McCulloch distinguishes between “real value” and “exchange-value”, but this is not the distinction between value and exchange-value that Marx sets out. Rather, the distinction that McCulloch makes is actually a reflection of the alternative concepts of cost of production referred to previously, or the distinction between the value of a commodity determined by labour-time, as against the quantity of labour a commodity can command. In other words, it comes down to the difference of the value of a commodity, as a commodity, or as capital. Marx quotes Cazenove.
““Mr. McCulloch, in his Principles of Political Economy, divides value into real and exchangeable; the former, he says, (page 225) is dependent on the quantity of labour required for the production of any commodity, and the latter on the quantity of labour, or of any other commodity, for which it will exchange; and these two values are, he says, (page 215), identical, in the ordinary state of things, that is, when the supply of commodities in the market is exactly proportioned to the effectual demand for them. Now, if they be identical, the two quantities of labour which he refers to must be identical also; but, at page 221, he tells us that they are not, for that the one includes profits, while the other excludes them” ( [John Cazenove,] Outlines of Political Economy, London, 1832, p. 25).” (p 169)
And, McCulloch from p 221 of his Principles,
““In point of fact, it” (the commodity) “will always exchange for more” [labour than has been required for its production] “and it is this excess that constitutes profits.”” (p 169)
For McCulloch, the real value is equivalent to the cost of production. Setting aside the constant capital, that is then equal to wages, or the value of labour (power). The exchange-value is always higher than this, he believes, because it includes profit. The exchange-value is what commodities it will exchange for, and these other commodities are sold at prices that are equal to their values. The distinction comes down to the labour-time actually required for the production of a commodity, as opposed to the labour-time that the capitalist actually pays for, to produce the commodity.
“The arguments of Malthus, Bailey, etc., compel him to differentiate between real value and exchangeable or relative value. But he does so, basically, in the way he finds the difference dealt with by Ricardo. Real value means the commodity examined with regard to the labour required for its production; relative value implies the consideration of the proportions of different commodities which can be produced in the same amount of time, which are consequently equivalents, and the value of one of which can therefore be expressed in the quantity of use-value of the other which costs the same amount of labour-time. The relative value of commodities, in this Ricardian sense, is only another expression for their real value and means nothing more than that the commodities exchange with one another in proportion to the labour-time embodied in them, in other words, that the labour-time embodied in both is equal.” (p 169)
The problem with this approach has been encountered before, when, as McCulloch does, labour itself is then considered to be a commodity. If labour is a commodity, and exchanges at its value, in a condition of equilibrium of demand and supply, the worker would be paid an equal value of commodities for the value of the labour they supply, but then there would be no surplus value, and the whole Ricardian system, and capitalism would collapse. It is this fear that haunts McCulloch. His argument comes down to an explanation of the divergence of “real value” from “exchange-value”, on the basis of a disequilibrium between demand and supply. Consequently, commodities can command more labour in exchange than is required for their own reproduction. In other words, it is back to the explanation of the appropriation of profit, and of the falling rate of profit given by Adam Smith, that capital is in short supply relative to labour.
“Ricardo, in dealing with relative value, always speaks only of commodities and does not include labour, since in the exchange of commodities a profit is only realised because in the exchange between commodity and labour unequal quantities of labour are exchanged. By putting the main emphasis right at the beginning of his book on the fact that the determination of the value of a commodity by the labour-time embodied in it differs immensely from the determination of this value by the quantity of labour which it can buy, Ricardo, on the one hand, establishes the difference between the quantity of labour contained in a commodity and the quantity of labour which it commands.” (p 170)
That, however, leaves Ricardo in a position where his theory is inconsistent. By leaving out labour (power) as a commodity whose value is thereby explained on this basis, he opens up a gap that can be exploited by his opponents. Moreover, by establishing this exception for labour, he creates a problem for his followers, because he provides no explanation for this exception. McCulloch resolves the inconsistency by including labour with other commodities in the definition of exchange-value, and, as a result, undermines the whole Ricardian system.
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