benefit calculations. The simple value-form does not (or not necessarily) involve a money-referent at all, and the expanded and general forms are intermediary expressions between a non-monetary and a monetary expression of economic value.
where the value of X(A) is expressed relatively, as being equal to a certain quantity of B, meaning that A is the relative form of value and B the equivalent form of value, so that B is effectively the value-form of (expresses the value of) A. If we ask "how much is X quantity of commodity A worth?" the answer is "Y quantity of commodity B". This simple equation, expressing a simple value proportion between products, however permits of several variations, mutations, or possibilities of differences in valuation emerging within the circulation of products:
These possible changes in valuation enable us to understand already that what any particular product will trade for is delimited by what other products will trade for, quite independently of how much the buyer would like to pay, or how much the seller would like to get in return. Value should not be confused with price here, however, because products can be traded at prices above or below what they are worth (implying value-price deviations; this complicates the picture and is elaborated only in the third volume of Das Kapital
). For simplicity's sake, Marx assumes initially that the money-price of a commodity will be equal to its value; but in Capital Vol 3 it becomes clear that the sale of goods above or below their value has a crucial effect on profits.
The main implications of the simple relative form of value are that:
But, Marx also argues that, at the same time, such an economic equation accomplishes two other things:
Effectively, a social nexus (a societal connection or bond) is established and affirmed via the value-comparisons in the marketplace, which makes relative labour costs (the expenditures of human work energy) the real substance of value. Obviously, some assets are not produced by human labour at all, but how they are valued commercially will nevertheless refer, explicitly or implicitly, directly or indirectly, to the comparative cost structure of related assets which are labour-products. A tree in the middle of the Amazon Rain Forest has no commercial value where it stands. We can estimate its value only by estimating what it would cost to cut it down, what it would sell for in markets, or what income we could currently get from it - or how much we could charge people to look at it. Imputing an "acceptable price" to the tree assumes that there already exists a market in timber or in forests which tells us what the tree would normally be worth.
X amount of commodity A is worth Y commodity B, is worth Z commodity C … etc.
What this means is, that if A is normally traded for B, and B is normally traded for C, then to find out how much A is worth in terms of C, we first have to convert the amounts into B (and maybe many more intermediate steps). This is obviously inefficient if many goods are traded at the same time.
-commodity which is a universal equivalent, meaning that (provided people are willing to trade) it possesses the characteristic of direct and universal exchangeability in precisely measured quantities. But for most of the history of human civilization, money was not actually universally used, partly because the prevailing systems of property rights and cultural custom
did not allow many goods to be sold for money, and partly because many products were distributed and traded without using money. Also, several different "currencies" were often used side by side. Marx himself believed that nomadic peoples were the very first to develop the money-form of value, because all their possessions were mobile, and because they were regularly in contact with different communities, which encouraged the exchange of products. When money is generally used in trade, money becomes the general expression of the value-form of goods being traded; usually this is associated with the emergence of a state authority issuing legal currency. At that point the value-form appears to have acquired a fully independent, separate existence from any particular traded object (behind this autonomy, however, is the power of state authorities or private agencies to enforce financial claims).
Commenting on the riddle of the money-fetish, Marx notes that:
According to Marx's theory of money, the money-form of value (whether coinage, paper or digital money) fulfills a number of social functions at the same time:
, silver
, bronze
) is securely established as a stable medium of exchange, symbolic money-tokens (e.g. bank notes and debt claims) which are issued by the state, trading houses or corporations can in principle substitute for the “real thing”, and this also usually happens, because it is cheaper and more efficient. At first, these "paper claims" (legal tender) are by law convertible on demand into quantities of gold, silver etc. But gradually currencies are brought into use which are not so convertible, i.e. "fiduciary money" or fiat money
which relies on social trust that people will honor their transactional obligations, and that this money will be able to claim goods, assets and services. These kinds of money rely not on the value of money-tokens themselves (as in commodity money
), but on the ability to enforce financial claims and contracts, principally by means of the power and laws of the state, but also by other institutional methods. Eventually, as Marx anticipated in 1844, precious metals play very little role anymore in the monetary system.
, and the Japanese Yen, the currencies of the world's richest and most powerful economies, are widely used as "world currencies" providing a near-universal standard and measure of value. They are used as a means of exchange worldwide, and consequently most governments have significant reserves or claims to these currencies. Nowadays the International Monetary Fund
also operates a special fund of world reserve currency, which can be used internationally to augment liquidity, but this isn't used on any very large scale.
It is just that, typically, what the socially accepted value of a wholly new kind of object will be, requires the practical "test" of a regular trading process, assuming a regular supply by producers and a regular demand for it, which establishes a trading "norm" consistent with production costs. A new object that wasn't traded previously may be traded far above or below its real value, until the supply and demand for it stabilizes, and its exchange-value fluctuates only within relatively narrow margins (in official economics, this process is acknowledged as a form of price discovery
).
Six main effects of this are:
Capital existed in the form of trading capital already thousands of years before capitalist factories emerged in the towns; its owners (whether rentiers, merchants or state functionaries) often functioned as intermediaries between commodity producers. Marx defines the capitalist mode of production
as “generalized commodity production”, meaning that most goods and services are produced primarily for commercial purposes, for profitable market sale. This has the consequence, that both the input and the output of production become tradeable objects with prices, and that the whole of production is reorganized according to commercial principles. Whereas originally commercial trade occurred episodically at the boundaries of different communities, Marx argues, eventually commerce engulfs and reshapes the whole production process of those communities.
In turn, this means what whether or not a product will be produced, and how it will be produced, depends not simply on whether it is physically possible to produce it or on whether people need it, but on its financial cost of production, whether a sufficient amount can be sold, and whether its production yields sufficient profit income. That is why Marx regarded the individual commodity, which simultaneously represents value and use-value as the "cell" (or the "cell-form") in the "body" of capitalism. The seller primarily wants money for his product and is not really concerned with its consumption or use (other than from the point of view of making sales); the buyer wants to use or consume the product, and money is the means to acquire it. Thus the seller does not aim directly to satisfy the need of the buyer, nor does the buyer aim to enrich the seller. Rather, the buyer and the seller are the means for each other to acquire money or goods. As a corollary, production becomes less and less a creative activity to satisfy human needs, but simply a means to make money or acquire access to goods and services.
The concept of the value-form as an aspect of the commodity form is intended to show how, with the development of commodity trade, anything which has a utility for people (a use-value) can be transformed into a quantity of abstract value, objectively expressible as a sum of money; but, also, how this transformation changes the organization of labour to maximize its value-creating capacity, how it changes social interactions and the very way in which people are aware of their interactions.
Essentially, Marx argues that if the values of things are to express social relations, then, in trading activity, people necessarily have to "act" symbolically in a way which inverts the relations among objects and subjects, whether they are aware of that or not. They have to treat a relationship as if it is a thing in its own right. In an advertisement, a financial institution might for example say "with us, your money works for you", but money does not "work", people do. A relationship gets treated as a thing, and a relationship between people is expressed as a relationship between things. In Postmodernist culture, this inversion is acknowledged, but an explicit attempt is made to recognize the social relationship involved and its meaning for Self
and Other
; the idea is that, in so doing, an otherwise impersonal, estranged or superficial trading contact can be "humanized". The question remains how one can know that this attempt is authentic and what its real motivation is.
The total implications of the development of the value-form are much more farreaching than can be described in this article, since (1) the processes by which the things people use are transformed into objects of trade (often called commodification
, commercialization or marketization) and (2) the social effects of these processes, are both extremely diverse. A very large literature exists about the growth of business relationships in all sorts of areas. For capitalism to exist, markets must grow, but market growth requires changes in the way people relate socially, and changes in property rights. This is often a problem-fraught and conflict-ridden process, as Marx describes in his story about primitive accumulation.
):
He admits early on, that the assumption of gold-money is a theoretical simplification, since the buying power of money units can vary due to causes which have nothing to do with the production system (within certain limits, X, Y and Z can vary independently of each other); but he thought it was useful to reveal the structure of economic relationships involved in the capitalist mode of production, as a prologue to analyzing the motion of the system as a whole; and, he believed that variations in the buying power of money did not alter that structure at all, insofar as the working population was forced to produce in order to survive, and in so doing entered into societal relations of production
independent of their will; the basic system of property rights remained the same.
As any banker or speculator knows, however, the expression of the value of something as a quantity of money-units is by no means the “final and ultimate expression of value”.
In Capital Volume 3, which he drafted before Volume I, Marx shows he was well aware of this. He distinguished not only between "real capital" (physical, tangible capital assets) and "money capital", but also noted the existences of "fictitious capital
" and "pseudo-commodities" which have exclusively symbolic value (which, however, can be converted into real product value through trade). Marx believed that a failure to theorize the value-form correctly led to "the strangest and most contradictory ideas about money" which "emerges sharply... in [the theory of] banking, where the commonplace definitions of money no longer hold water".
. Simply put, the price-form is a mediator of trade which is separate and distinct from the value-form. If we want to trade goods for money, or money for goods, we need to know how much we have to pay or what something will sell for. Prices tell us how much in money-quantities; they express exchange-value in money terms. Prices are not money themselves, but they indicate money-quantities. They symbolize how much money is required in exchange, to trade and acquire something. Thus, prices are ways to express and inform about how much money is involved in any kind of (potential) transaction, or what it takes to make the transaction (of course, price information can itself also be sold for money).
According to Marx, the price-form is not a “further development” of the value-form, for three reasons:
Value relationships among physical products and assets - as proportions of current labour effort involved in making them - exist according to Marx quite independently from price information, and prices can oscillate in all sorts of ways around economic values, or indeed quite independently of them. That is why Marx felt quite comfortable about mostly ignoring price fluctuations in the first stages of his value theory. In his pamphlet Wages, Price and Profit, he notes:
If prices for products rise, hours worked may rise, and if prices fall, hours worked may fall (sometimes the reverse may also occur, to the extent that extra hours are worked, to compensate for lower income resulting from lower prices, or if more sales occur because prices are lowered). In that sense, it is certainly true that prices and values mutually influence each other. It is just that, according to Marx, product-values are not determined by the labor-efforts of any particular enterprise, but by the combined result of all of them. That social valuation exists as a given social fact, quite independently of any price fluctuations. For example, the price of a particular brand of a new car might vary between $15,000 and $20,000, but it will normally never sell for "$2" or "$200,000". Quite simply, the new car is considered to be worth around $17,500 on average, and that valuation (a standard supply price) normally does not change much, no matter what people do. The car will neither be supplied at a cost of $2 nor at a cost of $200,000.
and Das Kapital
, Marx drew an essential distinction between actual prices charged and paid, i.e. prices which express how much money really changed hands, and various “ideal prices
" (imaginary or notional prices). Because prices are symbols or indicators in more or less the same way as traffic lights are, they can symbolize something that really exists (e.g. hard cash) but they can also symbolize something which doesn’t exist, or symbolize other symbols. That can make the forms of prices highly variegated, flexible and complex to understand, but also potentially very deceptive, disguising the real relationships involved. Consequently, as Marx notes in the Grundrisse
, the knowledge of prices itself became a specialized science. In what Marx called “vulgar economics”, all this is ignored however, because, Marx claimed, the vulgar economists assumed that:
In his critique of political economy, Marx denied that any of these assumptions were scientifically true. He distinguished carefully between the values, exchange values, market values, market prices and prices of production
of commodities. However he did not analyze all the different forms that prices can take (for example, market-driven prices, administered prices, accounting prices, negotiated and fixed prices, estimated prices, nominal prices, inflation-adjusted prices) focusing mainly on the value proportions he thought to be central to the functioning of the capitalist mode of production
as a social system. The effect of this omission was that debates about the relevance of Marx's value theory became confused, and that Marxists repeated the same ideas which Marx himself had rejected as "vulgar economics".
comments on the value-form concept in Part 3 chapter 4 of his 1876-1878 book Anti-Dühring
which was written with Marx's approval, emphasizing how the growth of commodity trade breaks up the social fabric of traditional societies:
, Friedrich von Hayek, Ian Steedman
and Francis Wheen
is that, even if Marx himself meant well, Marx’s value-form idea is simply an esoteric obscurantism, “dialectical hocus pocus” or “mumbo jumbo”. The Marxist Rosa Luxemburg
likewise complained about the “horror” of Marx’s unnecessary “Hegelian rococo” in Das Kapital
. The argument does not really make coherent scientific sense, it is argued – quite possibly because Marx tried to do too much at once. That is, at one and the same time, one finds Marx trying to respond to the classical discourses of the political economists about “the commodity”, “exchange-value”, “use-value” etc. in an erudite way; but also poking fun at, and setting traps for what he regarded as pedantic, pseudo-profound German professors prattling about “dialectics”; at the same time as trying to tell an entertaining story using literary and theatrical metaphors that would really sell (unlike his previous book, the super-abstract and boring A Contribution to the Critique of Political Economy); and trying to make a substantive, serious argument about the historical origin and essential nature of economic value. The result, some critics feel, is a series of devastating ambivalences and ambiguities, which cover up all kinds of illogical moves - moves which, they claim, are fatal to Marx’s argument. This is a criticism along the lines that one ought not to take Marx’s story seriously, as a scientific argument about economics. Often, Marxists have replied to this attack by restating Marx’s arguments in clearer language, or by showing that Marx’s theory of economic value at the very least fares no worse than the subjective theory of value (the theory of the util as the measuring unit of utility
). Even so, when he published his very clear restatement Karl Marx's Theory of History: A Defence
,the Marxist philosopher Gerald Cohen
explicitly dissociated himself from Marx’s value theory.
. Marx insists that:
Marx's argument is that the exchangeability of commodities according to their value is based on the common factor that all of them are products of social labour (co-operative human labour producing things for others). Ordinary working people know very well that their work effort is valuable and represents a value, but what exactly that value is, objectively speaking, becomes apparent only in the comparison of products when they are exchanged. If free citizens cannot produce everything they need themselves, they have to trade to get what they want, money or no money, but in doing so they also have to acknowledge the valuation of other free citizens' labor efforts in terms comparable or equal to their own (things might be different if goods and services are provided by slaves, such as in the Greek society that Aristotle lived in). Thus, the exchange process mediating the activities of producers and consumers represents effectively the value abstraction of human labour by means of shared symbols and symbolic objects. In principle, economic value does not exist because money exists to express economic value, but money exists because economic value exists; consequently we have to be able to explain economic value and its origin quite independently of the existence of money. The analysis of the value-form is intended precisely as a demonstration of this idea, by showing how the money-relationship actually and necessarily originates out of the exchange of wares in an increasingly complex division of labour
.
Critics however argue that Marx's argument is simply not logically compelling. They claim that we could just as well argue that what makes products exchangeable is simply the "common factor" that they have a price, or that a price can in principle be attributed to them; or even more simply, that people just have a common desire to exchange products for money. If that common desire exists, it is argued, nothing else is necessarily required in order to exchange products. Although the very word "price" (in the sense of a money-price) was unknown prior to the 13th century AD, it is argued that prices have nevertheless always existed in some form in human society. The same thing that Marx tries to explain using the notion of "value" could, it is argued, just as well be explained in terms of the supply and demand for priced goods among individuals and groups who interact with each other.
Thus, while Marx's observations might be of sociological or anthropological interest, it is argued they fail to provide any logically decisive proof that human labour is the substance of economic value. Approximately at the same time as Marx published his theory in 1867, Stanley Jevons for instance proposed that price fluctuations could be explained in terms of utility
and the subjective preferences of buyers and sellers. This recalls Aristotle's idea (mentioned above) that goods have value because people want them.
For this reason, the Japanese Marxist scholar Kozo Uno
argued in his classic Principles of Political Economy that Marx's original argument had to be revised. In the revised version, the theory of the value-form is integrated in the theory of commodity circulation, and does not refer to the substance (content) of value at all. The substance of value as labour then becomes apparent and is theoretically demonstrated only in the analysis of the production of commodities "by means of commodities". Some Western Marxists do not find this approach very satisfactory however, because of Marx's basic insistence that the formation of product values is an outcome of both the "economy of labour-time" and "the economy of trade", i.e. commodity values are originally formed through mutual adjustments of the processes of producing commodities and circulating (trading) commodities. Since exchanging products itself takes work, however - "circulation costs" - human labour and trade are in reality inseparable at any time (a product cannot be traded, unless it is produced, regardless of how specifically it is produced).
An additional complication is that, as the accumulation of capital grows, more and more durable assets exist external to the sphere of production. Marx was primarily concerned with the value of newly produced commodities, but it is unclear from his theory about the capitalist mode of production
what determines the value of the growing stock of durable assets which is neither an input nor an output of current production. This problem was seriously studied by Michael Hudson (economist)
.
argued that Marx's value theory had become redundant. Its problems could be resolved using the insights of Piero Sraffa
, so that the old value theory was unnecessary:
The argument (similar arguments are presented by Ian Steedman
) is that value theory is unnecessary, because all economic relationships can be described and explained in terms of prices. The Marxist response to this criticism was extremely weak; most Marxists had accepted the conventional price-theories of economics as largely correct and unproblematic, and just kept insisting that value-theory was a necessary "add-on" to make sense of the economy.
Since the 1970s, the so-called "value-form theorists" ("value-form school") have emphasized - influenced by the rediscovery of the writings of Isaak Illich Rubin
- the importance of Marx's value theory as a qualitative critique - a cultural, sociological or philosophical critique of the reifications involved in capitalist commercialism. The value-form school has become very popular especially among Marxists who are not economists. Examples in the English language literature are Christopher J. Arthur http://chrisarthur.net/, Tony Smith http://www.public.iastate.edu/~tonys/, Alfred Sohn-Rethel
, Moishe Postone
and Geert Reuten
& Michael Williams. Noted German-language value-form theorists are the Marx-scholars Hans-Georg Backhaus
, Helmut Reichelt
Michael Heinrich (Neue Marx-Lektüre
) and Nadja Rakowitz (:de:Wertkritik), as well as the Sydney-Constance Project (Michael Eldred, Marnie Hanlon, Lucia Kleiber, Mike Roth). Value-form theory has also been popular among intellectual supporters of Autonomism
and Anarchism
, although Antonio Negri
thinks the theory is out of date now:
Negri's interpretation is difficult to reconcile with the view of Marx and Engels, who regarded the value-form as an emergent characteristic of human dealings in thousands of years of commodity trade (As Marx - himself a philosophy graduate - mentions, Aristotle already talked about it).
The question still remains, "was Marx's journey really necessary?", i.e. what is the point of value theory, if all economic phenomena can be expressed in price terms? Utz-Peter Reich offers a possible answer to this problem. The expression of economic goods in price terms is more problematic than it seems at first sight. In any price-accounting, the grouping, calculation and aggregation of prices could not even occur without making valuation assumptions (categorical distinctions) about value equivalence, value comparability, value transferred, conserved value, value used up, depreciated or destroyed - in general, reduction of value - value increase and newly created value. Thus, whereas economists implicitly or explicitly adopt theoretical conventions in order to talk about price movements, those conventions themselves can be shown to depend ultimately on axioms about the nature of economic value itself. The issue is then whether those axioms are actually valid, and where we get them from; as soon as this question is posed, scientific theorizing about value as such is inescapable. If we talk constantly about economic value without being able to specify in a scientifically rigorous way what it is, we are left with a phlogiston theory
.
Most likely, Marx himself would have said that without a theory of value, only "vulgar economics" is left; in that case, we cannot explain capitalist dynamics, only describe them (and use the descriptions to make predictions). That is, the economic explanations depend on whether one accepts certain definitions, but since the definitions themselves are not proved, there is a sense in which one assumes the very thing that one tries to explain. Any rigorous theory of economic value would have to explain the real origins of the very meaning of "value" in human society, and how it evolves. That is indeed what Marx tried to do. However, as Marx himself implicitly admits, in science it is impossible to provide any absolute logical proof for any particular qualitative concept of what "value" is - its validity depends rather on the explanatory power of the theories which it enables. The theoretical debate about the nature of economic value is therefore itself interminable; meantime, just as in mathematical theory, quantitative systems are accepted by convention, in advance of any proof of fundamental categorical distinctions, insofar as the systems seem to be useful for economic policy and the explanation/prediction of economic events. Even if economic history is plausibly reconstructed to demonstrate objectively the existence of an operational concept of economic value, this remains an interpretation and not the absolute truth. Quite simply, a concept of value is assumed because without it, we are unable to "make sense" of economic phenomena. However, the unfortunate corollary is, that this makes theories of economic value highly susceptible to the influence of ideological beliefs and sectional interests (which Marx calls "the furies of private interest"). Ultimately, the concept of value of the capitalist class and the concept of value of the working class cannot be reconciled with each other. The different social classes each adopt a theory of value which makes sense in their own social position in society, but from a scientific viewpoint they contain, at best, only "relative" truths.
, who are inspired by the chartalist theory of money. These economists interpret Marx’s story about how money originates in the exchange process as a theory of commodity money
, or the "commodity theory of money". The “neo-Chartalist” interpretation of money entails, that the commodity theory of money is false; the latter, it is argued, can neither explain the origin of money and credit, nor provide a credible account of monetary phenomena in the modern world. Randy Wray has stated the basic idea of Chartalism
as follows:
If the Chartalist argument is true, then it cannot also be true that, as Marx argues, money originates as a “special commodity” (a universally exchangeable good) within the exchange process itself. Instead, money is completely “a creature of the state” – it first arises as a unit of account for state debts, credits and taxes, and is then gradually imposed on the whole of the trading process in society.
The controversy about this challenge to Marx’s idea is far from being resolved at this stage, for a number of reasons:
and reifying
phenomena which cause people to get used by others for ends they can no longer fathom. According to Marxists, value phenomena belong to the prehistory
of human
ity that closes with the abolition of capitalism. Thus, for example, Iring Fetscher states: "Marx's criticism is directed against value as such, not merely against its consequence, capital." In other words, the negative, dehumanizing features of markets for workers' lives have had prominence for Marxists, even although Marx also acknowledges here and there that markets have some progressive, developmental and "civilizing" features. Marx and Engels depict the "value form" as an alien, impersonal and corruptive force which gradually subordinates anything and everything to "making money". Five kinds of objections by pro-market critics can be mentioned:
All these five objections resurface in the Socialist calculation debate. The general theme of the responses of Marxian scholars to such criticisms has been that the criticisms are not based on the facts of reality and history; they are based on a false or one-sided perception of market activity, reflecting the self-interest of those who most strongly benefit from market activity. Market activity may look very "progressive" on the surface, but only because we cannot (yet) see the true costs of it. "Market freedom" depends entirely on the ability to own or borrow something which can be traded, but people may be forced to trade something to survive, even although they do not really want to trade it. There is also a big difference between selling a pair of shoes and selling a factory; they are not in the same category of trade. "The market" really doesn't exist, other than as an abstraction; there exist only many different, linked markets, operating according to different economic principles.
The claim made by socialists is that alternatives to market allocation do exist, such as sharing, reciprocation, redistribution, barter, grants, subsidization and direct allocation, and that market trade could as a matter of fact not even exist without them; market activity in reality always remains to a large extent dependent on forms of human cooperation
and trust involving non-market activity. If that cooperation is withdrawn, markets collapse. A narrow focus on the pattern of market transactions moreover deflects attention from the enforcible property
relations on which they are based. But in fact an enormous variety of different property rights and methods of allocating goods are possible, and some of those, it is argued, demonstrably serve humanity much better than others.
Some socialist theorists such as Włodzimierz Brus, Oskar Lange
, Abba Lerner, Branko Horvat
, John Roemer
, David Schweickart
, Erik Olin Wright
, Alec Nove and Bertell Ollman
argue that markets aren't necessarily a bad thing, but rather that they should combine with other allocative methods within a market socialism
. Makoto Itoh
and Ha-Joon Chang
offer a strong defence of state-directed economic organization. Anthony Giddens
, Robert Rowthorn
and Geoffrey Hodgson
have argued for a "third way" between capitalism and socialism. Others such as János Kornai
and Ernest Mandel
have argued - for different reasons - that any durable "third way" between capitalism and socialism is impossible.Michael Albert
and Robin Hahnel
have formulated a theory of participatory economics
, otherwise known as parecon. The leading Chinese economist Jinglian Wu claims that a thorough analysis of planned economy since the 1980s (coinciding with Chinese economic reforms) proves that it is "impossible for such a institutional arrangement to be efficient" His critics however question what he means by "efficiency" - if millions of people become unemployed and destitute, while waterways are diverted to irrigate golfcourses, how efficient is that?
All these arguments remain much in dispute among economists seeking economic reform; the debaters still cannot agree about basic concepts of economics, about the possible ways in which production, trade and democracy can be combined, or about what factual evidence would finally clinch the controversy.
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...
’s critique of the political economy
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...
. It refers to a socially attributed characteristic of 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...
(a product traded in markets) which contrasts with its tangible use-value or utility
Utility
In economics, utility is a measure of customer satisfaction, referring to the total satisfaction received by a consumer from consuming a good or service....
(its "useful form" or "natural form").
The concept is introduced in the first 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...
where Marx argues economic value becomes manifest in an objectified way only through the form of value established by the exchange of products. In other words, what something is economically "worth" can be expressed only relatively, by relating, weighing, comparing and equating it to amounts of other tradeable objects (or to the labour effort or sum of money which those objects represent).
The question that Marx's value-form analysis intends to answer, is essentially how the value of products is expressed in ways which acquire an objective existence in their own right (ultimately as money), and how these product-values can change, quite independently of the valuers who trade in them. Marx argued that neither the classical political economists nor the vulgar economists who succeeded them were able to explain satisfactorily how that worked, resulting in serious theoretical errors. Marx's idea can be traced back to his 1857 Grundrisse
Grundrisse
The Grundrisse der Kritik der Politischen Ökonomie is a lengthy manuscript by the German philosopher Karl Marx, completed in 1858. However, as it existed primarily as a collection of unedited notes, the work remained unpublished until 1939...
manuscript where he contrasted communal production with production for exchange. Marx notes in 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...
that:
Similarly, in vulgar (or vulgar Marxist) economics, the commodity is simply a combination of use-value and exchange-value. That is manifestly not Marx's own argument at all. As he explains in Capital, Volume III
Capital, Volume III
Capital, Volume III, subtitled The Process of Capitalist Production as a Whole, was prepared by Friedrich Engels from notes left by Karl Marx and published in 1894...
, business competition among producers centres precisely on the discrepancies between the socially established value of commodities and their particular exchange-value. Marx believed that correctly distinguishing between the form and content of value was essential for the logical coherence of the labour theory of value, and he criticized 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...
specifically because Smith:
The value-form is often regarded as a difficult, obscure or even esoteric idea by scholars, and there has been considerable debate about its real theoretical significance. In his "Preface to Capital Vol. 1," the French philosopher Louis Althusser
Louis Althusser
Louis Pierre Althusser was a French Marxist philosopher. He was born in Algeria and studied at the École Normale Supérieure in Paris, where he eventually became Professor of Philosophy....
asserted:
Althusser's suggestions have misled many people. Marx not only very deliberately and explicitly made an effort to state his interpretation of commodity trade with absolute clarity in his first chapters; it is also essential to understand all the rest, and that is exactly why Marx stated it at the beginning. It is not so difficult, provided one reads Marx himself, not Althusser.
- Probably the difficulty Marxist academics have had with Marx's own text is because, abstractly, economic value refers at the same time to quantitative and qualitative dimensions, which can be stated according to both absolute and relative criteria, and expressed both as a relationship, as a subjective orientation, as an attribute, and as an object in its own right. From the use of the expression "value" it may therefore not be immediately obvious what kind of valuation or expression is being referred to, it depends on the theoretical context. Marx himself rarely if ever defended his finished theory of value in scientific debate, and left it to his followers to clarify issues and problems in his unfinished manuscripts. Because he uses the term "value" somewhat differently in different contexts, academic disputes arise about what exactly he meant.
- In addition, official economicsEconomicsEconomics 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"...
typically takes it for granted that the exchange processes on which markets are based already exist and will occur, and that prices already exist, or can be imputed. This assumption is overturned only there where markets still have to be brought into being. In modern economics, the "value" of something is defined either as a money-price, or as a personal (subjective) valuation. According to orthodox economics, money originates as a medium of exchange to minimize the transaction costs of barterBarterBarter is a method of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money. It is usually bilateral, but may be multilateral, and usually exists parallel to monetary systems in most developed countries, though to a...
among utility-maximizing individuals. Such an approach is very different to Marx's historical interpretation of the formation of value. In Marx's theory, the "value" of a product is something separate and distinct from the "price" it happens to fetch (goods can sell for more than they are worth, or less, i.e. they are not necessarily worth what they happen to sell for).
The theory of the forms of value is the basis for Marx's concept of 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...
, which concerns how the independent power acquired by the value of tradeable objects is reflected back into human thought, and more specifically into the theories of the political economists about the market economy.
Basic explanation
Marx initially defines a product of human labour which has become a commodityCommodity (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...
(in German: Kaufware, i.e. merchandise, ware for sale) as being simultaneously:
- (1) a useful object that can satisfy a want or need (a use valueUse 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...
); this is the value of object considered from the point of view of consuming or using it, referring to its observable material form, i.e. the tangible, observable characteristics it has which make it useful, and therefore valued by people, even if the use is only symbolic. - (2) an object of economic value generally; this is the value of the object considered from the point of view of its earnings potential, its sale value or its cost of production ("commercial value"). The reference here is to the social form of the product which is not directly observable.
The “form of value” (a reference to phenomenology in the classical philosophical sense used by Hegel) then refers to the specific ways of relating through which “what a commodity is worth” happens to be socially expressed in trading processes, when different products and assets are compared with each other. Practically speaking, Marx argues that the product values cannot be directly observed and can become observably manifest only as exchange-values
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...
, i.e. as relative expressions, by comparing their worth to other goods they can be traded for. This causes people to think value and exchange-value are the same thing, but Marx argues they are not; the content, magnitude and form of value must be distinguished, and according to the law of value
Law of value
-General:The law of value is a central concept in Karl Marx's critique of political economy, first expounded in his polemic The Poverty of Philosophy against Pierre-Joseph Proudhon, with reference to David Ricardo's economics...
, the exchange value of products being traded is determined and regulated by their value.
Marx argues that the form of value is not "static" or "fixed once and for all", but rather, that it develops logically and historically in trading processes from very simple, primitive expressions to very complicated or sophisticated expressions. Subsequently he also examines the various "forms" taken by capital, the "forms" of wages, and so forth. In each case, the "form" denotes how a specific social or economic relationship among people is expressed or symbolized.
Initially, in primitive exchange, the form that economic value takes does not even involve any price
Price
-Definition:In ordinary usage, price is the quantity of payment or compensation given by one party to another in return for goods or services.In modern economies, prices are generally expressed in units of some form of currency...
s, since what something is "worth" is very simply expressed in (a quantity of) some other good (an occasional barter
Barter
Barter is a method of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money. It is usually bilateral, but may be multilateral, and usually exists parallel to monetary systems in most developed countries, though to a...
relationship). In the earliest forms of exchange of goods, Marx says,
But at the most abstract, developed level, the value form is only a purely monetary relationship between objects, or an abstract earnings potential or credit provision based on some assumptions, which may not even refer to any tangible object of trade anymore at all.
By analyzing the value-form, Marx aims to show that when people bring their products into relation with each other in market trade, they are also socially related
Social relation
In social science, a social relation or social interaction refers to a relationship between two , three or more individuals . Social relations, derived from individual agency, form the basis of the social structure. To this extent social relations are always the basic object of analysis for social...
in specific ways (whether they like it or not, and whether they are aware of it or not), and that this fact very strongly influences the very way in which they think about how they are related. It influences how they will view the whole human interactive process of giving and receiving, taking and procuring, sharing and relinquishing, accepting and rejecting - and how to balance all that. For example, Marx writes a bit theatrically:
Thus, the value-form of products does not merely refer to a “trading valuation of objects”; it refers also to a certain way of relating or interacting, and a mentality, among human subjects who internalize the value-form, so that the manifestations of economic value become regarded as completely normal, natural and self-evident in human interactions (a "market culture" which is also reflected in language
Language
Language may refer either to the specifically human capacity for acquiring and using complex systems of communication, or to a specific instance of such a system of complex communication...
use). Marx's slightly surreal description of what goes on in commodity exchanges highlights not only that value relationships appear to exist between commodities quite independently of the valuers, but also that people accept that these relationships exist even although they do not understand exactly what they are, or why they exist at all. They often participate in markets without knowing much at all about how they work.
Marx’s argument is that in order to be able to trade, people must objectify (objectively express) the value of goods produced, but it turns out that, in doing so, they are actually also objectifying and comparing the value of their own labour-efforts. Most abstractly, the quantities of money for which products are traded express claims to quantities of society's labour in general, or “abstract 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...
”. So by equating and comparing the value of their products in exchange, people at the same time equate and compare the value of their labour efforts, even if they are completely unaware of that; and what a product is worth becomes dependent on, and changes according to, what other products are worth, even regardless of subjective evaluations of what the product is worth.
This objectification process has two main effects:
- (1) value relations gain an independent, objective existence which begins to regulate and dominate human life, and to which all people must adjust their behaviour, whether they like it or not. They internalize the value-form by adjusting to its effects (this is called “the forces and laws of the market”). Simply put, if human valuations originate in people's ability to prioritize and weigh up behavioural responses according to self-chosen options, the very meaning of their choices, and the language in which they are expressed, will be strongly influenced by the surrounding world ordered by the value-system.
- (2) a consequent tendency towards a reifyingReification (Marxism)Reification or Versachlichung, literally "objectification" or regarding something as a separate business matter) is the consideration of an abstraction, relation or object as if they had human or living existence and abilities, when in reality they do not...
inversion in human awareness (subjects become treated as things, and things become treated as active subjects, while means become ends, and ends become means). Even although the values attributed to products exist only as a social effect of how people are relating and related, it begins to look like value is actually an intrinsic property of products; the way average values change, begins to lead a "life of its own" which individuals and groups are unable to control and must adjust to, like it or not. Traders become primarily concerned with the objective trading value of products, rather than any other kind of valuation, regarding products as "overvalued" or "undervalued" according to the "state of the market".
The combination of (1) and (2) mean that regardless of how one happens to think or choose, one must necessarily conform to the structure of value relations which exists in capitalist society, quite independently of one’s will or awareness. It is not that value relations are “only objective” or “only subjective” (value relations obviously could not exist at all, without humans making and accepting valuations, whether explicitly or implicitly) but rather that the objectification of value becomes a tangible, practical reality that one simply cannot get away from. A relationship is established between things which, although it originates in human valuations, escapes from the control of individuals, groups and nations.
Textual sources
Marx’s explanation of the value-form originated in his GrundrisseGrundrisse
The Grundrisse der Kritik der Politischen Ökonomie is a lengthy manuscript by the German philosopher Karl Marx, completed in 1858. However, as it existed primarily as a collection of unedited notes, the work remained unpublished until 1939...
manuscripts, and in ideas expressed his 1859 book A Contribution to the Critique of Political Economy
A Contribution to the Critique of Political Economy
A Contribution to the Critique of Political Economy is a book by Karl Marx, first published in 1859. The book is mainly an analysis of capitalism, achieved by critiquing the writings of the leading theoretical exponents of capitalism at that time: these were the political economists, nowadays often...
, which failed to sell many copies. It is already clearly evident in his manuscript of Theories of Surplus Value (1861–63). Marx first explicitly described the concept in an appendix to the first (1867) edition 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...
, but this appendix was dropped in a second edition, where the first chapter was rewritten to include a special section on the value-form at the end.
In a preface to the first edition of Das Kapital, Marx stated
Marx gives various reasons for this, but the main obstacle seems to be that trading relations refer to societal relations which are not necessarily observably manifest, and therefore can only be inferred or analyzed with the aid of highly abstract ideas. The quote clarifies that Marx thought that the value-form of commodities is not simply a feature of capitalism, but is associated with the whole history of commodity trade.
According to Marx, the Greek philosopher Aristotle
Aristotle
Aristotle was a Greek philosopher and polymath, a student of Plato and teacher of Alexander the Great. His writings cover many subjects, including physics, metaphysics, poetry, theater, music, logic, rhetoric, linguistics, politics, government, ethics, biology, and zoology...
had already described the basics of the value-form when he argued) that an expression such as "5 beds = 1 house" does not differ from "5 beds = such and such an amount of money", but according to Marx, Aristotle's analysis "suffered shipwreck" because he lacked a clear concept of value. By this Marx meant that Aristotle was unable to clarify the substance of value, i.e. what exactly was being equated in value-comparisons, or what was the common denominator commensurating different goods. Aristotle thought the common factor must simply be the demand for goods, since without demand for goods that could satisfy some need or want, they would not be exchanged. According to Marx, the substance of product-value is human labour-time in general, labour-in-the-abstract or "abstract 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...
". This value exists quite independently of the particular forms that exchange may take, though obviously value is always expressed in some form or other.
Marx argues that only when market production is highly developed, that it becomes possible to understand what economic value actually means in a comprehensive and theoretically consistent way, separate from other sorts of value (like aesthetic value or moral value). He states:
He discusses the notion of the formal equality of market actors more in the Grundrisse
Grundrisse
The Grundrisse der Kritik der Politischen Ökonomie is a lengthy manuscript by the German philosopher Karl Marx, completed in 1858. However, as it existed primarily as a collection of unedited notes, the work remained unpublished until 1939...
. Marx admitted that the value-form was a somewhat difficult notion but he assumed “a reader who is willing to learn something new and therefore to think for himself.” In a preface to the second edition 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 said that he had “completely revised” his treatment, because his friend Dr. Louis Kugelmann
Louis 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,...
had convinced him that a “more didactic exposition of the form of value” was needed.
The development of the value-form in the history of trading relations
Marx distinguishes between four successive steps in the process of trading products, i.e. in the circulation of commodities, through which fairly stable and objective value proportionalities (Wertverthaltnisse in German) are formed which express "what products are worth". These steps are:- 1. The simple value-form, an expression which contains the duality of relative value and equivalent value.
- 2. The expanded or total value-form, a quantitative "chaining together" of the simple forms of expressing value.
- 3. The general value-form, i.e. the expression of the worth of all products reckoned in a general equivalent.
- 4. The money-form of value, which is a general equivalent used in trading (a medium of exchange) which is universally exchangeable.
These forms are different ways of symbolizing and representing what goods are worth, to facilitate trade and cost/benefit calculations. The simple value-form does not (or not necessarily) involve a money-referent at all, and the expanded and general forms are intermediary expressions between a non-monetary and a monetary expression of economic value.
Simple value-form
The simplest value-form expression can be stated as the following equation:where the value of X(A) is expressed relatively, as being equal to a certain quantity of B, meaning that A is the relative form of value and B the equivalent form of value, so that B is effectively the value-form of (expresses the value of) A. If we ask "how much is X quantity of commodity A worth?" the answer is "Y quantity of commodity B". This simple equation, expressing a simple value proportion between products, however permits of several variations, mutations, or possibilities of differences in valuation emerging within the circulation of products:
- the absolute value of A changes, but the absolute value of B stays constant; in this case, the change in the relative value of A depends only on a change in the absolute value of A (The absolute value, Marx argues, is the total labour cost on average implicated in making a commodity).
- the absolute value of A stays constant, but the absolute value of B changes; in this case, the relative value of A fluctuates in inverse relation to changes in the absolute value of B, meaning that if B goes down then A goes up, while if B goes up then A goes down.
- the values of A and B both change in the same direction and in the same proportion. In this case, the equation still holds, but the change in absolute value is noticeable only if A and B are compared with a commodity C, where C’s value stays constant. If all commodities increase or decrease in value by the same amount, then their relative values all remain exactly the same.
- the values of A and B change in the same direction, but not by the same amount, or vary in opposite directions.
These possible changes in valuation enable us to understand already that what any particular product will trade for is delimited by what other products will trade for, quite independently of how much the buyer would like to pay, or how much the seller would like to get in return. Value should not be confused with price here, however, because products can be traded at prices above or below what they are worth (implying value-price deviations; this complicates the picture and is elaborated only 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...
). For simplicity's sake, Marx assumes initially that the money-price of a commodity will be equal to its value; but in Capital Vol 3 it becomes clear that the sale of goods above or below their value has a crucial effect on profits.
The main implications of the simple relative form of value are that:
- the value of an individual commodity can change relative to other commodities, although the real cost in labour of that particular commodity stays constant, and vice versa, the real labour cost of that particular commodity can vary, although its relative value remains the same; this means that goods can be devalued or revalued depending on what happens elsewhere in the trading system and on changes in the conditions of producing them elsewhere. It would therefore be wrong to claim, as some Marxists argue, that for Marx "economic value is labour"; rather, economic value really refers to the current social valuation of labour effort implicated in products. Indeed Marx himself is quite clear that living labour itself has no value, although it has a price and creates product-value; only labour power and products of human labour have an economic value (resources not produced by human labour can only have a price, determined ultimately by their scarcity relative to the demand for them, and by their income-earning potential).
- that the absolute and relative values of commodities can change constantly, in proportions which do not exactly compensate each other, or cancel each other out, via haphazard adjustments to new production and demand conditions. Thus, contrary to the concept of general equilibriumGeneral equilibriumGeneral equilibrium theory is a branch of theoretical economics. It seeks to explain the behavior of supply, demand and prices in a whole economy with several or many interacting markets, by seeking to prove that a set of prices exists that will result in an overall equilibrium, hence general...
, Marx did not believe at all, even at the most fundamental level, that the circulation process itself offers any guarantees that the gains and losses incurred by trading parties will somehow "balance out" (the secret of the economic balance is to be found instead in the maintenance of the social relations of productionRelations of productionRelations of production is a concept frequently used by Karl Marx and Friedrich Engels in their theory of historical materialism, and in Das Kapital...
, specifically the enforcement of property rights). If there is a relative balance in the exchange process as such, that is because people refuse to trade on terms which they regard as excessively unfavourable, or do so only with the greatest reluctance (see also Unequal exchangeUnequal exchangeUnequal exchange is a much disputed concept which is used primarily in Marxist economics, but also in ecological economics, to denote forms of exploitation hidden in or underwriting trade...
).
But, Marx also argues that, at the same time, such an economic equation accomplishes two other things:
- the value of specific labour activities is related in proportion to the value of labour in general, and
- private labour activities carried out independently of each other are socially recognized as being a fraction of society’s total labour.
Effectively, a social nexus (a societal connection or bond) is established and affirmed via the value-comparisons in the marketplace, which makes relative labour costs (the expenditures of human work energy) the real substance of value. Obviously, some assets are not produced by human labour at all, but how they are valued commercially will nevertheless refer, explicitly or implicitly, directly or indirectly, to the comparative cost structure of related assets which are labour-products. A tree in the middle of the Amazon Rain Forest has no commercial value where it stands. We can estimate its value only by estimating what it would cost to cut it down, what it would sell for in markets, or what income we could currently get from it - or how much we could charge people to look at it. Imputing an "acceptable price" to the tree assumes that there already exists a market in timber or in forests which tells us what the tree would normally be worth.
Expanded value-form
In the expanded value-form, the equation process between quantities of different commodities is simply continued serially, so that their values relative to each other are established, and they can all be expressed in some or other commodity-equivalent. However, Marx argues that, as such, the expanded value-form is practically inadequate, because to express what any commodity is worth might now require the calculation of a whole “chain” of comparisons, i.e.X amount of commodity A is worth Y commodity B, is worth Z commodity C … etc.
What this means is, that if A is normally traded for B, and B is normally traded for C, then to find out how much A is worth in terms of C, we first have to convert the amounts into B (and maybe many more intermediate steps). This is obviously inefficient if many goods are traded at the same time.
General value-form
The practical solution in trade is therefore the emergence of a general value-form, in which the values of all kinds of bundles of commodities can be expressed in amounts of one standard commodity (or just a few standards) which function as a general equivalent. The general equivalent has itself no relative form of value in common with other commodities; instead its value is expressed only in a myriad of other commodities. In ancient civilizations where considerable market trade occurred, there were usually a few types of goods which could function as a general standard of value. This standard was used for value comparisons; it did not necessarily mean that goods were actually traded for the standard commodity. In this sense, the "general value-form" fails to solve the practical problem that if trader A wants to trade X for Y, and trader B wants to trade Y for Z, no trade can occur at all unless e.g. a trader C can act as intermediary, and can trade Y for X, and Z for Y. This problem is solved with the introduction of money - the owner of a product can sell it for money, and buy another product he wants with money, without worrying anymore about whether the thing offered in exchange for his own product is indeed the product that he wants himself. Now, the only limit to trade is the development of the market, i.e. the extent to which products, services and assets are offered for sale as marketable things, rather than being things which according to law, custom and religion may not be traded.Money-form of value
Just because quantities of goods can be expressed in amounts of a general equivalent, which acts as a reference, this does not mean that they can necessarily all be traded for that equivalent. The general equivalent may only be a sort of yardstick used to compare what goods are worth. Hence, the general equivalent form in practice gives way to the moneyMoney
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,...
-commodity which is a universal equivalent, meaning that (provided people are willing to trade) it possesses the characteristic of direct and universal exchangeability in precisely measured quantities. But for most of the history of human civilization, money was not actually universally used, partly because the prevailing systems of property rights and cultural custom
Mores
Mores, in sociology, are any given society's particular norms, virtues, or values. The word mores is a plurale tantum term borrowed from Latin, which has been used in the English language since the 1890s....
did not allow many goods to be sold for money, and partly because many products were distributed and traded without using money. Also, several different "currencies" were often used side by side. Marx himself believed that nomadic peoples were the very first to develop the money-form of value, because all their possessions were mobile, and because they were regularly in contact with different communities, which encouraged the exchange of products. When money is generally used in trade, money becomes the general expression of the value-form of goods being traded; usually this is associated with the emergence of a state authority issuing legal currency. At that point the value-form appears to have acquired a fully independent, separate existence from any particular traded object (behind this autonomy, however, is the power of state authorities or private agencies to enforce financial claims).
Commenting on the riddle of the money-fetish, Marx notes that:
According to Marx's theory of money, the money-form of value (whether coinage, paper or digital money) fulfills a number of social functions at the same time:
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- It is a universal equivalent, which can in principle exchange for any product offered for sale.
- It is a means of exchange, facilitating the circulation of commodities.
- It provides a standard measure of value; a means of accounting for value; and it is the measuring unit of prices.
- It is a universally accepted means of payment for goods & services rendered, and for debt obligations.
- It is a means to store value owned, accumulate value, or form hoards of wealth.
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Fiat money
Once the money-commodity (e.g. goldGold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
, silver
Silver
Silver is a metallic chemical element with the chemical symbol Ag and atomic number 47. A soft, white, lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal...
, bronze
Bronze
Bronze is a metal alloy consisting primarily of copper, usually with tin as the main additive. It is hard and brittle, and it was particularly significant in antiquity, so much so that the Bronze Age was named after the metal...
) is securely established as a stable medium of exchange, symbolic money-tokens (e.g. bank notes and debt claims) which are issued by the state, trading houses or corporations can in principle substitute for the “real thing”, and this also usually happens, because it is cheaper and more efficient. At first, these "paper claims" (legal tender) are by law convertible on demand into quantities of gold, silver etc. But gradually currencies are brought into use which are not so convertible, i.e. "fiduciary money" or fiat money
Fiat money
Fiat money is money that has value only because of government regulation or law. The term derives from the Latin fiat, meaning "let it be done", as such money is established by government decree. Where fiat money is used as currency, the term fiat currency is used.Fiat money originated in 11th...
which relies on social trust that people will honor their transactional obligations, and that this money will be able to claim goods, assets and services. These kinds of money rely not on the value of money-tokens themselves (as in commodity money
Commodity money
Commodity money is money whose value comes from a commodity out of which it is made. It is objects that have value in themselves as well as for use as money....
), but on the ability to enforce financial claims and contracts, principally by means of the power and laws of the state, but also by other institutional methods. Eventually, as Marx anticipated in 1844, precious metals play very little role anymore in the monetary system.
World money
The ultimate universal equivalent according to Marx is "world money", i.e. financial claims which are accepted and usable for trading purposes everywhere, such as bullion. In the world market, the value of commodities is expressed by a universal standard, so that their "independent value-form" appears to traders as "universal money". Nowadays the US dollar, the EuroEuro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
, and the Japanese Yen, the currencies of the world's richest and most powerful economies, are widely used as "world currencies" providing a near-universal standard and measure of value. They are used as a means of exchange worldwide, and consequently most governments have significant reserves or claims to these currencies. Nowadays the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
also operates a special fund of world reserve currency, which can be used internationally to augment liquidity, but this isn't used on any very large scale.
In summary
It is important to note that Marx's four steps in the development of the value-form are mainly an analytical or logical progression, which may not always conform to the actual historical processes by which objects begin to acquire a relatively stable value and are traded as commodities. Three reasons are:- Various different methods of trade may always exist and persist side by side.
- Market and non-market methods of allocating resources may combine in rather unique ways.
- Objects which previously had no socially accepted value at all, may acquire it in a situation where money is already being used, simply by imputing or attaching a money-price to them. In this way, objects can acquire the value-form "all at once" - they are suddenly integrated in an already existing market (The only prerequisite is that somebody owns the trading rights for those objects).
It is just that, typically, what the socially accepted value of a wholly new kind of object will be, requires the practical "test" of a regular trading process, assuming a regular supply by producers and a regular demand for it, which establishes a trading "norm" consistent with production costs. A new object that wasn't traded previously may be traded far above or below its real value, until the supply and demand for it stabilizes, and its exchange-value fluctuates only within relatively narrow margins (in official economics, this process is acknowledged as a form of price discovery
Price discovery
The price discovery process is the process of determining the price of an asset in the marketplace through the interactions of buyers and sellers ....
).
General implications of the value-form analysis
To summarize, the development of the value-form through the growth of trading processes involves a continuous dual equalization & relativization process:- the worth of products and assets relative to each other is established with increasingly precise equations, creating a structure of relative values;
- behind that, the comparative labour efforts required to make the products are also valued in an increasingly standardized way at the same time.
Six main effects of this are:
- the process of market-expansion, involving the circulation of more and more goods, services and money, leads to the development of the value-form, which includes and transforms more and more aspects of human life, until almost everything is structured by the value-form (monetized, i.e. the value of everything is expressible in money-prices).
- that it increasingly seems as though economic value ("what things are worth") is a natural, intrinsic characteristic of products and assets (just like the characteristics which make them useful) rather than a social effect created by labour-cooperation;
- what any particular kind of labour is worth, becomes largely determined by the value of the tradeable product of the labour, and labour becomes organized according to the value it produces.
- The development of markets leads to the capitalization of money, products and services: the trade of money for goods and goods for money leads directly to the use of the trading process purely to "make money" from it (a practice known in classical Greece as "chrematisticsChrematisticsChrematistics according to Thales of Miletus is the art of getting rich.Aristotle established the fundamental difference between economics and chrematistics. The accumulation of money itself is an unnatural activity that dehumanizes those who practice it. Like Plato, he condemns the accumulation...
"). Money is converted into capital, when it is used primarily to make more money, or when it is treated as an asset which can yield a profit or return (a net income). Marx describes this as the inversion of the formula C-M-C' (a commodity is exchanged for money to buy a different commodity) to M-C-M' (money is invested in a commodity which, upon sale, obtains more money). - Labour power that creates no commodity value or does not have the potential to do so, has no value for commercial purposes, and is therefore usually not highly valued economically, except insofar as it reduces costs that would otherwise be incurred.
- The diffusion of value relations eradicates traditional social relations and corrodes all social relations not compatible with commerce; the valuation which becomes of prime importance is what something will trade for. The end result is the emergence of the circuit M-C...P...C'-M' which indicates that production has become a means for the process of making money (Money buys commodities which are transformed into new commodities, and, upon sale, result in more money than existed at the start).
Capital existed in the form of trading capital already thousands of years before capitalist factories emerged in the towns; its owners (whether rentiers, merchants or state functionaries) often functioned as intermediaries between commodity producers. Marx defines 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...
as “generalized commodity production”, meaning that most goods and services are produced primarily for commercial purposes, for profitable market sale. This has the consequence, that both the input and the output of production become tradeable objects with prices, and that the whole of production is reorganized according to commercial principles. Whereas originally commercial trade occurred episodically at the boundaries of different communities, Marx argues, eventually commerce engulfs and reshapes the whole production process of those communities.
In turn, this means what whether or not a product will be produced, and how it will be produced, depends not simply on whether it is physically possible to produce it or on whether people need it, but on its financial cost of production, whether a sufficient amount can be sold, and whether its production yields sufficient profit income. That is why Marx regarded the individual commodity, which simultaneously represents value and use-value as the "cell" (or the "cell-form") in the "body" of capitalism. The seller primarily wants money for his product and is not really concerned with its consumption or use (other than from the point of view of making sales); the buyer wants to use or consume the product, and money is the means to acquire it. Thus the seller does not aim directly to satisfy the need of the buyer, nor does the buyer aim to enrich the seller. Rather, the buyer and the seller are the means for each other to acquire money or goods. As a corollary, production becomes less and less a creative activity to satisfy human needs, but simply a means to make money or acquire access to goods and services.
The concept of the value-form as an aspect of the commodity form is intended to show how, with the development of commodity trade, anything which has a utility for people (a use-value) can be transformed into a quantity of abstract value, objectively expressible as a sum of money; but, also, how this transformation changes the organization of labour to maximize its value-creating capacity, how it changes social interactions and the very way in which people are aware of their interactions.
Essentially, Marx argues that if the values of things are to express social relations, then, in trading activity, people necessarily have to "act" symbolically in a way which inverts the relations among objects and subjects, whether they are aware of that or not. They have to treat a relationship as if it is a thing in its own right. In an advertisement, a financial institution might for example say "with us, your money works for you", but money does not "work", people do. A relationship gets treated as a thing, and a relationship between people is expressed as a relationship between things. In Postmodernist culture, this inversion is acknowledged, but an explicit attempt is made to recognize the social relationship involved and its meaning for Self
Self (philosophy)
The philosophy of self defines the essential qualities that make one person distinct from all others. There have been numerous approaches to defining these qualities. The self is the idea of a unified being which is the source of consciousness. Moreover, this self is the agent responsible for the...
and Other
Other
The Other or Constitutive Other is a key concept in continental philosophy; it opposes the Same. The Other refers, or attempts to refer, to that which is Other than the initial concept being considered...
; the idea is that, in so doing, an otherwise impersonal, estranged or superficial trading contact can be "humanized". The question remains how one can know that this attempt is authentic and what its real motivation is.
The total implications of the development of the value-form are much more farreaching than can be described in this article, since (1) the processes by which the things people use are transformed into objects of trade (often called commodification
Commodification
Commodification is the transformation of goods, ideas, or other entities that may not normally be regarded as goods into a commodity....
, commercialization or marketization) and (2) the social effects of these processes, are both extremely diverse. A very large literature exists about the growth of business relationships in all sorts of areas. For capitalism to exist, markets must grow, but market growth requires changes in the way people relate socially, and changes in property rights. This is often a problem-fraught and conflict-ridden process, as Marx describes in his story about primitive accumulation.
Value-form and price-form
In his story, Marx defines "value" simply as the ratio of a physical quantity of product to a quantity of average labour-time, which is equal to a quantity of gold-money (in other words, a scalarScalar multiplication
In mathematics, scalar multiplication is one of the basic operations defining a vector space in linear algebra . In an intuitive geometrical context, scalar multiplication of a real Euclidean vector by a positive real number multiplies the magnitude of the vector without changing its direction...
):
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- X quantity of product = Y quantity of average labour hours = Z quantity of gold-money
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He admits early on, that the assumption of gold-money is a theoretical simplification, since the buying power of money units can vary due to causes which have nothing to do with the production system (within certain limits, X, Y and Z can vary independently of each other); but he thought it was useful to reveal the structure of economic relationships involved in the capitalist mode of production, as a prologue to analyzing the motion of the system as a whole; and, he believed that variations in the buying power of money did not alter that structure at all, insofar as the working population was forced to produce in order to survive, and in so doing entered into societal 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...
independent of their will; the basic system of property rights remained the same.
As any banker or speculator knows, however, the expression of the value of something as a quantity of money-units is by no means the “final and ultimate expression of value”.
- At the simplest level, the reason is that different “monies” (currencies) may be used side by side in the trading process, meaning that “what something is worth” may require expressing one currency in another currency and that one currency is traded against another, where currency exchange rates fluctuate all the time. Thus, money itself can take many different forms.
- In more sophisticated trade, moreover, what is traded is not money itself, but rather claims to money (“financial claims”, for example debt obligations or stocks which provide the holder with a certain income).
- And in even more sophisticated trade, what is traded is the insurance of financial claims against the risk of possible monetary loss. In turn, money can be made just from the knowledge about the probability that a financial trend or risk will occur or not occur. Eventually financial trade becomes so complex, that what a financial asset is worth is often no longer expressible in any exact quantity of money (a “cash value”) without all sorts of qualifications, and that its worth becomes entirely conditional on its earnings potential, i.e. how much extra money could be obtained from owning title to the asset, or from selling it at a future date.
In Capital Volume 3, which he drafted before Volume I, Marx shows he was well aware of this. He distinguished not only between "real capital" (physical, tangible capital assets) and "money capital", but also noted the existences of "fictitious capital
Fictitious capital
Fictitious capital is a concept used by Karl Marx in his critique of political economy. It is introduced in chapter 29 of the third volume of Capital. Fictitious capital contrasts with what Marx calls "real capital" which is capital actually invested in physical means of production and workers, and...
" and "pseudo-commodities" which have exclusively symbolic value (which, however, can be converted into real product value through trade). Marx believed that a failure to theorize the value-form correctly led to "the strangest and most contradictory ideas about money" which "emerges sharply... in [the theory of] banking, where the commonplace definitions of money no longer hold water".
The price-form
Consistent with this, he explicitly introduced a distinction between the value-form and the price-form early on in Capital, Volume ICapital, Volume I
Capital, Volume I , by Karl Marx, is a critical analysis of capitalism as political economy, meant to reveal the economic laws of the capitalist mode of production, how it was the precursor of the socialist mode of production, and of the class struggle rooted in the capitalist social relations of...
. Simply put, the price-form is a mediator of trade which is separate and distinct from the value-form. If we want to trade goods for money, or money for goods, we need to know how much we have to pay or what something will sell for. Prices tell us how much in money-quantities; they express exchange-value in money terms. Prices are not money themselves, but they indicate money-quantities. They symbolize how much money is required in exchange, to trade and acquire something. Thus, prices are ways to express and inform about how much money is involved in any kind of (potential) transaction, or what it takes to make the transaction (of course, price information can itself also be sold for money).
According to Marx, the price-form is not a “further development” of the value-form, for three reasons:
- As Marx notes, prices may be attached to almost anything at all ("the price of owning, using or borrowing something"), and therefore need not express product-values at all. They may only express that "somebody owes somebody else some money".
- Insofar as the price of a commodity does express its value accurately, this does not necessarily mean that it will actually trade at this price; products can trade at prices above or below what the goods are really worth, or fail to be traded at any price.
- Although as a rule there will be a strong positive correlation between product-prices and product-values, they may change completely independently of each other for all kinds of reasons.
Value relationships among physical products and assets - as proportions of current labour effort involved in making them - exist according to Marx quite independently from price information, and prices can oscillate in all sorts of ways around economic values, or indeed quite independently of them. That is why Marx felt quite comfortable about mostly ignoring price fluctuations in the first stages of his value theory. In his pamphlet Wages, Price and Profit, he notes:
If prices for products rise, hours worked may rise, and if prices fall, hours worked may fall (sometimes the reverse may also occur, to the extent that extra hours are worked, to compensate for lower income resulting from lower prices, or if more sales occur because prices are lowered). In that sense, it is certainly true that prices and values mutually influence each other. It is just that, according to Marx, product-values are not determined by the labor-efforts of any particular enterprise, but by the combined result of all of them. That social valuation exists as a given social fact, quite independently of any price fluctuations. For example, the price of a particular brand of a new car might vary between $15,000 and $20,000, but it will normally never sell for "$2" or "$200,000". Quite simply, the new car is considered to be worth around $17,500 on average, and that valuation (a standard supply price) normally does not change much, no matter what people do. The car will neither be supplied at a cost of $2 nor at a cost of $200,000.
Real prices and ideal prices
In discussing the form of prices in the GrundrisseGrundrisse
The Grundrisse der Kritik der Politischen Ökonomie is a lengthy manuscript by the German philosopher Karl Marx, completed in 1858. However, as it existed primarily as a collection of unedited notes, the work remained unpublished until 1939...
and 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 drew an essential distinction between actual prices charged and paid, i.e. prices which express how much money really changed hands, and various “ideal prices
Real prices and ideal prices
Real prices and ideal prices refers to a distinction between actual prices paid for products, services, assets and labour , and computed prices which are not actually charged or paid in market trade, although they may facilitate trade...
" (imaginary or notional prices). Because prices are symbols or indicators in more or less the same way as traffic lights are, they can symbolize something that really exists (e.g. hard cash) but they can also symbolize something which doesn’t exist, or symbolize other symbols. That can make the forms of prices highly variegated, flexible and complex to understand, but also potentially very deceptive, disguising the real relationships involved. Consequently, as Marx notes in the Grundrisse
Grundrisse
The Grundrisse der Kritik der Politischen Ökonomie is a lengthy manuscript by the German philosopher Karl Marx, completed in 1858. However, as it existed primarily as a collection of unedited notes, the work remained unpublished until 1939...
, the knowledge of prices itself became a specialized science. In what Marx called “vulgar economics”, all this is ignored however, because, Marx claimed, the vulgar economists assumed that:
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- all prices belong to the same object class (they are qualitatively the same, and differ only quantitatively, irrespective of the type of transaction with which they are associated, or the valuation principles used).
- “price” is just another word for “value”, i.e. value and price are identical expressions.
- prices are always exact, in the same way that numbers are exact.
- price information is always objective.
- people always have equal access to information about prices, in which case swindlesConfidence trickA confidence trick is an attempt to defraud a person or group by gaining their confidence. A confidence artist is an individual working alone or in concert with others who exploits characteristics of the human psyche such as dishonesty and honesty, vanity, compassion, credulity, irresponsibility,...
are merely an aberration from the normal functioning of markets (rather than an integral feature of them, which requires continual policing). - the price for any particular type of good is always determined everywhere in exactly the same way, according to the same economic laws, regardless of the given social set-up.
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In his critique of political economy, Marx denied that any of these assumptions were scientifically true. He distinguished carefully between the values, exchange values, market values, market prices and prices of production
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...
of commodities. However he did not analyze all the different forms that prices can take (for example, market-driven prices, administered prices, accounting prices, negotiated and fixed prices, estimated prices, nominal prices, inflation-adjusted prices) focusing mainly on the value proportions he thought to be central to the functioning of 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...
as a social system. The effect of this omission was that debates about the relevance of Marx's value theory became confused, and that Marxists repeated the same ideas which Marx himself had rejected as "vulgar economics".
Quote by Marx on the relationship between the value-form and the price-form
Engels on the value-form
Friedrich EngelsFriedrich Engels
Friedrich Engels was a German industrialist, social scientist, author, political theorist, philosopher, and father of Marxist theory, alongside Karl Marx. In 1845 he published The Condition of the Working Class in England, based on personal observations and research...
comments on the value-form concept in Part 3 chapter 4 of his 1876-1878 book Anti-Dühring
Anti-Dühring
Herrn Eugen Dührings Umwälzung der Wissenschaft, commonly known as Anti-Dühring, is a book written in German by Friedrich Engels, published in 1878. It had previously been serialised in a periodical. There were two further editions in German in the lifetime of Engels...
which was written with Marx's approval, emphasizing how the growth of commodity trade breaks up the social fabric of traditional societies:
Scientific criticism
There are five main lines of scholarly criticism of Marx's idea of the value-form:Obscurantism
The criticism most often heard from the critics of Marx, such as Karl PopperKarl Popper
Sir Karl Raimund Popper, CH FRS FBA was an Austro-British philosopher and a professor at the London School of Economics...
, Friedrich von Hayek, Ian Steedman
Ian Steedman
Ian Steedman was for many years a Professor of economics at the University of Manchester before moving down the road to Manchester Metropolitan University...
and Francis Wheen
Francis Wheen
Francis James Baird Wheen is a British journalist, writer and broadcaster.-Early life and education:Wheen was born into an army family and educated at two independent schools: Copthorne Preparatory School near Crawley, West Sussex and Harrow School in north west London.-Life and career:Running...
is that, even if Marx himself meant well, Marx’s value-form idea is simply an esoteric obscurantism, “dialectical hocus pocus” or “mumbo jumbo”. The Marxist Rosa Luxemburg
Rosa Luxemburg
Rosa Luxemburg was a Marxist theorist, philosopher, economist and activist of Polish Jewish descent who became a naturalized German citizen...
likewise complained about the “horror” of Marx’s unnecessary “Hegelian rococo” in 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...
. The argument does not really make coherent scientific sense, it is argued – quite possibly because Marx tried to do too much at once. That is, at one and the same time, one finds Marx trying to respond to the classical discourses of the political economists about “the commodity”, “exchange-value”, “use-value” etc. in an erudite way; but also poking fun at, and setting traps for what he regarded as pedantic, pseudo-profound German professors prattling about “dialectics”; at the same time as trying to tell an entertaining story using literary and theatrical metaphors that would really sell (unlike his previous book, the super-abstract and boring A Contribution to the Critique of Political Economy); and trying to make a substantive, serious argument about the historical origin and essential nature of economic value. The result, some critics feel, is a series of devastating ambivalences and ambiguities, which cover up all kinds of illogical moves - moves which, they claim, are fatal to Marx’s argument. This is a criticism along the lines that one ought not to take Marx’s story seriously, as a scientific argument about economics. Often, Marxists have replied to this attack by restating Marx’s arguments in clearer language, or by showing that Marx’s theory of economic value at the very least fares no worse than the subjective theory of value (the theory of the util as the measuring unit of utility
Utility
In economics, utility is a measure of customer satisfaction, referring to the total satisfaction received by a consumer from consuming a good or service....
). Even so, when he published his very clear restatement Karl Marx's Theory of History: A Defence
Karl Marx's Theory of History: A Defence
Karl Marx's Theory of History: A Defence is a 1978 book by Gerald Cohen, considered a groundbreaking reinterpretation of the Marxist doctrine of historical materialism...
,the Marxist philosopher Gerald Cohen
Gerald Cohen
Gerald Allan "Jerry" Cohen was a Marxist political philosopher, formerly Visiting Quain Professor of Jurisprudence, University College, London and Chichele Professor of Social and Political Theory, All Souls College, Oxford...
explicitly dissociated himself from Marx’s value theory.
The substance of value
Whereas many economists and philosophers have been inspired by Marx's analysis of the value-form, they have usually rejected the thrust of Marx's argument, namely that the substance of product-value is the expenditure of human labor effort in general, i.e. abstract labourAbstract 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 insists that:
Marx's argument is that the exchangeability of commodities according to their value is based on the common factor that all of them are products of social labour (co-operative human labour producing things for others). Ordinary working people know very well that their work effort is valuable and represents a value, but what exactly that value is, objectively speaking, becomes apparent only in the comparison of products when they are exchanged. If free citizens cannot produce everything they need themselves, they have to trade to get what they want, money or no money, but in doing so they also have to acknowledge the valuation of other free citizens' labor efforts in terms comparable or equal to their own (things might be different if goods and services are provided by slaves, such as in the Greek society that Aristotle lived in). Thus, the exchange process mediating the activities of producers and consumers represents effectively the value abstraction of human labour by means of shared symbols and symbolic objects. In principle, economic value does not exist because money exists to express economic value, but money exists because economic value exists; consequently we have to be able to explain economic value and its origin quite independently of the existence of money. The analysis of the value-form is intended precisely as a demonstration of this idea, by showing how the money-relationship actually and necessarily originates out of the exchange of wares in an increasingly complex division of labour
Division of labour
Division of labour is the specialisation of cooperative labour in specific, circumscribed tasks and likeroles. Historically an increasingly complex division of labour is closely associated with the growth of total output and trade, the rise of capitalism, and of the complexity of industrialisation...
.
Critics however argue that Marx's argument is simply not logically compelling. They claim that we could just as well argue that what makes products exchangeable is simply the "common factor" that they have a price, or that a price can in principle be attributed to them; or even more simply, that people just have a common desire to exchange products for money. If that common desire exists, it is argued, nothing else is necessarily required in order to exchange products. Although the very word "price" (in the sense of a money-price) was unknown prior to the 13th century AD, it is argued that prices have nevertheless always existed in some form in human society. The same thing that Marx tries to explain using the notion of "value" could, it is argued, just as well be explained in terms of the supply and demand for priced goods among individuals and groups who interact with each other.
Thus, while Marx's observations might be of sociological or anthropological interest, it is argued they fail to provide any logically decisive proof that human labour is the substance of economic value. Approximately at the same time as Marx published his theory in 1867, Stanley Jevons for instance proposed that price fluctuations could be explained in terms of utility
Utility
In economics, utility is a measure of customer satisfaction, referring to the total satisfaction received by a consumer from consuming a good or service....
and the subjective preferences of buyers and sellers. This recalls Aristotle's idea (mentioned above) that goods have value because people want them.
For this reason, the Japanese Marxist scholar Kozo Uno
Kozo Uno
was a Japanese economist and is considered to be one of the most important theorists on the field of Marx's theory of value. His main work Principles of Political Economy was published in 1964. Among his scholars are Thomas T. Sekine and Makoto Itoh.-Thought:...
argued in his classic Principles of Political Economy that Marx's original argument had to be revised. In the revised version, the theory of the value-form is integrated in the theory of commodity circulation, and does not refer to the substance (content) of value at all. The substance of value as labour then becomes apparent and is theoretically demonstrated only in the analysis of the production of commodities "by means of commodities". Some Western Marxists do not find this approach very satisfactory however, because of Marx's basic insistence that the formation of product values is an outcome of both the "economy of labour-time" and "the economy of trade", i.e. commodity values are originally formed through mutual adjustments of the processes of producing commodities and circulating (trading) commodities. Since exchanging products itself takes work, however - "circulation costs" - human labour and trade are in reality inseparable at any time (a product cannot be traded, unless it is produced, regardless of how specifically it is produced).
An additional complication is that, as the accumulation of capital grows, more and more durable assets exist external to the sphere of production. Marx was primarily concerned with the value of newly produced commodities, but it is unclear from his theory about 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...
what determines the value of the growing stock of durable assets which is neither an input nor an output of current production. This problem was seriously studied by Michael Hudson (economist)
Michael Hudson (economist)
Michael Hudson is research professor of economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College...
.
The usefulness of value theory
In a 1975 paper subtitled "Was Marx's Journey Really Necessary?", the influential Marxist economist Ronald L. MeekRonald L. Meek
Ronald Lindley Meek was a Marxian economist and social scientist known especially for his scholarly studies of classical political economy and the labour theory of value....
argued that Marx's value theory had become redundant. Its problems could be resolved using the insights of Piero Sraffa
Piero Sraffa
Piero Sraffa was an influential Italian economist whose book Production of Commodities by Means of Commodities is taken as founding the Neo-Ricardian school of Economics.- Early life :...
, so that the old value theory was unnecessary:
The argument (similar arguments are presented by Ian Steedman
Ian Steedman
Ian Steedman was for many years a Professor of economics at the University of Manchester before moving down the road to Manchester Metropolitan University...
) is that value theory is unnecessary, because all economic relationships can be described and explained in terms of prices. The Marxist response to this criticism was extremely weak; most Marxists had accepted the conventional price-theories of economics as largely correct and unproblematic, and just kept insisting that value-theory was a necessary "add-on" to make sense of the economy.
Since the 1970s, the so-called "value-form theorists" ("value-form school") have emphasized - influenced by the rediscovery of the writings of Isaak Illich Rubin
Isaak Illich Rubin
Isaak Illich Rubin was a Russian economist and is considered to be the most important theorist of his time on the field of Marx's theory of value. His main work Essays on Marx's Theory of Value was published in 1924. During the course of the Great Purge he was executed in 1937.-Main Works:* Rubin,...
- the importance of Marx's value theory as a qualitative critique - a cultural, sociological or philosophical critique of the reifications involved in capitalist commercialism. The value-form school has become very popular especially among Marxists who are not economists. Examples in the English language literature are Christopher J. Arthur http://chrisarthur.net/, Tony Smith http://www.public.iastate.edu/~tonys/, Alfred Sohn-Rethel
Alfred Sohn-Rethel
Alfred Sohn-Rethel was a Marxist economist and philosopher especially interested in epistemology. He also wrote about the relationship of German industry with national socialism.-Life:...
, Moishe Postone
Moishe Postone
Moishe Postone is a professor of History at the University of Chicago, where he is part of the Committee on Jewish Studies. He received his Ph.D. from Johann Wolfgang Goethe-University in 1983...
and Geert Reuten
Geert Reuten
Thaddeus Antonius Gerardus Maria Reuten is a Dutch politician and economist. On behalf of the Socialist Party since June 2007 he is a member of the First Chamber...
& Michael Williams. Noted German-language value-form theorists are the Marx-scholars Hans-Georg Backhaus
Hans-Georg Backhaus
Hans-Georg Backhaus is a German economist and philosopher. He is considered one of the most important theorists on the field of Marx's theory of value. He began a long-term cooperation with Helmut Reichelt already from his years of university studies.-Main Work:* Backhaus, Hans-Georg: Dialektik...
, Helmut Reichelt
Helmut Reichelt
Helmut Reichelt is a German economist and philosopher of the Frankfurt School. Reichelt is one of the main authors of the “Neue Marx-Lektüre” and considered to be one of the most important theorists in the field of Marx's theory of value.He studied economics, sociology and philosophy in Frankfurt...
Michael Heinrich (Neue Marx-Lektüre
Neue Marx-Lektüre
Neue Marx-Lektüre in its broader meaning refers to the reception of the economic theory of Karl Marx, which started in the mid-1960s in Western and partly Eastern Europe, in distinction from both Marxism-Leninism and Social Democracy...
) and Nadja Rakowitz (:de:Wertkritik), as well as the Sydney-Constance Project (Michael Eldred, Marnie Hanlon, Lucia Kleiber, Mike Roth). Value-form theory has also been popular among intellectual supporters of Autonomism
Autonomism
Autonomism refers to a set of left-wing political and social movements and theories close to the socialist movement. As an identifiable theoretical system it first emerged in Italy in the 1960s from workerist communism...
and Anarchism
Anarchism
Anarchism is generally defined as the political philosophy which holds the state to be undesirable, unnecessary, and harmful, or alternatively as opposing authority in the conduct of human relations...
, although Antonio Negri
Antonio Negri
Antonio Negri is an Italian Marxist sociologist and political philosopher.Negri is best-known for his co-authorship of Empire, and secondarily for his work on Spinoza. Born in Padua, he became a political philosophy professor in his hometown university...
thinks the theory is out of date now:
Negri's interpretation is difficult to reconcile with the view of Marx and Engels, who regarded the value-form as an emergent characteristic of human dealings in thousands of years of commodity trade (As Marx - himself a philosophy graduate - mentions, Aristotle already talked about it).
- The suggestion of some authors (such as Reuten/Williams) is that although Marx's labour theory of value is theoretically wrong as stated, his theory can be modified such that, rather than value being created by co-operative human labour, value and abstract labour can be regarded as effects ("social forms") created by the exchange-process itself. Simply put, the value of goods is nothing more than the money they will exchange for, from which it seems to follow that if there is no money, value does not exist either. Marx himself denied this interpretation when he said explicitly in chapter 2 of Capital, Volume ICapital, Volume ICapital, Volume I , by Karl Marx, is a critical analysis of capitalism as political economy, meant to reveal the economic laws of the capitalist mode of production, how it was the precursor of the socialist mode of production, and of the class struggle rooted in the capitalist social relations of...
that "The act of exchange gives to the commodity converted into money, not its value, but its specific value-form"; in other words, the source of the commodity's value is not the exchange process itself. Critics of the Reuten/Williams interpretation think that, beyond rhetorics, it is really not much better than a vulgar accounting theory, according to which "value is created" when goods are sold for more than they were bought for. The objection here is, that value exists not simply because of a trading relationship, but because people actually did some work to produce something of value, and in so doing are socially related also external to the exchange process. If that work did not occur, nothing would be left but a ghost townGhost townA ghost town is an abandoned town or city. A town often becomes a ghost town because the economic activity that supported it has failed, or due to natural or human-caused disasters such as floods, government actions, uncontrolled lawlessness, war, or nuclear disasters...
, trade or no trade. Moreover, a "form" isn't a form at all without a content, namely it is "the form of something", the form that a content takes - the point being that a content or substance can take various "forms", necessitating a special study of what those forms are. A "form without a content" would make form and content identical, and the distinction between them redundant. We are then left only with a "sociology of trading processes" studying how people socially interact in trade and how they symbolize that. It might be insightful, but that was not Marx's full intention.
- In his Social Ontology (2008), 'Anglophone Justice Theory, the Gainful Game and the Political Power Play' (2009) and elsewhere, the Australian phenomenologist Michael Eldred radicalizes the reading of 'form' in the value-form to a socio-ontological category. According to Eldred, the phenomenon of exchange-value is substantially one of social power: Commodity A has to power to acquire Commodity B in an interplay. Hence, money reveals itself to be the quintessential, rudimentary form of reified social power in capitalist society. The further value-forms developed during the course of the capital-analysis, starting with the capital-form and the wage-form of value, through the value-forms of ground-rent, interest, profit of enterprise, to the revenue-form of these income-sources on the 'surface' of economic life, unfold the socio-ontological structure and movement of capitalism as a reified power-play. Eldred argues that such a total ontological structure of capitalist power-play can only come into view, if the whole of Marx's capital-analysis is reconstructed, not just the famous, notoriously difficult first chapter of Marx's Capital.
- From a different angle, Jonathan NitzanJonathan NitzanJonathan Nitzan is a Professor of Political Economy at York University, Toronto, Canada. He is the co-author of Capital As Power: A Study of Order and Creorder, published 2009. Their writings focus of the nature of capital in capitalism and provide an alternative view to that of Marxist and...
and Shimshon BichlerShimshon BichlerShimshon Bichler is an educator who teaches political economy at colleges and universities in Israel. Along with Jonathan Nitzan, Bichler has created an engaging power theory of capitalism and theory of differential accumulation in their analysis of the political economy of wars, Israel, and...
http://bnarchives.yorku.ca/ also depict the phenomena of economic value as power relationships. While retaining some of the language of Marx, they however reject Marx's theory of value. The power dimension of value relationships is also prominent in Harry CleaverHarry CleaverHarry Cleaver is Associate Professor in the Department of Economics at the University of Texas at Austin, where Cleaver teaches Marxism and Marxist economics. He is best known as the author of Reading Capital Politically, an autonomist reading of Karl Marx's Capital. Dr...
's commentary Reading Capital Politically
- There are also anthropologists such as the socialist Lawrence KraderLawrence KraderLawrence Krader was an important American socialist anthropologist and ethnologist. At the Philosophy Department of the City College of New York from 1936 onwards he studied Aristotle with Abraham Edel, Leibniz with Philipp P. Wiener and mathematical logic and linguistics with Alfred Tarski...
and the anarchist David GraeberDavid GraeberDavid Rolfe Graeber is an American anthropologist and anarchist who currently holds the position of Reader in Social Anthropology at Goldsmiths, University of London. He was an associate professor of anthropology at Yale University, although Yale controversially declined to rehire him, and his...
who argue that Marx's value categories should be modified in the light of historical and anthropological research about how human communities value objects.
The question still remains, "was Marx's journey really necessary?", i.e. what is the point of value theory, if all economic phenomena can be expressed in price terms? Utz-Peter Reich offers a possible answer to this problem. The expression of economic goods in price terms is more problematic than it seems at first sight. In any price-accounting, the grouping, calculation and aggregation of prices could not even occur without making valuation assumptions (categorical distinctions) about value equivalence, value comparability, value transferred, conserved value, value used up, depreciated or destroyed - in general, reduction of value - value increase and newly created value. Thus, whereas economists implicitly or explicitly adopt theoretical conventions in order to talk about price movements, those conventions themselves can be shown to depend ultimately on axioms about the nature of economic value itself. The issue is then whether those axioms are actually valid, and where we get them from; as soon as this question is posed, scientific theorizing about value as such is inescapable. If we talk constantly about economic value without being able to specify in a scientifically rigorous way what it is, we are left with a phlogiston theory
Phlogiston theory
The phlogiston theory , first stated in 1667 by Johann Joachim Becher, is an obsolete scientific theory that postulated the existence of a fire-like element called "phlogiston", which was contained within combustible bodies and released during combustion...
.
Most likely, Marx himself would have said that without a theory of value, only "vulgar economics" is left; in that case, we cannot explain capitalist dynamics, only describe them (and use the descriptions to make predictions). That is, the economic explanations depend on whether one accepts certain definitions, but since the definitions themselves are not proved, there is a sense in which one assumes the very thing that one tries to explain. Any rigorous theory of economic value would have to explain the real origins of the very meaning of "value" in human society, and how it evolves. That is indeed what Marx tried to do. However, as Marx himself implicitly admits, in science it is impossible to provide any absolute logical proof for any particular qualitative concept of what "value" is - its validity depends rather on the explanatory power of the theories which it enables. The theoretical debate about the nature of economic value is therefore itself interminable; meantime, just as in mathematical theory, quantitative systems are accepted by convention, in advance of any proof of fundamental categorical distinctions, insofar as the systems seem to be useful for economic policy and the explanation/prediction of economic events. Even if economic history is plausibly reconstructed to demonstrate objectively the existence of an operational concept of economic value, this remains an interpretation and not the absolute truth. Quite simply, a concept of value is assumed because without it, we are unable to "make sense" of economic phenomena. However, the unfortunate corollary is, that this makes theories of economic value highly susceptible to the influence of ideological beliefs and sectional interests (which Marx calls "the furies of private interest"). Ultimately, the concept of value of the capitalist class and the concept of value of the working class cannot be reconciled with each other. The different social classes each adopt a theory of value which makes sense in their own social position in society, but from a scientific viewpoint they contain, at best, only "relative" truths.
The Chartalist challenge
An implicit technical and historical criticism of Marx’s value-form theory is made by some neo-Keynesian and heterodox Marxian economists as well as anarchists like David GraeberDavid Graeber
David Rolfe Graeber is an American anthropologist and anarchist who currently holds the position of Reader in Social Anthropology at Goldsmiths, University of London. He was an associate professor of anthropology at Yale University, although Yale controversially declined to rehire him, and his...
, who are inspired by the chartalist theory of money. These economists interpret Marx’s story about how money originates in the exchange process as a theory of commodity money
Commodity money
Commodity money is money whose value comes from a commodity out of which it is made. It is objects that have value in themselves as well as for use as money....
, or the "commodity theory of money". The “neo-Chartalist” interpretation of money entails, that the commodity theory of money is false; the latter, it is argued, can neither explain the origin of money and credit, nor provide a credible account of monetary phenomena in the modern world. Randy Wray has stated the basic idea of Chartalism
Chartalism
Chartalism is a descriptive economic theory that details the procedures and consequences of using government-issued tokens as the unit of money. The name derives from the Latin charta, in the sense of a token or ticket...
as follows:
If the Chartalist argument is true, then it cannot also be true that, as Marx argues, money originates as a “special commodity” (a universally exchangeable good) within the exchange process itself. Instead, money is completely “a creature of the state” – it first arises as a unit of account for state debts, credits and taxes, and is then gradually imposed on the whole of the trading process in society.
The controversy about this challenge to Marx’s idea is far from being resolved at this stage, for a number of reasons:
- Firstly, there is nowadays no consensus view among Marxists about Marx's theory of money. (1) Some Marxists deny that Marx had any full-fledged theory of money in the modern sense of the word, since he never developed any substantive theory of money circulation and public finance; Marx had deliberately kept his discussion of money and bank capital brief, it is argued, because he aimed only to explain the nature of the capitalist mode of production as simply as possible. (2) Some Marxists like Thomas T. SekineThomas T. SekineThomas T. Sekine is a Japanese economist and is considered to be one of the most important theorists on the field of Marx's theory of value. His main work The Dialectic of Capital was published in 1986. He is a scholar of Kozo Uno.-Main Work:...
regard the value-form discussion as a purely theoretical discussion which has no bearing on empirical or historical reality; its main purpose is just to show why money necessarily emerges out of the exchange of products, not how exactly it originates. (3) Some Marxists, such as Ernest MandelErnest MandelErnest Ezra Mandel, also known by various pseudonyms such as Ernest Germain, Pierre Gousset, Henri Vallin, Walter , was a revolutionary Marxist theorist.-Life:...
, have argued that Marx really did have a commodity theory of money, while (4) others argue that (a) such as theory can only be a “special case” of a more general theory of money, or (b) that it is a purely theoretical/analytical assumption, or (c) that it applied only in a certain period in history. So, there exists no general agreement about the exact theoretical status of Marx’s theory of money.
- Secondly, the analysis of the historical and archaeological evidence about the real origins of money is not simply a matter of “facts”, but also a matter of the interpretation of the facts using theoretical frameworks. At what point, exactly, did primitive money come into being? When is money really money? How exactly do we draw the boundary between a "chiefdom" and an "early state"? How economists will interpret the historical record of human exchange processes is influenced by their theory of how markets work in the modern world, and by how they define monetary phenomena. The further one goes back into the past, however, the more fragmentary the scientific evidence about the circulation of goods is, and the more interpretation is involved to understand how it worked. It is easy to project a modern understanding of money into the past, even although money was understood quite differently in the past, or money functioned differently in the past, because people were related and relating in a different way.
- Thirdly, beyond the neo-Keynesian and Marxist theories about money, there is a lot of controversy and disagreement within the discipline of economics as a whole about the theory of money, credit and finance. Representatives of different schools of thought in economics often cannot agree at a very basic scientific level about the causes and effects of monetary phenomena, even if they share the same elementary concepts about the circulation of money. They are therefore likely also to interpret economic developments in quite different ways. For example, monetary economists failed to agree whether the long-term effect of the late-2000s financial crisisLate-2000s financial crisisThe late-2000s financial crisis is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s...
will be higher price inflation or lower price inflation.
The role of market value in human freedom and progress
A fifth line of criticism, articulated by libertarians such as Friedrich von Hayek, is that Marx and Engels tend to present "value" and "value relations" as negative, alienatingSocial alienation
The term social alienation has many discipline-specific uses; Roberts notes how even within the social sciences, it “is used to refer both to a personal psychological state and to a type of social relationship”...
and reifying
Reification (Marxism)
Reification or Versachlichung, literally "objectification" or regarding something as a separate business matter) is the consideration of an abstraction, relation or object as if they had human or living existence and abilities, when in reality they do not...
phenomena which cause people to get used by others for ends they can no longer fathom. According to Marxists, value phenomena belong to the prehistory
Prehistory
Prehistory is the span of time before recorded history. Prehistory can refer to the period of human existence before the availability of those written records with which recorded history begins. More broadly, it refers to all the time preceding human existence and the invention of writing...
of human
Human
Humans are the only living species in the Homo genus...
ity that closes with the abolition of capitalism. Thus, for example, Iring Fetscher states: "Marx's criticism is directed against value as such, not merely against its consequence, capital." In other words, the negative, dehumanizing features of markets for workers' lives have had prominence for Marxists, even although Marx also acknowledges here and there that markets have some progressive, developmental and "civilizing" features. Marx and Engels depict the "value form" as an alien, impersonal and corruptive force which gradually subordinates anything and everything to "making money". Five kinds of objections by pro-market critics can be mentioned:
- The first objection is, that such an historical judgement is not objective, because, on balance, the results for human civilization of the valuation of labour by capital have had much more progressive effect than Marx & Engels were willing to acknowledge. The proof is said to be, that workers themselves prefer choosing their own employer, purchasing goods at stable prices, and owning private property; market trade has improved their standard of living faster than any other method.
- A second objection made is that Marxists are wrong to think that value disappears when commercial trade is abolished. Here the argument is that humans would simply continue to make valuations anyway, and that goods continue to have value, except that knowing what exactly that value is, becomes much more problematic because a general, shared standard of valuation is absent. The proof of this is supposed to be the experience of Soviet-type societies.
- A third objection is that people can distinguish quite well between the means/ends rationality of commerce, and non-commercial relationships. Therefore, it is simply an inaccurate and false subjective opinion to claim that there exists some kind of "monumental domination" of commercial relationships over people's lives, because that is not true - except perhaps for people who are obsessively focused on trading relationships. What is ignored is that markets can offer a freedom of choice and development to those who value themselves, and believe in their own self-worth.
- A fourth objection made is that without the "discipline" and "incentives" of value relations, it is simply impossible to reconcile self-interest and the common interest in any efficient and fair manner, and achieve sensible cost-economies in the use of resources. Again, this is supposed to be proved by the resource waste and ecological damage suffered by Soviet-type societies.
- A fifth objection is that it is practically impossible to abolish trade as such in complex societies, and that trade could not be prevented, even if a central state authority allocated resources to individuals through some kind of credit or rationingRationingRationing is the controlled distribution of scarce resources, goods, or services. Rationing controls the size of the ration, one's allotted portion of the resources being distributed on a particular day or at a particular time.- In economics :...
system. So long as people can privately own belongings, they will trade them, if it is in their interest to do so. In Soviet-type societies, trading continued to occur anyway, even if it was highly regulated or driven underground. Since there is practically no alternative to trading, it is argued the only dispute there can be, concerns the terms on which goods and services are traded - whether that is efficient or morally justifiable. Any policy which aims to regulate or control how people may trade, it is argued by libertarians, represents an attack on their libertyLibertyLiberty is a moral and political principle, or Right, that identifies the condition in which human beings are able to govern themselves, to behave according to their own free will, and take responsibility for their actions...
and presumes wrongly that the regulators know better what trade is beneficial than the trading individuals do themselves.
All these five objections resurface in the Socialist calculation debate. The general theme of the responses of Marxian scholars to such criticisms has been that the criticisms are not based on the facts of reality and history; they are based on a false or one-sided perception of market activity, reflecting the self-interest of those who most strongly benefit from market activity. Market activity may look very "progressive" on the surface, but only because we cannot (yet) see the true costs of it. "Market freedom" depends entirely on the ability to own or borrow something which can be traded, but people may be forced to trade something to survive, even although they do not really want to trade it. There is also a big difference between selling a pair of shoes and selling a factory; they are not in the same category of trade. "The market" really doesn't exist, other than as an abstraction; there exist only many different, linked markets, operating according to different economic principles.
The claim made by socialists is that alternatives to market allocation do exist, such as sharing, reciprocation, redistribution, barter, grants, subsidization and direct allocation, and that market trade could as a matter of fact not even exist without them; market activity in reality always remains to a large extent dependent on forms of human cooperation
Cooperation
Cooperation or co-operation is the process of working or acting together. In its simplest form it involves things working in harmony, side by side, while in its more complicated forms, it can involve something as complex as the inner workings of a human being or even the social patterns of a...
and trust involving non-market activity. If that cooperation is withdrawn, markets collapse. A narrow focus on the pattern of market transactions moreover deflects attention from the enforcible property
Property
Property is any physical or intangible entity that is owned by a person or jointly by a group of people or a legal entity like a corporation...
relations on which they are based. But in fact an enormous variety of different property rights and methods of allocating goods are possible, and some of those, it is argued, demonstrably serve humanity much better than others.
Some socialist theorists such as Włodzimierz Brus, Oskar Lange
Oskar Lange
Oskar Ryszard Lange was a Polish economist and diplomat...
, Abba Lerner, Branko Horvat
Branko Horvat
Branko Horvat was a Croatian economist and politician. He worked a long time at the Institute of Economic Sciences, the former Planning Institute of the Socialist Federal Republic of Yugoslavia...
, John Roemer
John Roemer
John E. Roemer is an American economist and political scientist. He is currently the Elizabeth S. and A. Varick Stout Professor of Political Science and Economics at Yale University. Prior to joining Yale, he was on the economics faculty at the University of California, Davis, and before entering...
, David Schweickart
David Schweickart
David Schweickart is an American mathematician and philosopher. He holds a BS in Mathematics from University of Dayton, a PhD in Mathematics from University of Virginia, and a PhD in Philosophy from Ohio State University. He currently is Professor of Philosophy at Loyola University Chicago.He has...
, Erik Olin Wright
Erik Olin Wright
Erik Olin Wright is an American analytical Marxist sociologist, specializing in social stratification, and in egalitarian alternative futures to capitalism.-Biography:...
, Alec Nove and Bertell Ollman
Bertell Ollman
Bertell Ollman is a professor of politics at New York University. He teaches both dialectical methodology and socialist theory. He is the author of several academic works relating to Marxist theory ....
argue that markets aren't necessarily a bad thing, but rather that they should combine with other allocative methods within a market socialism
Market socialism
Market socialism refers to various economic systems where the means of production are either publicly owned or cooperatively owned and operated for a profit in a market economy. The profit generated by the firms system would be used to directly remunerate employees or would be the source of public...
. Makoto Itoh
Makoto Itoh
is a Japanese economist and is considered internationally to be one of the most important scholars of Marx's theory of value. He teaches at Kokugakuin University, Tokyo, and is professor emeritus of the University of Tokyo....
and Ha-Joon Chang
Ha-Joon Chang
Ha-Joon Chang is one of the leading heterodox economists and institutional economists specialising in development economics...
offer a strong defence of state-directed economic organization. Anthony Giddens
Anthony Giddens
Anthony Giddens, Baron Giddens is a British sociologist who is known for his theory of structuration and his holistic view of modern societies. He is considered to be one of the most prominent modern contributors in the field of sociology, the author of at least 34 books, published in at least 29...
, Robert Rowthorn
Robert Rowthorn
Robert Rowthorn, known as Bob is Emeritus Professor of Economics at the University of Cambridge and has been elected as a Life Fellow of King’s College.-Life:...
and Geoffrey Hodgson
Geoffrey Hodgson
Geoffrey M. Hodgson is a Research Professor of Business Studies in the University of Hertfordshire, and also the editor-in-chief of the Journal of Institutional Economics.Prof...
have argued for a "third way" between capitalism and socialism. Others such as János Kornai
János Kornai
János Kornai , is an economist noted for his analysis and criticism of the command economies of Eastern European communist states.- Biography :...
and Ernest Mandel
Ernest Mandel
Ernest Ezra Mandel, also known by various pseudonyms such as Ernest Germain, Pierre Gousset, Henri Vallin, Walter , was a revolutionary Marxist theorist.-Life:...
have argued - for different reasons - that any durable "third way" between capitalism and socialism is impossible.Michael Albert
Michael Albert
Michael Albert is an American activist, economist, speaker, and writer. He is co-editor of ZNet, and co-editor and co-founder of Z Magazine. He also co-founded South End Press and has written numerous books and articles...
and Robin Hahnel
Robin Hahnel
Robin Hahnel is a Professor of Economics at Portland State University. He is best known for his work on participatory economics with Z Magazine editor Michael Albert. He is currently a visiting professor at Lewis & Clark College....
have formulated a theory of participatory economics
Participatory economics
Participatory economics, often abbreviated parecon, is an economic system proposed primarily by activist and political theorist Michael Albert and radical economist Robin Hahnel, among others. It uses participatory decision making as an economic mechanism to guide the production, consumption and...
, otherwise known as parecon. The leading Chinese economist Jinglian Wu claims that a thorough analysis of planned economy since the 1980s (coinciding with Chinese economic reforms) proves that it is "impossible for such a institutional arrangement to be efficient" His critics however question what he means by "efficiency" - if millions of people become unemployed and destitute, while waterways are diverted to irrigate golfcourses, how efficient is that?
All these arguments remain much in dispute among economists seeking economic reform; the debaters still cannot agree about basic concepts of economics, about the possible ways in which production, trade and democracy can be combined, or about what factual evidence would finally clinch the controversy.
See also
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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... Commodification Commodification is the transformation of goods, ideas, or other entities that may not normally be regarded as goods into a commodity.... 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... 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... |
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... Law of value -General:The law of value is a central concept in Karl Marx's critique of political economy, first expounded in his polemic The Poverty of Philosophy against Pierre-Joseph Proudhon, with reference to David Ricardo's economics... Neue Marx-Lektüre Neue Marx-Lektüre in its broader meaning refers to the reception of the economic theory of Karl Marx, which started in the mid-1960s in Western and partly Eastern Europe, in distinction from both Marxism-Leninism and Social Democracy... |
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... Real prices and ideal prices Real prices and ideal prices refers to a distinction between actual prices paid for products, services, assets and labour , and computed prices which are not actually charged or paid in market trade, although they may facilitate trade... 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... Reification (Marxism) Reification or Versachlichung, literally "objectification" or regarding something as a separate business matter) is the consideration of an abstraction, relation or object as if they had human or living existence and abilities, when in reality they do not... |
Silent barter Silent barter is a system whereby traders who cannot speak each other's language can trade without talking and to protect the secrets of where gold and salt came from. This system was used in many parts of ancient Africa... Unequal exchange Unequal exchange is a much disputed concept which is used primarily in Marxist economics, but also in ecological economics, to denote forms of exploitation hidden in or underwriting trade... Use value Use 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... |