The end of the reign of the law of value --
the fading away of the labor-hour as the universal economic measure

Labor-money and socialist planning
(part 3):

by Joseph Green
(from Communist Voice #27, September 2001)

About parts one and two
Apparently different views by Marx and Engels
* Value resurrected?
* Concrete and abstract labor
* Not by labor alone
* The labor certificate
* Anti-Duhring
* Relative and absolute units
* "There is no alternative"
* Misreadings
Between capitalism and socialism -- the transitional economy
* The significance of value in the transitional economy
Classless society and the labor hour
* The labor certificate revisited
* Approximate assessments
* The end of the law of value



. Capitalist society runs on the basis of money. Every economic decision eventually comes down to the famous "bottom line"--does it make money or lose money, and how much? Engineers, architects, and inventors may worry about the physical properties of the machines, buildings, and inventions that they devise and design, but the ultimate decision on these products depends on how much they cost, and how much they can be sold for. It is money and profit which determines whether these products are built, what materials go into their construction, how well they are built, and who buys them. The consumer is concerned about whether these machines, buildings and inventions can serve their intended purpose, and hence about their physical properties. But ultimately, all that counts is how much the consumer is willing and able to pay.

. As a result, the average price of a product, its exchange-value, appears to be something innate in the product, as real and material as the height of a building or the color of a shirt. This is what Marx called the "fetishism of commodities": the value of a product appears to be something inherent in it, while its actual physical properties fade away and appear merely incidental. From the standpoint of the market, the average exchange-ratios of commodities, being independent of any individual, appear to be innate in the objects being exchanged. By way of contrast, the use-value of an object appears as a mere private matter of the individual owner, having no particular reality in itself, and differing according to the estimation of one or another owner. So things get turned upside down. The exchange-ratios, which describe a social relationship between people, appear as something material, as a material relationship between two objects, while the material properties of objects, which really are innate in them, appear as something accidental, something that, as use-value, appears only in the eyes of this or that human beholder. Marx wrote

"Could commodities themselves speak, they would say: Our use-value may be a thing that interests men. It is no part of us as objects. What, however, does belong to us as objects, is our value. Our natural intercourse as commodities proves it. In the eyes of each other we are nothing but exchange value."(1)

. Whether it is a material good which comes in a package, or a service such as a haircut or a concert, its value appears as its true or real measure. In reality, it is only the social relation of market exchange that results in a product being measured by a single number, whether this number be its price or cost or value. Otherwise its real "cost" would be regarded as composed of several distinct components which cannot simply be added together (the amount of direct labor needed to produce it, this itself being divided according to what skills are needed, the raw materials needed, the equipment needed, the effect the production process has on the environment, etc.), and its real "worth" would be regarded as its various useful material properties. But the reality, that value expresses a social relation, is hidden under the appearance that value is a material property of a commodity.

. Part one of this article traced the evolution of views about value in the socialist movement. Already in the early 19th century, the idea that true value is inherent in products led a number of working class activists to the idea of labor money. This was a time when such bourgeois economists as Adam Smith and David Ricardo themselves put forward the labor theory of value. A number of early socialists took this aspect of Ricardian economics as a vindication of the claims of labor, as the value of commodities was shown to be equal to the amount of socially-necessary labor involved in producing them, and to have nothing to do with the activities of the capitalists. They concluded that capitalist profit came from cheating the workers by buying and selling goods and labor at prices that differed from their true value. They thus believed that the labor theory of value contradicted the otherwise bourgeois standpoint of Smith and Ricardo, and that by pricing goods at their true value, the exploitation of the working class could be overcome. In their view, to achieve this, prices should be expressed in terms of labor-hours, and ordinary money replaced by labor-money (money denominated in labor-hours). This led to attempts to build labor exchange banks, shops and bazaars.

. A similar view was held by a number of anarchists, such as the famous Pierre-Joseph Proudhon, who was the founder of "mutualism" and a supporter of the idea of "People's Banks", and by Josiah Warren, a prominent early American anarchist who founded a Time Shop where goods were bought and sold according to the labor-hour. The influence of Proudhon and Warren led to a number of schemes for currency reform. Moreover, many anarchists who believe, not in reforming money, but in abolishing it, nevertheless envision this abolition as the creation of locally-controlled currencies which keep account in the labor-hour or some other proper unit, different from that of the hated national currency. Similar ideas have influence beyond anarchist circles, and indeed, to this day, there are small alternate community currencies and "Local Exchange Trading Systems" in several places, with some using exchange via the labor hour (for example, "Time Dollar Service Exchanges" and "Ithaca HOURS" plans).

. In the mid- and latter 19th century, Marx and Engels developed the labor theory of value more extensively and consistently than Smith and Ricardo. But their view of value was quite different from that of most earlier socialist thought. While the capitalists take every opportunity to cheat the workers, Marx's Capital stressed that the result of buying and selling labor and other goods at their value is itself the exploitation of the working class and the extraction of surplus value. It is the source of surplus value in the buying and selling of labor-power at its value that is the true secret of capitalist production. The Marxist labor theory of value thus shows how capitalist exploitation takes place: it is an analysis of current society, not a plan to establish a natural unit of economic calculation, the labor-hour, to replace the dollar. To eliminate exploitation, it is necessary to end the private ownership of the means of production and to replace production for the marketplace with production according to a unified societal plan representing the will of all the producers in common. This would mean not perfecting exchange according to value, but overcoming value and the law of value altogether.

. Marx and Engels showed why the labor-exchange, labor-money and labor bank schemes had repeatedly failed. This was not due to accidental flaws in these plans. They showed that so long as the private ownership of the means of production continued to exist, there is no way, "by juggling with money" to "evade the necessary conditions of that production". (2)

. But what if the private ownership of the means of production were eliminated, production was carried out communally, and exchange between communes was itself regulated communally? What if each individual then got back from the commune goods worth precisely as much labor as the labor he had done for the commune, and each commune got back from the overall society goods worth precisely as much labor as the goods they gave up to society? The German socialist Duhring envisioned that the exchange of "equal labor against equal labor" would be maintained in a "socialitarian" society in which communal production had replaced capitalist firms and capitalist ownership. In his famous work Anti-Duhring (1878), Engels criticized Duhring's plan and stressed that the principle of "equal labor against equal labor" was the law of value, and it would result in the growth of inequalities and other capitalist ills. True, in Duhring's plan, exchange didn't take place via an ordinary market, but through vast trading communes that embraced the entire country; not via competition, but according to a "national organization of trade"; and not via prices set by supply and demand, but with goods valued strictly according to their labor-content. But in Engels' view, the problem was the principle of "equal labor against equal labor" itself.

. Most plans of using labor-hours for economic calculation involve some entity, whether the Time Shop or the commune, keeping an equal balance of labor-hours in and labor-hours out. Engels' criticism would thus seem to strike at these plans too, and not just at Duhring.

. Later Engels reiterated his denunciation of the idea that the law of value might be retained in socialism, albeit in some purified form. He wrote to Karl Kautsky in 1884, reproaching him for believing that "value in itself would continue to exist, and only its form would be modified" under socialism. Engels stressed that "economic value is a category specific to commodity production, and disappears with the latter, as it likewise did not exist prior to commodity production."(3) Kautsky, who would become the main theoretician of the Second International, apparently accepted this criticism. In his 1902 essay The Day After the Revolution, where he outlined the economic steps which he thought the working class would take immediately after seizing state power in a socialist revolution, he claimed that these steps would amount to the elimination of the law of value. However what he actually pictured was a transitional economy, with a large state sector and the elimination of large capitalist firms, but still with several different types of ownership of the means of production, with money, and with marketplace exchange. He thought, however, that this transitional economy was already socialism and had already overcome the law of value, because the prices of goods and the level of wages would differ from what they would be under an ordinary free-market system. Thus if early socialists believed that capitalism could be overcome if the prices of good equaled their true or actual value, Kautsky believed that commodity production would be overcome when the prices of goods systematically deviated from their true value.

. The Bolshevik revolution of 1917 made the issue of economic reorganization into a pressing, practical concern. A number of different answers were put forward to the question of economic calculation. There were proposals by a number of economists to replace money with a "natural" economic unit based on the labor-hour, but no one figured out a practical way to accomplish this.

. The New Economic Policy, inaugurated in 1920-21, raised the question of a protracted transitional economy, where the old capitalists were dispossessed, but socialist production hadn't yet been established. The state sector had taken over all the large capitalist enterprises, but artisan production, small peasant farming, some foreign concessions, and commercial trade still existed. The Soviet economy still used money, the buying and selling of commodities flourished, and even the state sector ran on commercial principles. The point of view of this article is that whether NEP would result in progress towards socialism, or a new style of capitalism would develop, depended on whether the working class could increasingly control the economy and the state in reality, not simply in name. But at the time, there were a number of conflicting views concerning the significance of NEP, and how progress towards socialism should be measured.

. One view was that the issue was whether pricing was equal to value or not. The Trotskyist Preobrazhensky maintained that the state sector was essentially socialist already, and that its use of money, buying and selling, and commercial calculation was simply a surface appearance. He maintained that since prices in the state sector could be set by state decree, rather than simply following the lead of the marketplace, the state sector had thus overcome the law of value. In fact, the working class gradually lost control both of the politics and economics in the Soviet Union, and a full-fledged state-capitalist system was consolidated. Yet while this happened, state dictation of prices went further than ever. This didn't indicate that capitalism was being overcome, only that state-capitalism was being consolidated, rather than Western market-capitalism. To present this state-capitalism as "socialism", Stalin, in his Economic Problems of Socialism in the USSR, advocated a similar theory to Preobrazhensky's. Since Soviet prices could be set at different levels from those that would occur in Western marketplace economies, he held that this showed the law of value was being overcome. In essence, both Stalin and Preobrazhensky revived the idea of Kautsky that overcoming the law of value didn't mean eliminating the marketplace, but reforming the prices that appeared in the marketplace.

. However, if progress towards socialism isn't measured by whether prices are equal to the true value of commodities, or different from the true value, then what is left? It would seem that one is damned if one does, and damned if one doesn't. Part of the answer to this is that Marxist socialism doesn't aim to reform the market and its prices, but to establish a societal class control of the economy to replace the marketplace and its prices. The measure of how far a transitional economy moves towards socialism isn't its pricing levels, but how far the working class actually begins to exercise control over both the overall economy and the individual workplaces, and is increasingly able to dispense with market and financial mechanisms. But the question still remains, how then would the overall economy be planned? Wouldn't one measure the economic effort needed to produce goods, and wouldn't this mean that each product was associated with something like a "price" or, as one left-wing economist puts it, a "quasi-value"?(4)

. But the experience of Soviet planning gave rise to something new: the method of material balances. Soviet planning aimed not just to keep track of the economy, but to dramatically change the structure of the economy. To do this, it had to go beyond simply setting prices. It had to keep track of the total physical amount of each major good, and how much of this good was produced in or consumed by each sector of the economy. Moreover, it had to deal with the interconnections between the various products and material goods. If, say, tractors were to be produced, it was necessary to know how much raw materials were needed, how much energy was needed, how much equipment was needed, and so forth. All this information cannot be condensed into a single number, whether it is a price measured in dollars or rubles or the labor-content measured in labor-hours. Instead, a product, such as a tractor, becomes associated with a list of numbers, one number for each input needed to produce a tractor.

. As used in the Soviet-bloc, the method of material balances was not socialist planning. It was begun in the 20s, when the Soviet economy was at best a transitional economy. It was elaborated more fully during the period of Stalinist state-capitalism. It was always used in conjunction with financial planning. Moreover, it was implemented in a way that assumed the passivity of the working class and the developing rule of a new bourgeoisie. But what it had in common with socialist planning was the attempt to direct the economy as a whole. In so doing, it showed that such planning can't restrict itself to the value of products or to their labor-content. It showed that such planning, insofar as it actually considers the material interrelationships of the different sectors of an economy, cannot measure the economic cost of a product by a single number, whether price, value, or the labor-content. Familiarity with the method of material balances undermines the belief that value is something inherent in a product (the fetishism of commodities). By tracing the real material interrelationships between different products and sectors of the economy, it shows the historically transient nature of value, that is, that value is something dependent on marketplace economy, rather than being a basic measure of a product that is equally valid for all economic systems and all periods of human history.

. Part two of this article dwelt further on the overall planning of an economy. It began by sketching the concept of the annual productive cycle of the entire economy of a country. This raises considerations different from those that arise simply from analyzing the operation of an individual factory or workplace, and these new considerations are crucial in overall societal planning.

. The Physiocrats, an early trend of bourgeois economics that arose prior to Adam Smith's Wealth of Nations, were the first to lay stress on picturing the annual cycle of a country, which they did in a then-famous chart called the Tableau Economique. As free-market economists, they didn't aim to plan an economy. But they did want to investigate what economic activities gave rise to a surplus, and which activities merely consumed that surplus. They were not satisfied with the answer that profits arose from a successful financial transaction, but wanted to know the material activities that supplied the ultimate source of that profit. They regarded financial flows as a reflection of the flow of material goods back and forth in the French economy.

. With respect to the economic cycle, in many respects bourgeois economics went backwards from the Physiocrats. Marx, however, subjected the annual circuit of the total capital of a country to a careful analysis in volume II of Capital. He pointed out that when analyzing how an individual capitalist exploited his workforce, one might restrict oneself to examining how the value of the invested capital expanded during the process of production. One assumed that the capitalist could obtain the necessary supplies to run his factory, if only he had capital of a sufficient value, and that the factory's product could be sold on the market and fetch a price equal to its value. But in analyzing the economy as a whole, one had to show under what conditions these assumptions could be satisfied, that is, under what conditions would one capitalist produce precisely the products which other capitalists needed to run their enterprises or which consumers needed for daily life. One thus had to take account of the material nature of the product of each factory, and not just of the value of the product.

. Thus Marx modified the formulas which he had used to track surplus value. With respect to an individual factory, he had shown in volume I of Capital how the capitalist begins with so much constant capital (used to purchase machinery, raw materials, etc.) and variable capital (used to purchase the labor-power of the workforce) and ends up with a product whose value not only reproduces the value of the original constant and variable capital, but also contains an additional surplus-value, which is exploited from the labor of the employees. In analyzing the total economy, one might imagine that one could simply consider the total constant and variable capital of all the capitalists, and how much total surplus value they managed to extract from the workers in a year. But Marx's analysis showed it was necessary to keep track of the different spheres of production separately, the most important division being between Department I, means of production, and Department II, consumer goods. For these two departments or sectors, he wrote separate formulas that showed how they generated surplus value from their original capital. He then derived an equation that showed the relationship that had to exist between the size of Department I and that of Department II, if there were to be the right amount of means of production in the market and the right amount of consumer goods. Thus keeping track of two spheres of the economy separately required doubling, indeed more than doubling, the number of formulas expressing the circuit of capital. And Marx pointed out that, for further analysis, the economy might be divided into yet more sectors, thus requiring still more formulas.

. These formulas of Marx interested later economic planners, because they gave some idea of how changing one sector of an economy affects another. In a way, they foreshadowed the later method of material balances. Although Marx's analysis concerned capitalist production, and the resulting formulas would not apply unchanged to communism and other economic systems, the fundamental idea about the need to keep track of the material differences between different sectors of the economy provides a key to communist planning as well.

. The Soviet method of material balances went beyond simply separating Department I and II, and aimed to keep track of all major sectors of the economy separately. It also seems to have inspired the closely-related method of input-output economics championed in Western economics by the late Professor Wassily Leontief. Although input-output tables are usually written in financial terms in the West, the underlying idea of this method is to keep tract of the "intersectoral relations", that is, the material flows between different sectors of the economy. Input-output economics goes beyond the description of an economy simply by the financial size of various sectors, to a more detailed description by rectangular or "checkerboard" input-output tables. No longer is each sector of an economy described by a single number, but by two lists of numbers (a "column vector" and a "row vector"), one describing how the sector depends for its inputs on other sectors, and the other describing how the output of a sector contributes to other sectors. The Western bourgeoisie wasn't originally too enthusiastic about input-output economics because it seemed to have a Marxist taint and to suggest that it might be possible and desirable to replace spontaneous market forces with planning. For their part, Soviet economists hadn't originally envisioned the full complexity of material balances; instead they had imagined that one could simply use the labor-hour (or perhaps an energy unit) as the natural unit of economic planning. But these new economic methods evolved under both state-capitalism and Western capitalism because any attempt to analyze the economic cycle as a whole forces one to associate with a product not just a price or a labor-content, but its "intersectoral relations" as well.

. Thus consideration of the economic cycle shows that it is not possible to plan on the basis of evaluating goods according to a simple numerical scale, whether value or the labor-hour. Two goods may be the same according to such a scale, and yet differ in their role in the economic cycle. This point having been made theoretically, the article went on to illustrate it by several examples that showed the incommensurability of living and past labor. For example, it was shown that if, at the start of an economic cycle, there was a lack of suitable stockpiles of raw materials or of equipment, things which are the product of a certain amount of past labor, this could not be compensated for by a surplus of an equal amount of current or living labor. Instead the lack of sufficient supplies at the start of a cycle would affect what and how much could be produced.

. Part two ended by illustrating the practical consequences of trying to use the labor-content as the natural unit of planning. It considered the measurement of material abundance, the measurement of the efficiency of industries, and the decision on how much effort to devote to environmental protection. In all these cases, using the labor-content as the bottom-line of economic planning resulted in problems similar to those that arise when using money and financial calculation in capitalist societies. The use of the labor-hour doesn't overcome the law of value, but preserves it.


. This article has referred repeatedly to Marx and Engels' views on the law of value. But to this day, there are many who believe that Marx and Engels themselves advocated that the labor-hour would be the natural unit of socialist calculation and that socialist society would value goods according to their labor-content. There are several passages from the writings of Marx and Engels that have been interpreted as saying this. This section will examine some representative passages that have, or might be, used in this way, and see what Marx and Engels were actually saying.

. In doing so, I by no means mean to imply that textual analysis of Marxist writings suffices to settle economic controversies. It is economic and theoretical investigation, including a careful examination of economic history, that should serve as the judge, and it is the experience of socialist society itself that will eventually give the final answer. Marx and Engels' views on this or that issue might be right or wrong, and it's conceivable that they might even occasionally be inconsistent. But Marx and Engels not only established the general framework which still underlies any materialist conception of socialism, but they were among those rare authors whose works merit repeated reading. It pays not to casually write off various Marxist passages as inconsistent but first to ponder the matter very closely. Indeed, examining the disputed passages will shed further light on the content of the labor-hour controversy, and this is the main reason that I will go into these passages in such detail.

. It turns out that the main reasons for the controversy about the meaning of these passages are as follows:

. * Marx and Engels' stress on the need to take account of labor-time under socialism is often taken to mean that they believed that the labor-content would be used in a way analogous to how value is used under capitalism. It is imagined that they thought that the labor-hour would serve as the overall measure of the economic cost of a product similar to how the dollar does this under capitalism. Marx and Engels repeatedly pointed out that the abolition of capitalism did not mean the end of economic calculation; that labor time had to be distributed properly between different spheres of production; and even that "economy of labor" was the ultimate principle involved. But the question is whether they thought that this meant planning according to the labor-content.

. * In particular, in dealing with these passages the distinction made by Marx and Engels between concrete and abstract labor is generally forgotten, or regarded as inapplicable to the planning of production. Socialist society will naturally pay close attention to the number of concrete labor hours needed to produce something. Value and the labor-content, however, are measured by abstract labor-hours, and thus don't deal with the qualitative differences between different types of labor, and between the different products which labor produces. Planning via the abstract labor-hour amounts to applying the law of value. Planning via concrete labor-hours means, among other things, that the economic effort needed to produce something can no longer be measured by a single number; that the qualitative differences between the labor of different people, between labor in different occupations, and between present and past labor must be taken into account; that the immediate labor devoted to a product is recognized as being only part of the economic cost of producing it; and that conscious attention is paid to the qualitative and material differences between different products and different sectors of the economy. These are very different types of planning.

. * But Marx and Engels did not seek to invent their own special system of communist economic calculation. They only pointed out certain basic features which would characterize the economics of a socialist society, such as that economic calculation would still be necessary; that there would be "apportionment [of labor-time] in accordance with a definite social plan"(5); and that commodity-value would disappear. They didn't give any detailed examples of how this apportionment could be worked out; they didn't describe any system that could be used for planning without value. It was only in the twentieth century that material balances and input-out economics, although not socialist planning, were developed to deal with the myriad of interrelations between different products and different sectors of the economy. These methods of economic planning went beyond evaluating everything on a single, universal numerical scale. But as most commentators either aren't familiar with material balances and input-output economics, or haven't thought very much about their significance, they believe that planning can only be done with the abstract labor-hour, and see any reference to a societal plan for the distribution of labor as requiring use of the abstract labor-hour.

. * Sometimes Marx, when analyzing a particular feature of capitalist economics, would briefly remark on how this would differ in a socialist economy. To do so, he might temporarily discuss most of the features of capitalist and socialist economies in parallel terms, using the familiar capitalist categories. This is a perfectly reasonable way to make a point, but the resulting inconsistencies of expression led some people to imagine that he envisioned that these capitalist categories would really exist under socialism.

. * Marx's discussion of the possible use of labor-certificates in the early stage of a socialist economy has often been taken to mean that labor-certificates would circulate throughout the socialist economy like money, only denominated in labor-hours. It either wasn't understood, or it wasn't regarded as significant, that neither labor-certificates nor money were to circulate among factories, farms, and other workplaces, nor would they determine how labor was distributed among these workplaces. The labor-certificate only concerned the distribution of consumer goods among the working population, not the planning to produce these goods.

. * And some passages were just straight-out misunderstood. The habits of thought consequent upon living in capitalist society, where the marketplace is universal and looking at things in terms of value is second-nature, makes it easy to see everything in the light of the categories of commodity production.

. Now let's examine a number of these disputed quotations.

Value resurrected?

. Throughout this article I have cited statements by Marx and Engels to the effect that the law of value is the law of the "enslavement of the worker", and that value itself "is a category specific to commodity production, and disappears with the latter". (6) It was from this standpoint that they criticized labor-money schemes, the concept of "true value", and so forth.

. Yet value pops up unexpectedly in a brief reference to the future society in volume III of Capital. Here Marx questioned a quotation from the economist Storch to the effect that the commodities produced by a country represent exchange-value with respect to individuals, but use-value with respect to the nation as a whole. Marx objected that, first, it is a "false abstraction" to imagine a capitalist country as a single, aggregate individual working solely to create use-values. Continuing, he added,

. "Secondly, after the abolition of the capitalist mode of production, but still retaining social production, the determination of value continues to prevail in the sense that the regulation of labor-time and the distribution of social labor among the various production groups, ultimately the book-keeping encompassing all this, become more essential than ever."(7)

. Here Marx stressed, as he did in many places, that economic calculation is still necessary under socialism. A socialist society cannot simply consider the utility of the goods it would like to have, but must take into account the economic effort it takes to produce them. Conscious calculation is even more necessary after capitalism is abolished than before, as planning must replace marketplace transactions.

. But the passage also raises that this calculation is the "regulation of labor-time" and "the distribution of social labor among the various production groups". These references to labor-time and social labor might be taken to refer to the need to carry out calculation via the labor-hour and the labor-content. Of course, if this passage really means that the labor-content will be the bottom-line for socialist calculation, it also means that value will exist under socialism. After all, it talks of the "the determination of value" continuing to prevail. And so value, apparently banished from the future by the bulk of the work of Marx and Engels, here seems to return in triumph, having been resurrected from an apparently prematurely-announced death.

. Some people try to resolve this contradiction by saying that the labor-content will indeed be the bottom line for socialist calculation, but it won't be value because the labor-content of products will be determined directly by a conscious estimate, rather than indirectly via the average of marketplace fluctuations. One such advocate, H. Hayashi, writes that

".  .  . Marx and Engels recognized that 'the content of the determination of value' would remain even after capitalist society had been overcome. However, can one conclude from this that value, that is commodity production, will remain in socialist society? The answer, of course, is no. What remains is the content of the determination of value, not value itself."

Or to put it another way, in his view there are both "qualitative and quantitative aspects of value". The quantitative aspect of value, the measurement of abstract human labor, is the labor-content, and Hayashi holds that this remains under socialism. But the qualitative aspect, the existence of the quantitative aspect as precisely value, will no longer exist. Hayashi believes that without preserving the labor-content, economic calculation is impossible. (8)

. So the big question that arises from Marx's statement, and that causes most of the confusion, is whether there are other ways to "regulate labor-time" and "distribute social labor" besides using value or the labor-content. If not, then Marx really was saying that value--or at least, its "quantitative side", the labor-content--is an eternal category that will survive capitalism and exist as long as economic calculation is needed. But if there are other ways to regulate labor-time, then the passage was only saying that the labor-time remains of interest, but doesn't express an opinion on how this regulation of labor-time will be carried out. It would then be clear that it was mainly to make the necessity of economic calculation understandable to his readers, who live and work in economies based on commodity production, that Marx spoke at times of capitalism and socialism in parallel terms and talked of "the determination of value" continuing to prevail "in the sense" that the labor-time is still of interest.

. Well, are there in fact other ways to regulate labor-time and distribute social labor? Yes, we have seen that, for example, this can be done via either the method of material balances or input-output methods. These methods are based on the fact that neither the economic cost of producing something nor its economic usefulness can be represented by a single number. No doubt, in practice material balances and input-output economics were integrated with value considerations, since they were used in capitalist and state-capitalist economies. But a careful analysis of these methods suggests that not only is it possible to calculate without value, but that one can calculate more accurately without value. Indeed, input-output methods survive because they can calculate things that no economist knows how to calculate with ordinary value calculations.

. But these methods didn't yet exist in Marx's day, so he couldn't have been thinking of them. Thus, as far as interpreting what Marx meant in his own writing, the question becomes: did Marx believe that there was a way to regulate labor-time and distribute social-labor other than by using value and the labor-content?

Concrete and abstract labor

. Yes, he did. In his writing, he repeatedly distinguished between the abstract labor-hour, the embodiment of human labor in general, which is the essence of both value and the labor-content, and the concrete labor-hour, labor as performed by an individual or as materialized in a particular product. Concrete and abstract labor-hours obviously have something in common, one being an abstraction from the other. So one might speak of the "determination of value" in socialism "in the sense" that labor-time remains of interest, when one ignores for the moment the distinction between the abstract and concrete labor-hour. But when one goes on to devise actual methods of planning, this distinction can't be ignored. Indeed, Marx wrote about how the abstract labor-hour prevents consideration of the material qualities of products, and how this category loses its significance under socialism.

. This is clear in a passage from Marx's Grundrisse. It begins by stressing that "in communal production" (which here means communistic production) the tracking of labor-time is essential. It talks of "economy of time" and "the planned distribution of labor time among the various branches of production" as primary principles of communistic production. All this is similar to the passage I have cited above. But it ends with a surprising twist, in which it points out that all this is "essentially different" from exchange value--or anything else that sees purely quantitative differences between different workers and different products. Marx wrote that

. "On the basis of communal production, the determination of time remains, of course, essential. The less time the society requires to produce wheat, cattle etc. , the more time it wins for other production, material or mental. Just as in the case of an individual, the multiplicity of its development, its enjoyment and its activity depends on economization of time. Economy of time, to this all economy ultimately reduces itself. Society likewise has to distribute its time in a purposeful way, in order to achieve a production adequate to its overall needs; just as the individual has to distribute his time correctly in order to achieve knowledge in proper proportions or in order to satisfy the various demands on his activity. Thus, economy of time, along with the planned distribution of labour time among the various branches of production, remains the first economic law on the basis of communal production. It becomes law, there, to an even higher degree. However, this is essentially different from a measurement of exchange values (labour or products) by labour time. The labour of individuals in the same branch of work, and the various kinds of work, are different from one another not only quantitatively but also qualitatively. What does a solely quantitative difference between things presuppose? The identity of their qualities. Hence, the quantitative measure of labours presupposes the equivalence, the identity of their quality."(9)

. Here Marx declared that exchange-value measured by labor time can't be used for communist calculation, even though communist calculation is ultimately based on the economy, and proper distribution, of labor-time. It isn't that Marx sometimes saw the need to deal with labor-time under communism, while he forgot about this when he was preoccupied with denouncing value and the abstract measurement of labor. Here we see Marx denigrating value precisely in relation to the proper use of labor-time under communism. He believed that communist calculation requires taking account of the qualitative differences between products, between different types of labor, and even between the labor of different individuals in the same branch of work. Value, since it sees purely a quantitative difference between things, negates their qualitative differences.

. Not just value, but anything else that sees a purely quantitative difference between different things would be subject to the same objection. Marx stresses that the very act of equating two things quantitatively means ignoring their qualitative differences. This applies to value, but it would also apply to the labor-content, whether the labor-content is determined spontaneously by marketplace forces or by a conscious estimate of the socially-necessary labor. The simple fact that the labor-content equates, say, an hour's worth of steel to an hour's worth of wood means that it wipes out the qualitative differences between steel and wood. It hides the material differences between steel and wood, the different uses to which they can be put, the different processes by which they are produced, the different effects they have on the environment, and so forth. All that is left is a quantitative comparison: so much steel equals so much wood.

. Marx provided, in essence, a theoretical argument that economic calculation via the concrete labor-hour is superior to that via the abstract labor-hour. The abstract labor-hour, or any quantitative scale of measurement, abstracts out from a product all its material features. But we pointed out in part two of this article that, in volume II of Capital, Marx showed that one had to take account of the qualitatively different, material features of products in order to analyze the operation of the entire economic cycle of capitalist society. This was not necessary for the analysis of a single capitalist enterprise, but it was when one considered the overall circuit of the total social capital. (10) The reason that capitalism is able to exist although it uses value, which negates qualitative differences, is that capitalism is a system of infinite imbalances, fluctuations, and crises. When an assortment of goods of the wrong total value are thrown on the market, there is imbalance or even crisis. But also when goods of the proper total value, but of the wrong material types, are thrown on the market, imbalance exists. If the right goods are present, but in the wrong proportions, there is also an imbalance, and this results in a series of reactions. Balance is reached through constant imbalance, and in turn gives rise to new imbalances. This is how capitalism adjusts the proportions of different goods on the market. If communism is to do better than capitalism, it will have to take account directly of qualitative differences.

. Marx did not say how communist planning will take account of the qualitative differences: he did not show how to prepare a social plan that economizes on labor-time and correctly apportions labor to various branches of work. But he held that the preparation of such a plan requires dealing with qualitative differences, and hence concrete labor-time. This has to be borne in mind with respect to all his statements concerning the need for economic calculation under socialism. This is a fundamental feature of Marx's view of planning.

. The distinction between abstract and concrete labor is one of the central themes of Marx's economic work. He spent dozens of pages on it in Capital, the Grundrisse, and other writings. He stressed that value consists solely of abstract labor, writing:

".  .  . As use-values, commodities are, above all, of different qualities, but as exchange values they are merely different quantities, and consequently do not contain an atom of use-value.
. "If then we leave out of consideration the use-value of commodities, they have only one common property left, that of being products of labour. But even the product of labour itself has undergone a change in our hands. If we make abstraction from its use-value, we make abstraction at the same time from the material elements and shapes that make the product a use-value; we see in it no longer a table, a house, yarn, or any other useful thing. Its existence as a material thing is put of out sight. .  .  . there is nothing left but what is common to them all; all are reduced to one and the same sort of labour, human labour in the abstract."(11)

. A too-hasty consideration of this might lead to the idea that use-value, and the material form of a product, represents the aspect of a commodity that interests us as consumers, while exchange-value deals fully with the process of producing a product. It might then be believed that, parallel to this, under socialism the use-value concerns only choices concerning consumption, while the abstract labor would be all that is necessary to consider with regard to planning production. But use-value isn't restricted to consumer goods. The use-value of the means of production is the role they play in production. When the economic cost of producing something is reduced simply to the amount of abstract labor it contains (that is, the labor-content), one has abstracted away most of the essential information needed for conscious economic planning.

Not by labor alone

. The emphasis that Marx gave to the distinction between concrete and abstract labor thus provides the answer to the supposed resurrection of value. When Marx was stressing the need for there to be economic calculation under socialism, he might simply refer to the fact that all such calculation boils down, ultimately, to ensuring economy of labor or to apportioning labor-time among different occupations. But he believed that these calculations would have to deal with the concrete labor-hour, not the abstract labor-hour.

. In this regard, there are a few brief comments of Marx and Engels about socialist society that are particularly relevant. In one of them, Marx is the midst of discussing the way that variable capital is expended and regenerated under capitalism, and he interjects:

".  .  . If we conceive society as being not capitalistic but communistic, there will be no money-capital at all in the first place, nor the disguises cloaking the transactions arising on account of it. The question then comes down to the need of society to calculate beforehand how much labour, means of production, and means of subsistence it can invest, without detriment, in such lines of business as for instance the building of railways, which do not furnish any means of production or subsistence, nor produce any useful effect for a long time, a year or more, while they extract labour, means of production and means of subsistence from the total annual production. In capitalist society however where social reason always asserts itself only post festum great disturbances may and must constantly occur." (emphasis added)(12)

. The significant point here is that he referred to the need to "calculate beforehand" three separate categories, of which labor is only one: "labor, means of production, and means of subsistence". Yet all three categories represent so much abstract labor (in the case of means of production and means of subsistence, they represent past labor materialized in presently-existing products). Capitalists would simply add up the sums needed to purchase everything that was needed, and ask whether enough money was available to cover the financial total. Similarly, with respect to the labor-content, one would simply add together into a single figure the amount of abstract labor contained in each necessary item. Marx, however, listed separately the immediate or living labor (the amount of current labor needed on the project) and the past or materialized labor (congealed in already-existing objects, such as the needed means of production).

. This is not an accidental phrase of Marx's. Part two of this article, in dealing with the question of the annual economic cycle, pointed out that the present or living labor had to be kept track of separately from the past or materialized labor. It is also necessary to keep track of the different categories of materialized labor separately (such as past labor congealed in means of production and past labor congealed in means of subsistence). This is why Marx separated out "[living] labor, means of production, and means of subsistence". Indeed, if socialist society really is to avoid the "great disturbances" that afflict capitalist society, this is what it must do, and not simply set aside the right total amount of labor-time.

. In the cited passage, Marx didn't use the terms abstract and concrete labor. But his remark illustrated the issue involved in practice. When it comes to the economic cycle as a whole, one can no longer restrict oneself to the thought that, ultimately, economic calculation boils down to labor. The annual economic cycle does not circulate by abstract labor alone. As Marx said with respect to the overall economic cycle,

. "So long as we looked upon the production of value and the value of the product of capital individually, the bodily form of the commodities produced was wholly immaterial for the analysis, whether it was machines, for instance, corn, or looking glasses. study of the total social capital and of the value of its products."(13)

. Similarly, there is a brief remark by Engels whose significance is generally ignored. It occurs in a famous passage in Anti-Duhring that is often taken to mean that Engels believed that the calculation by the labor-hour under socialism would replace calculation by the dollar under capitalism. But in the midst of this passage, he says that

".  .  . it will still be necessary for society to know how much labour each article of consumption requires for its production. It will have to arrange its plan of production in accordance with its means of production, which include, in particular, its labour forces."(14)

. What's significant here is that Engels pointed out that the labor forces are only one part of the means of production. Here again is the same idea: not by labor alone. That is, the means of production include more than just the immediate labor, and communist calculation must take into account all the means of production. Engels separated out the living labor from the past or materialized labor, represented in the other means of production (such as machinery, raw materials, etc.). Most people who have read the overall passage containing this quote probably believe that when Engels said it would be necessary for society to know "how much labor" each article of consumption "requires for its production", he was identifying the total social cost of producing something with this amount of labor. But whatever else Engels may have been in the midst of saying, and I will return to this passage later, he went out of his way to point out that the amount of living labor was only part of the needed means of production. Engels did not go on to discuss how society will take account of all the means of production. But once this distinction is made, it is no longer possible to regard the labor-content, or total amount of abstract labor contained in a product, as sufficient for planning, as the labor-content mixes together living labor and the other means of production.

The labor certificate

. Marx and Engels didn't try to predict what communist planning would be like, but they did discuss the possible use of labor certificates for distributing consumer goods in a early phase of communist society. This was a way of implementing "to each, according to their work". Workers would receive labor-certificates for the number of hours that had been worked, and this would entitle them to a proportional amount of consumer goods. Such labor certificates resemble the labor money (money denominated in labor hours) that had been promoted earlier in the socialist movement. So it may seem like Marx and Engels were saying that, so long as the capitalists were expropriated, one could use labor money after all.

. However, Marx and Engels distinguished between different uses of labor certificates. As was pointed out earlier in this article, they consistently pointed out that the use of labor certificates for marketplace exchange wouldn't vanquish the bourgeoisie, and wouldn't even work as a reform of the currency system under capitalism. Such labor certificates might legitimately be called labor money, and they consistently led to the failure of the labor exchanges or other institutions which used them. But Marx and Engels were sympathetic to, say, the idea of Robert Owens concerning the use of labor certificates inside a communistic economy. If labor-certificates didn't circulate between workplaces, and were used only to apportion consumer goods to each worker, then Marx and Engels held that they were not money, and that they were then compatible with a communist economy.

. Marx's most detailed elaboration of this idea occurs in The Critique of the Gotha Program. I analyzed what Marx said about labor certificates there in a previous article. (15) I found that he was talking about an economy which had eliminated commodity production, and in which "the producers do not exchange their products". It turns out that labor certificates have little if anything to do with the economic planning of production in such an economy. For example, if a factory needs raw materials from another workplace, it wouldn't buy them with labor certificates (or with anything else). The labor certificates have nothing to do with relations between workplaces, or between workplaces and the planning agencies. The labor certificates don't even determine the total amount of consumer goods that are distributed among the working population, but only help allocate the overall pool of consumer goods among the workers. (This point will be dealt with further in the section "The labor certificate revisited".) The labor certificate will be very prominent, since everyone will be using it to obtain goods, but it won't have much to do with planning.

. This strictly limited role of the labor certificate under socialism can also be seen in Marx's comments on the labor certificate in Capital. There he remarks that

. "Let us now picture to ourselves, by way of change, a community of free individuals, carrying on their work with the means of production in common, in which the labour-power of all the different individuals is consciously applied as the combined labour-power of the community. .  .  . The total product of our community is a social product. One portion serves as a fresh means of production and remains social. But another portion is consumed by the members as means of subsistence. A distribution of this portion amongst them is consequently necessary. The mode of this distribution will vary with the productive organization of the community, and the degree of historical development attained by the producers. We will assume, but merely for the sake of a parallel with the production of commodities, that the share of each individual producer in the means of subsistence is determined by his labour-time. Labour-time would, in that case, play a double part. Its apportionment in accordance with a definite social plan maintains the proper proportion between the different kinds of work to be done and the various wants of the community. On the other hand, it also serves as a measure of the portion of the common labour borne by each individual and of his share in the part of the total product destined for individual consumption."(16)

. While Marx didn't use the term "labor certificate" in the above passage, this is basically what is being described when it is said that "the share of each individual producer in the means of subsistence is determined by his labour-time." Here again the labor certificate doesn't have much to do with actual planning. Marx distinguished between the "definite social plan" that maintains the proper proportions in the allocation of labor, and the role of the labor certificate, which simply assures each individual his proper portion of the part of the total community product that is devoted to consumption. The labor certificate doesn't even determine the size of the part of the total product devoted to consumption. This would presumably be set as part of the conscious social plan. All this is presumably why Marx remarked that:

"The producers may, for all it matters, receive paper vouchers entitling them to withdraw from the social supplies of consumer goods a quantity corresponding to their labour-time. These vouchers are not money. They do not circulate." (emphasis added)(17)

. It might be objected that Marx said that "labor-time", if not the labor-certificate, is crucial to economic planning. He talked of its "double role". But this is simply the issue already dealt with above: the importance of labor-time in socialist calculation is by no means the same thing as calculation according to the labor-content. "Labor-time" may have a double-role here, but as concrete labor in the social plan, and as abstract labor when products are measured out according to labor time by the labor certificate.

. It might be objected that the labor certificates do determine production, because if people use their labor certificates to buy the complete stock of a particular item, such as a popular item of clothing, then more will have to be produced. But in this case, the labor certificates that were redeemed as clothing aren't sent to the particular clothing factory. They wouldn't be of any use to the factory anyway, and wouldn't allow it to obtain more resources, since it doesn't obtain its resources by buying them from other workplaces. Rather, the "definite social plan" regulating production has to be adjusted to direct more resources towards the particular factory producing the needed item of clothing, and less resources towards the factories producing items which are in less demand. The labor certificates ensure only that total consumption is kept within certain bounds. Adjusting the quantity of what is produced, and the flow of resources between workplaces that allows them to carry out this production, has to be done via direct assessment of what goods are in short supply, and what resources are needed to rectify this problem.

. Thus the Marxist labor certificate doesn't show that the labor-hour will be the unit of socialist planning. The labor certificate is likely to have an important place in the consciousness of the workers, who will see it everyday, but it has little to do with economic planning. It will be historically transient, and when it is discarded, this won't affect the main system of social planning that has been built up. The length of time it will be used depends in large part on the level of consciousness of the working population, but also on how long it takes to achieve a situation of general material abundance.


. Engels' Anti-Duhring has played a major part in discussions concerning the labor-hour. In this polemic, Engels attacked the idea that socialism would restore the "true value" of products, or that it would maintain the exchange of "equal labor against equal labor". Yet certain passages have been taken to mean that the main problem with Duhring's system of economic calculation is that it measured the social labor in products indirectly via money (indeed, gold and silver), rather than using the labor hour as the unit of economic calculation. For example, Engels noted that Duhring wanted to use metallic money in the exchange of goods between communes, and commented that:

"In this exchange, on the assumptions made by Herr Duhring, metallic money is totally superfluous. In fact, mere bookkeeping would suffice, which would effect the exchange of products of equal labor against products of equal labour far more simply if it used the actual measure of labour-time, with the labour hour as unit--than if it first converted the labour hours into money." (18)

. But in this passage, while Engels ridiculed Duhring's attachment to gold and silver, he says that it doesn't make any real economic difference for the purposes under discussion whether gold and silver or labor hours are used. Indeed, that is why Duhring's attachment to gold and silver is so ridiculous. The same economic result, the exchange of "equal labor for equal labor", is maintained either way. And this equal exchange is the very principle for which Engels repeatedly denounces Duhring. So the above passage by itself probably wouldn't have given rise to the idea that Duhring's communes would have been saved if only they had used the labor hour for calculation. Indeed, the passage went on to say that

".  .  . the reader should always bear in mind that we are not ourselves constructing any edifice of the future; we are merely accepting Herr Duhring's assumptions and drawing from them the inevitable conclusions."

. However, several pages later Engels wrote about the nature of value and commodities, pointing out that value expresses "a definite quantity" of social labor, and moreover expresses this quantity "not in labour itself, in such and such a number of labour hours, but in another commodity." He sketched how money arose as the universal commodity for measuring this labor. Then, turning to socialist society, he stated:

. "From the moment when society enters into possession of the means of production and uses them in direct association for production, the labor of each individual, however varied its specifically useful character may be, is immediately and directly social labour. .  .  . Society can calculate simply how many hours of labour are contained in a steam-engine, a bushel of wheat of the last harvest, or a hundred square yards of cloth of a certain quality. It could therefore never occur to it still to express the quantity of labor put into the products, which it will then know directly and in its absolute amount in a third product, and moreover in a measure which is only relative, fluctuating, inadequate, though formerly unavoidable for lack of a better, and not in its natural, adequate and absolute measure, time. .  .  . On the assumptions we have made above, therefore, society will also not assign values to products. It will not express the simple fact that the hundred square yards of cloth have required for their production, let us say, a thousand hours of labour in the oblique and meaningless way, that they have the value of a thousand hours of labour. It is true that even then it will still be necessary for society to know how much labour each article of consumption requires for its production. It will have to arrange its plan of production in accordance with its means of production, which include, in particular, its labour forces. The useful effects of the various articles of consumption, compared with each other and with the quantity of labour required for their production, will in the last analysis determine the plan. People will be able to manage everything very simply, without the intervention of the famous 'value. '"(19)

. This is taken by many to mean that the calculation of the social labor in labor hours, rather than in dollars, marks, or some other financial unit, will provide the natural or absolute unit of economic calculation, or maybe even that labor certificates will be the basic economic tool of socialist society. Moreover, some readers may even take it to mean that the criterion of whether value is overcome (given that the former capitalists no longer own the means of production) is whether economic calculation is in labor-hours or dollars. But there are a number of reasons to doubt that Engels meant anything beyond that socialism will calculate with the direct material quantities of the means of production:

. * First of all, Engels couldn't have meant that socialist calculation will be based on labor certificates, since he regarded them as only a transient feature of socialism. Just a few pages earlier, Engels had dwelt on the issue of labor certificates under socialism, and defended their possible use against Duhring. But even though he defended Robert Owen's idea of the use of labor certificates in a communistic society, he stressed their temporary role, writing that

"with Owen the labour certificates are only a transitional form to complete communism and the free utilisation of the resources of society; and incidentally only a means designed to make communism plausible to the British public."(20)

. * Engels regarded that any system of exchanging equal labor versus equal labor is in fact subject to the capitalist law of value. He made this point repeatedly against Duhring, even though Duhring's system does not have individual ownership of the means of production and does not have direct competition in exchange, even between the various productive communes. Financial calculation aims precisely at preserving this equal exchange. Simply changing the unit to the labor hour still means preserving this balance. A more profound change is needed to go beyond the law of value.

. * When Engels pointed out that society has to know how much labor is contained in each product, he pointed to the need for socialist planning to take account of the "means of production, which include, in particular, its labour forces." The significance of this passage is pointed out in the above section "Not by labor alone". It shows that Engels was considering the living or immediate labor needed in production, which is not the same thing as the labor content of a product, which jumbles together into a single figure the measurements of all the different means of production.

. * Engels went on to say that "The useful effects of the various articles of consumption, compared to each other and with the quantity of labour required for their production, will in the last analysis determine the plan." This is another example where Marx and Engels said that, "in the final analysis", it all boils down to labor-time. This is not the same as describing how such a comparison is made. Engels was no doubt quite aware that use-values couldn't be measured on a simple numerical scale. Hence he was describing some of the factors that had to be weighed, not prescribing a definite numerical balance, as opposed to Duhring system's of balancing equal labor versus equal labor.

. In my opinion, all this makes it unlikely that Engels was suggesting the use of the labor-content as the natural unit for socialist calculation. But in any case, the logic of his argument rules out the labor content and points to the need for keeping direct track of all the means of production used by society.

. The fact that Engels did not counterpose a utopian scheme of his own to Duhring's fanciful but detailed working out of the future society makes Engels' polemic harder to understand, if more scientific. But there is also a weakness in Engels' presentation above, namely, that he passed back and forth from abstract to concrete labor, apparently without noticing it, and certainly without mentioning it. Thus value, as abstract labor, is the capitalist measure of the total economic cost of producing a commodity. Value adds together the direct labor used in producing something to the labor congealed in the raw materials, and so on. It is this abstract labor, the labor-content, that Duhring wants to perfect in his "socialitarian" society, and he demands that all goods be provided with an estimate of their "true value". Engels counterposed to "true value" the necessity and ease of directly estimating the immediate labor involved in production. This immediate labor is concrete labor, living labor regarded as only one aspect of the means of production, as opposed to the earlier labor congealed in the raw materials, machinery, etc. But the way Engels wrote, the difference between value and socialist calculation without value may appear to be mainly a question of how social labor should be measured, in financial units or labor-hours, rather than that two different things are being measured, abstract and concrete labor.

. Engels might well have been writing as he did for the sake of popularization. Most readers find the passages on abstract and concrete labor to be among the hardest sections of Marx's economic writings. But sidestepping the issue of abstract labor led to some problems in Engels' presentation.

Relative and absolute units

. These problems center on his replacing the contrast of abstract and concrete labor with, mainly, the contrast of relative and absolute units of measurement. He pointed out that financial terms are a relative, or indirect, way of measuring the amount of labor in a product, but not that they are measuring abstract labor, rather than concrete labor. He developed the issue of relative and absolute methods of measurement as follows:

. "The economic science of commodity production is by no means the only science which has to deal with factors known only in a relative way. .  .  . In chemistry the absolute atomic weights of the various elements are also not known to us. But we know them relatively, in as much as we know their reciprocal relations. Just as commodity production and the economics of commodity production obtain a relative expression of the unknown quantity of labour contained in the various commodities, by comparing these commodities on the basis of their relative labour content, so chemistry obtains a relative expression for the magnitude of the unknown atomic weight by comparing the various elements on the basis of their atomic weights, expressing the atomic weight of one element in multiples or fractions of the other (sulphur, oxygen, hydrogen). And just as commodity production elevates gold into the absolute commodity, the general equivalent of all other commodities, the measure of all value, so chemistry promotes hydrogen to the rank of a chemical commodity money, by fixing its atomic weight at 1 and reducing the atomic weights of all other elements to hydrogen, expressed in multiples of its atomic weight."(21)

. Thus Engels showed that the value of a product can represent the amount of socially-necessary labor congealed in that product, even though value is usually expressed in financial terms. The comparison to the atomic mass unit of chemistry is appropriate for this purpose, as it shows how something may be measured relatively.

. But Engels gave far too much importance to the issue of relative or absolute measurement. In the course of explaining why value will lose its significance under socialism, he suggested that relative measurements will be thrown aside as soon as one can replace them with a direct measurement. In a passage which I have cited above, after the sentence saying that "It could therefore never occur to it [society] still to express the quantity of labour put into the products, which it will then know directly and in its absolute amount", in value, which is indirect and moreover "only relative, fluctuating, inadequate", Engels wrote:

"Just as little as it would occur to chemical science still to express atomic weights in a roundabout way, relatively, by means of the hydrogen atom if it was once able to express them absolutely, in their adequate measure, namely in actual weight, in billionths or quadrillionths of a gram."(22)

. Engels was wrong about this: science has known the actual weight of atoms for a century, and yet chemistry still makes wide use of the relative measurement of weight via atomic mass units (amu's). (23) It tells someone familiar with chemistry a lot more to know that an atom of helium weighs 4 amu's than to know how much it weighs in grams. But from the theoretical point of view, from the moment when the actual measurement of the amu was known, it made absolutely no difference whether one used the relative or absolute form of measurement. By a simple multiplication or division, one can pass back and forth at will from the relative unit to the absolute unit. Scientists will use amu's or a direct measurement in terms of grams (or some other unit) according to which is more convenient for the problem they have in mind.

. The basic problem with value isn't that it is expressed relatively, but that it is a measurement of abstract labor, not concrete labor. As discussed earlier in this article, value is a social relation which appears, instead, to be an inherent property of a product. Concretely, the main problem isn't that value determines the amount of labor only approximately, but that the value (or its numerical value, the labor-content) measures something significant mainly for commodity exchange. No doubt it isn't simply an arbitrary figure, or else commodity production would never have lasted at all. It does take account, in its own way, of the resources needed for production, although it leaves some things out of consideration altogether, such as many environmental and health costs of production. (24) But it jumbles the figures for all these resources into a single figure, that of the total amount of abstract labor congealed in a product. Moreover, as we pointed out in part 2 of this article, any system of economic calculation that bases itself on the labor content will end up reproducing the problems of commodity production. Socialist calculation will have to base itself on concrete labor, and so the labor content or other measures of abstract labor can only have a secondary significance for it.

. Also noticeable is that Engels' views on the distinction between the relative and absolute unit contradict the main logic of Engels' criticism of Duhring. For example, he judged whether Duhring's proposed currency functions as money or a labor certificate not on whether it is denominated in relative or absolute units, but on what economic role it plays. He pointed out that the gold and silver coin that Duhring would use as money actually serves, in the relations between communes and their members, as a "disguised labor certificate". (25) Even though it is gold and silver!

. But, the reader may object, didn't Marx too make a big deal of the different forms in which value relations were expressed -- the relative, equivalent, expanded, and money forms -- in the first chapter of Capital (volume I)? Yes, but the analysis of these forms aimed at showing how value and money arise not from any natural or inherent property of products, but from the purely social relationship of exchange. The nature of value doesn't come from the peculiarities of the relative form, but from the fact that it represents abstract labor.

. At one point Marx, like Engels, made an analogy between value and weight. But Marx pointed out that this analogy can't be taken too far, because weight is a natural or inherent property, and value is not. It's not that something is a natural property when expressed in absolute units, but not when it is expressed in relative units. Both natural properties, and purely social ones, can be expressed in either relative or absolute units.

. First Marx pointed out the common relative form which can be used in both cases: "Just as the substance iron, as a measure of weight, represents in relation to the sugar-loaf weight alone, so, in our expression of value, the material object, coat, in relation to the linen, represents value." He then added, however:

. "Here, however, the analogy ceases. The iron, in the expression of the weight of the sugar-loaf, represents a natural property common to both bodies, namely their weight; but the coat in the expression of the value of the linen, represents a non-natural property of both, something purely social, namely, their value."(26)

. The reason why value is a "non-natural" property is that it represents abstract labor. Engels apparently tried to popularize the discussion of the different forms of value, but he went too far in oversimplifying it, and the issue of abstract labor dropped away. This is only a minor blemish in Engels' wide-ranging critique of Duhring, and he himself may have believed that his emphasis on the repudiation of value -- which is in the very same section of Anti-Duhring -- already contained the essence of the criticism of abstract labor. He might not have anticipated that many later readers would interpret his words to mean that value would be set aside, but its numerical size, the labor content, would rule the economy, since he would likely have seen such a plan as an attempt to run an economy according to "true value", something which he and Marx repeatedly objected to. Indeed what else is "true value", but a quantitative calculation of value (i.e. , a determination of the labor content), purified of all the deviations and mistakes introduced by the messy process of marketplace exchange?

"There is no alternative"

. Certain misunderstandings aside, the main reason why Marx's distinction between concrete and abstract labor hasn't been pondered more deeply with respect to socialist planning is the deeply ingrained belief that no method of economic calculation is possible other than the use of the abstract labor hour. Every marketplace exchange tends to inculcate the unthinking belief in the naturalness and appropriateness of measuring things according to a single numerical scale, such as the labor-content. Consider the views of H. Hayashi, who, as mentioned earlier, believes that, while value will no longer exist under socialism, "value determination" (his term for measuring things by their labor-content), which is the quantitative side of value, will remain as the ruling principle of socialist economy. In opposition to, in his words, the view that "abstract human labor is a concept that only corresponds to commodity production", he cites what to him is an obvious fact:

".  .  . even though general commodities become simple products of human labor under socialism, their 'value determination' (the fact or aspect that they are the outcome of abstract social human labor) does not disappear. If this were also to be eliminated, socialist society would lose all basis for a standard of distribution of products (consumption goods) as well as the basis for the 'planned economy' (the concept related to the overall reproduction of society), and would become a completely random and haphazard society, an inhuman society, where people would lose sight of all social existence and activity."(27)

. This is obvious to him. His argument consists mainly in the eloquence in which he depicts the anarchy that would supposedly result if society ever abandons the abstract labor hour. It is from this point of view that, whenever he sees Marx say that socialism will be subject to economic law, he concludes that Marx was really talking about labor-hour calculation. Thus, in another article, he cites Marx's letter to Dr. Kugelmann of July 11, 1868, which stated that:

".  .  . Every child knows, too, that the mass of products corresponding to the different needs require different and quantitatively determined masses of the total labour of society. That this necessity of distributing social labour in definite proportions cannot be done away with by the particular form of social production, but can only change the form it assumes, is self evident. No natural laws can be done away with. What can change, in changing historical circumstances, is the form in which these laws operate. And the form in which this proportional division of labour operates, in a state of society where the interconnection of social labour is manifested in the private exchange of the individual products of labour, is precisely the exchange value of these products."(28)

. Hayashi takes it for granted that distributing social labor properly among different tasks and occupations must mean making economic calculations according to the labor content. He therefore is convinced that if Marx said that the law of proportional distribution can't be done away, this means the labor content will remain the economic bottom line forever. Hayashi holds that a change of economic system can only result in a change in the form in which the labor content is calculated, such as measuring it directly in abstract labor hours instead of indirectly in dollars or yen, but the labor content itself must remain.

. Hayashi pays no attention to the new methods of economic planning that developed in the 20th century, whether material balances or input-output methods. He doesn't try to see whether, despite their use by capitalist and state-capitalist regimes, they show the need to take account of qualitative distinctions between products and, to that extent, go beyond simply keeping track of abstract labor. It doesn't occur to him that the experience of 20th century planning might shed some light on socialist planning.

. This is typical of many advocates of the use of the labor content. So long as they have no conception whatsoever that, in economic calculation, there is any alternative to the use of the abstract labor hour, they will naturally understand any statement by Marx about the economic laws that govern socialism to be a defense of the abstract labor hour. For them, it is a question of T. I. N. A. : there is no alternative.


. This sometimes results in taking passages from Marx and standing them on their hand. An example of this occurs in a pamphlet by the Trotskyist Spartacist League (SL), which tries to prove that the Stalinist regime in the former Soviet Union had a sort-of socialist, or "collectivist" economic base. In order to do so, it has to explain away, among other things, the various manifestations of commodity production that pervaded the Soviet economy. To the course of this, it claims that Marx really supported such forms of commodity production as socialism, for he allegedly held that pricing according to the law of value is the "rational state of affairs" for a "collectivized economy". (29)

. The SL does this by referring to a passage where Marx was discussing the relation of supply and demand to pricing in a capitalist society. Marx talked about what happens when too much of a commodity is produced, or too little, and how this affects price. At one point, Marx said that, in capitalist society, "the exchange, or sale, of commodities at their value is the rational state of affairs, i. e. , the natural law of their equilibrium". The SL concludes that this really refers to socialist society as well, on the odd grounds that Marx included a parenthetical remark about how socialist society would do things differently.

. Let's examine the passage from Marx:

".  .  . However, there exists an accidental rather than a necessary connection between the total amount of social labour applied to a social article, i.e. , .  .  . between the volume which the production of this article occupies in total production, on the one hand, and the volume whereby society seeks to satisfy the want gratified by the article in question, on the other. .  .  . if this commodity has been produced in excess of the existing social needs, then so much of the social labour-time is squandered and the mass of the commodities comes to represent a much smaller quantity of social labour in the market than is actually incorporated in it. (It is only when production is under the actual, predetermining control of society that the latter establishes a relation between the volume of social labour-time applied in producing definite articles, and the volume of the social want to be satisfied by these articles.) For this reason, these commodities must be sold below their market-value, and a portion of them may even be altogether unsaleable. The reverse applies if the quantity of social labour employed in the production of a certain kind of commodity is too small to meet the social demand for that quantity. But if the quantity of social labor expended in the production of a certain article corresponds to the social demand for that article, so that the produced quantity corresponds to the usual scale of reproduction and the demand remains unchanged, then the article is sold at its market-value. The exchange, or sale, of commodities at their value is the rational state of affairs, i. e. , the natural law of their equilibrium. It is this law that explains the deviations, and not vice versa, the deviations that explain the law."(30)

. The SL pamphlet takes this passage, and includes only the parenthetical comment and the two sentences beginning "But if the quantity of social labor expended in the production of a certain article corresponds to the social demand .  .  . " and ending with "the natural law of their equilibrium". It italicizes the word rational and concludes that the law of value is the rational law for a "collectivized economy".

. In fact, the parenthetical remark does indeed refer to socialist production, that is, a society with planned production, so that how much of something is produced is directly determined by the need for it. But this parenthetical remark contrasts planned production with how things stand in a competitive capitalist marketplace, which is what the overall passage was discussing. Such planned production is the alternative to the marketplace, to the law of value, and to buying and selling altogether..

. No matter. SL cites this passage to show that the buying and selling of commodities at their "true value and equilibrium quantity" is a general principle of socialist economic calculation. Excerpt for strict administrative measures during an emergency, the SL pamphlet can basically see only two possibilities for socialism: either such abundance that no economic calculation is needed at all, or the marketplace and the law of value. So the pamphlet states that, "as a norm in the dictatorship of the proletariat, and assuming the wage structure is optimal, the market is the most efficient, sensitive and democratic mechanism for adjusting scarce consumer goods and services to individual needs and desires." Could a neo-liberal praise the market more eloquently than this?



. Up to now, this article has mainly discussed the relation of value and the labor-hour to a fully socialist, classless society. But between capitalism and socialism there is a lengthy transition period. The socialist revolution, which overthrows the political rule of the bourgeoisie, is only the start of a protracted period of economic transformation. Such important steps as the taking over of large capitalist enterprises, the establishment of a large state sector, and land reform are just the initial steps of this transformation.

. This is the period of the transitional economy. It is not simply a mixture of capitalism and socialism, but a system with some unique features of its own. (31) It is marked by the contradiction between the proletariat's political rule over the bourgeoisie, and its incomplete ability to direct the economy.

. One aspect of the transitional economy is the large and growing role of the state sector. In that sense, it is, or develops toward, something that might be called "state economy". But "state economy" is by no means sufficient to define the transitional economy: Stalinist state capitalism was also a "state economy". Another aspect of particular relevance to the issue of value, is that it is a sort of mixed economy, albeit a very special type of mixed economy, with a dominant state sector and an ascendant working class. This is not the liberal capitalist type of mixed economy, but nevertheless it is an economy in which money and marketplace transactions still constitute an important bond holding together the different economic sectors. Exchange, and thus exchange value, remain a central fact of this economy, and mark this economy as still one of commodity production. Thus the law of value exercises its influence on this economy, forcing society to retain, alongside other methods of planning, value calculation (financial calculation and hence, at least indirectly, calculation via the abstract labor hour). This prevalence of value is a measure of how far the transitional economy is from a fully socialist economy, how far the working class still has to go in being able to run the economy according to a unified social plan.

. One of the reasons that socialism is often seen as no more than a special type of commodity economy is that the first steps of economic transformation are taken as its final form. Under the influence of this idea, if it is realized that there is no way to do without money immediately, it is assumed that this will be the case forever, or at least that money and marketplace relations can exist in one type of classless society. In The Day After the Revolution (1902), Kautsky showed that after a proletarian revolution, the working class would be impelled--not by doctrine, but by necessity--to set up a radical mixed economy where capitalist enterprises had been taken over by the state. But he held that this economy was already socialist, rather than one possible intermediate step towards socialism. Thus he attempted to prove that it had already gone beyond the law of value and eliminated the status of labor power as a commodity despite the existence of money and marketplace relations. He ended up with a picture of different systems of ownership coexisting in perfect harmony and overlooked the sharp contradictions that characterize intermediate economies and require them to either keep moving forward towards socialism or fall back into capitalism.

. The Bolshevik revolution of October 1917 in Russia marked a watershed in theorizing about socialist transformation. Prior to this, the transitional economy was rarely looked upon as something with its own features, separate from that of socialism. Socialism and the transitional economy were generally confused together, as Kautsky had done. But the experience of tens of millions of workers and peasants actually involved in revolution would force more attention to the issue of transitional forms.

. In the months prior to the Bolshevik revolution, Lenin wrote that socialism could not be immediately introduced into Russia, but that the revolution would have to implement steps towards socialism. Immediately after the revolution, the Soviet government proceeded to do so. The point was not to simply proclaim someone's idea of what a full socialist society would look like, but to step by step increase the ability of the working masses to replace the role of the bourgeoisie by directing economic life themselves. But by mid-1918, the bourgeoisie and agrarian landlords had plunged Russia into civil war. The Soviet government responded not only by speeding the expropriation of the bourgeoisie, but by implementing a system of direct economic controls which eventually became known as "War Communism". For a time, it was believed that this would allow Russia to directly eliminate commodity production and thus jump directly to socialism, rather than proceeding on the path of gradual transformation. But while "War Communism" dealt with the immediate emergency, it became clear by 1921 that it had gone far beyond what could be sustained. At that point, Lenin put forward the New Economic Policy (NEP).

. The NEP raised the issue that the Soviet Union would have an intermediate economy for some time. Individual peasant production would dominate in the countryside, and be linked to the urban economy by commodity exchange. The state sector itself would be run "on commercial lines", and each enterprise would have to carry out its own, separate financial balance and seek to make a profit. The big bourgeoisie and landlords remained dispossessed, but there would be a commodity economy with a state sector, a good deal of small-scale or handicraft production, private merchants and traders, and mainly individual peasant production. The working class, exhausted by the years of war and economic crisis, could not replace the managerial stratum in the state sector.

. There was a good deal of debate among the Bolsheviks, first over the necessity of NEP and then over what NEP actually was. Lenin referred at times to the "transitional character" of the period between capitalism and socialism, and he didn't hesitate to point out the state-capitalist features in NEP. He noted that even the character of the state sector was affected by the commercial features of NEP, and that there would be certain contradictions between the management and the workers in the state sector. (See my article The question of "state capitalism under workers' rule". (32))

. If the working class had gradually recovered its revolutionary initiative during the 1920s, and NEP had led to a more advanced economy, and then socialism, then there would be direct experience of how transitional economies create the conditions for socialism, and of how long is needed to do so. But while there was a dramatic economic recovery in the 20s under NEP, the socialist revolutionary content of the regime died away, and Stalinist state-capitalism was consolidated in the 1930s. This was no longer a transitional economy, but one in which a new bourgeoisie ruled the working class, based on its control over the state sector. From the purely formal point of view, the Stalinist economy may have appeared to be a relatively advanced transitional economy, since most of the private sectors were gone, agriculture was collectivized, and the state sector had dramatically expanded and dominated all other sectors. But an essential part, the heart, of the transitional economy is its class relations, and in Stalinist state capitalism the state had become the private preserve of a new exploiting class that ruled over passive masses, whose only role was to produce. Once one scratched the surface of the state-capitalist economy and looked a little deeper, this class reality could be seen reflected in every aspect of the economy. (33) No other 20th century revolution attained socialism either; those that attained intermediate or transitional economies also fell back into state-capitalism. This doesn't mean, however, that the experience of these revolutions can be ignored. A study of what these revolutions accomplished, and of how they died, shows the necessity of distinguishing between the transitional economy and socialism.

The significance of value in the transitional economy

. It is often thought that it was simply the preponderance of peasants among the working population of Russia that called for a transitional economy. But there were petty-bourgeois strata in the cities as well. Moreover, it takes a period of time even for the working class in large industry and the state sector to be able to direct these enterprises in a way that removes the necessity for a separate managerial layer, something that was never accomplished in the Russian revolution. The working class displays immense initiative in the socialist revolution itself, but it faces new and different tasks in learning how to not only run individual enterprises, but run the whole economy as a unified whole. Thus it is most likely that the transitional economy will have significance, not just for countries with large peasant populations, but generally.

. The existence of money, buying and selling, and marketplace transactions show that the transitional economy is a commodity economy. There are countervailing forces in the transitional economy, so it is not just an ordinary type of commodity economy. Nevertheless, where there are commodities, there is the law of value, and the reign of the abstract labor hour. The law of value doesn't only exist when it is recognized, or when it is consciously used in setting the price of goods. Both the Trotskyist Preobrazhensky and the Stalinists believed that if the state sector set prices higher or lower than the value of the products concerned, then this showed that the law of value had, to this extent, been overcome. Actually, the very concern with influencing economic life with pricing proved that the economy was still in the grips of commodity production. And when prices are set in defiance of value, there will be consequences to this act; those consequences are the sign that the law of value still applies to the economy. This is not to say that prices must be set in accordance with what they would be in a capitalist marketplace, only that the economic consequences of pricing have to be taken into account. Indeed, some public goods will be distributed freely, but it will not only be necessary to take account of the material effort needed to provide them, but also, in a transitional economy, of their financial cost, and to plan accordingly.

. Commodity production constantly applies its pressure on the transitional economy, and this pressure must be counteracted by ensuring that the initiative of the working masses in controlling production is constantly increasing. The fact that commodity production continues during the transitional period doesn't mean that now commodity production has become vaguely socialistic, and that a shiny, progressive new form of profit-seeking has been discovered. It means instead that the transitional economy contains profoundly contradictory elements, and is, in a sense, economically unstable. Commodity production pulls the economy backwards, while the increasing organization and initiative of the working masses pulls it forward.

. The class and economic contradictions of a transitional economy are only obscured by the theories that present commodity production as having been tamed. (34) For example, the Soviet revisionists, whether Stalinist, Khrushchevite or otherwise, were responsible for quite a few such theories. Of course, they were not talking about an actual transitional economy, but about a consolidated state-capitalist economy, such as the Soviet Union from the 1930s to its demise. To hide the class contradictions in state-capitalist society, they put forward a series of arguments about how all the economic devices of capitalist society, from steep wage differentials and inequality to profit-seeking and value, were now positive elements of socialist progress. They supposedly no longer had much or any downside, but were solely positive things, because it had allegedly been ensured that higher income went only to people who were doing things that were socially useful. For example, the Leningrad Institute of Philosophy defended growing pay differentials and executive bonuses in this way in 1937 with high-flown language that this was simply an instance of the "'mutual penetration' of personal and social interests". The Institute wrote that

"This 'mutual penetration' is manifested in the form of piece-work, the insistence of differential wages according to the quality and quantity of the work done, the bonus system, diplomas and other awards for exceptionally good work and other forms of encouragement designed to enlist all the powers of the individual in the service of society."(35)

. But recognition of the capitalist categories remaining in the transitional economy should not be for the sake of reconciling the working class to them, but to warn about the dangers that they still pose, or that their existence reveals. The issue isn't that prices should always either deviate or conform to value, but that the basic class contradictions in the transitional economy must be kept in mind. As the working masses increase their ability to control the economy directly, eventually the moment will arrive when commodity production and marketplace relations serve merely as an impediment to the regulation of production. At that point, the transitional economy will come to an end, along with money and financial calculation, and be replaced by truly socialist production. This will also mark the end to value and the law of value. Along with this, the labor content will lose any fundamental significance, since exchange value ceases to have much meaning when marketplace exchange ends.


. This brings us back to the classless society. The abstract labor hour may have lost most of its significance, but the concrete labor hour is more important than ever. This not only means taking account of qualitative differences in products, but of differences among people as well, and hence of differences in the result of a labor-hour expended by one person or another. People have different skills and live in different places, and this has to be taken into account in economic planning.

. Moreover, the decline of the abstract labor hour also reflects the fact that workers are no longer under socialism what they were under capitalism: a faceless mass which could be directed anywhere at will. Under socialism, whether labor can be applied to a great new project, depends on whether the workers themselves see this project as valuable and are willing to undertake the sacrifices involved. The entire population is now workers; it will decide as a whole on the general outlines of what will be produced; and, without the old capitalist whip of starvation, individual workers and teams of workers will only take part in adventurous new projects, or relocate themselves to faraway work sites, if they believe in the value of these projects. When people can see that they are really working for themselves, and society as a whole, and not for a handful of privileged parasites, there may well be an abundance of people volunteering for challenging new assignments, but the point is that economic planning will no longer consist of simply deciding on what resources are needed for some plan. Instead, whether a plan is viable will also depend on what inspires the mass of population, what they see as valuable goals, and what they want to expend their efforts on.

. Nevertheless, the abstract labor hour may survive in a niche here or there in classless society. This may even give it prominence far out of proportion to its actual significance. But it will never reach its once-dominant position as the bottom line in economic calculation. What are some of these niches?

The labor certificate revisited

. Earlier I discussed Marx's conception of the possible use of labor certificates to govern distribution in a communist society. In Capital, he had given an example where he had assumed, "but merely for the sake of a parallel with the production of commodities, that the share of each individual producer in the means of subsistence is determined by his labour-time." In this case, Marx pointed out, labor time "serves as a measure of the portion of the common labour borne by each individual and of his share in the part of the total product destined for individual consumption."(36) In Critique of the Gotha Program, Marx specified that this would take place in an early phase of socialism, where the slogan governing distribution is "To each according to his work" rather than "To each according to his needs".

. The labor certificate is thus one of the niches where the abstract labor hour would hang on, although only in the sphere of distribution. The labor certificate is in line with the conceptions about work and consumption inherited from capitalism, and likely to be still influential among the population. This type of distribution would differ from capitalism in that the labor certificate is not money: for example, it could not be used by factories to buy raw materials, or be received by factories in exchange for their goods, nor would it circulate among the population. It would be received in return for work, and redeemed at a distribution center for consumer goods. This type of distribution would also differ from capitalism in that capitalist wages aren't simply proportional to the duration of work and its intensity, but vary from workplace to workplace in accordance with the general conditions of the labor market and the extent to which the workers are organized to resist the wage-cutting demands of the employers.

. Marx described how the labor certificate would make socialist distribution plausible to a population used to the ideology of equal exchange. He writes that, under this system,

"the individual producer receives back from society -- after the deductions have been made -- exactly what he gives to it. .  .  . For example, the social working day consists of the sum of the individual hours of work; the individual labour time of the individual producer is the part of the social working day contributed by him, his share in it. He receives a certificate from society that he has furnished such and such an amount of labor (after deducting his labour for the common funds), and with this certificate he draws from the social stock of means of consumption as much as costs the same amount of labour. The same amount of labour which he has given to society in one form he receives back in another."(37)

. It would seem that the labor certificate would be denominated in hours. This is certainly what workers of the 19th century would have expected of a labor certificate. But as noted above in discussing the criticism of Duhring, Engels pointed out that even gold and silver might serve as a "disguised labor certificate", if the individual producer received it in proportion to his or her labor, and if it only served to entitle this producer to a certain share of consumer goods. Thus the defining feature of this type of labor certificate is not really the unit it is denominated in, but its economic function: that it serves to distribute consumer goods in proportion to labor.

. The many absurdities of Duhring's plan (including its use of gold and silver) aside, are there any reasons to believe that a socialist society might possibly choose to use "disguised labor certificates" rather than certificates directly demarcated in abstract labor hours? We shall see there are some considerations that favor the "disguised labor certificate". Moreover, even if labor certificates are denominated in labor hours, it is unlikely that a labor certificate for one hour's work will correspond to goods worth exactly one abstract labor hour.

. For one thing, as Marx and Engels pointed out, there have to be deductions for societal purposes from what the individual producer receives. Marx listed such deductions from the "total social product" as "replacement of the means of production used", "additional portion for expansion of production", "reserve or insurance funds to provide against accidents", "general costs of societal administration", "that which is intended for the common satisfaction of needs, such as schools, health services, etc." and "funds for those unable to work".

. Let's look at this more closely by using, just for the sake of illustration, some numerical figures. These numbers aren't taken from any actual economy, but it is realistic that the sum of all deductions will be large. Let's say that, during the annual economic cycle, 10 million hours work is done by the population of a future socialist society. (If it's a world socialist society, it will actually be trillions of hours, but for simplicity, I'll use "small" numbers like millions.) The "total social product" which Marx talked about will have a labor-content equal to these hours, plus an allowance for all those means of production that are used up in the course of the annual economic cycle (for example, some machines will get worn out, while raw materials stockpiled the previous year will be incorporated into finished goods). Say these means of production have a labor-content of 20 million hours. The "total social product" will then represent 30 million labor hours of work (10 million hours of the current year's work plus the 20 million hours from machinery, raw materials and other goods produced in the past). The total social product has a larger labor content than the total amount of work done during the year, reflecting the fact that the products of this year's work embody not just the current year's labor, but some of the labor of years past. But if production is to continue next year without interruption, there has to be a "replacement of the means of production used", which is the first deduction Marx talked about. Thus 20 million hours have to be subtracted from the gross social product in order to replace the used-up machinery, raw materials, etc. This leaves a gross social income of 10 million hours, which equals the amount of work done during the year. So far, so good. 10 million hours of work was done during the year, and (provided no work is wasted) there is a gross income of 10 million hours, exactly balancing it. (38)

. But, unfortunately for this balance, Marx pointed out there are still more deductions to be made. As a result, only part of the gross income will be distributed via labor certificates. For example, Marx pointed out that there has to be an additional deduction "for expansion of production". It's not sufficient just to replace the used-up means of production. If it is desired to increase production, then some of the gross income has to go to adding more machines, raw materials, factories and so forth. For that matter, if better ways to produce things are found, so that the process of production is more pleasant for the workforce or less harmful to the environment, this too will require an additional rebuilding or replacing of machines and factories, and so it too will require a deduction. The deduction for expanding or renovating production might amount to, say, a million labor hours, and yet represent only a modest new "investment" compared to the large mass of existing means of production.

. Marx also listed a number of other deductions, including "that which is intended for the common satisfaction of needs, such as schools, health services, etc.". These services will not be bought with labor certificates, but will be free services for the entire population. Marx pointed out that the mass of these services "grows considerably in comparison with present-day society and it grows in proportion as the new society develops". The resources for these services have to be deducted from the gross income, and this will be a large deduction, as the inclusion of schools and health services shows. So perhaps here is a deduction of another two million labor hours. There also has to be a deduction for those who have retired from the workforce and "those unable to work". Depending on the age distribution of the future society, there may well be only several active workers for every pensioner. Thus the deduction here might also be large, say, another two million labor hours. There are still more deductions to be made, and yet the gross income of 10 million hours has already been reduced to 5 million hours. It may turn out that it ends up as only 3 or 4 million hours.

. This means, however, that the labor certificates don't determine the size of the pool of purchasable consumer goods. It's not that one subtracts from the gross social product the total of all labor certificates, and discovers what size the deductions are. It's rather that the labor certificates serve to distribute a pool of consumer goods whose size is determined by societal decisions concerning the deductions.

. Well, will the future workers of socialist society be upset that 10 million hours of work only results in the distribution via labor certificates of goods with a labor content of half that many hours, or perhaps a third that many hours? Not necessarily. It will be quite obvious that each person benefits from the free or common services, as well as from what they purchase with labor certificates. The goods obtained with labor certificates may be quite abundant, even though their labor content is less than that of the gross income. And it is quite likely that the population will regard it as one of the shining features of socialist society that not only are there many social services, but that all retirees and disabled people are well provided for. Moreover, the population will take pride in the continual expansion of the role of common, free goods and the decline of the role of purchasable goods, and will be quite aware that this means increasing the deductions. Meanwhile, since society as a whole, and not a few privileged capitalists, will decide on the general plan for either increasing or renovating production, the workers are unlikely to feel that they are being cheated by the deduction needed to allow such a change in the scale or methods of production.

. But how, then, could it be said that the producer gets back labor certificates which are equal to the labor which has been contributed to society? Marx said that "the individual producer receives back from society [in labor certificates]--after the deductions have been made--exactly what he gives to it". Yet these deductions are so big, that it seems to make a mockery of the principle of equal exchange.

. But the key point of the labor certificate is that each producer gets labor certificates for an amount of goods which is proportional to the amount of labor that has been performed. Twice as much work entitles one to twice as many goods. It is only in this sense that "the same principle prevails as that which regulates the exchange of commodities", as Marx said of the labor certificate in Critique of the Gotha Program. Although an hour of living labor is exchanged for goods of a smaller labor-content, that hour is exchanged for the proper proportional share of the total social pool of consumer goods available for purchase (as opposed to the pool of consumer goods freely distributed). When Marx went on to show that this type of exchange is still "bourgeois right", he relied solely on the fact that "The right of the producers is proportional to the labour they supply; the equality consists in the fact that measurement is made with an equal standard, labour." (Marx's emphasis)

. Suppose, however, that the future society insisted that a labor certificate for one hour's work should entitle one to goods with a labor content of precisely one hour. What would the consequences be? Then the social deductions would have to be made by giving the producer an amount of labor certificates equal to the amount of time worked, minus the deduction. This wouldn't be a matter of someone working eight hours and getting back a labor-certificate for 7. 8 or 7. 9 hours. Due to the large size of the deduction, it would be more like working eight hours and getting back a certificate for four hours or even less.

. But would a working class that had just overthrown capitalism, and then continued the class struggle throughout the transition period, consent to get back certificates for one-half or less the hours worked? This would presumably depend on the psychology of the times. The most politically-advanced people might not be upset. But labor certificates are for everyone, not simply the politically-clearest workers. It would seem that a certificate that identified a worker as contributing to society far less labor time than had actually been worked, would be incitement to discontent. It would deny the actual work done by a worker. And wouldn't everyone remember the old revolutionary speeches that denounced the former capitalists for taking away the unpaid labor of the working class? Yet when a worker only received labor certificates for part of their labor, it would appear as if the rest of the labor was unpaid. This would only be a misleading appearance, as the deductions would go to satisfy such crucial needs as health, education, and the expansion of the economic system. But why should a socialist system use a distribution system that puts itself in a false, exploitative light?

. This problem could be avoided by having the labor certificate specify the actual hours worked, without a deduction at this point, but having the products subjected to a "sales tax", so to speak. Given the size of the needed deductions, this tax would result in doubling or more the price of goods. The individual producer would be credited with all the hours actually worked, and would probably be used to the idea of taxation from the old days. So this way of making the social deduction is probably not so irritating. Nevertheless, this still amounts to proclaiming the idea that a labor certificate for one hour should be worth goods with precisely a labor content of one hour, and then making a mockery of that idea. It maintains a cumbersome and unnecessary tax system, apparently for the sole purpose of making the social deductions appear to be a huge burden on society, even if the purchasable consumer goods are abundant. And the underlying principle of this system requires that prices should always be precisely proportional to the labor content, even though there is otherwise no necessity for this. Indeed, it might otherwise, for example, be considered useful to price certain goods, beneficial to the health and well-being of the population, particularly low, in order to encourage people to try them out, which would mean that certain other goods would be priced higher than otherwise, so that it all averaged out.

. All these problems vanish if it is accepted that an hour's labor certificate should entitle a worker to a proper proportional share of consumer goods, but not to goods with a labor content of one hour. This would be a violation of the Duhring's principles, since he insists that the "socialitarian" society must operate according to true value. But it poses no problem for Marxian socialism, which sees the law of value as only applying to capitalist society. Nor is it likely to prevent the labor certificate as being seen as a fair exchange of an hour's labor for an hour's worth of goods, since it would be regarded as absurd to use up the fund for the common needs of society in purely individual distribution.

. There is a further problem, however. In discussing the labor certificate, Marx talked of measuring labor "by its duration or intensity". (39) Indeed, depending on the sentiment of the population and on economic conditions, it might be considered necessary and just that some people should get paid a full day's amount for a lesser time of work, either because the work was more intense, or was done on night shift, or was especially disagreeable, or because the producer had some handicaps or special family responsibilities. But it might psychologically be one thing to accept that some worker gets paid the same for a lesser time of work, and another for them to receive a certificate which identifies them as working the full length of time. It might be one thing to accept that some intense or dangerous work deserves more compensation, and another thing to misrepresent it as longer work-time, rather than different work-time.

. If this does become a problem, it could be surmounted by having the labor certificate marked in a conventional unit, rather than the labor hour. A normal hour's work would be worth some specified amount of this unit. Producers would still get compensation proportional to the time and intensity of their work, which is the economic role of the labor certificate. There would still be deductions from the total social product in order to determine the amount of consumer goods, and differences in compensation levels to adjust for intensity of labor and/or other things that the mass of producers see as reasonable, but these would no longer be indicated in an irritating way.

. Thus, ironically, the labor hour might not necessarily turn out to be the appropriate unit for the labor certificate. Even if the labor hour is used, it is likely to refer only to the length of work (adjusted, perhaps, for intensity of work or some other factors), and not to the labor content of what it can purchase. Moreover, goods will not necessarily be priced strictly proportional to their labor content, but other factors might influence pricing. So although the abstract labor-hour might survive in the labor certificate, it might do so only in a modified or even disguised form.

Approximate assessments

. The labor content, at least in a modified form, may also find a niche in facilitating certain rapid, approximate judgments. For example, it is constantly necessary to judge which method of producing something is more suitable. To make a full assessment of this -- taking account of the precise availability of all resources, the full ramifications of producing additional resources, and all relevant factors -- would require considering the entire social plan. For important decisions this should be done. But there are a myriad of small, everyday decisions where such precision is unnecessary. To decide what type of factory to build is one thing; to decide which of several abundant types of fasteners to use at some stage of the production process in that factory is another.

. In minor decisions, one might fall back to giving a large role to evaluating things according to a simple numerical scale. To evaluate this or that variant of a production process, one might evaluate each factor used in production (the direct labor time, each raw material, etc.) according to this scale, and add them together: i. e. the old method of simply adding up the different "prices" involved. What scale should be used? Any scale that evaluates each factor as differing only quantitatively from any other factor is, in essence, a scale of abstract labor time. It is related to the labor content, as like the labor content it would have to add together the figures for the direct labor involved to the figures for the raw materials needed and the machinery used up. Perhaps the labor content itself might be used, but certainly with a number of corrections, such as ensuring that any material that is environmentally dubious or unsafe has its economic "price" increased, to discourage its use as compared with any substitute. (When using a numerical scale, then even though there is no buying and selling, a comparison of the economic "cost" of a material with that of other materials would help decide which to use, and which to economize on.) Any scale so used might conceptually be regarded as a modified labor content. (40)

. Why wouldn't this be an exact way of deciding which productive process to use? For one thing, it would be subject to all the problems of value. Thus, consider further the question of discouraging the use of certain materials. It really isn't sufficient to simply increase the "price" of these materials. This is a marketplace-style solution, and it suffers from all the defects of such solutions. There has to be an overall social control to ensure that the total use of such materials is kept within certain bounds, and to take general measures leading to the elimination of the use of certain materials altogether. This has to be done directly, and not simply through manipulating the definition of the labor content. The use of a single numerical scale, if it is the bottom line of economic calculation, amounts to bringing back the law of value.

. Why, then, bother with approximate methods at all, rather than judging every alternative precisely? This is because it is useful to be able to deal with minor issues rapidly. As well, this method may help make it obvious to anyone at a workplace such things as the use of which materials to minimize, and thus encourage mass initiative in solving a lot of production problems. So long as an overall watch on the economy is also carried out, so that any apparently minor decision that ended up causing a problem could be modified or overruled, the rapid solution of many immediate issues with the help of approximate methods is consistent with central planning.

. Although it is thus conceivable that a modified labor content might be used to help make a myriad of minor productive decisions, the various workplaces will not be connected by the buying and selling of products. Among other things, this means that it will be possible for different industries to use different scales in judging productive processes. It is, for example, quite possible that the same materials may have different significance in different industries: depending how one uses a material, its safety and even environmental qualities may differ. Since the supposed "prices" really aren't prices, but simply an approximate measure of the economic cost of using this or that good, there is no need for them to be consistent across the whole economy. Thus the labor content may vanish as a consistent measure for the economy as a whole, but retain some use in modified forms in different places in the economy. But decisions made on the basis of the labor content would always be subject to being overruled by decisions made according to overall social planning.

The end of the law of value

. But if the abstract labor hour may retain a subordinate and approximate use in some aspects of socialist economy, it will have lost its overall significance. Many large decisions will directly trample on the labor content. For example, the amount of effort to be put into education, culture, environmental protection, child care and other issues which the population finds important will no doubt exceed anything that makes sense according to value calculation. With regard to overall economic planning, direct calculation of the material amounts of different goods (including living labor) will replace the labor content. While in those niches which the abstract labor hour retains, it will only be present in modified and distorted forms. Thus the reign of the law of value, the law of the abstract labor hour, will come to an end.


(1) Marx, Capital, vol. I, Chapter I. Section 4. "The Fetishism of Commodities and the Secret thereof", the last paragraph of this section, which occurs on pp. 95-6 in the 1906 Kerr edition of Capital, as reprinted by "The Modern Library". This passage continued as follows: "Now listen how these commodities speak through the mouth of the economist. 'Value'--(i.e. , exchange value) 'is a property of things, riches'--(i.e.,, use-value) 'of man. Value, in this sense, necessarily implies exchanges, riches do not. ' 'Riches' (use-value) 'are the attribute of men, value is the attribute of commodities.' A man or a community is rich, a pearl or a diamond is valuable. .  . A pearl or a diamond is valuable' as a pearl or diamond." (Ibid., parenthetical remarks are as in the original) Marx commented ironically: "So far no chemist has ever discovered exchange value either in a pearl or a diamond. The economical discoverers of this chemical element .  .  . find however that the use-value of objects belong to them independently of their material properties, while their value, on the other hand, forms a part of them as objects. What confirms them in this view, is the peculiar circumstances that the use-value of objects is realised without exchange, by means of a direct relation between the objects and man, while, on the other hand, their value is realised only by exchange, that is, by means of a social process."

. An object has value only when it is produced in a certain social system, that of commodity production, which only exists under certain historical conditions. Yet value is seen as an inherent property of the object, while the truly-inherent, material properties of the object appear as something dependent on chance social circumstances and changing individual assessments. Or, as Marx said a few pages earlier, "the social character of men's labour appears to them as an objective character stamped upon the product of that labour; because the relation of the producers to the sum total of their own labor is presented to them as a social relation, existing not between themselves, but between the products of their labour. .  .  . it is a definite social relation between men, that assumes, in their eyes, the fantastic form of a relation between things. .  .  . This I call the Fetishism which attaches itself to the products of labor, as soon as they are produced as commodities .  .  ." (Ibid., p. 83). This "fantastic form" is precisely value, which appears to relate one object to another independent of human intervention. (Return to text)

(2) Capital, vol. I, Chapter III, Section 1, footnote 1. (Text)

(3) Engels to Kautsky, 20 Sept. 1884, as cited in Charles Bettelheim's Economic Calculation and Forms of Property, translated by John Taylor, Monthly Review Press, 1975, p. 30. (Text)

(4) Charles Andrews, From Capitalism to Equality: An Inquiry into the Laws of Economic Change, p. 313. (Text)

(5) Capital, vol. I, chapter 1, section 4, p. 90. (Text)

(6) See CV, vol. 6, #3, p. 33, col. 1 (which cites Marx's The Poverty of Philosophy, ch. 1, sec. 2, p. 49) and p. 35, col. 1 (which cites Engels' letter to Kautsky of 20 Sept. 1884, as quoted in Charles Bettelheim's Economic Calculation and Forms of Property, Monthly Review Press, 1975, p. 30). (Text)

(7) Capital, vol. III, p. 851 (the very end of Chapter XLIX, "Concerning the Analysis of the Process of Production"). (Text)

(8) See the book Socialism: Stalinist or Scientific (The Marxist Theory of State Capitalism), which is a translation by Roy West of a collection of articles written by Hiroyoshi Hayashi and Kennichi Suzuki of the Socialist Workers Party of Japan. (I give the names of Hayashi and Suzuki in Western-style, with the family name last, while the book gives these names Japanese-style, family name first.) The quotes from Hayashi are from pp. 112 and 203. The SWP (Japan) is fond of clarifying that it is not part of the international SWP trend based on the Trotskyism of Tony Cliff, and prior to 1984 it was called the Marxist Workers League. I hope to review this book at a later time. (Text)

(9) Marx, Grundrisse: Foundations of the Critique of Political Economy (Rough Draft), Translated and with a Foreword by Martin Nicolaus, "The Chapter on Money", pp. 172-3, emphasis as in the original. (Text)

(10) See Communist Voice (vol. 7, #1), May 1, 2001, pp. 13-16. (Text)

(11) Capital, vol. I. , Chapter I, section 1, pp. 44-45, Kerr edition. (Text)

(12) Capital, vol. II, Ch. XVI, Section III. "The Turnover of the Variable Capital from the Social Point of View", pp, 318-9 (Progress Publishers, Moscow, 1971 edition). (Text)

(13) Capital, vol. II, Part II, Chapter XX "Simple Reproduction", Section I, p. 398. (Text)

(14) Frederick Engels, Anti-Duhring, Part III, Chapter IV. , p. 338, International Publishers edition. (Text)

(15) See the Appendix, "From each according to his ability, to each according to his work" in "State ownership is not sufficient to define the transitional economy: Reply to Sal", Communist Voice, vol. 5, #3, 9 October 1999, pp. 38-42. (Text)

(16) Capital, vol. I, section 4 "The Fetishism of Commodities and the Secret thereof", pp. 90-1, Kerr edition. (Text)

(17) Capital, vol. II, at the end of Ch. XVIII, p. 362. (Text)

(18) Frederick Engels, Anti-Duhring, Part III. Socialism. Chapter 4. Distribution, p. 331, International Publishers edition. (Text)

(19) Anti-Duhring, pp. 335, 337-8. (Text)

(20) Anti-Duhring, p. 333. (Text)

(21) Anti-Duhring, pp. 336-7. (Text)

(22) Anti-Duhring, p. 337. (Text)

(23) Strictly speaking, the atomic mass unit is a measurement of mass, not weight, but the distinction between the two is irrelevant for this discussion. Numerically, the amu is equal, in grams, to approximately 1. 67 times ten to the minus twenty-fourth power, or . 00000000000000000000000167 grams. Also, chemistry now defines the atomic mass unit not as the mass of a hydrogen atom, but as one-twelfth the mass of a single atom of the most common isotope of carbon, namely, carbon 12. This leaves the atomic mass number of hydrogen as approximately 1. 008, which, while no longer precisely 1, is still very close to 1. (Text)

(24) In modern bourgeois economics, the disregarded costs--which affect other people but don't bother the capitalist making the product--are called "externalities". Positive effects that don't affect profits and value are also called "externalities". For example, the overall benefit to commerce and public life of a functioning post office is not reflected in the profit-and-loss statement of the postal authorities. (Text)

(25) Anti-Duhring, p. 331. Engels points out that, in Duhring's system, it was mainly in relations between communes and the outside world, or between different individuals inside the communes, that the gold and silver really would function as money. This then reacts back on, and undermines, the way relations between communes and their members are supposed to take place. (Text)

(26) Capital, vol. I, Chapter I, Section 3, Subsection 3. "The Equivalent Form of Value", p. 66, Kerr edition. (Text)

(27) Socialism: Stalinist or Scientific (The Marxist Theory of State Capitalism), p. 203, the parenthetical remarks are Hayashi's. (Text)

(28) Although Hayashi cites this passage in "Socialism": Stalinist or Scientific, pp. 111-2, it is reproduced above as in Letters to Dr. Kugelmann by Karl Marx, pp. 73-4, and two additional sentences (the first and last ones) have been added beyond the portion cited by Hayashi. The emphasis is as in the original. (Text)

(29) See Joseph Seymour's article "The Poverty of Maoist Economics: The Reactionary Utopian Doctrines of Bettelheim/Sweezy" in the pamphlet "Trotskyism versus Maoism: Why the U.S.S.R. is Not Capitalist", pp. 31-2. (Text)

(30) Capital, vol. III, Part II, Chapter X. "Equalisation of the General Rate of Profit Through Competition. Market-Prices and Market-Values. Surplus-Profit", pp. 187-8, Progress Publishers edition. (Text)

(31) This point is argued in the section "The transitional economy" of the article "State ownership is not sufficient to define the transitional economy" in Communist Voice, vol. 5, #3, Oct. 9, 1999, p. 37. A brief comparison of some of the characteristic institutions of a transitional society to both capitalist and socialist institutions, showing that the transitional economy is not simply a mixture of capitalism and socialism, is given as criticism of Preobrazhensky's idea of a "commodity-socialist system of economy" in the article "Preobrazhensky--ideologist of state capitalism (Part 1)" (see Communist Voice, vol. 4, #2, 20 April 1998, p. 40). (Text)

(32) Communist Voice, 10 August 1997, pp. 11-17. This article was part 3 of the series "State capitalism, Leninism, and the transition to socialism". (Text)

(33) See "The anarchy of production beneath the veneer of Soviet revisionist planning" in Communist Voice, March 1, 1997. This article shows how each-man-for-himself competition took place beneath the formal unity of the Soviet state sector. Even more dramatic with regard to the contrast between pretense and reality, because it discusses a wider array of economic and social policies, is Mark's article "Cuba in the 1960s: Bureaucrats head to 'communism' without the workers" in Communist Voice, 20 April 1998. It deals with the period when the Castroist regime claimed to be implementing a much more communistic policy than the Soviet Union. From the purely formal point of view, it was. But since the workers were kept in as passive a position as those in the Soviet Union, the economy stagnated and the communist phrases ended up as utter hypocrisy. To alleviate the resulting crisis, Cuba turned in the 1970s to massive copying of Soviet economic and political forms. In 1986, the Castroist regime reversed course again and claimed that it was rectifying the evils that came from copying the Soviet system. But the measures taken had nothing to do with developing any real initiative or control by the working class. The regime wasn't moving closer to socialism, but was simply cloaking in empty "communist" phrases its policies of the moment, which included moving towards greater reliance on the market. See Mark's, "Did Castro steer Cuba towards socialism in the late 1980s?" in Communist Voice, 15 December 1996. (Text)

(34) This subject is dealt with in some detail in a debate over the significance of the state sector in the transition to socialism that was carried in Communist Voice, vol. 5, #3, October 9, 1999. See in particular "Sal's capitalism without the consequences of capitalism" on pages 29-36. Sal sought to show that profit-making, value, and exploitation could be regarded as completely different in their significance, depending on whether they appeared under capitalism or in the transitional period. Under capitalism, they were bad, and under socialism they were supposed to be good. (Text)

(35) The Leningrad Institute of Philosophy under the Direction of M. Shirokov, A Textbook of Marxist Philosophy, translated by A. C. Moseley, revised translated and editing by John Lewis, Proletarian Publishers, Section II, Chapter III. "Mutual Penetration of Opposites", p. 167 (Text)

(36) Capital, vol. I, section 4 "The Fetishism of Commodities and the Secret thereof", pp. 90-1, Kerr edition. (Text)

(37) Critique of the Gotha Program, section 1, in the passage commenting on paragraph three of the Gotha Program. (Text)

(38) The terms "gross product" and "gross income" are used in accordance with Marx's usage in Capital, vol. III, Part VII, Chapter XLIX, p. 840, Progress Publishers edition. This is consistent with Marx's use of "gross social product" in Critique of the Gotha Program. Neither term corresponds to the "gross national product" or "gross domestic product" of modern bourgeois economics. Note that Marx reiterates in many places that the annual gross social product is greater than the labor expended during that year. For example, he writes that ".  .  . the entire product of a year is the product of the useful labour of that year. But the value of this total product is greater than that portion of the value in which the annual labour, the labour-power expended during the current year, is incorporated. The value-product of this year, the value newly created during this period in the form of commodities, is smaller than the value of the product, the aggregate value of the mass of commodities fabricated during the entire year. The difference .  .  . is value transferred to the annual product from value existing prior to it, .  .  . a value which may originate from the value of means of production which came into the world the previous year or in a number of years even previous to that. It is by all means a value transferred from means of production of former years to the product of the current year." (Capital, vol. II, Ch. XX, the first paragraph of Section X, p. 441, Progress Publishers edition, emphasis as in the original.) Of course, this refers to capitalist production, not socialist production. But replace the "value" by the "labor content", and it applies as well to socialist production, if evaluated in terms of the abstract labor hour. Finally, I have followed the numerical examples in vol. II of capital in letting the labor content transferred from the past be larger than the labor added in the current year. I am not sure what would be a realistic figure for a current economy, but the size of the deduction from the gross social product for the replacement of means of production doesn't affect the point I am making, since the result of this deduction is simply that the gross income and the labor added during the current year balance. (Text)

(39) Ibid. (Text)

(40) Note however that in this sense, the "prices of production" discussed in volume III of Capital, whose difference from value has caused so much debate about the validity of the law of value, are simply a modified form of the labor content. The "price of production" is higher than the value for goods which require a lot of constant capital compared to variable capital (i.e., "capital-intensive" goods in the terms of bourgeois economics), and lower than the value where there is a smaller proportion of constant capital ("labor-intensive" goods). In this sense, the price of production puts more weight than the labor-content does on labor already materialized into raw materials, machinery or other means of production, and less on living labor. (Text)

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