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{{Marxian economics}}
{{Marxism}}


The '''value-form''' or '''form of value''' (''Wertform'' in German) is a concept in [[Karl Marx]]'s critique of [[political economy]].<ref>[[Costas Lapavitsas]], ''Social foundations of money, markets and credit''. London: Routledge, 2003;
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Simon Mohun, "Value, Value Form and Money", in Simon Mohun (ed.), ''Debates in Value Theory''. Macmillan: London, 1994; Alfredo Saad-Filho, ''The value of Marx''. London: Routledge, 2002, section 2.2.</ref> It refers to the social form (a socially attributed status) of a [[Commodity (Marxism)|commodity]] (any product traded in markets), which contrasts with the tangible [[use-value]] or [[utility]] (its "useful form" or "natural form") which it has, as a product which satisfies some human need. The use-value of a product is normally observable when we see the product being used. The economic ''value'' of a product, however, refers to a symbolized relationship which is not directly observable, except as a number signalling a potential money-price. If we consider products purely as "values" of a certain magnitude, we disregard and abstract away from all the different use-values they can have in their tangible shapes and forms.
 
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Marx borrowed, criticized and developed the idea of the form of value from the Greek philosopher [[Aristotle]], who pondered the nature of exchange value in chapter 5 of Book 5 in his ''[[Nicomachean Ethics]]''.<ref>See further Scott Meikle, ''Aristotle's economic thought''. Oxford: Clarendon, 1995; Mark Blaug (ed.), ''Aristotle (384–322 BC)''. Aldershot: Elgar, 1991; Cosimo Perrotta, "Economic Value and Moral Value in Aristotle", in: Tony Aspromourgos and John Lodewijks (eds.), ''History and Political Economy. Essays in Honour of P.D.Groenewegen''. London: Routledge, 2004; Spencer J. Pack, ''Aristotle, Adam Smith and Karl Marx. On Some Fundamental Issues in 21st Century Political Economy''. Cheltenham: Edward Elgar, 2010, Part 1.</ref> In so doing, Marx was also influenced by, and responding to, the classical political economy discourse about the economic laws governing commodity values and money,<ref>[[Karl Marx]], ''[[Capital, Volume I]]'', Penguin ed. 1976, pp. 174–175.</ref> beginning with [[William Petty]]'s ''Quantulumcunque Concerning Money'' (1682)<ref>A. Anikin, ''A science in its youth: pre-Marxian political economy''. Moscow: Progress Publishers, 1975, p. 80.</ref> and culminating with [[David Ricardo]]'s ''Principles of Political Economy and Taxation'' (1817).
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Marx's concept is introduced in the first chapter of ''[[Das Kapital]]''<ref>[[Karl Marx]], ''[[Capital, Volume I]]'', chapter 1, section 3.</ref> where Marx argues 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. there is an economic cost of supply for the product. But how much value? What something is economically "worth" can be expressed only relatively, by relating, weighing, comparing and equating it to amounts of other tradeable objects (or to the labour effort or sum of money those objects represent).<ref>Karl Marx, ''[[Capital, Volume I]]'', Pelican edition, pp. 141–142.</ref> The value of products is expressed by their exchange-value, by what they can trade for. Because value is expressed as exchange-value, it seems to the ordinary observer that value and exchange-value are simply the same thing. And since exchange-value is most often expressed by a money-price, it seems that "value" and "money" are the same thing. But Marx argues they are not the same things.
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===The "problem" of a form-analysis of value===
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Essentially, Marx's value-form analysis intends to answer the question, how are the value-relationships of products expressed in ways that acquire an objective existence in their own right (ultimately as relationships between quantities of money, or money-prices),<ref>[[Karl Marx]], ''[[Capital, Volume I]]'', Penguin ed. 1976, p. 186.</ref> and how these product-values can change, independently of the valuers who trade in them.<ref>V.I. Lenin, "Karl Marx. A Brief Biographical Sketch With an Exposition of Marxism". In: ''Lenin Collected Works'', Vol. 21, Moscow: Progress Publishers, 1974, chapter 3.[http://www.marxists.org/archive/lenin/works/1914/granat/ch03.htm]</ref> Marx argued that neither the classical political economists nor the vulgar economists who succeeded them were able to explain satisfactorily how that worked, resulting in serious theoretical errors. The reason behind the errors was—according to Marx—that, as market trade developed, the economic relationship between commodity-values and money increasingly appeared in an inverted, reified way. In reality, economic value is a social relationship between people that is reflected by a thing or expressed by the relationship between things. Yet it often seems more like value is a thing which creates the social relationship.
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Marx's idea can be traced back to his 1857 [[Grundrisse]] manuscript where he contrasted communal production with production for exchange.<ref>See Karl Marx, ''Grundrisse'', Pelican edition 1973, pp.&nbsp;171–172.</ref> Marx notes in [[Das Kapital]] that:
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{{Quotation|It is one of the chief failings of classical political economy that it has never succeeded, by means of its analysis of commodities, and in particular of their value, in discovering the form of value which in fact turns value into exchange-value... The value-form of the product of labour is the most abstract, but also the most universal form of the bourgeois mode of production; by that fact it stamps the bourgeois mode of production as a particular kind of social production of a historical and transitory character. If then we make the mistake of treating it as the eternal natural form of social production, we necessarily overlook the specificity of the value-form, and consequently of the commodity form together with its further developments, the money form, the capital form, etc. We therefore find that economists who are entirely agreed that labour-time is the measure of the magnitude of value, have the strangest and most contradictory ideas about money, that is, about the universal equivalent in its finished form.<ref>Karl Marx, ''[[Capital, Volume I]]'', Pelican Books, p. 174 note 34.</ref>}}
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Similarly, in vulgar (or vulgar Marxist) economics, the commodity is simply a combination of [[use-value]] and [[exchange-value]]. That is not Marx's own argument.<ref>See the first part of the first chapter of ''[[Capital, Volume I]]''; Marx distinguishes between "use-value" and "value", and then considers successively the ''substance'' of value, the ''magnitude'' of value and the ''form'' of value.</ref> As he explains in ''[[Capital, Volume III]]'', business competition among producers centres precisely on the discrepancies between the socially established values of commodities and their particular exchange-values.<ref>''Capital, Volume III'', chapter 1.</ref> Marx believed that correctly distinguishing between the form and content of value was essential for the logical coherence of the labour theory of value,<ref>[[Makoto Itoh]], ''The basic theory of capitalism: the forms and substance of the capitalist economy.'' London: Macmillan, 1988.</ref> and he criticized [[Adam Smith]] specifically because Smith:
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{{Quotation|confuses the measure of value as the immanent measure which at the same time forms the substance of value [i.e., labour-time], with the measure of value in the sense that money is called a measure of value.<ref>[http://www.marxists.org/archive/marx/works/1863/theories-surplus-value/ch03.htm#s11 Karl Marx, ''Theories of Surplus Value'', Chapter 3, section 11]</ref>}}
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The value-form is often regarded as a difficult, obscure or even [[esoteric]] idea by scholars, and there has been considerable debate about its real theoretical significance. Marx himself started off the controversy when he emphasized that ''[[Capital, Volume I]]'' was not difficult to understand, "with the exception of the section on the form of value."<ref>[[Karl Marx]], ''[[Capital, Volume I]]'', Penguin ed., 1976, p. 90.</ref> In his "Preface to ''Capital Vol. 1,''" the French philosopher [[Louis Althusser]] famously asserted:
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{{Quotation|The greatest difficulties, theoretical or otherwise, which are obstacles to an easy reading of Capital Volume One are unfortunately (or fortunately) concentrated at the very beginning of Volume One, to be precise, in its first Part, which deals with 'Commodities and Money'. I therefore give the following advice: put the whole of Part One aside for the time being and begin your reading with Part Two...<ref>Louis Althusser, "Preface to Capital Vol. 1" (1969), in ''Lenin and Philosophy and Other Essays''. London: New Left Books, 1971.[http://www.marxists.org/reference/archive/althusser/1969/preface-capital.htm]</ref>}}
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Althusser's suggestions were taken up by many New Left Marxists, which meant that Marx's theory of the value-form and its significance were rarely taught.<ref>Scott Hamilton, "Necessity and contingency: the return of Althusser", ''Labor Tribune'' July 2006 [http://www.labortribune.net/ArticleHolder/200607_Althusser/tabid/102/Default.aspx].</ref> However, Marx very deliberately and explicitly made an effort to state his interpretation of commodity trade with absolute clarity in his first chapters. Marx aims to demonstrate that the "labour theory of value" that guided the classical political economists in interpreting the economy ''cannot'' be correct, because the concept of economic value itself is misconstrued.
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Probably the difficulty Marxist academics have had with Marx's own text is because, abstractly, economic value refers at the same time to ''quantitative'' and ''qualitative'' dimensions,<ref>[[Jacques Bidet]], ''Exploring Marx's Capital: philosophical, economic and political dimensions''. Leiden: Brill, 2007.</ref> which can be stated according to both absolute and relative criteria, and expressed as:
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From the use of the expression "value" it may therefore not be immediately obvious ''what kind'' of valuation or expression is being referred to, it depends on the theoretical context.<ref>Howard Engelskirchen, ''Capital as a Social Kind: Definitions and Transformations in the Critique of Political Economy.'' London: Routledge, 2011.</ref> [[Ladislaus von Bortkiewicz]], the originator of the famous "[[transformation problem]]" controversy, claimed confidently that in Marx's text, "the context always reveals clearly which value is meant".<ref>Ladislaus von Bortkiewicz, "Value and Price in the Marxian System", International Economic Papers, no. 2, 1952, p. 6, note 2.[http://classiques.uqac.ca/classiques/Bortkiewicz_ladislaus_von/value_and_price_marxian_system/value_price_marxian_system.pdf]</ref> Nevertheless, there have been very lengthy academic debates about what Marx really did mean in particular passages. Rigorously investigated, the concept of "value" turns out not to be a "neat-and-tidy accounting concept" that can be manipulated with mathematical precision; it can be manipulated with mathematical precision only if a series of definitions are already fixed and assumed (it is a [[fuzzy concept]]). At the end of his life, [[David Ricardo]] had to "conclude, rather sadly, that 'there is no such thing in nature as a perfect measure of value' (1823, p. 404) – there is no such thing as an invariable standard of value".<ref>John Eatwell, "absolute and exchangeable value". In: Steven N. Durlauf and Lawrence E. Blume (ed.), ''The New Palgrave Dictionary of Economics'', Second Edition, 2008.</ref>
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In addition, official [[economics]] typically takes it for granted that the exchange processes on which markets are based already exist and will occur, and that prices already exist, or can be imputed. This is often called the "gross substitution axiom" by economists: all products are, in principle, supposed to be mutually interchangeable, and therefore the "price mechanism" can allocate resources in such a way, that market equilibria are assured by the laws of supply and demand.<ref>Arne Heise, "'When the facts change, I change my mind...'Some developments in the economic scientific community and the situation in Germany." ''Real World Economics Review'', issue 62, December 2012. Paul Davidson, ''Financial markets, money and the real world''. Cheltenham: Edward Elgar, 2002, p. 43.</ref> This assumption is overturned only in special cases, where markets still must be brought into being and a process of "price discovery" takes place. In modern economics, the "value" of something is defined either as a money-price, or as a personal (subjective) valuation, and the exchangeability of products as such presents no special problem; it normally does not merit any special inquiry since exchangeability as such is taken for granted.
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According to orthodox economics, money serves as a medium of exchange to minimize the [[transaction costs]] of [[barter]] among utility-maximizing individuals. Such an approach is very different from Marx's historical interpretation of the formation of value. In Marx's theory, the "value" of a product is something separate and distinct from the "price" it happens to fetch (goods can sell for more than they are worth, or less, i.e., they are not necessarily worth what they happen to sell for).<ref>Karl Marx, ''[[Capital, Volume III]]'', chapter 45 [http://www.marxists.org/archive/marx/works/1894-c3/ch45.htm].</ref>
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The theory of the forms of value is the basis for Marx's concept of [[commodity fetishism]], which concerns how the independent power acquired by the ''value'' of tradeable objects is reflected back into human thought, and more specifically into the theories of the political economists about the market economy. In Althusserian theory, however, this meaning is unknown, because Althusserian theory detaches the concept of "commodity fetishism" from the concept of the "value-form". Almost none of the New Left discussions of commodity fetishism refer to Marx's value-form analysis in any depth.<ref>One notable exception is the journal ''Capital & Class'', which published a translation by Mike Roth and Wal Suchting of Marx's original text on the value-form as it appears in the first edition of ''[[Capital, Volume I]]''. See "The value-form", in: ''Capital and Class'', No.4 Spring 1978, pp. 130–150. Two other journals referring to the value-form discussion are ''Thesis Eleven''[http://the.sagepub.com/] and ''Telos''.[http://journal.telospress.com/]</ref>
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In the reified perception of the political economists and the vulgar Marxists, products have value ''because'' they are expressible in money-prices, but Marx argues that in reality it is just the other way round: because commodities have value, i.e. because they are all products of social labour, their values can be expressed by generally accepted money-prices, accurately or not. The true relationship can, however, be traced out only when the historical evolution of economic exchange is considered from its most simple beginnings to its most developed forms. The end-result of market development is a fully monetized economy (a "cash economy"), but how its workings appear to the individual at the micro-level, is often the exact inverse of its causal dynamic at the macro-level. According to Marx, this creates a lot of confusions in economic theorizing.
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Marx initially defines a product of human labour that has become a [[Commodity (Marxism)|commodity]] (in German: ''Kaufware'', i.e., merchandise, ware for sale) as being simultaneously:


* A useful object that can satisfy a want or need (a [[use value]]); this is the value of object considered 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.
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* An object of economic value generally; this is the value of the object considered from the point of view of its earnings potential, its sale value or its cost of production ("commercial value"). The reference here is to the ''social form'' of the product, which is not directly observable.
 
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The "form of value" (also a reference to [[phenomenology (philosophy)|phenomenology]] in the classical philosophical sense used by [[Hegel]]) then refers to the specific ways of relating through which "what a commodity is worth" happens to be socially expressed in trading processes, when different products and assets are compared with each other. Practically speaking, Marx argues that the product ''values'' cannot be directly observed and can become observably manifest only as [[Exchange value|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.
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Marx argues that the form of value is not "static" or "fixed once and for all", but rather, that it develops logically and historically in trading processes from very simple, primitive expressions to very complicated or sophisticated expressions. Subsequently he also examines the various forms taken by capital, the forms of wages, and so forth. In each case, the form denotes how a specific social or economic relationship among people is expressed or symbolized.
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Initially, in primitive exchange, the form that economic value takes does not even involve any [[price]]s, since what something is "worth" is very simply expressed in (a quantity of) some other good (an occasional [[barter]] relationship).<ref>Karl Marx, ''[[Capital, Volume I]]'', Pelican edition, p. 182.</ref> Some scholars, such as Hans-Georg Backhaus, argue that for this reason value simply did not exist in societies where money was not used. Marx, though, argues that product-values did exist in primitive economies, but that establishing how much products were worth followed customary practices, rather than purely a comparison with other products, or reckoning with money; thus, value was merely expressed in a different way. All the time, that is, people knew quite well that their products had value because it cost work-effort to replace them, and consequently they also valued their products.
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In the most primitive (simplest) situation, people acquire objects for which they have a use by borrowing, trading or bartering, in exchange for other goods that they don't particularly have a need for themselves. They value things directly because of their useful qualities. In the process, customary norms develop for what counts as a normal, balanced exchange.
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By analyzing the value-form, Marx aims to show that when people bring their products into relation with each other in market trade, they are also [[social relation|socially related]] in specific ways (whether they like it or not, and whether they are aware of it or not), and that this fact very strongly influences the very way in which they think about how they are related.<ref>See [[Wolfgang Fritz Haug]], ''Critique of Commodity Aesthetics: Appearance, Sexuality and Advertising in Capitalist Society.'' Introduced by Stuart Hall. Minneapolis: University of Minnesota Press, 1986, chapter 1.</ref> It influences how they will view the whole human interactive process of giving and receiving, taking and procuring, sharing and relinquishing, accepting and rejecting—and how to balance all that.<ref>''[[Capital, Volume I]]'', Penguin ed., pp. 179–180.</ref>
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The value-form of products does not merely refer to a "trading valuation of objects"; it refers also to a certain way of relating or interacting, and a [[mentality]], among human subjects who internalize the value-form, so that the manifestations of economic value become regarded as completely normal, natural and self-evident in human interactions (a "market culture," which is also reflected in [[language]] use). Marx's slightly surreal description of what goes on in commodity exchanges highlights not only that value relationships appear to exist between commodities quite independently of the valuers, but also that people accept that these relationships exist even although they do not understand exactly what they are, or why they exist at all. They often participate in markets without knowing much at all about how they work.
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Marx's argument is that in order to be able to trade, people must objectify (objectively express) the value of goods produced, but it turns out that, in doing so, they are actually also objectifying and comparing the value of their own labour-efforts. Most abstractly, the quantities of money for which products are traded express claims to quantities of society's labour in general, or "[[Abstract labour and concrete labour|abstract labour]]". So by equating and comparing the value of their products in exchange, people at the same time equate and compare the value of their labour efforts, even if they are completely unaware of that; and what a product is worth becomes dependent on, and changes according to, what other products are worth, even regardless of subjective evaluations of what the product is worth. Marxists often call this a "real abstraction", i.e. the symbolic token representing a socio-economic relationship is practically treated as a tradeable thing in its own right.
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# Value relations gain an independent, objective existence that begins to regulate and dominate human life, and to which all people must adjust their behaviour, whether they like it or not. They internalize the value-form by adjusting to its effects (this is called "the forces and laws of the market"). Simply put, if human valuations originate in people's ability to prioritize and weigh up behavioural responses according to self-chosen options, the very ''meaning'' of their choices, and the language in which they are expressed, will be strongly influenced by the surrounding world ordered by the value-system.
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# A consequent tendency towards a [[Reification (Marxism)|reifying]] inversion in human awareness (subjects become treated as things, and things become treated as active subjects, while means become ends, and ends become means). Even although the values attributed to products exist only as a social effect of how people are relating and related, it begins to look like value is actually an intrinsic property of products; the way average values change, begins to lead a "life of its own" that individuals and groups are unable to control and must adjust to, like it or not.


The combination of (1) and (2) mean that regardless of how one happens to think or choose, one must necessarily conform to the structure of value relations that exists in capitalist society, quite independently of one's will or awareness. It is not that value relations are "only objective" or "only subjective" (value relations obviously could not exist at all, without humans making and accepting valuations, whether explicitly or implicitly) but rather that the objectification of value becomes a tangible, practical reality that one simply cannot get away from. A relationship is established between things that, although it originates in human valuations, escapes from the control of individuals, groups and nations.
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Marx's explanation of the value-form originated in his [[Grundrisse]] manuscripts, and in ideas expressed his 1859 book ''[[A Contribution to the Critique of Political Economy]]'', which failed to sell many copies. It is already clearly evident in his manuscript of ''[[Theories of Surplus Value]]'' (1861–63). Marx first explicitly described the concept in an appendix to the first (1867) edition of [[Das Kapital]],<ref>http://www.marxists.org/archive/marx/works/1867-c1/appendix.htm#n1</ref> but this appendix was dropped in a second edition, where the first chapter was rewritten to include a special section on the value-form at the end.


In a preface to the first edition of ''Das Kapital'', Marx stated
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{{Quotation|"I have popularised the passages concerning the substance of value and the magnitude of value as much as possible. The value-form, whose fully developed shape is the money-form, is very simple and slight in content. Nevertheless, the human mind has sought in vain for more than 2,000 years to get to the bottom of it..."<ref>''[[Capital, Volume I]]'', Penguin ed., pp. 89–90).</ref>}}
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Marx gives various reasons for this, but the main obstacle seems to be that trading relations refer to societal relations that are not necessarily observably manifest, and therefore can only be inferred or analyzed with the aid of highly abstract ideas. The quote clarifies that Marx thought that the value-form of commodities is not simply a feature of capitalism, but is associated with the whole history of commodity trade.<ref>Marx, ''[[Capital, Volume I]]'', Penguin ed. 1976, p. 273.</ref>
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According to Marx, the Greek philosopher [[Aristotle]] (circa 360–370 BC) had already described the basics of the value-form when he argued<ref>[http://virtuescience.com/ethics5.html#5.5 In ''Nicomachean Ethics'', Book V, Ch.5]</ref>) that an expression such as "5 beds = 1 house" does not differ from "5 beds = such and such an amount of money", but according to Marx, Aristotle's analysis "suffered shipwreck" because he lacked a clear concept of value. By this Marx meant that Aristotle was unable to clarify the ''substance'' of value, i.e., what exactly was being equated in value-comparisons, or what was the common denominator commensurating different goods.<ref>Evald Ilyenkov, ''The Dialectics of the Abstract and the Concrete in Marx's Capital'', Moscow: Progress, 1982, p. 93.</ref> Aristotle thought the common factor must simply be the demand for goods, since without demand for goods that could satisfy some need or want, they would not be exchanged. According to Marx, the substance of product-value is human labour-time in general, labour-in-the-abstract or "[[Abstract labour and concrete labour|abstract labour]]". This value exists quite independently of the particular forms that exchange may take, though obviously value is always expressed in some form or other.
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Marx argues that only when market production is highly developed, that it becomes possible to understand what economic value actually means in a comprehensive and theoretically consistent way, separate from other sorts of value (like [[aesthetic value]] or [[moral value]]). He discusses the notion of the formal equality of market actors more in the ''[[Grundrisse]]''.<ref>Penguin ed., p.&nbsp;241ff.</ref> Marx admitted that the value-form was a somewhat difficult notion but he assumed "a reader who is willing to learn something new and therefore to think for himself."<ref>''[[Capital, Volume I]]'', Penguin ed., p.&nbsp;90.</ref> In a preface to the second edition of [[Das Kapital]], Marx said 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.<ref>''[[Capital, Volume I]]'', Penguin ed., p.&nbsp;94).</ref>
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==The development of the form of value in the history of trading relations==
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Marx distinguishes between four successive steps in the process of trading products, i.e., in the circulation of commodities, through which fairly stable and objective ''value proportionalities'' (''Wertverthaltnisse'' in German) form that express "what products are worth". These steps are:


*1. The ''simple value-form'', an expression that contains the duality of relative value and equivalent value.
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*2. The ''expanded or total value-form'', a quantitative "chaining together" of the simple forms of expressing value.
 
*3. The ''general value-form'', i.e., the expression of the worth of all products reckoned in a general equivalent.
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*4. The ''money-form'' of value, which is a general equivalent used in trading (a medium of exchange) that is ''universally exchangeable''.
 
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These forms are different ways of symbolizing and representing what goods are worth, to facilitate trade and cost/benefit calculations. The simple value-form does not (or not necessarily) involve a money-referent at all, and the expanded and general forms are intermediary expressions between a non-monetary and a monetary expression of economic value. The four steps are an abstract summary of what essentially happens to the trading relationship when the trade in products grows and develops. The four steps are not necessarily an adequate literal description of what historically happens.
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The value relationship in Marx's economic sense begins to emerge, when we are able to state that one bundle of use-values is worth the same as another bundle of (different) use-values. That happens when the bundles are regularly traded for each other, and thus are regarded as instruments of trade. It is a quantitative relationship between quantities. The simplest value-form expression can be stated as the following equation:
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{{Quotation|''X quantity of commodity A is worth Y quantity of commodity B''}}
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where the value of X(A) is expressed ''relatively'', as being equal to a certain quantity of B, meaning that A is the ''relative'' form of value and B the ''equivalent'' form of value, so that B is effectively ''the value-form'' of (expresses the value of) A. If we ask "how much is X quantity of commodity A worth?" the answer is "Y quantity of commodity B". This simple equation, expressing a simple ''value proportion'' between products, however permits several possibilities of differences in valuation emerging within the circulation of products:
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*the absolute value of A changes, but the absolute value of B stays constant; in this case, the change in the relative value of A depends only on a change in the absolute value of A (The absolute value, Marx argues, is the total labour cost on average implicated in making a commodity).
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*the absolute value of A stays constant, but the absolute value of B changes; in this case, the relative value of A fluctuates in inverse relation to changes in the absolute value of B, meaning that if B goes down then A goes up, while if B goes up then A goes down.
 
*the values of A and B both change in the same direction and in the same proportion. In this case, the equation still holds, but the change in absolute value is noticeable only if A and B are compared with a commodity C, where C's value stays constant. If all commodities increase or decrease in value by the same amount, then their relative values all remain exactly the same.
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These possible changes in valuation enable us to understand already that what any particular product will trade for is delimited by what ''other'' products will trade for, quite independently of how much the buyer would like to pay, or how much the seller would like to get in return. ''Value'' should not be confused with ''price'' here, however, because products can be traded at prices above or below what they are worth (implying value-price deviations; this complicates the picture and is elaborated only in the third volume of [[Das Kapital]]). For simplicity's sake, Marx assumes initially that the money-price of a commodity will be equal to its value (ordinarily, price-value deviations would not be very great); but in ''Capital Vol 3'' it becomes clear that the sale of goods above or below their value has a crucial effect on profits.
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*The ''value'' of an individual commodity can change relative to other commodities, although the real cost in labour of that particular commodity stays constant, and vice versa, the real labour cost of that particular commodity can vary, although its relative value remains the same; this means that goods can be devalued or revalued depending on what happens elsewhere in the trading system and on changes in the conditions of producing them elsewhere. It would therefore be wrong to claim, as some Marxists<ref>For example, [[Ernest Mandel]], ''Karl Marx'', Part 4: "For Marx, labour ''is'' value."[http://www.internationalviewpoint.org/spip.php?article284] [[Bertell Ollman]] ''Alienation: Marx's conception of man in capitalist society''. Cambridge: Cambridge University Press, 1975, chapter 26, p. 176.</ref> argue, that for Marx "economic value ''is'' labour"; rather, economic value really refers to the current social valuation of labour effort implicated in products.
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*That the absolute and relative values of commodities can change constantly, in proportions which do not exactly compensate each other, or cancel each other out, via haphazard adjustments to new production and demand conditions.<ref>[[Karl Marx]], ''[[Capital, Volume I]]'', Penguin ed., p. 146.</ref>
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In ancient civilizations where considerable market trade occurred, there were usually a few types of goods that could function as a general standard of value. This standard served for value comparisons; it did not necessarily mean that goods were actually traded for the standard commodity.<ref>Paul Einzig, ''Primitive money in its ethnological, historical and economic aspects''. Pergamon, 1966.</ref> This rather cumbersome problem is solved with the introduction of ''money''—the owner of a product can sell it for money, and buy another product he wants with money, without worrying anymore about whether the thing offered in exchange for his own product is indeed the product that he wants himself. Now, the only limit to trade is the development of the market.
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But for most of the history of human civilization, money was not actually universally used, partly because the prevailing systems of property rights and cultural [[Mores|custom]] did not allow many goods to be sold for money, and partly because many products were distributed and traded without using money. Also, several different "currencies" were often used side by side. Marx himself believed that [[nomadic]] peoples were the first to develop the money-form of value (in the sense of a universal equivalent in trade) because all their possessions were mobile, and because they were regularly in contact with different communities, which encouraged the exchange of products.<ref>[[Karl Marx]], ''[[Capital, Volume I]]'', Penguin ed., p. 183.</ref> When money is generally used in trade, money becomes the general expression of the value-form of goods being traded; usually this is associated with the emergence of a state authority issuing legal currency. At that point the value-form appears to have acquired a fully independent, separate existence from any particular traded object (behind this autonomy, however, is the power of state authorities or private agencies to ''enforce'' financial claims).
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According to Marx's theory of money,<ref>''[[Capital, Volume I]]'', chapter 3. For commentaries, see: Samezo Kuruma and E. Michael Schauerte, ''Marx's Theory of the Genesis of Money: How, Why and Through What Is a Commodity Money?'' Outskirts Press, 2008; Suzanne de Brunhoff, ''Marx on Money''. New York: Urizen Books, 1976; Anitra Nelson, ''Marx's concept of Money''. London: Routledge, 1999; Fred Moseley (ed.), ''Marx's Theory of Money: Modern Appraisals''. London: Palgrave Macmillan, 2005; Duncan K. Foley, ''Understanding Capital''. Cambridge: Harvard University Press, 1986; Phillip Anthony O'Hara, "Money and Credit in Marx's Political Economy
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and Contemporary Capitalism". Working paper, School of Economics and Finance, Curtin University of Technology, 2000 [http://www.hetsa.org.au/pdf/32-RA-2.pdf]; Augusto Graziani, "The Marxist theory of money". ''Journal of Political Economy'', Vol. 27, no. 2, Summer 1997, p. 26-50.</ref> the money-form of value (whether bullion, coinage, paper or money of account) fulfills a number of social functions at the same time:
:::::*It is a universal equivalent, which can in principle exchange for any product offered for sale.
:::::*It is a means of exchange, facilitating the circulation of commodities.
:::::*It provides a standard measure of value; a means of accounting for value; and it is the measuring unit of prices.
:::::*It is a universally accepted means of payment for goods & services rendered, and for debt obligations.
:::::*It is a means to store value owned, accumulate value, or form hoards of wealth.


Once the money-commodity (e.g., [[gold]], [[silver]], [[bronze]]) is securely established as a stable medium of exchange, symbolic money-tokens (e.g., [[bank notes]] and debt claims) issued by the state, trading houses or corporations can in principle substitute for the "real thing" on a regular basis. At first, these "paper claims" (legal tender) are by law convertible on demand into quantities of gold, silver etc., and they circulate alongside precious metals. But gradually currencies come into use that are not so convertible, i.e., "fiduciary money" or [[fiat money]] which relies on social trust that people will honor their transactional obligations. These kinds of fiduciary money rely not on the value of money-tokens themselves (as in [[commodity money]]), but on the ability to enforce financial claims and contracts, principally by means of the power and laws of the state, but also by other institutional methods. Eventually, as Marx anticipated in 1844, precious metals play very little role anymore in the monetary system.<ref>Karl Marx, ''Economic and Philosophic Manuscripts of 1844'', in ''Marx-Engels Collected Works'', Vol. 3. Moscow: Progress, 1975, p. 312. Karl Marx,''[[Capital, Volume II]]'', chapter 4. [http://www.marxists.org/archive/marx/works/1885-c2/ch04.htm].</ref>
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Alongside fiat money, credit money also develops. Credit money, although expressed in currency units, does not consist of money tokens. It consists rather of financial claims, including of all kinds of debt certificates (promissory notes) which entitle the holder to future income under contractually specified conditions. These claims can themselves be traded for profit. Credit arrangements existed already in the ancient world,<ref>[[Bruce G. Trigger]], ''Understanding Ancient Civilizations''. Cambridge University Press, 2003, p. 343.</ref> but there was no very large-scale trade in debt obligations. In the modern world, the majority of money no longer consists of money tokens, but of credit money. Marx was quite aware of the role of credit money, but did not analyze it in depth. His concern was only with how the credit system directly impacted on the capitalist production process.
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The ultimate universal equivalent according to Marx is "world money", i.e., financial instruments that are accepted and usable for trading purposes everywhere, such as [[bullion]].<ref>Henry C. K. Liu, "The London Gold Market", ''Asia Times'', 27 January 2011.</ref> In the world market, the value of commodities is expressed by a universal standard, so that their "independent value-form" appears to traders as "universal money".<ref>See Karl Marx, ''[[Capital, Volume I]]'', chapter 3 section 3C.[http://www.marxists.org/archive/marx/works/1867-c1/ch03.htm#S3c]</ref> Nowadays the [[US dollar]],<ref>Jan Toporowski, "How the Global Crisis Is Transmitted to Developing Countries", ''Development Viewpoint'', No. 24, February 2009.[http://eprints.soas.ac.uk/7329/1/DevelopmentViewpoint24.pdf]</ref> the [[Euro]], and the Japanese [[Yen]] are widely used as "world currencies" providing a near-universal standard and measure of value. They are used as a means of exchange worldwide, and consequently most governments have significant reserves or claims to these currencies.
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It is important to note that Marx's four steps in the development of the value-form are mainly an ''analytical'' or logical progression, which may not always conform to the ''actual'' historical processes by which objects begin to acquire a relatively stable value and are traded as commodities.<ref>There is a long-running academic dispute about whether the development of the value-form presented by Marx describes an historical sequence, whether it is only a logical exposition, or whether it is both.</ref> Three reasons are:
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*Various different methods of trade (including [[counter-trade]]) may always exist and persist side by side. Thus, simpler and more developed expressions of value may be used in trade at the same time, or combined (for example, in order to fix a rate of exchange, traders may have to reckon how much of commodity B can be acquired, if commodity A is traded).
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*Market and non-market methods of allocating resources may combine, in rather unique ways. The act of sale, for example, may not only give the owner of a good possession of it, but also grant or deny access to other goods. The actual distinction between selling and barter may not be so easy to draw, and all kinds of "deals" can be done in which the trade of one thing has consequences for the possession of other things.
*Objects that previously had no socially accepted value at all, may acquire it in a situation where money is already used, simply by imputing or attaching a money-price to them. In this way, objects can acquire the value-form "all at once"—they are suddenly integrated in an already existing market (The only prerequisite is that somebody owns the trading rights for those objects).


It is just that, typically, what the socially accepted value of a wholly new kind of object will be, requires the practical "test" of a regular trading process, assuming a regular supply by producers and a regular demand for it, which establishes a trading "norm" consistent with production costs. A new object that wasn't traded previously may be traded far above or below its real value, until the supply and demand for it stabilizes, and its exchange-value fluctuates only within relatively narrow margins (in official economics, this process is acknowledged as a form of [[price discovery]]).<ref>The causal mechanism of price discovery is however not altogether clear, since it could be that the interaction of traders necessary for price discovery ''determines'' prices, or that inversely ''prices'' determine the interaction of traders.</ref>
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*The development of markets leads to the capitalization of money, products and services: the trade of money for goods and goods for money leads directly to the use of the trading process purely to "make money" from it (a practice known in classical Greece as "[[chrematistics]]").
 
*[[Labour power]] that creates no commodity value or does not have the potential to do so, has no value for commercial purposes, and is therefore usually not highly valued economically, except insofar as it reduces costs that would otherwise be incurred.
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*The diffusion of value relations eradicates traditional [[social relations]] and corrodes all social relations not compatible with commerce; the valuation that becomes of prime importance is what something will trade for. The end result is the emergence of the circuit M-C...P...C'-M', which indicates that production has become a means for the process of making money (that is, Money [=M] buys commodities [=C] which are transformed through production [=P] into new commodities [=C'], and, upon sale, result in more money [=M'] than existed at the start).
 
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===Generalized commodity production===
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Capital existed in the form of trading capital already thousands of years before capitalist factories emerged in the towns; its owners (whether rentiers, merchants or state functionaries) often functioned as ''intermediaries'' between commodity producers. They facilitated exchange, for a price. Marx defines the [[capitalist mode of production]] as "generalized commodity production", meaning that most goods and services are produced primarily for commercial purposes, for profitable market sale.<ref>Karl Marx, ''[[Capital, Volume I]]'', Penguin ed. 1976, p. 733.</ref> This has the consequence, that both the input and the output of production become tradeable objects with prices, and that ''the whole of production'' is reorganized according to commercial principles. Whereas originally commercial trade occurred episodically at the boundaries of different communities, Marx argues,<ref>Karl Marx, ''Capital, Volume III'', Penguin ed., p. 278. Archaeologists and scholars of ancient trade (such as Philip D. Curtin) nowadays reject the idea that primitive trade occurred initially only in the periphery of economic communities.</ref> eventually commerce engulfs and reshapes the whole production process of those communities.
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In turn, this means what whether or not a product will be produced, and how it will be produced, depends not simply on whether it is physically possible to produce it or on whether people need it, but on its financial cost of production, whether a sufficient amount can be sold, and whether its production yields sufficient profit income. That is why Marx regarded the individual commodity, which simultaneously represents value and [[use-value]] as the "cell" (or the "cell-form") in the "body" of capitalism. The seller primarily wants money for his product and is not really concerned with its consumption or use (other than from the point of view of making sales); the buyer wants to use or consume the product, and money is the means to acquire it. Thus the seller does not aim directly to satisfy the need of the buyer, nor does the buyer aim to enrich the seller. Rather, the buyer and the seller are the means for each other to acquire money or goods. As a corollary, production becomes less and less a creative activity to satisfy human needs, but simply a means to make money or acquire access to goods and services.<ref>[[Richard Sennett]] provides a eulogy for the vanishing art of craftsmanship in capitalist society. See: Richard Sennett, ''The Craftsman''. Yale University Press, 2009.</ref> As against that, products obviously could not be sold unless people need them, and unless that need is practically acknowledged. The social effect is that the motives for trading may be hidden to some or other extent, or appear somewhat differently from what they really are (in this sense, Marx uses the concept of "[[character mask]]s").
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The concept of the value-form as an aspect of the commodity form is intended to show how, with the development of commodity trade, anything with a utility for people (a [[use-value]]) can be transformed into a quantity of abstract value, objectively expressible as a sum of money; but, also, how this transformation changes the organization of labour to maximize its value-creating capacity, how it changes social interactions and the very way people are aware of their interactions.
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Essentially, Marx argues that if the values of things are to express social relations, then, in trading activity, people necessarily have to "act" symbolically in a way that inverts the relations among objects and subjects, whether they are aware of that or not. They have to treat a relationship as if it is a thing in its own right. In an advertisement, a financial institution might for example say "with us, your money works for you", but money does not "work", people do. A relationship gets treated as a thing, and a relationship between people is expressed as a relationship between things.
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In [[Postmodernist]] culture, this inversion is acknowledged, but an explicit attempt is made to recognize the social relationship involved and its meaning for [[Self (philosophy)|Self]] and [[Other]]; the idea is that, in so doing, an otherwise impersonal, estranged or superficial trading contact can be "humanized". The question remains how one can know that this attempt is authentic and what its real motivation is.
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The total implications of the development of the value-form are much more farreaching than can be described in this article, since (1) the processes by which the things people use are transformed into objects of trade (often called [[commodification]], commercialization or marketization) and (2) the social effects of these processes, are both extremely diverse. A very large literature exists about the growth of business relationships in all sorts of areas. For capitalism to exist, markets must grow, but market growth requires changes in the way people relate socially, and changes in property rights. This is often a problem-fraught and conflict-ridden process, as Marx describes in his story about [[primitive accumulation]].
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In his story, Marx defines "value" simply as the ratio of a physical quantity of product to a quantity of average labour-time, which is equal to a quantity of gold-money (in other words, a [[scalar (mathematics)|scalar]]):
 
 
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:::::'''X quantity of product = Y quantity of average labour hours = Z quantity of gold-money'''
 
 
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He admits early on, that the assumption of gold-money is a theoretical simplification,<ref>"Throughout this work I assume that gold is the money commodity, for the sake of simplicity." – Karl Marx, ''[[Capital, Volume I]]'', Penguin edition, chapter 3, p. 188.</ref> since the buying power of money units can vary due to causes that have nothing to do with the production system (within certain limits, X, Y and Z can vary independently of each other); but he thought it was useful to reveal the structure of economic relationships involved in the capitalist mode of production, as a prologue to analyzing the motion of the system as a whole; and, he believed that variations in the buying power of money did not alter that structure at all, insofar as the working population was forced to produce in order to survive, and in so doing entered into societal [[relations of production]] independent of their will; the basic system of property rights remained the same, irrespective of whether products and labour were traded for a higher or a lower price.
 
 
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As any banker or speculator knows, however, the expression of the value of something as a quantity of money-units is by no means the "final and ultimate expression of value".<ref>Martin Wolf, "Intolerable choices for the eurozone". ''Financial Times'', 31 May 2011 (in the US, it is about 7%; in 1960 according to Federal Reserve data series, it was about 50%)</ref>
 
 
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*At the simplest level, the reason is that different "monies" (currencies) may be used side by side in the trading process, meaning that "what something is worth" may require expressing one currency in another currency and that one currency is traded against another, where currency exchange rates fluctuate all the time. Thus, money itself can take many different forms.
 
*In more sophisticated trade, moreover, what is traded is not money itself, but rather claims to money ("financial claims" and counter-claims, for example debt obligations, borrowing facilities or stocks that provide the holder with an income).
 
*And in even more sophisticated trade, what is traded is the insurance of financial claims against the risk of possible monetary loss. In turn, money can be made just from the knowledge about the probability that a financial trend or risk will occur or not occur.
 
Eventually financial trade becomes so complex, that what a financial asset is worth is often no longer expressible in any exact quantity of money (a "cash value") without all sorts of qualifications, and that its worth becomes entirely conditional on its expected earnings potential.<ref>For more information, see Willi Semmler, ''Asset Prices, Booms and Recessions: Financial Economics from a Dynamic Perspective'', 2nd edition. Springer, 2006.</ref>
 
In ''Capital Volume 3'', which he drafted before ''Volume I'', Marx shows he was well aware of this. He distinguished not only between "real capital" (physical, tangible capital assets) and "money capital", but also noted the existences of "[[fictitious capital]]" and "pseudo-commodities" that have exclusively symbolic value (which, however, can be converted into real product value through trade). Marx believed that a failure to theorize the value-form correctly led to "the strangest and most contradictory ideas about money," which "emerges sharply... in [the theory of] banking, where the commonplace definitions of money no longer hold water".<ref>Marx, ''[[Capital, Volume I]]'', Pelican Books, p.&nbsp;174, note 34.</ref>
 
===The price-form===
 
Consistent with this, Marx explicitly introduced a distinction between the value-form and the price-form early on in ''[[Capital, Volume I]]''. Simply put, the price-form is a mediator of trade that is separate and distinct from the value-form.<ref>For Marx's discussion of the price form in the ''Grundrisse'', see: Adalbert G. Lallier, ''The economics of the Grundrisse: an annotated summary''. New York: St, Martins Press, 1989, chapter 11.</ref> Prices express exchange-value in units of money.<ref>"Exchange value posited in terms of money is price"- [[Karl Marx]] & [[Frederick Engels]], ''Collected Works'', Vol. 28, p. 124.</ref> A price is a "sign" that conveys information about either a possible or a realized transaction (or both at the same time). The information may be true or false; it may refer to observables or unobservables; it may be estimated, assumed or probable. However, because prices are also numbers, it is easy to treat them as manipulable "things" in their own right, in abstraction from their appropriate context. The price resulting from a calculation may be regarded as symbolizing (representing) one transaction, or many transactions at once, but the validity of this "price abstraction" all depends on whether the computational procedure is accepted.
 
According to Marx, the price-form is not a "further development" of the value-form,<ref>See: Karl Marx & Frederick Engels, ''Letters on Capital''. London: New Park Publications, 1983, p. 108. In the final text, the simplest price form is expressed as "X quantity of use-value = Y quantity of money".</ref> for three reasons:
 
*As Marx notes, prices may be attached to almost anything at all ("the price of owning, using or borrowing something"), and therefore need not express product-values at all. Prices do not necessarily have anything to do with the production of tangible wealth, although they might facilitate claims to it.
*Insofar as the price of a commodity does express its value accurately, this does not necessarily mean that it will actually trade at this price; products can trade at prices above or below what the goods are really worth, or fail to be traded at any price.
*Although as a rule there will be a strong positive correlation between product-prices and product-values, they may change completely independently of each other for all kinds of reasons. When things are bought or sold, they may be over-valued or under-valued due to all kinds of circumstances.
 
In Marx's theory, not just anything has a value in the economic sense, even if things can be priced. Only the products of human labour have the property of value, and their "value" is the total current labour cost implicated in making them, on average. Value relationships among physical products and assets—as proportions of current labour effort involved in making them—exist according to Marx quite independently from price information, and prices can oscillate in all sorts of ways around economic values, or indeed quite independently of them. However, the expression of product-value by prices in money-units in most cases does not diverge very greatly from the actual value; if there was a very big difference, people would not be able to sell them, or they would not buy them.
 
If prices for products rise, hours worked may rise, and if prices fall, hours worked may fall (sometimes the reverse may also occur, to the extent that extra hours are worked, to compensate for lower income resulting from lower prices, or if more sales occur because prices are lowered). In that sense, it is certainly true that product-prices and product-values mutually influence each other. It is just that, according to Marx, product-values are not determined by the labor-efforts of any particular enterprise, but by the combined result of all of them.
 
===Real prices and ideal prices===
 
In discussing the form of prices in various draft manuscripts and in [[Das Kapital]], Marx drew an essential distinction between actual prices charged and paid, i.e., prices that express how much money really changed hands, and various "[[Real prices and ideal prices|ideal prices]]" (imaginary or notional prices).<ref>Howard Nicholas, ''Marx's theory of price and its modern rivals''. London: Palgrave Macmillan, 2011.</ref> Because prices are symbols or indicators in more or less the same way as traffic lights are, they can symbolize something that really exists (e.g., hard cash) but they can also symbolize something that doesn't exist, or symbolize other symbols. That can make the forms of prices highly variegated, flexible and complex to understand, but also potentially very deceptive, disguising the real relationships involved. Modern economics is largely a "price science" (a science of "price behaviour"), in which economists attempt to analyze, explain and predict the relationships between different kinds of prices—using the laws of [[supply and demand]] as a guiding principle. This however was not Marx's primary concern; he focused rather on the structure and dynamics of the capitalist system as a whole. His concern was with the overall results that market activity would lead to in human society.
 
In what Marx called "vulgar economics", the complexity of the concept of prices is ignored however, because, Marx claimed, the vulgar economists assumed that:
 
:::*all prices belong to the same object class (they are qualitatively the same, and differ only quantitatively, irrespective of the type of transaction with which they are associated, or the valuation principles used).
:::*for theoretical purposes, there is no substantive difference between price idealizations and prices which are actually charged.
:::*"price" is just another word for "value", i.e., value and price are identical expressions, since the value relationship simply expresses a relationship between a quantity of money and a quantity of use-values.
:::*prices are always exact, in the same way that numbers are exact (disregarding price estimation, valuation changes and accounting error).
:::*price information is always objective (i.e., it is never influenced by how people regard that information).
:::*people always have equal access to information about prices, in which case [[Confidence trick|swindles]] are merely an aberration from the normal functioning of markets (rather than an integral feature of them, which requires continual policing).
:::*the price for any particular type of good is always determined everywhere in exactly the same way, according to the same economic laws, regardless of the given social set-up.
 
In his critique of political economy, Marx denied that any of these assumptions were scientifically true (see further [[real prices and ideal prices]]). He distinguished carefully between the values, exchange values, market values, market prices and [[prices of production]] of commodities. However he did not analyze all the different forms that prices can take (for example, market-driven prices, [[administered prices]], accounting prices, negotiated and fixed prices, estimated prices, nominal prices, or inflation-adjusted prices) focusing mainly on the value proportions he thought to be central to the functioning of the [[capitalist mode of production]] as a social system. The effect of this omission was that debates about the relevance of Marx's value theory became confused, and that Marxists repeated the same ideas Marx himself had rejected as "vulgar economics". In other words, they accepted a vulgar concept of price.<ref>See further: Juan Iñigo Carrera, "The reason for being of value or price according to political economy", translation of chapter 1 by Leonardo Kosloff in Carrera, ''Conocer el capital hoy. Usar crísticamente El Capital. Volumen I. La mercancía, o la conciencia libre como forma de la conciencia enajenada''. Buenos Aires: Imago Mundi, 2007.[http://cicpint.org/CICP%20English/Libros/Conocer/conocer.html]</ref>
 
Fluctuating price signals serve to adjust product-values and labour efforts to each other, in an approximate way; prices are mediators in this sense. But that which mediates should not be confused with what is mediated. Thus, if the observable price-relationships are simply taken at face value, they might at best create a distorted picture, and at worst a totally false picture of the economic activity to which they refer. At the surface, prices might quantitatively express an economic relationship in the simplest way, but in the process they might abstract away from other features of the economic relationship that are also very essential to know. Indeed, that is another important reason why Marx's analysis of economic value largely disregards the intricacies of price fluctuations; it seeks to discover the real economic movement behind the price fluctuations.
 
==Scientific criticism==
There are five main lines of scholarly criticism of Marx's idea of the value-form.
 
===Obscurantism===
 
The criticism most often heard from the critics of Marx, such as [[Karl Popper]], [[Friedrich von Hayek]], [[Ian Steedman]] and [[Francis Wheen]] is that, even if Marx himself meant well, Marx's value-form idea is simply an esoteric obscurantism, "dialectical hocus pocus", "sophistry" or "mumbo jumbo". Francis Wheen refers to "a shaggy-dog story, a picaresque journey through the realms of higher nonsense."<ref>Francis Wheen, ''Marx's Das Kapital: a biography''. Grove Press, 2008, p. 42. See also Francis Wheen, ''Karl Marx''. London: Fourth Estate, 1999, p. 299f.</ref> This type of criticism was already being made while Marx was still alive, as Marx himself reports in a postface to the second German edition of ''[[Das Kapital]]'' in 1873.<ref>[[Karl Marx]], ''[[Capital, Volume I]]'', Penguin edition, 1976, pp. 99–100.</ref>
 
Marx's argument does not really make coherent scientific sense, it is argued by his critics – quite possibly because Marx tried to do too much at once. That is, at one and the same time, one finds Marx
 
* trying to respond to the classical discourses of the political economists in an erudite way;
* poking fun at, and setting traps for what he regarded as pedantic, pseudo-profound German professors prattling about "dialectics";
* trying to tell an entertaining story using metaphors that would really sell;
* trying to make a substantive, serious argument about the historical origin and essential nature of economic value.
 
The result, some critics feel, is a series of devastating ambivalences and ambiguities, which cover up all kinds of illogical moves—moves that, they claim, are fatal to Marx's argument.
 
Often, Marxists have replied to this type of criticism by restating Marx's arguments in clearer language, or by showing that Marx's theory of economic value at the very least fares no worse than the subjective theory of value (the theory of the [[util]] as the measuring unit of [[utility]]). Even so, when he published his very clear restatement [[Karl Marx's Theory of History: A Defence]],<ref>[[Gerald Cohen]], ''[[Karl Marx's Theory of History: A Defence]]''. Princeton University Press, 1978, reprint 2001.</ref> the Marxist philosopher [[Gerald Cohen]] explicitly dissociated himself from Marx's value theory. Cohen argued that it is possible to have an [[historical materialism]] without a [[labour theory of value]], because the one does not logically entail the other as well. This interpretation contrasts with [[Lenin]]'s opinion—repeated by Johann Witt-Hansen<ref>Johann Witt-Hansen, ''Historical materialism, the method, the theories. Exposition and critique. 1. The method.'' Copenhagen : Munksgaard, 1960.</ref>—that with the appearance of ''[[Das Kapital]]'', "the materialist conception of history is no longer a hypothesis, but a scientifically proven proposition".<ref>[[V.I. Lenin]], ''What the "Friends of the People" Are and How They Fight the Social-Democrats (A Reply to Articles in Russkoye Bogatstvo Opposing the Marxists)'' (1894), Part 1, ''Lenin Collected Works'', Vol. 1. Moscow: Progress Publishers, 1937. [http://www.marxists.org/archive/lenin/works/1894/friends/01.htm#v01zz99h-131-GUESS].</ref>
 
===The substance of value===
 
Whereas many economists and philosophers have been inspired by Marx's analysis of the value-form, they have usually rejected the thrust of Marx's argument, namely that the substance of product-value is the expenditure of human labor effort in general, i.e., [[Abstract labour and concrete labour|abstract labour]].
 
Marx insists that:
 
{{Quotation|It is not money that renders the commodities commensurable. Quite the contrary. Because all commodities, as values, are objectified human labour, and therefore in themselves commensurable, their values can be communally measured in one and the same specific commodity, and this commodity can be converted into the common measure of their values, that is into money. Money as a measure of value is '''the necessary form of appearance''' of the measure of value immanent in commodities, namely labour-time.<ref>''[[Capital, Volume I]]'', Penguin ed., p. 188</ref>}}
 
Marx's argument is that the exchangeability of commodities with recognition of their value is based on the common factor that all of them are products of social labour (co-operative human labour producing things for others).<ref>[[Karl Marx]] & [[Frederick Engels]], ''Collected Works'', Vol. 28, p. 532.</ref> Critics however argue that Marx's argument is simply not logically compelling. They suggest Marx's observations fail to provide any logically decisive proof that human labour is the substance of economic value.
 
Because of the controversy over the substance of value, the famous Japanese Marxist scholar [[Kozo Uno]] argued in his classic ''Principles of Political Economy'' that Marx's original argument had to be revised.<ref>[[Kozo Uno]], ''Principles of Political Economy. Theory of a Purely Capitalist Society''. Translated from the Japanese by Thomas T. Sekine. Brighton, Atlantic Highlands/New Jersey: Harvester Press, 1980. See also Samezo Kuruma, ''Theory of the Value-Form & Theory of the Exchange Process''. Tokyo: Iwanami Shoten, 1957 [http://marxists.org/archive/kuruma/value-form/index.htm#Preface]</ref> In the revised version, the theory of the value-form is integrated in the theory of commodity circulation, and does not refer to the substance (content) of value at all. The substance of value as labour then becomes apparent and is theoretically demonstrated only in the analysis of the ''production'' of commodities "by means of commodities". Some Western Marxists do not find this Unoist approach very satisfactory however,<ref>E.g. Jim Kincaid, "A Critique of Value-Form Marxism". ''Historical Materialism'', volume 13, No. 2, 2005, pp. 85–119.[http://dajialai.org/ziliao1/Marxism/Historical%20Materialism/A%20Critique%20of%20Value-Form%20Marxism.pdf]</ref> because of Marx's basic insistence that the formation of product values is an outcome of ''both'' the "economy of labour-time" ''and'' "the economy of trade" working in tandem.
 
An additional complication is that, as the [[accumulation of capital]] grows, more and more durable assets exist ''external'' to the sphere of production. When society becomes wealthier, the total amount of the personally owned properties of individuals (assets owned by households) and public property increases, even if some people own little and others own a lot. Marx was primarily concerned with the value of newly produced commodities, but it is unclear from his theory about the [[capitalist mode of production]] what determines the value of a growing stock of durable assets in society, a stock of assets which is neither an input nor an output of current production.
 
===Usefulness===
 
This criticism is basically that all the problems Marx tries to solve with his theory of the forms of value can be solved much better and more plausibly with modern price theory.
 
In a 1975 paper subtitled "Was Marx's Journey Really Necessary?", the influential [[Marxian economist]] [[Ronald L. Meek]] argued that Marx's value theory had become redundant because all economic relationships can be described and explained in terms of prices. Indeed, what Marx calls "value" can be regarded simply as a kind of "theoretical price". The conclusion drawn is that value theory really adds nothing to the economic arguments, and is therefore best abandoned.
 
The Marxist response to this criticism<ref>One important reply to the Sraffians was Ernest Mandel & Alan Freeman (ed.), ''Ricardo, Marx, Sraffa. The Langston Memorial Volume''. London: Verso, 1984.[http://www.iwgvt.org/MarxRicardoSraffa/]</ref> was extremely weak; most Marxists had accepted the conventional price-theories of economics as largely correct and unproblematic,<ref>Thus, for example, in his textbook ''Monetary Theory'' (New York: McGraw-Hill, 1981) the prominent English Marxian economist Laurence Harris, well known for his contributions to Marxian value theory, paid no attention to the price-form itself.</ref> and just kept insisting that value-theory was a necessary "add-on" to make sense of the economy.<ref>[[Diane Elson]] (ed.), ''Value: the representation of labour in capitalism''. London: CSE books, 1979. Paolo Giussani, "La 'value-form school'" (in Italian).[http://www.countdownnet.info/archivio/teoria/166.pdf]</ref>
 
From the 1970s, the so-called "value-form theorists" ("value-form school") have emphasized—influenced by [[Theodor W. Adorno]]<ref>[[Helmut Reichelt]], "From the Frankfurt School to Value-Form Analysis". ''Thesis Eleven'', No. 4, 1982, pp. 166–169.</ref> and the rediscovery of the writings of [[Isaak Illich Rubin]]<ref>[[Isaak Illich Rubin]], ''Essays on Marx’s theory of value''. Detroit: Black & Red, 1972.</ref>—the importance of Marx's value theory as a ''qualitative'' critique—a cultural, sociological or philosophical critique of the reifications involved in capitalist commercialism. The value-form school has become very popular especially among Western Marxists who are not economists. Supporters of the "value-form school", especially in Germany and Britain, often regard Marx's theory of the form of value as proof of a radical break from all conventional economics. This implies there is little point in engaging with conventional economics, because conventional economics makes quite incompatible theoretical assumptions. Critics of the value-form school often see this intellectual tradition as an "evasive tactic", which avoids difficult quantitative problems concerning the relationship between economic value and money-prices which still need to be solved.<ref>Cf. Paolo Giussani, "Orthodoxy in Marxian Price Theory". In: ''International Journal of Political Economy'', vol. 28, no. 4, winter 1998–99, pp. 6–22.</ref>
 
Value-form theory has also been popular among intellectual supporters of [[Autonomism]]<ref>*[[Axel Kicillof]] & Guido Starosta, "Value form and class struggle: A critique of the autonomist theory of value". ''Capital & Class'', Summer 2007.</ref> and [[Anarchism]],<ref>(Anon.), "Communisation and value-form theory". ''Endnotes'' No. 2, April 2010 [http://endnotes.org.uk/articles/4]</ref> although [[Antonio Negri]] thinks the theory is outdated now.<ref>[http://www.generation-online.org/p/fpnegri8.htm Antonio Negri, "Thesis 5" in: ''Theses on Marxism'']</ref> Negri's theory is the same as that of the ''[[Financial Times]]'' journalist [[John Kay (economist)|John Kay]], who believes that "The political and economic environment in which Marx wrote was a brief interlude in economic history."<ref>John Kay, "Let's talk about the market economy", ''[[Financial Times]]'', 10 January 2012.</ref> Both writers regard Marx's theory of value as outdated, although they still like to use some of Marx's rhetorics.
 
The suggestion of some authors (such as Reuten/Williams) is that although Marx's [[labour theory of value]] is theoretically wrong as stated, his theory can be modified such that, rather than value being created by co-operative human labour, value and abstract labour can be regarded as effects ("social forms") created by the exchange-process itself.<ref>[http://www1.fee.uva.nl/pp/greuten/ Geert Reuten's papers are available at his university web page]</ref> Simply put, the value of goods is nothing more than the money they will exchange for, from which it seems to follow that if there is no money, value does not exist either. This interpretation is often called the "monetary theory of value".<ref>Kolja Lindner, "The German Debate on the Monetary Theory of Value. Considerations on Jan Hoff's Kritik der klassischen politischen Ökonomie", ''Science & Society'' Vol. 72, No. 4, 2008, pp. 402–414.[http://halshs.archives-rtes.fr/docs/00/42/26/20/PDF/Hoff_Kritik_der_klassischen_politischen_Okonomie-Science_Society.pdf] Jean Cartelier, "Marx's Theory of Value, Exchange and Surplus Value: A Suggested Reformulation". ''Cambridge Journal of Economics'', Vol. 15, no. 3, September 1991, pp. 257–269.</ref> Marx himself denied this interpretation when he said explicitly in chapter 2 of ''[[Capital, Volume I]]'' that "The act of exchange gives to the commodity converted into money, not its value, but its specific value-form".<ref>Karl Marx, ''[[Capital, Volume I]]'', Penguin edition, 1976, pp. 184–185.</ref> Critics of the Reuten/Williams theory<ref>For example, Guglielmo Carchedi, "The Fallacies of 'New Dialectics' and Value-Form Theory". ''Historical Materialism'' 17 (1), 2009, pp. 145–169; Patrick Murray, "Reply to Geert Reuten". In: ''Historical Materialism'', Vol. 10:1, pp. 155–176.</ref> make three main points:
 
*Reuten and Williams fall victim to precisely the theory Marx's argument intends to demolish. That is, they fall victim to [[commodity fetishism]] and therefore they believe that commodities have value because money exists, or because exchange exists.
 
*Beyond sophisticated neo-Hegelian rhetorics, the Reuten/Williams theory is really not much better than a vulgar accounting theory, according to which "value is created" when goods are sold for more than they were bought for. The objection here is, that value exists not simply because of a trading relationship, but because people actually did some work to produce something of value, and in so doing are socially related also external to the exchange process.<ref>Fred Moseley, "Marx's theory of value and money: a critique of Reuten's 'value-form' interpretation of part 1 of volume 1 of Capital". Working paper, Mount Holyoke College, c2005 [http://www.mtholyoke.edu/~fmoseley/Working_Papers_PDF/measure.pdf].</ref>
 
*A "form" isn't a form at all without a content, namely it is "the form of something", the form that a content takes—the point being that a content or substance can take various "forms", necessitating a special study of what those forms are. A "form without a content" would make form and content identical, and the distinction between them redundant. We are then left only with a "sociology of trading processes" studying how people socially interact in trade and how they symbolize that.<ref>Peter P. Ekeh, ''Social exchange theory: the two traditions''. Cambridge, Mass.: Harvard University Press, 1974.</ref>
 
Marxian economist John Milios also argues for a "monetary theory of value", where "Money is the necessary form of appearance of value (and of capital) in the sense that prices constitute the only form of appearance of the value of commodities."<ref>John Milios, "Marx's Value Theory Revisited. A ‘Value-form' Approach." ''Proceedings of the Seventh International Conference in Economics'', Economic Research Centre, METY, Ankara, September 6–9, 2003. (Part 5, p. 9)[http://users.ntua.gr/jmilios/F2_3.pdf]</ref> Critics of this interpretation think that it cannot be correct, for two reasons:
 
*as Marx so painstakingly showed in his discussion of the development of the value-form, the value of commodities can also be expressed simply and directly in terms of a quantity of other commodities, or one referent commodity. To establish a trading ratio that expresses a value relationship, in principle no money or prices are required at all – that is the whole point. All that is required is the expression that "x quantity of product y is worth p quantity of product q". Milios's argument can be sustained only if, in the trade of one bundle of commodities for another (as in [[counter-trade]]), the bundle of commodities traded is itself treated as if it is a "price". But such a "price" is obviously not a quantity of money. The point here is simply that the value-form, in its less developed state, does not require any monetary expression; counter-trade does not necessarily require any monetary referent at all, although in modern times it often does take into account the cash value of a deal.
 
*Milios conflates the money that actually changes hands with all kinds of possible computable price data for a commodity under various conditions. Effectively, he conflates the value-form with the price-form, and real prices with ideal prices. Milios implies, that only priced goods can have value, but this idea flatly contradicts Marx's theory according to which product-values exist also quite independently from exchange (simply because products represent quantities of labour-effort). If Milios's interpretation is correct, Marx's value theory serves no good purpose—values and prices are hardly distinguishable. In all his economic manuscripts, Marx says that prices are at best the "idealized expression" of the value-form. This view is only logical; after all, prices express the quantity of money for which particular commodities will, or could, change owners. But if the idealization of the value-form as a price is equated with the value-form, the whole value-form idea is itself redundant. It is a bit like saying that the price information about a good is the same as the actual money that changes hands when the good is traded. Most people know very well what the difference is.
 
In his ''Social Ontology'' (2008), "Anglophone Justice Theory, the Gainful Game and the Political Power Play" (2009) and elsewhere, the Australian [[Phenomenology (philosophy)|phenomenologist]] Michael Eldred radicalizes the reading of 'form' in the value-form to a socio-ontological category. According to Eldred, the phenomenon of exchange-value is substantially one of social power. Hence, money reveals itself to be the quintessential, rudimentary form of reified social power in capitalist society. The further value-forms developed during the course of the capital-analysis, starting with the capital-form and the wage-form of value, through the value-forms of ground-rent, interest, profit of enterprise, to the revenue-form of these income-sources on the surface of economic life, unfold the socio-ontological structure and movement of capitalism as a reified power-play. Eldred argues that such a total ontological structure of capitalist power-play can only come into view, if the whole of Marx's capital-analysis is reconstructed, not just the famous, notoriously difficult first chapter of Marx's ''Capital''.
 
From a different angle, [[Jonathan Nitzan]] and [[Shimshon Bichler]] [http://bnarchives.yorku.ca/] also depict the phenomena of economic value as [[Power (philosophy)|power]] relationships.<ref>In their book ''Capital as power'' (Routledge, 2009).</ref> While retaining some of the language of Marx, they however reject Marx's theory of value. The power dimension of value relationships is also prominent in [[Harry Cleaver]]'s commentary ''Reading Capital Politically.''<ref>Harry Cleaver, ''Reading Capital Politically''. University of Texas Press, 1979. [http://libcom.org/library/reading-capital-politically-cleaver]</ref>
 
This interpretation also has its critics, the main criticism being that by reducing all economic phenomena to a matter of power, the concept of power itself becomes a nebulous idea, which explains "everything and nothing".<ref>For example, Andrew Kliman argues that Nitzan & Bichler seek to define power "in terms of market capitalization: a market cap that is 1000 times as great as the average doesn't give the owners 1000 times as much power; it simply is 1000 times as much power. This identification of capital and power—capital as power—is certainly not correct in a literal sense." Andrew Kliman, "Value and Crisis: Bichler and Nitzan versus Marx." in: ''Journal of Critical Globalisation Studies'', issue 4, 2011, p.67.[http://www.criticalglobalisation.com/]</ref> "Power", like economic value, is by no means a straightforward, simple concept. Power is often circumstantial. It cannot be automatically inferred, from the position taken by participants in market trade, what kind of power they really have. Much may depend simply on popular perceptions and beliefs that they have a certain kind of power. Particularly in economic crises, it is often discovered that those who were thought to have a lot of power, do not really have it (leading to political crises).
 
There are also anthropologists such as the socialist [[Lawrence Krader]] and the anarchist [[David Graeber]] who have argued that Marx's value categories should be modified in the light of historical and anthropological research about how human communities value objects.<ref>[[Lawrence Krader]], ''A Treatise of Social Labour''. Assen: Van Gorcum, 1979 and ''Labor and value'', ed. by Cyril Levitt and Rod Hay. New York: Peter Lang, 2003. [[David Graeber]], ''Towards an Anthropological Theory of Value: The False Coin of our Own Dreams''. Palgrave Macmillan, 2001.</ref> Ever since [[Werner Sombart]] and [[Nikolai Bukharin]] first argued it,<ref>In ''The Economic Theory of the Leisure Class'' (completed 1914), Bukharin cites Werner Sombart's review article "Zur Kritik des oekonomischen Systems von Karl Marx", in ''Archiv fur soziale Gesetzgebung und Statistik'', vol. VII, 1894, pp. 591, 592. See further David P. Levine, ''Subjectivity in political economy. Essays on wanting and choosing''. London: Routledge, 1998.</ref> orthodox Marxists have described Marx's theory of value as a purely objective theory of value, as opposed to the subjective theory of the bourgeois economists. However, Krader argued that Marx's theory of value and the theory of utility are compatible, i.e., the one does not exclude the other; and Krader insisted that value has both objective and subjective aspects. Graeber's work is very focused on how value categories shape human lives, and the direct political effects of that.<ref>David Graeber, "Value: anthropological theories of value", in: James G. Carrier, ''A Handbook of Economic Anthropology''. Edward Elgar, 2005, p. 453.</ref>
 
===The Chartalist challenge===
 
An implicit technical and historical criticism of Marx's value-form theory is made by some [[neo-Keynesian]]<ref>L. Randall Wray, "Modern Money". The Jerome Levy Economics Institute Working Paper No. 252. 1998 [http://www.levyinstitute.org/pubs/wp252.pdf]; Stephanie Bell, "The role of the state and the hierarchy of money". ''Cambridge Journal of Economics'', Vol. 25, issue 2, 2001, pp. 149–163 [http://cas.umkc.edu/econ/economics/faculty/wray/601wray/Bell%20The%20Role%20of%20the%20State%20and%20the%20Hierarchy%20of%20Money.pdf]; Mathew Forstater, "Taxation and primitive accumulation: the case of colonial Africa". ''Research in Political Economy'', Vol. 22, 2005, pp. 51–64.[http://cas.umkc.edu/econ/economics/faculty/Forstater/papers/Forstater2005/RiPE%20Forstater.pdf]</ref> and heterodox Marxian economists<ref>[[Paul Cockshott]] and Dave Zachariah, "Credit crunch: origins and orientation". ''Science & Society'', Vol. 74, No. 3, July 2010, pp. 343–361. [http://gesd.free.fr/cockz10.pdf]</ref> as well as [[anarchists]] like [[David Graeber]],<ref>David Graeber, ''Debt: the first 5,000 years''. Brooklyn: Melville House, 2010</ref> who are inspired by the [[chartalist]] theory of money.<ref>For more information, see the wiki articles on Modern Monetary Theory (MMT) at MMTWiki.org.[http://mmtwiki.org/wiki/Main_Page].</ref> These economists interpret Marx's story about how money originates in the exchange process as a theory of [[commodity money]], or the "commodity theory of money". That is, they believe that Marx's theory is more or less the same as the "barter theory of money".
 
The "neo-Chartalist" interpretation of money entails, that the commodity theory of money is false;<ref>Pavlina R. Tcherneva, "Chartalism and the tax-driven approach". In: Philip Arestis & Malcolm C. Sawyer, ''A handbook of alternative monetary economics''. Cheltenham: Edward Elgar, 2006. [http://pavlina-tcherneva.net/Tcherneva-Chartalism.pdf]. Pavlina Tcherneva, "The Nature, Origins, and Role of Money: Broad and Specific Propositions and Their Implications for Policy." Center for Full Employment and Price Stability, University of Missouri, Working Paper No. 46, July 2005. [http://www.cfeps.org/pubs/wp-pdf/WP46-Tcherneva.pdf]</ref> the latter, it is argued{{by whom|date=December 2013}}, can neither explain the origin of money and credit, nor provide a credible account of monetary phenomena in the modern world.<ref>L. Randall Wray, "The Neo-Chartalist Approach to Money". Center for Full Employment and Price Stability, University of Missouri-Kansas City, Working Paper No. 10, July 2000.
[http://www.cfeps.org/pubs/wp-pdf/WP10-Wray.pdf]</ref> If the Chartalist argument is true, then it cannot also be true that, as Marx argues, money originates as a "special commodity" (a universally exchangeable good) within the exchange process itself. Instead, money is completely "a creature of the state" – it first arises as a unit of account for state debts, credits and taxes, and is then gradually imposed on the whole of the trading process in society.<ref>L. Randall Wray (ed.), ''Credit and State Theories of Money: The Contributions of A. Mitchell Innes''. Cheltenham: Edward Elgar, 2004.</ref> The neo-Chartalist theory is also known as Modern Monetary Theory (MMT) (see [[Chartalism]]).
 
The controversy about this challenge to Marx's idea is far from being resolved at this stage,<ref>See Costas Lapavitsas, "Money as 'universal equivalent' and its origin in commodity exchange." Working Paper, Department of Economics, SOAS, University of London, May 2003.[http://mercury.soas.ac.uk/economics/workpap/adobe/wp130.pdf]</ref> for five reasons:
 
*Firstly, there is nowadays no consensus view among Marxists about Marx's theory of money. (1) Some Marxists deny that Marx had any full-fledged theory of money in the modern sense of the word, since he never developed any substantive theory of money circulation and public finance; Marx had deliberately kept his discussion of money and bank capital brief, it is argued, because he aimed only to explain the nature of the capitalist mode of production as simply as possible. (2) Some Marxists like [[Thomas T. Sekine]] regard the value-form discussion as a purely theoretical discussion with no bearing on empirical or historical reality; its main purpose is just to show why money necessarily emerges from the exchange of products, not how exactly it originates. (3) Some Marxists, such as [[Ernest Mandel]] and John Weeks,<ref>[[Ernest Mandel]], "Introduction" to [[Karl Marx]], ''[[Capital, Volume I]]''. Harmondsworth: Penguin, 1976. p. 75. John Weeks, "The theoretical and empirical credibility of commodity money", 2010 [http://jweeks.org/Weeks%20money.pdf].</ref> have argued that Marx really did have a commodity theory of money, while (4) others argue that (a) such as theory can only be a "special case" of a more general theory of money, or (b) that it is a purely theoretical/analytical assumption, or (c) that it applied only in a certain period in history. (5) Some Marxists think that Marx's theory is substantially the same as the barter theory of money, while others argue it is very different from the barter theory. So, there exists no general agreement about the exact theoretical status of Marx's theory of money.<ref>Carlo Panico, "Marx on the Banking Sector and the Interest Rate: Some Notes for a Discussion". ''Science & Society'' Vol. 52, No. 3 (Fall, 1988), pp. 310–325; Carlo Panico, ''Interest and profit in the theories of value and distribution''. London: Macmillan, 1988; Makoto Itoh and Costas Lapavitsas, ''Political Economy of Money and Finance''. London: Macmillan, 1999.</ref>
 
*Secondly, the analysis of the historical and archaeological evidence about the real origins of money<ref>Michael Hudson, "The Archaeology of Money: Debt versus Barter Theories of Money's Origins." Chapter 5 in: L. Randall Wray, ''Credit and State Theories of Money: The Contributions of A. Mitchell Innes''. Cheltenham, UK: Edward Elgar, 2004.</ref> is not simply a matter of "facts", but also a matter of the interpretation of the facts using theoretical frameworks.<ref>Jan Lucassen (ed.), ''Wages and currency: global comparisons from antiquity to the twentieth century''. Bern: Peter Lang, 2007.[http://www.helsinki.fi/iehc2006/papers3/Lucassen.pdf]</ref> At what point, exactly, did primitive money come into being?<ref>Paul Einzig, ''Primitive money in its ethnological, historical and economic aspects.'' Pergamon, 1966.</ref> When is money really money?<ref>George Dalton, "Primitive money". In: ''American anthropologist'', new Series, Vol. 67, No. 1 February 1965, pp. 44–65. [http://www.bylany.com/kvetina/kvetina_etnoarcheologie/literatura_eseje/5_literatura_obchod.pdf]</ref> How exactly do we draw the boundary between a "chiefdom" and an "early state"?<ref>''Social evolution & history: studies in the evolution of human societies'' (Moscow). Special issue: "Chiefdoms: theories, problems and comparisons". Vol. 10, No. 1, March 2011.</ref> How economists will interpret the historical record of human exchange processes is influenced by their theory of how markets work in the modern world, and by how they define monetary phenomena.<ref>Eladio Febrero, "Three difficulties with Neo-Chartalism". Bilbao: XI Jornadas de Economía Crítica, 2008.[http://www.ucm.es/info/ec/ecocri/cas/Febrero.pdf]</ref> The further one goes back into the past, however, the more fragmentary the scientific evidence about the circulation of goods is, and the more interpretation is involved to understand how it worked. It is easy to project a modern understanding of money into the past, even although money was understood quite differently in the past, or money functioned differently in the past, because people were related and relating in a different way.<ref>Pierre Berger, quoted in Pierre Vilar, ''A History of Gold and Money, 1450–1920''. London: New Left Books, 1976, p. 7.</ref>
 
*Thirdly, beyond the neo-Keynesian and Marxist theories about money, there is a lot of controversy and disagreement within the discipline of economics as a whole about the theory of money, credit and finance.<ref>[http://www.oecd.org/dataoecd/40/31/35391062.pdf OECD, ''The future of money''. Paris: OECD, 2002; [[Jan Toporowski]], 2013 audio lectures on the international financial system and macroeconomic imbalances, at the University of Bergamo, Italy.[https://www.facebook.com/pages/Economisti-di-classe-Riccardo-Bellofiore-Giovanna-Vertova/148198901904582#!/pages/Economisti-di-classe-Riccardo-Bellofiore-Giovanna-Vertova/148198901904582]</ref> Representatives of different schools of thought in economics often cannot agree at a very basic scientific level about the causes and effects of monetary phenomena, even if they share the same elementary concepts about the circulation of money.<ref>[[Marshall Sahlins]], ''Waiting for Foucault, Still''. Chicago: Prickly Paradigm Press, 2002, p. 30.</ref> They are therefore likely also to interpret economic developments in quite different ways.
 
*Fourthly, as a matter of fact, very few Marxian economists have studied monetary economics in any detail, and very few of them have published significant works on the role of money in the economy.<ref>See: Karl Kautsky, "Gold, Paper Currency and commodity" introduced by David Gaido (MIA archive)[http://www.marxists.org/archive/kautsky/1912/xx/gpccintro.htm]; Hilferding, ''Finance Capital''; and [[Isaak Illich Rubin]], "Studien zur Geldtheorie von Marx". ''Beiträge zur Marx-Engels-Forschung''. Neue Folge, Sonderband 4, 2012.</ref>
 
*Fifthly, when economists try to "modernize" Marx's view of money, they strike the problem that in official economics the "macro-theory" of money is very different from the "micro-theory" of money. The way economists think that money functions at the macro-level of society as a whole, differs a lot from the way they say money functions at the level of individuals.<ref>Prof. [[Victoria Chick]], "Why don't academics understand money?". Paper presented at the Positive Money Conference, January 2013.[http://www.positivemoney.org/2013/03/why-dont-economists-understand-money-new-video/?utm_source=twitterfeed&utm_medium=twitter]</ref> They have one story for transactions between individuals, and quite another story for the "big picture". According to Marxist and post-Keynesian critics such as [[Wynne Godley]], [[Marc Lavoie]], [[Steve Keen]], [[Edward J. Nell]] and [[Anwar Shaikh]], this creates all kinds of theoretical inconsistencies. To overcome the inconsistencies, post-Keynesian Marxists try to create a so-called "stock-flow consistent model" of monetary transactions. However, it still remains rather unclear how this model can be reconciled with Marx's theory.
 
The main difficulty for the Chartalist theory is that, for most of recognizably human history, economic exchange took place without using a sovereign currency, and that all kinds of physical goods (such as minerals, cattle, hides, shells and slaves) were used as a kind of money. That is, commodity money existed long before sovereign currency emerged.<ref>Paul Einzig, ''Primitive money in its ethnological, historical and economic aspects''. Pergamon, 1966.</ref> In addition, large trading houses—such as the [[Dutch East India Company]]—sometimes issued their own currency, quite independently of the state. So, the ability of tokens of value to function as money does not necessarily depend on the state at all, even although, in the "modern" epoch, money has ''mostly'' taken the form of state-issued currency.
 
===The role of market value in human freedom and progress===
 
A fifth line of criticism, articulated by libertarians such as [[Friedrich von Hayek]], is that Marx and Engels tend to present "value" and "value relations" as negative, [[Social alienation|alienating]] and [[Reification (Marxism)|reifying]] phenomena that cause people to get used by others, for ends they can no longer fathom. According to Marxists, value phenomena belong to the [[prehistory]] of [[human]]ity that closes with the abolition of capitalism.<ref>Scott Meikle, ''Essentialism in the thought of Karl Marx''. London: Gerald Duckworth & Co. Ltd, 1985, p. 95.</ref> Thus, for example, Iring Fetscher states: "Marx's criticism is directed against value as such, not merely against its consequence, capital."<ref>Iring Fetscher et al., ''Social classes, action and historical materialism''. Poznań studies in the philosophy of the sciences and the humanities, Vol. 6. Amsterdam: Rodopi, 1982, p. 27.</ref> In other words, the negative, dehumanizing features of markets for workers' lives have had prominence for Marxists, even although Marx also acknowledges here and there that markets have some progressive, developmental and "civilizing" features.<ref>E.g. Karl Marx, ''Grundrisse'', Penguin edition 1973, pp. 287, 325, 527–29, 707–12, etc.</ref> Marx and Engels depict the "value form" as an alien, impersonal and corruptive force that gradually subordinates anything and everything to "making money"—and it leads to the [[Reification (Marxism)|reification]] of human life (and to wars). Five kinds of objections by pro-market critics can be mentioned.
 
The ''first objection'' is, that such an historical judgement is ''not objective'', because, on balance, the results for human civilization of the valuation of labour by capital have had much more ''progressive'' effect than Marx & Engels were willing to acknowledge. The proof is said to be, that workers themselves prefer choosing their own employer, purchasing goods at stable prices, and owning private property; market trade has improved their standard of living faster than any other method.<ref>[[Gillian Tett]], "The story of the Brics", in ''[[Financial Times]]'', January 15, 2010.[http://www.ft.com/cms/s/2/112ca932-00ab-11df-ae8d-00144feabdc0.html#axzz1PZK49KeG]</ref>
 
A ''second objection'' is that Marxists are wrong to think that ''value disappears when commercial trade is abolished''.<ref>Tadayuki Tsushima, "Understanding "Labor Certificates" on the Basis of the Theory of Value", in: Tadayuki Tsushima, Kuremuren no shinwa ("Myths of the Kremlin"), 1956. [http://www.marxists.org/subject/japan/tsushima/labor-certificates.htm]</ref> Here the argument is that humans would simply continue to make valuations anyway, and that goods continue to have value, except that knowing what exactly the magnitude of that value is, becomes much more problematic because a general, shared standard of valuation (expressed in money quantities) is absent. The proof of this is supposed to be the experience of Soviet-type societies where a very large amount of goods was effectively "bartered" or allocated by government decree.<ref>[[Michael Voslensky]], ''Nomenklatura. Anatomy of the Soviet ruling class.'' London: The Bodley Head, 1984.</ref> Even if there was no trade at all, however, the Soviet authorities knew very well that the products of human labour had value, and, with experience, they could estimate fairly accurately how much labour would need to be employed to produce various kinds of outputs. More generally, it can be argued that human beings as moral subjects are intrinsically valuing subjects, and therefore human relations without values or valuations of some sort do not exist. At best one could say, that the type of value or valuation can change.
 
A ''third objection'' is that people can distinguish quite well between the means/ends rationality of commerce, and non-commercial relationships.<ref>[[Max Weber]] sociologically distinguished already between an "instrumental rationality" (the efficiency of a means-ends relationship) and a "value rationality" (the reasonableness or valuation of goals in themselves).</ref> Therefore, it is simply an inaccurate and false subjective opinion to claim that there exists some kind of "monumental domination" of commercial relationships over people's lives, because that is not true—except perhaps for people who are obsessively focused on trading relationships. What is ignored is that markets can offer a freedom of choice and development to those who value themselves, and believe in their own self-worth.<ref>This is argued most powerfully by [[Milton Friedman]] in his book [[Free to choose]].</ref> This kind of argument suggests that the "oppression by economic value" or the "domination of economic value" only exists as a belief or an interpretation.
 
A ''fourth objection'' made is that without the "discipline" and "incentives" of value relations, it is simply ''impossible to reconcile self-interest and the common interest in any efficient and fair manner'', and achieve sensible cost-economies in the use of resources. Again, this is supposed to be proved by the resource waste and ecological damage suffered by Soviet-type societies.<ref>[[Richard Pipes]] has famously argued, in various writings, that the lack of a clear concept of [[private property]] in the communist era was a disaster for the Russian economy. According to Pipes, since in Muscovite society the Czar either owned or controlled practically all the assets of his empire, a mature tradition of private ownership never developed in Russia.</ref> If people don't have to work for a living, they will just try to live at the expense of other people. But giving people monetary rewards and costs as a framework to reckon with in making choices about their lives, is vastly preferable to forcing them to work with the threat of real punishment if they don't.
 
A ''fifth objection'' is that it is practically ''impossible'' to abolish trade as such in complex societies, and that trade could not be prevented, even if a central state authority allocated resources to individuals through some kind of credit or [[rationing]] system. So long as people can privately own belongings, they will trade them, if it is in their interest to do so. In Soviet-type societies, trading continued to occur anyway, even if it was highly regulated, or driven underground (the "[[grey economy]]" or [[black market]]). Since there is practically no alternative to trading, it is argued the only dispute there can be, concerns the terms on which goods and services are traded—whether that is efficient or morally justifiable. Any policy that aims to regulate or control how people may trade, libertarians argue, represents an attack on their [[liberty]] and presumes wrongly that the regulators know better what trade is beneficial, than the trading individuals do themselves.
 
All these five objections resurface in the [[Socialist calculation debate]]. The general theme of the responses of Marxian scholars to such criticisms has been that the criticisms are not based on the facts of reality and history; they are based on a false or one-sided perception of market activity, reflecting the self-interest of those who most strongly benefit from market activity. Market activity may look very "progressive" on the surface, but only because we cannot (yet) see the true costs of it. "Market freedom" depends entirely on the ability to own or borrow something that can be traded, but people may be forced to trade something to survive, even although they do not really want to trade it. There is also a big difference between selling a pair of shoes and selling a factory; they are not in the same category of trade. "The market" really doesn't exist, other than as an abstraction; there exist only many different, linked markets, operating according to different economic principles.<ref>[[Richard Lipsey|Richard G. Lipsey]], ''An introduction to positive economics''. London: Weidenfeld & Nicolson, 1967, p. 497.</ref>
 
The claim made by socialists is that alternatives to market allocation do exist, such as sharing, reciprocation, redistribution, barter, grants, subsidization and direct allocation, and that market trade could as a matter of fact not even exist without them; market activity in reality always remains to a large extent dependent on forms of human [[cooperation]]<ref>See the research of [[Samuel Bowles (economist)]] and his colleagues.[http://tuvalu.santafe.edu/~bowles/]</ref> and [[trust (social sciences)|trust]]<ref>Reinhard Bachmann & Akbar Zaheer (eds.), ''Handbook of trust research''. Cheltenham: Elgar, 2006. [[Paul Seabright]], ''The company of strangers: a natural history of economic life.'' Princeton University Press, 2004.[http://idei.fr/doc/by/seabright/company_strangers.pdf]</ref> involving non-market activity. If that cooperation is withdrawn, markets collapse. A narrow focus on the pattern of market transactions moreover deflects attention from the enforcible [[property]] relations on which they are based. But in fact an enormous variety of different property rights and methods of allocating goods are possible, and some of those, it is argued, demonstrably serve humanity much better than others.
 
Already from the time that they wrote the ''[[Communist Manifesto]]'', Marx and Engels were very aware that there was not only "one kind of socialism", but many possible varieties of socialisms – some more desirable than others.<ref>Hal Draper, ''Karl Marx's Theory of Revolution, Vol IV: Critique of Other Socialisms''. New York: Monthly Review press, 1990.</ref> Some socialist theorists have argued that markets aren't necessarily a bad thing, but rather that they should combine with other allocative methods within a [[market socialism]].<ref>[[Włodzimierz Brus]], ''The Market in a Socialist Society''. London: Routledge, 1972; [[Oskar Lange]], ''Economic Theory and Market Socialism: Selected Essays of Oskar Lange'', ed. Tadeusz Kowalik. Edward Elgar Publishing, 1994; [[Abba P. Lerner]], "Statics and Dynamics in Socialist Economics," ''Economic Journal'', Vol. 47, June 1937; [[Branko Horvat]], Political Economy of Socialism: A Marxist View. M.E. Sharpe, 1983; [[David Miller (political theorist)]], ''Market, state and community: the theoretical foundations of market socialism.'' Oxford: Clarendon Press, 1989; [[Erik Olin Wright]] (ed. & introd.), ''Equal Shares: making market socialism work''. London: Verso, 1996. [[Bertell Ollman]] (ed.) ''Market Socialism: The Debate Among Socialists''. Routledge, 1998; [[Alec Nove]], ''The economics of feasible socialism'', 2nd ed. Routledge, 1992.</ref> The more that economic goods are allocated by the market, the more the financially strong will defeat the financially weak, and the more socio-economic inequality there will be.<ref>[[Jawaharlal Nehru]], "Basic Approach", reprinted in Vincent Shean, ''Nehru: the Years of Power''. Random House, 1960, p. 295.</ref> Therefore, it is argued, a more egalitarian society requires ''both'' market ''and'' non-market mechanisms, to allocate goods in a fair way. In this respect, there are many different possible combinations of argument.<ref>Julian Le Grand and Saul Estrin (eds.) ''Market Socialism''. Oxford: Oxford University Press, 1989.</ref> [[Makoto Itoh]] and [[Ha-Joon Chang]] offer a strong defence of state-directed economic organization.<ref>[[Makoto Itoh]], ''Political economy of socialism''. Macmillan, 1995; [[Ha-Joon Chang]], ''23 Things They Don't Tell You About Capitalism''. Penguin Books, 2010.</ref> [[Anthony Giddens]], [[Robert Rowthorn]] and [[Geoffrey Hodgson]] have argued for a "third way" between capitalism and socialism.<ref>[[Anthony Giddens]], ''The Third Way. The Renewal of Social Democracy''. Cambridge : Polity, 1998; [[Robert Rowthorn]], ''Democracy and Efficiency in the Economic Enterprise''. Taylor & Francis, 2003; [[Geoffrey Hodgson]], ''Economics and utopia''. London: Routledge, 1999.</ref> Others such as [[János Kornai]] and [[Ernest Mandel]] have argued—for different reasons—that any durable "third way" between capitalism and socialism is ''impossible''.<ref>[[János Kornai]], ''The socialist system''. Oxford University Press, 1992; [[Ernest Mandel]] "The myth of market socialism", ''New Left Review'', I/169, May–June 1988.</ref> [[Michael Albert]] and [[Robin Hahnel]] have formulated a theory of [[participatory economics]], otherwise known as [[parecon]].<ref>[[Michael Albert]], ''Parecon: Life After Capitalism''. London: Verso Books, 2003; [[Robin Hahnel]], ''Economic Justice And Democracy: From Competition To Cooperation.'' London: Routledge, 2005.</ref> The leading Chinese economist [[Jinglian Wu]] claims that a thorough analysis of planned economy since the 1980s (coinciding with Chinese economic reforms) proves that it is "impossible for such a institutional arrangement to be efficient"<ref>[[Jinglian Wu]], ''Understanding and interpreting Chinese Economic Reform''. Mason, Ohio: Thomson, 2005, p. 17.</ref> His critics, including [[Chinese New Left]] scholars such as [[Minqi Li]], however question what he means by "efficiency".<ref>As discussed in the ''Real-world economics review'' (formerly known as the "post-autistic economics review").[http://www.paecon.net/PAEReview/]</ref> In their more recent research, the American socialists [[Samuel Bowles (economist)|Samuel Bowles]] and [[Herbert Gintis]] look at the whole problem from a different angle: human beings cannot exist without social cooperation, as atomized individuals or isolated monads, so the dispute between capitalists and socialists really revolves around the methods of cooperation that work best for humanity.<ref>See e.g., [[Samuel Bowles (economist)]] & [[Herbert Gintis]], ''A cooperative species: human reciprocity and its evolution.'' Princeton: Princeton University Press, 2011.[http://tuvalu.santafe.edu/~bowles/]</ref> Last but not least, there are also "market anarchists" who believe in free markets but not in capitalism.<ref>Gary Chartier & Charles W. Johnson (eds.), ''Markets, not capitalism. Individualist anarchism against bosses, inequality, corporate power and structural poverty.'' New York: Autonomedia, 2011.[http://radgeek.com/gt/2011/10/Markets-Not-Capitalism-2011-Chartier-and-Johnson.pdf]</ref>
 
All these arguments<ref>Some of the historical Marxist debates in Europe are reviewed in [[Catherine Samary]], ''Plan, Market and Democracy'', IIRE Notebook for study and research 7/8, 1988.[http://fileserver.iire.org/nsr/NSR7.pdf]</ref> remain much in dispute among economists seeking economic reform; the debaters still cannot agree about basic concepts of economics, about the possible ways that production, trade and democracy can be combined, or about what factual evidence would finally clinch the controversy.<ref>Many of the important technical discussions in socialist or post-socialist societies have unfortunately never been translated into English, and the controversies are often strongly influenced by ideological, political or moral positions or cherished dogmas.</ref>
 
==See also==
*[[Socialist market economy]]
*[[Silent barter]]
*[[Use value]]
 
==Notes==
<references />
 
{{DEFAULTSORT:Value-Form}}
[[Category:Marxist theory]]

Latest revision as of 10:59, 11 December 2014

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