Contrasting Michael Roberts, Adam Smith, and Karl Marx on value: "So far no chemist ever discovered value in a pearl or a diamond". ----------------------------------------------------------------------------------
Just over a week ago, on March 14, Michael Roberts posted "Adam Smith: 250 years", on his blog. It began with a bit of exaggeration: "This week 250 years ago, Adam Smith published `An Inquiry Into the Nature and Causes of the Wealth of Nations´ - and invented economics." Continuing, Roberts focused on the ideas of Smith and Marx on the labor theory of value. But, as we shall see, Roberts misunderstands the Marxist theory of value, presenting value as being a "material substance". (Roberts' article is at (His article is at (https://thenextrecession.wordpress.com/2026/03/14/adam-smith-250-year s/) Roberts noted that "Marx was a close reader of the `Wealth of Nations´. He recognized Smith´s contribution in attempting to develop a theory of value based on labour. As Smith said: `Labour alone, therefore, never varying in its own value, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared. It is their real price; money is their nominal price.´" Smith was talking about a specific type of value, exchange value - the average price in which things are bought and sold on the market. Roberts also pointed out that Karl Marx criticized Smith for being inconsistent in his presentation of the labor theory of value. And indeed, Marx used the labor theory of value to look far more deeply into capitalist economy than Smith, and he showed that exchange according to value results in the exploitation of the working class, and its surrender of surplus value to the capitalist class. But Roberts left aside an issue of great importance: that Marx stressed emphatically that the value given to products in a capitalist or marketplace economy was not a material reality, but simply a social relation between people. It reflected what people would buy and sell a commodity for in the marketplace, not the physical nature of the product being bought and sold. If value were instead a physical or material part of a commodity, this would suggest that the buying and selling in the capitalist marketplace simply reflected the reality of what inevitably happens when people produce something; it might thus suggest that capitalism was something permanent, that couldn´t be replaced, so long as things have to be produced. But that was not Marx´s view. In a famous section, "The Fetishism of Commodities", of his major work "Capital", Marx wrote that value was "a definite social relation between men, that assumes, in their eyes, the fantastic form of a relation between things." (1) A social relation, not a material relation. A relation between people, not an objective relation between objects. In 2023 Roberts and Guglielmo Carchedi published a major exposition of their views in the book "Capitalism in the Twenty-first Century: Through the Prism of Value". Unfortunately, their analysis is marred by their mistaken view of what economic value is. In the introduction to the book, they wrote that value is "actually physical". In their view, there are only two possibilities: value is either a metaphysical fiction or it is a physical reality. They emphasize that "... value is not some metaphysical abstraction, but actually physical - it exists in objective reality." And they state that "the material substance of this value is abstract labour". (2) Marx, by way of contrast, mocked the view that value or abstract labor was a substance, writing in "Capital" that "So far no chemist has ever discovered value either in a pearl or a diamond." (3) And he would never have agreed that labor "is never varying in its own value". (4) Marx also went on to show in part 3 of the second volume of "Capital" that one can´t restrict oneself to value, but also has to go further and consider the actual material nature of the things that are produced, in order to understand how the overall economic cycle of production works. Yes, the pricing in the capitalist market-place is not metaphysical; it is something which we all see vividly every time we go to a store, or pay a bill, or plan how to survive in the current society. But it, and the value which underlies it, are social relations, not a physical reality. Social relations are real things, even though they are not material substances. Value and pricing have a social reality under capitalism; they are not an illusion; they take place in the real world of people and the societies and economies built by people; but they are not physical; they are not material; and value is not the rational measure showing the best way to plan what is produced - it is simply the measure which is used in marketplace societies. (5) It is not an illusion; but it is an illusion to take value as something determined by the material reality of a commodity. Roberts and Carchedi, however, have a different view which is hard to understand; in fact, they are inconsistent in what they write in their book. On one hand, they note that value refers to "abstract labor", while they also write - even in the same sentence - that it has a "material substance". But one can´t have it both ways. It´s one or the other. And looking at economic issues through "the prism" of such a wrong and inconsistent view of value can´t help but damage their analysis of twenty-first century capitalism. Marx not only had a deeper analysis of value then Smith, but also showed that, to understand capitalism, one had to deal both with value and with the material nature of products. He even foreshadowed, decades in advance, the development of material planning, such as "material balances" or certain type of "input-output analysis". Material planning, to this or that extent, occurs in capitalism as well as socialism; it´s important both in understanding what´s going on in capitalist economies today as well as indicating some features of economic accounting that will exist long after financial accounting is a thing of the past. If one puts forward an overall picture of economic life that ignores this, it is neither Marxist nor accurate, but many steps backward from the best socialist thinking. Notes: (1) "Capital, A Critique of Political Economy", translated by Samuel Moore and Edward Aveling, vol. 1, Chapter 1, Part 1, Section 4, "The Fetishism of Commodities and the Secret Thereof", in the 1906 Charles H. Kerr & Company edition, reprinted in "The Modern Library" series from Random House, Inc., p. 83. (2) Roberts and Guglielmo, "Introduction", pp. 1 and 2. (3) Ibid., "The Fetishism of Commodities and the Secret Therefore", p. 95. (4) Surprisingly, the precise quotation from Adam Smith that Roberts cited in his article as an example of what Marx accepted from Smith is given by Marx as an example of a "false conclusion". For one thing, Marx notes that the "value of labor" does change. See Marx, "Theories of Surplus Value", Part 1, p. 77. (The Progress Publishers edition, as reproduced by Lawrence & Wishart, 1969,) Also see p. 71 where Marx wrote that "The value of labour, or rather of labour-power, changes, like that of any other commodity, and is in no way specifically different from the value of other commodities." (5) Some strains of socialist thought believe in the importance of pricing things according to their value. See my three-part series of articles, "The labor-hour is *not* the natural unit of socialist calculation", which is linked to at https://www.communistvoice.org/00LaborHour.html. <> -- Joseph Green -=-=-=-=-=-=-=-=-=-=-=- Groups.io Links: You receive all messages sent to this group. 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