Productivity - Part 1 of 6, Value and Use Value

Value and Use Value

Bourgeois economics defines productivity in terms of an increase in value per unit of factor input, but Marx defines productivity in terms of an increase in use values. The bourgeois definition is meaningless and misleading, but flows from its assumption that all factors of production contribute to value creation, and the owners of those factors receive revenues proportionate to the value created by those factors.

Marx distinguishes between value and use value, whereas the bourgeois theory does not, because the bourgeois version of use value, utility, is seen as the foundation of subjective value, on the basis of the marginal utility derived by the consumer. Any factor of production that increases output, thereby, increases the quantity of use value/utility, marginal product, and, by assuming the market price of this product is given, thereby, derives the marginal revenue product it produces, so that MP x price = MRP. If the price of the factor of production, per unit, is lower than this MRP, a more optimal condition can be achieved by employing more of this factor.

To understand Marx's theory, it is important to understand the difference between use value and value, but also, in this regard, the difference between individual value and market value. Marx sets out that all factors of production are, indeed, contributors to the production of use values – the real basis of wealth – but that it is only labour that produces new value, so that it is only the existing value of other factors that is, preserved by the action of labour, and, thereby, transferred to the value of output.

Marx sets this out in A Contribution To The Critique of Political Economy, in Capital and Theories of Surplus Value, and emphasises the point as against the Lassalleans, in The Critique of The Gotha Programme, saying that Nature is the Father, and Labour the Mother of use value, and so of the real wealth of society.

“Labour is not the source of all wealth. Nature is just as much the source of use values (and it is surely of such that material wealth consists!) as labour, which itself is only the manifestation of a force of nature, human labour power.”

(Critique of the Gotha Programme, Part 1)

So, if Nature, and other factors of production (e.g. capital in the form of machines) are productive of use-values, then clearly some of them are more productive/fertile than others, and this is the basis of Marx's theory of Differential Rent I, in respect of the marginal productivity of land, and Differential Rent II, in respect of the marginal productivity of capital. I will come back to the importance of the rest of this paragraph, later. In this context, it is also necessary to understand the difference between the new value created by current (living labour), and the value of constant capital merely preserved and transferred into the value of the product/commodity by the simultaneous action of that current labour.

The new value created by current labour is a function of time, whereas the value preserved and transferred to the end product is a function of the quantity of use values produced. This is a fundamental difference between Marx's theory – and, indeed, of Classical theory, as epitomised by Ricardo – with neoclassical theory, and its inheritors amongst Austrian, Keynesian and post-Keynesian, bourgeois economics. It is also the fundamental distinction and importance of Marx's definition of productivity as against that of bourgeois economics.

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