From the classical economists to Marx

While today’s bourgeois economists are all “physicalists,” this was not the case with the classical economists. Though the French school of the Physiocrats were physicalists in the sense that they confused surplus value with the biological fact that if you plant a certain quantity of corn seeds, at the end of the growing season you will possess more corn seeds than you began with. This is why the Physiocrats saw only agricultural labor as productive of surplus value. Though naive, this view was still a great advance over the view that surplus value arises in the sphere of circulation and not the sphere of production.

It was the English school of classical political economy—England and Scotland being the countries where capitalist production was most advanced—that developed the distinction between what they called value in use—use values—and value in exchange that is produced only by human labor.

The distinction of English classical economy between use value and exchange value was the starting point for Marx. Nobody was ever born an accomplished Marxist economist, not even Marx. In the beginning, Marx was the student of the classical economists. He did not become a fully fledged “Marxist” economist all at once. Inevitably, therefore, Marx’s early writings are mixture of “Marxism” and classical political economy. (4)

However, by the time he wrote “Capital,” Marx described not two but three types of “value.” In addition to use value and exchange value, the distinction he inherited directly from classical political economy, Marx distinguished between value and the form of value—exchange value. Why did Marx introduce this distinction that was unknown to the classical economists? Was he simply showing off his philosophical education? Remember, Marx was a philosophy major in college and held a doctorate in philosophy.

Since Marx did not fully develop the distinction between value and exchange value until relatively late in his career and didn’t make this distinction in his earlier writings, many modern Marxists, who often lack a proper philosophical education, remain confused on this question. The very concept of “forms,” after all, takes us back to the world of ancient Greek philosophy. What do the old Greeks who lived thousands of years ago in a slave—not capitalist—society have to do with the economics of modern capitalist society (5)

I believe that without understanding the distinction between value and the form of value, we not only fail to fully grasp Marx’s theory of value—at best, we have an understanding of value that is somewhere between that of Ricardo and the mature Marx—we cannot fully understand either capitalist crises or the evolution and fate of modern capitalist society.

What is this “form of value” and how does it differ from “value.” According to Marx, the form of value is exchange value. Exchange value arises because value, after the earliest phases of barter, cannot express itself directly as hours of labor but must express itself through the ratio in which a commodity of one use value exchanges with a commodity of another use value.

Let’s take an example that Marx himself used in “Capital.” Suppose a coat of a given quality is exchanged for a given number of yards of linen. How would a merchant measure the amount of coats he has in inventory? He would measure the coats in discreet units—by how many physical individual coats he has in inventory. Why does he measure coats this way? Because it is in the nature of coats as a material use value that two coats can never be combined into one coat. Also if you cut a coat in half, the coat will lose its entire use value as a coat.

Linen, by contrast, has a completely different unit of measure, some unit of length. Marx uses the old English measure of length called a yard, which consists of three old English feet. These old English units of measure are still used in the United States, but most of the rest of the world uses meters. A yard is roughly the old English equivalent of a modern metric meter. If Marx was writing “Capital” today, he would probably have used meters rather than yards. But old English yards and metric meters have one thing in common, they are both measures of length. Therefore, the use value of linen is measured in some unit of length.

Notice that the use value of our two different commodities, coats and linen, are measured in totally different units. In contrast, their (labor)values are measured in a common unit of measure, the quantity of abstract human labor measured in units of time. The unit of time may be hours, minutes or seconds just like we can measure the lengths of linen in terms of either meters or yards.

Suppose I am the maker of the coat and barter it for linen. I am interested in what the value in exchange of my coat will be in terms of linen—measured in yards or meters. This brings us to the distinctionbetween value and exchange value. In the above example that I borrowed from “Capital,” the value of the coat is measured in abstract human labor—that is, in some measure of time. In contrast, the exchange value of the coat is measured in terms of units of linen measured in some unit of length.

Therefore, value and exchange value are two distinct relationships. However, the fact that the coat and a given quantity of linen are being exchanged implies that they have something in common. But what is it? Marx finds that what they have in common is that they are both products of abstract human labor. Not the specific human labor that produces a coat nor the specific human labor that produces linen, but what the human labor that produces coats, linen, gold, iron and so on have in common.

When the value of the coat corresponds directly to the value of linen it exchanges for, the coat represents the same quantity of abstracthuman labor that the linen does. This relationship, however, includes the possibility, and, in the real world as Marx makes clear, the overwhelming probability, that the coat and linen will exchange at some ratio other than the one that exactly expresses the coat’s labor value.

Indeed, Marx explains again and again that exchange value virtuallynever expresses value exactly. The distinction between exchange value exactly expressing value—the rare exception—and exchange value not exactly expressing value—almost always the case—causes any concept of MELT without a commodity like linen that measures the value of a coat in terms of its own use value to break down.

Marx explains that the exchange value relationship where the exchange value of a coat is measured in terms of a given quantity of the use value of linen contains in embryo the money relationship. In order to arrive at the money relationship of production, we simply have to generalize the relationship between the coat and the linen. Instead of measuring the exchange value of only a coat in terms of linen, we can measure the exchange value of all commodities—except linen—in terms of linen. In that case, linen would serve as money. Alternatively, we can replace linen with a more suitable commodity—a precious metal such as gold.

To return for a moment to the coat-linen example, Marx calls the coat—the commodity whose value is being measured—the relative form of value and the linen—the commodity that serves as the unit of measure of exchange value—the equivalent form of value. Of course, in a simple barter exchange we could just as well use coats to measure the exchange value of linen. In that case, we would call the coat the equivalent form of value and the linen the relative form of value.

But this ceases to be true once a commodity establishes itself as the universal equivalent. Why do we need a universal equivalent? When only a few products of human labor are exchanged, we really don’t need a universal equivalent. However, this changes once hundreds and then thousands of products—still far less than the millions of types of commodities that are exchanged today—are exchanged. Indeed, if we did not have a universal equivalent, every commodity would have many thousands of prices, or as many prices as there are commodities with distinct use values and qualities—minus one, the commodity whose value we are trying to determine.

This problem is easily solved if we simply set one commodity aside and use its use value to measure the exchange values of all other commodities. In “Capital,” Marx gives an example where linen serves as the universal equivalent and calls it the general form of value because linen is not really a very good money. He then gives another example where gold replaces linen as the universal measure of value. We have arrived at the stage of money where gold serves as the universal equivalent, or money commodity.

Price is shown to be the measure of the value of a commodity—value must always be measured in terms of its value form, exchange value—as a given weight of the precious metal gold. The value of a commodity can never be measured directly in terms of quantities of abstract labor but only through the form of exchange value. Once gold has established itself as the universal equivalent, the values of all commodities, all the wealth of capitalist society, are measured in terms of weights of gold—that is, in terms of prices.

Whatever commodity serves as money, whether gold, silver or some other commodity, is not determined by any individual, government or “monetary authority” but rather by a process akin to natural selection. Some commodities, due to their material use values—such as gold, for example—make better potential monies than other commodities with different use values, such as linen.

Gold is superior to linen as a money commodity because it contains a much greater quantity of value in a smaller physical mass, it does not deteriorate with time as linen does, and it is divisible down to its atomic level. Gold therefore approximates the (in principle) infinite divisibility of embodied abstract human labor much better than the physical divisibility of linen. Also, unlike linen, different quantities of gold can be easily recombined by melting down different physical pieces of gold and recombining them.

For example, gold coins can be melted down and forged into a bar of bullion, which is the purest form of money. A bar of bullion can also be melted down and minted into many gold coins. Currency units can then be defined as specific weights of gold, and gold then becomes the standard of price. Prices then become physical quantities of gold measured in terms of a given unit of weight. In this way, all the wealth of the capitalist world can be measured in terms of weights of gold.