Commodity - Commodities in Marxism

Commodities in Marxism

For the Marxist definition of a commodity, see Commodity (Marxism).

In classical political economy and especially in Karl Marx's critique of political economy, a commodity is an object or a good or service ("product" or "activity") produced by human labour. Objects are external to man. However, some objects attain "use value" to persons in this world, when they are found to be "necessary, useful or pleasant in life," "Use value" makes an object "an object of human wants," or is "a means of subsistence in the widest sense."

As society developed people found that they could exchange goods and services for other goods and services. At this stage, these goods and services became "commodities." Commodities are defined as objects which are offered for sale or are "exchanged in a market." In the marketplace, where commodities are sold, "use value" is not helpful in facilitating the sale of commodities. Accordingly, in addition to having use value, commodities must have an "exchange value"--a value that could be expressed in the market.

Prior to Marx, many economists debated as to what elements made up exchange value. Adam Smith maintained that exchange value was made up of rent, profit, labour and the costs of wear and tear on the instruments of husbandry. David Ricardo, a follower of Adam Smith, modified Smith's approach on this point by alleging that labour alone is the content of the exchange value of any good or service. While maintaining that all exchange value in commodities was derived directly from the hands of the people that made the commodity, Ricardo noted that only part of the exchange value of the commodity was paid to the worker who made the commodity. The other part of the value of this particular commodity was labour that was not paid to the worker—unpaid labour. This unpaid labour was retained by the owner of the means of production. In capitalist society, the capitalist owns the means of production and therefore the unpaid labour is, therefore, retained by the capitalist as rent or as profit. The means of production means the site where the commodity is made, the raw products that are used in the production and the instruments or machines that are used for the production of the commodity.

However, not all commodities are reproducible nor were all commodities originally intended to be sold in the market. These priced goods are also treated as commodities, e.g. human labor-power, works of art and natural resources ("earth itself is an instrument of labour", even though they may not be produced specifically for the market, or be non-reproducible goods.

Marx's analysis of the commodity is intended to help solve the problem of what establishes the economic value of goods, using the labor theory of value. This problem was extensively debated by Adam Smith, David Ricardo and Karl Rodbertus-Jagetzow among others.

All three of the above-mentioned economists, rejected the theory that labour composed 100% of the exchange value of any commodity. In varying degrees, these economists turned to supply and demand to establish the price of commodities. Marx held that the "price" and the "value" of a commodity were not synonymous. Price of any commodity would vary according to the imbalance of supply to demand at any one period of time. The "value" of the same commodity, would be consistent and would reflect the amount of labor value used to produce that commodity.

Prior to Marx, economists noted that the problem with using the "quantity of labour" to establish the value of commodities was that the time spent by an unskilled worker would be longer than the time spent on the same commodity by a skilled worker. Thus, under this analysis, the commodity produced by an unskilled worker would be more valuable than the same commodity produced by the skilled worker. Marx pointed out, however, that in society at large, an average amount of time that was necessary to produce the commodity would arise. This average time necessary to produce the commodity Marx called the "socially necessary labour time" Socially necessary labour time was the proper basis on which to base the "exchange value" of a given commodity.

Value and price are not equivalent terms in economics, and theorising the specific relationship of value to market price has been a challenge for both liberal and Marxist economists. However, Marx held that the value and price of any commodity would coincide only when demand and supply were equivalent to each other.