The commodity law of exchange
Marx, like his predecessors in political economy, distinguished “value in use” from “value in exchange”. Value in use, or “use-value”, derives from the qualitative properties of a product that make it desirable for someone to consume.
Thus a chair, for example, has use-value because one can sit on it; by contrast, a two-legged chair has no use-value (except possibly as firewood). It is their different use-values that constitute objects as different from each other, and so objects with use-value, or use-values, are inherently heterogeneous. One way producers can meet their own needs is to consume the use-values they themselves create.Value in exchange, or exchange-value, on the other hand, derives from the fact that when each producer has the power to exchange his or her own products for those of other producers, it is possible to acquire use-values in the marketplace by offering something equivalent in exchange. Our own produced use-value is therefore “worth” so many units of some other use-value produced by someone else. In an economy where produced use-values are exchangeable as commodities, producers can meet their own needs by exchanging the use-values they themselves create for other use-values produced by other producers.
In a money economy exchanges of commodities are typically transacted indirectly through money: the producer of a commodity sells it for money and then uses the money to buy other commodities. A commodity is worth so many units of money, which is its price. Because units of money are homogeneous, qualitatively identical and differing only in quantity, so too are exchange-values expressed as prices. A theory of commodity exchange is simultaneously a theory of production, a theory of prices, and a theory of money.
Confining attention to objects that are produced to be exchanged, that is, to commodities, the problem of the theory of value is to explain what determines the exchange-value of a typical or representative commodity.
Because any commodity can be transformed into any other through sale and purchase, regarded purely as exchange-values all commodities are homogeneous, differing only in quantity.For Marx, the homogeneity of commodities as exchange-values reflects the fact that the production of any commodity requires a certain fraction of the total labour time of society. This labour time at any moment takes many different concrete forms, but labour has the capacity to adapt through training and practice to the requirements of various productive activities. It is fungible in a way that non-labour inputs are not. Underlying exchange-value is thus an amount of potentially homogeneous social labour time, social labour considered only as a quantity of (standardized or “socially necessary”) hours. That labour time is always employed in particular ways, with particular tasks required to produce particular commodities. It is this heterogeneity that produces particular usevalues, and Marx called “concrete labour” the labour involved from this perspective. That same labour considered as producing a quantity of homogeneous exchange-value expressed in terms of money, Marx called “abstract labour”. This was then the substance of value, and was measured in units of “socially necessary labour time”. Exchange-value is the form in which abstract labour appears, and since prices are expressed in monetary units, money expresses abstract labour.
Consider an equation of exchange, such as x units of commodity i are worth y units of commodity g. This is only possible because both i and g require amounts of society’s total labour; so that the value of i is expressed in terms of g. This entails that i’s value is expressed relatively in g, and g’s value is the equivalent of that of i. However, g is some particular use-value, so that it is this use-value that expresses the value of i. Hence the concrete labour producing g represents the abstract labour that produces i. This inversion was part of what Marx called the “peculiarities of the equivalent form” (Marx 1867 [1976]: ch.
1, s. 3; also Marx 1867 [1994]) on which he also based his theory of ideology, which he attributed to the “fetishism of the commodity” (Marx 1867 [1976]: ch. 1, s. 4).Following such inversion, social development selects some particular g (that has properties of homogeneity of units, portability, divisibility, storage without deterioration and so on) to act as the equivalent form of value of all other commodities, to act, that is, as the money commodity. The money commodity (for example, gold) has, like other commodities, particular use-values (as a conducting medium in electronic circuits or for capping teeth in dentistry) and acquires an additional use-value in serving as the universal equivalent form of value. With the development of a money commodity, the exchange-value of a unit of i is its price (p*), and its price is defined as the ratio of its natural price or value (λi) to the natural price or value of the money commodity g (λg).
li p* = — p λ.
(1)
Equation (1) is formulated on the basis that commodities exchange as equivalents at natural prices: equivalent exchange implies that natural prices or values are proportional to social labour times required to produce commodities, with the common factor of proportionality being the inverse of the value of the money commodity, sometimes called the monetary expression of labour time (MELT) m = ι1. Retaining this presumption for the present, then equation (1) applies to every commodity (and obviously therefore to every aggregate of commodities). Because of this universality, it could be called the commodity law of exchange. In particular, the commodity law of exchange applies to labour-power and to aggregate value added. It is through these aggregates that Marx explained the mechanism of exploitation in capitalist production. Consider each in turn.