The Poverty of Philosophy, Chapter 1 – A Scientific Discovery, 1. The Opposition Between Use-Value and Exchange-Value - Part 4 of 7

In The Grundrisse, and in Theories of Surplus Value, Marx explains why, as set out above, supply is, in fact, a function of value, whereas demand is a function of use-value. As we will now see, Proudhon arrives at the opposite conclusion.

Marx notes Proudhon's statement,

“So that, following up the principle to its ultimate consequences, one would come to the conclusion, the most logical in the world, that the things whose use is indispensable and whose quantity is unlimited should be had for nothing, and those whose utility is nil and whose scarcity is extreme should be of incalculable worth. To cap the difficulty, these extremes are impossible in practice: on the one hand, no human product could ever be unlimited in magnitude; on the other, even the scarcest things must perforce be useful to a certain degree, otherwise they would be quite valueless. Use value and exchange value are thus inexorably bound up with each other, although by their nature they continually tend to be mutually exclusive.” (p 36-7)

This is a precursor to the water-diamond paradox, much beloved by proponents of neoclassical economics. In the latter, its argued that a man in a desert, dying of thirst, would give up a diamond in their possession in exchange for a glass of water, demonstrating that its not total utility that determines value, for individual consumers, but only marginal utility, i.e. the utility of the last unsatisfied unit of demand. But, what this neoclassical example, and Proudhon, fail to take into account, in analysing commodity production and exchange, let alone capitalism, is precisely the requirement for commodities to be produced, before they can be exchanged, and such production has a cost that the producer will seek to at least cover, before engaging in that production. As Marx sets out later, in fact, more significantly, commodities that are sold, must be reproduced, and it is this current reproduction cost that determines their value. I've set this out, elsewhere, in relation to the Water-Diamond paradox.

If we take Proudhon's argument then it can be seen to be clearly false, but from the opposite direction. The most obvious example is air. It has the greatest possible utility, because without it we die in minutes. Contrary to Proudhon's claims that the extremes are impossible, in practice, the supply of air is indeed unlimited, relative to demand, and it is, indeed, free. Similarly, if something has no utility for anyone, it is not a use-value for anyone, there is no demand for it, and so, no matter how scarce it may be, its supply, relative to demand is excessive.

“What caps M. Proudhon’s difficulty? That he has simply forgotten about demand, and that a thing can be scarce or abundant only in so far as it is in demand. The moment he leaves out demand, he identifies exchange value with scarcity and use value with abundance. In reality, in saying that things “whose utility is nil and scarcity extreme are of incalculable worth,” he is simply declaring that exchange value is merely scarcity.” (p 37)

Put another way, he assumes away the problem of demand, and, as will be seen later, this is important for him, because, by this means, he smuggles in the basis of value being the cost of production. As Marx sets out, in The Grundrisse, and in Theories of Surplus Value, Ricardians make the same error.

“Here a great confusion: (1) This identity of supply, so that it is a demand measured by its own amount, is true only to the extent that it is exchange value = to a certain amount of objectified labour. To that extent it is the measure of its own demand -- as far as value is concerned. But, as such a value, it first has to be realized through the exchange for money, and as object of exchange for money it depends (2) on its use value, but as use value it depends on the mass of needs present for it, the demand for it. But as use value it is absolutely not measured by the labour time objectified in it, but rather a measuring rod is applied to it which lies outside its nature as exchange value.”

(The Grundrisse)

And,

“The value supplied (but not yet realised) and the quantity of iron which is realised, do not correspond to each other. No grounds exist therefore for assuming that the possibility of selling a commodity at its value corresponds in any way to the quantity of the commodity I bring to market. For the buyer, my commodity exists, above all, as use-value. He buys it as such. But what he needs is a definite quantity of iron. His need for iron is just as little determined by the quantity produced by me as the value of my iron is commensurate with this quantity.

It is true that the man who buys has in his possession merely the converted form of a commodity—money—i.e., the commodity in the form of exchange-value, and he can act as a buyer only because he or others have earlier acted as sellers of commodities which now exist in the form of money. This, however, is no reason why he should reconvert his money into my commodity or why his need for my commodity should be determined by the quantity of it that I have produced. Insofar as he wants to buy my commodity, he may want either a smaller quantity than I supply, or the entire quantity, but below its value. His demand does not have to correspond to my supply any more than the quantity I supply and the value at which I supply it are identical.”

(Theories of Surplus Value, Chapter 20)

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