Value and Price in Marx

All theories, however abstractly formulated, have associated preconceptions, or visions, which determine what it is that the theory is supposed to explain. Often this larger vision is implicit, having to be teased out; generally it is based on a set of priors involving beliefs, a world view, which shapes what the theory can and cannot explain.

Smith and Ricardo had talked in terms of social classes. Smith had often emphasized the role of power in determining the distribution of income as wages, rent and profits, and Ricardo had seen the interests of landowners and capitalists as opposed to one another (the protective tariffs known as the Corn Laws were a dominating theme in British politics in the first half of the nineteenth century). However, Smith and Ricardo had no conception of class other than defined through the receipt of a type of income. Neither had seen the antagonistic relation between those who owned and controlled the means of production and those who did not as the overarching perspective it assumed in Marx.

How was such antagonism compatible with the notion that society was non- anarchically self-organized? In one way, Marx followed in the footsteps of Smith, although he put it in different terms.

[T]he amounts of products corresponding to the differing amounts of needs demand differing and quantitatively determined amounts of society’s aggregate labour. It is self-evident that this necessity of the distribution of social labour in specific proportions is certainly not abolished by the specific form of social production; it can only change its form of manifestation. Natural laws cannot be abolished at all. The only thing that can change, under historically differing condi­tions, is the form in which those laws assert themselves. And the form in which this proportional distribution of labour asserts itself in a state of society in which the interconnection of social labour expresses itself as the private exchange of the individual products of labour, is precisely the exchange value of these products. (Marx 1868 [1988]: 68, bold and emphases in original)

However, at the same time, Marx considered that there would be periodic ruptures in the social fabric. For class relations were defined in terms of property relations, and the development of technology (which he called the “forces of production”) by these class relations periodically rendered existing property relations redundant. A social revolu­tion then occurred, overthrowing the basis of existing class relations, and establishing new relations more compatible with the forces of production. An analogy might be a landscape which appears peaceful, harmonious and at rest; and yet if this landscape rests on tectonic plates moving remorselessly against each other, then, irregularly and unpre- dictably, these movements result in earthquakes which violently recast the landscape. So Marx both retained the eighteenth-century vision of society and its economy as a social organism, but at the same time he also transformed it into something with evolutionary and path-dependent dynamics, by changing the focus from self-seeking individuals to antagonistic classes.

This transformation presents a challenge.

[A] very Eden of the innate rights of man. It is the exclusive realm of Freedom, Equality, Property and Bentham. Freedom, because both buyer and seller of a commodity... are deter­mined only by their own free will. They contract as free persons, who are equal before the law. Their contract is the final result in which their joint will finds a common legal expression. Equality, because each enters into relation with the other, as with a simple owner of commodi­ties, and they exchange equivalent for equivalent. Property because each disposes only of what is his own. And Bentham because each looks only to his own advantage. The only force bring­ing them together, and putting them into relation with each other, is the selfishness, the gain and the private interest of each. Each pays heed to himself only, and no one worries about the others. And precisely for that reason... they all work together to their mutual advantage, for the common weal, and in the common interest. (Marx 1867 [1976]: 280)

This vision is extraordinarily powerful, indeed so powerful that the distance between it and the vision underlying contemporary economic theory more than a century later, for all its formalization, is negligible.

Marx’s approach to this Eden of unfettered free markets was not to begin with the chaotic appearances of actual markets, but rather to establish a set of abstract general analytical relations (drawn from the detailed observation of real historical processes). This he called “the method of inquiry”, whose purpose was “to appropriate the material in detail, to analyze its different forms of development and to track down their inner connection” (Marx 1867 [1976]: 102).

Exchange value, value and price were Marx’s organizing abstractions, abstractions that were developed on the basis of their concrete reality in the universalization of com­modity purchase and sale. For Marx, as for his predecessors, it was through exchange value, value and price that the “anarchy of the market” organized the distribution of the labour resources of society. However, it did this via antagonistic class relations. Marx’s approach to the Eden of appearances was to develop the abstract relations of exchange value, value and price to show that capitalism’s “Freedom, Equality, Property and Bentham” were all founded on coercive class relations. In this, individuals were only treated explicitly in so far as they could be considered the “bearers” of capitalist relations.