Notes [Smith, Sweezy]

April 19, 2009

Okay. For purposes of clarification, principally self-clarification, I’m going to be working through the early sections of The Wealth of Nations – the sections that develop Smith’s version of the labour theory of value. This is basically note-taking stuff, so don’t expect scintillating reading.

Here’s the opening paragraph of Smith’s Chapter V:

Every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniencies, and amusements of human life. But after the division of labour has once thoroughly taken place, it is but a very small part of these with which a man’s own labour can supply him. The far greater part of them he must derive from the labour of other people, and he must be rich or poor according to the quantity of that labour which he can command, or which he can afford to purchase. The value of any commodity, therefore, to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities.

That “therefore” is, I think, question-begging. There’s a vast argumentative leap between sentences 3 and 4. Fortunately Smith goes on to explain himself.

The real price of everything, what everything really costs to the man who wants to acquire it, is the trouble and toil of acquiring it. What everything is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people. What is bought with money or with goods is purchased by labour as much as what we acquire by the toil of our own body. That money or those goods indeed save us this toil. They contain the value of a certain quantity of labour which we exchange for what is supposed at the time to contain the value of an equal quantity. Labour was the first price, the original purchase-money, that was paid for all things. It was not by gold or by silver, but by labour, that all the wealth of the world was originally purchased; and its value, to those who possess it, and who want to exchange it for some new productions, is precisely equal to the quantity of labour which it can enable them to purchase or command.

Here we’re getting to the real stuff. The key lines:

1) “The real price of everything, what everything really costs to the man who wants to acquire it, is the trouble and toil of acquiring it.”

2) “Labour was the first price, the original purchase-money, that was paid for all things.”

3) “its value… is precisely equal to the quantity of labour which it can enable them to purchase or command.”

We have here, I think, the core of an important emotional/physical truth: what we value is what we are willing to give things up for; and the most basic thing we can give up is ourselves. We give up our lives – and we give up portions of our lives, in the form of time. There is a connection between value and life-time, body-time.

Wealth, as Mr. Hobbes says, is power. But the person who either acquires, or succeeds to a great fortune, does not necessarily acquire or succeed to any political power, either civil or military. His fortune may, perhaps, afford him the means of acquiring both, but the mere possession of that fortune does not necessarily convey to him either. The power which that possession immediately and directly conveys to him, is the power of purchasing; a certain command over all the labour, or over all the produce of labour which is then in the market. His fortune is greater or less, precisely in proportion to the extent of this power; or to the quantity either of other men’s labour, or, what is the same thing, of the produce of other men’s labour, which it enables him to purchase or command. The exchangeable value of every thing must always be precisely equal to the extent of this power which it conveys to its owner.

This is good stuff. Wealth is power. Not political power – though it can often enable access to that too – but economic power, power produced by and deployed through the institution of the marketplace. Wealth, because it is used to purchase commodities, is power over the producers of those commodities. If I purchase a car, then through the many mediations of exchange and production, people are working for me – working to make me a car. Or they have been working – the institutions of money and the market dissociate the command from the obedience: the obedience precedes the command, and this dissociation, this distancing, permits the illusion to arise and be maintained that a power relationship is not, fundamentally, what we are dealing with here. Furthermore, this dissociation of command and obedience must be maintained through power-dynamics that are entirely separate from the ‘abstract’ power of money – from the power-relationship of consumer-producer: a social system of other power-dynamics must be in place for money to possess this power in the first place – for “the power of purchasing” to be a real power, over real people. For my purchasing-commands to be obeyed, pre-emptively, larger social power-forces must create a specific social system, in which this use of power is ordinary, everyday, unremarked.

But now we start hitting the problems:

But though labour be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated. It is often difficult to ascertain the proportion between two different quantities of labour. The time spent in two different sorts of work will not always alone determine this proportion. The different degrees of hardship endured, and of ingenuity exercised, must likewise be taken into account. There may be more labour in an hour’s hard work than in two hours easy business; or in an hour’s application to a trade which it cost ten years labour to learn, than in a month’s industry at an ordinary and obvious employment. But it is not easy to find any accurate measure either of hardship or ingenuity. In exchanging indeed the different productions of different sorts of labour for one another, some allowance is commonly made for both. It is adjusted, however, not by any accurate measure, but by the higgling and bargaining of the market, according to that sort of rough equality which, though not exact, is sufficient for carrying on the business of common life.

I won’t keep quoting at length – but Smith goes on to say that “money has become the common instrument of commerce” and that money, not labour, therefore comes to be the intuitive measure of value.

Jump completely now. Jump to Sweezy’s Theory of Capitalist Development, picking up at the start of Chapter III – ‘The Quantitative Value Problem’. Smith has formulated the problem: it is extremely difficult to see how different labouring activities can be compared. Sweezy picks this up:

labour more skilled than average (or ‘simple’) labour must have a correspondingly greater power of producing value. … The quantitative relation between an hour of simple labour and an hour of any given type of skilled labour is observable in the relative values of the commodities which they produce in one hour. This does not mean, of course, that the relation between two types of labour is determined by the relative values of their products. To argue in this way would be circular reasoning. The relation between the two types of labour is theoretically susceptible to measurement independently of the market values of their products.

I do not see that circular reasoning is a problem in economic analysis of this kind. Sweezy is claiming here that labour’s power of producing value is analysable independently of the market value of its products. In other words – economic value is analysable independently of market value.

Okay. Sweezy has established that value is analysable entirely in terms of labour time, and can be analysed through the analytic reduction of all kinds of labour to simple labour. Now we get back to Smith, via Sweezy.

[Sweezy:] Let us first enquire under what conditions exchange ratios would correspond exactly to labour-time ratios. Adam Smith’s famous deer-beaver example, which was also used by Ricardo, provides a convenient starting point.

[Quoting Smith, start of Chapter VI:] “In that early and rude state of society which precedes both the accumulation of stock and the appropriation of land, the proportion between the quantities of labour necessary for acquiring different objects seems to be the only circumstance which can afford any rule for exchanging them for one another. If among a nation of hunters, for example, it usually costs twice the labour to kill a beaver which it does to kill a deer, one beaver should naturally exchange for or be worth two deer. It is natural that what is usually the produce of two days or two hours labour, should be worth double of what is usually the produce of one day’s or one hour’s labour.”

[Sweezy continues:] Adam Smith’s hunters are what Marx would have called simple commodity producers, each hunting with his own relatively simple weapons, in forests which are open to all, and satisfying his needs by exchanging his surplus catch against the products of other hunters. Why, under these circumstances, would deer and beaver exchange in proportion to the quantity of time required to kill each? It is easy to supply a proof for what Adam Smith took for granted.

A hunter by spending two hours of his time can have either one beaver or two deer. Let us imagine now that one beaver exchanges for one deer ‘on the market’. Under the circumstances any one would be foolish to hunt beaver. For in one hour it is possible to catch a deer and thence, by exchange, to get a beaver, whereas to get a beaver directly would require two hours. Consequently this situation is unstable and cannot last. The supply of deer will expand, that of beaver contract until nothing but deer is coming on the market and no takers can be found. Following this line of reasoning it is possible to show by exclusion that only one exchange ratio, namely one beaver for two deer, does constitute a stable situation. When this ratio rules in the market, beaver hunters will have no incentive to shift to deer hunting, and deer hunters will have no incentive to shift to beaver hunting. This, therefore, is the equilibrium ratio of exchange. The value of one beaver is two deer and vice versa. Adam Smith’s proposition is thus demonstrated to be correct.

To get this result two implicit assumptions are necessary, namely, that hunters are prepared to move freely from deer to beaver if by so doing they can improve their position; and that there are no obstacles to such movement. In other words, the hunters must be both willing and able to compete freely for any advantages which may arise in the course of exchange by shifting their labour from one line to another. Given this kind of competition in a society of simple commodity production, supply and demand will be in equilibrium only when the price of every commodity is proportional to the labour time required to produce it. Conversely prices proportional to labour times will be established only if the forces of competitive supply and demand are allowed to work themselves out freely. The competitive supply-and-demand theory of price determination is hence not only not inconsistent with the labour theory; rather it forms an integral, if sometimes unrecognized, part of the labour theory.

Sweezy’s version of the labour theory of value thus has three pillars.

1) Labour and labour alone produces value. The value of commodities is the amount of simple labour required to produce them.

2) There is a measurable simple given-value-producing labour time, into which all labour can be analysed, and which can be ascertained entirely independent of its products’ market value.

3) Market value will nonetheless tend to converge with labour value, provided the economic structure of society permits free movement of labour between industries.


1) Value has always and everywhere been produced by labour and only by labour.

2) Only in a form of society where labour can move freely between industries will market value be regulated by actual value.

Why would labour and only labour produce value? Smith provides an explanation for this: labour is the original purchase-money for all things. Everything comes back to the physical human body – and the exchange of this body, or of this body’s activities, for all other human goods.

The only true money is flesh.

Or: Flesh has been re-imagined in the image of money – in the image of the commodity.


PR Question

April 18, 2009

Was it a) clever, or b) not clever of the Metropolitan Police to call the G20 operation “Glencoe”?

“Though the command of superior officers be very absolute, yet no command against the laws of nature is binding; so that a soldier, retaining his commission, ought to refuse to execute any barbarity, as if a soldier should be commanded to shoot a man passing by inoffensively, upon the street, no such command would exempt him from the punishment of murder.”

London Pride

April 8, 2009

I was very proud of everyone involved in the policing of the City this week. It was a truly joined up operation between the City of London, Metropolitan and British Transport Police, assisted by Sussex and Hampshire police.

The success of the operation is shown in the excellent feedback we have received from across the Square Mile.”