Basic of Marxist Economics:

Marx's law of value

12 June 2021
Revista Nueva Realidad
 The Law of Value

• Its basic thesis: in a commodity-producing economy (and especially a capitalist

commodity-producing economy) market prices (and their fluctuations) are being
geared to some other (more stable?) economic variable: value
Value Price

• Two streams of Value theories (VT): based on A.Smith’s distinction between use-
value and exchange-value
1) Objective Value Theories: value is the (objective) expenditure of human
labour in producing a commodity; thus, Labour Theories of Value (LTV)
2) Subjective Value Theories: value is the (subjective) utility derived by the use
of a commodity
• Classical and Marxist Political Economy adhere to the former
• Economics were founded on the latter (but later discarded the notion of value)
 Objective Value Theories
• A.Smith: two VTs
1) Value Theory of Embodied Labour: labour expended in the production
process of a commodity A
2) Value Theory of Commanded Labour: the value of commodity A is the
labour contained in a commodity B with which commodity A is exchanged
Smith considered them equivalent
Ricardo and Marx correctly argued that they are not

• D.Ricardo: Value Theory of Embodied Labour

He considered only the technical aspects and neglected the social aspects
(e.g. choice of technology)
He assumed that (labour) values directly determine market prices (that is
prices’ deviations from labour values are insignificant and not requiring
analysis)
A weak theory of competition
• K.Marx: Value Theory of Abstract Labour
He considered both the technical and social aspects of labour expended in
production (hence, abstract labour meaning socially equalized labour and not
only technically equalized labour as in Ricardo)
He assumed that (labour) values determine market prices through the
intermediation of prices of production

Value Price of Production Market Price

A sophisticated theory of competition (competition within sectors but also

between sectors)
He argued that (labour) values detn. market prices but the latter have degrees
of freedom (due to the interplay of S – D). Thus, market prices only rarely
coincide with their determining values. Market prices oscillate around values
(their centre of gravity)
 The Law of Value in Marxist Political Economy
• The Law of Value is the regulating principle of the exchange of the products of
human work: market prices (which are ultimately monetary prices) are
proportional to the average amounts of human labour-time (socially equated,
hence socially necessary labour-time) used to produce them
• The Law of Value brings order in the anarchy of the capitalist economy (individual
capitals more or less blindly competing one another)
• The Law of Value regulates three main kinds of relationships:
1) between people (social relations: between K – L and between K - K).
2) between people and their economic products (technical relations).
3) between economic products themselves (relations of equivalence between
different commodities)
• More specifically, The Law of Value determines:
1) The distribution of the means of production among sectors
2) The distribution of the labour force among sectors
3) The market prices of commodities

• Modification in the world market

• Value and crisis: falling profitability and the overaccumulation of

capital

• The Marxian Law of Value is a dynamic and not an equilibrium theory

(although it considers points of equilibrium as transitory centres of
gravity)
 VT, the Law of Value and class struggle

• VT is not a socially-neutral conception

• Different VTs follow different class perspectives
• Classical Political Economy’s VT class perspective focuses on the conflict
between capitalists and land-owners (a deformed class stemming from the
feudal class
• Marginalism’s VT dilutes and liquidates class struggle into a Babel of individual
egotistic competiions
• Marxist Political Economy focuses on the conflict between capitalists and
workers with the aim of overthrowing capitalism and building socialism. Of
course, it also theorises class struggle between other classes and within
classes (intra-capitalist competition). But its primary focus (the primary
contradiction) is between capital and labour
 Modern deformations of Marx’s theory of value

• The neo-Ricardian technicism:

 The Law of Value can operate without values (they are redundant): physical
quantities detn. prices of production
A simultaneous equations framework akin to general equilibrium
An underlying positivist methodology alien to materialist dialectic
contradictions
Assimilation of Marxism as the poor relative of neo-Ricardianism and post-
Keynesianism
• The pseudo-Rubinist value-form theories (value-form theories, monetary theory
of value etc.)
They deform I.I.Rubin’s analysis presenting him as a pure circulationist
They themselves resort to circulationism: value takes flesh and blood only in
circulation via monetization (its incarnation in money)
In the end, value-form theories consider the form of value (monetary prices)
and liquidate its content (labour-time): a form-without-content approach that
is akin to idealist dialectics
They usually separate Marx (the critical bourgeois theorist) from Engels (the
devious communist subversive), consider Marxism as an incomplete and non-
completable approach and assimilate Marxism as the poor relative of
Heterodox bourgeois Economics