The Marxian Theory of Value: A Response to David Pena (Part One)

David Pena has responded to a critique I wrote of an article of his published in this e-journal.  My critique was published in the Socialist Standard, monthly journal of the Socialist Party of Great Britain (SPGB), and Pena’s response has appeared here.   What follows is my response to Pena’s response.

Pena kicks off in robustly combative style:

The present article is my response to Cox’s critique. I will show that his ignorance of Marxism and scientific method, and his polemical approach to the subject, which is full of fallacies and misrepresentations of my views, renders his arguments inept and unconvincing.

Naturally, I don’t accept any of these charges. I guess it won’t come as too much of a surprise that I feel, on the contrary that, if anything, they can be far more aptly levelled at Pena’s own original article and now his follow up article in response to mine (which does not really offer anything new by way of argument).  But then such are the joys of public debate that we cannot be expected to see eye to eye on all things.

At the outset let me just correct Pena on one point.  He somewhat snootily comments as follows:

I suspect Cox’s primary concern lies not with his threadbare notions of naïve empiricism, social relationships, and the like. The real issue, I suggest, is Cox cannot abide anyone using language differently, and thereby thinking differently, than his guru, Karl Marx. Does he think terminological independence from Marx is wrong by definition? Is that why he puts so little effort into constructing arguments and so much into selecting quotations and letting his master, and a few others, do his thinking for him?

Contrary to what Pena might think I am quite relaxed about the question of terminological usage.   If you want to use a particular term to define a concept then that is fine by me — so long as you clearly say what you mean by the term. Ultimately, it’s not really the label on the bottle that counts; it’s what is actually in the bottle that matters.

However, it seems to have escaped Pena’s notice that his original article was a critique of “Marx’s theory of value”.   Now, if you are going to critique this theory, then you should employ the terms Marx used in the way he intended, not tendentiously foist your own bizarre interpretation of these terms on this discussion as Pena has done.

Moreover, let me add in response to Pena’s jibe – his over-reliance on supercilious ad hominems, only further highlights the weakness of his own argument — that Marx is not my “guru”.  I am not into “gurus” and, in any case, am, by nature, eclectic.  Marx is not the be-all and end-all of everything. There are a number of points on which I (and, indeed, the SPGB) disagree strongly with Marx. The viewpoint of the SPGB (and myself) stands on its own two feet, with or without Marx’s endorsement.

The intention of my article was to simply defend Marx’s labour theory of value against what I perceived to be a rather ill-informed and ignorant assault on it.   I am quite entitled to uphold a theory that, to me, makes a lot of intuitive sense but that does not mean I go along with everything Marx wrote.  Far from it.

Pena’s response is very long and I don’t propose to deal with every little nit-picking point he raises — only the more salient ones — under the broad headings I present below. The quotations I indiscriminately attribute to Pena are derived from both his original article and his follow-up article. For the sake of balance, both these articles really ought to be read first before assessing what I have to say here.

1.Marx’s Theory of Value and “Science”

Pena begins by referring us to Marx’s example of a certain quantity of corn exchanging for a certain quantity of iron.  Drawing on Aristotle’s observation that “exchange cannot take place without equality, and equality not without commensurability” Marx, quite reasonably, argued that both these things must therefore be “equal to a third thing, which is neither the one nor the other.  Each of them, so far as it is exchange value, must therefore be reducible to this third thing” It is this “third thing” that allows one to adjust the quantities of iron and corn being exchanged in such a way as to ensure the exchange was “objectively” one of equivalent values.  Otherwise it would simply not occur.   One party to the exchange would feel short-changed vis-à-vis the other.

In response to this, Pena comments:

Marx speaks of a common element and its magnitudes. Given his use of physicalist language, his reputation as a materialist, and the examples of corn and iron, one would expect this common element to be natural property. According to Marx, however, it is nothing of the kind.

 But why? Why should we expect this common element to be a “natural property”? Pena doesn’t really say except to say that Marx had a reputation for being a “materialist” and so on.  However, by “materialism” one suspects that Pena means something quite different to what Marx meant by this term.  Pena’s notion of materialism, one suspects, is more probably akin to the kind of reductionist mechanical materialism that Anton Pannekoek found in Lenin’s writings which he roundly attacked from a Marxian perspective in his book Lenin as Philosopher (1938). No doubt Pena follows Lenin, not Marx, in his understanding of “materialism”.

We have more than a hint of this in his crudely physicalist approach to the question of what constitutes value.  He dismisses Marx’s theory of value as “logically nonsensical” and “inconsistent” because it allegedly posits something immaterial as constituting the “substance” of something that is material – a commodity.  Presumably he thinks that in order to be “consistent” the theory has to posit value as being something “material”.  But in suggesting this, Pena not only exposes himself to the charge of being “logically nonsensical” himself (as we shall see), he also demonstrates that he has not really understood what the theory is about at all.

Rather than rely on Pena’s questionable grasp of Marxian theory it is worth reading what Marx himself had to say on the question of a “commodity’s substance”:

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. (Capital Vol 1, Ch 1)

For Marx, then, the two-fold character of commodities lies in the fact that they are “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.” (Ibid.)

It is the latter, of course, that supplies the “common element” that facilitates the equivalent exchange of commodities. However, as Marx makes clear (above), the value of a particular commodity is not, and cannot be, part of its “substance” as a physical object having a particular use value. It is, as he says, the very opposite of the coarse materiality that constitutes that substance.   Rather, the value of a commodity is the expression of “one identical social substance, viz., human labour”.

If this “common element” was a natural property, as Pena feels it ought to be, then it would be no different in status from corn or iron whose own natural properties make them incommensurable vis-a-vis each other. In other words, it could not really serve as a common element. This is why Pena’s whole approach to the question of value is logically nonsensical.  Something that is said to possess “natural properties” does so by virtue of the fact that these properties pertain to it and not some other thing.  The natural property of cheese is quite different to the natural property of chalk.  You can’t compare chalk and cheese.  They are incommensurable.  But the labour required to produce them both is something they do indeed have in common and I shall shortly discuss in what sense this is true.

You can see where Pena’s line of argument goes completely off the rails when he makes comments like this: “Marx never offered a cogent explanation of how an immaterial element can be a property of a commodity”.   What Pena is doing here is looking at a “commodity” as though it were a mere physical thing — for example, a Rayleigh bicycle. This is very clear from his claim that “Marx did not develop a scientific theory of value at all. He produced a metaphysical theory of value; that is, a theory which purports to explain how an undetectable, immaterial element interacts with physical objects (commodities) and causes them to have value.” So commodities are, for him, just “physical objects”.

To Pena’s way of thinking, then, the fact that a bicycle takes the form of a commodity, something that is bought and sold on a market, emerges, as it were, from the very nature of bicycles as such.   That is what is meant by being a “natural property”, after all.  It is in the nature of bicycles to be bought and sold on the market, he seems to be saying.

Now clearly this is nonsense. The commodity status of a bicycle is a property, not of the bicycle, per se, but rather of a kind of society in which goods, including bicycles, are produced to be sold on a market.  Pena has completely misidentified what the term “property” in this context refers to.  It is society that stamps on this bicycle the property of being a commodity, not something in the nature of bicycles themselves.

In Capital Vol 1, Marx refers to the process called “commodity fetishism” whereby market relationship appear to be a relationship between things rather than relationships between people.  This is a form of reification which perceives value as inhering in, or arising from, the physical or natural form of commodities themselves rather than emerging out of the social relationships between individuals who cooperate to produce these commodities.   Marx rebutted this way of looking at things in the following terms:

As against this, the commodity-form, and the value-relation of the products of labour within which it appears, have absolutely no connection with the physical nature of the commodity and the material relations arising out of this. It is nothing but the definite social relation between men themselves which assumes here, for them, the fantastic form of a relation between things.

It seems to me that Pena has succumbed lock, stock and barrel to precisely the kind of alienated worldview that Marx referred to in his critique of commodity fetishism.   He (Pena) seems to have no conception whatsoever of value as a social relation despite his rather lame half-hearted admission, later, that “value is indeed a human construct”.  Half-hearted though it may be, this admission, as we shall see, has utterly devastating implications for the fundamental premise of his entire argument — that “value in its original and grounding manifestation, the dual form of matter and energy, pre-exists human and all other life forms”. Meaning value cannot logically be considered a “human construct” since, according to him, it pre-exists human beings.

The essence of a commodity is that it is not a thing but a social relationship – something immaterial. Or as Marx said, the “value of commodities has a purely social reality.., value can only manifest itself in the social relation of commodity to commodity”.  Hence, Pena’s comment that “Marx never offered a cogent explanation of how an immaterial element can be a property of a commodity” is completely invalid because he is assuming here that a “commodity” is something purely material when it is emphatically not.

Marx was not trying to make a physical comparison of corn and iron in order to tease out some “natural property” they might have in common.  Rather, he was trying to address the question of why it is that they exchange in a certain ratio and not some other ratio.  As he explicitly states: “Each of them, so far as it is exchange value, must therefore be reducible to this third thing”.  This “third thing” by its very nature, so to speak, cannot logically be said to have a physical character in the way that corn or wheat have a physical character.

Pena protests heatedly that I am caricaturising his position as one based on naïve empiricism because he thinks, instead, that this “third thing” has to be something physical and that you have to be able to empirically measure it in physical units in order to be “scientific”.  Yet he makes no serious attempt to extricate himself from the charge of being a naïve empiricist, preferring instead to throw up a load of flak in the guise of an entertaining procession of colourful ad hominems, no doubt in the hope that this will somehow get him off the hook as far as this charge is concerned. Unfortunately for him, it won’t.

So let us look more closely at this “third thing” — human labour — that Marx refers to that underpins and enables the whole process of commodity exchange   As stated, the exchange value of a commodity is the ratio in which it exchanges with other commodities in order to ensure equivalence.  So one suit is exchangeable for — or, in money terms, is worth the same as — three pairs of shoes and not, say, four. That is to say, they each have the same economic value.

What determines this value? For Marx the basic metric of value is the “socially necessary labour time” – or “abstract labour” – “congealed” in a commodity. By socially necessary labour time is meant the average amount of time it takes to produce a given commodity from start to finish under prevailing industry-wide conditions. This is not to be confused with concrete labour – which is the actual amount of (past) labour time expended on producing this commodity.  Abstract labour, as the word itself suggests, is an abstraction, a social average.  It is not something you can measure with a stop watch as you can in the case of concrete labour (and, for Pena, as we shall see, this is the basis of his claim that the theory is “unscientific” and “metaphysical”).

Market exchanges, according to Marx, tend, on average (or in the “long run”) to boil down to exchanges of equivalent amounts of abstract labour “congealed” in the commodities being exchanged (and continue to keep in mind here that commodities are not mere physical things).  So the money price of three pairs of shoes is the same as that of one suit because they each approximately embody the same amount of abstract (not concrete) labour.   The operative word here is “approximately”.   Marx was very clear on this point.  Though the price of a commodity will tend to coincide with its “value” in the long run, in practice such a coincidence is hardly ever likely to occur. Factors such as fluctuations in supply and demand along with the tendency for profit rates to equalise will almost inevitably cause the prices of commodities to diverge from their values in the “short run”.

Nevertheless, and this is important to take in, value exerts a gravitational pull, or a “patterning effect”, on prices which ensures that, on average, the latter do not depart too markedly from the former but, rather, are subject to the “law of value” regulating production under capitalism. This law imposes, as it were, both a “floor” and “ceiling”, limiting the range of price movements around the notional “value” of a commodity.

So, for instance, the economic imperative for businesses to make a profit is what prevents prices from dropping too far below their value.  Businesses that do not make a profit cease to function and so do not generate value any longer. They are bankrupted. On the other hand, businesses, like monopolies, that realise super-profits on account of being able to raise their prices above the going rate will  eventually succumb to competition themselves and be compelled to reduce their prices.  Or as Marx put it, “Monopoly produces competition, competition produces monopoly. Monopolists compete among themselves; competitors become monopolists” (1847, The Poverty of Philosophy)

Furthermore, from an overall economy-wide perspective, the total sum of prices must logically equate with the total sum of values generated — since prices are the monetary expression of values — so that if some goods are sold at prices below their value this must imply other goods are being sold above their values. In other words, by increasing prices above their value in the case of some goods you in effect exert a downward pressure on prices in the case of other goods, ceteris paribus.

This makes intuitive sense since, presumably, we are all pretty much familiar with that homely concept of a budget.  If we spend more money on home improvements, that means there is less money available for that family holiday we had planned for.  Translated into economy-wide terms that might mean, for instance, the market demand for package holidays going down to which the tourist industry responds by reducing its prices in a bid to lure back customers with “special offer” deals and the like.

This, very roughly, summarises what the Marx’s labour theory of value is about which we will return to when we look at other aspects of Pena’s critique of Marxian value theory. But we have not quite finished yet dealing with his claim that “Marx never offered a cogent explanation of how an immaterial element can be a property of a commodity”.

The notion that an immaterial element like abstract labour can be “congealed” in a commodity evidently perplexes Pena a great deal. He can’t seem to wrap his head around it and partly, as we have seen, this is because he thinks a commodity is something purely physical or material.   As a naive empiricist (which is precisely what he is for all his protestations to the contrary) he looks at a bicycle and thinks, “ah, this must be a commodity!”  He has no understanding of the social context in which commodities come into existence – even though he might pay lip service to the idea.  But such lip service that he pays strikes me as just a debating ploy, an endeavour to come across as covering all his bases so as to deflect criticism of his fundamentally physicalist approach to value. He has nailed his colours to the mast as a physicalist exponent of value theory and should stand by it rather than pretend to be something else.

So he thinks that the very word “congealed” must imply that we are talking about a material and not an immaterial element and that this is what makes Marx’s theory “logically nonsensical”. After all doesn’t the word “congealed” denote a physical process – like melted fat on cooling chicken soup or blood coagulating into a scab (to use his examples).  As he confidently asserts, “‘Congealability’ is perfectly understandable when applied to physical objects, but it is meaningless when used to denote a property of an abstraction”

However, in this particular context, it must clear to everyone in the world, apart from David Pena, that Marx is using the term in a metaphorical sense. And he is not alone in using the term in this way.  To take a random example off the internet, look at how the Free Dictionary defines the word “congeal”:

To cause to come together to form a whole or produce a result: The conversation congealed his thoughts into a theory.

Are thoughts “physical”? Surely not, or at least not in the way Pena imagines. Certainly, they require a physical organ — the brain — in the same way that abstract labour presupposes concrete labour — but in and of themselves they cannot usefully be described as physical and having physical properties. That would be sheer reductionism. More accurately, thoughts can be described as the emergent phenomena that “supervene” on, but are not reducible to, or purely explicable in terms of, the neural activity within the brain.  Yet they “congeal” in the metaphorical sense used above.

There are some additional points that can be made here that will drive a final nail or two in the coffin of this particular line of argument Pena is intent upon peddling.

One of these is this.   Pena seems to think that commodities can only take the form of goods — meaning, tangible physical objects — that are sold on a market.   However, this was not Marx’s view.   Marx held that services too can take the form of commodities and, indeed, criticised Adam Smith for precisely focusing solely on “goods” in developing his own labour theory of value.

If Marx was not using the term “congealed” in a purely metaphorical sense then in what sense does he (Pena) imagine value is “congealed” in the performance of a commodified service if he insists on (mis)interpreting Marx as suggesting this has to imply some sort of physical process?  How is labour “congealed” in a service in the physicalist sense Pena imagines Marx is, or should be, thinking?

This brings me to my second point concerning value. As I put it in my Socialist Standard article, value:

can only express itself through market exchange. As Marx explained: ‘Social labour-time exists in these commodities in a latent state, so to speak, and becomes evident only in the course of their exchange. Universal social labour is consequently not a ready-made prerequisite but an emerging result’.(A Contribution to the Critique of Political Economy, Lawrence & Wishart, Ch. 1, p. 45). Meaning the value of a product can change even after it has been produced as a result of ongoing technological and other changes.

So here is a further question for Pena to answer: if the value of a commodity can change, for the reasons given, even after it has been produced how can it possibly be deemed a “physical quality”?  Once a commodity has been produced and is just sitting there on the supermarket shelf waiting to be sold, then presumably no more concrete labour is being bestowed upon it.  Yet its value, in Marxian theory, can change, post-production, so to speak.  This is because, as a commodity, it is inextricably part of the wider world of commodities, subject to all sorts of developments going on in that world — like technological innovation — that continually impact on the commodity’s value insofar as what we are talking about here is a social average.  Value, in other words, is not something fixed. It is a notional average which is constantly shifting in line with these aforementioned developments.

Pena goes on:

An average is just an abstraction, however, a mathematical generalization of some quantifiable characteristic of physical objects or processes; it is not a substance created by a physical process and congealed into objects, nor can it affect objects. It is precisely the other way around: the characteristics of the objects and the processes that produce them; i.e., actual labor times spent producing commodities, determine the outcome of the calculation; the figure is the result of, not an effect upon, the characteristics of the objects. Thus, the value of a commodity is not and cannot be determined by socially necessary labor time.

Here we see laid out before us in clear daylight why Pena’s entire critique of Marx’s labour theory of value is just so much “nonsense on stilts”.  It is completely muddled from start to finish. He seems to think that Marx is saying that value of a commodity, the amount of socially necessary time embodied or congealed in it, has an effect “upon the characteristic of the objects” in question. But it doesn’t and Marx never said it did.  I find it frankly astonishing that someone with even a smattering of knowledge of Marx could even come to such a conclusion. What Marx is saying is that value has an effect on the ratio in which objects exchange and emphatically not on their “characteristics”, “physical qualities”, “material substance” or anything else along those lines. Marxian value only has meaning in the context of commodity exchange, the ‘law of value’ being what regulates this exchange.

I want to turn now to address Pena’s comments concerning the “scientific validity” of Marx’s theory, in particular, this:

The question of prediction is irrelevant because Marx’s theory of value is obviously not predictive. Furthermore, I did not make the fatuous claim that astrophysicists were being unscientific when they hypothesized the existence of black holes. It is not unscientific to infer the existence of unobserved objects, provided the inference is cogent and the theorized object is not an obvious contradiction in terms or an empirically empty metaphor, like those in Marx’s theory.

Unlike black hole theory, Marx’s labor theory of value is a different creature altogether; it is unverifiable in principle. Metaphors and contradictions cannot be verified. This should be obvious to anyone who understands basic logic and scientific prediction. The problem lies in treating an abstraction, such as abstract human labor, like a substance that can act on and give value to commodities.

Additionally, I do not understand why Cox faults me for stressing empirical detection and measurement, except that it is not helpful to his case. Hypotheses cannot be tested without these methods, and the failure to employ them would make science impossible. Does he not understand that claims to scientific knowledge, even Marx’s, must be empirically tested? He seems to think my emphasis on verification means I do not understand that science is predictive, but that does not follow; my point is that predictions must undergo empirical confirmation.

There is a lot to unpack here.  Apart from the obvious boo-boo committed by Pena based on his physicalist interpretation of abstract labour acting “like a substance” on commodities, there are a number of points amongst this jumble of comments that are highly questionable.

Contrary to what he claims I did not fault Pena for stressing the importance of “empirical detection and measurement” to science. I merely pointed out that that in some branches of science — such as theoretical physics — there is a problem of what is called “under-determination” where there is a distinct lack of hard empirical evidence to back up the theory in question.  Indeed, this has prompted some commentators to argue for a somewhat wider definition of what is meant by “scientific methodology” than something that necessarily requires empirical verification.

I gave an example of black hole theory.  Significantly, Pena concedes that the lack of empirical evidence did not mean astrophysicists were being “unscientific” when they hypothesized the existence of black holes.  However, he ventures to suggest that Marx’s labor theory of value is a different creature altogether; it is unverifiable in principle.

Let’s assume this to be the case for the sake of argument. We are still left wondering why Pena thinks an astrophysicist, hypothesizing the existence of black holes in the absence of empirical evidence and having no way of knowing yet whether the concept is verifiable or not, is being “scientific” while Marx putting forward his labour theory of value, likewise — supposedly in the absence of empirical evidence — is being “unscientific”.   Why is it that, according to Pena, when both are “lacking in empirical evidence” one is “scientific” and the other is not?  Could it be that the notion of what is “scientific” is a little more complex than Pena seems to think?

Pena then states:

Metaphors and contradictions cannot be verified.

Ah, so that’s it then! Marx is a poor deluded metaphysician with no understanding of science because he employs “metaphors” and talks about such amorphous woolly things as “contradictions”.  Obviously he could have benefitted from the superior wisdom imparted by some 19th century version of David Pena to rescue him from the mire of pseudoscience to which he succumbed.

Well, let’s look at this.  Let’s take the term, “contradictions” first.  What does Pena think is meant by this?

A “contradiction” in Marxian terms might be illustrated by an example like this.   In capitalism there are large numbers of people without homes and, at the same time, there are large numbers of homes without people.  Now, note well that both these claims can be empirically verified. It is the conjunction of these empirically verifiable facts in the real world — homeless people alongside empty homes — that allows us to talk of there being a “contradiction” in Marxian terms, something that does not add up or make sense.  This calls for an explanation of how such a contradiction could possibly arise when common sense would suggest that the problem of homeless people could be solved by making all those empty homes — about 18 million in the US alone, apparently — available to these people.

What Marx’s theory seeks to provide is some sort of explanation as to how such a nonsensical state of affairs could come about which it describes as a contradiction.   So the theory posits that under capitalism it is not human need as such that motivates, or activates, production but “effective demand”, meaning demand backed up by purchasing power and only then to the extent that this can profitably be met.  “Ineffective demand”, for want of a better expression, falls under the radar as far as the capitalist market mechanism is concerned.

As for Pena’s reference to “metaphors” this only goes to show what an incredibly narrow (and narrow-minded) view of science he has. Actually, metaphors have always played a fundamental role in science, not least as a spur to theory-building.  Perhaps he should acquaint himself with some of the literature.  I would recommend something like Theodore Brown’s, Making Truth: Metaphor in Science (2003) if Pena is in need of some bedtime reading.

In Metaphors and Through (1993) Thomas Kuhn, who popularised the term “paradigm” in his classic work, The Structure of Scientific Revolutions (1962) makes the following point which is worth heeding:

Metaphors play an essential role in establishing links between scientific language and the world. Those links are not, however, given once and for all. Theory change, in particular, is accompanied by a change in some of the relevant metaphors and in the corresponding parts of the network of similarities through which terms attach to nature.

Let us now turn more directly to the question of the scientific validity of the Marxian labour theory of value.  Actually, if Pena had done his homework instead of just giving vent to his ill-informed prejudices, he would have discovered that in recent decades there have been enormous strides taken in advancing the empirical aspects of the theory.  This field has become almost a cottage industry in its own right, with countless books and research papers published on the subject.   What helped to stimulate this development was the publication of Piero Sraffa’s critical work, Production of Commodities by Means of Commodities back in 1960.   But things have moved on a lot since then in the world of quantitative Marxian economics.

I would suggest Pena reads something like Anwar Shaikh’s widely cited paper on “The Empirical Strength of the Labour Theory of Value” in Marxian Economics: A Reappraisal (1998, Vol 2).  Shaikh is quite an important figure in this development.  His paper focuses on the role of Marx’s “production prices” in mediating market prices and labour values.

Someone else who has done quite a lot of work on the empirical aspect of Marx’s value theory is Paul Cockshott. This comment from his blog is pertinent and provides some useful context:

The labour theory of value predicts that the prices of commodities will vary proportionately with their labour content. Refuting this should be easy, just show that in fact their prices do not vary with labour content in this way. Did the economists opposed to the labour theory of value do this?

Did they hell, they did not even bother to collect the data to do the tests. So for a century after Marx, the theory was ‘discredited’, but never empirically refuted.

As soon as economists started to collect data to test the theory, which depended on reasonably good economic statistics of whole economies, what did they find?

They found the Ricardo and Marx had been right all along. A whole bunch of studies since the 1980s have shown that the labour theory of value is very good at predicting prices. Far from being refuted by the evidence, it has been confirmed .

The problem with much criticism of the labour theory of value is that the critics often start off with the assumption that it is individual commodities that are said to “possess” values as if in some kind of self-contained fashion.  This tends to go hand in hand with a sort of inept physicalist approach to value that we have seen exhibited by Pena which posits value as somehow being literally congealed in the individual commodity. However, as I have tried to explain, value is essentially a social phenomenon and can only really be grasped from a macro-economic perspective.

Of course, as I mentioned earlier, while it quite true that abstract labour cannot be directly measured that does not mean you cannot devise reasonably good surrogate or proxy indicators of value — such as average wage bills and working hours.  What makes these indicators useful as approximations (not direct measures) of Marxian value derives from much the same kind of “cogent reasoning” based on logical inference, that an astrophysicist might use to infer the presence of black holes, based on an understanding of the laws of physics.

Starting from the premise that the sum total of values must logically equate with the sum total of prices at the aggregate level (since the latter, as stated, is the monetary expression of the former), we can see how it is that at level of particular commodities relative prices and relative values can diverge as a result of the impact of such factors as fluctuations in supply and demand. However, this same process that causes these things to diverge in the short run tends to cause them to converge in the long run as a result of the operation of the law of value, discussed earlier, which then justifies the use of such proxy indicators as an (indirect) measure of labour values in the long run.

It is not an exact science but it a science, nevertheless.   Its methodology is broadly scientific (as I will shortly elaborate).  All things being equal the larger the data set, the closer we can expect the theory to approximate the reality.  This is what Cockshott means when he refers to the collection of data to test the theory being dependent on reasonably good economic statistics of whole economies.

Moreover, it is unquestionably the case that Marx’s approach to the subject has made an impact even on mainstream economics itself.   For example, his notion of the real price of labour power being the time it takes for an average worker to obtain the money to purchase a given basket of goods is widely seen to be a particularly useful measure of comparative living standards between countries.  Similarly, his argument that the real price of commodities (as measured by their labour content) will tend to fall as a result of mechanisation. Progressively replacing living labour does seem to have been borne out by the facts.  Technological innovation has indeed brought about a remarkable reduction in the real price of many commodities.

So it is important to understand Marx’s method before passing judgment. As I wrote elsewhere:

The relationship between price and value in Marxian theory often gives rise to misunderstandings. Largely, this is because critics fail to grasp Marx’s method. As Michael Harrington notes:

Therefore the reader must be warned that the opening pages of Das Kapital – or, for that matter, the entire first volume – contain conscious simplifications. Marx, like everyone else, actually began with the “chaotic whole” of immediate experience, but in his masterpiece he follows a logical rather than an experiential order. So in understanding any part of the Marxian analysis one must carefully ask: Under what simplifying assumptions is it subsumed’ (Socialism, 1972).

As Marx’s argument unfolds, one ‘conscious simplification’ after another disappears. The purpose of this procedure is to arrive at a progressively closer approximation of capitalist reality. Hence the initial hypothesis that commodities sell at their values gives way to a new hypothesis that commodities sell, not literally at, but around, their value and that their price is influenced by other factors apart from value – such as the interplay of supply and demand.

That does not invalidate the theory, however. Though there is a constant disequilibrium in capitalism, there is also a constant tendency for supply and demand to adjust to each other via the price mechanism. In the long run, argues Marx:

If supply equals demand, they cease to act, and for this very reason commodities are sold at their market-values. Whenever two forces operate equally in opposite directions, they balance one another, exert no outside influence, and any phenomena taking place in these circumstances must be explained by causes other than the effect of these two forces’ (Capital, Vol. 3. Ch. 10).

Thus, after balancing out supply and demand we have still to explain why, say, a Berlingo van consistently costs so much more than a Raleigh bicycle. It is at this deep structural level that the law of value exerts a powerful gravitational pull on prices. ((“Economics: The Marginalist Fallacy”, June 2020, Socialist Standard.))

I would like to finally turn to Pena’s notion of what is meant by the “predictive power” of science.  He remarks:

Furthermore, Cox’s claim that Marx’s theory, and by implication all science, lies exclusively in predictive power is obviously false. Many sciences are explanatory, not predictive. Two examples will suffice: evolutionary theory explains speciation; it does not predict which new species will evolve; archeology uses physical evidence to explain the past, not predict the future. Marx’s labor theory is clearly explanatory.

This is far too black-or-white: “prediction” does not preclude “explanation” or vice versa.  I actually used the expression “predictive power” in my Socialist Standard article in a quite specific sense.  What I said was “The value of scientific theory lies in its predictive power and this is the basis on which Marx’s theory must be judged.”

However, this means something quite different to what Pena evidently seems to think it means.   He seems to think by “predictive power” is meant the ability of a theory to foretell or anticipate some event or development yet to happen.  But that’s not really what it means in this context.  Rather, it refers to the extent to which a theory can be said to account for or explain a particular phenomenon in the light of the evidence that has been subsequently collected.

What distinguishes a scientific theory from pseudoscience is precisely its predictive power. All scientific theories start off as hypotheses or “educated guesses” derived from past experience or background knowledge.  In a sense, hypotheses are about making testable — and falsifiable — predictions about causal relationships between one variable and another along the lines of “if X occurs Y will result”.  These are “predictions” in the sense that the hypothesis is formulated in advance of evidence being collected to support the hypothesis which the scientist then proceeds to collect.  Then when sufficient (or sufficiently robust) evidence has been collected the hypothesis comes to be regarded as a “scientific theory” within the scientific community.

A classic example is Einstein’s hunch, based on deductive reasoning, that light would bend in the presence of a gravitational field. This was later confirmed through observations carried out by the astrophysicist, Arthur Eddington, thereby demonstrating the predictive power of Einstein’s general relativity theory.

Pena states that “evolutionary theory explains speciation; it does not predict which new species will evolve”.  That may be the case but, again, that is not really what the predictive power of the theory is about.  In this regard, Wikipedia provides an interesting example to illustrate the point:

Charles Darwin used his knowledge of evolution by natural selection to predict that since a plant (Angraecum sesquipedale) with a long spur in its flowers exists, a complementary animal with a 30 cm proboscis must also exist to feed on and pollinate it. Twenty years after his death, a form of hawk moth (Xanthopan morganii) that did just that was found.” (Wikipedia, “Predictive Power”)

Pena goes on:

Marx’s labor theory is clearly explanatory. It tries to explain how exchange value is created, not predict how value will be created in some future mode of production. Cox admitted as much in the concluding section of his article when he said, “Marx’s labour theory of value is an explanation of the modus operandi of a system socialists want to get rid of, not perpetuate.”

Here once again Pena has misunderstood what is meant by predicative power but in this case you would have thought it was even more glaringly obvious that the term as I have used it does not mean what Pena thinks it means.  If Marx law of value has “predictive power” in Pena’s sense and if Marx is advocating for a society to replace capitalism in which the law of value will cease to operate, then very clearly by “predicative power” cannot be meant that he (Marx) was trying to “predict how value will be created in some future mode of production”.

For Marx, “value” as an economic concept ceases to exist with the cessation of commodity production.  But the predictive power of his theory of value lies elsewhere — in its ability to explain the workings of capitalism and such developments as the falling rate of profit or the effect on the real prices of commodities resulting from mechanisation.

• Part 2 to follow.

Robin Cox is a member of the Socialist Party of Great Britain (Britain’s oldest socialist party, formed in 1904).  He lives in Southern Spain and does landscape gardening and ground maintenance for a living. Robin can be reached at Read other articles by Robin.