The Marxian Law of Value


The Marxian Law of Value
By James Sim
from The People, June 4, 1988

It is not possible to exaggerate the importance of the law of value and the theory of surplus value. Upon an understanding of this economic law and its corollary rests the fate of the working class.

Wars, depressions, unemployment, working-class insecurity -- all these flow from the working out of the law of value and surplus value. Through an understanding of Marxian economics we learn how the capitalist class robs the working class on a colossal scale. We learn what causes strikes -- and how the labor leaders betray the workers in the settlements they negotiate.

It follows that a study of the law of value and the theory of surplus value is a must for every responsible and serious-minded worker. Without this knowledge we cannot help but go from disaster to disaster. With it we can proceed with courage, confidence and enthusiasm to build the socialist labor movement.


First, consider the law of value. What determines the value of commodities? Why, at a certain period, did a bushel of wheat, a yard of linen, a cloth cap and a bottle of wine exchange equally? What did they all have in common in equal proportion? For centuries the economists sweated over this problem. The best-laid plans of statesmen went astray because of their misunderstanding of economics. The physical and exact sciences were making great progress, but economics remained a mystery.

With the rise of the capitalist system, however, came a compelling need to understand the system's behavior and contradictions. In the eighteenth century, our own celebrated Benjamin Franklin

(whom Karl Marx quoted with approval in Capital), and the Englishman, Adam Smith, had concluded that commodities exchange in the market on the basis of the amount of labor (measured in time) embodied in them. In the early nineteenth century, another Englishman, David Ricardo, one of the greatest of the classical economists, arrived at the same conclusion in his monumental study of taxation. Karl

Marx hailed the great pioneering work of the classical economists, and took up the investigation where they left off. Not only did Marx bring new light to the law of value, light that cleared up all the major mysteries of the economic operations of capitalism, but he thereby also supplied one of the cornerstones of a great movement of human emancipation. Together with the materialist conception of history and the principle of the class struggle, the law of value, with its surplus-value corollary, became the foundation of scientific socialism.


In explaining the law of value, it is first necessary to explain that every commodity has two kinds of value. One is its value in exchange; the other its use value.

"The use value of a commodity," wrote Arnold Petersen in The High Cost of Living, "is determined by its particular quality of satisfying a human need of some sort or other. A police club, e.g., may be very useful as a means of defense against assailants; it is equally useful for the purpose of cracking the heads of striking workers. Its value in exchange, or exchange value, however, is determined by the amount of socially necessary labor time required for its production. Let us see how.

"Suppose we have two commodities, say a hat and a pair of shoes, and assume that one exchanges for the other in the market (or, in everyday parlance: fetches the same price). It is clear that these two must have something in common, something apart from their particular utilities. For if we were to consider their utility only we might well ask: 'Why is a pair of shoes equal to a hat; why are they not equal, for instance, to a diamond ring?' Most people would argue that in point of utility the shoes rank above the diamond ring. The reason, then, why it would require ever so many pairs of shoes to exchange for a diamond ring is that it has required more socially necessary labor time to produce the ring than it did to produce the shoes.

"Hence a given quantity of socially necessary labor time in one commodity will exchange for the same quantity of labor time in any other commodity, regardless of the particular utilities of the respective commodities. On the other hand, if the commodity is in no way useful, it is not exchangeable, no matter how great a quantity of labor time is congealed in it. Ricardo, the English economist, 'the last of the Mohicans' among the classical bourgeois economists, says: "That this [labor time] is really the foundation of the exchangeable value of all things, excepting those which cannot be increased by human industry, is a doctrine of the utmost importance in political economy, for from no other source do so many errors, and so much difference of opinion in that science proceed, as from the vague ideas which are attached to the word value.'

"The socialist, acknowledging the truth of this statement, has taken the warning to heart. The capitalist professional economists, however, true to their class interests, scenting the danger and perceiving the revolutionary tendency in admitting that labor is the only source of value, have, ostrich-like, buried their heads in the sand of economic fancy and fiction, and persistently denied or ignored this cardinal principle."


Note well that the value of a commodity (and by "value" we mean hereafter value in exchange) is determined by the amount of socially necessary labor time embodied in it.

Capitalist wiseacres, imagining they are dealing Marxism a mortal blow, misinterpret what they call "Marx's labor theory of value" as meaning that the more labor wasted on a commodity the greater its value. This is silly. Marx, of course, perceived and noted that wasted labor does not create value. "The labor time socially necessary," he wrote in Capital, "is that required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time." And Marx offered the following to illustrate his point:

"The introduction of power looms into England probably reduced by one-half the labor required to weave a given quantity of yarn into cloth. The handloom weavers, as a matter of fact, continued to require the same time as before; but for all that, the product of one hour of their labour represented after the change only half an hour's social labor, and consequently fell to one-half its former value."


There is, of course, a direct relationship between the price of a commodity and its exchange value. That is not to say that price always reflects that value. It does not. As Petersen pointed out:

"When we buy or sell commodities in the market, we do not, to be sure, inquire as to whether this or that article contains such or such a quantity of labor time. In the commodity market only one thing interests us: its price. What, then, is price, and in what manner is it related to the value of the commodity?

"The price of a commodity is determined by the fluctuations between the supply of and demand for any given commodity. The price may at one time be high, at another low. The very fact that these changes take place proves the existence of a central point, above or below which the price oscillates. If the supply and demand were equal, the oscillation would cease and the commodity is then said to be selling at its value. Normally, all commodities in the long run sell at their value; that is to say, they exchange, one for another, at a ratio determined by the amount of socially necessary labor time requisite for their reproduction.

"Some of our learned professors in economics advance the theory that the value of commodities is determined by the supply and demand in the market, i.e., by the difference existing between the supply and demand for any given commodity. But suppose supply and demand are equal? Why then, according to our professors' theory, the commodity would have no value at all. We shall illustrate this feature in economics by referring to the law of gravity. The law of gravity, briefly stated, is the accelerating tendency of bodies toward the center of the Earth, being equal to the Earth's attraction minus the centrifugal force arising from the rotation of the Earth on its axis. Suppose a stone is dropped - the natural tendency will be for it to fall in a straight line to the earth; but a gust of wind blowing from, say east, will cause it to fall in a westerly direction, and vice versa. This fact, however, by no means overthrows that central law, called the law of gravity. On the contrary, it confirms and proves the existence of this law. And similarly in economics. What the law of gravity is in physics, the law of value is in economics. Let us suppose that a straight line represents the value of a commodity; this is the amount of socially necessary labor time requisite for its reproduction. The fluctuations in the market will act upon that commodity exactly as the gusts of wind acted upon the stone before. When the supply of an article is large and the demand small, its price will sink below its value; if the supply is small and the demand is keen, then the price will rise above the value.

"In the long run, however, as stated before, the supply and the demand will neutralize each other and cause the commodity to sell at its value."


To sum up, we may note that commodities, whether they be automobiles, tons of steel, bushels of wheat, pairs of shoes or what have you, exchange on the basis of the socially necessary labor time required to produce them. Such socially necessary labor time includes that of engineers, lathe hands, plumbers, painters, janitors, physicists and workers engaged in a great multitude of trades. The labor embodied in commodities is, in fact, homogeneous human labor, which is to say, human labor in the abstract.

The point to note here, however, is that nothing is contributed to the value of commodities by the capitalists. The capitalists don't produce; they merely own. Their proper category, therefore, is that of parasites. The law of value, to which the classical bourgeois economists contributed as well as Marx, proves beyond peradventure that labor, and labor alone, produces all social values, or social wealth.

The law of value leads therefore to two vital conclusions:

1. The wealth in the hands of the capitalist class is plunder - wealth created by labor and stolen (albeit legally) from labor.

2. The capitalists play a completely useless role. Were their class status and privileges eliminated through the outlawing of private ownership of the means of social production, the workers of brain and brawn could produce all the good things of life for the benefit of the producers. The logical copestone to the law of value is that those who produce the wealth should have it. Production for use and production democratically administered is socialism.

NEXT ISSUE: How do the capitalists keep the workers enslaved in a system in which only a semblance of freedom exists? How, precisely, is capitalist exploitation carried on? By focusing on the corollary of the law of value -- the theory of surplus value -- these questions and many more will be answered in our next issue.