First Published: 1887
Source: National Reformer, August 14th, 1887
Transcription: Steve Palmer
Copyleft: Internet Archive(marxists.org) 2009. Permission is granted to copy and/or distribute this document under the terms of the Creative Commons License.
Karl Marx prefaces his economic analysis of Capitalism by stating that the human mind has for more than 2,000 years striven in vain to master the subject of value, though it has meanwhile done much more difficult things. Now, what is the object of the capitalist, as such? Always to make money. And what is money? Money is value materialised in gold: "gold, as gold, is exchange value itself". Capitalism, then, exists only to produce exchange value. Hence above all things we must know what exchange value is if we would understand the aim of capitalism. But this only throws us back on the enigma that has stood unsolved for two thousand years. Marx comes to the rescue with his claim to have plucked out this heart of the capitalistic mystery.
It is customary in economics to begin further back, with a simpler view of man and his wants. Some of these wants are satisfied gratuitously by Nature: others can only be supplied by labour. Of the latter, some are needs, and must be supplied at any cost: others are whims, and are not worth the trouble. For example, I should like to see a sunrise from the top of Primrose Hill; but as I can satisfy that want only by rising with the lark - a proceeding abhorrent to my constitution - I am likely to go to my grave without having witnessed the spectacle. Those needs, tastes, and desires of man which cost labour to satisfy, and which are not, like the Primrose Hill fancy, left unsatisfied because they cost too much, are the subject matter of political economy. The energy called forth in the effort to satisfy them is the economic motor; and the sole assumption made by the economist is that this energy will be used as sparingly as possible: that is, that every individual will strive to satisfy his wants with the least possible effort on his own part. By proceeding deductively from this perfectly safe assumption, and from the ascertained facts as to population, natural fertility, and the physiological conditions of labour, conclusions have already been reached which have every quality that makes a science fascinating to academicians, useful to men of affairs, and indispensable to statesmen. Yet Carlyle dubbed economics "the dismal science" without rebuke; and a publisher recently told me that it had not fifty students in England! The publisher may have exaggerated; but I suspect that the number per cent. of English voters who could at need do more than confute a very crude Protectionist, would have to be expressed by a fraction with a startlingly large denominator.
When man begins to produce commodities for the satisfaction of his wants, labour, as Adam Smith said, is the natural price he pays for them. But when, to save time, it becomes customary for each man to acquire special skill in the production of some one sort of commodity, and to buy what else he wants with it, the commodities so produced become "wares"; and it becomes customary to express the "natural price", no longer in labour, but in wares. Then arises the question, how much of one ware is another worth? This sounds to modern ears like a proposition in ethics; but in practice it is found to mean how much of one ware will another fetch. That will depend on circumstances; but two men, A and B, who have equal opportunities for producing all sorts of wares, will proceed in this way. Suppose A wants to obtain 5-lbs. of B's ware (nails, for instance). He must offer some of his own ware in exchange. How much will be offer? That will depend on how long it would take him to make the 5-lbs. of nails for himself. Say it would take two hours. A obviously will not offer more of his ware (call it soap) than would rake him two hours to make, otherwise he would lose time by not making nails for himself. And, with this as his maximum, he will offer as much less as B will take. Now B, who on his part wants to obtain soap, has arrived by the same reasoning at a determination to take for 5-lbs. of his nails no less than as much soap (say 20-lbs.) as would take him two hours to make, with, of course, as much more as he can induce A to give him. After the necessary "higgling", A then will get 5-lbs. of nails because he will take no less and B will give no more; and B will get 20-lbs. of soap because he will take no less and A will give no more. Thus between men of average ability with equal opportunities, the price of wares will, with admirable justice, be measured by the labour they cost, and that although each exchanger may he selfishly indifferent to any but his own individual gain. Each is striving to satisfy his wants with the least trouble to himself: each is buying in the cheapest and selling in the dearest market: yet the unrestrained conflict of egotism produces all the effects of the most enlightened altruism.
The soap-maker, however, finds it troublesome to estimate the value of his ware not only in nails, but in candles, gloves, bread, and every separate ware used by him. So does the nail-maker; and so do all the other exchangers. So they agree upon a suitable ware, such as gold, in which each can estimate the value of his ware. Gold can then be bought for wares; and all wares can be bought for it. Gold becomes money; and values become prices. Money then becomes the customary expression of the "natural price of all things". In the Robinson Crusoe age before division of labour and exchange, labour seemed the natural price; when wares were exchanged and bartered, wares seemed the natural price; and when gold was selected as "the universal equivalent," as Marx calls it, money became the natural price. But, all through, the magnitude of the value was determined by the duration of labour.
This theory of the determination of magnitude of value by quantity of labour, which prevailed among our economists from its establishment by Ricardo to its upset by Jevons, is affirmed by Marx as a dogma without a word of explanation. No account is given of its deduction: there is not even a word that would suggest to a novice that it is deduced, and is neither an axiom nor a postulate. Here and there, when he speaks of value being "a relation between persons expressed as a relation between things", or when he says (p. 80) that a vendor who overestimated his ware would be brought to his senses by "his competitors", we guess that he came to the familiar theory by the familiar path. But he begins with the downright assertion that "the magnitude of the value of any article is the amount of labour socially necessary, or the labour-time socially necessary for its production." Again, "wares in which equal quantities of labour are embodied, or which can be produced in the same time, have the same value". And, "the value of one ware is to the value of any other, as the labour-time necessary for the production of the one is to that necessary for the production of the other".
It must not be supposed, however, that the purely dogmatic character of these statements will be easily perceived by unwary readers of Marx. They are preceded by a metaphysical analysis of wares, proceeding by a series of abstractions which eventually leave only their "value form" under notice. Considerations as to the magnitude and measurement of value follow. Then the dogma as to the determination of the magnitude of value by labour comes in with the most natural air in the world; and three readers out of four probably accept it as having been ratiocinatively led up to. It is followed by a second metaphysical analysis, this time of the value form arrived at in the preceding analysis. Thus, gratuitous as it is, it is so neatly fitted in between two chains, that you do not discover that it is not a link until you test it with a pull.
Marx's omission to give the rationale of his dogma can hardly he condemned as unwarrantable. When a theorem has been proved so often that all the world cries "agreed!" the theorem becomes an axiom. There are axioms of ours which are still theorems to our mothers, and blasphemies or paradoxes to our grandmothers. Marx may have thought that his Ricardian theorem that "the value of one commodity is to the value of any other as the labour time necessary for the production of one is to that necessary for the production of the other", might by this time be advanced as an axiom. But sometimes the paradox or blasphemy that became a theorem and has become an axiom, is doomed to become a dogma; to be challenged and become a theorem again by having its deduction retraced; and finally to be rejected as an exploded superstition, because the reasoning that convinced during its second phase seems inconclusive during its fifth. To-day the Ricardian theory seems to be running this course. The reasoning that satisfied Ricardo and Marx did not satisfy Jevons; and whatever be the upshot, the Marxite of today must not expect his master's axiom to be admitted now as it would have been in the middle of the century.
But the dogma is not the first questionable point in the book. The analysis of wares which precedes it is faulty. I may apply it to the nails and soap instanced above, thus: here is a ware - nails. Nails are useful for fastening things together; and they embody nailmaker's labour. Here is another ware - soap. Soap is useful for cleansing; and it embodies soapboiler's labour. Soap and nails differ from one another in both respects. Soap will not fasten things together; nor nails cleanse them. In point of usefulness therefore, they are disparate (says Marx, "badate ben, non io"). Now they are apparently disparate in point of embodying labour also; for it is not soap-boiler's labour that the nails embody, nor is it nailmaker's labour that the soap embodies. But they are still both products of labour - of exertion of muscle and brain - of expenditure of energy. Abstract then the specific quality of the labour - its application to the production of nails or soap; and you will see that the two wares are alike in embodying a certain quantity of abstract [as opposed to specific] human labour. Human labour is measurable by its duration. The two otherwise disparate wares can therefore, for the purposes of exchange, be measured against one another by the abstract human labour they contain. They can not be measured by anything else; for you cannot say that so much fastening of things together by nails is equal to so much cleanliness; but you can say that so many hours abstract human labour embodied in nails are equal to so many hours abstract human labour embodied in soap. "But," says Marx, suddenly slipping in his dogma, "the value of a ware represents human labour in the abstract." Never was question more adroitly begged.
Let us go back upon the analysis of the two wares, and see whether it will bear scrutiny. The utilities of the soap and nails were summarily rejected as disparate because they were specifically different. Yet when the embodied labours were found to be also specifically different, they were not rejected: they were examined and found to be reducible from specific soapboiling and nailmaking to "expenditure of human labour in general". But why was this not done with the utility? There is specific utility and abstract utility just as truly as there is specific labour and abstract labour. Fastening things together and cleansing them are two specifically different ways of doing the same thing, i.e., satisfying human needs. Let us abstract the specific aspects of the employment of nails and soap, just as we abstracted the specific aspects of the nailmaker's labour and the soapboiler's, and we have left "abstract utility" common to the two wares just as much as abstract human labour is common to them.
And we are constantly measuring things against one another by comparing their abstract utility - by deciding whether we would rather have one or the other - by comparing the satisfaction they can afford us. Now let me slip in another dogma by saying, "But the value of a commodity represents desirability in the abstract"; and it will be seen that though I, too, have begged the question of the nature of value, I have made out exactly the same case for "desirability in the abstract" as Marx has for "labour in the abstract"
Let us now place alongside our two wares, which Marx has revealed to us as "definite masses of congealed labour time", and which we have found to be also definite masses of congealed desirability, such an article as a bit of broken china, once part of a ware which was valuable and exchangeable for gold in the market, but now a worthless shard. Yet it still embodies abstract labour - more labour actually than when it was a ware; for the labour of breaking it has been added to the labour of making it. Will it therefore exchange for larger quantities of nails or soap than before? Not a bit of it: the labour has increased; but the value has gone. Now compare it in point of utility. The breaking of the teacup destroyed its specific utility and, with that, its desirability. Now we have three things, nails, soap, and shard, all embodying abstract human labour, whilst two only embody abstract utility. These two have value also. Further, all three formerly had labour, utility, and value. An accident destroyed the utility of one of the three; and the moment the utility vanished the value vanished also. The labour remained, but could not keep the value. This does not conclusively connect value with utility, since there are commodities, such as fresh air, which have abstract utility but apparently no value; but it does conclusively disconnect value from mere abstract human labour. And of course Marx presently mentions that "nothing can have value without being an object of utility. If the thing is useless, so is the labour contained in it: the labour does not count as labour, and therefore creates no value." It is as if he had proved by an elaborate series of abstractions that liquids were fatal to human life, and had finished by remarking: "Of course, the liquids must be poisonous".
As a matter of fact, men are governed in production by the painfulness of their efforts, and in exchange by their desire for the wares they seek, rather than by calculations of the labour embodied in wares. If a new patent ware is introduced which embodies as much labour as a sovereign, the inventor will not fix its price at a sovereign. He will, in order to make it as useful as possible to himself, charge the highest price at which it will bring him the greatest wealth. Suppose he fixes the price at £5. The wealthy public compares the desirability of the ware with the desirability of £5, prefers the latter, and so does not buy. The inventor perforce reduces the price to, say, £3 3s. The wealthy public thinks that it would just as soon have the article as £3 3s., but, for the matter of that, would just as soon have £3 3s. as the article. The inventor consequently reduces the price to £3; and now the plutocracy are quite clear that they would rather have the article than £3. At that price, accordingly, it sells, £1 practically exchanging for £3 at every sale. Labour devoted to the article has, therefore, a high utility: consequently when the patent expires labour rushes into the business of producing it. But all the people who barely prefer the article to £3 are supplied already: therefore the new supplies must find a market among the people who prefer £3 to it. But they prefer it to - let us say - £2 10s.; so the market price falls to that; for the plutocrats who were willing to give £3 when they could not get it for less, will not give £3 when they can get it in the market for £2 10s. So the price falls. Still, however, £2 10s, for an article costing £1 to make, is good business; and labour still flows to it until all the £2 10s, people are supplied, and it becomes necessary, in order to sell the articles, to tap that class which prefers 30s. to the article, and therefore will not buy it until it is in the market at 25s. Yet labour will flow to its production because manufacturers prefer 25s. to 20s.; and the flow will not cease until the price reaches 20s. It will not go below that, because it costs that to make; and if the price fell to 19s. no man would make it unless he preferred 19s. to £1, and not even then, since he could gratify his preference more easily by merely swapping coins without engaging in manufacture at all. The supply then stops when the price is £1, or, to use a phrase of Mr. Wicksteed's, the price "at the margin of supply" is £1. Also, the utility of the first increment of the article was expressed by £3 3s.; but the utility of the last increment - the final utility, as Jevons called it - is expressed by £1. Value, in short, does not represent the specific utility of the article, but its abstract utility; and not its total abstract utility, but its final abstract utility, or the utility of the final increment that is worth producing. Or, going behind the ware to the labour, its value represents, not the quantity of human labour embodied in it, but the final utility of the abstract human labour socially necessary to produce it. Now, under the normal conditions assumed by the Ricardians in their investigation of value, the final utilities of two doses of labour embodied in two wares will he equal when quantities of labour have been expended on them, so that, under the circumstances, wares containing equal quantities of labour will be equal in value. But instead of being equal in value because equal quantities of labour have been expended on them, equal quantities of labour will have been expended on them because they are of equal value [or equally desirable], which is quite another thing. That slip in the analysis of wares whereby Marx was led to believe that he had got rid of the abstract utility when he had really only got rid of the specific utility, was the first of his mistakes. By it the two thousand years secret of value slipped through his fingers after all as it had slipped through Aristotle's, to be pounced on almost immediately by Jevons and Walras, whose combined shares of "abstract human ability" were probably less than the combined shares of Marx and Aristotle. Still, the Ricardian and Marxian treatises are saved from invalidation by the circumstance that both the Ricardian and Devonian theories lead to the conclusion that under certain ideal conditions of equal opportunities of production from equally fertile material by men of equal ability, "commodities in which equal quantities of labour arc embodied, or which can be produced in the same time, have the same value". On the other hand, as this statement is true only under these conditions, and as the conditions seldom, if ever, occur in practice, whereas the law deduced by Jevons fits all conditions, actual or hypothetical, Jevons' law would probably drive Marx's dogma out of the field, were it not so much easier to understand "quantity of labour" than "degree of final utility."
G. BERNARD SHAW
This assumption is the ground of the complaint that political economy is sordid and selfish; but unless the complainants arc prepared to contend that everything should be done in the longest and least commodious way [and certain pious forms of that contention arc by no means uncommon] they must admit that it is right as well as practically certain that things will be done in the shortest and easiest way.
This flaw in Marx's analysis of wares was, as far as I know, first pointed out to English Socialists by Mr. Philip Wicksteed in his article on Marx in the To-Day of October, 1884. That article has never been refuted by any Marxite. The "comment" upon it which appeared in the number for January, 1885, was obtained from a gentleman who, for private reasons, will not take an action for libel against me if I say that he proved nothing but his own incompetence (which Mr. Wicksteed had not questioned). But even he had not a word to say in defence of Marx's oversight of abstract utility.
It will be seen presently that the final utility of fresh air is, like the value, zero.