This article was first posted on this website on 2008-10-27 and is being re-posted as a "source article" for a section of the author’s new book DAOIST-LEGALIST SOCIALISM: One with real Chinese characteristics, §2-1(3) Three-source theory of commodity value.
DAOIST-LEGALIST SOCIALISM: One with real Chinese characteristics
(Table of contents)
THE HAND VISIBLE
By the author
For one half of hours waking
and five sevenths of days living
we bow our heads
to the meal plate
held in an alien hand
And every four times or two
three hundred sixty five days
we dance one dance
to the flute enchanting
held in the same hand
9/22/04, San Francisco, USA
Preface
With the collapse of the USSR-East Europe Camp and the end of the cold war, a planned socialist economy is no longer attractive; but this does not imply that capitalism is infallible while the ideal of socialism has come to bankrupts and human history will end with the globalization of capitalism. In the realm of political economy, discussions on and practice in market socialism, economic democracy, producers’ co-op, workers’ participation in firm governance, and mixed public-private ownership are manifestations of explorations and experiments in a non-capitalist and non-planned new economic order – a trend existing in both the East and the West (see, for instances, Schumacher 1973, PP. 290-312; Bardhan and Roemer 1993; Geisler and Daneker 2000; Dow 2003; Blair and Roe 1999; Duan, 2001, PP. 328－350).
New practice needs the guidance of a new theory, which should be different both from traditional socialist theories and from current capitalist ones. The essential distinction between socialism and capitalism should be in the ownership of materials of production, that is, between ownership by a social public and that by private capital, and in the production relationship and economic order based on the ownership pattern. And the issue of the source of commodity value is the heart of an ownership theory. Marx’s labor theory of value has been the foundation of the world socialist movement’s efforts to establish a public ownership and with it a brand new economic and social order. But, with the development of historical conditions and that of human practice and understanding, it has become necessary to re-think about the “source of value” issue. This thesis is just intended to, starting from what our predecessors have achieved, reveal all the sources of the use value of all social products and, based on this new value theory, propose a more justifiable pattern of ownership.
I. THE THREE-SOURCE VALUE THEORY
I-1. Utility Value vs. Exchange Value
The value of all commodities is manifested in two variant expressions: “utility value” and “exchange value”.
“utility value” refers to the commodity’s degree of usefulness in satisfying a specific need of the user, which is a manifestation of its certain innate quality (such as water’s usefulness in quenching thirst as is inherent in its inner make-up). This innate quality, as has originally been inherent in itself before it enters the market for exchange, would not vary no matter whether it’s abundantly available or running short on the market. Also, this innate utility value is hardly measurable without a comparison with other commodities on the market. When Jevons, the 19th century British economist, said "value depends entirely upon utility" (Dobb 1973, P 106), he was obviously talking about “utility value”.
“Exchange value”, then, is the rate of exchange or price ratio between different commodities, a quantified measurement of one commodity’s market value against another. No quantification of value is possible without a comparison or exchange with some other commodity. Therefore, besides its innate useful quality as the basic decisive factor, a commodity’s exchange value is also affected by its supply and demand conditions on the market. When economists are saying that a commodity’s value is decided by both its usefulness and degree of scarcity combined, they must actually be talking about its “exchange value”.
Nevertheless, no matter how the exchange value shifts, it is first of all rooted in the commodity’s innate useful quality, i.e., its utility value, around which its exchange value fluctuates as the center line. That is to say: utility value is the basis for exchange value. The former finally determines the latter in its existence and magnitude; while the latter is only a variant of the former which is contingent on the ever-changing market situation. In a word, the use value is fundamental while the other only incidental. Therefore, when we talk about the source(s) of value, it should be meant to be that or those of use value, i.e., where the utility, the innate quality of usefulness, of all commodities comes from.
According to the Columbia Encyclopedia, Sixth Edition, "value, in economics" means the“worth of a commodity in terms of other commodities, or in terms of money (see *price*)”. This tells us that the word “value”, as used in economics, usually means “exchange value”. As a matter of fact, in the history of economics, most discussions about commodity value have been centered around exchange value and few have touched upon the issue of utility value and its source(s) (as seen in, for instances, Dobb 1973, Burgstaller 1994, Freeman, Kliman, and Wells 2004).
I-2. The Three Sources of Value
Past discussions on the value of social products generally attribute it to human labor as the root source. But the concept of “labor” has been changing in the history of economics, as was well summarized by some scholars: “The treatment of labor as the sole source of value, developed in England by Locke and later by David Ricardo to aid the emerging capitalist proprietors in their struggle with the landed interests, was appropriated later by socialists in the British working class, leading to its hasty abandonment and rejection by supporters of the bourgeoisie.”( Bowles and Gintis 1986, P.162. ). This shows that capital owners’ business activities were also included in the concept of “labor” at the beginning. Even Marx, while criticizing capitalists’ exploitation of workers, did not deny their contribution to the creation of value by their managing activities. Only those self-styled “Marxist” editors of political economy textbooks during China’s leftist reign denied this fact.. According to them, capitalists’ work cannot be included as labor. Marx, however, did not count as “labor” scientists’ and technologists’ work in the past which had made higher production rate possible, thus leading to the paradoxical conclusion that “the higher the production rate,…the lower the value of products”. This was pointed out by a Chinese-born scholar, who asserted that scientists’ and technologists’ mental work should also be counted as “labor”. ( Chao 1991, PP. 26-27. ) Deng Xiaoping’s statement that “Science and technology is also a production force” should have the same implication.”
To sum up, economists have up till today attached different connotations to the word “labor” but generally shared the following two inadequacies: (1) Their concept of labor does not cover all kinds of actually existing forms of labor which contribute to the creation of value. (2) They (except a very few of them, see below) are generally not aware of the fact that there are other sources of value except human labor. To mend these inadequacies, here is a comparatively more nearly complete and new set of viewpoints comprising a “Three-Source Value Theory”:
1. The Nature-endowed potential value hidden in the primary raw materials for production is the primary source of value of all products.
This view has been expressed before by some other economists but was ignored by the mainstream science of economics. For instance, Alfred Marshall said, “Man cannot create material things – his efforts and sacrifices result in changing the form or arrangement of matter to adapt it better for the satisfaction of his wants – as his production of material products is really nothing more than a rearrangement of the matter which gives it new utilities, so his consumption of them is nothing more than a disarrangement of matter which destroys its utilities.” The combination of the two words “new utilities” suggests that utility value has already been existing in natural matter before it is “rearranged” by human labor, but this suggestion was generally overlooked by economists.（Daly 1996, PP. 62-63）Later, however, the Romanian scholar Nicholas Georgescu-Roegena, a student of Schumpeter’s, explicitly pointed out the “primacy of nature’s value added”（Daly 1996, P. 196）。
2. The collective wisdom of all humanity accumulated through all generations, as embodied in tools, equipments, skills, and processed materials of production, is the second important source of value of all commodities, especially of modern high-tech ones.
3. Current labor of human individuals, labor in a broader sense, which includes:
a. On-the-spot labor of front-line workers;
b. Past-labor-turned just capital (for “just capital” see below), such as savings from wage income used as current investment;
c. Creative labor of scientists and technologists as embodied in new inventions and innovations (based, first of all, on accumulated collective human wisdom, of course);
d. The organizing, operating and risk-taking work of entrepreneurs of business ventures and/or of new product developers;
e. The work of managers running a business;
f. The work of government workers supervising and servicing society on a macro scale, which is also an indispensable part of social production;
g. The work of cultural and educational workers for the personal development of all laborers and all people;
h. The supporting work of laborers’ family members for maintaining their working ability and for raising the young and assisting the old as future and past providers of labor.
I-3. Nature-Endowed Potential Value
The Nature-endowed potential value hidden in all natural materials which was, is and will be used by humanity is the first important, basic and primary source of value of all social products.
Just imagine: In the primitive times before humans learned to tame animals and till the land, they could only, with empty hands, collect wild plant fruits and seeds and hunt wild beasts and birds for food. At that time, they were still on a par with all animals, but those fruits, seeds, and animals had “life-or-death” values for them. Where did those values come from then? Their collecting and hunting activities were not essentially different from those of other animals, that is to say, not belonging to the category of “labor” as that after they had learned to breed animals and sow plants. Obviously, those fruits, seeds and animals had in themselves potential value for sustaining the lives of all humans and other animals. The collecting and hunting activities of humans were only realizing those potential values, but not adding any new value to them, just as our mouth’s activities of chewing and swallowing of food is not considered as labor for not adding value to your food.
Later on, humans learned to breed animals and cultivate plants as their mind improved under the pressure of rough natural environments. People began to use tools and improve the qualities of their plants and animals, thus raising the latter’s value to them. Only then did human labor begin to add new value to those Nature-endowed potential values hidden in the plants and animals. Thus, Nature-endowed values and human labor values began to mix together in such a seamless way that later people almost forget the truth that labor only adds value to natural primary values but is not itself the primary value source
The above truth applies to, besides plants and animals, all other materials used by people: land, mineral resources, forests, grassland, rivers-lakes-seas-oceans with all useful living things and all other uses over and under the water, all wild plants and animals on earth, and also natural clean air, wind power, unblocked sunshine, natural sceneries, etc., etc.,. and the whole eternally self-regenerating biosphere. No matter whether they are ready for consumption without human processing or needs processing, whether as raw materials for processing or as resources for sites, tools, power sources or other auxiliary materials for production – all have Nature-endowed potential primary value hidden in them, with no exception. Their natural value to humanity can never be measured, calculated, indicated by any numbers, any math equations, any economic theories! We should not, however, ignore the pre-existence of their value just because they cannot be measured, just as one cannot ignore the existence of one’s own head just because one cannot measure its weight!
In a word, all useful natural materials with their value to humans are, in Western religious terms, creations of God, or, in traditional Chinese secular terms, products of Nature. Actually, in the final analysis, humans themselves with their labor power are nothing but products of Nature. Therefore, these natural values should in principle belong jointly to all mankind of all generations to come on earth, not to any individual persons, any groups, any regional communities (including nation-states). This view has been shared by many outstanding thinkers in the East and the West, in the past and the modern times (see later).
It is an obvious fact that all social products are joint creations of Nature and human labor, a truth not too profound to understand. This revelation of the truth here is just a continuation of the millenniums-old traditional Chinese thinking about the oneness of Humanity with Heaven. This simple and self-evident truth has been turned upside-down ever since the European Enlightenment, when anthropocentrism (an expansion of human individual self-centeredness) based on the Human-versus-Nature antagonism came to be the mainstream of Western socio-philosophical thought and spread all over the world, denying the fact about Nature’s favor and overlooking everything as if man were God. It is this turning upside-down, this denying that has led to the reductionist attribution of value sources to mere individual human labor or its master, the capital, to justify the private ownership of the means of production (or ownership by a narrower “public” of nation-states) and the domination by usurpers of means of production over the management of production and distribution of profits. Once the truth about all means of production bearing Nature-endowed primary value is revealed to the whole world, any philosophical apology for the capital’s private ownership will have no ground to stand on.
I-4. Value of Collective Human Wisdom
No production can proceed without material means and technological skills. Means of production contains, besides hidden potential value from Nature, also the value of collective wisdom of all humanity; while production technology contains, besides the current creative mental labor value of individual inventors and innovators, also collective human wisdom inherited from the long past. Human wisdom includes metaphysical insight as well as knowledge about the physical world, which serves as a basis for current inventions and innovations. Knowledge to mental (and manual) labor is both similar to and different from material means of production in its relation to labor in the following ways:
The similarity: Past accumulated collective knowledge is the basic “raw material” from which to develop new knowledge through mental labor in applying old knowledge to new practice and research, just as natural physical material is the basis from which new products are developed and to which new values added through labor. Therefore, past accumulated collective knowledge and the new results of creative labor of current scientists and technologists, just like Nature-endowed value in physical materials and materialized labor value, are inseparable in practice while they should be separated in scientific theorizing.
The difference: Knowledge and wisdom cannot be used up as physical materials would during production, but would accumulate, develop and grow in scope and depth. Knowledge and wisdom inherited from different regional and cultural communities would mix, interpenetrate and enrich each other, develop together and become inseparable and shared spiritual wealth belonging to the whole humanity. Today’s high-tech and whole spiritual civilization would not have been possible but for the continual and co-operative efforts of generation after generation of all peoples of the world working like a collective relay team. Such collective wisdom is embodied in people’s productive labor, manual or mental, and in the materials and process design for production as well.
Like the Nature-endowed value in all materials, the value of collective wisdom to people can never be measured, calculated, indicated by any numbers, any math equations, any economic theories, either! We should not, however, ignore the existence of their value just because they cannot be measured, just as one cannot ignore the existence of one’s own head just because one cannot measure its weight!
Furthermore, the value of collective wisdom should also in principle belong jointly to all mankind of all generations to come on earth, not to any individual persons, any groups, or any regional communities (including nation-states). This view has also been shared by some outstanding thinkers.(see later.) This truth has been concealed by the atomistic individualist worldview and methodology of Western economics, which regards the society as an aggregation of isolated individual humans with only external mechanic connections, but no internal, organic, socio-historical interpenetration and interdependence and which serves to cover up the injustice of a few people or groups’ exclusive possession of such values
In a word, the value of all social products comes from the above-said three sources. But under the system of capitalist ownership of means of production, the whole value from Nature and collective human wisdom, and a large part of value from individual employed labor, together with the extra added value created through the integration of all the above three kinds of original value has been unjustly usurped by capital owners. The following parts of this thesis will discuss how capital owners swallowed the whole value from Nature and from collective human wisdom which should belong to all mankind, how originally just capital generates unjust capital under the capitalist system with employed labor, how unchecked unjust capital has grown from economically to also politically and culturally dominating forces of the society and from local to national and even global hegemonic forces and finally from originally a socially positive force to a major perpetrator of world poverty, of wars and other disasters and calamities.
A New Political Economy: A theory of three sources of value & 3-tier joint community ownership (2): Capital’s hegemony over three sources of value
A New Political Economy: A theory of three sources of value & 3-tier joint community ownership (3): Origin of unjust capital
A New Political Economy: A theory of three sources of value (4): Ugly consequences of unchecked expansion of unjust capital
References:
Duan, Zhongqiao, 2001, Dang Dai Guo Wai Si Chao (Current social trends of thought abroad), Chinese People’s University Press
Bardhan, Pranab K. and John E. Roemer, eds., 1993, Market socialism: The current debate, Oxford University Press, New York.
Blair, Margaret M. and Mark J. Roe, eds., 1999, Employees and corporate governance, Brooking Institution Press, Washington, D.C..
Bowles, Samuel and Herbert Gintis, 1986, Democracy and capitalism:Property, community, and the contradictions of modern social thought, Basic Books, New York.
Burgstaller, Andre, 1994, Property and prices: Toward a unified theory of value, Cambridge University Press.
Chao, Tzu-yuan, 1991, New labor theory of value, Verlag an der Lottbek.
Daly, Herman E., 1996, Beyond growth, Boston, Mass., Beacon Press.
Dobb, Maurice, 1973, Theories of value and distribution since Adam Smith: Ideology and economoc theory, Cambridge University Press.
Dow, Gregory K. , 2003, Governing the firm: Workers’ control in theory and practice, Cambridge University Press.
Freeman, Alan, Andrew Kliman, and Julian Wells, eds., 2004, The new value controversy and the foundations of economics, Cheltenham ; Northampton, MA : Edward Elgar.
Geisler, Charles and Gail Daneker, eds., 2000, Property and values: Alternatives to public and private ownership, Island Press, Washington, D.C..
Schumacher, E.F. , 1973, Small is beautiful: Economics as if people mattered, Harper perennial.
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