Capital III, Chapter 48 - Part 5

For any product to have value, it must be a use value, but it is impossible to equate an amount of use value with an amount of value. This may seem to contradict the concept of the value form, whereby the exchange value of a commodity is expressed as a quantity of some other use value. For example, 1 coat = 10 grams of gold. But, in fact, it is quite the opposite.

The equation above does not measure the value of the coat against the use value of the 10 grams of gold, but measures it against the value represented by 10 gram of gold, as opposed to say 20 grams of gold. The equation is not altered by a change in the use value of gold, but only by a change in the value of coats, or of gold, or both.

If I like carrots much more than potatoes, i.e. the use value or utility of carrots is higher for me than that of potatoes, I will be likely to exchange any potatoes I have for carrots. But, the rate at which I exchange them will have nothing to do with the extent to which I prefer one to the other. It will be determined by the value of carrots relative to potatoes.

All that my relative preference for carrots over potatoes will determine is whether I bother to exchange at all, and the point at which I stop exchanging, i.e. the point at which I stop demanding carrots. That will be the point at which carrots no longer offer me greater use value than potatoes.

If I replace potatoes here with £'s, the same thing applies. The amount of £'s I have to give up to obtain 10 kg. of carrots is not determined by the use value, for me, of carrots, relative to £'s, i.e. the price of carrots is not a consequence of my subjective valuation of carrots, relative to £'s. It is determined by the relative value of carrots compared to £'s, i.e. the amount of labour-time represented by each.

All that my subjective valuation of each determines is how many carrots I will demand. When the use value I obtain from additional carrots ceases, compared with the use value of the £'s, I have to give up, i.e. the use value to be obtained from other commodities I can buy with those £'s, I will stop buying carrots. As Marx puts it in Theories of Surplus Value, supply is determined by value, whereas demand is determined by use value.

Suppose it takes 10 hours to produce a kilo of carrots, and the same to produce 2 kilos of potatoes. Then the exchange value of 1 kg. of carrots is equal to 2 kg. of potatoes. If I produce potatoes, but really like carrots, and so hand over my 2 kilograms of potatoes in exchange for 0.5 kg. of carrots, the producer of carrots will make a surplus. But, the consequence will be that other producers of carrots will want a piece of the action, whereby they can exchange 1 hour of value for 2 hours of value!

The production and supply of carrots will rise, and consequently the price of carrots, measured in potatoes will fall. The Law of Value here will simply have acted to reallocate available social labour-time so that it meets expressed social preferences. More labour-time will be allocated to the production of carrots, relative to potatoes, more carrots are demanded and supplied, in accordance with their relative preference, but the exchange value of potatoes and carrots will be determined by the labour-time required for their respective production.

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