The basis of the future criticism of the Smithian/Ricardian/Marxian theories of objective value, by the neoclassical school, is first set out by Samuel Bailey. The door to this criticism by Bailey is provided by Ricardo himself, who talks of value only in terms of relative value, i.e. exchange value. The author of the “Observations” writes,
““[An increased supply of labour is an increased supply of that which is to purchase labour.] If we say, then, with Mr. Ricardo, that labour is at every moment tending to what he calls its natural price, we must only recollect, that the increase made in its supply, in order to tend to that, is itself one cause of the counteracting power, which prevents the tendency from being effectual” (op. cit., pp. 72-73).” (p 111)
The intention here is to show that wages do not rise to the value of labour-power as capital accumulation raises the demand for labour-power, because the rise in wages also calls forth a rise in population, and supply of labour. This is really more a criticism of Smith than Ricardo. Smith equates the value of labour (power) with the value of the product of labour. The difference between the two, under capitalism, he equates to the excess supply of labour to capital, an excess he feels must disappear as capital accumulation proceeds.
If we instead start from the concept of labour-power, and a value of labour-power, as a commodity, then the assumption of that value of labour-power, as the point of departure, i.e. as the equilibrium price, follows for wages, as the market price of labour-power, just as with the market price of any other commodity. Its only on that basis that any sense can be made of fluctuations in market prices around this equilibrium price. However, this is the point of departure for proponents of theories of subjective value like Bailey, or the neoclassical school. For these theorists there is no objectively determinable value of commodities, or equilibrium price around which market prices fluctuate. For these theorists, value is purely subjective, and is identical to whatever the current market price is.
The author of the “Observations” writes,
““… it is not meant to be asserted by him” (Ricardo), “that two particular lots of two different articles, as a hat and a pair of shoes, exchange with one another when those two particular lots were produced by equal quantities of labour. By ‘commodity’, we must here understand ‘description of commodity’, not a particular individual hat, pair of shoes, etc. The whole labour which produces all the hats in England is to be considered, to this purpose, as divided among all the hats. This seems to me not to have been expressed at first, and in the general statements of his doctrine” (op. cit., pp. 53-54).
… for example, Ricardo says that “a portion of the labour of the engineer” who makes the machines (Ricardo, On the Principles of Political Economy, and Taxation, third ed., London, 1821, quoted from the Observations) is contained, for instance, in a pair of stockings. “Yet the ‘total labour’ that produced each single pair of stockings, if it is of a single pair we are speaking, includes the whole labour of the engineer; not a ‘portion’; for one machine makes many pairs, and none of those pairs could have been done without any part of the machine…” (Observations etc., London, 1821, p. 54).” (p 111-112)
The statement that what is being considered in the concept of the exchange-value of the commodity is not some individual commodity unit, such as a particular hat, but that whole class of commodity, i.e. hats in general (at least hats of the same type) is correct, and set out by Marx in Capital I. As far as the last part of the statement is concerned, as Marx says, it is based on a misunderstanding. The machine as a whole takes part in the labour process of making stockings, but only a part of its value is transferred to the commodity, in the form of wear and tear.
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