David B. Shemano wrote:
I am truly curious -- do you (and others on this list) really, really, reject
that value is subjective? It is so self-evidently true to me that it is hard
for me to even conceptualize the opposite. I understand the labor theory of
value as polemic, but as philosophically correct, I don't get it.
In the web page by Arnold Kling on "Masonomics," it is stated that "Most
economists favor the free market, with reservations. Masonomics rejects the
reservations. If John and Mary are free individuals, and John trades with Mary,
then John and Mary both are better off. End of story." This statement of the
subjective theory of valuation contains at least two key aspects: (1) both are
better off and (2) end of story.
Kling's statement of the subjective valuation theory is supported by Mises:
The basis of modern economics is the cognition that it is precisely the disparity
in the value attached to the objects exchanged that results in their being
exchanged. People buy and sell only because they appraise the things given up less
than those received. Thus the notion of a measurement of value is vain. An act of
exchange is neither preceded nor accompanied by any process which could be called
a measuring of value. ... But if there is a diversity in valuation, all that can
be asserted with regard to it is that one a is valued higher, that it is preferred
to one b. (Human Action, Chapter 11)
For the Austrians this is the end of the story, "we must realize that valuing
means to prefer a to b" (ibid.). Many of the opening chapters of Capital Vol I
explain why this is not "end of story." Marx first explores Kling's story as a
story about use-values, but it is not a story about exchange-value, and thus, it
is not a story about capitalism. It is important to make clear that Marx does not
deny "subjective value" (which he and the classicals called use-value), but that
this was not the end of the story.
In Chapter 5 of Capital I Marx states: "A, who sells wine and buys corn, possibly
produces more wine, with given labour-time, than farmer B could, and B on the
other hand, more corn than wine-grower A could. A, therefore, may get, for the
same exchange-value, more corn, and B more wine, than each would respectively get
without any exchange by producing his own corn and wine. With reference,
therefore, to use-value, there is good ground for saying that 'exchange is a
transaction by which both sides gain.'"
But then, Marx immediately makes the point that exchange-value leads to a
different result. In the case of exchange-value, an exchange takes place between
corn and wine which are of the same value. "'This act produces no increase of
exchange-value either for the one or the other; for each of them already
possessed, before the exchange, a value equal to that which he acquired by means
of that operation.' The result is not altered by introducing money, as a medium of
circulation, between the commodities, and making the sale and the purchase two
distinct acts."
Marx concludes this passage with a point that seems to me worth emphasizing: "The
value of a commodity is expressed in its price before it goes into circulation,
and is therefore a precedent condition of circulation, not its result."
Mises rejects the concept of exchange-value, and thereby makes it impossible to
understand how capitalist markets work. That is, Mises abstracts away from
capitalism. He abstracts from a system where "the product is not produced as an
immediate object of consumption for the producers, but only as a bearer of value,
as a claim, so to speak, to a certain quantity of all materialised social
labour..." (Marx, Theories of Surplus Value)
Here are the words of Mises:
An inveterate fallacy asserted that things and services exchanged are of equal
value. Value was considered as objective, as an intrinsic quality inherent in
things and not merely as the expression of various people's eagerness to acquire
them. People, it was assumed, first established the magnitude of value proper to
goods and services by an act of measurement and then proceeded to barter them
against quantities of goods and services of the same amount of value. This fallacy
... seriously vitiated the marvelous achievements of the classical economists and
rendered the writings of their epigones, especially those of Marx and the Marxian
school, entirely futile. (Human Action, Chapter 11)
There is much that can be said about this passage. For full consideration we would
need to discuss the role of money for Mises and for Marx. I will remain less
ambitious here. Consider the second sentence. Whoever may have held that view, it
was not the view of Marx (nor was it view of Thorstein Veblen). Marx is
particularly illuminating in "Theories of Surplus Value" where he critiques Samuel
Bailey. This is a useful critique because Mises claims "it was Samuel Bailey who
first disclosed what is going on in preferring one thing to another." Because my
message is getting long, I will focus on "value as an intrinsic quality" and leave
aside the issue of "value as an expression" for a different message.
In his critique of Bailey, Marx explains that in order for one thing to "exchange
for _an_infinite_mass_ of other things which have nothing in common with it ...
all those various heterogeneous things must be considered as expressions of the
same common unity, [of] an element quite different from their natural existence or
appearance. ... [T]he value of a commodity is something which not only
distinguishes it from or relates it to other commodities, but is a quality
differentiating it from its own existence as a thing, a value in use."
The "common unity" of commodities, according to Marx, is not an intrinsic property
of the thing being exchanged. "No scientist to date has yet discovered what
natural qualities make definite proportions of snuff tobacco and paintings
'equivalents' for one another."
Elsewhere in his critique of Bailey, Marx explains: "As values, commodities are
_social_ magnitudes, that is to say, something absolutely different from their
'properties' as 'things'. As values, they constitute only relations of men in
their productive activity. Value indeed 'implies exchanges', but exchanges are
exchanges of things between men, exchanges which in no way affect the things as
such. A thing retains the same 'properties' whether it be owned by A or by B."
So, to answer the question directly, yes, I do reject the notion that value is
subjective, with the qualification that I reject the notion as applicable under
capitalism. Marx considered Bailey's reasoning, and would have considered Mises'
reasoning, as "vulgar" because it says only what is obvious. Kling's statement
that John and Mary both are better off when they enter into exchanges is vulgar in
this sense too. Marx accused Bailey of being "a fetishist in that he conceives
value ... as a relation of objects to one another." Mises, as I quoted above, does
the same.
Under capitalism value becomes objective, not because it is a physical property of
things (Mises completely misunderstands this point), but because its appearance in
money prices are accepted as something real. Like the notion of "God," "Value" is
a creation of the human mind. But it is not the creation of a single human mind.
It is more like a belief or a "habit of thought" (as Thorstein Veblen described
it). And I agree with Veblen that habits are the constitutive material of
institutions (including markets, prices, money, and exchange-value), providing
them with power and normative authority. Therefore, just like God maintains an
independent existence for believers, Value in a capitalist economy takes on an
independent existence. God and Value are both creations of the human mind, and
both rule over those who created it.
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