Could you explain in layman's terms why Marx would care about labor costs?

The value (as I understand the word) of a can of green beans is the price a consumer is willing to pay for it. There is no other value no matter what labor (along with parts and overhead) may have gone into creating the item. If billions of labor dollars are spent creating X, but nobody will buy X, the value of X is $0.00.

I've written a lot about the distinction between real price and direct price. Real price is what something costs in money - a tin of Eldorado tuna costing about 8NOK here. Direct price is what something costs in labour. Supply, demand and purchases don't immediately influence the direct price in labour, but they can immediately effect the cost.

For Marx, only commodities have a direct price as they are the only things which are a product of labour. Nevertheless anything and everything can have a real price. Like unworked land, oil drilling rights, counselling or hiring a lawyer.

I understand. Why does Marx care about labor costs?

Is that dolphin-safe tuna?

Read the long post I made reconstructing Marx's argument for why labour time is determinative of direct price. There are also plenty of other posts where I'm highlighting reasons why direct price can diverge from real price.

We see then that that which determines the magnitude of the value of any article is the amount of labour socially necessary, or the labour time socially necessary for its production.[9] Each individual commodity, in this connexion, is to be considered as an average sample of its class.[10] Commodities, therefore, in which equal quantities of labour are embodied, or which can be produced in the same time, have the same value. The value of one commodity is to the value of any other, as the labour time necessary for the production of the one is to that necessary for the production of the other. “As values, all commodities are only definite masses of congealed labour time.”[11]

The first bolded bit is essentially a restatement/summary of Marx's developments so far. The magnitude of value (in direct price, for @frank) is explained by the magnitude of labour socially necessary for its production. Marx is also aware that the socially necessary labour time can change due to adopting productive innovations.

It's worthwhile staying for a little bit and working with this idea of social necessity. What makes a labour time socially necessary? A tentative definition of a socially necessary labour time is as follows:

(1) A labour time t is socially necessary for producing commodity x if all productive processes that yield x have the same duration.

But, as Marx highlighted, it can change. So how does the socially necessary labour time behave in Marx's cotton loom example?

For some time, there will be productive processes that have not adopted the looms, and some which will have adopted the looms. Going from (1) this implies that there is no socially necessary labour time so long as there are productive processes which yield x with different durations. But clearly, Marx expects the socially necessary labour time to half after the adoption of cotton loom halved the production time.

So there's some dynamic here. The invention of a more efficient productive process does not have to decrease the socially necessary labour time for x if it is not adopted. I have an analogy to demonstrate this: assume we have an industrialist Nostradamus isolated in his tower inventing productive processes so advanced they would reduce the socially necessary labour times in general by 80%, but he never leaves his tower or communicates his discoveries. Nostradamus, then, would have no effect on the socially necessary labour times despite providing the schematics for a huge reduction in all of them. This implies that socially necessary labour time changes require the real adoption of productive changes, rather than simply theoretical developments. To be sure, productive developments must be invented before they are adopted, but their adoption is what matters.

This implies that the socially necessary labour time of x is a property of the aggregate conditions of production of x; that is, a statistical property of the distribution of labour times for x.

But a bit more work is needed to translate the idea that the socially necessary labour time is a statistical property of the distribution of labour times for a given commodity into an actual statistical property of the aggregate.

Relying on Marx's cotton loom example, it doesn't seem a stretch to say that once the cotton loom was adopted in general, the socially necessary labour time for cotton was decreased. At the start of the adoption, fewer productive processes will have used the cotton loom than at the end. This implies that when a labour saving device begins to be adopted, it eventually brings down the socially necessary labour time in proportion to the amount of labour saved. To be sure, when the aggregate conditions of production for cotton started using cotton looms, the socially necessary labour time will have decreased in accordance with the new productive method. This gives us two notions which are useful for describing the transition of socially necessary labour times:

(A) A distribution of labour times for real productive methods for a commodity x is in productive equilibrium if the mode of that distribution equals the minimum of that distribution.
(B) A distribution of labour times for real productive methods for a commodity x is in productive disequilibrium if the mode of that distribution is greater than the minimum of that distribution.

When cotton looms began to be adopted, (B) is the case; there are few productive processes producing at the minimal labour time and most of them still use the old one. The forces of market saturation and decreased production costs giving higher rates of profit incentivise the adoption of the productive innovation; those that do not adopt it suffer comparative disadvantage. As more and more productive processes for x adopt the labour saving innovation, we trend towards (A). This is when the aggregate conditions of production reflect the new minimum rather than the old mode.

This contrast between productive equilibrium and productive disequilibrium cashes out in terms of comparative disadvantage in profit rates for those who don't adopt the new method; thus there is a compulsion to adopt it. This compulsion, arising from the incentive to increase profit rates and avoid comparative disadvantage therein, is a component of the social necessity of the labour time. The costs of production minimise by minimising the direct price.

So, with (1) and (A) in mind, we end up with a better characterisation of socially necessary labour time.

(2) For a commodity x whose real productive processes are in productive equilibrium (A) the socially necessary labour time is the minimum (and modal) labour time to produce x.

Edit: I think there are more facets to the social necessity of a given labour time than this, but I think it's a good enough account to proceed. What the above tries to capture is how the magnitude of the socially necessary labour time arises and under what conditions is it changing. The coincidence of the mode and minimum is a condition where less efficient productive processes are heavily disincentivized, you will be out produced on all fronts if you don't satisfy the minimum, so there is an element of social necessity in the equation of minimum and mode. Perhaps there are others, and I suspect the story is more complicated if, say, two countries have isolated sets of productive processes for the same commodity (no trade), so the aggregate could possibly be in productive disequilibrium even when both countries are in productive equilibrium. Two features that arise from this is the importance of international trade deals and the geographic specialisation of labour for maximising profit rates.

Edit2: a more mathematical framing for the above is that seeking to remove comparative disadvantage or gain momentary comparative advantage through more efficient production acts to minimise the expected difference of minimum and mode of the distribution of labour times.

Marx continues to give some examples which back up the relationship of socially necessary labour time and prices. He highlights that socially necessary labour time is a property of the aggregate conditions of production:

The value of a commodity would therefore remain constant, if the labour time required for its production also remained constant. But the latter changes with every variation in the productiveness of labour. This productiveness is determined by various circumstances, amongst others, by the average amount of skill of the workmen, the state of science, and the degree of its practical application, the social organisation of production, the extent and capabilities of the means of production, and by physical conditions.

and states that the aggregate property of socially necessary labour time is an ideal average of the 'lawless irregularities' of concrete productive conditions. It is another example of how Marx thinks his account holds of capital.

An interesting coincidence is that since competition acts to minimise the difference between the minimal labour time and the modal labour time for a commodity; this characterises the state of productive equilibrium of the distribution of production times as a literal statistical attractor of distributions.

Marx makes some remarks about how changes in socially necessary labour time over time manifest in changes in direct price.

For example, the same amount of labour in favourable seasons is embodied in 8 bushels of corn, and in unfavourable, only in four. The same labour extracts from rich mines more metal than from poor mines. Diamonds are of very rare occurrence on the earth’s surface, and hence their discovery costs, on an average, a great deal of labour time. Consequently much labour is represented in a small compass. Jacob doubts whether gold has ever been paid for at its full value. This applies still more to diamonds.

The same is still true today; eg the lettuce shortages and price increases in response to the May->July heatwave in Europe. Interestingly today, synthetic diamonds are relatively cheap but natural diamonds are still very expensive. The impurities in natural diamond are seen as making it more valuable than the much purer synthetic diamonds bought in bulk by experimental physics departments worldwide. However, this difference in opinion just masks the difference in labour times to create the same quantity of natural and synthetic diamond - it is no surprise that natural ones remain more valuable because of the amount of labour it takes to extract one from the earth compared to the productive efficiency afforded to synthetic diamonds.

Another feature in this account is the decomposition of commodities into other commodities and their sources of labour. See here for a mathematical exhibition of the decompositions.

According to Eschwege, the total produce of the Brazilian diamond mines for the eighty years, ending in 1823, had not realised the price of one-and-a-half years’ average produce of the sugar and coffee plantations of the same country, although the diamonds cost much more labour, and therefore represented more value. With richer mines, the same quantity of labour would embody itself in more diamonds, and their value would fall. If we could succeed at a small expenditure of labour, in converting carbon into diamonds, their value might fall below that of bricks. In general, the greater the productiveness of labour, the less is the labour time required for the production of an article, the less is the amount of labour crystallised in that article, and the less is its value; and vice versâ, the less the productiveness of labour, the greater is the labour time required for the production of an article, and the greater is its value. The value of a commodity, therefore, varies directly as the quantity, and inversely as the productiveness, of the labour incorporated in it.

The major highlight here is that the productiveness of a productive process of a commodity is the rate of its production per unit time; which scales inversely with the socially necessary labour time per commodity; which then scales inversely to the value. Going the other direction, the more of a commodity which is produced, the more the value of that commodity. This is summarised as follows:

$\text{value of x} \propto \frac{\text{quantity of x}}{\text{productiveness of labour for x}}$

Marx finishes the section as he usually does; folding the concepts he exhibited of x into the material expression of x. Before it was value and physical money tokens, here it is use value and exchange value into the commodity. The motivation for this is also the same as usual; the real abstractions Marx has developed are embedded into the entity which is governed by those real abstractions.

A thing can be a use value, without having value. This is the case whenever its utility to man is not due to labour. Such are air, virgin soil, natural meadows, &c. A thing can be useful, and the product of human labour, without being a commodity. Whoever directly satisfies his wants with the produce of his own labour, creates, indeed, use values, but not commodities.

This is very important; things can have use without having value. An item which has a use in terms of its concrete capacities of labour is much different from one which has use only for exchange; whose power in exchange is determined by the abstract labour it congeals. Thus abstract and concrete labour are structurally symmetric to exchange and use value.

To reiterate; use value depends on utilising a thing for its material properties brought about through concrete labour, exchange value depends on utilising a thing for its abstract properties brought about through abstract labour.

In order to produce the latter (values), he must not only produce use values, but use values for others, social use values. (And not only for others, without more. The mediaeval peasant produced quit-rent-corn for his feudal lord and tithe-corn for his parson. But neither the quit-rent-corn nor the tithe-corn became commodities by reason of the fact that they had been produced for others. To become a commodity a product must be transferred to another, whom it will serve as a use value, by means of an exchange.)[12] Lastly nothing can have value, without being an object of utility. If the thing is useless, so is the labour contained in it; the labour does not count as labour, and therefore creates no value.

However, in order to be exchangeable with respect to the expanded form detailed earlier; the use value of a commodity must satisfy a common need; use values insofar as they are produced in capitalist societies are always social use values. Good for and available to the generic human who would use them. Rather than knitting a hat for your friend.

This implies that the presence of value (abstract labour) is grounded in the presence of utility (concrete labour). Again, Marx 'folds' the abstraction into the concretions which constitute its aggregate. Labour in the abstract is derived from the general properties of concrete labour.

Thus ends the first section, "The Two Factors of a Commodity".

Section Summary: THE TWO FACTORS OF A COMMODITY: USE-VALUE AND VALUE (THE SUBSTANCE OF VALUE AND THE MAGNITUDE OF VALUE)

Commodities have two types of value in them.

Use value and exchange value.

Use value is what the commodity is used for. Exchange value is what the commodity is exchanged for.

Use value arises from the material properties of an object shaped by concrete acts of labour, exchange value arises from the abstract properties of an object in their relation to human labour in the abstract.

Human labour in the abstract denotes the general properties shared by all labour; which are that they are effortful time expenditure. Concrete labour denotes the specific properties of labour in the production of a given commodity.

Use value/concrete labour and exchange value/abstract labour are structurally similar. Use and concrete labour are aligned with qualities, exchange value and abstract labour are aligned with quantities.

Exchange value has a magnitude, and because the only magnitudinal property of labour in general is its duration, the magnitude of value must depend on the magnitude of duration for producing that commodity.

The privileged duration which gives the commodity its specific value (direct price) is the socially necessary labour time for its production.

The socially necessary labour time for a commodity is, roughly, the minimal duration for its production given a specific organisation of production for that commodity.

The value (direct price) of a commodity is proportional to the amount of it and inversely proportional to its socially necessary production rate per unit time.

In order for a commodity to have an (exchange) value, it must have a social use value; that is it must be able to be used generically by those who have a want or need for it.

Section 2: THE TWO-FOLD CHARACTER OF THE LABOUR EMBODIED IN COMMODITIES

Marx begins this short section with a quick recap.

At first sight a commodity presented itself to us as a complex of two things – use value and exchange value. Later on, we saw also that labour, too, possesses the same two-fold nature; for, so far as it finds expression in value, it does not possess the same characteristics that belong to it as a creator of use values. I was the first to point out and to examine critically this two-fold nature of the labour contained in commodities. As this point is the pivot on which a clear comprehension of political economy turns, we must go more into detail.

He reiterates that the commodity is composed of use values and exchange values. And labour is composed of concrete and abstract labour. Labour, when it results in a commodity, results in a composite of use values and exchange values; which mirror the labour done as concrete and abstract labour respectively.

From the bolded sentence, Marx believes that the production of commodities, and the nature of commodities, is a central topic for the understanding of capital.

Let us take two commodities such as a coat and 10 yards of linen, and let the former be double the value of the latter, so that, if 10 yards of linen = W, the coat = 2W.

The coat is a use value that satisfies a particular want. Its existence is the result of a special sort of productive activity, the nature of which is determined by its aim, mode of operation, subject, means, and result. The labour, whose utility is thus represented by the value in use of its product, or which manifests itself by making its product a use value, we call useful labour. In this connection we consider only its useful effect.

Marx introduces the notion of useful labour; which is defined as labour that produces a use value; a good which satisfies some want or need (whose use is realised in the consumption of the good). He proceeds to analyse the trade of goods as the trade of use values.

As the coat and the linen are two qualitatively different use values, so also are the two forms of labour that produce them, tailoring and weaving. Were these two objects not qualitatively different, not produced respectively by labour of different quality, they could not stand to each other in the relation of commodities. Coats are not exchanged for coats, one use value is not exchanged for another of the same kind.

x with use value y is not exchanged for some u with exactly the same use value y. This is because the trade of use values requires that each trader stands to gain materially form the trade. The qualitative distinction of the use values, again, mirrors the qualitative distinctions between the acts of concrete labour that produced them. Because of the reality of this quantitative distinction, again, the properties of human labour in general are what facilitate the equivalence of x with u as tradable goods.

To all the different varieties of values in use there correspond as many different kinds of useful labour, classified according to the order, genus, species, and variety to which they belong in the social division of labour. This division of labour is a necessary condition for the production of commodities, but it does not follow, conversely, that the production of commodities is a necessary condition for the division of labour. In the primitive Indian community there is social division of labour, without production of commodities. Or, to take an example nearer home, in every factory the labour is divided according to a system, but this division is not brought about by the operatives mutually exchanging their individual products. Only such products can become commodities with regard to each other, as result from different kinds of labour, each kind being carried on independently and for the account of private individuals.

It is here that Marx introduces the division as labour as a necessary constituent of capitalist production. The division of labour arises as a logical condition of the qualitative plurality of concrete labours. This type of labour produces a shoe, this other type of labour produces a hat. Note that the division of labour is simply a necessary constituent of commodity production, not a sufficient condition for commodity production. Which is to say societies can make use of a division of labour, and indeed have, without adopting the capitalist mode of production. This means that the division of labour does not necessarily produce commodities, nevertheless the way labour is divided under capital is a necessary constituent of it.

There are two threads of argument which buttress this point; on the derivation of the division of labour from the nature of commodities. Firstly, that commodities stand in a relation of abstract/value-numerical equivalence with each other in trade requires that goods are produced not just for use value, but for exchange value. The requirement of exchange of goods to satisfy wants and needs is embodied in the production of socially useful commodities (which are a fortiori tradable).

The coupling of the division of labour under capitalist production occurs through the production of commodities from three related sources of social necessity:

(1) From the opening paragraph; if someone had all the use values they needed or desired, they would not need to trade any of them for any other use values.

(2) This, then, suggests a social distribution of use values whereby each, or most, must be obtained through trade of some sort.

(3) (1) and (2) together suggest that an individual's concrete labour is consists in producing a narrow range of use values for trade. Thus their skills become professionalised and wants are satisfied through trade.

All together they implicate the social division of labour into the exchange mechanism of capital, and moreover into the production of commodities. Since Marx thinks the production of commodities is an essential feature of capitalist production, so too does he think that the division of labour in producing those commodities is essential.

Another note is that "for the account of private individuals." in the last line is suggestive that each individual owns the product of their labour, however it is also consistent with the idea that not every individual owns the product of their labour. This prefigures probably the most well known idea from Marx - workers not owning the products of their labour.

Regardless, since the division of labour is a necessary but not-sufficient condition for the production of commodities; Marx continues describing general features of trade under social organisations of labour that require its division.

To resume, then: In the use value of each commodity there is contained useful labour, i.e., productive activity of a definite kind and exercised with a definite aim. Use values cannot confront each other as commodities, unless the useful labour embodied in them is qualitatively different in each of them. In a community, the produce of which in general takes the form of commodities, i.e., in a community of commodity producers, this qualitative difference between the useful forms of labour that are carried on independently of individual producers, each on their own account, develops into a complex system, a social division of labour.

Marx states that under a social organisation of labour where use values are often obtained through trade, that social organisation will bear a division of labour. Different people will make different things as afforded by their skills and desires.

Anyhow, whether the coat be worn by the tailor or by his customer, in either case it operates as a use value. Nor is the relation between the coat and the labour that produced it altered by the circumstance that tailoring may have become a special trade, an independent branch of the social division of labour. Wherever the want of clothing forced them to it, the human race made clothes for thousands of years, without a single man becoming a tailor. But coats and linen, like every other element of material wealth that is not the spontaneous produce of Nature, must invariably owe their existence to a special productive activity, exercised with a definite aim, an activity that appropriates particular nature-given materials to particular human wants. So far therefore as labour is a creator of use value, is useful labour, it is a necessary condition, independent of all forms of society, for the existence of the human race; it is an eternal nature-imposed necessity, without which there can be no material exchanges between man and Nature, and therefore no life.

Because humans have needs which require myriad interactions with their environment; food, clothing, shelter etc, labour which acts on nature is an essential feature of satisfying those requirements; an essential feature of being human. Irrelevant of the social organisation, people will still be doing labour to produce use values to the extent that they have the wants and needs serviced by those use values. The fortune of humankind will always be tied to the vicissitudes of their labour. Regardless, this does not preclude the production of use values to take different social forms; as with capitalist production, use value comes along with exchange value.

The use values, coat, linen, &c., i.e., the bodies of commodities, are combinations of two elements – matter and labour. If we take away the useful labour expended upon them, a material substratum is always left, which is furnished by Nature without the help of man. The latter can work only as Nature does, that is by changing the form of matter.[13] Nay more, in this work of changing the form he is constantly helped by natural forces. We see, then, that labour is not the only source of material wealth, of use values produced by labour. As William Petty puts it, labour is its father and the earth its mother.

Of note here is that the 'material substratum' of nature strictly speaking does not have value; since no labour has been done to it. The 'material substratum' facilitates the satisfaction of need and want; of the creation of use values; through its own proclivities, nevertheless the perpetual unfolding of nature is not a human labour; and thus when untouched by humanity has no value. This observation grounds that the iterative decomposition of commodities as detailed here bottoms out in the valueless collection of goods (the kernel of the decomposition operator) and the sum total of labours in each stage of the hierarchical production of commodities. Here's a picture of how it works. The commodity C1 is produced through the assembly of C2 and C3, C3 is produced through the assembly of C4 and C5, C2,C4,C5 are all directly transformed from raw goods.

Marx turns the discussion from the production and trade of use values to the production and trade of (exchange) values. Marx is using his argument about the relationship of human labour in the abstract to value; and of the socially necessary labour time to the magnitude of value, so if you are unsure of how those work at this point it's worthwhile to go back and study them more.

Let us now pass from the commodity considered as a use value to the value of commodities.

By our assumption, the coat is worth twice as much as the linen. But this is a mere quantitative difference, which for the present does not concern us. We bear in mind, however, that if the value of the coat is double that of 10 yds of linen, 20 yds of linen must have the same value as one coat. So far as they are values, the coat and the linen are things of a like substance, objective expressions of essentially identical labour. But tailoring and weaving are, qualitatively, different kinds of labour. There are, however, states of society in which one and the same man does tailoring and weaving alternately, in which case these two forms of labour are mere modifications of the labour of the same individual, and not special and fixed functions of different persons, just as the coat which our tailor makes one day, and the trousers which he makes another day, imply only a variation in the labour of one and the same individual. Moreover, we see at a glance that, in our capitalist society, a given portion of human labour is, in accordance with the varying demand, at one time supplied in the form of tailoring, at another in the form of weaving. This change may possibly not take place without friction, but take place it must.

Most of this paragraph is a restatement of previous things. The most interesting parts are that a professional can do different types of concrete labour during one job; like tailoring and weaving, or making trousers and suits, and furthermore the social division of labour (ideally) apportions labour with regard to demand and supply. Again, Marx is aware of the troubles of linking the amount of labour with demand and supply, and the two, if they follow laws, follow them only in the aggregate on the backdrop of the usual 'lawless irregularities' of capital.

The next paragraph features a methodological reduction of labour in the abstract to simple labour in the abstract. While this was already set up with human labour in the abstract removing all specifics of labour; like goal and skill; it's important to be able to consider human labour in the abstract as a homogenous lump for the purposes of analysing value, since human labour in the abstract as a homogenous lump is what imbues a commodity with its value (direct price).

Productive activity, if we leave out of sight its special form, viz., the useful character of the labour, is nothing but the expenditure of human labour power. Tailoring and weaving, though qualitatively different productive activities, are each a productive expenditure of human brains, nerves, and muscles, and in this sense are human labour. They are but two different modes of expending human labour power. Of course, this labour power, which remains the same under all its modifications, must have attained a certain pitch of development before it can be expended in a multiplicity of modes.

Marx briefly notes that the historical accumulation of skills in skilled labour; of the vagaries and necessities of the transformation of nature to suit humanity; prefigures the development of social roles associated with types of skilled labour. Regardless, once labour entangles itself with social roles and skills, the products of those labour can be 'brought to market' and held equivalent in terms of value.

But the value of a commodity represents human labour in the abstract, the expenditure of human labour in general. And just as in society, a general or a banker plays a great part, but mere man, on the other hand, a very shabby part,[14] so here with mere human labour. It is the expenditure of simple labour power, i.e., of the labour power which, on an average, apart from any special development, exists in the organism of every ordinary individual. Simple average labour, it is true, varies in character in different countries and at different times, but in a particular society it is given. Skilled labour counts only as simple labour intensified, or rather, as multiplied simple labour, a given quantity of skilled being considered equal to a greater quantity of simple labour. Experience shows that this reduction is constantly being made.

Marx notes that skilled labour might be, and usually is, waged higher than simple labour. Regardless, Marx insists that because a given amount of skilled labour will always be equivalent to a given amount of unskilled labour in terms of the commodity value produced, it suffices to consider simple labour; simple labour is labour done with the average skill and average expenditure within a sphere or production (society). The argument here mirrors the previous arguments in thread (though they occur later in the book) of the isomorphism between direct prices and socially necessary labour times, and of proportion as an isomorphism of ordered fields. That is, dealing with skilled labour of a given sort, in the aggregate, requires only the scaling of that labour to unskilled or generic labour. Marx insists that this reduction, rather than being simply a methodological posit, is actually occurrent in capitalist societies. The evidence for this is of the different amounts people are payed for labours of different skill. Someone who builds computers from scratch will typically have a higher wage (within the same society) than someone who attaches washers to a product in a factory assembly line.

Marx concludes the argument thusly:

A commodity may be the product of the most skilled labour, but its value, by equating it to the product of simple unskilled labour, represents a definite quantity of the latter labour alone.[15] The different proportions in which different sorts of labour are reduced to unskilled labour as their standard, are established by a social process that goes on behind the backs of the producers, and, consequently, appear to be fixed by custom. For simplicity’s sake we shall henceforth account every kind of labour to be unskilled, simple labour; by this we do no more than save ourselves the trouble of making the reduction.

reaching the same conclusion.

Marx is still summarising the implications of his arguments relating concrete labour to use and abstract labour to exchange, and the properties of abstract labour to the magnitude of exchange value.

Just as, therefore, in viewing the coat and linen as values, we abstract from their different use values, so it is with the labour represented by those values: we disregard the difference between its useful forms, weaving and tailoring. As the use values, coat and linen, are combinations of special productive activities with cloth and yarn, while the values, coat and linen, are, on the other hand, mere homogeneous congelations of undifferentiated labour, so the labour embodied in these latter values does not count by virtue of its productive relation to cloth and yarn, but only as being expenditure of human labour power. Tailoring and weaving are necessary factors in the creation of the use values, coat and linen, precisely because these two kinds of labour are of different qualities; but only in so far as abstraction is made from their special qualities, only in so far as both possess the same quality of being human labour, do tailoring and weaving form the substance of the values of the same articles.

He is restating the implication that when two commodities enter into the exchange relation, their use values and features of concrete labour are not relevant to the value equivalence; only that they are the results of usefully productive exertion (labour power) and the duration of that labour power matter (up to proportion/isomorphism). In exchange in capitalist societies, commodities meet as the congelations of homogenous human labour in the abstract. In production for exchange, the commodities have this abstract equivalence socially embedded within them.

The labor time embodied by a commodity is partly the labor required to construct it. Some portion of the social investment in an item is overhead. This can also be looked at as labor (sort of): research and development, lawyers, strategists, logistics, and on and on. In a society where labor is pervasively mechanized, that overhead explodes across time and space as manufacturing labor time itself becomes meaningless.

So why would Marx focus simply on the labor directly involved in manufacture to gauge the magnitude of social investment in a commodity? In a way, the ideological theme of the 19th Century was human labor, and that continued through the first half of 20th Century. It's interesting to ponder what happened to that theme. But perhaps the prominence of that theme in Marx's lifetime affected his perspective?

As in every other response to you in this thread, so far the discussion concerns value and value production. It is true that even the production of commodities has logistical, engineering and bureaucratic real price overheads which give the social and technical texture to the production of commodities; perhaps even logistics should be considered as part of the direct price. Regardless, the concern so far is direct price and its relationship to labour in commodity production.

Coats and linen, however, are not merely values, but values of definite magnitude, and according to our assumption, the coat is worth twice as much as the ten yards of linen. Whence this difference in their values? It is owing to the fact that the linen contains only half as much labour as the coat, and consequently, that in the production of the latter, labour power must have been expended during twice the time necessary for the production of the former.

A simple restatement of the proportionality derived above. Direct price is proportional to the quantity produced and inversely proportional to the productivity of labour.

While, therefore, with reference to use value, the labour contained in a commodity counts only qualitatively, with reference to value it counts only quantitatively, and must first be reduced to human labour pure and simple. In the former case, it is a question of How and What, in the latter of How much? How long a time? Since the magnitude of the value of a commodity represents only the quantity of labour embodied in it, it follows that all commodities, when taken in certain proportions, must be equal in value.

Again, use value and concrete labour align on the axis of quality, value and abstract labour align on the axis of quantity. Also see previous discussion of why socially necessary labour time manifests in direct price. The 'equality in value for certain proportions' component of this prefigures the discussion of the value form in the next section.

An increase in the quantity of use values is an increase of material wealth. With two coats two men can be clothed, with one coat only one man. Nevertheless, an increased quantity of material wealth may correspond to a simultaneous fall in the magnitude of its value. This antagonistic movement has its origin in the two-fold character of labour. Productive power has reference, of course, only to labour of some useful concrete form, the efficacy of any special productive activity during a given time being dependent on its productiveness. Useful labour becomes, therefore, a more or less abundant source of products, in proportion to the rise or fall of its productiveness. On the other hand, no change in this productiveness affects the labour represented by value. Since productive power is an attribute of the concrete useful forms of labour, of course it can no longer have any bearing on that labour, so soon as we make abstraction from those concrete useful forms. However then productive power may vary, the same labour, exercised during equal periods of time, always yields equal amounts of value. But it will yield, during equal periods of time, different quantities of values in use; more, if the productive power rise, fewer, if it fall. The same change in productive power, which increases the fruitfulness of labour, and, in consequence, the quantity of use values produced by that labour, will diminish the total value of this increased quantity of use values, provided such change shorten the total labour time necessary for their production; and vice versâ

Some of this is an echo of the distinction between concrete and abstract labour. But, concrete and abstract labour become linked conceptually and conceptually to value in the sense of real abstractions through the productivity of concrete labour. The productive power of concrete labour producing a given commodity scales inversely to its socially necessary labour time. Productivity provides the means of embodiment of abstract labour within its concretions; the concrete conditions of production distributed over every commodity.

A consequence of this is the decoupling of material wealth magnitudes in terms of use-value satisfaction and material wealth magnitudes in terms of exchange value - it costs less to obtain something which is produced more quickly, an a horde of a rare use value with high exchange rate can become devalued when the socially necessary labour time for the items in that horde decreases in the aggregate.

The decoupling of use and exchange, the intermingling of concrete and abstract labours in productivity, and the destruction of specificity in magnitude of value comparisons pave the way for the analysis of the value form - how a commodity becomes branded with value, how that value expresses underpinning social conditions of production, and how the magnitude of that value is linked to other commodities and human labour in the abstract. Marx puts it thusly (footnote A):

Now we know the substance of value. It is labour. We know the measure of its magnitude. It is labour time. The form, which stamps value as exchange-value, remains to be analysed. But before this we need to develop the characteristics we have already found somewhat more fully.

perhaps even logistics should be considered as part of the direct price. — fdrake

It is, and it varies greatly from one country to the next. Another feature of labor that goes into commodity creation is a society's physical infrastructure, roads that facilitate the transfer of supplies, that sort of thing. So again, the direct price (or labor time) is actually scattered far and wide.

This is one of the reasons that manufacturing accounting is a world apart. The human labor time that's congealed in a can of green beans is incalculable.

The brevity of the second section suits its function as an interlude between the analysis of use and exchange values - and their linkage with concrete and abstract labour - in the first section, and the analysis of the social and logical/mathematical structure of trade in the third section. The second section serves this end by recapitulating the notion of human labour in the abstract and showing how concrete and abstract labour become linked in the commodity through productivity.

The single major term which is introduced here is human labour power, which is useful, productive exertion. Another major highlight in the chapter is that in order for a commodity to have an exchange value, its use value must be a social use value; that is useful to the aggregate.

It is, and it varies greatly from one country to the next. Another feature of labor that goes into commodity creation is a society's physical infrastructure, roads that facilitate the transfer of supplies, that sort of thing. So again, the direct price (or labor time) is actually scattered far and wide.

Yeah. I agree with this, but I think it's a part of the account. Read the bits I wrote on the decomposition of commodities into labour sources and assembly times again if it's unclear.

Also, something being hard to estimate or get a handle on has never stopped economists from trying. I think direct price is actually a very useful tool in thinking about production in general - it's relatively time stable and definitely linked to the real costs of production and profit rates; and I also think Marx's analysis of the value form( s ) (his 'theory of value', thread title), is extremely persuasive.

Also, something being hard to estimate or get a handle on has never stopped economists from trying. — fdrake

I don't think either economists or accountants try to estimate the actual labor time in commodities (if we extend our assessment out to the broader well of labor time). Nobody does that. To even start, you'd probably look to the kind of statistical analysis industrial engineers do.

I think direct price is actually a very useful tool in thinking about production in general - it's relatively time stable and definitely linked to the real costs of production and profit rates; and I also think Marx's analysis of the value form( s ) (his 'theory of value', thread title), is extremely persuasive. — fdrake

That's cool that you find it useful.

Profit is return on investment. Where there is human labor, that's an aspect of investment. But how does that work when the labor market is global? For instance, China uses free labor in the form of incarcerated Africans. The "society" here is global. There is no global government, so maybe we could think of this as something closer to true unregulated capitalism.

The investment the Chinese make has to do with how they persuade Africans to accept this arrangement. I don't doubt that some bribe money is part of the investment.

I'm unsure if you've actually been reading what I write. Lots of the posts I've made highlight that 'society' for Marx is a placeholder.

I also doubt that you read what I write.

In some cases it's easy to link labor time with profit. Sometimes not.

Can we really limit our view to hard commodities? We're looking at a part of the global economy that isn't produced using software. So that rules out any manufacturing that involves CAD/CAM. We're talking about Africa and Indonesia. A little bit of core nation labor.

There's another 2 volumes left of the account frank. Marx doesn't restrict his view to commodities eventually. There's analysis of debt, speculation, credit, stores of value, different coupled productive spheres etc etc. I think you're attributing limitations to the account which aren't there, and I'm not going to go through them - at least not before I'm finished going through what I said I would in volume 1.

So yes, the analysis so far is limited. It's about 20-30 usual book pages into a 2.5k page work - with lots of accompanying relevant essays.

Cool. His predictions about speculation are famous.

It's fascinating to look at commodities in terms of over-all social investment using units of time. In a way that's what a human life is: a certain amount of lived time.

A fair amount of the technological explosion that started in the 19th Century (and continues today) had to do with time. Productivity is output over labor time, so mechanization resulted in super-productivity.

But think about it: why did actual production explode? Why didn't we just drop the work day to 5 hours instead of 8?

I think I know why.

Carry on!

Ironically enough you don't have to wait that long in volume 1 to get to parts dealing with the content of this post. It begins in chapter 3 with the circulation of commodities and money.

Section 3

THE FORM OF VALUE OR EXCHANGE VALUE

Marx has spent a lot of time setting up the notion of value as it occurs within commodities, and how it facilitates exchange of somehow 'equal' commodities. The abstract equivalence (sortal & numeric) of socially necessary labour time and the direct price of a commodity has been laid bare, but what hasn't been part of the account is the structure of value and how this structure prefigures and is embodied in exchange. Maybe a useful distinction here to set up where Marx is going is exchange in the abstract and concrete acts of exchange; so far, the realities of trade and the social relations around it have played little part in the determination of commodities as equal subjects of exchange, even less so how the social relations in an economy mathematically/logically structure exchange.

We know so far that commodities of equivalent value can be exchanged, and we know that the magnitude of value is embodied in the direct price as expressed in socially necessary labour time; but we don't know the structure of value which facilitates this equation for exchange at large. That is to say, extra work needs to be done to reveal the structure of value within the commodity that allows it to be (always-already) equivalent to another of equal value. That is, Marx needs to spend some time exhibiting exchange in the abstract; its general features without reliance on specific trades, the general properties of trade that are essential to specific social organisations of trade. He then needs to fold this exchange in the abstract into concrete acts of exchange of equivalent value; showing how the logical structure of value reproduces itself through commodity and money flows.

The first part of the above; dealing with exchange in the abstract; is of determining the value-form of value in capitalist societies. The second part is in showing how the value form is carried forth in the concrete acts of exchange. Exchange in the abstract is the topic of section 3, the concretion of it is more fully developed in chapters 2 and 3 - dealing specifically with exchange then the circulation of commodities through money.

So, Marx has already demonstrated that socially necessary labour time, and thus direct price, inheres in commodities through the productivity of their corresponding labour. What is at stake in section 3 here is the logical/mathematical/algebraic structure of that inherence. It is half of the core of Marx's value theory, the other being the analysis of concrete exchange as it plays out under capitalist rules.

Much of section 3 is recapitulated in chapter 3 section 1 in order to relate it to concrete exchange and circulation; so a very dense exhibition of Marx's value theory was the original intention for this thread. Since the thread has been of interest to some posters, I decided to continue it - so the analysis of the next section will consist of more thorough exhibition of Marx's theory of value. Of course, it will come along with my usual mathematical embellishments.

Commodities come into the world in the shape of use values, articles, or goods, such as iron, linen, corn, &c. This is their plain, homely, bodily form. They are, however, commodities, only because they are something two-fold, both objects of utility, and, at the same time, depositories of value. They manifest themselves therefore as commodities, or have the form of commodities, only in so far as they have two forms, a physical or natural form, and a value form.

Marx recaps: commodities are only commodities only insofar as they have use and exchange values. Use values are always a product of concrete, social labour, exchange values are always a product of human labour in the abstract - the coincidence of both of these features is the mark of the commodity.

The reality of the value of commodities differs in this respect from Dame Quickly, that we don’t know “where to have it.” The value of commodities is the very opposite of the coarse materiality of their substance, not an atom of matter enters into its composition. Turn and examine a single commodity, by itself, as we will, yet in so far as it remains an object of value, it seems impossible to grasp it. If, however, we bear in mind that the value of commodities has a purely social reality, and that they acquire this reality only in so far as they are expressions or embodiments of one identical social substance, viz., human labour, it follows as a matter of course, that value can only manifest itself in the social relation of commodity to commodity. In fact we started from exchange value, or the exchange relation of commodities, in order to get at the value that lies hidden behind it. We must now return to this form under which value first appeared to us.

Not an atom of value is found upon dissection of the commodity - no assay of a material item will provide more insight into the composition of its value than staring at it blankly. Rather, value is found in the social relations which surround the thing and become embedded into it as the manifestation of a social function. The value of a commodity consists in the social relations which underpin its production and exchange, thus the conceptual analysis of the value of a commodity is to be embarked upon by analysing social relations of exchange and the abstract features of production.

The aim of the investigation is to find that social mechanism, and its mathematical/logical grammar, which imbues the commodity with value and facilitates it to be exchanged with others of equal value. There is somewhat of a 'left turn' here in the analysis, the initial focus on exchange as the exchange of commodities is now being leveraged into an analysis of the values which permeate that exchange and lend it its features in capitalist production.

Every one knows, if he knows nothing else, that commodities have a value form common to them all, and presenting a marked contrast with the varied bodily forms of their use values. I mean their money form. Here, however, a task is set us, the performance of which has never yet even been attempted by bourgeois economy, the task of tracing the genesis of this money form, of developing the expression of value implied in the value relation of commodities, from its simplest, almost imperceptible outline, to the dazzling money-form. By doing this we shall, at the same time, solve the riddle presented by money.

Marx highlights a problem which the economists of his time, and the conventional wisdom you will still find in economics textbooks, pay no attention to. Everyone and their dog knows that everything has a price, and since prices are all we see pricing is seen as a subjective act, as an affectation of a supply/demand model, or as the empirical subject of a willingness to pay study. These are the usual recourses to explain why everything has a price and why it has the price it has. Marx seeks to ask a deeper set of questions; what is it about an economy that allows everything to have a price? What is it about an economy that is facilitated by money? How does money obtain its value? To say that the value of money is determined by a pricing mechanism is as well as saying the sleep inducing effects of tramadol are caused by its soporific properties; that is to say nothing of note and coat it with different words. The question of pricing mechanisms as they work in capitalist economy is a lot different from the questions regarding what allows value to obtain of commodities and money in the first place. The question of value underpins the question of price.

Whenever an economic crisis comes - most recently in 2008 - we see talk of 'bubbles bursting'. Economic bubbles arise from the over pricing of an asset suddenly collapsing towards its true price. What allows us to distinguish the over priced asset from the truly priced one? Well, the true price is invariably lower than the over priced asset - but if we were to concede to an account of political economy that begins solely with a pricing mechanism, an asset can only be seen as over valued with relation to a sharp drop in its price, until the price drops the pricing mechanism has the final say. Even highly sophisticated econometric methods, such as the analysis of asset growth using wavelet methods to screen for impending crashes, or the thresholding of instantaneous variance in stochastic volatility models to mitigate unpredictable large losses attempt to describe the precursors in the price mechanism which may signal the over valuation of an asset. But of course, this is a symptom of the properties of the economy which underly the proximity of changes. And we would be as well as saying that the increase in body temperature due to a fever was really due to the increase in bodily temperature, as we would in saying that instabilities in price curves and the pricing mechanism are the systemic cause of the popped bubble.

Again, this state of affairs is a rather strange one; if a close friend suddenly starts behaving very differently, we definitely could give the following account: the friend behaved different before, the friend behaves different now. But if all we had to judge on was the relation of short term behavioural changes, we might as well say that the friend was behaving normally before, and now they are behaving normally despite the observed difference. Of course, anyone truly interested in their close friend would wonder things like: 'what has brought about this change contrary to their personality?' or 'what has caused their personality to change?'.

Just as with the bubble; 'what about the previous trend popped the bubble?' or 'what forced the dominance of the post bubble trend?'. Systematic investment; all our skin in the game; demands we be able to ask these questions; and a theory of value accompanied by a theory of price is one way to make room for them. These are important questions, politicians, business owners, economists and members of think tanks require, use and supply analyses of them; people pay a lot of money to get these questions to have the answers they want. People pay a lot of money to anyone willing and skilled enough to try answer these kind of questions.

The tensions underpinning changes in price effect us all, and if it were so 'lawless and irregular', we should be more surprised at the often successful efforts of the rich and powerful to harness these 'lawless irregularities' for their overwhelming benefit.

The thing that's odd about a speculative bubble is that people buy a commodity (such as swamp land in Florida circa 1929) with the expectation that they will sell it and make a short term profit. IOW, they aren't buying it to use it, and they aren't engaging in conservative long term investment. The commodity market has become a casino. Another sign is that people who don't normally engage in gambling enter the commodity market with their extra money hoping to become rich.

The bubble is self reinforcing, but all markets experience undulation. Just the smallest downturn in the casino-commodity-market can trigger a sell off. The bubble pops and a "panic" occurs. The price of the commodity drops as the expectation turns the other way.

Why do bubbles happen? They may be a sign of over-concentration of wealth. That theory says that only the super-wealthy have the means to start a bubble.

The 2008 crash wasn't caused by a commodity market bubble crash. The housing market did crash, but that didn't bring down Bear Stearns et al. It was a financial product called a derivative that accomplished that. It's a kind of insurance.

I'm having a real hard time gauging what the intentions behind your posts in this thread are.

Ok.

I mean what are they? I don't understand if it's criticism; I never claimed that the 2008 crisis was brought about through the crash of a commodity market, nor did I deny the self reinforcing feedback mechanisms that can amplify the rate of devaluation of financial assets.

I'm not criticizing.

I think Marx would have been interested in the ancient palace economy and why it disappeared. I'm off to read more about that. Thanks for the inspiration!