Value-form
The value-form or form of value is an important concept in Karl Marx's critique of political economy, discussed in the first three chapters of Capital, Volume 1. It refers to the social form of tradeable things as units of value, which contrast with their tangible features, as objects which can satisfy human needs and wants or serve a useful purpose. The physical appearance or the price tag of a traded object may be directly observable, but the meaning of its social form is not. Marx intended to correct errors made by the classical economists in their definitions of exchange, value, money and capital, by showing more precisely how these economic categories evolved out of the development of trading relations themselves.
Playfully narrating the "metaphysical subtleties and theological niceties" of ordinary things when they become instruments of trade, Marx provides a brief social morphology of economic value — what its substance really is, the forms which this substance takes, and how its magnitude is determined or expressed. He analyzes the evolution of the form of value in the first instance by considering the meaning of the simple value-relationship that exists between two quantities of traded objects. He then shows how, as the exchange process develops, it gives rise to the money-form of value – which facilitates trade, by providing standard units of exchange value. Once money exists, all quantities of products, services and assets can conveniently be expressed as money-prices, for trading purposes. Lastly, he shows how the trade of commodities for money gives rise to investment capital. Tradeable wares, money and capital are historical preconditions for the emergence of the factory system. With the aid of wage labour, money can be converted into production capital, which creates new value that pays wages and generates profits, when the output of production is sold in markets.
The value-form concept has been the subject of numerous theoretical controversies among academics working in the Marxian tradition, giving rise to many different interpretations. Especially from the late 1960s and since the rediscovery and translation of Isaac Rubin's Essays on Marx's theory of value, the theory of the value-form has been appraised by many Western Marxist scholars as well as by Frankfurt School theorists and Post-Marxist theorists. There has also been considerable discussion about the value-form concept by Japanese Marxian scholars.
The academic debates about Marx's value-form idea often seem obscure, complicated or hyper-abstract. Nevertheless, they continue to have a theoretical importance for the foundations of economic theory and its critique. What position is taken on the issues involved, influences how the relationships of value, prices, money, labour and capital are understood. It will also influence how the historical evolution of trading systems is perceived, and how the reifying effects associated with commerce are interpreted.
Basic explanation
When the concept of the form of value is introduced in the first chapter of Capital, Volume I, Marx clarifies that economic value becomes manifest in an objectified way only through the form of value established by the exchange of products.People know very well that any product represents a value, i.e. that there is a normal economic cost of supply for the product – some people have to work to produce and supply it, so that others can use it. But according to Marx, various further questions arise about that simple insight, such as: how much value is that, exactly? How does that value exist, or what really determines that value? What is the source of that value? How can value be expressed or measured? What explains differences in value? How does value change? Answering these sorts of questions convincingly turns out to be more challenging than one might think at first sight.
Value relation
What something is economically "worth" can be expressed only relatively, by relating, weighing, comparing and equating it to amounts of other tradeable objects. The value of products is expressed by their "exchange-value": what they can trade for, but that exchange-value can be expressed in many different ways. Since exchange-value is most often expressed by a "money-price", it then seems that "exchange value", "value", "price" and "money" are really all the same thing. But Marx argues they are not the same things at all.For Marx, this point is absolutely vital for a scientifically adequate understanding of economic value and markets. Precisely because the political economists kept conflating and confusing the most basic economic categories, Marx argued, they were unable to provide a fully consistent, integral theory of the economy. One might be able to quantify and measure economic phenomena, but that does not necessarily mean that they are measured in a way that they are fully understood.
In a preface to the first edition of Capital, Volume I, Marx stated:
Marx gives various reasons for this ancient puzzle. The main obstacle seems to be that trading relations refer to social relations which are not directly observable. What these social relations are, has to be conceptualized with abstract ideas. The trading ratios between commodities and money are certainly observable, via prices and transaction data. Yet how exactly the things being traded get the value they have, is not observable. It seems like "the market" does that, but what the market is, and how that happens, remains rather vague. This story does not get much further than the idea, that things have value, because people want to have them, and are prepared to pay money for them.
Marx's comment clarifies, that according to Marx the value-form of commodities is not simply a feature of industrial capitalism. It is associated with the whole history of commodity trade. Marx claimed that the origin of the money-form of value had never before been explained by bourgeois economics, and that "the mystery of money will immediately disappear" once the evolution of value-relations has been traced out from its simplest beginnings.
This was probably a vain hope; even today economists and economic historians cannot agree about what is the correct theory of money. Wolfgang Streeck states that "money is easily the most unpredictable and least governable human institution we have ever known". Put another way, the possibilities for arranging any type of trade or deal are extremely diverse; the only operative requirement is that the trading partners agree to the terms of the arrangement, however simple or complicated it may be. It follows that, what specific role money has in the given arrangement, can vary greatly. In addition, new kinds of credit instruments and types of money-tokens keep emerging that were previously unheard of.
Only when market production and its corresponding legal system are highly developed, does it becomes possible to understand what "economic value" actually means in a comprehensive and theoretically consistent way, separate from other sorts of value. The reason is that, to a large extent, the different kinds of value have become practically separated in reality and become increasingly universal in their applications. When Marx considers "value" as such or in itself, as a general social form in the economic history of humans, i.e. "the form of value as such", he is abstracting from all the particular expressions it might have.
Marx admitted that the form of value was a somewhat difficult notion, but he assumed "a reader who is willing to learn something new and therefore to think for himself." In a preface to the second edition of Capital, Volume I, Marx claimed that he had "completely revised" his treatment, because his friend Dr. Louis Kugelmann had convinced him that a "more didactic exposition of the form of value" was needed. Usually Marx-scholars refer to both versions anyhow, because each of them provides some extra information which does not occur in the other version. Hans-Georg Backhaus however distinguishes between no less than four different versions of Marx's story about the value-form: the first version in Marx's A contribution to the critique of political economy, the second version in the first chapter of the first edition of Capital, Volume 1, the third version in a special appendix added to the first edition of Capital, Volume 1, and the fourth revised version in the first chapter of the second edition of Capital, Volume 1, where the appendix of the first edition was scrapped.
Evolution of forms
Marx calls commodities, as a basic form of value, "the economic cell-form of bourgeois society", meaning that commodities are the simplest economic units out of which the "body" of West European capitalist civilization was developed and built up, across many centuries. Wares trade for money, money trades for wares, more and more money is made from this trade, and the markets reach more and more areas – transforming society into the world of business, where products and people originating from everywhere are brought together to create buildings, tools, facilities, clothing, foodstuffs, weapons etc.. In this way, Marx explains how, in specific historical conditions, capital originated and expanded in society, eventually conquered most of economic life, and transformed the whole of society according to the laws and logic of capital accumulation. This developmental process occurred across many centuries, both through gradual and incremental evolutionary changes, and through huge social upheavals, crises, wars and revolutions.The capitalist mode of production is viewed by Marx as "generalized" commodity production, i.e. the production of commodities by means of commodities, in a circular self-reproducing flow of actions and transactions. Already in his Grundrisse manuscript of 1858, Marx worked out his insight that "The first category in which bourgeois wealth presents itself is that of the commodity" and that became the opening statement of his 1859 Critique and the first volume of Capital. In their pathbreaking treatises on political economy, both Adam Smith and David Ricardo had started out from an analysis of the value of traded commodities produced by human labour.
The "forms of value" of commodities are only the first of a series of social forms which Marx analyzes in Das Kapital, such as the forms of money, the forms of capital, the forms of wages, and the forms of profit. All of these are different forms of value, normally expressed by prices, yet they all presuppose the exchange of tradeable wares. In Marx's dialectical story, each of these forms is shown to grow out of other forms, and so all the forms are connected with each other, step by step, logically and historically.
Each form is expressed with categories, the content of which evolves or mutates to some degree in response to new distinctions or circumstances. At the end of the story, all the forms appear seamlessly integrated with each other in a self-reproducing, constantly expanding capitalist system, of which the distant historical origin has become hidden and obscure; the fully developed system appears other than it really is, and does not transparently disclose its real nature.
If the workings of the capitalist system were perfectly obvious and transparent, Marx argues, then there would be no need for any special economic "science"; one would just be stating platitudes. They prompt further inquiry, because they turn out to be not as obvious as they seem, and indeed become rather puzzling or even mindboggling, on further reflection. Economists are constantly trying to "second-guess" what the market will do, and what the overall effects might be of transaction patterns, but in truth they often don't succeed any better than astrologers. A critical re-examination is then called for, of precisely those ordinary phenomena which were previously taken for granted.
After his first cryptic attempt at telling the story flopped when he published it in Germany, Marx resolved to tell it another time, in a much more interesting, intriguing and elaborate way, so that people would really grasp the significance of it—beginning from exactly the same starting point. That became Das Kapital, which is still being read and discussed today.
Marx initially defines a product of human labour that has become a commodity as being simultaneously:
- A useful object that can satisfy a want or need ; this is the object valued from the point of view of consuming or using it, referring to its observable material form, i.e., the tangible, observable characteristics it has that make it useful, and therefore valued by people, even if the use is only symbolic.
- An object of economic value generally; this is the value of the object considered from the point of view of its supply cost, commercial value, or "what you can get for it". The reference here is to the social form of the product, which is not directly observable.
Practically speaking, Marx argues that the product values cannot be directly observed and can become observably manifest only as exchange-values, i.e., as relative expressions, by comparing their worth to other goods they can be traded for. This causes people to think value and exchange-value are the same thing, but Marx argues they are not; the content, magnitude and form of value must be distinguished, and according to the law of value, the exchange value of products being traded is determined and regulated by their value. His argument is, that the market prices of a commodity will oscillate around its value, and that its value is the outcome of the average, normal labour requirements to produce it.