Schrödinger’s Capital: Why Chris Arthur followed Bohm-Bawerk in rejecting the law of value

by Jehu

NOTE 24(c):  The superposition of socially necessary labor time

As I showed in my last post, bourgeois simpletons have tried to expunge the law of value from economics without success. This is because, as Bohm-Bawerk admitted, the law of value provides a weapon for the working class in its conflict with the capitalist. Assuming Marx is correct, says Bohm-Bawerk, “the difference in value that falls as surplus to the capitalist” is revealed by the law:

“And this principle, entirely unfounded as it is, the socialist adherents of the Exploitation theory do not maintain as something unessential, as some innocent bit of system building; they put it in the forefront of practical claims of the most aggressive description. They maintain the law that the value of all commodities rests on the labour time incorporated in them, in order that the next moment they may attack, as ‘opposed to law,’ ‘unnatural,’ and ‘unjust,’ all formations of value that do not harmonise with this ‘law'”

It is obvious why Marx’s law of value might be a problem for Bohm-Bawerk and the neoclassical school, but it is not at all evident why the value-form school should spend so much time trying to 2000px-Schrodingers_cat.svgexpunge the law of value from Marxism as well. In any case, this effort by the value-form school is just as impotent once the content of their criticism of the law of value is explained.

According to the Chris Arthur and value-form school, it is not value that determines the prices of commodities,  but prices that create a ‘value dimension’ allowing use-values to then be compared with one another as values:

“The unity of commodities as values is secured only in their common relation to money. Money is not therefore a measure of value, it is the form of value as measure. Only through this coordination are commodities situated in a value dimension, and hence only through the mediation of money may such social aspects of commodities as their representation of abstract socially necessary labour be secured. It is not that the commodities themselves have a common value dimension subsequently given a metric by money. It is our practice of pricing commodities that creates this value dimension ideally. Social practice posits the presupposition [that commodities are values].”

While both Bohm-Bawerk and the value-form school deny that value has an existence independent of money, the argument of the Austrian school and that of the value-form school should not be conflated. For the Austrian school the denial of the independent existence of value is a rejection of the claim of the working class that its labor is the sole form of social wealth and, with nature, constitutes the source of all material wealth.

Does satisfaction of human needs require living labor?

Not so with the value-form school. As can be seen above, Arthur’s argument amounts to the assertion no socially necessary labor time is required for the production of use values until these use values first acquire prices in the market. By contrast, we already know that in Marx’s labor theory of value, value is nothing more than the socially necessary labor time required for production of the use value and must therefore arise from production prior to their exchange in the market.

But we also know something else, in Marx’s theory, value, exchange value and prices are simply definite quantities of congealed socially necessary labor time in three different forms. Value is the socially necessary labor time required for production of a commodity. Exchange value is the socially necessary labor of a second commodity that is exchanged for the first. Price is some quantity of socially necessary labor time required to produce the object serving as money.

In a twist on the punchline of one of Stephen Hawking’s stories: “it’s socially necessary labor time all the way down!” Following from one commodity to money and on to another commodity all we are dealing with are different forms of socially necessary labor time. Chris Arthur, and the value-form school generally, take the rather bizarre and theoretically indefensible position that the satisfaction of human needs does not require any living labor. And they seem to base this rather bizarre argument on the observation a community of producers have no means to directly compare the relative values of their commodities.

Since the socially necessary labor time required to produce any commodity cannot be determined simply by examining the commodity. the value-form school concludes this socially necessary labor time cannot exist until the commodity acquires a price in an exchange. The value or socially necessary labor time required to produce a commodity results from the universal social practice of pricing commodities in exchange; value or socially necessary labor time does not account for the universal practice of pricing commodities.

This argument is then turned into a perverse challenge against labor theory that we must prove the satisfaction of human needs requires labor.

Bohm-Bawerk and the problem of ‘exclusions’ from the law of value

I can identify six forms of material wealth Marx refers to in chapter 1 of Capital. These are (in no order):

1. Natural use value: this is a product of nature, which is not a product of labor. This use value:

a. has no value;
b. has no exchange value; and
c. has no price.

2. Man-made use value: this is a typical commodity, a product of living labor. This use value:

a. has value;
b. has exchange value; and
c. has price.

3. Man-made use value, This is a use value created by labor but transferred without exchange (taxes, tithes, etc.)

a. has value;
b. has no exchange value; and
c. has no price.

4. Special case of a natural use value: This is not a product of labor, but bought or sold. This use value:

a. has no value;
b. has exchange value; and
c. has price.

Two other categories are not directly mentioned by Marx, but can be inferred.

5. Overproduction of man-made use values: This is a commodity that has been produced for which there is no demand in the market. This use value:

a. has value;
b. has no exchange value; and
c. may of may not have a price (e.g., agriculture price supports).

6. Superfluous man-made products: This is a commodity that has been produced that has no use value (or what me might call waste): This use value:

a. has no value;
b. has no exchange value; and
c. may or may not have a price (e.g., military spending).

In his critique Bohm-Bawerk refers to several of these exceptions, although his categories are drawn from many labor theory writers and thus may not agree with Marx’s. He argues since an object without value can have a price (as in case 4) and an object with no price can have value (as in case 5), Marx’s rules are incoherent.

However, another way to look at this is that in Marx’s theory value and price can and will very often be unequal. A commodity containing no socially necessary labor time, may nevertheless have a price equal 1 hour of socially necessary labor time; while a commodity with a value of 1 hour of socially necessary labor time, may have a price equal to zero hours of socially necessary labor time. This inequality cannot be explained by the socially necessary labor time of the commodity itself, nor of the socially necessary labor time of the commodity for which it is exchange. Socially necessary labor time allows us to explain why objects can be compared to one another as values, but it does not explain why they exchange in ratios that are unequal.

Capital, prices and the law of value

To use one of Bohm-Bawerk’s examples: a seam of coal may have a price in the market, not because it is a product of socially necessary labor time, but because living labor can be expended on it to produce surplus value; which is to say, the seam of coal acquires a price in the market resulting from its quality as capital, not labor.

Obviously, in chapter 1 of Capital, Marx has not yet introduced the concept of capital as distinct from commodity production, so he could not fully explain this in the chapter, but could only indicate it needed to be explained. However, as Bohm-Bawerk explains, Marx notes the peculiar category of natural objects that have prices without having value. The existence of objects that have prices without having values, suggests also that there are commodities that have values but no prices.

To explain this, consider two commodities in any exchange:

Ideally, these two commodities are exchanged at some ratio thought to reflect their relative values. But this is not always the case — in fact it is generally the case that commodities will more often exchange in proportions that do not reflect their relative values. This is because while we can approximate the relative value of the two commodities, some level of error must enter into our calculation. One commodity may be undervalued relative to the other commodity and if one is being exchanged above its value, then by a process of exclusion the other must be exchanged below its value

On one level, Marx is showing that there is an opposition between value and price, but he is also showing that they are both expression of the same thing: socially necessary labor time. The value and the price of any commodity may indeed be a loggerheads with one another,  but both can only be at loggerheads because they are composed of one and the same social substance: socially necessary labor time. The sum of the socially necessary labor time expended by society may alternately appear as the values of commodities and as the prices of the commodities.

In the same sense that energy and matter are merely two forms of the same thing, represented by Einstein’s equation e=mc-squared,  so values and prices are simply two forms of the same thing; two different forms of socially necessary labor time. Marx thus provides a unified theory of value where the prices and values of commodities are not simply in contradiction with one another, but each also assumes the form of the other. The paradox of the price-form and the conversion of values into prices, inherited from Smith and Ricardo, is solved in principle.

The general law of value and prices

That law can be stated this way:

The sum of the values of all commodities produced in a community of commodity producers  is equal to the sum of all the prices paid for the commodities they produce.

Thus:

(SUM)P = (SUM)v

However, a caveat is in order: it does not follow from the general law (SUM)P=(SUM)v, that P, the price of a particular commodity equals v, the socially necessary labor time required for the production of the commodity. As we have seen the relative values of commodities are almost never equal to their actual exchange ratios in the market. The actual exchange ratios are simply approximations, more or less arrived at by some combination of experience and circumstance. The players in the market have no idea of the value of their commodities, nor the values of any other commodities.

We can, therefore, arrive at another rule: While (SUM)P=(SUM)v, the price of any given commodity will never be its actual value.

Which brings us to another paradox: So far as Marx’s labor theory of value is concerned, in any actual exchange in the market, the values of the commodities in the exchange do not exist for the parties to the exchange.

This allows us to fully account for the observations of bourgeois simpletons like Bohm-Bawerk and also of the value-form school who both take market prices as their starting point. If you begin with market prices and the exchange of commodities in the market, you must conclude prices are not determined by values. This conclusion is not a fallacy. It is an entirely accurate observation; and moreover one that can be demonstrated empirically.

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