The Poverty of Philosophy, Chapter 1 – A Scientific Discovery, 1. The Opposition Between Use-Value and Exchange-Value - Part 5 of 7

But, the actual producers of commodities, as opposed to those who merely exchange surplus products, are acutely aware, not only of the question of value, i.e. how much labour is required to produce a given amount of output, which, thereby, is a determinant of supply, but also of the question of demand. If there is no demand for something, because it has no utility, for anyone, then, no matter how cheaply it can be produce, it cannot be sold, and so the labour expended by the producer was wasted. The producer must first determine the cost of production of the commodity, and then consider what demand for it there is at the corresponding market value.

“After having represented abundance as use value and scarcity as exchange value – nothing indeed is easier than to prove that abundance and scarcity are in inverse ratio – M. Proudhon identifies use value with supply and exchange value with demand. To make the antithesis even more clear-cut, he substitutes a new term, putting “estimation value” instead of exchange value. The battle has now shifted its ground, and we have on one side utility (use value, supply), on the other side, estimation (exchange value, demand).” (p 38)

So, now, we have two contradictory forces of supply and demand, as the determinant of prices, but how, exactly, is this contradiction to be resolved by the establishment of a market price? What determines that this price is X rather than Y? For Proudhon, the solution resides, again, within the individual, both as producer and consumer, and in the realm of the mind, rather than the real world. He says,

“In my capacity as a free buyer, I am judge of my needs, judge of the desirability of an object, judge of the price I am willing to pay for it. On the other hand, in your capacity as a free producer, you are master of the means of execution, and in consequence, you have the power to reduce your expenses." (p 38)

So, now, exchange-value is reduced to market price, and market price is reduced to only what the consumer is prepared to pay, or, in terms of neoclassical theory, their subjective valuation of the commodity, or as Proudhon calls it, the estimation value. Having initially omitted demand from the question of determining scarcity and abundance, he now makes demand the sole determinant of value, with the producer left with the problem of somehow reducing their expenses so as to sell it at that price.

“Thus there is no possible way out. There is a struggle between two as it were incommensurable powers, between utility and estimation, between the free buyer and the free producer.” (p 39)

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