This chapter was a real slog for me, but I had a few take-aways that I thought were actually very interesting to think about - especially in terms of how economists not only think about the world but communicate about the economy to lay people and policy makers. Marx writes so differently from the modern economist and his ideas and assumptions are as far from modern economic discourse as the intricate forest ecosystem is from the laboratory petri dish. Now, economics is devoted to value as being defined by marginal costs and benefits - the intersections of supply and demand - it takes some work to dislodge these ideas from my own mind enough to engage seriously with Marx.
Main-stream economic theory states that in perfectly competitive markets, an object’s value is revealed by it’s price. While the precise structure of that marketplace may impact the determined price, economists use prices to determined what people are willing to pay for the object and thus the object’s value to society. More precisely, perhaps, a price might be defined by economists as an object’s “marginal benefit” to the buyer. The object costs money because producing and/or selling the object induces a “marginal cost” for the seller. The price is set so that marginal costs and marginal benefits are equated. Thus an object’s value is determined by both the underlying cost of producing and holding the object, as well as the demand for the object. This is the simple supply-demand model that any economics 101 course spoon feeds students.
Of course, you don’t have to stray too far to see massive deviations from this logic. For example, a recent lecture by Professor Pat Kline of UC Berkeley delves deeply into research on minimum wage laws. Under basic Econ 101 principles, a minimum wage would distort the market and cause a reduction in employment. However, empirical work suggests that these disemployment effects are small, if existent at all, and that setting a minimum wage could have dramatically positive impacts for reducing inequality and the racial wage gap.
There is no innate value of any object - simply what a group of nearby people are willing to trade for it and the amount for which it’s owner is willing to sell it. This idea may seem simple, but in fact has profound consequences that have influenced the development of free-market democracies in which the setting of prices freely through a market have dictated the path of history.
In contrast, Marx doesn’t see just one market-determined value as the only concept of value worth considering.* While for many, Marx’s theory of value feels like a non-starter, Marx makes what I believe to be an important distinction: that between an objects “use value” and its “exchange value.” To be honest, my understanding of these distinct concepts is at best rudimentary. From what I read, I believe an objects “use value” or “value” to be the utility that it brings to its owner. That is, what value it holds while in stationary ownership. For example, a hair brush brings the value of brushing your hair, an apple brings the value of eating, a tabloid brings the value of catching up on the latest celebrity gossip. These values seem simple, they seem like what value should mean, right?
But Marx also defines an objects “exchange value” - that is, the value of an object in the context of a marketplace. One might imagine that this value should be the same, or should represent (in the modern economist’s language) the equated use values of the “marginal buyer” and “marginal seller” in the market place. I suppose it’s within modern economic theory to note that a use value to an individual - even the “average” use value - could be distinct from the exchange value. I believe this is equivalent to saying that the average cost might be distinct from the marginal cost. Or, it might also capture the fact that there is “consumer surplus” and “producer surplus” for thoseconsumers and producers on the correct side of the market price.
But I think that Marx’s more simple definitions - though perhaps lacking in nuance, or theoretical precision - have something to add to the conversation. In particular, I think that starting his discription of society with a long an forceful description of these two different types of value - making clear that they are distinct and naming them in simple terms so that one might clearly understand their distinction, has been lost in much of modern economic parlance. Yes, once you get in the weeds with some economists they are sure to mention that the wage may not actually be equivalent to the marginal product of labor. But are those words really conveying the truth that the prices we see on, say, a home, might not accurately reflect its value as a shelter.
There is much to say on this topic, and I will revisit it again in a future post. For now, I just want to stick to thinking about how often we economists forget the built-in complexities of our own systems. We miss the forest for the trees far too often. This time, Marx delivered the forest - and one we should really pay more attention to.
He he he he he... You have to transform yourself into a German phillosophy Ph.D. of the 1840s in order to have even a chance of this chapter singing to you...