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From The Militant, Vol. X No. 19, 11 May 1946, p. 6.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
Exchange value, unlike usefulness, can be measured quite exactly. The fact that things are always exchanged in definite proportions is a proof of this. Prices prove this in a special way. Commodities are exchanged for fifty cents in money – fifty-one cents – fifty-five, etc. If one commodity sells for fifty cents, and another for a dollar, we say that the second is twice the value of the first and will exchange for two of the first.
But some people think that all the grocers and storekeepers get together and cook up their price-lists every so often and foist them on an unwary public. No doubt, the storekeeper tries his best to get a high price out of us. But what is a “high” price? – higher than what? – “Why higher than the real value,” you will say.
There we are again – back to value itself. How can we measure this real value? If we tried to exchange a bicycle across the table for an automobile, we’d find the bicycle not remotely able to balance the automobile in the scales of value. But a little diamond only an ounce or so in weight would exchange very readily for the car.
But what is the measuring meter on this scale of value? It isn’t pounds or ounces. It isn’t yards or inches. Is it dollars and cents? – But a dollar is only a certain amount of gold – today 35 to the ounce. If a diamond and a car are both worth 560 dollars, then they both have the value of a pound of gold.
”Well, gold has value because it is rare,” people will say. “It’s hard to get.” But how rare is it and how hard to get is it? What determines that? Automobiles aren’t so rare. How come they exchange with diamonds, gold, boats, tractors and so on? There must be something in them all that is common to each.
Perhaps it would be easier to discover this common thing which determines value if we looked at the simple exchange of commodity for commodity before gold and money were in universal use. Take a couple of farmers of an earlier century who were craftsmen on the side. One made plowshares and the other made axes. When the first one wanted an ax, he would offer the second a plowshare and expect, say, two axes in return. Suppose the second would give him only one ax?
Right then and there number one would balk. And why? Because only a few years before he had been making axes himself, and he knew that two could be made in the same time he made one plowshare. He would go back to making his own axes again. Or if a third farmer made axes he would take his business there.
Even if number one had never made axes before, he could soon find out that it took less labor to make axes than plowshares, and he wouldn’t dream of exchanging the product of two days’ labor for the product of one day’s labor. If he should do this, then the more days he labored and exchanged the poorer he would get.
Without seeing gold, dollars, dimes or cents from one year’s end to the next, he would know quite well when he was getting gypped. He would have an excellent scale on which to weigh the value of the article he traded. He would measure the value by the amount of labor-time took to make it – and the other trader would do the same.
It takes a great deal of labor, on the average throughout the world, to find, mine and refine gold. It takes as much labor for an ounce of gold as for a half ton of cast iron. And whether you call the ounce of gold 20 dollars or 35 dollars, that’s what the half ton of iron will exchange for – one ounce of gold. It’s the amount of labor in a thing that determines its value.
The rarity of a thing is only incidental. Commodities are not rare moths or butterflies that you catch only once in thirty years or so. They are made in mass production. Automobiles are much more plentiful on the streets than rare butterflies. But they are also more expensive. The number of autos could even be doubled under certain conditions, and the value of each car would still be the same.
It isn’t how pretty or ugly, how big or how little, how rare or how plentiful a thing is that determines its value. It’s how much labor under average conditions is necessary to produce it. A commodity, as Marx said, is nothing but crystallised labor so far as its value is concerned.
Next Week – How Value Is Created
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Last updated: 23 December 2018