Adam Smith
[1. Smith’s Two Different Definitions of Value; the Determination of Value by the Quantity of Labour Expended Which Is Contained in a Commodity, and Its Determination by the Quantity of Living Labour Which Can Be Bought in Exchange for This Commodity]
Marx describes the way that Adam Smith has two definitions of value. One stems from a labour theory of value, whereby the value of commodities is determined by the labour-time required for their production. The other appears to Smith as being the same thing, but isn't. It is that the value of a commodity is the amount of labour that it commands.
What is the difference between these two concepts of value? Suppose we have two people A and B. We might consider them as say a peasant and a blacksmith. We know that, in history, one of the foundations of the exchange of commodities at their value is that initially, equal amounts of labour-time were expended. So, peasant A might work for two hours on blacksmith B's land, whilst blacksmith B works for this time shoeing A's horse.
“... 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” (p 100-1.))
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” (p 275).)
“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 Primitive Peoples” (p 136-7).)
In other words, what is actually being exchanged are equal amounts of labour-time. If A and B, therefore, exchange commodities this same principle applies. If A exchanges ten metres of linen, which requires ten hours of labour-time to produce, they will require from B a commodity or commodities that similarly requires ten hours of labour-time to produce.
Put another way, if A exchanges ten metres of linen, they expect to be able to command ten hours of labour-time in exchange, whether this labour is in the form of “dead labour”, already embodied in some commodity, or “living labour”, available to undertake some form of production. However, what Smith fails to distinguish here is that two entirely different things are being conflated – firstly labour, which is the essence of value, and labour-power, which is the capacity to perform labour, and is, therefore, a use value, which, as wage labour, is also transformed into a commodity.
Consequently, if A is a capitalist, who owns means of consumption – or the money equivalent of the value of these means of consumption – with a value of ten hours, they can exchange this quantity of value with worker B. Worker B is also in possession of a commodity – labour-power. It too has a value, equal to the labour-time required for its production. That time is the labour-time required to produce all of those commodities needed to reproduce the workers' labour-power.
Let us say that this is equal to the means of consumption in the hands of capitalist A. Capitalist A, therefore, exchanges the means of consumption in their possession, whose value is ten hours, with worker B, who provides their labour-power, whose value is also equal to ten hours. But, its clear that the ten hours of value that capitalist A has exchanged does not thereby command only ten hours of labour.
It commands another commodity – labour-power – which has a value of ten hours. In other words, it commands the product of ten hours of labour. But, this commodity, labour-power, is a use value precisely because of its capacity to create new value. In doing so, the amount of labour it performs is in no way limited to just the labour-time required for its own production. If that were the case, it would be impossible for capital to extract surplus value.
But, more than that. Were it the case, human societies could never have developed. The value of labour-power, whether it is a commodity, sold as wage labour, or whether it is just a use value, as in the case of a producer in a primitive commune, or a direct peasant producer, is determined, as with any other product, by the labour-time required for its production. If that labour-power can only produce an equal amount of new value as is required for its own reproduction then its clear that such a society could never accumulate additional means of production, because it could never produce a surplus product or surplus value that could be accumulated.
Human societies were able to develop precisely because the value of labour-power is less than the value of the product of that labour. The producers in a primitive commune may need to work say six hours a day – hunting, fishing, tending crops – in order to meet their needs for survival, and to produce the next generation. This is the value of their labour-power. But, if this producer performs ten hours of labour per day, the value of the product of this labour is then equal to ten hours. Their labour is then divided into two parts – six hours of necessary labour, which produces an amount of new value required to replace the means of consumption used by the producer, to reproduce their labour-power, and four hours of surplus labour, which creates a surplus product and surplus value, which can thereby be accumulated so as to expand and develop production.
The same thing applies to the direct peasant producer, who performs an amount of necessary labour on their land, which produces an amount of new value sufficient to reproduce the labour-power of the peasant, and then performs a quantity of surplus labour, which is appropriated as rent by the feudal lord.
Finally, the same thing applies to the wage-worker, whose total working time is divided into a portion of paid labour, during which they produce new value, sufficient to reproduce their labour-power, and a portion of unpaid labour, when they produce new value, which is directly appropriated by capital as surplus value.
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