Diane Elson's "The Value Theory of Labour" in Plain(er) Language

Thoughts on Elson’s Paper

Diane Elson’s essay “The Value Theory of Labour” (1979) is perhaps one of the best essays on Marx’s value theory I’ve seen, and an important correction to those who dismiss, or defend, Marx as supporting a “labor theory of value.” The term “value theory of labor” was previously used by Raya Dunayevskaya in her essay “The Logic and Scope of Capital, Volumes II and III”.

There are a few points that I would like to have seen expanded on, especially related to the move from gold money to paper money. Some more direct addresses to the critiques of Böhm-Bawerk might have also been nice, although this essay was published alongside another essay by Geoffrey Kay “Why Labour is the Starting Point of Capital” which Elson directs people to more directly, although also notes a few times she disagrees with Kay as well in how he presents abstract labor.

The full collection of essays can be found in “Value: The Representation of Labour in Capitalism”. The essay itself should be understood in the context of debates in the Conference of Socialist Economists (CSE), as Elson spends much of her time correcting often subtle errors in their interpretation of Marx.

Often when I read complicated works, my notes end up being me rereading over certain lines enough until I can explain it back to myself in a way more like my own words. I have done that here with limited success. This is easier for me to go through, but especially as a paper trying to explain Marx’s own argument and jargon, it will often be pulled back in. A full ‘plain language’ explanation would need to pass through this a few times and probably be less focused on responding to other individual economists.

I have also titled these sections largely in ways in line with Elson, but combined some sections where the point needed was brief, and added in other section titles for parts that were relatively long.

I also recommend checking out Mike Gouldhawke’s essay “The Labour-Power Theory of Capital”.

Since this page has become more like my own note-taking process, I will begin here by trying to summarize the major points, coming back to the ‘plain language’ explanation. My more detailed notes/restatement/rewriting will come after this ‘summary’ section.

The Brief Summary of Elson’s Paper

What is Marx’s Theory of Value a Theory Of?

1. The Theory of Value: A Proof of Exploitation?

Elson begins by discussing the object of Marx’s theory of value.

Marx is commonly interpreted in two ways. The first theory claims that Marx’s value theory is meant to act as proof that workers are being exploited in capitalism. The second theory claims Marx’s value theory is meant to work as an explanation of prices in capitalism, as a “labor theory of value” (LTV).

Elson disagrees with both of these positions.

We know the first theory is wrong because Marx recognized pre-capitalist societies, like feudalism, as exploitative while recognizing his value theory as specific to capitalism. The method we use to determine whether exploitation occurs is therefore distinct from the theory of value, which is a theory meant to specifically apply to capitalism. It follows that he is using some other method for determining whether a society is exploiting workers. Specifically, Marx looked at whether some group of society has monopolized the means of production and is therefore able to make others do surplus-labor.

2. The Theory of Value: An Explanation of Prices?

The second theory, the LTV interpretation, is a bit more complex, especially since it is a much more common interpretation of Marx. It is often used as a way to compare Marx to other “value theorists” like Adam Smith, David Ricardo, etc., and turns this into an empirical question over whose theory models prices best.

According to the LTV, the equilibrium price of commodities in the market tends toward the amount of labor needed to make it. If it’s harder to make something, requiring more labor, it is more valuable and has a higher price. If it becomes easier to make, requiring less labor, it is less valuable and becomes cheaper.

Two arguments are given for the LTV. The first is Adam Smith’s “deer and beaver” argument, which basically says that people naturally tend to direct their labor to where it is more rewarded. The second argument is a little more complex, saying that a society in certain conditions will produce some mass of products, part of which will go to the workers and part which is a surplus which becomes profit. The size of this surplus is measured in labor-time, setting the aggregate level of profit for the entire economy which is then distributed across various industries, and therefore sets prices along with it.

Both of these arguments treat labor-time as an independent variable found in production which then determines prices as the dependent variable. It treats production and circulation as distinct processes, even if connected. It also tends to depoliticize Marx’s theory, turning Marx into merely a proto-mathematical economist.

There are also serious empirical issues with any LTV theory making it redundant at best. Elson has no intention of rescuing any “labor theory of value.”

3. An Abstract Labour Theory of Value?

LTV theorists cannot save their theory simply by emphasizing that Marx was using ‘abstract labor.’ While this is an important distinction Marx made, but doesn’t seem to help address the objections to the LTV.

Elson denies that Marx was trying to develop a theory of prices at all. Marx wasn’t looking at prices as ‘values’ and finding the answer in labor-time. He was looking at how labor is represented in capitalism and finding it to be value, as well as considering the political implications that come from this. He had a value theory of labor.

4. Labour as the Object of Marx’s Theory of Value

Marx said he began Capital with an examination of the commodity because it is the “simplest form in which the labour product is represented in contemporary society.” This seems to confirm that labor was his real object. It also helps to address some critiques, like from Böhm-Bawerk, that claim Marx was ‘cheating’ by only considering the price of things made by labor and leaving out how some things have prices without being products of labor, like the price of untouched land.

5. A Possible Misconception: The Social Distribution of Labour

Even if we say Marx was focused on labor, some people might also misread this as Marx focusing on the distribution of labor, as if we were dealing with a pre-given economic structure with a bunch of tasks that need to be done which labor is being spread out through. This interpretation of Marx can be found in a few places, but tends to just reduce back down to an LTV, albeit one that focuses on value more in the process of circulation instead of in production.

6. The Indeterminateness of Human Labour

Marx didn’t hold to this kind of ‘pre-given’ structure view. Instead, he focused on labor as a dynamic and living force, something highly adaptable and full of potential. Any society then, including capitalism, needs some system to ‘fix’ this fluidity, directing labor by particular people toward particular goods to be made in a particular way. The potential is actualized by some process. This is how labor is ‘determined.’

To say labor is being ‘determined’ here is not meant in a ‘deterministic’ way. He isn’t denying a role of individual choice. But whatever choices we make are limited within whatever context we find ourselves in.

Misplaced Concreteness and Marx’s Method of Abstraction

Elson moves on from the object of Marx’s theory to Marx’s method of abstraction.

1. Rationalist Concepts of Determination

Elson contrasts Marx’s method with ‘rationalist’ concepts of determination. These theories have a ‘misplaced concreteness’ where they understand things in terms of relations between independent and dependent variables which are discretely distinct from one another. The labor theory of value is an example of one such way of looking at things.

2. Determination in Marx’s Theory of Value: The Relation Between Labour-Time, Value and Exchange-Value

Marx’s idea of determination is different, where the thing doing the ‘determining’ is also a part of what is being determined. There is both a continuity and a difference between these elements, rather than them being discretely distinct from one another.

Going into Marx’s value theory, we see this in his idea that value is determined by ‘socially necessary labor time’ or by ‘abstract labor.’ Production in any society will take some set amount of time, but it is only in capitalism that Marx thinks this labor-time is being turned into value. Value isn’t the same as abstract labor then, but they aren’t also entirely distinct. Value is rather a particular kind of form that abstract labor is taking. There is both a continuity and a difference. This is especially emphasized by Marx’s chemical and biological metaphors as things crystalize, become embodied, go through a metamorphosis, etc.

Marx sees the relation between value and exchange-value to be similar, despite how different they seem. Marx claims that, without exchange-value, value would have no ‘practical reality.’ If we are going to really attribute value to commodities, then this needs to be connected to some immediately obvious appearance of the commodity, even if this appearance doesn’t immediately inform us about the true nature lying underneath.

Value needs exchange-value as a way to express itself. This is something it will ultimately only be able to do when something (money) is able to act as a universal equivalent, allowing all products of labor to be compared.

We can again contrast this to the labor theory of value. There we were supposed to be able to determine, at least in principle, the value of a commodity completely independently from prices. They were discretely distinct variables. But here they are mixed up together, and cannot be cleanly separated.

3. The Measure of Value: Labour-Time and Money

Marx did not think that the value of a commodity could be measured apart from its price. Even if labor-time is what determines value, we cannot just find the average amount of time it takes to make something and declare that to be its value. Why? Because we only ever observe concrete labor as it is carried on by specific individuals. What matters for value though is social and abstract labor, and these aspects only become obvious in exchange.

Why is Marx saying that both labor-time and price are working as measures of value, especially if he isn’t using this kind of relation of independent and dependent variables? The idea seems to come down to Marx’s notion of immanent and external measures. An internal measure is the feature of something that allows it to be measured in terms of quantity. The external measure is the medium actually used to measure something.

For example, we can use iron to measure the weight of something on a balance scale, but that only works with things that actually have weight. Iron here works as an external measure of weight, but that is only possible thanks to the ‘immanent’ measure of something actually having weight.

Abstract or ‘indifferent’ labor-time works for Marx as the immanent measure of value. Hours of labor can be added or subtracted from one another, allowing for it to be cardinally measured. This can only be done when we consider labor as an expenditure of labor-power in general, as something that takes time and effort. The same could not be said for concrete labor, since we can’t exactly add one hour of weaving to one hour of tailoring.

4. The Analysis of Form Determination: The Method of Historical Materialism

The method Marx is using in all this is ‘historical materialism.’ This is a way of looking at how social forms are determined through a historical process. These forms dissolve, change, and develop into new forms according to their own internal dynamics over time. These forms are both determinate and transient. This, again, contrasts with the rationalist view of determination, which is a much more static relation, and any change represents a sudden discontinuity.

The method of historical materialism begins with a phase of analysis where we look at some historic form as being made up of opposed “potentia.” These aspects co-exist within the form and work as parts of functions in process. This is generally what Marx believes by ‘contradiction.’ The example of elliptical motion, as something simultaneously moving away and toward a body, is a good illustration of this. These counter-posed aspects work as ‘determinants’ for Marx. They act as one-sided abstractions being singled out from a form.

The phase of analysis is followed by a phase of synthesis. After we’ve broken down a form to the potentia which make it up, we build things back up to the appearance we began with, now with a greater understanding of how it works. This builds our understanding of the form we are studying, suggesting new aspects of it that can then be analyzed, repeating the process over again and deepening our understanding each time.

There is perhaps a danger here if, in this process of analyzing the one-sided abstraction, it can begin to look like its own self-developing entity. Marx believed Hegel, who used a very similar technique, fell for this kind of danger. Part of what Elson wants to do in this paper is defend Marx from areas where it seems like he might be guilty of the same mistake, treating value as a self-developing and independent entity.

Marx’s Value Theory of Labour

1. Aspects of Labour: Social and Private, Abstract and Concrete

We move on from Marx’s method to his actual value theory of labor.

We begin by considering the various aspects of labor. Marx divided labor into four aspects, presented in two opposing pairs: abstract labor and concrete labor, and social labor and private labor.

Elson argues that these aspects are common to all labor, rather than being certain types of labor. They are one-sided abstractions of the whole of living labor.

She also argues they are also common to all epochs of history. This is a more controversial view on her part since many Marxists argue that abstract labor only exists within capitalism, presumably because they closely associate it with value. But since Elson thinks value is only one form abstract labor is taking, she has no issue calling it a valid abstraction even in societies where it does not take on this kind of ‘practical truth’ as value.

Elson also holds that, while there is some overlap between these aspects of labor, they are really distinct.

In capitalism, commodities are the product of private labor, which seems to only gain a social form in exchange. But this social aspect of labor was really there in the beginning, albeit in a latent form.

There is some overlap between the idea of private labor and concrete labor. Both focus on the individual and the subjective aspects of their labor. But concrete labor adds to this an idea of a process going on between man and nature, with this private labor being a specific kind of process like tailoring, weaving, spinning, etc. Concrete labor presents labor as diverse and heterogenous.

But the various kinds of labor also share some common characteristics. All labor takes time and effort, irrespective of what kind of labor it is. This is the abstract aspect of labor, considered only as homogenous human labor distinguished from one another only by the quantity of their duration.

This idea of abstract labor also overlaps with social labor, as both are looking at labor in a way detached from specific individuals. This is viewing labor as some fraction of the collective effort humanity is doing. But abstract labor adds on this idea of quantity not seen in social labor.

In capitalism, the abstract aspect of labor is dominant, making the other aspects subject to it. The social aspect of labor is only seen in exchange for money, which we will see is acting as the universal equivalent and the incarnation of abstract labor. The concrete and private aspects of labor also need to be mediated by this abstract aspect, satisfying someone’s individual needs only when their product is transformed through exchange for what they want.

This domination of abstract labor over the other aspects signifies that capitalism is a system of production dominating mankind. The process of production has mastery over mankind instead of the other way around.

Given this, we can also see why it is wrong to think that abstract labor is unique to capitalism. It is gaining a particular kind of ‘practical truth’ and stands out as especially important in capitalism. In capitalism, abstract labor is objectified, and this is reflected in exchange-value. This is why Marx begins his analysis with a study of the commodity, the simplest social form that the product of labor presents itself as within capitalism.

2. The Phase of Analysis: From the Commodity to Value

Having noted how Marx will be thinking about the various aspects of labor, we move on to his actual argument for why we should think all of this is actually the case in capitalism.

Marx begins with the commodity, as we said, as the simplest social form the product of labor presents itself as in capitalism. He analyzes the commodity dialectically, first considering as made up of two opposed aspects: use-value and exchange-value. Since exchange-value is the aspect most relevant to capitalism, it gets special attention. Ultimately he argues that the existence of exchange-value implies the existence of a further idea: value.

Marx’s argument has two parts. First, he argues that, in the act of exchange, commodities are being made equivalent to one another, implying the existence of something common to both, which he calls ‘value.’ Secondly, he argues that this common thing must be the objectification of their abstract labor.

This argument is quite unlike the arguments we saw given for the labor theory of value, like the beaver and deer argument or the surplus product argument. It is not presenting a relation between independent and dependent variables, as labor-time determining prices. Instead it is looking at exchange-value and finding it implies the existence of a deeper social substance.

While Elson thinks argument in Capital is ultimately correct, it can be misleading, resulting in the many misinterpretations of Marx like him holding to the LTV. There are also places where certain arguments he makes, or responses to certain objections, will be incomplete unless we incorporate some of the comments he makes outside of Capital.

The first issue here is that Marx’s argument about how exchange implies that commodities are being equated is something that only works within the context of capitalism, but the way he presents it makes it look like it comes from any act of exchange, even outside this capitalist context.

Not all exchange equates the objects being exchanged. For example, we do not need to explain the exchange of Christmas gifts by appealing to some idea of value. Rather, Marx seems to have in mind the act of exchange where something is being bought and sold. Furthermore, this is also being done within the context of a large number of these kinds of exchanges, where the product of any kind of labor could be exchanged for the product of any other kind of labor, and where these exchange-ratios are being determined by this social process in the market.

Understanding this helps to address objections that claim Marx’s argument is formalist and ahistoric. While Marx uses the example of a simple exchange between only two parties trading corn and iron with one another, he is not considering this as an exchange done in complete isolation, but as one instance of exchange within a broader social process. It is an instance of capitalist commodity exchange.

The reduction of the goods exchanged to equivalence depends on their general exchangeability, through the market, of every commodity with every other commodity. Many different commodities are able to express the same value, and do replace one another in the act of exchange itself. This general exchangeability is established as a social, not an individual, process, and can in fact only be found in capitalism where commodity production is dominant.

Marx’s claim that commodity exchange implies their equivalence is not being derived from the ahistoric and formal concept of exchange itself, but from his observation of the specific capitalist process of exchange where goods are being made socially commensurated. This is visibly expressed by their prices.

Marx does not only argue that commodities are being equated on the market though, but that this equivalence implies the need for a common element shared between them, which Marx is calling ‘value.’

Marx’s argument for this isn’t obviously satisfactory. It seems like we could just pick one commodity as a ‘numeraire’ and express the exchange-values of all other commodities in terms of this single one. This would seem to make commodities commensurable with one another without needing to appeal to any further idea of value. Marx’s argument about the equivalence of triangles implying they have a common element doesn’t rule out this kind of approach, and in a way encourages it since this kind of geometric reasoning is a purely mental process.

The critical flaw with the numeraire approach though is that it doesn’t tell us as what are commodities being equated. It tells us nothing about the actual social process which is making commodities commensurable. What is this process that is allowing a commodity to act as a numeraire in the first place?

This question is often ignored by modern economists, instead focused on whether they can build a mathematical model where a certain set of prices are consistent with some criterion they want achieved. Some earlier economists were a bit better here. But while Marx wants to ultimately answer that this equivalence of value is found in abstract labor, they wanted to say it is found in commodities being objects that yield utility, bringing satisfaction.

Marx does not deny that use-value plays an important part in the process of exchange. But he does deny that this can explain their social equivalence.

Marx seems to have two reasons for this. The first reason is that use-value is important in exchange because of the difference in the use-values between what is being traded, not their equivalence. The second reason is that a purely subjective approach to the exchange process leaves out certain crucial features of it.

If commodities are equated as use-values, then this implies they are wanted for the ‘utility’ or ‘satisfaction’ they bring, treating this as a common essence of all wants to which its particular forms are merely a means to that end. Marx denies that our diverse wants can be reduced to a common want this way though. Our everyday experience seems to support this, as different use-values are needed to satisfy different ends (e.g. bread cannot help someone dying of thirst). The 19th-century theories about how utility could be measured and cardinally added or subtracted from each other has also largely been abandoned.

As for the purely subjective approach leaving out crucial features, we can first note that Marx does not deny that there is a subjective element in exchange. Marx is well aware that commodities do not exchange themselves and that the commodity owners are acting according to their own desires. But while exchange-ratios form out of the actions of all commodity owners, each owner also enters into a market where exchange-ratios appear to already be given. It has been decided ‘behind their backs’ in this social process.

This is what leads Marx to treat value as a kind of substantial equivalence. They are not just being commensurated by their owners, but have some unifying common element embodied within them, designated as this separate category of ‘value.’

Elson believes that Marx is using this idea of ‘substance’ in a way similar to the idea of substances in natural science, like with matter or energy. Energy takes on different form as light, heat, mechanical motion, and so on, but we take these all as forms of the same energy. The same is true for matter, as the same chemical substance in different arrangements will have different properties. This materialist view of substance of how the same thing change forms.

As the rate of exchange is determined ‘behind the backs’ of commodity owners, the transformation of one commodity into another is similar to these natural processes. It has its own law operating over and above the will of individuals acting in the market.

But this is a social process. This substantial equivalence must ultimately be something human. While it may appear as a social relation between objects, we know it is really one between people. When considering what relation these commodities share, it is that they are products of human self-activity. Their value is the human vitality spent on their production, embodied in these commodities. It is abstract labor.

This identity with abstract labor is important, since it cannot be, as Ricardo presented it, labor as such. Labor has this two-fold nature of different aspects. As values, if commodities are only quantitatively different, then we must likewise consider only the homogenous aspect of labor that is only different quantitatively.

3. The Phase of Synthesis: From Value to Price

This brings us out of the phase of analysis into the phase of synthesis. Having divided the commodity up into potentia and seen how we have this substance of value as the objectification of abstract labor, we now build back up to the appearance of commodities that we began with.

We are concerned here mostly with how this process of objectification actually happens. How does abstract labor become objectified? Marx calls this the ‘law of value,’ emphasizing the naturalistic aspect of this process, although we’ve seen enough to know Marx’s who idea of laws and determination isn’t rigid here.

For this to happen, abstract labor needs to become expressed through something other than the commodity itself. This means we need another commodity to step in as the bearer of value, as the “value-form.” This is done when it steps in as the “equivalent form” in an exchange. But to really take on this role as equivalent, it needs to be directly exchangeable with what it is exchanging for, and it needs to become universally exchangeable with all other goods so they can have their values compared.

We find this in practice with gold-money. One commodity has been selected out from others, not just arbitrarily but through a social process, and became directly exchangeable with all other commodities. Even if we don’t use gold-money any more, this is an important step in the development of capitalism as Marx’s theory allows.

This universal equivalent becomes the physical embodiment, the incarnation, of abstract value. All other commodities have their value reflected by it.

As the universal equivalent, abstract labor becomes the dominant aspect of labor. To make the money commodity, private and concrete labor is done for the purpose of making something to reflect abstract value, which is also its social role. It also dominates all other commodities as they become brought into this process of capitalist production, which is primarily a way of producing surplus-value. The self-expansion of the money-form of capital dominates the entire process, including labor itself.

This establishes how value is ultimately connecting to exchange-value. The abstract aspect of labor is reflected by the universal equivalent, giving us a way that value connects to price. And it seems, or at least we so far have no reason to doubt, that this exchange also properly reflects the magnitude of these values.

However, Marx signals that this is not the case, and he covers how these do diverge in Volume 3 of Capital. The ultimate reason is that, while Marx begins by looking at commodities as merely products of labor exchanging with one another, the later analysis of capitalist production shows it as more, about being fundamentally about the production of value and surplus-value.

The systematic deviations from the magnitude of value Marx finds comes from how value is ultimately distributed between capitals. This is what is covered in Volume 3.

We also see prices break away from values in another important way, namely the relative autonomy that money has from circulation. People can sell their commodities while holding off from buying, or they can buy immediately. This disruption of the process means the price of commodities, expressed in money, is deviating from their value as it reflects the changes happening to the money itself.

Ultimately this also helps to set up Marx’s theory of crisis. While the ‘law of value’ pushing things towards equilibrium and equality is important to understand, the tendency to disequilibrium is no less real.

4. The Political Implications of Marx’s Value Analysis

We end with the political implications of Marx’s theory. The most important parts here are what this value theory tells us about what we can do about capitalism. Elson thinks it does at least three things.

Firstly, it lets us analyze capitalist production as a whole, rather than being fragmented into these periods of production and exchange. This makes better sense of our experience of exploitation.

Secondly, it lets us understand the crisis-ridden nature of capitalism, as well as how it recovers, changes, and adapts.

Thirdly and finally, it lets us know how the process of exploitation works, and directs us to the real possibility of ending it.

With this, I have finished the ‘brief’ summary of Elson. From here on are my notes where I try to explain back to myself each step in her argument, as well as finding and exploring the sources she cites.

The Longer Restatement of Elson’s Paper

What is Marx’s Theory of Value a Theory Of?

1. The Theory of Value: A Proof of Exploitation?

Marx's value theory is frequently misinterpreted because people misunderstand what the object of his theory is. This happens in different ways.

Firstly, some people think the point of his value theory is to prove the existence of exploitation. Marx talks a lot about how capitalism exploits people because capitalists are getting the “surplus-value” that workers produce beyond what they are paid in wages. Some therefore think that, if Marx’s value theory were disproved, then he could no longer prove that exploitation exists in capitalism.

This is incorrect and the reason becomes clear when we think about how Marx believed exploitation existed in pre-capitalist systems. It is only in capitalism that the product of the worker’s labor appears as a value, since it is only in capitalism where most workers are focused on mass producing commodities for sale on the market. Slave labor was and is obviously exploitative, even if what the slaves made was directly enjoyed by the slave masters instead of being sold.

Marx thought the existence of exploitation was proved in a different way, namely by looking at who owns and controls the means of production, and therefore determines the length of the working-day, making laborers produce not only what they need to support themselves but also the owners of the means of production.

Capital did not invent surplus labour. Wherever a part of society possess the monopoly of the means of production, the worker, free or unfree, must add to the labour-time necessary for his own maintenance an extra quantity of labour-time in order to produce the means of subsistence for the owner of the means of production. (Marx, Capital, Vol. 1, Ch. 10)

There is at least one advantage of this mistaken view of Marx’s value theory: it retains its political aspect. We will see this is not true of other interpretations. Still, this view is mistaken about what Marx is doing with his value theory, which is quite useful for examining capitalist exploitation and telling us what we can do about it, but is not here to prove whether that exploitation exists.

2. The Theory of Value: An Explanation of Prices?

The second mistake is to view Marx’s value theory as an explanation of prices. According to this interpretation, the market equilibrium price of a commodity is determined by its value, which is determined by the average amount of labor needed to make it. This is a common interpretation of Marx, viewing him as having a “labor theory of value” (LTV). This position can be found in Ronald L. Meek, Maurice Dobb, Paul Sweezy, and Michio Morishima.

This also leads Marx to be compared to other people with similar ideas, like Adam Smith and David Ricardo, and focuses the debate around whether this is an accurate theory of price compared to other competing economic theories. It treats all of these theories as having the same object: explaining prices.

For example, Ronald Meek argued that,

‘there is surely little doubt that he (Marx) wanted his theory of value … to do another and more familiar job as well — the same job which theories of value had always been employed to do in economics, that is, to determine prices.’ (Meek, Smith, Marx and After (1977), p. 124)

When these authors try to distinguish what Marx was doing from other economists, it is by saying that Marx’s theory adds a qualitative element, both explaining prices and explaining the social relations underlying commodities.

For example, Dobb writes this:

‘Marx’s theory of value was something more than a theory of value as generally conceived: it had the function not only of explaining exchange-value or prices in a quantitative sense, but of exhibiting the historico-social basis in the labour process of an exchange — or commodity — society with labour power itself become a commodity.’ (Dobb, Introduction to Marx’s A Contribution to the Critique of Political Economy (1971), p. 11)

In this view, Marx is seen as explaining prices, the process of commodity exchange or circulation, in terms of the more fundamental processes of production.

For example, Sweezy states that:

‘Commodities exchange against each other on the market in certain definite proportions; they also absorb a certain definite quantity (measured in time units) of society’s total available labour force. What is the relation between these two facts? As a first approximation Marx assumes that there is an exact correspondence between exchange ratios and labour-time ratios, or, in other words, that commodities which require an equal time to produce will exchange on a one-to-one basis. This is the simplest formula and hence a good starting point. Deviations which occur in practice can be dealt with in subsequent approximations to reality.’ (Sweezy, The Theory of Capitalist Development (1962), p. 42)

As we can see in this interpretation, Marx’s assumption that commodities exchange at their values, held throughout Volume 1 and 2 of Capital, is treated as him presenting this as a ‘first approximation,’ which is then given up in Volume 3 and we see how values are transformed into prices. The question then becomes a matter of whether Marx adequately solved this ‘transformation problem.’

There are, generally, two major arguments used for the LTV.

The first argument is derived from an example given by Adam Smith where there is an equalization of advantages in a simple ‘deer and beaver’ economy.¹ We are asked to imagine a simple society where only two commodities are exchanged: beaver and deer. If it takes one hour to hunt deer and two hours to hunt beaver, then, it is argued, they will tend to trade for a price of 2 deer for 1 beaver, each representing two hours of labor. If we assumed this was not the case, and you were able to trade one deer for one beaver, meaning that the deer is overvalued and the beaver is undervalued. People would switch from hunting beaver to hunting deer since, after making exchanges on the market, they could get the same amount of stuff with only half the work. As people make this switch, beaver gets more scarce as deer becomes more abundant. As the supply changes, the price changes along with it until price equilibrium as they exchange at a rate of 2 to 1. Thus prices are determined by the amount of labor-time needed to produce these commodities (although Smith also kept other considerations in mind too, like how hard each type of labor is or the amount of skill needed for it).

The second argument gives a more intricate and complex explanation for how labor-time is transformed into prices. According to this model, an economy of a given level of technology and sociological conditions will produce a certain mass of products. This mass of products will contain a certain surplus over and above what actually goes back to the workers, which then becomes profit and other forms of non-wage income (rent, taxes, etc.). This size of this surplus, typically measured in labor-time, sets the aggregate level of profit over the economy, which is then distributed across various industries which will tend toward a certain average rate of profit and will accordingly set the price of all commodities.

This can be seen in Meek:

‘In their basic models, all three economists (i.e. Ricardo, Marx and Sraffa) in effect envisage a set of technological and sociological conditions in which a net product or surplus is produced (over and above the subsistence of the worker, which is usually conceived to be determined by physiological and social conditions.) The magnitude of this net product or surplus is assumed to be given independently of prices, and to limit and determine the aggregate level of the profits (and other non-wage incomes) which are paid out of it. The main thing which the models are designed to show is that under the postulated conditions of production the process of distribution of the surplus will result in the simultaneous formation of a determinate average rate of profit and a determinate set of prices for all commodities.’ (Meek, Smith, Marx and After (1977), p. 160)

Both versions of the LTV treat the labor-time socially necessary to produce these commodities is something entirely distinct and independent from their price. It is focused entirely on the process of production, and sees market circulation as an entirely separate process, even if connected to production. We have a relation here where labor-time acts as an independent-variable determine prices as the dependent variable. In this view we could, at least in theory, calculate what a commodity’s value is entirely independently from their prices, and therefore deduce what the market equilibrium price would be. The world might be so complex that we could never do this in practice, but the possibility exists in principle and helps to establish Marx’s value theory as properly scientific.

Interpretations of Marx as having yet another labor-theory of value tends to depoliticize his actual value theory, turning him into just another theorist trying to mathematically model prices in capitalism.

An extreme example of this can be seen in Michio Morishima, in which,

‘the classical labour theory of value is rigorously mathematised in a familiar form parallel to Leontief’s inter-sectoral price-cost equations. The hidden assumptions are all revealed and, by the use of the mathematics of the input-output analysis, the comparative statical laws concerning the behaviour of the relative values of commodities (in terms of a standard commodity arbitrarily chosen) are proved. There is a duality between physical outputs and values of commodities, which is similar to the duality between physical outputs and competitive prices. It is seen that the labour theory of value may be compatible with the utility theory of consumers demand or any of its improved variations.’

[…]

‘(values) are determined only by technological coefficients … they are independent of the market, the class-structure of society, taxes and so on.’

(Morishima, Marx’s Economics (1973), p. 5 and 15

Thus all the politics is removed from Marx’s value theory to make him a respectable proto-mathematical economist.

Some Marxists have tried to push back against this tendency, but because they accept the same premises as the Sweezy-Meek-Dobb tradition, they have decided that to retain the politics of Marx they need reject value itself!

For example, we find in Ian Steedman that,

‘the project of providing a materialist account of capitalist societies is dependent on Marx’s value magnitude analysis only in the negative sense that continued adherence to the latter is a major fetter on the development of the former.’ (Steedman, Marx after Sraffa (1977), p. 207)

Similar ideas can be found in Geoffrey Hodgson. Both of these figures instead struggle with the first misinterpretation, focusing on a proof of exploitation which could be understood perfectly well in terms of appropriating a surplus-product without involving ‘value’ whatsoever.

Steedman is so critical of value here because the socially-necessary labor-time embodied in commodities has been found to be at best redundant to, and at worst incapable of, explaining equilibrium prices. Attempts to preserve a traditional Anglo-Saxon version of the LTV tend to dissolve into positions even more Ricardian than the Neo-Ricardians.

Elson has no intention of rescuing the traditional “Labor Theory of Value”. Instead, she wants to give an entirely different reading of Marx’s value theory which would make critiques given against it, like from Piero Sraffa, redundant.

Elson believes she is doing something similar to Tony Cutler, Barry Hindess, Athar Hussain, and Paul Q. Hirst, the authors of Marx’s ‘Capital’ and Capitalism Today (1977) hereon referred to as ‘Cutler et al.’ They argue that value is not a ‘general determinant’ of prices and exchange-values, i.e. it is not a a singular ‘origin’ or ‘cause’ of prices and profits. They say this claim puts them outside of both Marxist theory and conventional economic theory.

Elson agrees that value is not a ‘general determinant’ in this sense, but denies that that Marx ever intended his value theory to be treated this way. Rather, Marx’s idea of ‘determination’ is quite different from how the authors of this section think about it.

3. An Abstract Labor Theory of Value?

Elson is not the first person to question whether the labor theory of value exists in Marx, at least in the versions given above.

Some have argued that Marx does hold to the LTV, but has developed his own version distinct from what we might find in Ricardo because of how he developed this idea of ‘abstract labor.’

There is some truth here. Marx certainly does claim he differs from Ricardo because of the attention he gives to the form of labor and because of how he distinguishes abstract labor and concrete labor.

At first sight a commodity presented itself to us as a complex of two things – use value and exchange value. Later on, we saw also that labour, too, possesses the same two-fold nature; for, so far as it finds expression in value, it does not possess the same characteristics that belong to it as a creator of use values. I was the first to point out and to examine critically this two-fold nature of the labour contained in commodities. (Marx, Capital, Vol. 1, Ch. 1)

This point is taken up by Himmelweit and Mohun in their essay “The Anomalies of Capital” (1978). They base their response to Steedman on,

‘a distinction between Ricardian embodied-labour theory of value and a Marxian theory of value based on the category of abstract labour. While the former is intended immediately to be a theory of price, the latter is only so after several mediations.’ (Himmelweit and Mohun, “The Anomalies of Capital” (1978), p. 94)

They are claiming that Steedman’s critique of the LTV only applies to the version presented by David Ricardo, but which Marx avoids because of how he uses this idea of abstract labor.

This response is not convincing for two reasons.

Firstly, Steedman claims to have treated labor as abstract labor, and was applying his critique to an ‘abstract labor theory of value.’ Himmelweit and Mohun act as if he did not, and do not confront this claim. Perhaps they had a different understanding of abstract labor from Steedman, but they’d need to address that in their critique.

Secondly, this makes their argument circular. They are deriving the concept of abstract labor from the commodity form, but then are trying to use the same concept to explain the commodity form.

Elson affirms that the distinction between abstract and concrete labor really is important as a way to distinguish Marx from Ricardo, but it is not the only way they differ. Even more fundamental than this is their method of analysis.

4. Labor as the Object of Marx’s Value Theory

The object of Marx's theory of value was not exploitation or prices, but labor itself. Marx wasn’t trying to figure out why prices are what they are and finding that the answer is found in labor. Rather, he was trying to figure out why labor takes on the form that it does in capitalism and what the political consequences follow from this.

Political Economy has indeed analysed, however incompletely, value and its magnitude, and has discovered what lies beneath these forms. But it has never once asked the question why labour is represented by the value of its product and labour time by the magnitude of that value. These formulæ, which bear it stamped upon them in unmistakable letters that they belong to a state of society, in which the process of production has the mastery over man, instead of being controlled by him, such formulæ appear to the bourgeois intellect to be as much a self-evident necessity imposed by Nature as productive labour itself. (Marx, Capital, Vol. 1, Ch. 1)

Marx begins Capital by looking at commodities because that is the "simplest social form in which the labour product is represented in contemporary society." (Marx, Marginal Notes on Wagner) Labor, not price, is the object of his theory.

This also helps to explain the flaw of Eugen von Böhm-Bawerk’s critique of Marx (see Karl Marx and the Close of His System). Böhm-Bawerk argued that Marx had ‘rigged’ his explanation of prices, discovering that all commodities share the feature of being products of labor, by deliberately leaving out of consideration things that have prices yet are not products of labor (e.g. the price of untouched land). If Marx is not trying to study prices, but is instead trying to study how labor is represented in capitalism, this exclusion makes much more sense.

5. A Possible Misconception: The Social Distribution of Labor

When Marx analyzes the form labor takes in capitalism, he does not consider this to be merely a question of distribution.

When people do read Marx this way, it is usually as a result of this quote written in a 1868 letter from Marx to Kugelmann:

Every child knows a nation which ceased to work, I will not say for a year, but even for a few weeks, would perish. Every child knows, too, that the masses of products corresponding to the different needs required different and quantitatively determined masses of the total labor of society. That this necessity of the distribution of social labor in definite proportions cannot possibly be done away with by a particular form of social production but can only change the mode of its appearance, is self-evident. No natural laws can be done away with. What can change in historically different circumstances is only the form in which these laws assert themselves. And the form in which this proportional distribution of labor asserts itself, in the state of society where the interconnection of social labor is manifested in the private exchange of the individual products of labor, is precisely the exchange value of these products.

Taken by itself, this passage can lead someone to think Marx is only looking at labor as individuals are distributed and connected within a pre-given structure of tasks that must be completed.

You can find this reading of Marx in very different Marxist tendencies, like with the ‘Hegelian’ I. I. Rubin or the ‘anti-Hegelian’ Louis Althusser. Both gave ultimate causal significance for the distribution of labor to a certain pre-given set of technical and material conditions of production.

This kind of view tends to simply reintroduce the LTV, although in a more subtle and reciprocal way where labor-time and exchange-value mutually determine each other.

For example, we can see this with Rubin:

In a simple commodity economy, the exchange of 10 hours of labor in one branch of production, for example shoemaking, for the product of 8 hours of labor in another branch, for example clothing production, necessarily leads (if the shoemaker and clothesmaker are equally qualified) to different advantages of production in the two branches, and to the transfer of labor from shoemaking to clothing production. (Rubin, Essays on Marx’s Theory of Value, Ch. 11)

This is basically the same argument Sweezy gives, except that Sweezy properly credits this argument back to Adam Smith. Rubin claims to be avoiding Smith’s mistakes because this ‘equalization of advantages’ is being enforced by an objective social process forcing individuals to behave this way.

This argument is wrong. There is no social pressure in simple commodity production for producers (using their own or their family’s labor, and not hired labor) to compare the different rewards an hour’s labor gets in different branches of production. It is only in capitalist production that the capitalists are forced by market competition to account for all labor-time spent in production. And when capitalists do this kind of accounting, they do it in terms of money, not hours of labor, because it isn’t their own labor-time that they need to account for.

A more significant break here with Sweezy is that Rubin does not present value as a category of the production process, whereas Sweezy does. Because of this, Rubin tends to obscure the relation between value and exchange-value, while Sweezy (and Meek, Dobb, etc.) tends to obscure the relation between value and labor-time.

For example, Rubin claims that:

[V]alue represents that average level around which market prices fluctuate and with which the prices would coincide if social labor were proportionally distributed among the various branches of production. (Rubin, Essays on Marx’s Theory of Value, Ch. 8)

Thus value is a category of circulation.

By contrast, we see Meek claim that:

‘Marx began by defining the ‘value’ of a commodity as the total quantity of labour which was normally required from first to last to produce it.’ (Meek, Smith, Marx and After (1977), p. 95)

Thus value is a category of production.

Like other supporters of the LTV, Rubin also treats production as a distinct process where we find the ‘independent variables’ determining prices as a dependent variable.

Rubin writes that:

In this way the moving force which transforms the entire system of value originates in the material-technical process of production. The increase of productivity of labor is expressed in a decrease of the quantity of concrete labor which is factually used up in production, on the average. As a result of this (because of the dual character of labor, as concrete and abstract), the quantity of this labor, which is considered "social" or "abstract," i.e., as a share of the total, homogeneous labor of the society, decreases. The increase of productivity of labor changes the quantity of abstract labor necessary for production. It causes a change in the value of the product of labor. A change in the value of products in turn affects the distribution of social labor among the various branches of production. Productivity of labor - abstract labor-value - distribution of social labor: this is the schema of a commodity economy in which value plays the role of regulator, establishing equilibrium in the distribution of social labor among the various branches of the national economy (accompanied by constant deviations and disturbances). The law of value is the law of equilibrium of the commodity economy. (Rubin, Essays on Marx’s Theory of Value, Ch. 8)

Rubin is therefore still in the terrain of the labor theory of value. Like them, the object of his theory is in the process of circulation. The only difference is he has widened this to include the circulation of labor-time as well as the products of labor.

6. The Indeterminateness of Human Labor

If Marx is not focused on the circulation/distribution of labor, filling in slots in the pre-given structure of production, then what is his object?

We could try saying that Marx is determining both the structure of production and how labor is distributed within it. But this is too mechanical a way of thinking.

Marx rejected this kind of ‘pre-given structure’ analysis because labor is, by its nature, a dynamic and living force.

Labour is the living, form-giving fire; it is the transitoriness of things, their temporality, as their formation by living time. (Marx, Grundrisse)

Labor is marked by this fluidity and potential. Societies must ‘fix’ or ‘objectify’ this potential so that particular goods are made by particular people in particular ways.

This fluidity of labor, and the need to objectify it, is true of all societies, but becomes most apparent in industrial societies where people can and do frequently change jobs instead of being fixed into them by tradition, family, religion, etc.

As Marx put it:

[W]e see at a glance that, in our capitalist society, a given portion of human labour is, in accordance with the varying demand, at one time supplied in the form of tailoring, at another in the form of weaving. This change may possibly not take place without friction, but take place it must. (Marx, Capital, Vol. 1, Ch. 1)

Because we can see people regularly switch jobs in capitalism, and labor gets redistributed according to rising and falling demand, capitalism makes the inherent fluidity of labor immediately apparent. That this is not immediately apparent in pre-capitalist societies which limited people’s ability to move jobs doesn’t make it any less true.

The fundamental question around labor then for any society is 'how is labor determined?'

By ‘determination’ here, we do not mean to deny the element of individual choice. Rather, we mean that individuals are limited in their choices to the options available to them. They cannot choose anything, as if the world would be built back up from scratch to accommodate them.

This is an idea of determination which is, ironically, non-deterministic. Marx emphasizes that determination is not merely an exercise of our individual will, but it is not independent of our individual wills either.

The social structure and the State are continually evolving out of the life-process of definite individuals, but of individuals, not as they may appear in their own or other people’s imagination, but as they really are; i.e. as they operate, produce materially, and hence as they work under definite material limits, presuppositions and conditions independent of their will. (Marx, The German Ideology)

Thinking about the ‘distribution’ of labor is not a good metaphor since it lends itself to thinking people are being distributed into this pre-given structure, which is not itself being determined.

What we actually need is to understand a process moving from the indeterminate potential to the determined actual. Marx’s Capital is an attempt to provide that, using a method of investigation that is uniquely his own, and which Marx claims has not been used previously by other economists.

[T]he method of analysis which I have employed, and which had not previously been applied to economic subjects, makes the reading of the first chapters rather arduous, and it is to be feared that the French public, always impatient to come to a conclusion, eager to know the connexion between general principles and the immediate questions that have aroused their passions, may be disheartened because they will be unable to move on at once.

That is a disadvantage I am powerless to overcome, unless it be by forewarning and forearming those readers who zealously seek the truth. There is no royal road to science, and only those who do not dread the fatiguing climb of its steep paths have a chance of gaining its luminous summits. (Marx, Capital, Vol. 1, Preface to the French Edition)

This unique method might explain why so many people misread Capital.

In the next section, we will analyze what Marx’s method was and how it is distinguished from those who support the Labor Theory of Value. Instead, Elson presents Marx as having a ‘Value Theory of Labor.’

Elson also wants to emphasize that she is only claiming that Marx developed this method to its fullest in Capital. In some of Marx’s earlier texts, while he was still developing this method, we can find both elements of a ‘labor theory of value’ and a ‘value theory of labor.’

For example, this can be seen in his earlier Critique of Political Economy (1859), published eight years before Capital, where Marx does not make a clear distinction between value and exchange-value.

Instead, we see Marx developing his theory in Theories of Surplus-Value, especially his critique of Samuel Bailey. The focus of Elson’s paper is therefore primarily on Capital, some on Theories of Surplus-Value, and a few passages from the Critique of Political Economy related to money.

Misplaced Concreteness and Marx’s Method of Abstraction

1. Rationalist Concepts of Determination

The interpretations of Marx’s value theory we have looked at so far all share a common error: they involve a ‘misplaced concreteness’ so that the theory can be understood as a relation between independent variables (found in the production process) and dependent variables (found in the circulation process).

It is simply taken for granted that any theory needs separable determining factors that are discretely distinct from what they are determining.

Althusser’s ‘structural causality’ is no exception here. He just puts the independent variables one stage back, behind the ‘structure’ of the global mode of production being determined by things like labor power, direct laborers and masters, objects and instruments of production, etc.

Cutler et al.’s abandonment of Althusser does not break with this view either. They get rid of his self-reproduction ‘structures,’ but keep these elements as the ‘conditions of existence.’ They are just more agnostic about their choice of independent variables.

This view presents determination as an effect of discretely distinct elements or factors on other separate elements or factors, whose general form is given but their position within a certain range is not.

This is a ‘rationalist’ method. It assumes the material world is like symbols of math or logic: separate, self-bound, and related to each other in the same way.

Marx did not use this method. His theory of value is not constructed along rationalist lines.

2. Determination in Marx’s Theory of Value: The Relation Between Labor-Time, Value, and Exchange-Value

Labor-Time and Value

Bertell Ollman has pointed out that Marx’s idea of determination is not a relationship of independent and dependent variables. Instead, the thing doing the determining is also a part of what is being determined.

For example, Marx argued that the ‘superstructures’ of society, like the legal system, are determined by the relations of production. But some elements of that superstructure are also part of the relations of production. Property relations are a system of legal claims, part of the superstructure, but are simultaneously part of the relations of production determining that superstructure.

We see Marx making a similar point in the first chapter of Capital.

Consider the first time Marx discusses something being determined in Capital:

Some people might think that if the value of a commodity is determined by the quantity of labour spent on it, the more idle and unskilful the labourer, the more valuable would his commodity be, because more time would be required in its production. The labour, however, that forms the substance of value, is homogeneous human labour, expenditure of one uniform labour power.

[…]

We see then that that which determines the magnitude of the value of any article is the amount of labour socially necessary, or the labour time socially necessary for its production. (Marx, Capital, Vol. 1, Ch. 1)

If we mix up ‘value’ here with ‘exchange-value’ or ‘price,’ it is easy to read this passage as advocating for a labor theory of value. The commodity’s value/exchange-value is being determined by the amount of labor time socially necessary to make it. But Marx early clearly distinguished value from exchange-value, and made it clear he only as the former in mind here.

So how is Marx saying value is being determined? Is it ‘determined’ in the sense of ‘logically defined?’ Is value just another term for socially necessary labor-time? Obviously not, since socially necessary labor-time isn’t simply the same thing as value, as if they were just interchangeable terms.

Rather, value is a certain way that a certain aspect of labor-time, namely when it is considered simply as an expenditure of human labor-power in general, i.e. abstract labor. This abstract labor is being ‘objectified’ or ‘materialized’ by capitalism.

Value is not just the same thing as abstract labor, but a particular social form that abstract labor is being given within capitalism. This is not labor being physically objectified, like how the concrete labor of carpentry might be objectified by its product of a wooden chair, but how it is being socially objectified, giving the commodity a kind of “unsubstantial reality” or “phantomlike objectivity.”

Let us now consider the residue of each of these products; it consists of the same unsubstantial reality in each, a mere congelation of homogeneous human labour, of labour power expended without regard to the mode of its expenditure. All that these things now tell us is, that human labour power has been expended in their production, that human labour is embodied in them. When looked at as crystals of this social substance, common to them all, they are – Values. (Marx, Capital, Vol. 1, Ch. 1)

Also consider the metaphors Marx is using here. Homogenous human labor is being ‘congealed.’ We are working with ‘crystals’ of this social substance.

This is how Marx thinks about determination. We do not have a relation of independent and dependent variables, where abstract labor and value are two separate things and the former is determining the latter, like we might see in mathematical formulas. Rather, homogenous human labor, i.e. abstract labor, is determining value in a way similar to how the quantity of a chemical substance in its liquid-form will determine the size of its crystal or jellied form.

As Elson puts it:

There is a continuity as well as a difference between what determines and what is determined.

Value and Exchange-Value

So Marx thinks abstract labor is being crystallized into this social form of ‘value.’ What about the relation between value and exchange-value? How does that work?

At first glance, these seem even more like entirely separate variables. Value is a quantity of socially-necessary abstract labor-time. Exchange-value is the quantity of one commodity needed to exchange for some quantity of another commodity.

These seem quite different from one another, so it seems like we could only have a relation here, if any at all, between independent and dependent variables, as is argued by the labor theory of value.

True, Marx does make the following claim:

[E]xchange value, generally, is only the mode of expression, the phenomenal form, of something contained in it, yet distinguishable from it [i.e. value]. (Marx, Capital, Vol. 1, Ch. 1)

This seems to imply we have a relation like before, where there is a continuity and difference between value and its ‘form of appearance’ or ‘phenomenal form’ as exchange-value.

But maybe this only means that exchange-value is approximating value, even as they remain two entirely separate things. That is how Steedman seems to have interpreted Marx, anyway. They seem even more independent from one another when we consider how they are measured in two very different ways, value being measures by labor-time and exchange-value being measured in terms of some other commodity, typically money.

However, it is very hard to maintain this interpretation when we consider the third section of chapter 1, ‘The Value-Form or Exchange Value’. Here Marx suggests that, without exchange-value, then value would be a mere abstraction, lacking any practical reality. Value is therefore not independent from exchange-value, but is manifested through it.

If we say that, as values, commodities are mere congelations of human labour, we reduce them by our analysis, it is true, to the abstraction, value; but we ascribe to this value no form apart from their bodily form. (Marx, Capital, Vol. 1, Ch. 1)

Just like with labor-time and value, there is both a continuity and a difference between value and exchange-value. Value only becomes manifested by exchange-value. If a product of labor counts as a value, then this must be reflected in some immediately apparent attribute.

This is not to say that we need to immediately recognize what this immediately apparent attribute is reflecting though. As Marx clarified,

Value, therefore, does not stalk about with a label describing what it is. It is value, rather, that converts every product into a social hieroglyphic. (Marx, Capital, Vol. 1, Ch. 1)

The simplest form of this reflection is when two commodities stand in a relation of equivalence to each other, the second commodity serving as the material to express the value of the first.

However, this is a very limited expression of value, only dealing with two commodities. To adequately express value, it needs a universal equivalent. It needs a commodity that is directly exchangeable with all other commodities and whose use-value is precisely this interchangeability.

As the process of exchange develops, one commodity is set apart to play this role. As Marx puts it,

Money is a crystal formed of necessity in the course of the exchanges, whereby different products of labour are practically equated to one another and thus by practice converted into commodities. (Marx, Capital, Vol. 1, Ch. 2)

The form of value is therefore found in a commodity’s price. The process which determines a commodity’s price is not independent from the formation of its value.

[T]he money-form is but the reflex, thrown upon one single commodity, of the value relations between all the rest. (Marx, Capital, Vol. 1, Ch. 2)

Just because one commodity is turned into money does not mean that money must always be commodity money (i.e. gold).

Marx argued that,

…money can, in certain functions, be replaced by mere symbols of itself… (Marx, Capital, Vol. 1, Ch. 2)

He also points out that,

The function of gold as coin becomes completely independent of the metallic value of that gold. Therefore things that are relatively without value, such as paper notes, can serve as coins in its place. This purely symbolic character is to a certain extent masked in metal tokens. In paper money it stands out plainly. (Marx, Capital, Vol. 1, Ch. 3)

Instead, what Marx is actually arguing is that money cannot be completely autonomous, as if it were established by mere convention. It must come about as a result of this ‘blind’ social process. Marx argued that not recognizing this was the flaw of Benjamin Franklin’s analysis of money:

He [Franklin] therefore fails to see the intrinsic connection between money and labour which posits exchange-value, but on the contrary regards money as a convenient technical device which has been introduced into the sphere of exchange from outside. (Marx, Critique of Political Economy, Note A)

Value and price are therefore not two completely separate variables. As he says, there is an “intrinsic connection” between them.

This does not mean that value and price are identical, as if they were two terms for the same thing. Marx explicitly critiques Bailey for thinking that “Value equals price” (see Theories of Surplus-Value). There is a continuity and a difference in price, regardless of whether this is expressed in gold or paper.

In summary, Capital does not treat labor-time, value, and exchange-value as three discretely distinct variables, nor are they identical with one another. There is a relation of continuity and a difference between, rather than one of independent and dependent variables.

3. Measures of Value: Labor-Time and Money

Value Cannot Be Measured Apart from Price

We saw that the labor theory of value required us to be able to, at least in principle, measure value directly in terms of labor-time, independently from price. But the above analysis does not imply any such possibility, since they are all interconnected.

This also helps to explain Marx’s own criticism of any labor-money scheme seen in John Gray, which Marx presents as a precursor to Proudhon’s own idea of a People’s Bank. By this plan, the national bank would determine how much labor-time is needed for each commodity. The bank would then purchase these commodities, issuing a certificate stating its value according to this labor-time, which could then be used to purchase any other commodity made with an equal amount of labor-time.

Marx does not deal with this at length in Capital, referring us instead to a lengthier critique he made in his Critique.

Since labour-time is the intrinsic measure of value, why use another extraneous standard as well? Why is exchange-value transformed into price? Why is the value of all commodities computed in terms of an exclusive commodity, which thus becomes the adequate expression of exchange-value, i.e., money? This was the problem which Gray had to solve. But instead of solving it, he assumed that commodities could be directly compared with one another as products of social labour. But they are only comparable as the things they are. Commodities are the direct products of isolated independent individual kinds of labour, and through their alienation in the course of individual exchange they must prove that they are general social labour, in other words, on the basis of commodity production, labour becomes social labour only as a result of the universal alienation of individual kinds of labour. But as Gray presupposes that the labour-time contained in commodities is immediately social labour-time, he presupposes that it is communal labour-time or labour-time of directly associated individuals. (Marx, Critique of Political Economy, Ch. 2 Part 1.B)

The main problem with Gray’s plan is that he assumed the labor-times needed for each commodity were directly comparable. But Marx denies this, arguing the only labor we can directly observe is “isolated independent individual kinds of labor.”

In short, we can only observe the private and concrete aspects of labor, whereas value is concerned with the social and abstract aspects of labor. As Marx argued earlier, these aspects only become evident through exchange.

But the different kinds of individual labour represented in these particular use-values, in fact, become labour in general, and in this way social labour, only by actually being exchanged for one another in quantities which are proportional to the labour-time contained in them. Social labour-time exists in these commodities in a latent state, so to speak, and becomes evident only in the course of their exchange. The point of departure is not the labour of individuals considered as social labour, but on the contrary the particular kinds of labour of private individuals, i.e., labour which proves that it is universal social labour only by the supersession of its original character in the exchange process. Universal social labour is consequently not a ready-made prerequisite but an emerging result. (Marx, Critique of Political Economy, Ch. 1)

If the social-necessity of labor cannot be established independently from their price, then values cannot be directly observed or calculated independently from prices.

Immanent and External Measures

If only prices manifest value, then how can Marx claim that labor-time is acting as a measure of value?

The answer lies in Marx’s distinction between immanent and external measures. This distinction is found elsewhere in Marx, but is barely touched on in Capital, no doubt adding to more confused readings. The distinction is implicit in Marx’s analogy of measuring weight, and is only explicit at the beginning of Marx’s chapter on money:

Money as a measure of value, is the phenomenal form that must of necessity be assumed by that measure of value which is immanent in commodities, labour-time. (Marx, Capital, Vol. 1, Ch. 3)

A more complete elaboration on the distinction between immanent and external measures is found in Marx’s critique of Bailey in Theories of Surplus Value.

An 'immanent' measure is the characteristic that allows something to be measured in terms of pure quantity.

An 'external' measure is the medium in which the measurements of the immanent measure are actually made.

The concept of an immanent measure does not strictly determine what the external measure will be. There is room for convention in what medium is being used, how things are calibrated, etc.

This is not, as Cutler et al. suggest, a distinction between a ‘realist’ theory of measurement to a ‘formalist’ one. Rather, Marx is suggesting that there are realist and formalist aspects of cardinal measurability (i.e. when something can be measured as an absolute quantity that can be added or subtracted from, in contrast to measuring something merely as ‘bigger’ or ‘smaller’ or ranked in a certain order).

Something can only be cardinally measured when it has certain real properties. We can see this in the example of measuring weight.

The external measure of weight is, by convention, iron. We might have chosen another metal, like steel, and we can use different units like ounces, pounds, grams, etc.

But iron can only act as an external measure if both it and whatever is being measured actually have weight. Weight itself is the immanent measure.

The actual act of measuring weight therefore involves bringing two objects into comparison, both of which have weight, and where one of these objects is acting as an external measure and whose weight is presupposed.

Labor-Time as an Immanent Measure

When Marx says that labor-time is the measure of value, he means it is the immanent measure of value. In other words, it is because commodities are objectifications of abstract or ‘indifferent’ labor-time, hours that can be added to and subtracted from one another, that we are capable of cardinally measuring it.

This does not work for commodities as products of concrete labor, since then we would not be dealing with pure time. We would have three hours of tailoring added to five hours of weaving. We could rank these in terms of hours spent on each task, but we cannot directly add them together since they are qualitatively different. We would have to arbitrarily assume that one hour of one task is equal to one hour of any other task.

The argument that labor-time is the immanent measure of value does not imply that labor-time can work as a medium of measurement. In fact, it actively excludes it since we cannot in practice separate the abstract and concrete aspects of labor. The only way we could do that is by arbitrarily assuming away the qualitative differences between different kinds of labor, which Marx refuses to do.

It is surprising that Cutler et al. missed this distinction between immanent and external measures. If they had, they might have realized that it is money, not labor-time, which Marx uses as the standard of measurement throughout Capital.

Marx stresses that labor-time is the measure of value because he wants to emphasize that money is not what makes the products of labor commensurable (i.e. measurable by the same standard). Rather, they are commensurable because they are objectifications of the same abstract aspect of labor.

These confusions are not new. Marx made the same point in a comment about the early French political economist Boisguillebert:

Boisguillebert’s work proves that it is possible to regard labour-time as the measure of the value of commodities, while confusing the labour which is materialised in the exchange-value of commodities and measured in time units with the direct physical activity of individuals. (Marx, Critique of Political Economy, Note A)

It follows from this that the value-magnitude equations Marx introduces in Capital are not referring to directly observable amounts of labor-time. Rather, they are a way of indicating this intrinsic character of the directly observable amounts of money.

Marx generally introduces these equations in a general form, like saying the value of a commodity = (c + v) + s, and then following this with a specific example. These specific examples are always presented in terms of money, and never in terms of hours of labor-time. For example:

When the process of production is finished, we get a commodity whose value = (c + v) + s, where s is the surplus-value; or taking our former figures, the value of this commodity may be (£410 const. + £90 var.) + £90 surpl. The original capital has now changed from C to C', from £500 to £590. The difference is s or a surplus-value of £90. (Marx, Capital, Vol. 1, Ch. 9)

This does not mean Marx is identifying value with price. Rather, he is indicating the inner value-character of these amounts of money. Marx is not simply working at the level of money either because he wants to also uncover certain social relations that do not appear directly in the money-form, like the rate of surplus-value.

We might summarize Marx like this: In a capitalist economy, time is money in more than just a metaphorical sense. Labor-time and money are not distinct variables that need to be brought into correspondence. Rather they have a relation of continuity and difference. Significantly, the metaphors Marx uses to characterize this relation are not mechanical terms like ‘articulation,’ nor are they mathematical or logical like ‘correspondence’ or ‘approximation.’ Marx instead uses chemical and biological terms like crystallization, incarnation, embodiment, metabolism, and metamorphosis. The idea they carry is not of discretely different variables, but of a change of form.

4. The Analysis of Form Determination: The Method of Historical Materialism

The Logic of Historical Materialism

Some might feel that, if Marx is not proposing a strict relation between independent determinant variables and dependent variables, then his theory must be circular. He cannot explain labor, prices, or anything else because he is not completely separate what is determining from what is being determined.

This would be true if Marx were trying to explain the external origins of phenomena. But that is not Marx’s project.

Marx saw the determination of social forms as a historical process. Through this process these forms dissolve, change, and develop into new forms according to their own internal dynamics, having no external ‘cause’ standing outside of history of which they are an effect. The world is, therefore, a qualitatively changing continuum, rather than an assembly line of discretely distinct forms.

Unfortunately, Marx did not provide a methodological preface to Capital that systematically describes this view.

We see some hints to it in the afterward of the second edition of Capital Vol. 1. Marx discusses various reviews of Capital, including an article from the European Messenger in St. Petersburg discussing his method. The writer finds Marx’s method to be “severely realistic,” but doesn’t like his method of presentation. Marx responds by quoting some of this writer’s own words back at him, apparently with his approval:

Of still greater moment to him [Marx] is the law of their [phenomena’s] variation, of their development, i.e., of their transition from one form into another, from one series of connexions into a different one.

[…]

In a word, economic life offers us a phenomenon analogous to the history of evolution in other branches of biology. (Quoted by Marx, Capital, Vol. 1, Afterward to the Second German Edition)

This view about the determination of social forms gets a more systematic exposition from Engels in his book Anti-Duhring, which Marx read in manuscript form and was issued with his knowledge. For example, Engels writes this:

Political economy is therefore essentially a historical science. It deals with material which is historical, that is, constantly changing; it must first investigate the special laws of each individual stage in the evolution of production and exchange, and only when it has completed this investigation will it be able to establish the few quite general laws which hold good for production and exchange in general. (Engels, Anti-Duhring, Part II, Ch. 1)

This view of form determination is not simply pointing out that these forms have not always existed, finding different ‘epochs’ in the past. Rather, it is a method of analyzing them as both determinate yet transient. We are not merely seeing a series of ‘stills’, frozen in a certain shape, until we switch to the next ‘still’. Each moment of being is also a moment of becoming.

The rationalist method we saw before, utilizing independent and dependent variables, may be appropriate for things that do involve static structures, like math and logic, where any qualitative change would represent a sudden discontinuity.

What kind of logic is appropriate for studying the historical process?

We cannot simply list out the previous forms. That would tell us what came before what, but it won’t show us this process of crystalizing and dissolving relations. Further, where could we start this investigation without also presenting this starting point as the ‘origin’ of this system from outside of history?

Marx makes it clear he is asking these same questions early on in his writings:

Do not let us go back to a fictitious primordial condition as the political economist does, when he tries to explain. Such a primordial condition explains nothing; it merely pushes the question away into a grey nebulous distance. The economist assumes in the form of a fact, of an event, what he is supposed to deduce – namely, the necessary relationship between two things – between, for example, division of labor and exchange. Thus the theologian explains the origin of evil by the fall of Man – that is, he assumes as a fact, in historical form, what has to be explained.

We proceed from an actual economic fact. (Marx, Economic and Philosophical Manuscripts of 1844)

The sequential approach also has the problem that it makes is seem like these forms inevitably follow one another. Marx saw this danger too:

It would therefore be infeasible and wrong to let the economic categories follow one another in the same sequence as that in which they were historically decisive. Their sequence is determined, rather, by their relation to one another in modern bourgeois society, which is precisely the opposite of that which seems to be their natural order or which corresponds to historical development. The point is not the historic position of the economic relations in the succession of different forms of society. … Rather, their order within modern bourgeois society. (Marx, Grundrisse)

Instead of going outside the form we are looking to describe, Marx wants us to go inside it, examining its own internal dynamics.

Contradiction and the Phase of Analysis

Beneath its immediate appearance, we treat the historical form we are analyzing as being temporarily made up of opposed “potentia”. These are co-existent possibilities that function, not as building blocks, but as opposed aspects on a continuum of functions in process.

This is generally what Marx means by forms being embodiments of ‘contradiction.’ He illustrates this with the example of elliptical motion, which itself embodies two opposed tendencies, moving both away and toward a body.

We saw in a former chapter that the exchange of commodities implies contradictory and mutually exclusive conditions. The differentiation of commodities into commodities and money does not sweep away these inconsistencies, but develops a modus vivendi, a form in which they can exist side by side. This is generally the way in which real contradictions are reconciled. For instance, it is a contradiction to depict one body as constantly falling towards another, and as, at the same time, constantly flying away from it. The ellipse is a form of motion which, while allowing this contradiction to go on, at the same time reconciles it. (Marx, Capital, Vol. 1, Ch. 3)

Marx usually refers to these counter-posed aspects as his ‘determinants.’ But this does not mean they act autonomously, as if their mere presence is enough to decide things. The same determinants might exist in some systems without having the same effect. For example, Marx claims Robinson Crusoe would have all the determinants of value.

All the relations between Robinson and the objects that form this wealth of his own creation, are here so simple and clear as to be intelligible without exertion, even to Mr. Sedley Taylor. And yet those relations contain all that is essential to the determination of value. (Marx, Capital, Vol. 1, Ch. 1)

By this, Marx clearly did not mean that Crusoe’s labor was actually objectified as value. Rather, he is pointing out that all the things that act as determinants of value in capitalism are present here too.

The point here is that the way Marx’s “determinants” determine things is not like how an independent variable determines a dependent one. Rather, they are aspects, one-sided abstractions, singled out from the form being analyzed.

The Phase of Synthesis

This ‘phase of analysis’ is only the first part of Marx’s investigation. After this is the ‘phase of synthesis’, reconstructing the appearance of the form, but now with a deeper understanding. This suggests new abstractions, allowing us to repeat the process.

This method cannot give us Cartesian ‘absolute’ knowledge, which it would reject as idealist. This method instead takes for granted that the world has a material existence outside our attempt to understand it, and that these attempts can only give us a partial understanding, capturing a particular aspect from a particular vantage point.

The phase of synthesis helps this one-sidedness inherent to the phase of analysis. By following this procedure, we build a more and more complete understanding of the world.

Even so, the world is more than just our understanding of it. Fully appropriating it requires practical action.

The totality as it appears in the head, as a totality of thoughts, is a product of a thinking head, which appropriates the world in the only way it can, a way different from the artistic, religious, practical and mental appropriation of this world. The real subject retains its autonomous existence outside the head just as before… (Marx, Grundrisse)

The major danger to this method is that, as Marx put it, “the movement of the categories appears as a real act of production.” This process can make it seem like the one-sided abstraction we are analyzing is really some self-developing entity, and the historical process is some expression of that entity. This is seen in the “capital-logic” view where capital itself (or self-expanding value) becomes the dominant subject of history.

The categories we use produce our knowledge of the world, but not the world itself. This was Marx’s major critique of Hegel, although we should still be on the lookout if Marx fell for this error himself.

Marx’s Value Theory of Labor

1. Aspects of Labor: Social and Private, Abstract and Concrete

The Four Abstractions of Labor

To analyze capitalism, Marx uses four categories of labor, divided into two opposing pairs:

1. Abstract Labor and Concrete Labor

2. Social Labor and Private Labor

Firstly, we should note that these are not different types of labor, as if only some labor were abstract while others were concrete. Rather, these are aspects of all labor. Labor, as Marx describes it, has a ‘two-fold nature’ or a ‘dual character.’ All of these are mere one-sided abstractions taken from the whole of living labor.

Secondly, these categories are universal to all epochs of history, since they are common to all labor. While they are represented or appear in different ways in different epochs, the categories themselves are inherent to human labor itself.

Elson argues that these belong to the ‘determinations’ Marx talks about in his Grundrisse:

Some determinations belong to all epochs, others only to a few. [Some] determinations will be shared by the most modern epoch and the most ancient. No production will be thinkable without them… (Marx, Grundrisse)

Elson also wants to get ahead of some objections here since this point is likely to be controversial. Many Marxists hold that abstract labor is a category unique to capitalism, where it has ‘practical truth’ as value. To claim that abstract labor is common to all epochs therefore sounds like we are similarly making value and capitalism “eternal.”

To defend her position, Elson points out that Marx distinguishes something having a “formless appearance,” i.e. expressed as scattered and seemingly unconnected symptoms, and something having a “practical truth,” i.e. having a crystallized and distinct form of appearance or representation. Something can be a valid abstraction even if it lacks a practical truth. This, Elson argues, is how Marx treats abstract labor, pointing us again to the Grundrisse:

Here, then, for the first time, the point of departure of modern economics, namely the abstraction of the category ‘labour’, ‘labour as such’, labour pure and simple, becomes true in practice. The simplest abstraction, then, which modern economics places at the head of its discussions, and which expresses an immeasurably ancient relation valid in all forms of society, nevertheless achieves practical truth as an abstraction only as a category of the most modern society. (Marx, Grundrisse)

Likewise, Marx also tells us what he believes makes an abstraction ‘valid’:

Production in general is an abstraction, but a rational abstraction in so far as it really brings out and fixes the common element and thus saves us repetition. (Marx, Grundrisse)

When a valid abstraction takes on a ‘practical truth’ in a certain society, then our mental process correlates to a real social process, giving that common element a distinct form of appearance (although this might be a fetishized and misleading appearance).

Thirdly, and finally, we need to be careful to not confuse these two pairs of abstractions of labor (i.e. abstract vs concrete and social vs private) with one another. Some Marxists equate private labor with concrete labor or equate social labor with abstract labor, as if these were just different names for the same thing. While there is some overlap, these are nevertheless distinct concepts.

What Marx instead argues is that, as practical realities within capitalism, the distinctions between these things are obliterated. The concrete aspect of labor is ‘privatized’ and the social aspect of labor is ‘abstracted.’

Private and Social Labor

There is a tendency for some Marxists to think Marx’s analysis of capitalism begins with ‘concrete’ and ‘private’ labor which becomes embodied within their commodity product. Then, through the act of exchange, the labor embodied here becomes ‘abstract’ and ‘social.’

For example, we find this in Rubin:

Concrete labor is directly connected with the private labor of separate individuals. Private labor of separate commodity producers is connected with the labor of all other commodity producers and becomes social labor only if the product of one producer is equalized as a value with all other commodities. This equalization of all products as values is, at the same time (as we have shown) an equalization of all concrete forms of labor expended in the various spheres of the national economy. This means that the private labor of separate individuals does not acquire the character of social labor in the concrete form in which it was expended in the process of production, but through exchange which represents an abstraction from the concrete properties of individual things and individual forms of labor. (Rubin, Essays on Marx’s Theory of Value, Ch. 8)

Marx certainly made statements that sound similar to this. We can find him saying that commodities are the products of labor for private individuals, that their social labor is an emerging result, and we can find him analyzing labor independently from specific social forms, all of which makes it sound like our private labor isn’t necessarily social.

As a general rule, articles of utility become commodities, only because they are products of the labour of private individuals or groups of individuals who carry on their work independently of each other. (Marx, Capital, Vol. 1, Ch. 1)

Universal social labour is consequently not a ready-made prerequisite but an emerging result. (Marx, Critique of Political Economy, Ch. 1)

We shall, therefore, in the first place, have to consider the labour-process independently of the particular form it assumes under given social conditions. (Marx, Capital, Vol. 1, Ch. 7)

However, these claims are not Marx departing from the idea that our private labor is also social labor. Rather, this indicates how, in capitalism, our labor appears to be detached from one another. So long as there is at least some sense where our labor is done for others, then our private labor is also social.

Individuals producing in society – hence socially determined individual production – is, of course, the point of departure. […] In this society of free competition, the individual appears detached from the natural bonds etc. which in earlier historical periods make him the accessory of a definite and limited human conglomerate. (Marx, Grundrisse)

[F]rom the moment that men in any way work for one another, their labour assumes a social form. (Marx, Capital, Vol. 1, Ch. 1)

In capitalism, workers appear as private individuals, and any social form appears to be merely the result of their private decisions. Exchanges of money appear just as ways of reconciling these individual choices.

Marx contrasts this appearance to pre-capitalist societies where the social forms are more immediately apparent in things like the patriarchal family, feudal rights and duties, etc.

When Marx talks about private individuals in Capital, he is referring to this appearance.

Since the producers do not come into social contact with each other until they exchange their products, the specific social character of each producer’s labour does not show itself except in the act of exchange. (Marx, Capital Vol. 1, Ch. 1)

When Marx says that capitalist production is private, he means that its social character is latent. He does not mean that the labor has no social character whatsoever, only for exchange to then confer this social form onto the labor-product. Rather, exchange is bringing out the social character that already existed in latent form, albeit in a fetishized way as a social relation between the commodities themselves.

[I]t is a characteristic feature of labour which posits exchange-value that it causes the social relations of individuals to appear in the perverted form of a social relation between things. (Marx, Capital Vol. 1, Ch. 1)

Concrete and Abstract Labor

There is some overlap between the concepts of private labor and concrete labor. Like private labor, concrete labor is focused on the individual, subjective aspects of human labor. But it adds on to this the idea of labor being a process between man and nature, taking on different from like tailoring, weaving, spinning, etc. In other words, it is focused on labor as diverse and heterogeneous.

In capitalism, private and concrete labor coincide. The different kinds of labor are undertaken because of individual choice (although perhaps a very constrained choice). This is not the case in pre-capitalist societies where labor more immediately appears as social and where people have little choice about what they do.

Here [in the European middle ages], instead of the independent man, we find everyone dependent, serfs and lords, vassals and suzerains, laymen and clergy. Personal dependence here characterises the social relations of production just as much as it does the other spheres of life organised on the basis of that production. But for the very reason that personal dependence forms the ground-work of society, there is no necessity for labour and its products to assume a fantastic form different from their reality. They take the shape, in the transactions of society, of services in kind and payments in kind. Here the particular and natural form of labour, and not, as in a society based on production of commodities, its general abstract form is the immediate social form of labour. (Marx, Capital Vol. 1, Ch. 1)

Despite its name, concrete labor is still a one-sided abstraction. Instead of looking at living labor as a whole (which is how Marx used ‘concrete’ in the Grundrisse), it is focused specifically on those characteristics which make its product a use-value.

Concrete labor isn’t the ‘given’ reality upon which the other social aspects are being imposed. It is just yet another aspect of this whole living labor process.

We now see, that the difference between labour, considered on the one hand as producing utilities, and on the other hand, as creating value, a difference which we discovered by our analysis of a commodity, resolves itself into a distinction between two aspects of the process of production. (Marx, Capital, Vol. 1, Ch. 7)

Failure to take note of this fact tends to lead either toward technological determinism, as with Rubin, or toward presenting socialism as the impossible task of removing any social mediation between the individual and her work, as found in Lucio Colletti’s From Rousseau to Lenin.

It is generally accepted that concrete labor applies to all epochs of history. The same cannot be said for abstract labor, as we’ve already seen hinted at.

The usual reasoning is that abstract labor is only relevant for commodity production. To argue otherwise, it is claimed, would make Marx’s theory of value ‘eternal’ instead of specific to capitalism.

Elson believes this misreading stems from two sources. They are either misreading Marx’s claim that abstract labor is the substance of value as a definition of abstract labor, or they believe that abstract labor is a type of labor, and must therefore produce something, namely something called ‘value.’

However, as we will see, Marx arrives at the categories of ‘abstract labor’ and ‘value’ separately, rather than deriving one from the other.

Like concrete labor, abstract labor is not a type of labor, but an aspect of labor. This is clearly indicated by Marx’s repeated reference to the “dual character of the labour embodied in commodities.”

Marx first arrives at the idea of abstract labor in a purely negative way, considering what remains of labor once we disregard any particular or useful aspect (i.e. weaving, tailoring, etc.).

If we make abstraction from its use value, we make abstraction at the same time from the material elements and shapes that make the product a use value; we see in it no longer a table, a house, yarn, or any other useful thing. Its existence as a material thing is put out of sight. Neither can it any longer be regarded as the product of the labour of the joiner, the mason, the spinner, or of any other definite kind of productive labour. Along with the useful qualities of the products themselves, we put out of sight both the useful character of the various kinds of labour embodied in them, and the concrete forms of that labour; there is nothing left but what is common to them all; all are reduced to one and the same sort of labour, human labour in the abstract. (Marx, Capital Vol. 1, Ch. 1)

However, from here on Marx gives a more positive description of abstract labor as quantities of homogenous human labor.

Let us now consider the residue of each of these products; it consists of the same unsubstantial reality in each, a mere congelation of homogeneous human labour, of labour power expended without regard to the mode of its expenditure.

[…]

[T]he value of a commodity represents human labour in the abstract, the expenditure of human labour in general. (Marx, Capital Vol. 1, Ch. 1)

In other words, while concrete labor focuses on the diversity of human labor, abstract labor is focused on the unity and similarity of human labor, differentiated only by the quantity of its duration.

It is important to note that this is not assuming that all labor is physiologically identical. Rather, it emphasizes that all work, irrespective of the kind of work, takes time and effort.

Marx emphasizes that this concern about labor time is something of interest to mankind in all situations, although not to the same degree.

For, in the first place, however varied the useful kinds of labour, or productive activities, may be, it is a physiological fact, that they are functions of the human organism, and that each such function, whatever may be its nature or form, is essentially the expenditure of human brain, nerves, muscles, &c. Secondly, with regard to that which forms the ground-work for the quantitative determination of value, namely, the duration of that expenditure, or the quantity of labour, it is quite clear that there is a palpable difference between its quantity and quality. In all states of society, the labour time that it costs to produce the means of subsistence, must necessarily be an object of interest to mankind, though not of equal interest in different stages of development. (Marx, Capital Vol. 1, Ch. 1)

Marx continues on from here to apply this as a concern to the case of Robinson Crusoe (a man completely isolated on an island), European feudalism, and even communal production in socialism. Abstract labor is therefore not unique to capitalism.

Just like how concrete labor overlaps with private labor, we also see abstract labor overlap with social labor. Both look at labor ‘objectively,’ detached from specific individuals. Instead, it looks at labor as part of the collective effort. However, unlike social labor, abstract labor adds this idea of quantity. It is labor not merely as part of the collective effort, but some definite fraction of the total amount.

The Dominance of Abstract Labor

Using the logic of historical materialism, we can see all four aspects of labor as opposed potentia, which cannot exist on their own. Labor always has all four aspects, and they are common to all epochs of society. What changes between these epochs is the relation between these aspects and how they are represented by that society.

In capitalism, abstract labor is dominant. The other aspects of labor (concrete, private, and social) are all made subject to it.

The social aspect of labor is only established through the representation of abstract labor.

Only because the labour-time of the spinner and the labour-time of the weaver represent universal labour-time, and their products are thus universal equivalents, is the social aspect of the labour of the two individuals represented for each of them by the labour of the other, that is to say, the labour of the weaver represents it for the spinner, and the labour of the spinner represents it for the weaver. (Marx, Critique of Political Economy, Ch. 1)

The fact, that in the particular form of production with which we are dealing, viz., the production of commodities, the specific social character of private labour carried on independently, consists in the equality of every kind of that labour, by virtue of its being human labour, which character, therefore, assumes in the product the form of value… (Marx, Capital Vol. 1, Ch. 1)

The concrete and private aspects of labor are mediated by the abstract aspect of labor.

[The labor of the individual producer] can satisfy the manifold wants of the individual producer himself, only in so far as the mutual exchangeability of all kinds of useful private labour is an established social fact, and therefore the private useful labour of each producer ranks on an equality with that of all others. The equalisation of the most different kinds of labour can be the result only of an abstraction from their inequalities, or of reducing them to their common denominator, viz. expenditure of human labour power or human labour in the abstract. (Marx, Capital Vol. 1, Ch. 1)

We can get some interesting insight from Marx’s Results of the Immediate Process of Production, which was originally intended as Part Seven of Volume 1 of Capital, serving as a bridge to Volume 2.

[L]abour itself does not count within the [capitalist] production process as productive activity of a particular useful character, but as the substance that creates value, as social labour in general which is being objectified, and of which the only interesting aspect is its quantity. (Marx, Results of the Immediate Process of Production, 6) The Direct Production Process)

This is not to say the other aspects do not matter at all. Instead it means that private, concrete, and social labor matter insofar as they affect the quantity of human labor being spent in production.

This domination of abstract labor signifies that capitalism is a system where the production process is dominating mankind, rather than the other way around.

Political Economy has indeed analysed, however incompletely, value and its magnitude, and has discovered what lies beneath these forms. But it has never once asked the question why labour is represented by the value of its product and labour time by the magnitude of that value. These formulæ, which bear it stamped upon them in unmistakable letters that they belong to a state of society, in which the process of production has the mastery over man, instead of being controlled by him, such formulæ appear to the bourgeois intellect to be as much a self-evident necessity imposed by Nature as productive labour itself. (Marx, Capital Vol. 1, Ch. 1)

Money and capital are both forms of this domination of abstract labor. Marx’s theory of value is his foundation for this conclusion.

Marx’s argument is therefore not that abstract labor is the product of capitalist social relations. Rather, his argument is that capitalist social relations are characterized by the domination of abstract labor over the other aspects.

In capitalism, abstract labor gains a ‘practical truth’, rather than merely being mentally recognized, because it has a correlate in that social process. That social process is going on regardless of how we think about it. Marx is not arguing that a particular type of labor in capitalism can be recognized as abstract labor. He is arguing that the abstract aspect of labor is being ‘objectified’ or ‘crystalized’ in capitalism.

The objectification of concrete labor is universal to all epochs of history, but the objectification of abstract labor is not. This is specific to capitalism.

The objectification of abstract labor can also take a few forms (e.g. standardization of labor motion patterns, treating labor as an interchangeable part, the mobility of labor, etc.), but the most basic form of this objectification of abstract labor is as a characteristic of the product of labor, reflected in exchange-value. This is why Marx begins Captial by focusing on the commodity.

I do not proceed from “concepts,” hence neither from the “concept of value,” and am therefore in no way concerned to “divide” it. What I proceed from is the simplest social form in which the product of labour presents itself in contemporary society, and this is the “commodity.” (Marx, Marginal Notes on Wagner)

Now we need to consider Marx’s argument where he is trying to establish that the abstract aspect of labor is being objectified, and how this establishes the domination of abstract labor.

2. The Phase of Analysis: From the Commodity to Value

Marx’s argument begins from the commodity toward the existence of value, the substance of which he argues is objectified abstract labor.

Marx analyzes the commodity dialectically, as the co-existence of two opposed aspects: use-value and exchange-value. Then exchange-value, as the aspect specific to capitalism, is given more scrutiny.

The trickiest part of Marx’s argument is the move from exchange-value to value. There are some issues with how Marx presents it, which has inspired criticisms from Eugen von Böhm-Bawerk and from Cutler et al. that Marx’s conclusions cannot be legitimately be drawn.

(For more on a response to Böhm-Bawerk, Elson directs us to another essay: “Why Labour is the Starting Point of Capital” by Geoffrey Kay, published in the same volume as this original essay.)

Marx’s argument has two parts. Firstly there is the argument that, in exchange, commodities are being made equivalent to one another, implying there “exists in equal quantities something common to both.” Secondly, there is the argument that this common element is an objectification of abstract labor.

Importantly, most defenders of the ‘labor theory of value’ interpretation of Marx ignore the structure of Marx’s own argument. Instead, they typically argue from pre-given quantities of labor straight to prices. We saw this earlier with the two typical arguments for the LTV described before. Marx does not make either argument.

Elson believes there is a problem with the way Marx presents his argument, making it seem like he’s reasoning ahistorically from the formal concept of exchange. However, Elson does not believe these are inherent issues of his argument and, especially when we look at arguments Marx gives elsewhere like Theories of Surplus Value, we can replace the problematic parts of his argument with satisfactory ones.

Equivalence and Exchange

Let’s consider the argument Marx gives about exchange:

Let us take two commodities, e.g., corn and iron. The proportions in which they are exchangeable, whatever those proportions may be, can always be represented by an equation in which a given quantity of corn is equated to some quantity of iron: e.g., 1 quarter corn = x cwt. iron. What does this equation tell us? It tells us that in two different things – in 1 quarter of corn and x cwt. of iron, there exists in equal quantities something common to both. The two things must therefore be equal to a third, which in itself is neither the one nor the other. Each of them, so far as it is exchange value, must therefore be reducible to this third. (Marx, Capital Vol. 1, Ch. 1)

Marx’s argument makes it seem like the trade itself is what is equating these goods together, as if corn and iron are equal just because two people happened to want to trade them. The argument makes it seem like Marx is deriving this conclusion from the formal concept of exchange.

Cutler et al. make the following objection: While exchange does require people to agree to the terms of the exchange, it does not require the goods that are exchanged to be equated. Even in capitalism we can see this, as with the exchange of Christmas gifts. What matters there is the specific kinds of goods exchanged, personal obligations, ideas of reciprocity, etc. With these kinds of exchanges, the goods exchanged are not reduced to a common element.

However, these exchanges are not done through acts of buying and selling, which is clearly what Marx has in mind, even if he does not emphasize it here. The exchange of corn and iron here is meant to be just one instance of a large number of background exchanges, as Marx implies in the preceding paragraph.

A given commodity, e.g., a quarter of wheat is exchanged for x blacking, y silk, or z gold, &c. – in short, for other commodities in the most different proportions. Instead of one exchange value, the wheat has, therefore, a great many. (Marx, Capital Vol. 1, Ch. 1)

While Marx doesn’t make it very clear here, is seems fair to say he did not intend to consider this exchange in isolation. Rather it is one instance of a whole process of exchange he is abstracting from. He is therefore not working with exchange per se, but with a particular form of exchange. He is dealing specifically with capitalist commodity exchange, not the formal and ahistorical concept of exchange itself.

This reading is supported if we look at Marx’s critique of Bailey in his Theories of Surplus Value. Marx argues against the idea that a single act of exchange equates commodities. Instead, what matters is their general exchangeability. The market allows any commodity to be replaced with any and every other commodity.

But although the commodity has a thousand different kinds of value, or a thousand different prices, as many kinds of value as there are commodities in existence, all these thousand expressions always express the same value.  The best proof of this is that all these different expressions are equivalents which not only can replace one another in this expression, but do replace one another in exchange itself. (Marx, Theories of Surplus Value)

The same point was made in Critique of Political Economy:

A commodity functions as an exchange-value if it can freely take the place of a definite quantity of any other commodity, irrespective of whether or not it constitutes a use-value for the owner of the other commodity. (Marx, Critique of Political Economy, Ch. 1)

General exchangeability does not simply depend on the owners of the goods themselves for the rates they will exchange. It simultaneously relies on all other exchanges made on the market too. This is a social, not an individual, process.

A single exchange, like that between corn and iron, can only indicate value this way in the context of a large number of interchangeable commodities and exchanges. Marx introduces this presupposition in the opening sentence of Capital:

The wealth of those societies in which the capitalist mode of production prevails, presents itself as “an immense accumulation of commodities,” its unit being a single commodity. (Marx, Capital, Vol. 1, Ch. 1)

This general interchangeability of goods only becomes dominant in capitalism, where the worker is separated from the means of production. But in Chapter 1 Marx hasn’t introduced capitalist relations yet, so he does not make this point explicitly.

Elson directs us to the Grundrisse for support, and I believe she has this section in mind:

Production based on exchange value and the community based on the exchange of these exchange values – even though they seem, as we saw in the previous chapter on money, to posit property as the outcome of labour alone, and to posit private property over the product of one’s own labour as condition – and labour as general condition of wealth, all presuppose and produce the separation of labour from its objective conditions. This exchange of equivalents proceeds; it is only the surface layer of a production which rests on the appropriation of alien labour without exchange, but with the semblance of exchange. This system of exchange rests on capital as its foundation… (Marx, Grundrisse)

In summary, Marx’s claim that commodity exchange implies their equivalence is not being deduced from a formal and ahistorical concept of exchange. Rather, it is an observation of capitalist exchange where goods are, in fact, being socially equated, as visibly expressed in their prices.

Marx is not alone in describing exchange in terms of equivalence. In fact, this is a general feature of the work of economists.

Cutler et al. argue that marginal utility theories of commodity exchange do not explain it in terms of equivalence, but this is wrong. It is true that they explain exchange as a difference in total utility, as each commodity owner will find greater utility from what they are trading for compared to what they have. This is their motivation for entering into exchange. However, the quantities they exchange, and therefore the rate of exchange, is described precisely in terms of the equivalence of their marginal utility. (Elson points readers here to Dobb’s Theories of Value and Distribution since Adam Smith (1973), p. 183-4 as well as to Nicholas Georgescu-Roegen’s Analytic Economics (1966), p. 191.)

Where Marx differs from other economists because he argues this implies the need for a separate concept: Value.

Why should this be the case? Why can we not just pick one commodity to act as a “numeraire” or benchmark to express the value of all other commodities against? Is this not exactly what we do with money anyway? If we could do this, then we would need to agree with Bailey that value is just a “scholastic invention,” as Marx discusses in Theories of Surplus Value.

Unfortunately, the argument Marx gives in Capital for this ‘common element’ is similarly inadequate. Marx gives this famous ‘simple geometrical example’:

A simple geometrical illustration will make this clear. In order to calculate and compare the areas of rectilinear figures, we decompose them into triangles. But the area of the triangle itself is expressed by something totally different from its visible figure, namely, by half the product of the base multiplied by the altitude. In the same way the exchange values of commodities must be capable of being expressed in terms of something common to them all, of which thing they represent a greater or less quantity. (Marx, Capital Vol. 1, Ch. 1)

This argument fails to say why we cannot just take the numeraire approach. In fact, it encourages it since it is only calling for us to do a mental process instead of considering a social process.

The people in the market are not trying to establish the general interchangeability of products on purpose. They just want to trade their own product. The exchange ratios that result from this are a consequence of the many cumulative iterations of this competitive process, not something we rationally deduce. Money is established by this unplanned historic process, rather than simply being picked from a rational social convention.

The key flaw of the numeraire approach is that it presupposes that commodities are already equivalent. It does not tell us what the social process is that is allowing them to become the numeraire.

This point is, again, clearer in Marx’s discussion about Bailey in Theories of Surplus Value than it is in Capital. Modern Sraffian or neo-classical economics often sidestep this question. Instead of focusing on the formation of exchange-values as a social process, it is just assumed and they focus instead on consistency.

They are focused on whether certain prices are compatible with another criterion the economists sets, like the reproduction of the structure of production, or whether consumers can get their ‘preferred’ bundle of goods given certain assumptions about how they react to prices. This is all about finding the ‘existence’ of some market equilibrium.

This ‘existence’ is merely having a formal solution to a certain model rather than looking at the real-world process of exchange. Going into the real world is messier. Some neo-classical economists are better on this, as are some modern ones when they are more policy-oriented.

But when asked the question “As what do commodities become exchangeable” they give the same answer as Böhm-Bawerk: they are equivalent as yielders of utility or satisfaction. The exchange process is explained by different commodity owners comparing commodities according to the satisfaction they bring.

Marx rejects this view, but does not set out a clear reason why, possibly because this only became the dominant view of economists after his death.

Even worse, some of Marx’s arguments in the first chapter of Capital can give the impression he denied any role to use-value in exchange. For example, Marx says this:

[T]he exchange of commodities is evidently an act characterised by a total abstraction from use value. (Marx, Capital Vol. 1, Ch. 1)

But Marx’s later argument make it clear he recognizes that use-value has a role in exchange. What he rejects is that the equivalence of commodities can be explained in terms of use-value.

Elson believes there are two aspects of this rejection.

Firstly, Marx is arguing that, in exchange, it is the difference of their use-values, not their equivalence, that is causing the exchange.

So far as regards use-values, it is clear that both parties may gain some advantage. Both part with goods that, as use-values, are of no service to them, and receive others that they can make use of. (Marx, Capital, Vol. 1, Ch. 5)

Secondly, Marx argues that this purely subjective approach to the exchange process leaves out certain crucial features about it.

If we are going to argue that commodities are equated as use-values, then this implies they are only wanted as a means to an end: utility. Utility is turned into a common essence of all want, to which all other particular wants can be reduced.

Other neoclassical economists, including the founders of marginal utility theory, presented their arguments in a manner which veiled the passage from a theory of many wants to that of a unique want to which all others could be reduced. For this is in fact what utility represents; the common essence of all wants, the unique want into which all other wants can be merged. (Georgescu-Roegen, Analytical Economics, p. 195-6)

Marx rejects this idea that all wants can be reduced to a common want.

As use values, commodities are, above all, of different qualities, but as exchange values they are merely different quantities, and consequently do not contain an atom of use value. (Marx, Capital Vol. 1, Ch. 1)

Our everyday experience also supports this irreducibility, since different use-values cannot do the same thing. Bread cannot save someone dying of thirst.

This theory about the reducibility of wants is inherent to most of neo-classical price theory, despite the fact that the 19th-century idea that satisfaction could be measured and added or subtracted has been abandoned. (See Georgescu-Roegen, Analytical Economics, Ch. 3)

Perhaps neo-classical economists could avoid trying to reduce different wants to a common want if they only used a “lexiographic preference ordering of commodities”. In other words, they would just have a list of priorities of different wants, where want A is ranked over want B, similar to how words are ordered in the dictionary. This would make the commodities comparable, but not commensurable.

However, it is hard to see how the process of forming exchange values can be explained this way if we are ruling out comparing commodities in terms of a common satisfaction. What this looks more like is, rather, a theory of how individuals make choices when faced with a given set of prices.

It is sometimes said that, because Marx rejected use-values as the basis of equivalence, that he rejected there being any subjective element acting as a determinant in the exchange process. This is wrong.

It is plain that commodities cannot go to market and make exchanges of their own account. We must, therefore, have recourse to their guardians, who are also their owners. (Marx, Capital, Vol. 1, Ch. 2)

Marx also recognized that the occasion for exchange is the desire that each commodity owner has for the use-value of what they are trading for.

What Marx is instead emphasizing is that, while exchange-values are the result of the action of individual commodity owners, each commodity owner enters into the market with the exchange-ratios already seeming to be given.

The character of having value, when once impressed upon products, obtains fixity only by reason of their acting and re-acting upon each other as quantities of value. These quantities vary continually, independently of the will, foresight and action of the producers. To them, their own social action takes the form of the action of objects, which rule the producers instead of being ruled by them. (Marx, Capital Vol. 1, Ch. 1)

Insofar as commodity owners want to trade their use-value for some other use-value, the process of exchange is made of individual and subjective acts.

But insofar as exchange-values appear as ‘given’ to each commodity owner, this is a general social process which happens ‘behind the backs’ of commodity owners. Marx wants to capture both the subject/individual aspects of exchange and the social/general aspects.

Every owner of a commodity wishes to part with it in exchange only for those commodities whose use-value satisfies some want of his. Looked at in this way, exchange is for him simply a private transaction. On the other hand, he desires to realise the value of his commodity, to convert it into any other suitable commodity of equal value, irrespective of whether his own commodity has or has not any use-value for the owner of the other. From this point of view, exchange is for him a social transaction of a general character. But one and the same set of transactions cannot be simultaneously for all owners of commodities both exclusively private and exclusively social and general. (Marx, Capital, Vol. 1, Ch. 2)

Elson believes this desire from Marx is why some find how he treats the equivalence of commodities to puzzling. He treats it as a substantial equivalence.

The Idea of Substantial Equivalence

For Marx, the equivalence of commodities isn’t just a matter of them having a common element being compared their owners. Rather, he suggests there is a ‘common element’ or ‘substance’ that the commodities embody: Value. The equivalence of commodities is found in the nature of this substance, rather than the subjective comparisons of the commodity owners.

Unfortunately, Marx does not explicitly discuss the idea of commodities having ‘substantial’ equivalence, and the considerations that underlie this are pushed off to Section 4 of Chapter 1, well after the initial argument was made.

This encourages two misconceptions.

Firstly, it leads to the idea that Marx’s method is ‘formalist,’ which this common element simply being a common characteristic we are subjectively using to compare commodities.

Secondly, it leads to the idea that Marx’s method is ‘idealist,’ with the value substance being a reification of the equivalence between commodities.

The first interpretation was the basis of Böhm-Bawerk’s attack on Marx’s argument. It makes Marx look arbitrary in locating abstract labor as the common characteristic of commodities. But Böhm-Bawerk did not grasp the force of Marx’s idea of a substance. This was discussed well by Geoffrey Kay.

The second interpretation is more plausible. ‘Substance’ is a term with a lot of baggage in philosophical history, often designating an absolute entity underlying and producing all particular forms. For example, in Spinoza there is only one substance called “God,” and all material things and thoughts are just different modes of this entity.

This objection is also better because it’s one Marx made himself against Hegel for ‘comprehending Substance as Subject.’

In the speculative way of speaking, this operation is called comprehending Substance as Subject, as an inner process, as an Absolute Person, and this comprehension constitutes the essential character of Hegel's method. (Marx, The Holy Family, Ch. 5)

But perhaps Marx is vulnerable to the same criticism.

Marx certainly claims he is not treating value as “an absolute” or as “an entity”:

Thus he, the wiseacre, transforms value into something absolute, “a property of things”, instead of seeing in it only something relative, the relation of things to social labour, social labour based on private exchange, in which things are defined not as independent entities, but as mere expressions of social production.

But to say that “value” is not an absolute, is not conceived as an entity, is quite different from saying that commodities must impart to their exchange-value a separate expression which is different from and independent of their use-value and of their existence as real products, in other words, that commodity circulation is bound to evolve money. (Marx, Theories of Surplus Value)

But how do we know he really followed through with this? Is Marx using this idea of substance appropriately?

In Elson’s view, Marx presents commodities as substantially equivalent in a way similar to natural sciences, like physics or chemistry.

Light, heat, and mechanical motion are all forms of Energy. In this way, they can be seen as substantially equivalent to one another, being different forms of something which is ‘self-activating’ in the sense that it doesn’t require outside intervention to sustain itself. They all share this common substance.

Likewise, we also have a substantial equivalent when we see different chemical substances as just various forms of the same ‘self-activating’ matter.

Marx, in fact, directly uses this example himself, showing how the same chemical substance of C₄H₈O₂ takes on different forms as butyric acid or as propyl formate. They are both equal in terms of their chemical composition (both are C₄H₈O₂), but are in different arrangements and have different physical properties.

It is only the value of the linen that is expressed. And how? By its reference to the coat as its equivalent, as something that can be exchanged for it. In this relation the coat is the mode of existence of value, is value embodied, for only as such is it the same as the linen. On the other hand, the linen’s own value comes to the front, receives independent expression, for it is only as being value that it is comparable with the coat as a thing of equal value, or exchangeable with the coat. To borrow an illustration from chemistry, butyric acid is a different substance from propyl formate. Yet both are made up of the same chemical substances, carbon (C), hydrogen (H), and oxygen (O), and that, too, in like proportions – namely, C₄H₈O₂. If now we equate butyric acid to propyl formate, then, in the first place, propyl formate would be, in this relation, merely a form of existence of C₄H₈O₂; and in the second place, we should be stating that butyric acid also consists of C₄H₈O₂. Therefore, by thus equating the two substances, expression would be given to their chemical composition, while their different physical forms would be neglected. (Marx, Capital Vol. 1, Ch. 1)

A materialist account of the transformation of energy and matter relies on this idea of a substance, presenting this as a natural history following its own internal dynamics instead of requiring an outside cause to sustain it.

There is a danger that ‘energy’ or ‘matter’ could be reified into absolute entities, but properly understood we see that they are not discretely distinct from their particular forms. Rather, they are concepts of the continuity and difference between these forms. The self-activity of the substance here is not understood in a teleological or goal-directed way.

This is a materialist, not an idealist, notion of substance. For the materialist, a substance is an abstraction with a practical reality insofar as one form of the substance is actually transformed into another form. For the idealist, a substance is an absolute entity realizing its goals.

Crystalized Abstract Labor as the Substance of Value

Insofar as the rates of exchange are being determined ‘behind the backs’ of commodity owners, the transformation of one commodity in another through exchange is similar to a process of natural history. It has its own laws which operate over and above the will of the individuals acting in the market.

This is why Marx suggests that this is a process of substantial equivalence, if we understand ‘substance’ in materialist terms.

But there is an important difference here that, for commodities, their substantial equivalence must be something ‘human.’ While value looks like a relation between objects, it is really a social relation.

In the first part of my book, I mentioned that it is characteristic of labour based on private exchange that the social character of labour “manifests” itself in a perverted form—as the “property” of things; that a social relation appears as a relation between things (between products, values in use, commodities). This appearance is accepted as something real by our fetish-worshipper, and he actually believes that the exchange-value of things is determined by their properties as things, and is altogether a natural property of things. No scientist to date has yet discovered what natural qualities make definite proportions of snuff tobacco and paintings “equivalents” for one another. (Marx, Theories of Surplus Value)

Marx does not treat capitalist exchange as if agency is coming from a non-human source, like an ‘invisible hand’ of the market. He holds that the equivalence of commodities must essentially be a relation between people, not the objects themselves.

The terms Marx used needed to both capture this naturalistic appearance while also capturing its human essensce. Marx therefore presents the substance of value as human self-activity, as human vitality embodied in commodities.

[T]hese means of existence are themselves the products of social activity, the result of expended human energy,² materialized labour. As objectification of social labour, all commodities are crystallisations of the same substance. (Marx, Critique of Political Economy)

This idea of substance was apparently so obvious to Marx that he took it for granted without discussion. Or at least Elson cannot find any discussion from him about what he means by ‘substance’ or any helpful secondary literature on it.

Marx’s underlying consideration in Capital seems to be this:

[The equivalence of commodities] is only a representation in objects, an objective expression, of a relation between men, a social relation, the relationship of men to their reciprocal productive activity. (Marx, Theories of Surplus Value)

However, this is not made explicit until Section 4 of Chapter 1, discussing the fetishism of the commodity. Elson believes that, despite this, it is a consideration in the argument from the start.

Marx seems to have been more concerned with distinguishing himself from Ricardo by emphasizing the particular way labor forms of the substance of value.

The latter reproach arises from Ricardo’s inadequate presentation, because he does not even examine the form of value—the particular form which labour assumes as the substance of value. He only examines the magnitudes of value, the quantities of this abstract, general and, in this form social, labour which engender differences in the magnitudes of value of commodities. (Marx, Theories of Surplus Value)

Marx liked to stress his difference from Ricardo here, rather than on the different objects of their theory or their methods of investigation.

The social substance of commodities as values cannot be labor as such because labor has a two-fold nature. There is its qualitative aspect as concrete labor, and its quantitative aspect as abstract labor.

As values, commodities are only quantitatively different. They are all interchangeable. Their substance must therefore be homogenous and uniform. This must be the abstract aspect of labor.

Every product of labour is, in all states of society, a use value; but it is only at a definite historical epoch in a society’s development that such a product becomes a commodity, viz., at the epoch when the labour spent on the production of a useful article becomes expressed as one of the objective qualities of that article, i.e., as its value. (Marx, Capital, Vol. 1, Ch. 1)

Now we can look back at this whole argument in review.

1. We started from the simplest form of the product of labor: the commodity.

2. We then split the commodity into two aspects: use-value and exchange-value.

3. We further examined exchange-value as a historically specific form of an exchange relation.

4. We established what this form of appearance needs to presuppose as a product of a socio-historical process.

Methodologically, we needed to use historical materialism to establish these results, and we used the premises of capitalist commodity exchange. Without these, we could not establish our result.

Our phase of analysis concluded that the equivalence of commodities presupposes the objectification of the abstract aspect of labor. However, it does not show us how this objectification can take place. In fact, it seems like an strange conclusion, as Marx signals with calling it a ‘phantom-like objectivity.’

We move on to our phase of synthesis, showing how the objectification of abstract labor takes place, as well as how it becomes the dominant aspect of labor. We will also look at how tenuous and transient this domination is, how it has not been immutably fixed but is actually liable to disintegrate because of its own internal oppositions.

It has been argued by Makoto Itoh that there is an inconsistency in the first chapter of Capital Volume 1 between the first two sections (the phase of analysis) and the third section (the phase of synthesis). The first two assume the interchangeability of commodities, but the third emphasizes the difficulties of interchanging them and having this equivalence break down. Itoh argues that the first two sections represent a Ricardian residual in Marx’s argument.

Elson disagrees, arguing there is no inconsistency. Instead, Marx is beginning his analysis from the most immediate appearance of the commodity: a product of labor interchangeable with (in a relation of equivalence with) many other products. In other words, it looks like a set of equilibrium exchange relations.

This appearance does not directly signal the problems of this equivalence, which makes the claim that aggregate supply is always equal to aggregate demand (i.e. Say’s Law) seem plausible.

Marx was aware that this appearance of equilibrium is a one-sided abstraction from what is actually fundamentally a process of disequilibrium. The second phase of his argument shows these contradictions of exchange equivalence, and therefore emphasizes how we need to revise our first impression from the immediate appearance of exchange-value.

The Phase of Synthesis: From Value to Price

The Task of Synthesis and the “Law” of Value

When we discussed the method of historical materialism, we divided it into a phase of analysis and a phrase of synthesis. The phase of analysis moved from the immediate appearance of a historical form to divide it up into different opposed potentia, gaining an understanding of what lies beneath that appearance. This is followed by a phase of synthesis, building back up to the appearance from what we found, and finding what new abstractions that suggests about the form we are studying.

We have seen the phase of analysis with Marx in the first two sections of the first chapter of Capital Vol. 1. The phase of synthesis is much longer, extending from the third section of the first chapter all the way through chapter 3, which is the end of Part One of Capital.

This phase of synthesis is concerned with how the objectification of abstract labor actually happens, how it implies the dominance of abstract labor, and how precarious the nature of this objectification really is.

This also describes how the “law of value” operates. This is the “law” of the process through which abstract labor becomes objectified. The term “law” here and its comparison to a law of nature is referencing the naturalistic aspect of this process that is happening ‘behind the backs’ of commodity owners.

[I]n the midst of all the accidental and ever fluctuating exchange relations between the products, the labour time socially necessary for their production forcibly asserts itself like an over-riding law of Nature. The law of gravity thus asserts itself when a house falls about our ears. The determination of the magnitude of value by labour time is therefore a secret, hidden under the apparent fluctuations in the relative values of commodities. (Marx, Capital, Vol. 1, Ch. 1)

It is important to emphasize that Marx’s concept of a ‘regulative’ or ‘over-riding law’ is not rigid or ‘deterministic.’ The law itself is subject to change or of being suppressed.

Marx criticized James Mill in his early writings for making this kind of error.

[…] Mill commits the mistake – like the school of Ricardo in general – of stating the abstract law without the change or continual supersession of this law through which alone it comes into being. If it is a constant law that, for example, the cost of production in the last instance – or rather when demand and supply are in equilibrium which occurs sporadically, fortuitously – determines the price (value), it is just as much a constant law that they are not in equilibrium, and that therefore value and cost of production stand in no necessary relationship. Indeed, there is always only a momentary equilibrium of demand and supply owing to the previous fluctuation of demand and supply, owing to the disproportion between cost of production and exchange-value, just as this fluctuation and this disproportion likewise again follow the momentary state of equilibrium. This real movement, of which that law is only an abstract, fortuitous and one-sided factor, is made by recent political economy into something accidental and inessential. (Marx, Comments on James Mill, Éléments D’économie Politique)

Marx wanted to be careful to avoid making such an ‘abstract law’ in Capital.

Under capitalist production, the general law acts as the prevailing tendency only in a very complicated and approximate manner, as a never ascertainable average of ceaseless fluctuations. (Marx, Capital, Vol. 3, Ch. 9)

So in our study of any kind of ‘law of value’ is not ‘rigid.’

The law of value is frequently presented as a relation between value and price. This is because price is the form which achieves the objectification of abstract labor. Establishing this is the first step of the phase of synthesis.

The Objective Expression of Value in Money

Marx needs to explain the process by which abstract labor becomes ‘objectified’ as the value of a commodity. He argues this requires the abstract labor to be expressed as something distinct from the commodity itself, yet common to it and all other commodities.

In order to express the value of the linen as a congelation of human labour, that value must be expressed as having objective existence, as being a something materially different from the linen itself, and yet a something common to the linen and all other commodities. (Marx, Capital, Vol. 1, Ch. 1)

So to objectively express the value of a commodity, we need another commodity to step in as the bearer of value, as the “value-form,” which will reflect the value of the first commodity it is exchanging with. Marx dedicates the third section of the first chapter of Capital to exploring how this takes place.

[T]he bodily form of commodity B becomes the value form of commodity A, or the body of commodity B acts as a mirror to the value of commodity A. (Marx, Capital Vol. 1, Ch. 1)

Marx calls the commodity acting as the bearer of value the “equivalent form,” while the commodity whose value is being reflected is the “relative form.”

Marx next concludes that, to function as an equivalent form, a commodity must be directly exchangeable.

We have seen that commodity A (the linen), by expressing its value in the use value of a commodity differing in kind (the coat), at the same time impresses upon the latter a specific form of value, namely that of the equivalent. The commodity linen manifests its quality of having a value by the fact that the coat, without having assumed a value form different from its bodily form, is equated to the linen. The fact that the latter therefore has a value is expressed by saying that the coat is directly exchangeable with it. Therefore, when we say that a commodity is in the equivalent form, we express the fact that it is directly exchangeable with other commodities. (Marx, Capital, Vol. 1, Ch. 1)

To serve as the equivalent form, the commodity needs to be ‘directly exchangeable’ with the relative value the commodity owner is trying to sell.

Whether this commodity is available to be directly exchanged with is clearly not based on its use-value. Instead, it depends on its social position as equivalent.

(NB: I interpret Elson here as, again, contextualizing this within capitalist commodity exchange. Clearly if two people randomly decide to exchange goods with one another, like the exchange of Christmas gifts above or barter, then each person in the ‘relative’ position is also in the ‘equivalent’ position for the other. But if some commodity is going to be set apart as the equivalent used by all society, then that is a different matter.)

This social position needs to be established by a social process.

The general form of value, C, results from the joint action of the whole world of commodities, and from that alone. A commodity can acquire a general expression of its value only by all other commodities, simultaneously with it, expressing their values in the same equivalent; and every new commodity must follow suit. (Marx, Capital, Vol. 1, Ch. 1)

The equivalent form is established socially through all commodity owners trying to exchange their commodities with one another. It is not and cannot be established by the arbitrary choice of some individual.

But a particular commodity cannot become the universal equivalent except by a social act. The social action therefore of all other commodities, sets apart the particular commodity in which they all represent their values. Thereby the bodily form of this commodity becomes the form of the socially recognised universal equivalent. To be the universal equivalent, becomes, by this social process, the specific function of the commodity thus excluded by the rest. (Marx, Capital, Vol. 1, Ch. 2)

The potential for direct exchangeability is only actualized by becoming a universal equivalent, where this commodity is made directly exchangeable with all other commodities. This means all other commodities have their value, their objectified abstract labor, reflected by it.

The general form of relative value, embracing the whole world of commodities, converts the single commodity that is excluded from the rest, and made to play the part of equivalent – here the linen – into the universal equivalent. The bodily form of the linen is now the form assumed in common by the values of all commodities; it therefore becomes directly exchangeable with all and every of them. The substance linen becomes the visible incarnation, the social chrysalis state of every kind of human labour. (Marx, Capital, Vol. 1, Ch. 1)

To fully establish this direct exchangeability, this universal equivalent should also become a unique universal equivalent. This is part of the whole social process which is setting this single commodity apart.

In other words, it becomes money.

[F]rom the moment that this exclusion becomes finally restricted to one particular commodity, from that moment only, the general form of relative value of the world of commodities obtains real consistence and general social validity.

The particular commodity, with whose bodily form the equivalent form is thus socially identified, now becomes the money commodity, or serves as money. It becomes the special social function of that commodity, and consequently its social monopoly, to play within the world of commodities the part of the universal equivalent. (Marx, Capital, Vol. 1, Ch. 1)

We have our theory. Now we can empirically check whether this lines up with reality.

The argument implies that one commodity should be excluded from the ranks of all other commodities, gaining this monopoly status on direct exchangeability with all other commodities. If we cannot find this, then there would be something wrong with Marx’s argument.

We do, of course, find this in one commodity: gold-money.

Importantly, Marx’s argument is not that the universal equivalent must always be gold-money. We saw before that gold could, for some purposes, be replaced by paper money. Rather, the implication is that gold-money as a universal equivalent is a necessary precursor to paper money.

The main thing Marx rejects here is that the universal equivalent could be established ‘by a convention.’ Money is not established by a conscious and simultaneous decision of all commodity owners.

Money is a crystal formed of necessity in the course of the exchanges, whereby different products of labour are practically equated to one another and thus by practice converted into commodities. (Marx, Capital, Vol. 1, Ch. 2)

Just because we found that gold-money exists doesn’t prove Marx’s argument is correct that it is the visible expression of objectified abstract labor. Instead, his argument has only not been falsified and can proceed. That is all an empirical check here could ever do.

There is another problem with Marx’s presentation because he is not clearly distinguishing money’s role as a medium of exchange from its role as the form of value, as the universal equivalent. Value is a category unique to capitalism, as we’ve seen, relying on capitalist commodity exchange. But money is much older than capitalism. It functioned as a medium of exchange long before it became the universal equivalent.

This impression is especially seen in chapter 2 of Capital. Money as a medium of exchange is definitely a necessary precursor to it becoming the universal equivalent, but Marx overstresses this so that it seems that, where there is money, there is value.

To summarize:

• We begin in an economy where capitalist production and exchange relations are dominant.

• This means that the products of labor are generally exchangeable through the process of sale and purchase.

• This general exchangeability equating the products of labor presupposes value, the objectification of abstract labor.

• We found a condition for this objectification of abstract labor is the existence of a universal equivalent reflecting and acting as the expression of value.

• Gold-money in capitalism has the characteristics necessary to act as a universal equivalent.

• But gold-money could only act as a universal equivalent in social relations based on the capitalist mode of production.

Marx’s argument is not formalist. He is reasoning from real premises that are specific to capitalist social relations. He argument survives empirical checks.

Still, this is an extraordinary conclusion, where one commodity has become the incarnation of value, reflecting the value of all other commodities. Marx emphasizes himself in the last section of the first chapter of Capital:

When I state that coats or boots stand in a relation to linen, because it is the universal incarnation of abstract human labour, the absurdity of the statement is self-evident. Nevertheless, when the producers of coats and boots compare those articles with linen, or, what is the same thing, with gold or silver, as the universal equivalent, they express the relation between their own private labour and the collective labour of society in the same absurd form. (Marx, Capital, Vol. 1, Ch. 1)

Marx makes this point even more strikingly in the first edition of Capital, but not in subsequent editions:

It is as if alongside and external to lions, tigers, rabbits, and all other actual animals, which form when grouped together the various kinds, species, subspecies, families etc. of the animal kingdom, there existed also in addition the animal, the individual incarnation of the entire animal kingdom. (Marx, Capital, Vol. 1, Ch. 1, First Edition)

External Independence and Fetishism

The objectification of abstract labor implies it needs to be expressed in some determinate form. This is the money commodity.

But does this undermine Marx’s claim that value is not conceived of as an absolute entity?

Here we should keep in mind Marx’s little-noticed distinction between ‘internal independence’ and ‘external independence.’

(Note: The line Elson has in mind here is actually hidden in the marxists.org version. She is primarily working from the Penguin Classics editions of Capital, while my own attempts to directly link to these works have been using the marxists.org version. The Penguin edition reads like this:

To say that these mutually independent and antithetical processes form an internal unity is to say also that their internal unity moves forward through external antitheses. These two processes lack internal independence because they complement each other. Hence, if the assertion of their external independence [äusserliche Verselbständigung] proceeds to a certain critical point, their unity violently makes itself felt by producing - a crisis. (Marx, Capital Volume I, p. 209)

The marxists.org presents the same lines like this:

To say that these two independent and antithetical acts have an intrinsic unity, are essentially one, is the same as to say that this intrinsic oneness expresses itself in an external antithesis. If the interval in time between the two complementary phases of the complete metamorphosis of a commodity become too great, if the split between the sale and the purchase become too pronounced, the intimate connexion between them, their oneness, asserts itself by producing — a crisis. (Marx, Capital, Vol. 1, Ch. 3)

This version obscures the technical terms Elson is trying to highlight, so I have added this note to explain why I’m using the Penguin edition.)

Internal independence is necessary for something to be an entity. Value lacks this because it is only ever one side of the commodity, which is a unity of value and use-value. Value is not its own distinct thing that can stand apart from the commodity.

But the value-side of the commodity can be given external independence if it is brought into relation with another commodity that serves to reflect value.

This can give the illusion that value in the money-form is an independent entity, but this is only a relative existence. It is an objectified form of a one-sided abstraction, the abstract aspect of labor.

This is the fetishism of commodities. Unlike religious fetishism, this is not an ideological product based on how we look at things. Rather, it is a product of how labor is being determined in in a particular relations of production (capitalism).

The Dominance of the Universal Equivalent

As the universal equivalent, abstract labor is not only objectified, but made the dominant aspect of labor.

This is seen first in the production of the money-commodity of gold itself.

The usefulness of the concrete labor embodied in the universal equivalent has been done only so that there can be something to express value.

This concrete labour becomes, therefore, the medium for expressing abstract human labour. If on the one hand the coat ranks as nothing but the embodiment of abstract human labour, so, on the other hand, the tailoring which is actually embodied in it, counts as nothing but the form under which that abstract labour is realised. In the expression of value of the linen, the utility of the tailoring consists, not in making clothes, but in making an object, which we at once recognise to be Value, and therefore to be a congelation of labour, but of labour indistinguishable from that realised in the value of the linen. In order to act as such a mirror of value, the labour of tailoring must reflect nothing besides its own abstract quality of being human labour generally. (Marx, Capital, Vol. 1, Ch. 1)

The private aspect of labor only serves to express the social aspect. Individual producers cannot decide to make the universal equivalent until it has already been created by this ‘blind’ social process.

The social aspect of labor embodied in money, in other words its social necessity, is to make a commodity which functions as the incarnation of abstract labor.

Each other aspect of labor has been dominated by abstract labor. This does not mean that the concrete, private, and social aspects of labor are obliterated. Gold does not represent simply abstract labor. It is only that these other aspects have been subsumed by it. It reflects only abstract labor.

From here, we see how the universal equivalent dominates over other commodities. This domination is found in the self-expansion of the money-form of value. In other words, in capital.

This domination is also not limited to the labor ‘fixed’ in the product. It also extends over the production (and reproduction) process itself.

The subsumption of labor as a form of capital is just a development of the subsumption of the other aspects of labor to the abstract aspect.

Value as the Subject of the Process of Capital

While discussing this domination of objectified abstract labor through the capital-form of value, Marx talks about value in a way that again seems like an independent entity.

In truth, however, value is here the active factor in a process, in which, while constantly assuming the form in turn of money and commodities, it at the same time changes in magnitude, differentiates itself by throwing off surplus-value from itself; the original value, in other words, expands spontaneously. For the movement, in the course of which it adds surplus-value, is its own movement, its expansion, therefore, is automatic expansion. (Marx, Capital, Vol. 1, Ch. 4)

Value is the ‘subject’ or ‘active factor,’ the independently acting agent, of a process which is valorizing itself ‘spontaneously’ or ‘independently.’

Once again we see value being presented like an absolutely independent entity, as seen in the critique of Marx as idealist. However, we can explain this if we recall the distinction between external and internal independence, and the fact that these references occur in the context of the circulation of capital. This is the appearance of valorization in money-terms.

Here value seems to have a life of its own, but there is more to it than meets the eye. Marx indicates that with the next lines:

Because it is value, it has acquired the occult quality of being able to add value to itself. It brings forth living offspring, or, at the least, lays golden eggs. (Marx, Capital, Vol. 1, Ch. 4)

This seems like an ironic reference to the mysterious abilities of a commodity Marx discussed around the fetishism of commodities.

A commodity appears, at first sight, a very trivial thing, and easily understood. Its analysis shows that it is, in reality, a very queer thing, abounding in metaphysical subtleties and theological niceties. (Marx, Capital, Vol. 1, Ch. 1)

In Elson’s view, Marx presenting value as the subject of a process, something which is valorizing itself ‘independently,’ is him presenting another way commodities present social relations as objective characteristics of the commodities themselves.

A commodity is therefore a mysterious thing, simply because in it the social character of men’s labour appears to them as an objective character stamped upon the product of that labour; because the relation of the producers to the sum total of their own labour is presented to them as a social relation, existing not between themselves, but between the products of their labour. (Marx, Capital, Vol. 1, Ch. 1)

Prices Appear to Represent Magnitudes of Value

This process for how the abstract labor of one commodity is objectified and expressed by the money-form of value is what establishes the foundation for the relation between value and price, i.e. exchange-value expressed in money.

We saw before that the first two sections of the first chapter of Capital, the phase of analysis, showed how the size or magnitude of value was determined by labor-time. This was not an argument about the relation of value to price, but about the relation of value to its internal measure.

It is in the remainder of the first chapter of Capital, i.e. sections 3 and 4, that we also find value as the regulator of exchange-ratios.

We see this most notably in these cases:

It becomes plain, that it is not the exchange of commodities which regulates the magnitude of their value; but, on the contrary, that it is the magnitude of their value which controls their exchange proportions.

[…]

[I]n the midst of all the accidental and ever fluctuating exchange relations between the products, the labour time socially necessary for their production forcibly asserts itself like an over-riding law of Nature. (Marx, Capital, Vol. 1, Ch. 1)

(NB: Elson here seems to give the wrong page number for the second quote about ‘regulative law of nature.’ It is on page 168, not 156.)

We discussed earlier why it would be wrong to interpret this ‘regulative’ or ‘over-riding’ law as a relation between independent and dependent variables.

Instead it is regulating in the way that the inner character of something regulates its appearance. Compare this to how the molecular structure of a chemical regulates how this substance is represented as a crystal, or how the cell-structure of a living organism regulates the form of its body.

Also note that Marx is saying that value regulates exchange ratios. He is not committed to the view that exchange ratios expressed in the equivalent form directly represent the magnitude of values. In other words, he has not committed himself to the view that prices are equal to values.

There are other lines from Marx which are more ambiguous though.

All commodities being equated to linen now appear not only as qualitatively equal as values generally, but also as values whose magnitudes are capable of comparison. By expressing the magnitudes of their values in one and the same material, the linen, those magnitudes are also compared with each other. For instance, 10 lbs of tea = 20 yards of linen, and 40 lbs of coffee = 20 yards of linen. Therefore, 10 lbs of tea = 40 lbs of coffee. In other words, there is contained in 1 lb of coffee only one-fourth as much substance of value – labour – as is contained in 1 lb of tea. (Marx, Capital, Vol. 1, Ch. 1)

The last line here certainly seems to suggest an equality between the size of value and prices. (Linen is playing the role of money.)

However, Elson argues we should pay attention to how Marx begins by saying how they all appear equal, both qualitatively as values in general and quantitatively as magnitudes of value.

Challenging the Appearance that Prices Equal Values

On the basis of Marx’s investigation so far, this all certainly appears to be the case. Commodities do appear to exchange in ratios that are directly reflecting the magnitude of their value. We as of yet have no basis for challenging that appearance.

However, Marx was well aware of where his argument would be going at the later stages and how this appearance would be challenged. He signals this explicitly in a footnote indicating how he will talk about how insufficient Ricardo’s analysis of the magnitude of value is.

Political Economy has indeed analysed, however incompletely, [32] value and its magnitude, and has discovered what lies beneath these forms. But it has never once asked the question why labour is represented by the value of its product and labour time by the magnitude of that value.

[32] The insufficiency of Ricardo’s analysis of the magnitude of value, and his analysis is by far the best, will appear from the 3rd and 4th books of this work. (Marx, Capital, Vol. 1, Ch. 1)

Marx did not seem to have this same awareness in Critique of Political Economy, which he published eight years before Capital in 1859, and which lacks this same careful and systematic distinction between value and exchange-value.

Marx does not take any steps to dispel this appearance that prices directly represent the magnitude of value in Capital Volume 1. But this is not the same thing as him assuming that prices are approximately equal to values, only for him to relax this assumption in later volumes.

Rather, in Capital Volume 1 Marx is abstracting away from the social relations that imply prices cannot directly represent magnitudes of value.

Sometimes people try to explain this as Capital Volume 1 explaining ‘capital in general,’ only for Volume 3, where Marx more explicitly deals with how the magnitude of value is represented, is dealing with ‘many capitals.’

The issue with this explanation is it leads to some mistaken assumptions, like assuming that Volume 1 is abstracting away from competition. Clearly this is not the case. Capital can only exist as many capitals.

Marx is not abstracting away from competition in Volume 1, but from questions of the distribution of value between capitals. That is what he is reintroducing in Volume 3.

We can find a more helpful distinction at the start of Results of the Immediate Process of Production. Marx distinguishes between commodities being simply a product of labor and being products of capital or self-valorizing labor.

(NB: Elson does not quote particular pages or lines here.)

He clarifies that his procedure in Volume 1 is to begin with the commodity viewed simply as the product of labor, since this is its immediate appearance, only for his investigation to show how superficial this is and that the commodity, as the ‘immediate result of the capitalist process of production,’ is embodying not only value, but surplus-value. This is represented not only in the price, but in profit.

Once we see that commodities are not merely the product of labor, but of capital, and the magnitude of its value also includes surplus-value, we are forced to reconsider how the magnitude of value is being represented by prices. This is what Marx sets out to do in Volume 3 of Capital, especially by elaborating on the concept of prices of production.

Whether Marx’s conclusions in Volume 3 are adequate is beyond the scope of Elson’s paper. All she needs to defend here is that Volume 3 is not relying on a different relation between prices and values than what Marx introduces in Volume 1. Instead, it is a further development of the same analysis, introducing the features of capitalism that Volume 1 abstracted away from.

How Value’s Regulation of Price Breaks Down

Value is not only claiming that value regulates, and in this sense explains, prices. He is also claiming that this possibility of regulation breaks down.

For the abstract labor embodied in a commodity to be objectified, it must have a price. However, this price can deviate from the commodity’s magnitude of value. This is actually a natural feature of prices.

But this exchange-ratio may express either the real magnitude of that commodity’s value, or the quantity of gold deviating from that value, for which, according to circumstances, it may be parted with. The possibility, therefore, of quantitative incongruity between price and magnitude of value, or the deviation of the former from the latter, is inherent in the price-form itself. This is no defect, but, on the contrary, admirably adapts the price-form to a mode of production whose inherent laws impose themselves only as the mean of apparently lawless irregularities that compensate one another. (Marx, Capital, Vol. 1, Ch. 3)

Money being a universal equivalent is necessary for the objectification of abstract labor. However, it is not sufficient to guarantee the quantitative form it takes.

The circulation of money has some relative degree of autonomy from the production of commodities, which can upset how the magnitude of value is being realized in the price-form.

Commodities as use-values now stand opposed to money as exchange-value. On the other hand, both opposing sides are commodities, unities of use-value and value. But this unity of differences manifests itself at two opposite poles, and at each pole in an opposite way. (Marx, Capital, Vol. 3, Ch. 3)

There is no necessary relation between someone deciding to sell off the use-value of their commodity and deciding to buy someone else’s use-value. Between these steps, someone might decide to hold on to their money, a commodity that is normally uniquely exchangeable at any time for any other commodity.

However, the magnitude of value for money is necessarily indeterminate, since it has no universal equivalent to reflect its value. Instead, it only has a whole series of reflections in the quantities of all other commodities.

(NB: This, I believe, is part of the reason why something relatively valueless, like paper money, is able to step in and replace gold-money.)

Whether the coat serves as the equivalent and the linen as relative value, or the linen as the equivalent and the coat as relative value, the magnitude of the coat’s value is determined, independently of its value form, by the labour time necessary for its production. But whenever the coat assumes in the equation of value, the position of equivalent, its value acquires no quantitative expression; on the contrary, the commodity coat now figures only as a definite quantity of some article. (Marx, Capital, Vol. 1, Ch. 1)

The timing of purchases and sales of different goods can therefore have an independent effect on prices. There is no guarantee at any moment in time that aggregate sales will equal aggregate purchases.

However, the relative autonomy that the circulation of money has from the production of commodities cannot deviate too much, since they are still connected. If circulation deviates too much away from production, then a crisis will result.

If the interval in time between the two complementary phases of the complete metamorphosis of a commodity become too great, if the split between the sale and the purchase become too pronounced, the intimate connexion between them, their oneness, asserts itself by producing — a crisis. The antithesis, use-value and value; the contradictions that private labour is bound to manifest itself as direct social labour, that a particularised concrete kind of labour has to pass for abstract human labour; the contradiction between the personification of objects and the representation of persons by things; all these antitheses and contradictions, which are immanent in commodities, assert themselves, and develop their modes of motion, in the antithetical phases of the metamorphosis of a commodity. These modes therefore imply the possibility, and no more than the possibility, of crises. The conversion of this mere possibility into a reality is the result of a long series of relations, that, from our present standpoint of simple circulation, have as yet no existence. (Marx, Capital, Vol. 1, Ch. 3)

Our observation of capitalist economies tells us not only is this possibility of a crisis realized, it is also resolved, at least temporarily. A restructuring takes place and there is a recovery from the crisis.

There are therefore limits to how much the circulation of money can depart from the production of commodities. Or, to put it another way, there is a limit to how much price can depart from the magnitude of value.

What sets this limit must be left to another paper. All we can say here is that this limit takes the form of pressure on commodity producers to represent the labor-time spent in production in money-terms. It is the pressure to account for every moment.

This does not mean that every hour of labor is objectified as the same quantity of value or represented by the same quantity of money. Hours of different concrete labors can be objectified as different quantities of value, and therefore represented as different quantities of money. Marx presents this as a relation between skilled and unskilled labor. It is, again, beyond the scope of this paper to see if this is adequate. We can note that a lot of the literature commenting on this is full of misconceptions, just like how Marx’s theory of value itself is misunderstood.

This also doesn’t mean that the purpose of Marx’s value theory is to generate pricing rules governing how the labor-time involved in a particular production process is being represented in money to secure the reproduction of that process. In fact, no consistent rules can be generated to link the labor-time needed to produce an individual commodity and its price. This does not invalidate Marx’s value theory because that’s not what he was trying to do.

Instead, Marx’s value theory is meant to provide a tool for analyzing why pricing rules are so important and necessary in capitalism, giving rise to the need for accountants, capital budgeting experts, etc., as well as why modern economists are so focused on ‘optimum’ pricing rules. It also helps us investigate the contradictions inherent to these pricing rules. Elson points to sections 4 and 5 of Himmelweit and Mohun’s essay “The Anomalies of Capital” (1978) for more.

To see how the pressure to account for every moment in production takes place would need a deeper analysis of capitalist production. We cannot simply gesture to the ‘need’ for capital to reproduce itself. Elson agrees with Cutler et al. in rejecting this kind of reasoning, but also points out that this reasoning is not found in Marx’s argument.

For the most part, Capital Volume 1 does assume that we are dealing with the equilibrium instead of disequilibrium, that prices are corresponding to the magnitude of value instead of deviating from it. It largely assumes we are dealing with the exchange of equal values instead of unequal values.

However, this is because the influence felt by the circulation of money shows up in the distribution of profit between different capitals, which is precisely what Marx is abstracting away from in Volume 1.

Instead, Volume 1 is focused on establishing how labor comes to count ‘simply as a value-creating substance’ and how this entails the subsumption of labor as a form of capital.

Marx therefore begins by focusing on the equilibrium aspect of this process, the ‘law of value,’ while also indicating this is only one side of the process, and that this process implies disequilibrium and crisis just as much as it does equilibrium and ‘law.’

The Political Implications of Marx’s Value Analysis

Overview of the Political Implications

We saw at the beginning that Marx’s value theory was not a proof of exploitation, but warned against attempts to ‘depoliticize’ his analysis as well.

The political merits of Marx’s value theory, why it is helpful for socialists, is that it gives us a tool for how capitalist exploitation works, changes, and develops (in contrast to proving the existence of exploitation generally).

Because of this, it gives us key insight into what openings there are for materialist political practice, subverting the conditions that give rise to it.

Elson identifies three key points about the political use of Marx’s value theory:

1. It lets us analyze capitalist exploitation as a whole, allowing us to overcome the fragmentation of personal experience of that exploitation.

2. It lets us grasp the contradictory, crisis-ridden nature of capitalist exploitation, allowing it to continually change.

3. It builds our understanding of how this process of exploitation works, and implies the possibility of action to end it.

The Fragmentation of Exploitation

The exploited do not need complex works of theory to tell them that something is wrong with their situation. But their own experience can be disconnected, and make it difficult to tell what exactly is wrong.

In particular, exploitation has been split into issues of money relations and labor process relations. On the one hand, it is seen as an issue with ‘unfair’ wages and prices. On the other hand, it is seen as issues of long working hours or poor working conditions.

This bifurcation leads to a split of:

1. A politics of circulation: Focused on wages, prices, regulating finance, directing investment, promoting state welfare programs, etc.

2. A politics of production: Focused on shorter working days, unionizing labor on the shop-floor, building worker co-ops, producing ‘alternative paths’ for companies more beneficial to workers against things like layoffs, etc.

These methods are not wrong per se, but should not be seen as being isolated from one another. With Marx’s value theory, we see that exploitation is a unified process, connecting production and circulation. One side cannot be addressed without the other.

The Contradictory Process of Exploitation

Examining the process of exploitation, we can see how it leads continually into crisis and how, nevertheless, it survives despite its continually changing form.

Although money and labor relations are part of the unity of exploitation, they still have their own degrees of autonomy that lead into this crisis. While the crisis does not itself break down capitalism, it does give us space for political action. We can collectively regulate production and distribution, instead of relying on these ‘blind’ market forces.

This identifies the space for political action.

The Possibility of Political Action

We not only recognize the space for, but the real possibility of political action. This possibility is not only assumed by socialists here, but is worked directly into the theory itself.

Class struggle is not introduced into capitalism from the outside. Rather, it is inherent to capitalism and can be built up. This way we can view the transition from capitalism into socialism as a historical process, consciously brought about by our collective action, rather than us leaping between two pre-given structures.

Marx’s theory is not about pre-given structures in dominance, nor is it a model of political economy, nor is it about some self-developing and all-enveloping entity.

Rather it analyzes, in societies where the capitalist mode of production prevails, the determination of labor as forming what is intrinsically unformed, i.e. the domination of one aspect of labor, i.e. abstract labor, objectified as value.

This domination has limits. Abstract labor is not able to obliterate the other aspects of labor, even as it subsumes them.

Our political problem is to bring these other aspects together without mediation of the value form, and therefore allowing us to take particular, conscious, collective action against exploitation.

Realizing this political project is helped by using the tools of Marx’s value theory to analyze how labor is being determined in capitalist countries today.

1. From Adam Smith’s Wealth of Nations, Book 1, Ch. 6: “In that early and rude state of society which precedes both the accumulation of stock and the appropriation of land, the proportion between the quantities of labour necessary for acquiring different objects seems to be the only circumstance which can afford any rule for exchanging them for one another. If among a nation of hunters, for example, it usually costs twice the labour to kill a beaver which it does to kill a deer, one beaver should naturally exchange for or be worth two deer. It is natural that what is usually the produce of two days' or two hours' labour, should be worth double of what is usually the produce of one day's or one hour's labour.

“If the one species of labour should be more severe than the other, some allowance will naturally be made for this superior hardship; and the produce of one hour's labour in the one way may frequently exchange for that of two hours' labour in the other.

“Or if the one species of labour requires an uncommon degree of dexterity and ingenuity, the esteem which men have for such talents will naturally give a value to their produce, superior to what would be due to the time employed about it. Such talents can seldom be acquired but in consequence of long application, and the superior value of their produce may frequently be no more than a reasonable compensation for the time and labour which must be spent in acquiring them. In the advanced state of society, allowances of this kind, for superior hardship and superior skill, are commonly made in the wages of labour; and something of the same kind must probably have taken place in its earliest and rudest period.”

2. Mike Gouldhawke has noted this as a mistranslation. In the original German, Marx uses the term menschlicher Lebenskraft, which translates more directly to “human vitality” or “life force.” Translating this as “energy” seems to imply what Marx has in mind here is more about the calories spent in exertion. Labor is measured in terms of time though, not joules of energy. See note 4 of the “Tragic Theses”.