Mechanism of value

Comrades, I'm struggling with some theory here. What exactly is the mechanism by which labor-time governs exchange?
I get that you can decompose the exchange-value of any commodity into (vertically integrated, i.e. direct and indirect) wages and profits, or into surplus product and…whatever you call non-surplus product. And I also get that in the latter case, you can correspondingly divide up the labor-time necessary for these categories of product into surplus labor and necessary labor.
However, these are post-hoc analyses, rather than a causative explanation of the process by which labor-time regulates exchange. (I'm not looking here for empirical evidence, such as that provided by Paul Cockshott.) Can anyone help me out here? Am I retarded?

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Followup: In a classless society of independent commodity producers, you can't decompose prices into wages and profits at all, nor into surplus and non-surplus product, nor therefore into surplus and necessary labor. I suspect that this (along with removing money and reducing exchange to barter) is probably an easier starting-point for addressing the question.

Capital Volume 1, chapter 1, section 4 is pretty much all about this topic. Marx’s argument is pretty complex there, but he answers that question very well.

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The answer can be found in Capital. I'll try to be succinct. We'll call law of value the law according to which, as you said, socially necessary labor-time contained in commodities determines it's exchange value.

One thing must be clear from the beginning: the law of value it's an specific law from capitalism, not an universal law of exchange. The latter is what classical economists like Ricardo thought, the former is what Marx thought.

So, let me begin my explanation talking about an issue that may seem kind of off-topic, but it's not. It's related to Marx's philosophical and historical conception: historical materialism. As human beings, we are compelled to produce and reproduce our existence by engaging in a collective labor process. That is to say something very simple and universal, that applies to any society, kinda like an anthropological statement: to produce and reproduce our lives and communities in every sense —to produce and reproduce the buildings which we inhabit, the cultural products which we enjoy, etc.— to do all of that, every society has to engage in a collective labor process with nature (to extract it’s resources and make them disposable) organized by a determined set of social relations. In other words, it needs an operative economic system: a set of social relationships that rule its production and enable the community to survive. This sets are what Marx called modes of production. But Marx didn’t give too much time and attention to all of the modes of production that existed through history, he only mentioned them briefly. Instead, he dedicated most of his life to analyze one specific mode of production: capitalism. What I want you to keep in mind is the following: we survive because we are integrated to a society, we need this collective process to produce all of the goods needed to reproduce our daily existence. The division of labor makes us all dependent of each other.

Let’s now return to the subject. There is one, big, major contradiction of capitalism from which all other contradictions stem. This is the contradiction between the social (collective) aspect of labor, and it’s private and individual aspect. All labor is collective, because in a modern society with a high degree of division of labor, one individual can’t produce all of the goods; but the society as a whole can. In this sense, labor has a social aspect: it is done for others, for the community in general. But in capitalism, private ownership of the means of production generates, at the same time, the opposite condition: labor is private, this means that each producer decides what, how and how much to produce. Labor is, in a capitalist society, both social and private at the same time. That’s the great contradiction specific of capitalism.

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So, how does one producer satisfy its multiple needs? He certainly can’t produce all of the goods he needs by himself. He has to exchange his surplus product with other producers and get the other goods (remember, we are under a high degree of division of labor, so each producers creates only one good, but he creates a lot more than he needs of that good, say, one shoemaker produces only shoes, but he does 100 shoes because he specialized in that). Simple bartering (mediated by money) a simple exchange. But when you have to do it, how do you regulate this exchange? How can you determine the worth that this commodity has? I guess you already know the answer: by the socially necessary labor-time contained in it. This is what’s important: to secure our existence in the capitalist mode of production, we have to get all the goods that we need making abstraction of the concrete labor contained in the commodity which we produce. We make abstraction of this concrete labor, and we consider only the abstract, homogenous labor contained in it. In this way, we can compare our labors and in doing so, providing us of all of the commodities we need: the food, the clothing, the cellphone, etc. This is why Marx says that labor is a social relation. Capitalist society is a society which a high degree of division of labor, and that’s what allows a generalized exchange, but at the same time, it is a society where social reproduction is secured through private labor, through infinite atoms or islands of producers, all of them producing exactly only one commodity. From this central contradiction stems the law of value, as a way to repair this “mistake”. Let me quote Sismondi: “the supply doesn’t know anything about the demand”. Marx didn’t choose labor arbitrarily like the neoclassicals suppose. He choose it because it’s a social relation.

But don’t take my word, take Marx word. :

There's a whole lot more to the question. But I hope this is was enough for a first answer. If the topic goes on, I'll gladly say more about this (for example, Marx addresses, without naming it because it didn't exist at that time, the subjective labor of value). Forgive my tortuous and horrible english user, it’s not my native language.

I've read Capital, Vol. I. Nowhere did I find the explanation that I'm looking for. I'm not sure how the section on commodity fetishism provides such an explanation.

I want to start by saying that I appreciate the time that you took to write out your response. But I don't think it answers my question.

Huh. That complicates things then, because systemic deviation of prices from labor-time is (as far as I can tell) caused by variation in the organic composition of capital, which can obviously only occur under capitalism.

If we're talking about capitalism, then this is only true for capitalists; workers have no product, surplus or otherwise, to exchange for the means of subsistence; rather, they have a money-wage. (It's possible that they may have truck wages, i.e. payment in kind, but this is the exception rather than the rule.)

This is a contradiction in terms; barter is exchange which is not mediated by money.

Producers and consumers do not deliberately try to exchange commodities in proportion to their respective labor-time. If they did, competition wouldn't exist. This is doubly true under capitalism, in which price prevails over barter. In order for labor-time to regulate exchange, it has to assert itself independently of the will of the individual parties engaged in exchange; in other words, it must be an emergent social property, similar to the way in which prices of production provide a "center of gravity" via the competition for profit between firms.
Marx says that the law of value operates "behind the backs" of the producers (and presumably also of the consumers), but what I am looking for is how this operation occurs.

I suspect that supply and (effective) demand has something to do with labor-time prevailing as a regulator in exchange, but I'm not quite sure how to grapple with that idea yet. (As far as I can tell, under capitalism, the effect of supply and demand is simply to equalize profit rates across different industries.)

This seems to imply that effective demand is the mechanism by which labor-time regulates exchange but it's vague enough that I can't say for sure.

Marx is merely asserting this without argument, without providing a causative rationale.
I consider myself, broadly speaking, a Marxist. I have enough respect for his work that I think he was convinced that he had good reason to believe that labor-time regulates exchange. But I don't yet see why he believes it.

Your English was quite good; I understood everything you were trying to say.

You're totally right, it was a mistaken expression.

Yes indeed. What happens is that Marx begins his analysis from the most abstract to the concrete. If you read Capital, you'll know that he doesn't introduce labor as a commodity until chapter 4 or 5. He begins by considering bartering, then he introduces money, then he introduces capital and so on. But at first, he's looking for a law that rules exchange in a system funded on the contradictory aspect of private and social labor. This method might be questionable, of course. In that case, i'm not necessarily defending it, I'm just quoting what Marx said.

Let me add something: supply does know about demand, but not a priori, that's why it is contradictory in opposition to, say, a centralized economy. We know that markets tend to reach equilibrium in the long term, with an average price, at least that's what Marx thought. But a priori, you have this contradiction where producers just make goods and try to sell them only after that.

I guess it is in the long term. Remember that Marx gives way more importance to effective demand than what some marxist think. He repeatedly says that in order to produce a commodity, this has to be useful in social terms. If it's not useful for anyone else, then it's not a commodity, regardless of how many work it has contained in it. Furthermore, and I think this is the answer you're looking for, effective demand is what sanctions labor-time as socially necessary and productive. So both aspects are completely necessary.

You're right user. Because it's in the market where labor is sanctioned as socially useful, as productive. I'll quote:

The first part of the paragraph just asserts us what we know. But pay attention to the second part: "For the labour spent upon them counts effectively, only in so far as it is spent in a form that is useful for others. Whether that labour is useful for others, and its product consequently capable of satisfying the wants of others, can be proved only by the act of exchange."

Yes you're completely right. Like Marx says, they don't know it but they do it. It's an emergent property, not a willful agreement (I was just trying to be illustrative, but thanks for showing me my mistake). Making a long story short, I guess you could say that this is forcefully the only way that commodities can be exchanged and market and competition drive them to their values.

Well, I could only repeat the same. You asked for a causative explanation. From what I understand, I can only say that this is an emergent property of a society marked by the contradiction between the social character of labor and it's private one, which stems from private ownership of the means of production. That's the causative explanation. Sage for doubleposting

I remember. I was just confused, because you said that the law of value was specific to capitalism, and so I was assuming that we were talking about exchange in the context of capitalist production, rather than in the context of independent commodity producers.

On this subject, I value the perspective of Anwar Shaikh, who talks about "turbulent gravitation," in which equilibrium points are never actually achieved, yet still exert influence as economic agents continually (and without knowing that they are doing so) overshoot and undershoot these targets.

I see. So labor-time is the point at which exchange-value tends to converge in the long run. That seems more realistic, though of course we have yet to establish why labor-time is the point of convergence.

That's where my thinking has intuitively led. Now I guess I just have to come to a more formal understanding of that intuition, which is easier said than done.

This is interesting. But it seems to me that Marx is very quick in turning his attention to labor-time, rather than to the products of labor themselves. I'm just going to write down my thoughts here and see if I can make better sense of them.

For a society to reproduce itself, it must recreate its material basis; that is, it must produce certain goods in certain quantities. This is demand. In a society of independent specialized producers, we don't know the extent to which society has achieved this goal until those producers exchange their products. Deviations in supply of goods from demand will obviously produce countervailing deviations in exchange-value, due to competition, etc.
This aggregate social target in the forms and quantities of goods implies a corresponding aggregate social target in the forms and quantities of labor. It is thus fair to say that the exchange of one good for another is, in a sense, the exchange of one kind of labor for another. Since the exchange of commodities is, in general, an exchange of equivalents–given that neither party wants to be cheated–these different labors must be, in some sense, equal.
In an ideal society which has achieved its aggregate social target of output (of goods and thus also of labor), long-run gravitation of supply in goods around the aggregate social target of demand thus implies a corresponding long-run gravitation of exchange-value around labor.

I still need to think more about this, but I think I'm starting to get it.

Thank you.

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I have yet to read Shaikh, but this seems a very good insight. Marx knew, for example, that these equilibrium prices, or value-centered-prices were just a pure form. He says so in chapter 5 I believe. In reality, we see prices constantly changing. The LTV only explains this "pure prices". Being that the case, it may look like the LTV is metaphysical mumbo-jumboo (this is what Joan Robinson, the prominent postkeynesian economist, thought). But without it, we still couldn't explain something as simple as the huge and constant difference between the value of a car and the value of a shoe. We really need it to have a strong theoretical base.

Correct. This is the important passage of concrete labor to abstract labor (Marx said that the discovery of this category was his most important achievement, literally). This subsumption of the concrete to the abstract is specific to capitalism; it is the law needed to "repair" the contradiction between private and social character of labor as I said (an author called Rosdolsky does a pretty good job illustrating this with Marx quotes from all of his texts in his work about Capital). Value is immaterial, and its a social relation: this means that is the social way of interconnecting our labors, of making the social division of labor work under a private property regime. Without the law of value, it couldn't work. But it has to work, and the way that it works is through the comparison of our works by the time they require. Breaking it down, I suppose that if we were in a 100% automatized economy without the need for human labor, this law wouldn't apply. But that's never been the case. Like Marx said, machines die without human maintenance.

You're welcome user

I guess that you could say that value is quantified in the production sphere, but it has to be sanctioned in the circulation sphere. Hence, you can't determine the value of a thing neither exclusively in the production sphere nor in the circulation one. You need both stages. Because until the moment that the commodity is sold, you don't know if the labor invested in it is the socially necessary. You don't know if you wasted more labor than the needed, or what. Competition in the market (in simple words, the fact that you can sell the product or not) will tell you that.

OP, you are not retarded, it is a good question. That said, the validity of the LTV does not depend on an explanation of why it's that way.

It's because there's a limited amount of labor you can use at any given time in the economy. It is the ultimate limit on production. Even nearly endless resources like crops are limited by the amount of labor you can put into them. The result is that the value of things becomes the total amount of labor put into them by the division of labor.
Imagine in early forms of trade (even barter), how people appraised each other's goods. Barring exotic goods, the standard people would have used was "did my goods take the same amount of effort to make/get as theirs? Could I make what they made with the same effort?"

I think Ricardo's examples with corn are good for this, IDK what book/chapter they're actually from though.

Reality is independent of the mind, but the law of value as a scientific model does depend on whether or not it can be rationally explained. It's not enough to empirically observe phenomena; we must be able to satisfactorily explain how they work and where they come from. I could notice that a hammer falls at 9.8 m/s^2, and it really would fall at that rate whether I noticed or not, but it is up to us (i.e. humanity) to come up with rational models that explain phenomena, and to confirm or reject them empirically; that is science.

All inputs to production are finite. What makes labor different is that it comes from people, and so it will necessarily be privileged by those who perform it. (If, for example, I find a pearl by the side of the road, I'll part with it more easily than if I had to dive for it myself.)

Can you provide any sort of source or reference? I've never read any Ricardo.

So what's gravity from, then? Why does it work that way?

The Higgs field.

value is a VERB and value requires someone to value it

ie, the value of something is what another person is willing to exchange for that item

if you value something "work" or maybe how much suffering it took to make that item it has no practical value

if you knew one item caused X amount of human suffering and the other item caused Y amount then how does that knowledge help you invest and analyze how much money or usefulness that item could do for you?

it some cases it might make sense like if you are the person paying for the time it takes to make something, but still you are not going to get more for the item than someone else values you it based on their opinion of how useful it is

and we see this sometimes in markets where you have "ethically grown" stamped on certain produce or certain brands advertise "made in america" and they might get a certain boost in sales for assuring their customers these claims are true

Usefulness of an item is purely opinion based whether it's just to sell something later when demand is high or whether it's a tool that can be used to make other things. And hording does have value because it encourages people to store things so when there is as shortage (demand increases) there now are items available to those who want or need it. For example if people keep water for emergencies then if there's an emergency they have water that they can use or sell.

Sometimes drug dealers will do this when there's lots of competition and they feel like they cant make as much money, so one drug dealer will get smart and he will hold onto his product until the other drug dealers in the neighborhood sell out and he can fill the demand between when everyone else sells out and when the next load comes in from the bulk dealers that all the other dealers are buying from, like once a week or every two weeks or whatever it is.

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subjective value theory is refuted, what people are willing to pay depends on how much time and effort they have spend to get money

labour theory of value is empirically verified


So after reading a little more of Shaikh and Sraffa, I think I've hit upon a decent starting point for my analysis. Below are my notes.

Producers Product Unit Labor-hours/unit Total labor-hours Total supply Demand per consumer Total demand30 Wheat bushel 5 60,000 12,000 bushels 150 bushels 12,000 bushels10 Mutton pound 2 20,000 10,000 pounds 125 pounds 10,000 pounds10 Pine cord 50 20,000 400 cords 5 cords 400 cords30 Iron ingot 30 60,000 2,000 ingots 25 ingots 2,000 ingots
1 bushel of wheat = 2.5 pounds of mutton = 1/10 cord of pine = 1/6 ingot of iron1 pound of mutton = 2/5 bushel of wheat = 1/25 cord of pine = 1/15 ingot of iron1 cord of pine = 10 bushels of wheat = 25 pounds of mutton = 5/3 ingots of iron1 ingot of iron = 6 bushels of wheat 15 pounds of mutton 3/5 cord of pine
6 bushels of wheat = 1 ingot of iron 15 pounds of mutton3/5 cord of pine

Sorry for the wall of text. I hope the tables came out OK. Anyway, my next step is to test the three assumptions listed in the first paragraph, and see which, when suspended, will cause value to systemically differ from labor-time. In other words, I continue the thought experiment with expanded and recessed production, inequality between supply and demand, and variations between occupations in labor-time per producer.
After that, my next step will be to examine this system under capitalist production proper, with all that entails–class, capital, profits, wages, etc. I'm going to initially assume homogeneity in the length of the working day and the wage rate (and therefore the rate of exploitation), and the organic composition of capital (and therefore the rate of profit). Then I will test those assumptions, too, and even re-test the earlier assumptions I adopted under simple commodity production.

I think I'm becoming kind of obsessive about this stuff, but I want to truly understand and critique these ideas, rather than simply memorize them and accept them.

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Seems decent enough so far, to me at least.

"Human suffering" is not a universal component of commodities; human labour-time is.
saging because I reposted to fix formatting

this economics stuff is really hard. i will stick to the manifesto

don't user, economics is the basis of marxism. Begin by the basics and do a thread here on leftypol if you need someone to explain you anything

like what. i was reading das kapital vol 1 and there is a lot of complicated stuff there

Give wage labour and capital a try.

try with what user said, wage labour and capital. If you want more conventional stuff I recommend economics by Mankiw, or macroeconomics by Mankiw and microeconomics by Hal Varian, that's what I read in college. It's neoclassical stuff but if you know absolutely zero about econ it's a good place to start, you don't have to read them from beginning to end of course

Start with this then go deep.>>2952766

Just keep reading it. It's ok if it takes you half a year. It took me like 4 months.