Saturday, May 9, 2009

Marx, Capital, Part 1, Chapter 2: Exchange

Thus far, Marx has discussed commodities, things. In chapter one, Marx discussed how commodities are the embodiment of human labor and he says that it is human labor that provides the essence of value. Value is expressed in terms of a relationship amongst commodities: one coat equals so much linen, so much wheat, or so much silver, ad infinitum for each and every thing. This exchange value betrays a social relationship among commodities. In Chapter two, Marx discusses how this social relationship takes the form of an exchange of private property by owners of private property (commodities).

Commodities cannot go to market and make exchanges on their own account. They must be exchanged by free actors. The exchange of commodities thus reflects an economic relationship between individuals as owners of commodities. What type of relationship is this? Marx says: “In order that these objects may enter into relation with each other as commodities, their guardians must place themselves in relation to one another, as persons whose will reside in those objects, and must behave in such a way that each does not appropriate the commodity of the other, and part with his own, except by means of an act done by mutual consent. They must therefore, mutually recognize in each other the rights of private proprietors.” An exchange is a contract: the free and mutual consent to exchange things between owners of private property. “We shall find,” says Marx, “that the characters who appear on the economic stage are but the personification of the economic relations that exist between them.”

It is difficult to know just what Marx means here because his language in this chapter is poetic and filled with metaphor. All commodities are owned by someone. The exchange relationship that exists between commodities defines an economic relationship between the owners of commodities. However, questions are raised more than they are answered.

The free exchange of commodities between owners of private property happens, of course, but what does it tell us? I believe Marx would say that Bill Gates is the owner of wealth that reflects the collective value produced by all who labored to create the Microsoft Empire. Gates may exchange some of his wealth for a $52 million mansion on the shores of Lake Washington. On the other hand the idea of a free exchange of commodities doesn’t tell us much about what happens with the money Gates donates to the Bill and Melinda Gates foundation. It also tells us nothing about how commodities are accumulated or wealth is amassed. Marx notes that private property can be acquired by force. He does not mention, but one should not forget, trickery, chicanery, and the unscrupulous use of monopoly power. In “Wealth and Democracy” (2002) Kevin Phillips describes how in the United States great concentrations of wealth have successively come about from (1) piracy, (2) slavery, (3) war profiteering, (4) railroad monopolies, (5) steel monopolies, (5) oil monopolies, (6) banking charters, and (7) high technology monopolies. The fact of an exchange, as such, tells us not much about how property was accumulated, or why things are valued as they are in a given exchange.


Marx again notes the qualification made earlier that labor imparts value to commodities only to the extent that the resulting product has use value for persons. But use value lies in the eye of the beholder, collectively the market. If I set up a refrigerator factory in Caracas lots of people will find my refrigerators to be of use, or desirable, which is the same thing; but if I set up this factory in Inuvik, less so. If only a few people find a commodity of use, does this mean that the labor that went into making the thing imparts less value? I think Marx would agree. But if so, isn't the value of commodities ultimately derived from demand and what the highest bidder is willing to pay, and not from the labor that went into creating the thing?

Thus far Marx has addressed commodites, their use value, their exchange value as depositories of labor, and how an exchange of commodities implies an economic relationship between the owners of commodities. But whereas all commodities are owned, not everyone owns commodities. What about the laborer who does not own commodities? There has been no talk yet of how labor should be compensated. What is the value of the labor rendered by the refrigerator factory worker in Inuvik; does the labor have no value because the commodity has no value?

Stay tuned.


  1. Actually, Marx talks about "socially necessary labour time". If it was "any labour time", then the less efficient capitalist, whose workers spend more time (ie wasteful time) to produce a given commodity would be more profitable, but we know that is not true. Instead, it is the capitalist who uses the latest technology and the most efficient work process (and hence the least socially necessary time) to get her commodity to market, is the one who can sell at a lower price and therefore most profitable.

    Another point - your example about the refrigerators in Caracas and Inuvik. I'm no expert on life in Inuvik, but if it is true that refrigerator are of no, or little "use-value", why would a profit-seeking capitalist produce socially undesirable "use-values"??? Also, if a refrigerator of some-kind is required in Inuvik, I assume, it would require a lot less socially necessary labour time to produce it.

    Let's face it, Marx (and for that matter Adam Smith) are no dummies. They have all studied economics - and come to the same conclusion that value is created by socially necessary labour. "Supply and Demand" does have a role to play in the price of a commodity, but as you know, Marx differentiates between "value" and "price" of a commodity.


  2. Thank you for commenting. Yes, as I understand it thus far, Marx holds that value comes from labor that creates use-value. He says in Chpt 1 that "If the thing is useless, so is the labor contained in it; the labor does not count as labor, and therefore creates no value." As you note, he also discusses some type of average unit of labor (skilled labor being a multiple of the base unskilled labor unit) necessary to make a product as being the measure of value.

    I'm not fully clear yet how Marx handles the distinction between price and value. I see some discussion of this coming up in chapter 3. "Value" as conceived thus far, would seem to be impossible to truly measure. I'm not yet clear on whether Marx believed this could, or should be measured, or if it matters.

    Selling refrigerators to eskimo's, of course, is a a saying usually applied in connection with salesemanship. I intended it to stand in as an example of producing an article with little use-value. Capitalists, of course, do that all the time, and they go broke over it. The example does raise a question that seems problematic for the scheme proposed thus far. The refrigerator obviously has more use-value at the equtor than at the north pole. If the use value is 10% in Inuvik vs. Caracas, I assume Marx would say the value of the labor is just 10%. Again, however, the use-value seems to be a market driven thing. Sometimes there is great demand for uselss things. E.g. see the "Barry Manilow Theory" advanced in comment to an earlier post, below. I'm waiting to see how Marx will, might address it.

    Thanks again. RN

  3. So, it turns out that when you DO purchase a refrigerator in Inuvik, you can get a rebate for buying an energy efficient one.

    And I believe the people referred to are called Inuits, not that other frozen ice cream sandwich name. So much for my analytic skills.

    "Northwest Territories

    * Up to $200 rebate if you purchase Energy Star refrigerator or front loading washer with diesel or natural gas.
    * $100 rebate if you use hydro."