I. I. Rubin's Essays on Marx's Theory of ValueI. I.

Rubin's Essays on Marx's Theory of Value Part II MARX'S LABOR THEORY OF VALUE Marx's critics often fling at him the reproach that he did not completely prove his labor theory of value, but merely decreed it as something obvious. Other critics have been ready to see some type of proof in the first pages of Capital, and they aimed their heavy artillery against the statements with which Marx opens his work. This is the approach of Bohm-Bawerk in his critique (Karl Marx and the Close of his System; Positive Theory of Capital).Bohm-Bawerk's arguments at first glance seem so convincing that one may boldly say that not a single later critique was formulated without repeating them. However, Bohm-Bawerk's entire critique stands or falls together with the assumptions on which it is built: namely, that the first five pages of Capital contain the only basis on which Marx built his theory of value. Nothing is more erroneous than this conception. In the first pages of Capital, Marx, by means of theanalytic method, passes from exchange value to value, and from value to labor. But the complete dialectical ground of Marx's theory of value can only be given on the basis of his theory of commodity fetishism which analyzes the general structure of the commodity economy. Only after one finds the basis of Marx's theory of value does it become clear what Marx says in the famous first chapter of Capital. Only then do Marx's theory of value as well as numerous critiques of it appear in a proper light. Only after Hilferding's work [1] did one begin to understand accurately the sociological character of Marx's theory of value. The point of departure of the labor theory of value is a determined social environment, a society with a determined production structure. This conception was often repeated by Marxists; but until Hilferding's time, no one made it the foundation-stone of the entire edifice of Marx's theory of value. Hilferding deserves great praise for this, but unfortunately he confined himself to a general treatment of the problems of the theory of value, and did not systematically present its basis. As was shown in Part I, on commodity fetishism, the central insight of the theory of fetishism is not that political economy discloses production relations among people behind material categories, but that in a commodity-capitalist economy, these production relations among people necessarily acquire a material form and can be realized only in this form. The usual short formulation of this theory holds that the value of the commodity depends on the quantity of labor socially necessary for its production; or, in a general formulation, that labor is hidden behind, or contained in, value: value = "materialized" labor. It is more accurate to express the theory of value inversely: in the commodity-capitalist economy,

production work relations among people necessarily acquire the form of the value of things, and can appear only in this material form; social labor can only be expressed in value. Here the point of departure for research is not value but labor, not the transactions of market exchange as such, but the production structure of the commodity society, the totality of production relations among people. The transactions of market exchange are then the necessary consequences of the internal structure of the society; they are one of the aspects of the social process of production. The labor theory of value is not based on an analysis of exchange transactions as such in their material form, but on the analysis of those social production relations expressed in the transactions. Footnotes [1] "Bohm-Bawerks Marx-Kritik," Marx-Studien, Wien, 1904, and the previously cited article, "Zur Problemstellung der theoretischen Oekonomie bei Karl Marx," Die Neue Zeit, Stuttgart, 1904.

Chapter Eight BASIC CHARACTERISTICS OF MARX'S THEORY OF VALUE

Before approaching Marx's theory of value in detail, we consider it necessary to describe its main characteristics. If this is not done, the presentation of the separate aspects and individual problems of the theory of value (which are very complex and interesting) can conceal from the reader the main ideas on which the theory is based and which impregnate every part of it. Obviously the general characteristics of Marx's theory which we present in this chapter can be fully developed and grounded only in the following chapters. On the other hand, in the following chapters the reader will come across repetitions of the ideas expressed in this chapter, though presented in greater detail. All the basic concepts of political economy express, as we have seen, social production relations among people. If we approach the theory of value from this point of view, then we face the task of demonstrating that value: 1) is a social relation among people, 2) which assumes a material form and 3) is related to the process of production. At first glance value, as well as other concepts of political economy, seems to be a property of things. Observing the phenomena of exchange we can see that each thing on the market exchanges for a determined quantity of any other thing, or - in conditions of developed exchange - it exchanges for a given quantity of money (gold) for which one can buy any other thing on

the market (within the limits of this sum, of course). This sum of money, or price of things, changes almost every day, depending on market fluctuations. Today there was a shortage of cloth on the market and its price went up 3 roubles and 20 kopeks per arshin [1 arshin = 28 inches-tr.]. In one week the quantity of cloth supplied to the market exceeds the normal supply, and the price falls to 2 roubles 75 kopeks per arshin. These everyday fluctuations and deviations of prices, if taken over a longer period of time, oscillate around some average level, around some average price which is, for example, 3 roubles per arshin. In capitalist society this average price is not proportional to the labor value of the product, i.e., to the quantity of labor necessary for its production, but is proportional to the socalled "price of production," which equals the costs of production for the given product plus the average profit on the invested capital. However, to simplify the analysis we can abstract the fact that the cloth is produced by the capitalist with the help of wage laborers. Marx's method, as we have seen above, consists of separating and analyzing individual types of production relations which only in their entirety give a picture of the capitalist economy. For the time being we are concerned only with one basic type of production relation among people in a commodity economy, namely the relation among people as commodity producers who are separate and formally independent from each other. We know only that the cloth is produced by the commodity producers and is taken to the market to be exchanged or sold to other commodity producers. We are dealing with a society of commodity producers, with a so-called "simple commodity economy" as opposed to a more complex capitalist economy. In conditions of a simple commodity economy the average prices of products are proportional to their labor value. In other words, value 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. Thus a state of equilibrium would be established among the branches of production. Every society based on a developed division of labor necessarily assumes a given allocation of social labor among the various branches of production.Every system of divided labor is at the same time a system of distributed labor. In the primitive communistic society, in the patriarchal peasant family, or in socialist society, the labor of all the members of a given economic unit is allocated in advance, and consciously, among the individual tasks, depending on the character of the needs of the members of the group and on the level of productivity of labor. In a commodity economy, no one controls the distribution of labor among the individual branches of production and the individual enterprises. No clothmaker knows how much cloth is needed by society at a given time nor how much cloth is produced at a given time in all cloth-making enterprises. The production of cloth thus either outruns the demand (overproduction) or lags behind it (underproduction). In other words, the quantity of social labor which is expended on the production of cloth is either too large or not large enough. Equilibrium between cloth production and other branches of production is

constantly disturbed. Commodity production is a system of constantly disturbed equilibrium. But if this is so, then how does the commodity economy continue to exist as a totality of different branches of production which complement each other? The commodity economy can exist only because each disturbance of equilibrium provokes a tendency for its reestablishment. This tendency to reestablish equilibrium is brought about by means of the market mechanism and market prices. In the commodity economy, no commodity producer can direct another to expand or contract his production. Through their actions in relation to things some people affect the working activity of other people and induce them to expand or contract production (though they are themselves not aware of this). The overproduction of cloth and the resulting fall of price below value induce clothmakers to contract production; the inverse is true in case of underproduction. The deviation of market prices from values is the mechanism by means of which the overproduction and underproduction is removed and the tendency toward the reestablishment of equilibrium among the given branches of production of the national economy is set up. The exchange of two different commodities according to their values corresponds to the state of equilibrium among two given branches of production. In this equilibrium, all transfer of labor from one branch to another comes to an end. But if this happens, then it is obvious that the exchange of two commodities according to their values equalizes the advantages for the commodity producers in both branches of production, and removes the motives for transfer from one branch to another. In the simple commodity economy, such an equalization of conditions of production in the various branches means that a determined quantity of labor used up by commodity producers in different spheres of the national economy furnishes each with a product of equal value. The value of commodities is directly proportional to the quantity of labor necessary for their production. If three hours of labor are on the average necessary for the production of an arshin of cloth, given a certain level of technique (the labor spent on raw materials, instruments of production, etc., is also counted), and 9 hours of labor are necessary for the production of a pair of boots (assuming that the labor of the clothmaker and the bootmaker are of equal skill), then the exchange of 3 arshins of cloth for one pair of boots corresponds to the state of equilibrium between both given sorts of labor. An hour of labor of the bootmaker and an hour of labor of the clothmaker are equal to each other, each of them representing an equal share of the total labor of society distributed among all the branches of production. Labor, which creates value, thus appears not only as quantitatively distributed labor, but also as socially equalized (or equal) labor, or more briefly, as "social" labor which is understood as the total mass of homogeneous, equal labor of the entire society. Labor has these social characteristics not only in a commodity economy but also, for example, in a socialist economy. In a socialist economy organs of labor-accounting

examine the labor of individuals in advance as part of the united, total labor of society, expressed in conventional social labor-units. However, in the commodity economy the process of socialization, equalization and distribution of labor is carried out in a different manner. The labor of individuals does not directly appear as social labor. It becomes social only because it is equalized with some other labor, and this equalization of labor is carried out by means of exchange. In exchange the concrete use values and the concrete forms of labor are completely abstracted. Thus labor, which we earlier considered as social, as socially equalized and quantitatively distributed, now acquires a particular qualitative and quantitative characteristic which is only inherent in a commodity economy: labor appears as abstract and socially necessary labor. The value of commodities is determined by the socially necessary labor, i.e., by the quantity of abstract labor. But if value is determined by the quantity of labor which is socially necessary for the production of a unit of output, then this quantity of labor in turn depends on the productivity of labor. The increase of productivity of labor decreases the socially necessary labor and lowers the value of a unit of goods. The introduction of machines, for example, makes possible the production of a pair of boots in 6 hours instead of 9 hours which were necessary earlier. In this way their value is lowered from 9 roubles to 6 roubles (if one assumes that an hour of a bootmaker's labor, which we assume to be average labor, creates a value of 1 rouble). The cheaper boots begin to penetrate into the countryside, chasing out bast sandals and homemade boots. The demand for shoes increases and shoe production expands. In the national economy a redistribution of productive forces takes place. 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. The theory of value analyzes the laws of exchange, the laws of the equalization of things on the market, only if these laws are related to the laws of production and distribution of labor in the commodity economy. The

terms of exchange between any two commodities (we are considering average terms of exchange, and not accidental market prices) correspond to a given level of productivity of labor in the branches which manufacture these goods. The equalization of various concrete forms of labor as components of the total social labor, allocated among various branches, takes place through the equalization of things, i.e., the products of labor as values. Thus the current understanding of the theory of value as a theory which is confined to exchange relations among things is erroneous. The equilibrium of labor [allocation] behind the regularity in the equalization of things [in the process of exchange]. It is also incorrect to view Marx's theory as an analysis of relations between labor and things, things which are products of labor. The relation of labor to things refers to a given concrete form of labor and a given, concrete thing. This is a technical relation which is not, in itself, the subject of the theory of value. The subject matter of the theory of value is the interrelations of various forms of labor in the process of their distribution, which is established through the relation of exchange among things, i.e., products of labor. Thus Marx's theory of value is completely consistent with the above-given general methodological postulates of his economic theory, which does not analyze relations among things nor relations of people with things, but relations among people who are connected to each other through things. Until now we have considered value mainly from its quantitative aspect. We dealt with the magnitude of value as the regulator of the quantitative distribution of social labor among individual branches of production. In this analysis we were led to the concept of abstract labor which was also treated predominantly from its quantitative aspect, namely as socially necessary labor. Now we must briefly examine the qualitative aspect of value. According to Marx, value is not only a regulator of the distribution of social labor, but also an expression of the social production relations among people. From this point of view, value is a social form which is acquired by the products of labor in the context of determined production relations among people. From value seen as a quantitatively determined magnitude, we must pass to value which we treat as a qualitatively determined social form. In other words, from the theory of the "magnitude of value" we must pass to the theory of the "form of value" (Wertform). [1] As we have already pointed out, in a commodity economy value plays the role of regulating the distribution of labor. Does this role of value originate in the technical or social characteristics of the commodity economy, i.e., from the state of its productive forces or from the form of its production relations among people? The question has only to be asked in order to be answered in terms of the social characteristics of the commodity economy. Every distribution of social labor does not give the product of labor the form of value, but only that distribution of labor which is not organized directly by society, but is indirectly regulated through the market and the exchange of things. In a primitive communistic community, or in a feudal village, the product of labor has "value" (tsennost) in the sense of utility, use value, but

it does not have "value" (stoimost). The product acquires value (stoimost) only in conditions where it is produced specifically for sale and acquires, on the market, an objective and exact evaluation which equalizes it (through money) with all other commodities and gives it the property of being exchangeable for any other commodity. In other words, a determined form of economy (commodity economy), a determined form of organization of labor through separate, privately-owned enterprises, are assumed. Labor does not, in itself, give value to the product, but only that labor which is organized in a determined social form (in the form of a commodity economy). If producers are related to each other as formally independent organizers of economic activity and as autonomous commodity producers, then the values of their labor confront each other on the market as "values." The equality of commodity producers as organizers of individual economic units and as contractors of production relations of exchange, is expressed in equality among the products of labor as values. The value of things expresses a determined type of production relations among people. If the product of labor acquires value only in a determined social form of organization of labor, then value does not represent a "property" of the product of labor, but a determined "social form" or "social function" which the product of labor fulfills as a connecting link between dissociated commodity producers, as an "intermediary" or as a "bearer" of production relations among people. Thus at first glance value seems to be simply a property of things. When we say: "a painted, round oak table costs, or has the value of 25 roubles," it can be shown that this sentence gives information on four properties of the table. But if we think about it, we will be convinced that the first three properties of the table are radically different from the fourth. The properties characterize the table as a material thing and give us determined information on the technical aspects of the carpenter's labor. A man who has experience with these properties of the table can get a picture of the technical side of production, he can get an idea of the raw materials, the accessories, the technical methods and even the technical skill of the carpenter. But no matter how long he studies the table he will not learn anything about the social (production) relations between the producers of the table and other people. He cannot know whether or not the producer is an independent craftsman, an artisan, a wage laborer, or perhaps a member of a socialist community or an amateur carpenter who makes tables for personal use. Characteristics of the product expressed by the words: "the table has the value of 25 roubles" are of a completely different nature. These words show that the table is a commodity, that it is produced for the market, that its producer is related to other members of society by production relations among commodity owners, that the economy has a determined social form, namely the form of commodity economy. We do not learn anything about the technical aspects of the production or about the thing itself, but we learn something about the social form of the production and about the people who take part in it. This means that "value" (stoimost)does not characterize things, but human relations in which things are produced. It is not a property of things but a

social form acquired by things due to the fact that people enter into determined production relations with each other through things. Value is a "social relation taken as a thing," a production relation among people which takes the form of a property of things. Work relations among commodity producers or social labor are "materialized" and "crystallized" in the value of a product of labor. This means that a determined social form of organization of labor is consistent with a particular social form of product of labor. "Labor, which creates (or more exactly, determines, seztende) exchange value, is a specific social form of labor." It "creates a determined social form of wealth, exchange value" [2] (Italics added). The definition of value as the expression of production relations among people does not contradict the definition of value as an expression of abstract labor which we gave earlier. The difference lies only in the fact that earlier we analyzed value from its quantitative aspect (as a magnitude), and now from its qualitative aspect (as a social form). Consistently with this, abstract labor was presented earlier in terms of its quantitative side, and is now being treated in terms of its qualitative side, namely as social labor in its specific form which presupposes production relations among people as commodity producers. Marx's theory of the "form of value" (i.e., of the social form which the product of labor assumes) is the result of a determined form of labor. This theory is the most specific and original part of Marx's theory of value. The view that labor creates value was known long before Marx's time, but in Marx's theory it acquired a completely different meaning. Marx carried through a precise distinction between the material-technical process of production and its social forms, between labor as the totality of technical methods (concrete labor) and labor seen from the standpoint of its social forms in the commodity-capitalist society (abstract or human labor in general). The specific character of the commodity economy consists of the fact that the material-technical process of production is not directly regulated by society but is directed by individual commodity producers. 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. Actually, since commodity production is oriented to exchange already during the process of production, the commodity producer already in the process of direct production, before the act of exchange, equalizes his product with a determined sum of value (money), and thus also his concrete labor with a determined quantity of abstract labor. But, first of all, this equalization of labor carries with it a preliminary character "represented in consciousness."

The equalization must still be realized in the actual act of exchange. Secondly, even in its preliminary form, the equalization of labor, even though it precedes the act of exchange, is carried out through an equalization of things as values "represented in consciousness." However, since the equalization of labor through the equalization of things is a result of the social form of the commodity economy in which there is no direct social organization and equalization of labor, abstract labor is a social and historical concept. Abstract labor does not express a psychological equality of various forms of labor, but a social equalization of different forms of labor which is realized in the specific form of equalization of the products of labor. The special character of Marx's theory of value consists of the fact that it explained precisely the kind of labor that creates value. Marx "analyzed labor's value-producing property and was the first to ascertain what labor it was that produced value, and why and how it did so. He found that value was nothing but congealed labor of this kind." [3] It is precisely this explanation of the "two-fold character of labor" which Marx considered the central part of his theory of value. [4] Thus the two-fold character of labor reflects the difference between the material-technical process of production and its social form. This difference, which we explained in the chapter on commodity fetishism, is the basis of Marx's entire economic theory, including the theory of value. This basic difference generates the difference between concrete and abstract labor, which in turn is expressed in the opposition between use value and value. In Chapter 1 ofCapital, Marx's presentation follows precisely the opposite order. He starts his analysis with market phenomena which can be observed, with the opposition between use and exchange value. From this opposition, which can be seen on the surface of phenomena, he seems to dive below toward the two-fold character of labor (concrete and abstract). Then at the end of Chapter 1, in the section on commodity production, he reveals the social forms which the materialtechnical process of production assumes. Marx approaches human society by starting with things, and going through labor. He starts with things which are visible and moves to phenomena which have to be revealed by means of scientific analysis. Marx uses this analytical method in the first five pages of Capital in order to simplify his presentation. But the dialectical course of this thought must be interpreted in the reverse order. Marx passes from the difference between the process of production and its social form, i.e., from the social structure of the commodity economy, to the two-fold character of labor treated from its technical and social aspects, and to the two-fold nature of the commodity as use value and exchange value. A superficial reading of Capital may lead one to think that by opposing use value and exchange value, Marx designated a property of things themselves (such is the interpretation of Bohm-Bawerk and other critics of Marx). Actually the problem is the difference between the "material" and the "functional" existence of things, between the product of labor and its social form, between things and the production relations among people "coalesced" with

things, i.e., production relations which are expressed by things. Thus what is revealed is an inseparable connection between Marx's theory of value and its general, methodological bases formulated in his theory of commodity fetishism. Value is a production relation among autonomous commodity producers; it assumes the form of being a property of things and is connected with the distribution of social labor. Or, looking at the same phenomenon from the other side, value is the property of the product of labor of each commodity producer which makes it exchangeable for the products of labor of any other commodity producer in a determined ratio which corresponds to a given level of productivity of labor in the different branches of production. We are dealing with a human relation which acquires the form of being a property of things and which is connected with the process of distribution of labor in production. In other words, we are dealing with reified production relations among people. The reification of labor in value is the most important conclusion of the theory of fetishism, which explains the inevitability of "reification" of production relations among people in a commodity economy. The labor theory of value did not discover the material condensation of labor (as a factor of production) in things which are the products of labor; this takes place in all economic formations and is the technical basis of value but not its cause. The labor theory of value discovered the fetish, the reified expression of social labor in the value of things. Labor is "crystallized" or formed in value in the sense that it acquires the social "form of value." The labor is expressed and "reflected" (sich darstellt). The term"sich darstellen" is frequently used by Marx to characterize the relationship between abstract labor and value. One can only wonder why Marx's critics did not notice this inseparable connection between his labor theory of value and his theory of the reification or fetishization of the production relations among people. They understood Marx's theory of value in a mechanical-naturalistic, not in a sociological, sense. Thus Marx's theory analyzes the phenomena related to value from qualitative and quantitative points of view. Marx's theory of value is built on two basic foundations: 1) the theory of the form of value as a material expression of abstract labor which in turn presupposes the existence of social production relations among autonomous commodity producers, and 2) the theory of the distribution of social labor and the dependence of the magnitude of value on the quantity of abstract labor which, in turn, depends on the level of productivity of labor. These are two sides of the same process: the theory of value analyzes the social form of value, the form in which the process of distribution of labor is performed in the commodity capitalist economy. "The form in which this proportional distribution of labor operates, in a 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." [5] Thus value appears, qualitatively and quantitatively, as an expression of abstract labor. Through abstract labor, value is at the same time connected with the social form of the social process of production and

with its material-technical content. This is obvious if we remember that value, as well as other economic categories, does not express human relations in general, but particularly production relations among people. When Marx treats value as the social form of the product of labor, conditioned by a determined social form of labor, he puts the qualitative, sociological side of value in the foreground. When the process of distribution of labor and the development of productivity of labor is carried out in a given social form, when the "quantitatively determined masses of the total labor of society" [6](subsumed under the law of proportional distribution of labor) are examined, then the quantitative (one may say, mathematical) side of the phenomena which are expressed through value, becomes important. The basic error of the majority of Marx's critics consists of: 1) their complete failure to grasp the qualitative, sociological side of Marx's theory of value, and 2) their confining the quantitative side to the examination of exchange ratios, i.e., quantitative relations of value among things; they ignored the quantitative interrelations among the quantities of social labor distributed among the different branches of production and different enterprises, interrelations which lie at the basis of the quantitative determination of value. We have briefly examined two aspects of value: qualitative and quantitative (i.e., value as a social form and the magnitude of value). Each of these analytical paths leads us to the concept of abstract labor which in turn (like the concept of value) appeared before us either primarily in terms of its qualitative side (social form of labor), or in terms of its quantitative side (socially-necessary labor). Thus we had to recognize value as the expression of abstract labor in terms of its qualitative and its quantitative sides. Abstract labor is the "content" or "substance" which is expressed in the value of a product of labor. Our task is also to examine value from this standpoint, namely from the standpoint of its connection with abstract labor as the "substance" of value. As a result we come to the conclusion that complete knowledge of value, which is a highly complex phenomenon, requires thorough examination of value in terms of three aspects: magnitude of value, form of value and substance (content) of value. One may also say that value must be examined: 1) as a regulator of the quantitative distribution of social labor, 2) as an expression of social production relations among people, and 3) as an expression of abstract labor. This three-fold division will help the reader follow the order of our further explanation. First of all, we must treat the entire mechanism which connects value and labor. Chapters Nine to Eleven are devoted to this problem. In Chapter Nine, value is considered as a regulator of the distribution of labor. In Chapter Ten, value is treated as an expression of production relations among people, and in Chapter Eleven it is treated from the standpoint of its relation with abstract labor. Only such thorough analysis of the mechanism which connects value and labor in its entirety can give us the foundations of

Marx's theory of value (this is why the content of Chapters Nine to Eleven can be considered the foundation of the labor theory of value). This analysis prepares us for an analysis of the component parts of this mechanism: 1) value which is created by labor, and 2) labor which creates value. Chapter Twelve is devoted to an analysis of value treated in terms of its form, content (substance) and magnitude. Finally, chapters Thirteen to Sixteen present an analysis of labor (which creates value) in terms of the same three aspects. Since value is an expression of social relations among people, we must first of all give a general characterization of social labor (Chapter Thirteen). In a commodity economy, social labor acquires a more precise expression in the form of abstract labor which is the "substance" of value (Chapter Fourteen). The reduction of concrete labor to abstract labor implies the reduction of skilled labor to simple labor (Chapter Fifteen), and thus the theory of skilled labor is a completion of the theory of abstract labor. Finally, the quantitative aspect of abstract labor appears in the form of socially necessary labor (Chapter Sixteen). Footnotes [1] By form of value we do not mean those various forms which value assumes in the course of its development (for example, elementary form, expanded form, and so on), but value conceived from the standpoint of its social forms, i.e., value as form. [2] Kritik der politischen Oekonomie, p. 13. [3] F. Engels, "Preface" to Volume II of Capital, p. 16. (Italics by Engels.) [4] Capital, I, p. 41; Letters of Marx and Engels (Russian translation by V. Adoratski, 1923, p. 168). [5] "Letter of Marx to L. Kugelmann, July 11, 1868" in Karl Marx and Frederick Engels, Selected Works, Moscow: Foreign Languages Publishing House, 1962, Volume II, p. 461. (Marx's italics.) 6 [6] Ibid. Chapter Nine VALUE AS THE REGULATOR OF PRODUCTION

After the publication of Volume I of Capital, Kugelmann told Marx that in the opinion of many readers, Marx had not proved the concept of value. In the previously cited letter of July 11, 1868, Marx responded quite angrily to this objection: "Every child knows that 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

require 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 form in which it appears, 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 operate. And the form in which this proportional distribution of labor operates, in a 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." [1] Here Marx mentioned one of the basic foundations of his theory of value. In the commodity economy, no one consciously supports or regulates the distribution of social labor among the various industrial branches to correspond with the given state of productive forces. Since individual commodity producers are autonomous in the management of production, the exact repetition and reproduction of an already given process of social production is completely impossible. Furthermore, proportional expansion of the process is impossible. Since the actions of the separate commodity producers are not connected or constant, daily deviations in the direction of excessive expansion or contraction of production are inevitable. If every deviation tended to develop uninterruptedly, then the continuation of production would not be possible; the social economy, based on a division of labor, would break down. In reality every deviation of production, whether up or down, provokes forces which put a stop to the deviation in the given direction, and give birth to movements in the opposite direction. Excessive expansion of production leads to a fall of prices on the market. This leads to a reduction of production, even below the necessary level. The further reduction of production stops the fall of prices. Economic life is a sea of fluctuating motion. It is not possible to observe the state of equilibrium in the distribution of labor among the various branches of production at any one moment. But without such a theoretically conceived state of equilibrium, the character and direction of the fluctuating movement cannot be explained. The state of equilibrium between two branches of production corresponds to the exchange of products on the basis of their values. In other words, this state of equilibrium corresponds to the average level of prices. This average level is a theoretical conception. The average prices do not correspond to the actual movements of concrete market prices, but explain them. This theoretical, abstract formula of the movement of prices is, in fact, the "law of value." From this it can be seen that every objection to the theory of value which is based on the fact that concrete market prices do not coincide with theoretical "values," is nothing more than a misunderstanding. Total agreement between market price and value would mean the elimination of the unique regulator which prevents different branches of the social economy from moving in opposite directions. This would lead to a breakdown of the economy. "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" (C., I, p. 102). A given level of market prices, regulated by the law of value, presupposes a given distribution of social labor among the individual branches of production, and modifies this distribution in a given direction. In one section, Marx speaks of the "barometrical fluctuations of the market prices" (C., I, p. 356). This phenomenon must be supplemented. The fluctuations of market prices are in reality a barometer, an indicator of the process of distribution of social labor which takes place in the depths of the social economy. But it is a very unusual barometer; a barometer which not only indicates the weather, but also corrects it. One climate can replace another without an indication on a barometer. But one phase of the distribution of social labor replaces another only through the fluctuation of market prices and under their pressure. If the movement of market prices connects two phases of the distribution of labor in the social economy, we are right if we assume a tight internal relation between the working activity of economic agents and value. We will look for the explanation of these relations in the process of social production, i.e., in the working activity of people, and not in phenomena which lie outside the sphere of production or which are not related to it by a permanent functional connection. For example, we will not look for an explanation in the subjective evaluations of individuals or in mathematical interrelations of prices and quantities of goods if these interrelations are treated as given and isolated from the process of production. The phenomena related to value can only be grasped in close relation with the working activity of society. The explanation of value must be sought in social "labor." This is our first and most general conclusion. The role of value as the regulator of the distribution of labor in society was explained by Marx not only in his letter to Kugelmann, but also in various sections of Capital. Perhaps these observations are presented in their most developed form in Chapter 12, section 4 of the first volume of Capital[Chapter 14, section 4, in the English translation] (the section on the "Division of Labor and Manufacture"): "While within the workshop, the iron law of proportionality subjects definite numbers of workmen to definite functions, in the society outside the workshop, chance and caprice have full play in distributing the producers and their means of production among the various branches of industry. The different spheres of production, it is true, constantly tend to an equilibrium: for, on the one hand, while each producer of a commodity is bound to produce a use-value, to satisfy a particular social want, and while the extent of these wants differs quantitatively, still there exists an inner relation which settles their proportions into a regular system, and that system one of spontaneous growth; and, on the other hand, the law of the value of commodities ultimately determines how much

of its disposable working-time society can expend on each particular class of commodities. But this constant tendency to equilibrium, of the various spheres of production, is exercised only in the shape of a reaction against the constant upsetting of this equilibrium. The a priori system on which the division of labor, within the workshop, is regularly carried out, becomes in the division of labor within the society, an a posteriori, nature-imposed necessity, controlling the lawless caprice of the producers, and perceptible in the barometrical fluctuations of the market-prices" (C, I, pp. 355-356). The same idea is presented by Marx in Volume III: "The distribution of this social labor and the mutual supplementing and interchanging of its products, the subordination under, and introduction into, the social mechanism, are left to the accidental and mutually nullifying motives of individual capitalists... Only as an inner law, vis-a-vis the individual agents, as a blind law of nature, does the law of value exert its influence here and maintain the social equilibrium of production amidst its accidental fluctuations" (C., III, p. 880). Thus without a proportional distribution of labor among the various branches of the economy, the commodity economy cannot exist. But this proportional distribution of labor can only be realized if the profound internal contradictions which lie at the very basis of the commodity society are overcome. On one hand, the commodity society is unified into a single social economy by means of the division of labor. Individual parts of this economy are closely related to each other and influence each other. On the other hand, private ownership and autonomous economic activity of individual commodity producers shatter the society into a series of single, independent economic units. This shattered commodity society "becomes a society only through exchange, which is the single economic process known to the economy of this society." [2]The commodity producer is formally autonomous. He acts according to his own one-sided judgment, guided by his own interest as he conceives it. But due to the process of exchange he is related to his co-negotiator (buyer or seller) and through him he is indirectly connected to the entire market, i.e., with the totality of buyers and sellers, in conditions of competition which tend to reduce market terms to the same level. The production connection between individual commodity producers in the same branch of production is created through exchange, through the value of the product of labor. Such a connection is also created between different branches of production, between different places in the country, and between different countries. This connection does not only mean that commodity producers exchange with one another, but also that they become socially related to each other. Since they are connected in exchange through the products of labor, they also become connected in their productive processes, in their working activity, because in the process of direct production they mUst take into account the presumed conditions on the market. Through exchange and the value of commodities, the working activity of some commodity producers affects the working activity of others, and causes determined modifications. On the other hand, these

modifications influence the working activity itself. Individual parts of the social economy adjust to each other. But this adjustment is only possible if one part influences another through the movement of prices on the market, a movement which is determined by the "law of value." In other words, it is only through the "value" of commodities that the working activity of separate independent producers leads to the productive unity which is called a social economy, to the interconnections and mutual conditioning of the labor of individual members of society. Value is the transmission belt which transfers the movement of working processes from one part of society to another, making that society a functioning whole. Thus we face the following dilemma: in a commodity economy where the working activity of individuals is not regulated and is not subjected to direct mutual adjustment, the productive-working connection between individual commodity producers can either be realized through the process of exchange, in which the products of labor are equalized as values, or it cannot be realized at all. But the interconnection between the individual parts of the social economy is an obvious fact. This means that the explanation of this fact must be sought in the movement of the values of commodities. Behind the movement of value, we must uncover the interrelations between the working activities of individuals. Thus we confirm the connection between the phenomena related to value and the working activity of people. We confirm the general connection between "value" and "labor." Here our starting point is not value, but labor. It is erroneous to represent the matter as if Marx had started with the phenomena related to value in their material expression and, analyzing them, had come to the conclusion that the common property of exchanged and evaluated things can only be labor. Marx's train of thought moves precisely in the opposite direction. In the commodity economy, the labor of individual commodity producers, which directly has the form of private labor, can acquire the character of social labor, i.e., can be subjected to the process of mutual connection and coordination, only through the "value" of the products of labor. Labor as a social phenomenon can only be expressed in "value." The specific character of Marx's labor theory of value lies in the fact that Marx does not base his theory on the properties of value, i.e., on the acts of equalization and evaluation of things, but on the properties of labor in the commodity economy, i.e., on the analysis of the working structure and production relations of labor. Marx himself noted this specific character of his theory when he said: "Political Economy has indeed analyzed, however incompletely, value and its magnitude, and has discovered what lies beneath these forms. But it has never once asked the question why labor is represented by the value of its product and labor-time by the magnitude of that value" (C., I, p. 801 italics by I.R.). Starting with the working activity of people, Marx showed that in a commodity economy this activity inevitably has the form of the value of products of labor. Critics of Marx's theory of value are particularly opposed to the "privileged" position which is given to labor in this theory. They cite a long list of factors

and conditions which are modified when the prices of commodities on the market change. They question the basis according to which labor is isolated from this list and placed in a separate category. To this we must answer that the theory of value does not deal with labor as a technical factor of production, but with the working activity of people as the basis of the life of society, and with the social forms within which that labor is carried out. Without the analysis of the productive-working relations of society, there is no political economy. This analysis shows that, in a commodity economy, the productive-working connection between commodity producers can only be expressed in a material form, in the form of the value of products of labor. One may object that our view of the internal causal connection between value and labor (a causal connection which necessarily follows from the very structure of the commodity economy) is too general and undoubtedly will be questioned by critics of Marx's theory of value. We will see below that the formulation of the labor theory of value which we give now in its most general form will later acquire a more concrete character. But in this general formulation, the presentation of the problem of value excludes, in advance, a whole series of theories and condemns to failure an entire series of attempts. Concretely, theories seeking the causes which determine value and its changes in phenomena which are not directly connected with the working activity of people, with the process of production, are excluded in advance (for example, the theory of the Austrian school, which starts with the subjective evaluations of individual subjects isolated from the productive process and from the concrete social forms in which this process is carried out). No matter how keen an explanation was given by such a theory, no matter how successfully it discovered certain phenomena in the change of prices, it suffers from the basic error which assures all its special successes in advance: it does not explain the productive mechanism of contemporary society nor the conditions for its normal functioning and development. By pulling value, the transmission belt, out of the productive mechanism of the commodity economy, this theory deprives itself of any possibility of grasping the structure and motion of this mechanism. We must determine the connection between valueand labor not only to understand the phenomena related to "value," but in order to understand the phenomenon "labor" in contemporary society, i.e., the possibility of unity of the productive process in a society which consists of individual commodity producers. Footnotes [1] Marx's letter to L. Kugelmann, July 11, 1868, in Karl Marx and Frederick Engels, Selected Works in Two Volumes, Volume II, Moscow: Foreign Languages Publishing House, 1962, p. 461. [2] Rudolf Hilferding, Finanzkapital (Russian edition, 1923, p. 6).