The individual value of the product is determined by the Law of Value, by the labour-time required for its production.
“Every product of labour is, in all states of society, a use value; but it is only at a definite historical epoch in a society’s development that such a product becomes a commodity, viz., at the epoch when the labour spent on the production of a useful article becomes expressed as one of the objective qualities of that article, i.e., as its value. It therefore follows that the elementary value form is also the primitive form under which a product of labour appears historically as a commodity, and that the gradual transformation of such products into commodities, proceeds pari passu with the development of the value form.” (Capital I, Chapter 1)
As Marx says, all use values that are the products of human labour have value.
“A use value, or useful article, therefore, has value only because human labour in the abstract has been embodied or materialised in it.” (Capital I, Chapter I)
But, it is only when it is brought into this social relation that this value becomes manifest, “expressed as one of the objective qualities of that article”, that it assumes the value form, in the shape of an equivalent, whose ultimate form is money.
The amount of value depends on the quantity of labour-time expended, and that is true whether it is expended by a primitive commune, a peasant family, or a commodity producer. Marx sets out the way, in fact, it is first products that are produced, not commodities, and these products become exchanged, at first, only at the periphery, as different tribes come into contact with each other. The process by which, products become commodities, and value becomes expressed as exchange value, is a long one.
Engels describes it.
“We all know that at the beginning of society, products are consumed by the producers themselves, and that these producers are spontaneously organized in more or less communistic communities; that the exchange of the surplus of these products with strangers, which ushers in the conversion of products into commodities, is of a later date; that it takes place at first only between individual communities of different tribes, but later also prevails within the community, and contributes considerably to the latter's dissolution into bigger or smaller family groups. But even after this dissolution, the exchanging family heads remain working peasants, who produce almost all they require with the aid of their families on their own farmsteads, and get only a slight portion of the required necessities from the outside in exchange for surplus products of their own. The family is engaged not only in agriculture and livestock-raising; it also works their products up into finished articles of consumption; now and then it even does its own milling with the hand-mill; it bakes bread, spins, dyes, weaves flax and wool, tans leather, builds and repairs wooden buildings, makes tools and utensils, and not infrequently does joinery and blacksmithing; so that the family, or family group, is in the main self-sufficient.” (Capital III, Law of Value Supplement)
But, after this period, and when commodity production and exchange becomes widespread, it is then that the situation described above of the development of petty commodity producers arises, and it is during this period that commodities exchange at their values.
“Thus, the Marxian law of value has general economic validity for a period lasting from the beginning of exchange, which transforms products into commodities, down to the 15th century of the present era. But the exchange of commodities dates from a time before all written history — which in Egypt goes back to at least 2500 B.C., and perhaps 5000 B.C., and in Babylon to 4000 B.C., perhaps to 6000 B.C.; thus, the law of value has prevailed during a period of from five to seven thousand years.” (ibid)
I think Engels is using the Law of Value in a restricted sense here, different to that used by Marx. Engels is talking only about the exchange of commodities at their exchange values, which does not occur after the 15th century, he says, because, from that time on, capital becomes involved in production, and commodities begin to exchange at modified prices, as the price of production gradually replaces exchange values. Marx uses it to mean that everything, in all societies, produced by labour, has a value equal to the labour-time required for its production. Each product's value represents the same proportionate share of that society's total product, as the labour-time spent producing it constitutes of the total available social labour-time. Each society allocates the available social labour-time, therefore, so as to maximise the satisfaction of its wants in the form of use values. Every society achieves this by different mechanisms, and so the Law of Value assumes different forms in each society. In a society of commodity production and exchange, it takes the form of exchange value.
As Marx puts it in his Letter To Kugelmann
“And every child knows, too, that the amounts of products corresponding to the differing amounts of needs demand differing and quantitatively determined amounts of society’s aggregate labour. It is self-evident that this necessity of the distribution of social labour in specific proportions is certainly not abolished by the specific form of social production; it can only change its form of manifestation. Natural laws cannot be abolished at all. The only thing that can change, under historically differing conditions, is the form in which those laws assert themselves. And the form in which this proportional distribution of labour asserts itself in a state of society in which the interconnection of social labour expresses itself as the private exchange of the individual products of labour, is precisely the exchange value of these products.
Where science comes in is to show how the law of value asserts itself.”
And,
“Apart from the domination of prices and price movement by the law of value, it is quite appropriate to regard the values of commodities as not only theoretically but also historically prius to the prices of production. This applies to conditions in which the labourer owns his means of production, and this is the condition of the land-owning farmer living off his own labour and the craftsman, in the ancient as well as in the modern world. This agrees also with the view we expressed previously that the evolution of products into commodities arises through exchange between different communities, not between the members of the same community. It holds not only for this primitive condition, but also for subsequent conditions, based on slavery and serfdom, and for the guild organisation of handicrafts, so long as the means of production involved in each branch of production can be transferred from one sphere to another only with difficulty and therefore the various spheres of production are related to one another, within certain limits, as foreign countries or communist communities.” ( p 177-8)
This is consistent with the description of the Law of Value that Marx gave in Volume I, where he describes not just these kinds of societies, but also the condition of Robinson Crusoe, who measured the time taken to produce his various wants so as to maximise the utility obtained as against the labour expended.
“Whatever the manner in which the prices of various commodities are first mutually fixed or regulated, their movements are always governed by the law of value. If the labour-time required for their production happens to shrink, prices fall; if it increases, prices rise, provided other conditions remain the same.
Apart from the domination of prices and price movement by the law of value, it is quite appropriate to regard the values of commodities as not only theoretically but also historically prius to the prices of production.” (p 177)
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