Marx notes,
“Exchange-value seems at first to be a quantitative relation, the proportion in which use-values are exchanged for one another. In this relation they constitute equal exchangeable magnitudes. Thus one volume of Propertius and eight ounces of snuff may have the same exchange-value, despite the dissimilar use-values of snuff and elegies. Considered as exchange-value, one use-value is worth just as much as another, provided the two are available in the appropriate proportion.” (p 28)
This illustrates the point that exchange-values are not themselves measured in labour-time, but in a quantity of some other use-value, and how this is manifest, itself depends upon these different commodities confronting each other in the appropriate proportions in the market. These two different use-values have nothing in common with each other as use-values. Indeed, if they were identical, as use-values, there would be no basis for exchange. Why would I exchange my 1 ton of iron, for your identical 1 ton of iron? There is only a point in exchanging different use values, but then the question arises, if 1 kilo of iron is equal to/exchanges for 1 metre of linen, what is the basis of this condition of equality?
Bailey argued that there was none, and that the relative values of each commodity, one to another, were determined subjectively, in each and every exchange, on the basis of the subjective preferences of those involved in the exchange. On this basis, exchange-value and market price are the same thing, and this is the foundation of all subsequent theories of subjective value.
Observation itself, however, shows this not to be the case. If commodities somehow just sprang into existence, so that their owners exchanged those in their possession for others they desired, then, of course, they could exchange purely on the basis of a whim, much as occurred when primitive tribes and nomads first exchanged products as gifts at ceremonies, or to dispose of surplus products. But, that is no longer reality even for generalised commodity production, by independent producers, let alone for capitalist production. The commodity producer is governed not by their subjective preferences for this product as against that product, but by the objective reality of how much labour-time is required for the production of commodity A,B,C,D etc.
In reality, this is no different to The Law of Value faced by the direct producer, or Robinson. If, in a year, I can produce 1 ton of potatoes, but only 0.5 tons of carrots, for my own consumption, my preference for carrots over potatoes does not change this objective value relation between the two. If I desire to consume 0.5 tons of carrots, then the opportunity cost of that is the 1 ton of potatoes I must forego. The exchange-value of the 0.5 tons of carrots is 1 ton of potatoes.
Now, if I am a commodity producer, the fact that I can produce 1 ton of potatoes, but only 0.5 tons of carrots is significant, because if commodity producer B can produce 1 ton of carrots, but only 0.5 tons of potatoes, it means that by both of us specialising, we can produce more in total. I do not produce potatoes, because I like potatoes (here, I prefer carrots), but because I have a greater facility to do so. Similarly, B does not produce carrots out of a preference for them, but again because of their advantage in production. Production is not undertaken for consumption, but precisely for exchange/sale, and The Law of Value, again, drives, via competition, producers to engage in production of those commodities in which they have some specific advantage, i.e. where their individual value is lower than the average, and so where they are able to exchange less labour for more labour.
It is this cost of production which ultimately amounts to a quantity of abstract labour-time, which is then the basis of the determination of value, and from it exchange-value, not subjective preferences. The latter can only determine the level of demand at any given market value.
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