Historical Proofs and Origins of Value Theory

The following is largely a summary of information provided by Ernest Mandel in his book, "Marxist Economic Theory".

The emergence of Exchange Value is synonymous with the emergence of trade. In primitive societies trade rarely took place because there was usually little or no social surplus to trade, and these societies were run as co-operative societies like large families where land was owned and farmed collectively so there was no concept of trade within the society. Where trade did take place, it was between different tribes or villages as a result of an unexpected surplus, or crisis requiring certain goods to be obtained from outside the tribe. It was under these circumstances that trade began and was commonly a trade of people as part of ceremonies. For example, the daughter of a tribal elder may be married to someone from another tribe. Even then, this trade had some element of labour content. If a woman from one tribe was married into another the other tribe was considered to owe a woman back to the first tribe. The question then arose as to what the basis of exchange would be.

The idea of labour being the only measure by which commodities could be valued relative to each other goes back to Plato who referred to it in “The Republic”. Plato also identified the dual nature of commodities as having a Use Value and an Exchange Value. There is considerable documented evidence to show that labour time has been used from the beginning of trade as the measure of Exchange Value. References for this documentation are given below. The list is far from a complete one.

1. Ruth Bunzel in Frank Boaz “General Anthropology” p346 says primitive people consider only labour “scarce”.

2. The economy of the Indonesian village community is based on calculation of hours of labour expended. (J.H. Boeke – ‘De Theorie der Indische Economie’ p39.)

3. The same was true of Japan. “the principle of exchange is people and days. Thus if household A has two people at work on household B’s field for two days, household B is expected to provide its equivalent on A’s fields…” (John Embree – “Mura, A Japanese Village” pp100-1.)

4. In Africa Ralph Piddington tells us that a peasant from the Heh tribe who orders a spear from the smith works on the smith’s land while he is making the spear. “An Introduction to Social Anthropology” p275.

5. Kautilya’s ‘Arthashastra’ p147 says that "in Ancient India during the Maurya epoch labour and products of labour governed the rules of economic life.”

6. Amongst the Incas “tribute was to consist of labour, time and skill as a workman, artisan or soldier.” John Collier “The Indians of the Americas pp 61-2.

7. The same was true of Europe in the early Middle Ages. Villagers were expected to work three days on the Lord’s land and three on their own. (See Polyptique of Saint Germain-des-Pres and the descriptio villarum of the Abbey of Lobbes.

8. “Should a Dadaga wish more of these utensils, he would have to work in the field of the Kota iron worker of whom he requested them while they were being forged.” David Mandelbaum “Notes on Fieldwork in India” in Herskovits “Economic Life of Primiitive Peoples” pp 136-7

9. Moreover, since the dawn of petty commodity production about 3000 B.C. all labour has been considered equivalent, regardless of its special character. On the tablets, inscribed in a Semitic language, found at Susa, the wages in the household of a prince are fixed uniformly at 60 qua of barley for the cook, the barber, the engraver of stones, the carpenter, the smith, the cobbler, the cultivator, the shepherd and the donkey man.Clement Huart and Louis Delaporte “L’Iran antique” p83.

10. “He (the medieval artisan) has to produce, in accordance with fixed conditions, cloth which is ‘not personal but official, municipal’; his labour, one might say is expressly objective not subjective.” Georges Espinas “Les Origines du Capitalisme” Vol 1. p40.

11. In a study of the Guatemala Indians of Panajachel Professor Sol Tax tells us that exchanges and equivalences are strictly calculated and a woman who could not read or write was able to state within a penny the exact cost of production of a carpet on which she had worked the whole of one day. Sol Tax “Penny Capitalism” pp 18, 15, 80

12. The corporations of Antiquity and in those of China and Byzantium and in the European and Arab Middle Ages fixed rules, known to all, laid down alike the labour time to be devoted to the making of each object, the length of apprenticeship, its cost and the equivalent normally to be asked for each commodity. Georges Espinas “Les Origines du Capitalisme” pp 118, 140-2.

Although initially all labour was valued equally later with the division of labour and increased specialisation some highly skilled labour was recognised as more highly valuable or compound labour and adjustments of equivalent labour time to be exchanged with it was made in calculation.

I have already mentioned Plato as one of the first to recognise Labour as the measure of Exchange Value, but the fact that calculation of labour time was so embodied in the act of exchange is illustrated by its continued reference by philosophers down the ages. For example, the idea was later taken up by Thomas Aquinas, and Albertus Magnus. Others such as Duns Scotus and Ibn-Khaldun also used it. For example,

“Everything that constitutes acquisition and funds (of goods) and wealth proceeds only from man’s labour… Without labour, these occupations (crafts, agriculture, mining) would yield no profit or advantage.”

Ibn-Khaldum – ‘Prolegemenes’ Vol 1 p311.

With the advantage of a wealth of empirical data demonstrating that labour was the measure of exchange value William Petty gave the theory its more modern basis. It was also expounded by Benjamin Franklin. Franklin wrote extensively and clearly on the subject.

“By labour may the value of silver be measured as well as other things. As, suppose one man is employed to raise corn, while another is digging and refining silver; at the year’s end, or at any other period of time, the complete produce of corn, and that of silver, are the natural price of each other; and if one be twenty bushels, and the other be twenty ounces, then an ounce of that silver is worth the labour of raising a bushel of that corn. (I have pointed out elsewhere that what we are talking about here is not individual acts of labour but the average socially necessary labour AB) Now if by the discovery of some nearer, more easy or more plentiful mines, a man may get forty ounces of silver as easily as formerly he did twenty, and the same labour is still required to raise twenty bushels of corn, then two ounces of silver will be worth no more than the same labour of raising one bushel of corn, and that bushel of corn will be as cheap at two ounces, as it was before at one ceteris paribus. Thus the riches of a country are to be valued by the quantity of labour its inhabitants are able to purchase.”

And

“trade in general being nothing else but the exchange of labour for labour, the value of all things is, as I have said before, most justly measured by labour.”

Ben Franklin, “A Modest Inquiry into the Nature and Necessity of a Paper Currency pp 265 and 267.

Not surprisingly then, Adam Smith also advocated the Labour Theory of Value.

“The real price of everything (Smith however confused value with price on occasion), what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What everything is really worth to the man who has acquired it, and who wants to dispose of it, or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose on other people…. It is natural that what is usually the produce of two days’, or two hours’ labour, should be worth double of what is usually the produce of one day’s or one hour’s labour.”

(Adam Smith – The Wealth of Nations Book 1 Chapter 5)

Indeed all Classical Economists accepted the theory. Marx merely refined it the theory and made it more precise which is why it is wrong to describe it as ‘Marxist’ Theory. There are a number of reasons why serious students of economics should read these original texts carefully. Firstly, they are rarely taught as part of modern economics and if so are glossed over as many modern teachers have a poor understanding of them themselves. Secondly, because of the first point most people uncritically accept modern economic teaching as gospel. Thirdly, we ignore the voices of dead people at our peril, and I for one would prefer to listen to the voices of dead people going back thousands of years (and people who were intellectual giants compared to the minnows of modern economic theory) than the academic scribblings of a few professors with a political agenda.

Finally, another reason is given by two opponents of the theory and particularly of Marx. Joseph Schumpeter wrote in his monumental ‘History of Economic Analysis’ of Marx,

“the totality of his his vision, as a totality, asserts its right in every detail and is precisely the source of intellectual fascination experienced by everyone, friend as well as foe, who makes a study of him’; and elsewhere “at the time when his first volume appeared there was nobody in Germany who could have measured himself against him either in vigour of thought or in theoretical knowledge.”

And from the original Austrian theorist Bohm-Bawerk we read,

“Marx has become the apostle of a wide circle of readers, including many who are not as a rule given to the reading of difficult books."

“Karl Marx and the Close of his System”

Unfortunately, the experience of Stalinism for much of the last century and the effects of Cold War propaganda for fifty years have meant that many people have thrown the intellectual baby out with the bath water, and shun reading these original texts for fear of being seen a communist. Any serious student of economics or of life cannot afford to worry about what others might think of them. They just have to approach their study honestly and with an open mind.