[OPE] Law of value and abstract labour

A friend asked: "As regards the historical aspect of abstract labour, could not one theorize the Adam Smith "beaver-deer" trade example in similar terms? If the hunters know how much labour is consumed to hunt a beaver and a deer, this will be the terms of the trade."

Reply: I agree, see below. According to Paul Samuelson "the beaver-deer exchange ratio can range anywhere from 4/3 to 2/1 depending upon whether tastes are strong for deer or for beaver" and therefore it seems that trading ratios are set by the volume of consumer demand expressed by consumer preferences. www.estrellatrincado.com/madrid07a%20Roncaglia.doc

The law of value, as a law of exchange, originates historically in the "terms of trade" established for different products. If a producer has to supply too much of his own product to get a different product, then as Friedrich Engels notes, this has direct consequences for the additional time he has to work to sustain himself and the trading of his product. This point is maybe not obvious, if you don't have to produce things for a living, and can just buy anything you have a taste for, but if you do produce for a living, it is fairly obvious.

In this sense, as Engels says, producers are rarely "stupid"; they know very well what the consequences are for their own worktime if they trade on unfavourable terms; they know fairly accurately the maximum amount of product they are willing to (or can afford to) trade to obtain another product, and they also normally try to get the best return for their own product they can get. Over time, with more market integration, relatively stable values (trading ratios or relative costs) for products are established which - this is the point - exist independently of the productivity of individual producers. If you are then not prepared to trade products on these terms, potential trading partners will go elsewhere, because they are able to do so.

In that situation, each producer has to adapt his own production to those socially accepted values, the average terms of trade for products then vary only within fairly narrow margins, and thus producers' activities fall under the sway of the law of value, which links "the economy of labour-time" to "the economy of trade". Obviously, the normal terms of trade can be contingently distorted by all sorts of factors (speculation, hoarding, sudden scarcities or oversupply, market monopolies etc.) but even then, the amount of fluctuation that can occur in trading terms, is typically "braked" by the amounts of labour-time that can and will be worked to produce products or acquire them, directly and indirectly.

If that wasn't the case, if there were no objective production costs reducible to time worked, then there is no reason for why a product A would not trade for 1000 units of product B one day, and 5 units the next, depending just on Samuelson's subjective appetites, whims and preferences, in a completely unpredictable way. In reality, this kind of thing usually happens only as a marginal phenomenon, simply because the economy of human labour-time sets limits on the economy of trade.

If producers have to adapt to "the state of the product market" in the mentioned sense, then it seems as though "the product market" sets the terms of trade, but in reality the terms of trade are bounded by direct and indirect costs in social labour-time - imputing independent agency to "the market" in abstracto is more a reification, since in reality we are dealing with social and economic relations among producers and the intermediaries between them, shaped by relative quantities of direct and indirect labour effort. It's just that those relations are often not directly observable, hence the mystery of the market.

You could easily "refute" the influence of the law of value on the terms of trade for reproducible labour-products by focusing on particular instances that will contradict it, but what needs to be explained is why the terms of trade of the bulk of products traded display a fairly stable structure, why there is a fairly stable "value & cost structure" for products which does not usually change very radically or very quickly. In modern times you can study this by looking at the regimen for the consumers price index, the producers price index or capital expenditure index, which shows that although relative prices for products do change, the fluctuations are normally rather limited across time - big changes in trading ratios typically occur only across a decade or several decades, or, in the context of an economic crisis or innovations which revolutionise labour productivity.

Karl Marx never claimed to have "discovered" the law of value, and he considered the basic idea of it so obvious, that he thought it was hardly very interesting in itself - rather, he was interested in the interaction of the law of value with the law of capitalist competition, the latter which had "hitherto never been explained by political economy".

Jurriaan

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Received on Thu Dec 11 15:10:53 2008