[OPE] Understanding value (reply to Michael Heinrich)

From: Jurriaan Bendien <adsl675281@telfort.nl>
Date: Thu Apr 30 2009 - 18:33:11 EDT

Paul B.,

Why are we still discussing this? Shouldn't we be tackling more topical

Most Marxists teach value theory wrongly in my opinion. They don't know why
you need value theory, what the questions are the value theory is supposed
to resolve. In addition, they also misrepresent Marx & Engels on this
subject. You get the guru's of Marxism like Tony Negri or Hillel Ticktin
saying that the law of value is all finished now, but they don't know what
they are talking about, in my opinion. The Marxist academics have this
language, but a lot of them evidently don't know what the language refers
to, they repeat that language over and over, and they think they are very
deep and profound, but I don't think so at all. If they solved even just one
modest problem I would be immensely grateful, but often they don't even do
that. It's more a style cult, a secular religion.

When Marx talks about value, he doesn't just mean the value of anything. He
means the economic value of products, specifically the newly produced
products of human labour. A community of people typically owns and trades a
lot of other assets as well, the value of which may or may not be influenced
by the law of value (as I have said many times, most economists including
Marxist economists suffer from a delusion - they think that GDP (the new
value added or net output) equals the whole economy, but this is simply not

What is the "value" of a product? Roughly speaking it's the normal average
production cost (expressible in labour time), comprising its average cost
price and a quantity of surplus value, the gross profit or markup.

Now whether or not a quantity of products of that type sell or fail to sell
is not easily going to change the "value" of that type of product, because
that value refers to an average cost which is a social norm - what it
normally costs to produce, it's something that usually does not change very
rapidly, and on a very large scale, at least for most products.

The Marxian value can explain why prices normally do not vary in
unpredictably random patterns. If price is simply an expression of
subjective preference scale, there is no reason why a packet of butter at
the shop shouldn't cost a consumer e.g. $100 tomorrow and 5 cents the next
day and $10 the next day and $5000 the next day and so on, just because
individual preference scales, tastes and animal spirits differed from moment
to moment. Economists solve this problem only by pretending that everyone
thinks like an economist, but there is no good reason why that should be so.
Marxists, Ricardians and Institutionalist economists know better.

A more accurate expression of the substance of the Marxian "value" is: the
quantity of living labour which is, on average, currently socially necessary
to replace a type of product. We have to distinguish here between:

* the labour necessary for the production of a "given amount" of a
commodity - this quantity defines the aggregate value of the output, arising
from the nature of a commodity as a bearer of exchange-value;

* the quantity of labour socially necessary to produce the "appropriate
amount" of the product, i.e. the amount of a product which at the production
price meets the effective demand for it - this quantity defines the
correspondence between the total quantity of the commodity product as
use-values and the effective demand for those use-values.

The former determines the unit value of commodities, hence influences their
production price, and the latter determines the discrepancy between actual
supply and effective demand, hence the discrepancy between market price and
production price. Marx makes it very explicit, that product-values, product
production-prices and product market-prices can all vary independently
within certain broad limits. And precisely that fact is crucial to what Marx
calls the "law of competition" and the quest for surplus-profits which have
rarely if ever been convincingly explicated by the Marxists since most of
them are obsessed with general equilibrium equations rather than with

Value has nothing much directly to do with exchange value though, because
products are constantly being bought and sold above or below their value,
within certain margins of possibility and probability. It also has nothing
much directly to do with use-value or utility, since a type of product
simply "has a certain production cost" which does not change much at all,
whatever the shorter term demand fluctuations may be. The shorter term
demand fluctuations affect only how much surplus value or profit you can
realise from the product, but not the cost structure, which can change only
in the longer term usually.

So this Marxian value has nothing much to do with all sorts of price
fluctuations and sales fluctuations which are constantly occurring; it is
instead a sort of "social norm", a normal and fairly durable average
physical cost of production, whether that is expressed in labour hours, as a
tradio ratio, or in money units. To produce a product, you have a certain
cost structure, and in a developed market it is usually difficult to alter
that cost structure very radically (unless you can suddenly force down
wages, introduce technical innovations, control more of the product chain,
or are able to influence government taxation and subsidization etc.). Hence,
value determines price in the sense of being a "constraint" on price, i.e.
limiting price variations and setting the longer-term direction for price

If a product fails to sell, this does not mean necessarily that there is no
human need for the product, it's just that the purchasing power doesn't
exist to buy it. It doesn't even necessarily mean, that the product has no
exchange value, because it may still be exchanged without using a cash
transaction. Workers may starve to death, although there is plenty food

Value in Marx's sense has a material content and a social form.

The material content is that a product takes a certain normal amount of
living labour effort to produce, that's an objective physical reality, a
physical necessity which exists regardless of how any Marxist academic
happens to philosophize about it.

The social form refers to how the economic valuation of the product is
practically expressed among people, its terms of trade and its consumer

According to Marx, that valuation is not simply arbitrary, willy nilly,
chaotic or random, but rather it conforms to social laws, or lawlike
regularities, which shape up that valuation, so that it usually varies only
within definite "normal" limits. And I think he is correct about that.

The problem of intermediation through multiple resales and subcontracting is
not only that a massive discrepancy can emerge between real production costs
and final market prices, and that supply and demand adjust to each other
much less efficiently, but also, that the intermediation costs may be
proprietary costs only (a sort of rent), and not labour costs.

A theoretical problem arises out of this, because it is no longer clear
whether the real value of the product should refer to the market in which it
is produced, or to the market in which it is finally sold, and in turn this
affects our understanding of so-called "value transfers". It seems like the
product has diferent values at different stages, between initial production
and final consumption.

I am personally a bit skeptical about the theory of value transfers, because
I think in general value is not "transferred" through exchange (a sort of
Rylean category mistake) - it is just either partly or fully realised, or
more than fully realised, or it fails to be realised, in certain magnitudes.
Another aspect is that "different kinds" of production prices can be
calculated at different stages between initial manufacture and final
consumption (see on this my wiki article on prices of production). Whatever
the case, for Marx the "value" of the product remains always the quantity of
living labour required worldwide to make the product, but prices may or may
not express that value with any accuracy.

I am not a rich Marxist academic who can leisurely pontificate about value
all the time, but an ordinary wage worker, and I do not have the luxury of
writing a thousand page treatise on value on the strength of a Harvard
salary, which comprehensively covers every possible problem and variation in
the theory of value. A bunch of people conspired to wreck the best years of
my life, cause me permanent physical damage and to consciously misrepresent
me, and then it takes many years before you can shake the bastards off, draw
your own profile, and get back on track again in terms of what you really
wanted to do yourself, insofar that is still possible. The bourgeois also
scream about "private initiative" but as soon as you really take initiative
and do something of your own, they come down on you like a ton of bricks and
beat the almighty shit out of you, or, at the very least, they get terribly
nervous, protest that you are not conforming to their precious "norms" and
freeze you out. In this sense, bourgeois freedom is "being a dog on a leash"
as they say, and every day there's a fight to get the bastards off your wick
and do what you intended to do anyway without violating the law.

So anyway most probably you will always be jibing, that I am "leaving
certain things out", since one cannot do full justice to such a complex
topic in a few posts. I am not misleading anyone, since I do not pretend to
lead anyone; I just aim to promote independent thinking on these questions.
The difference between me and the Marxists is that I am interested in
answers, not simply emotionally gratifying rhetorics in a sentimentally
cherished academic language. I am interested in content, not
r-r-r-revolutionary rants.

PS - I am on holiday and I don't want to write all the time about value
theory. I don't have a wife but if I did, she would simply pull the plug out
of the PC.


Look out kid
Youre gonna get hit
But losers, cheaters
Six-time users
Hang around the theaters
Girl by the whirlpool
Lookin for a new fool
Don't follow leaders
Watch the parkin' meters

- Bob Dylan, Subterranean Homesick Blues

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Received on Thu Apr 30 18:35:32 2009

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