The individual capitalist does not revolutionise their production, and increase their output of use values, because of some altruistic goal of raising social wealth, in the form of an increased quantity of use values. They do so, because, so long as they can produce more cheaply than their competitors, they can increase their market share, and grab more profit. But, as every capitalist follows suit, in revolutionising their production, the consequence is that, collectively, they produce a much increased volume of use values, which, assuming the value of money remains constant, only represents the previous amount of exchange-value, whilst the exchange-value of each individual unit of use value, necessarily falls.
“From this it obviously follows: that the rate at which commodities exchange for one another as use-values, although it is an expression of their value, their realised value, is not their value itself, since the same proportion of value can be represented by quite different quantities of use-values. Value as an aspect of the commodity is not expressed in its own use-value, or in its existence as use-value. Value manifests itself when commodities are expressed in other use-values, that is, it manifests itself in the rate at which these other use-values are exchanged for them. If one ounce of gold equals a ton of iron, that is, if a small quantity of gold exchanges for a large quantity of iron, is therefore the value of the gold expressed in iron greater than the value of the iron expressed in gold? That commodities exchange for one another in proportion to the labour embodied in them, means that they are equal, alike, insofar as they constitute the same quantity of labour. Consequently it means likewise that every commodity, considered in itself, is something different from its own use-value, from its own existence as use-value.” (p 127)
The exchange-value is merely the form in which the value of a use value is expressed, in a mode of production based on commodity production and exchange. As Marx put it explaining the nature of value as opposed to exchange-value, in his letter to Kugelmann, describing The Law of Value as a natural law, that operates in all modes of production,
" 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.”
Primitive communes may not have used the term "value" to express the labour-time required for the production of the products they consumed, but they certainly understood the way the Law of Value imposed itself upon the way they produced, constrained by their available labour-time, and the specific proportions of it required to produce all of the use values they required. Before Priestley, society had no term for oxygen, explaining the actions caused by oxygen as due to the existence of phlogiston, but, the absence of the term, the lack of scientific understanding of the existence of oxygen did not mean that oxygen did not exist, or impose itself on reality, by its chemical reactions. And, as Marx says, once society goes beyond that stage of its development in which the mode of production is based upon the production and exchange of commodities, value will continue to exist, after exchange-value has ceased. The Law of Value, will likewise continue to operate, and the concept of value itself, becomes even more important.
"...after the abolition of the capitalist mode of production, but still retaining social production, the determination of value continues to prevail in the sense that the regulation of labour-time and the distribution of social labour among the various production groups, ultimately the book-keeping encompassing all this, become more essential than ever."
(Capital III, Chapter 49)
The exchange-value of a commodity is not at all the same as its value, any more than its value is the same as its use value.
“The value of the same commodity can, without changing, be expressed in infinitely different quantities of use-values, always according to whether I express it in the use-value of this or of that commodity. This does not alter the value, although it does alter the way it is expressed.” (p 127)
When the exchange-value of 100 metres of linen is expressed as 10 grams of gold, this does not, in any sense, mean that the use value of 100 metres of linen is equal to the use value of 10 grams of gold, as Bailey, and proponents of theories of subjective value would have us believe.
The modern, marginalist versions of this theory of subjective value, effectively go back to the same conceptions of barter that underlie Say's Law, i.e. of individual commodity owners who fix the exchange-value of the commodity they own – be it labour-power exchanged for wages, or money exchanged for a myriad of other commodities, or these other commodities, for money – with each of these individual potential exchanges being represented by a series of indifference curves. But, the reality is that, despite literally billions of dollars being spent on academic research, no one has yet been able to establish how, scientifically, the utility of one apple equals the utility of 10 grapes! In the last 150 years, bourgeois economic science has moved forward not one inch, in that respect.
However, it's clear, as the marginalists understood, but which Bailey, and the author of the “Observations” did not, that, in order to obtain an exchange relation between A and B, both must be equated to some third term. For the marginalists, the third term is use value, or utility itself. Having initially attempted to derive some absolute measure of utility, or cardinal utility, such as utils, the neoclassical economists fell back on the concept of ordinal utility, or relative utility, whereby the utility of different commodities is merely ranked in order of preference. Further attempts to establish measures of cardinal utility were developed by Neumann-Morgernstern.
Orthodox economics goes to these extreme lengths to identify some measure of utility to use as this third term, in order to avoid the obvious conclusion that the third term is value itself, and as Marx says, "value is labour" (Capital III, Chapter 48), whose measure is time. The extravagant and mathematically beautiful constructs that orthodox economics develops are reminiscent of the lengths that James Mill, and the disciples of Ricardo went to, to try to reconcile all of the contradictions inherent within the Ricardian system, but which, in the process, took them further and further from the real world. So too with modern bourgeois economic science. In the debate between Cambridge, Massachusetts, and Cambridge, England, the US defenders of the orthodox model of partial equilibrium responded to their English critics revelation of the internal inconsistency of the model, by shifting the ground of their defence on to a model of general equilibrium, but the cost of doing so was to abandon all pretext that such a model bore any resemblance to the real world it was intended to explain, and make sense of.
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