"Utility" Goods (1950)

From the June 1950 issue of the Socialist Standard

The 1939-45 Great War and His Majesty’s third Labour Government have made the people of this country “Utility” conscious, but long before 1939 such economists as Bohm Bawerk, Jevons and Marshall were searching in the realm of utility for an answer to the question why a pair of boots exchange for thirty shillings.

The fruit of their efforts is the much-boosted Marginal Theory of Value by which they attempted to explain the value of a commodity—an article produced for sale—as the point at which marginal utility (the utility derived from that unit for which the consumer is just prepared to pay) coincides with the marginal cost of production (the cost to a firm that just pays its way). Thus they claimed their theory of Value takes both demand and supply into account.

Long before Bohm Bawerk and his Utility school of thought, Marx had shown that the value of a commodity is determined by the socially necessary labour time embodied in its production.

The Marginal school criticised this theory of Value on the grounds that Marx had looked at Value from the point of view of the producers and had therefore chosen “labour time” as the basis of Value. They contended that Value should be looked upon from the point of view of the consumer also and that Utility should form part of the basis of Value.

When Marx stated that the only quality commodities have in common with each other is that they are the “products of labour,” the Utility school pointed out triumphantly that commodities also have this in common—they must be useful. On these grounds they have argued that it is merely arbitrary to say that Labour is the source of Value. Indeed they have gone further and stated that only some useful things are the products of labour but all products of labour, if they are to be commodities, capable of sale and exchange, must be useful. They have pointed gleefully to the solitary traveller in the desert picking up a piece of gold or a diamond. They have argued that surely this piece of gold or diamond must have Value but its Value is certainly not determined by socially necessary labour time.

So frequently have the apologists of Capitalism put forward this view, that it is now accepted by most text-books on economics and is usually advanced by lecturers in Universities and Commercial Colleges as the Theory of Value which has ousted that of Marx.

In practically all books dealing with the classification of the Sciences, Economics is classified as a Social Science. That being so, Economics must be concerned with social relationships—the social relationships dealing with the production and distribution of Wealth at that.

We have therefore to examine the means by which Men produce and distribute the wealth of society in order to find which of these theories correctly reflect the law by which boots exchange for Gold (in the form of pounds, shillings and pence).

In all previous systems of society, production had been for use and only the surplus had appeared in the form of commodities but under our capitalistic system of society, production becomes solely for sale—for the World Market. Capitalism is therefore distinguished by the fact that here wealth takes the form of commodities.

In a commodity producing society extensive division of labour and private property are essential factors. That is to say the aggregate labour force of society consists of the sum total of the labour of all the producers of the different types of commodities who carry on their work independently of each other. When therefore we say that a fur cape is equal in value to a wrist watch we are really equating the labour of the furrier with that of the jeweller. In the early days of Man’s history when any surplus product was being exchanged, the question which confronted the two parties or groups involved in the exchange, say of arrow heads for skins, was this—Would it take us as long (or as much labour time) to produce these skins as it took us to produce the arrow heads? If the answer was in the affirmative then the transaction was completed. In the same manner the value of a commodity is determined by the socially necessary labour time embodied in its production.

What confuses the critics is that in capitalism value appears to be a quantitative relationship between things. They only see 100 bricks exchanging for two tables and do not see the SOCIAL RELATIONSHIPS underlying this quantitative equation.

In modern society, however, exchange does not take place in the form of barter (one article for another article) but Money enters into the field. Articles in the shop window have their price tag—their money form. Price is the monetary expression of Value, that is to say Price means the amount of gold equivalent in Value to the article which is being priced.

It is precisely in this developed form of Value that the law of Value manifests itself as the regulating principle of capitalist production. When the supply of a commodity is greater than the demand the price of the commodity falls and conversely when the demand is greater than the supply the price rises. The Capitalist economists see in this the regulator of the markets— the so-called Law of Supply and Demand.

Here again however, the Labour Theory of Value comes into its own. In our commodity producing society, the labour contained in a commodity has two aspects. It is the private labour of the commodity producer and at the same time part of the collective labour of society. To meet the last condition it must satisfy a definite social want—it must be useful to society. The private commodity producer fails to see his labour in this aspect—the social aspect. He never knows how much of a commodity is coming on to the market and what demand there will be for it. He therefore keeps on churning out his product until the demand for it drops and prices fall. Then he curtails production but he never dreams that the cause of the falling prices could be the fall in value of his product—a fall in value occasioned by the fact that he has expended part of the collective labour of society—his own private labour —USELESSLY. The value of a commodity being determined by the amount of SOCIALLY NECESSARY labour time embodied in its production, he has therefore not added one jot of Value to the commodities he has produced in excess of demand. Thus, does Marx’s Labour Theory of Value take Utility into account.

R.R.