Sunday, May 24, 2009

Part I, Chapter 3: Money, or the Circulation of Commodities

Section 1. The Measure of Values

Money can’t buy you love, and what’s that diamond ring worth, anyway? So what comes of the distinction between the value of a commodity and its price. Marx says that the value created in a coat by socially useful labor expended by the weaver and tailor is invisible. Such value is an abstraction, an ideal or mental form. By contrast, the coat’s price is concrete and specific.
“As a measure of Value, and as standard of price, money has two entirely distinct functions to perform. It is the measure of value inasmuch as it is the socially recognized incarnation of human labor; it is the standard of price inasmuch as it is a fixed weight of metal. As the measure of value it serves to convert the values of all the manifold commodities into prices, into imaginary quantities of gold: as the standard of price it measures those quantities of gold. The measure of values measures commodities considered as values; the standard of price measures, on the contrary, quantities of gold by a unit quantity of gold, not the value of one quantity of gold by the weight of another.”
I think this means something like this. A coat, as an item of style and usefulness, has value commensurate with the labor used to create it. This value can be expressed as a certain weight of gold, the money commodity discussed by Marx. How much gold? The answer is so much gold as is its equivalent in value. The value of a coat is equal to an amount of gold that embodies the same amount of human labor as is contained in the coat. This is an unknown amount of gold, an abstraction, because either we cannot measure it, or we have not measured these labor value equivalencies.

But there is a problem with this abstract formulation of value, Marx readily acknowledges. In order to actually sell the coat, the owner of the coat, says Marx, must “lend [it] his tongue, or hang a ticket on [it], before [its] price[] can be communicated to the outside world.” Human nature being what it is, however, this price tag will not necessarily speak truthfully about the value of the coat. As soon as we name a price, we establish “a more or less accidental exchange ratio between a single commodity and another, the money commodity.” In other words the coat may be overpriced or underpriced relative to its underlying “real” value. This, says Marx, is not a defect but “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.” I think this means, in essence, don’t worry if the price does not correlate to value because, in the long run, it all evens out. If that’s what he’s saying, I’m not certain that this is satisfactory.

A bigger issue is casually raised:
"The price-form, however, is not only compatible with the possibility of a quantitative incongruity between magnitude of value and price, . . . but. . . . Objects that in themselves are not commodities, such as conscience, honor, etc. , are capable of being offered for sale by their holders, and of thus acquiring through their price, the form of commodities. Hence an object may have a price without having value. [Those Barry Manilow tickets?] The price in that case is imaginary, like certain quantities in mathematics. On the other hand, the imaginary price-form may sometimes conceal either a direct or indirect real value-relation; for instance, the price of uncultivated land, which is without value, because no human labor has been incorporated in it.”
Since Marx restricts the concept of “value” to human labor that is incorporated in commodities, there are necessarily many things that have no value but that nevertheless have a price. Marx allows that such transactions can assume the form of commodities. Therefore, it appears that the value of commodities is reflected in their prices, however inaccurately, and the prices of things that are not commodities (like services?) can make them operate like commodities with value.


When Marx indicates that conscience and honor can be sold for a price, prostitution, selling of legislative votes, and murder for hire come to mind. These items all have a price but I think Marx would say they have no value [because they are not human labor expended upon the creation of a commodity]. Selling legislative votes and prostitution have in common that they are not physical objects—they are not commodities. They seem to be more in the nature of services. Services in general would seem to fall in this category of useful labor that is expended on something other than in the service of creating a commodity. Marx says the price in those cases is imaginary. But what is imaginary about it? It seems the price is real enough. Services from prostitution, to selling votes, to providing legal services have use value for many people, and they command a price that must be paid. What is the value of these services? Is it simply the price they command? Marx is unclear on this so far.

Raw land also, says Marx, has a price but no value because it does not incorporate human labor. However, the price, as Marx puts it, “conceals a direct or indirect value relation.” If this doesn’t mean that the value of raw land is defined by its price, then I don’t understand what Marx is saying.

Between natural resources, like raw land, on the one hand, and services that are not labor expended upon a commodity on the other hand, there appears to be a whole lot of economic activity that falls outside Marx’s Platonic ideal of “Value” expressed as useful human labor expended on commodities. Is the ultimate value of these forms of activity simply expressed by their price?

This whole idea of human labor expended as an objective measure of value appears problematic. Consider the value of art. An abstract art piece has use-value to many people. It is pleasant to look at, it can evoke feelings, emotions, and thoughts; it can be pleasing, soothing, or stimulating, as well as jarring, or confrontational. It has physical manifestation and would appear to be a commodity as envisioned by Marx. But does it have “value” in the Marxian sense? Is the value equal to the socially useful labor spent in creating it? Does it matter if one person likes it, millions like it, or no one likes it? Does it matter what someone is willing to pay for it? The idea of valuing artwork based on hours spent in creating it independent of how many people like it, or would be willing to buy it, or what someone would be willing to pay for it seems problematic.

In the legal services world, the billable hour is king. That seems to be one area where the value of human labor expended is equated directly to value. However, billable hours are measured very differently by attorney’s of relatively equal experience and skill. Many arguments are devised against the billable hour. Lawyers complain that it forces everyone to become a slave to the billable hour and to work excessive hours, and that it limits the upside on compensation when good results are achieved. Clients complain that it encourages inefficient work habits, and overcompensates when an undesirable result is achieved. Objectively, it is not always clear whether a particular avenue of research is productive and will add value to a case, or not. On large business deals, attorney fees are often valued based on a flat fee, or a percentage of the deal that translates to remuneration that is considerably higher than the customary hourly rate times the hours devoted to the project. Personal injury work is often priced as a percentage of any recovery. All of these methods of pricing legal services value the human labor expended on a case very differently. It is not intuitively obvious that one of these systems is objectively more correct than any other. It is not clear that a satisfactory explanation along the lines contemplated by Marx could be devised.

1 comment:

  1. Roland,

    As always thank you for your work. Marx's analysis of value appears to be stultifyingly arcane. The steadfast distinction between value and price is a classic case of a distinction without a difference. The failure to proscribe value to the commodity or raw land clearly is beyond logic (I wish you could use this in repricing the ground lease for Velo 2 LLC).
    The issue of valueing art is actually a bit more interesting, and clearly this is an area where with the exception of the big names there is an imbalance between supply and demand, that is to say there is a huge amount of talented supply and limited demand, as opposed to legal services where miraculously enormous supply seems to create a bottomless pit of demand.