[3. Ricardo’s Confusion about the Question of “Absolute” and “Relative” Value. His Lack of Understanding of the Forms of Value]
Marx describes the way Ricardo's use of the term value is confused. He essentially confuses value and exchange value. In fact, that confusion is carried forward to some Marxists. Lenin, for example, equates value and exchange value. The confusion provides an opening for Samuel Bailey to criticise Ricardo. Bailey is one of the precursors of the neoclassical school. He puts forward an entirely subjective theory of value, whereby value and exchange value are entirely equated, and the exchange value is nothing more than what a particular commodity can obtain in exchange at any moment in time.
The confusion is not helped by the fact that Ricardo also uses the same term 'relative value' to describe different things, and also uses the term 'comparative value' to refer to one of them, as well as sometimes referring just to value.
“First of all Ricardo speaks of “value in exchange” (l.c., p. 1) and, like Adam Smith, defines it as “the power of purchasing other goods” (l.c., p. 1). This is exchange-value as it appears at first. Then, however, he proceeds to the real determination of value:
“It is the comparative quantity of commodities which labour will produce, that determines their present or past relative value” (l.c., p. 9).” (p 170)
So, what Ricardo defines value correctly as,
“...the comparative quantity of commodities which labour will produce” (p 170)
In other words, if it takes 10 hours to produce 100 metres of linen that is the value of the linen. That, of course, does not tell us what its “relative value”, or exchange value, of the linen is. The exchange value of the linen can only be determined in conjunction with knowing the value of some other commodity with which it is to be exchanged. If, for example, 50 litres of beer require 10 hours of labour for their production, then 50 litres of beer will have a value of 10 hours, and that is the same amount of value as 100 metres of linen. In that case the 'relative value'/exchange value of 100 metres of linen is 50 litres of beer.
Ricardo also calls this relative value "comparative value".
“For instance, 1 pound of sugar equals 2 pounds of coffee. Later 1 pound of sugar equals 4 pounds of coffee. The “variation” which we want to know about is: whether the “necessary labour-time” has altered for sugar or for coffee, whether sugar costs twice as much labour-time as before or whether coffee costs half as much labour-time as before and which of these “variations” in the labour-time required for their respective production has called forth this variation in their exchange relation. This “relative or comparative value” of sugar and coffee—the ratio in which they exchange—is thus different from relative value in the first sense. In the first sense, the relative value of sugar is determined by the quantity of sugar which can be produced by a certain amount of labour-time. In the second case, the relative value of sugar [and coffee] expresses the ratio in which they are exchanged for one another and changes in this ratio can be the result of a change in the “relative value” in the first sense, in coffee or in sugar.” (p 170 – 1)
If 50 litres of beer can be produced in 5 hours, the value of beer will have halved. Now, the value of 10 hours is represented by 100 litres of beer. The value of linen remains unchanged at 100 metres equals 10 hours, but the exchange value of linen has changed. Now 100 metres of linen has an exchange value of 100 litres of beer, not because of any change in its own value, but because of the change in the value of beer. If the value of linen also falls so that 100 metres are produced in 5 hours, then although now the value of both linen and beer have halved, their exchange value would have remained constant – 100 metres of linen would still exchange for 50 litres of beer.
“Variations in their comparative value, that is, if the exchange-value of sugar is expressed in coffee, and vice versa, will only appear when the variations in their relative value in the first sense, i.e., the values determined by the quantity of labour, have altered to a different extent, when therefore comparative changes have occurred.” (p 171)
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