Schrödinger’s Capital: A not very ‘useful’ definition of value

by Jehu

NOTE 17: Do trident nuclear missiles have value in the value-form argument?

MissileDefenseCatThe charts I published in my last post present a puzzle for any analysis rooted in historical materialism. This is because the two definitions of value offered by Marx and the value-form school result in two different pictures of the history of the US economy.

We have to ask ourselves which of these two definitions of value produces a valid picture of the actual history of the US economy?

Of course, I can argue that Marx’s definition of value is the correct one but this is likely to convince no one. Marx’s definition of value has always been explicitly stated in Capital. It would be extremely condescending to think the value-form school, including such academic specialists like Harvey, Arthur and Heinrich, simply misunderstood Marx’s argument in Capital. The value-form school does not misunderstand the definition of value in Capital, it disagrees with Capital.

Thus, it makes no sense for me to simply assert Marx is right about value when the value-form school only exists because they think Marx got value all wrong. Moreover, it is not all that clear the value-form school is wrong. After all, paper currency is a valid money-form. While this money-form has no value and cannot stand in for gold to express the values of commodities, tokens of money never functioned in that role in the first place — they merely symbolically represented the quantity of gold that would replace the paper if gold was in circulation.

What happened to the standard of prices?

When the currency was allowed to float against gold this event had no impact whatsoever on the ability of currency to serve as means of exchange, nor on the ability of gold to express the values of commodities. In any case, token currency only symbolically represented the quantity of gold that can replace it in circulation. What changed after 1971 is that the currency itself is no longer fixed to some definite quantity weight of gold. Instead, that price standard function played by gold moves constantly in much the same way as currencies themselves move against each other.

In any given year one dollar can be exchanged for anything from 0.76 euro to 0.93 euro. The fact that a euro is worth $1.30 one day and $1.07 six months later does not in any way mean the euro or dollar are not valid money-forms. It simply means the two are not pegged to each other by the respective state policies of the two zones and thus their exchange rate can fluctuate.

The same is true for gold. Its ‘exchange rate’ (more accurately, the price standard) of the dollar can over a period of time fall from 20.67 dollars to a troy ounce (where it was in 1933) to 1100 dollars to a troy ounce, (where it, more or less, stands in 2015). What distinguishes the float of the dollar against gold from the floating exchange rate against the euro is that both the euro and the dollar symbolically represent definite quantities of gold.

The value-form school simply asserts the dollar is as much money as gold by their own definition of money; a definition of money that is necessary to support their definition of value as a social property posited on commodities by the value-form.

To put this another way, according to the value-form school’s definition of value, the sum of all prices realized in a given year is equal to the sum of all values of commodities sold in the market. Since value is a simply property posited on commodities by money through exchange, this must be true even if a commodity no longer serve as the standard of prices.

For Marx it is not so simple: only after we have determined the commodity standard of currency prices can we determined the sum value of all commodities produced in a given year. Since 1971, the currency prices of commodities no longer tells us anything about the value of the commodities or even if they contain any value at all, because the currency prices of the commodities no longer are pegged to a commodity money.

We thus end up with two entirely distinct and incompatible methods for calculating the value of annual GDP:

  • The value-form method: Where the sum of prices of commodities sold in the market equals the sum of values of those commodities; and,
  • The labor theory method: where the sum of prices must first be reduced by employing a commodity money to serve as a price standard to find the sum of values.

The value-form’s schools ‘labor theory of value’

Now here is the thing:

Whether or not the value-form school realizes this fact, both Marx’s definition of value and the value-form school’s definition of value simply measure aggregate social labor times. As explained above, using the value-form school’s definition of value, we simply add up the prices of all commodities sold in a year, to get the total value of GDP produced in a year. What these folks obviously never realized — perhaps they did but want to keep it to themselves — the commodities whose prices we are adding up are also products of hundreds of billions of hours of concrete particular human labor carried on in various definite forms during the year.

Think of it this way: We have, on the one hand, the prices of so many pairs of shoes plus the prices of so many washer machines plus the prices of so many cars plus the prices of so many nuclear missiles plus … etc. But these products also required so much shoe producing labor plus so much washer machine producing labor plus so much car producing labor plus so much trident nuclear missiles producing labor plus …  etc.

Which means the sum of prices of commodities also tells us the total duration of all concrete particular labor carried on in whatever form was necessary to produce the products whose prices we have summed. The sum of prices are, therefore, the monetary expression of the sum of all the labor times actually expended by society stated in the form of the currency.

How does the value-form school distinguish useful from non-useful labor?

And this is a big problem.


The value-form school simply takes all of the labor expended in society without regards to whether any of this labor might be productive or actually wasteful and even destructive. The prices paid for drone strikes is added together with the prices paid to grow corn. There is no differentiation between useful and non-useful labor since, according to the value-form school, by definition all labor has value if it is paid for with the value-form.

In Marx’s labor theory this is not enough, because not all labor produces value. The only labor that produces value in Marx’s theory is socially necessary labor and this labor can only be expressed in a commodity money. As I explained in an earlier post, in Marx’s theory labor does not create value, only some labor creates value. It is thus entirely possible, based on Marx’s definition of value, that almost all actual labor expended in our economy today produces no value at all.

You cannot simply add up all the currency prices of commodities sold in the economy to arrive at the sum of values produced in the economy. Without a standard for prices, the value-form school treats all labor as value producing labor as long as it is sold in the market.

While the value-form school denies labor is the source of value, their approach to value paradoxically ends up saying all labor expended in our society which is realized in prices, no matter how unnecessary and even toxic to life, produces value. In the value-form school argument, all labor produces value when the product of that labor is sold for money.

This proposition cannot be correct.