# Shop Talks on Economics/Chapter 3

III.
Prices.
The value of a commodity is determined by the necessary social labor contained in it. If some one told me that an overcoat was equal in value to the value of (or contained in) a suit of clothes, I would know that the overcoat and suit of clothes were equal in value because they contained equal quantities of the same common thing—labor.
Generally speaking the value of four pairs of trousers is about equal to the value of one coat. Why is the coat more valuable than the trousers? And what determines the measure of value when we come to exchange commodities?
You exchange your labor-power—to the boss—for perhaps $2 in gold a day, and in turn the gold is exchanged for the necessities of life—food, clothing and shelter. Why do these commodities exchange for each other?
As we learned before, labor is the measure of value. The coat, mentioned above, exchanges for four pairs of trousers because the coat contains four times the quantity of social labor that one pair of the trousers contains.
The necessary social labor contained in a commodity (shoes, coats, gold, bread, your labor power, ​or whatever it may be) determines what it will exchange for. The natural tendency is for commodities of equal value to exchange for each other, or for other commodities of equal value.
For example: the amount of wheat produced by ten hours of necessary social labor time will exchange for the amount of cloth, shoes, chairs, gold or some other commodity that will be produced by ten hours of necessary social labor.
The value or values for which commodities will exchange change constantly as the social labor necessary to their production changes. Last month we read of a new molding machine that enables one boy to produce as many castings in one day as four men had been accustomed to produce. These castings have now greatly decreased in value (in the individual plant where the new process is used) but the total value of castings in general has been only slightly reduced. The average labor necessary to produce castings is only a little less than formerly. When the new process becomes general and the average necessary labor greatly reduced, castings will greatly decrease in value.
"If we consider commodities as values, we consider them exclusively under the single aspect of realized, fixed, or, if you like, crystalized human labor. In this respect they can differ only by representing greater or smaller quantities of labor, as for example, a greater amount of labor may be worked up in a silken handkerchief than in a brick.
​"A commodity has value, because it is a crystalization of social labor… The relative values of commodities are, therefore, determined by the respective quantities or amounts of labor worked up (or contained) in them." (Pages 56 and 57, Value, Price and Profit.)
"In calculating the exchangeable value of a commodity we must add to the quantity of labor last employed, the quantity of labor previously worked up in the raw material of a commodity, and the labor bestowed in the implements, tools, machinery, and buildings, with which labor is assisted." (Value, Price and Profit, page 60.)
The value of barrels, for example, is determined by the social (factory) labor spent in producing staves and hoops and the labor time used in producing the portion of machinery worn out in making them, as well as the necessary social labor spent in cutting and hauling (producing) raw logs for use in the mill.
Every time more social labor is needed in making commodities—shoes, hats, gloves, stoves or cigars—whatever these commodities may be—their value is increased. Every time the quantity of socially necessary labor is lessened in the production of commodities, their value is decreased.
Nearly all kinds of furniture have greatly deereased in value the past few years owing to the improved machines used in their production and the relatively small quantity of labor contained in furniture.
​Gold has steadily been decreasing in value in the past ten years owing to the improved methods of producing gold and the decreasing quantity of labor contained in it.
Rubber is steadily growing more valuable because the available world supply has been nearly exhausted and it requires more time hunting or planting, and caring for rubber trees—more labor is contained in a pound of rubber than a few years ago.
Gradually we see huge machines replacing the smaller ones in all the great producing industries and, with the constant introduction of more improved machinery, the quantity of human labor contained in commodities produced by modern methods—grows less and less. Such commodities decrease in value with every decrease in the labor embodied in them.
Price.
Price is the money name for which commodities exchange. We are accustomed to figure in gold prices. All our bank notes read "payable in—so much—gold." But gold is a commodity just like bread, or overcoats, or dresses, or automobiles. And commodities tend to exchange for the sum of gold containing a quantity of labor equal to the quantity of labor contained in them.
That is, if ten dollars in gold contains forty hours of necessary labor, that gold will exchange for (or will ​buy) as many pairs of shoes as forty hours of social labor will produce.
Generally speaking, a commodity containing ten hours of necessary labor will tend to exchange for gold, or any other commodity containing ten hours of necessary labor.
This is true when price and value are equal. But supply and demand cause commodities to exchange (or sell) above or below their value, temporarily.
A temporary shortage in coal—when the supply does not equal the demand—may enable the dealers to exchange coal above its value for a short time. An over supply of automobiles may cause the manufacturers to offer to sell (or exchange) autos below their value, for a time.
Prices are often a little above or below the value of commodities, but they are always inclining toward the value of commodities.
(Please remember that we are not here speaking of monopoly prices. We shall consider them in a later lesson.)
"If supply and demand equilibrate each other, the market prices of commodities will correspond with their natural prices, that is to say with their values, as determined by the respective quantities of labor required for their production… If, instead of considering only the daily fluctuations, you analyze the movement of market prices for longer periods… you will find that the fluctuations of market prices, ​their deviations from values, their ups and downs, paralyze and compensate each other; so that, apart from the effect of monopolies and some other modifications I must now pass by, all descriptions of commodities are, on the average, sold at their respective values or natural prices…
"If, speaking broadly, and embracing somewhat longer periods, all descriptions of commodities sell at their respective values, it is nonsense to suppose that profit, not in individual cases, but the constant and usual profits of different trades, spring from the prices of commodities, or selling them at a price over and above their value.
"To explain the general nature of profits, you must start from the theorem that, on an average, commodities are sold at their real values, and that profits are derived from selling them at their values, that is in proportion to the quantity of labor realized (or contained) in them.
"If you cannot explain profit upon this supposition, you cannot explain it at all." (From Value, Price and Profit, pages 68, 69 and 70.)
QUESTIONS.
Why does skilled labor-power sell (or exchange) at a higher price (for more gold) than unskilled labor? Does the fact that it requires more LABOR to produce a skilled laborer, that it takes more years of feeding, clothing and shelter to PREPARD a skilled workman, have anything to do with the VALUE of their labor-power?
Mining experts tell us that it takes much less labor-power to produce the commodity—gold, than it did a few years ago. ​Have you noticed that your gold (or money) exchanges for fewer commodities nowadays than it did ten years ago?
Wheat is produced for a world market. Do you think wheat has decreased much in value in the past ten years as compared to the decrease in value (or social labor necessary) of steel?
We believe it takes very nearly as much labor-power to produce a bushel of wheat (on the AVERAGE) as it did in 1900; hence its value must have remained nearly the same.
Why then will a hundred bushels of wheat today exchange for MORE gold dollars than it did in 1900?
If the VALUE of both commodities had remained the same and no monopolist controlled the world's wheat or gold supply, they would exchange upon the same basis as formerly. That is, the same amount of gold would exchange for (or buy) the same amount of wheat.
Does the decreased value of GOLD result in the farmer getting a higher price (or more gold) in exchange for his wheat crop?
(Do not forget that, as Marx says, if we cannot explain profits upon the basis that all commodities exchange at their Values, we cannot explain them at all.)
Our next lesson will take up Surplus Value, which explains how capitalists make profits even though all commodities exchange at their values.
Remember that we do not sell our labor. We sell our strength to work our laboring power, our labor power. Labor is the expenditure of labor-power. See Value, Price and Profit, pages 71, 72 and 73. When we apply for a job, we do not offer to sell our WORK, but our strength to WORK. The commodities we make are crystallizations of our work or of our LABOR, but it is our strength to labor, or laboring power—our labor-power which we sell to the boss.