A very brief history of Political Economy
What determines the market value of a commodity? Is it its utility or usefulness? Is it the amount of labour that went into it? Is it related to the market of goods and services and how competitive that market is? Does it depend on the subjective demand of consumers? Or is it a combination of these factors and more?
These questions formed a major field of enquiry in early Political Economy, with a large number of economists transfixed by the question of exactly what gave a commodity economic value, and how that related to its market price.
There are two primary ways of viewing Value creation: the Labour Theory of Value, whose first major proponent was the political economist Adam Smith in the 18th century, and the Subjective Theory of Value, which gained prominence in the 19th century. With the Labour Theory of Value, the quantity and quality of labour involved in creating a commodity determines Value; with the Subjective Theory of Value, the individual wants and needs of consumers determine Value. The Subjective Theory of Value is often combined with Marginal Utility Theory, the latter of which attributes Value to the changing usefulness of a commodity.
But while mainstream political economy was debating how Value structured Economics, Karl Marx was concerning himself with a slightly different problem: why did analysis of Value result in such divergent and often incompatible theories?
A very brief history of Political Economy
Economics as a discipline (then known as Political Economy) developed alongside the growth of Industrial Capitalism as a way to analyse and understand the huge commercial changes taking place in society, and to be able to make predictions about the fluctuations of the economy, and therefore the stability of society. Like many of the other sciences of the Enlightenment, including the natural sciences, it was intertwined with industry.
For economists of both the early Capitalist period as well as today, the discipline of Economics is thought to have derived an understanding of industry and commerce that is based on inviolable laws: laws that are trans-historical — applicable across all human epochs — and are separate from, although connected to, other aspects of human life. That is to say, these laws appear to have a mathematical, or meta-physical, quality. For Adam Smith, individuals and businesses acting in their own economic self-interest created commerce, but commodity markets were guided by an ‘invisible hand’, out of reach of any individual agent.
For Marx, it wasn’t enough to analyse how this functioned, but where it emerged from. Marx believed that there was something hidden in the movement of Value that explained and justified the opposition of competing theories, each of which expressed partial truths about the economy.
We can use a scientific analogy here: prior to the 20th century there were two major oppositional theories that explained the behaviour of light — Wave Theory and Particle Theory (Corpuscular Theory). In some experiments, light appeared to behave as a wave. In other experiments, light appeared to behave as a particle. This gave rise to the concept of Wave-Particle Duality — the alignment of two theories that could accurately describe how light functioned in different circumstances, but that, as far as some scientists were concerned, hid a deeper truth about how light functioned; a truth that, once uncovered, would explain how light appeared to be either a wave or a particle depending on how it was measured.
For Marx, competing theories of Value had equal merit in different circumstances — they helped explain different economic phenomena in different conditions. But the real task was to uncover why Value theories were oppositional — what was the truth that grounded all of them, and their opposition?
Marx believed that the answer lay in the historicity of Value. He viewed Value as a historically specific phenomenon, just as Political Economy was a historically specific discipline: both formed out of the growth of Capitalist society. Value could only be understood, in his opinion, in reference to other historically specific categories.
Preparing the Critique of Political Economy
In 1867 Marx published the first volume of Capital (Das Kapital), a book in which he attempted to illustrate how the Value-form’s unique properties structured the entirety of Capitalist society, and led to oppositional theories that were nevertheless able to explain and predict certain economic phenomena in specific circumstances. For Marx, understanding how the Value-form related to commodities and money was not only of importance to economists, but of anyone who wanted to understand Capitalism as a social system, and of special importance to those who wanted to move from Capitalism to Communism. This was so important that Marx spent over a decade preparing Volume 1 of Capital.
Marx’s first claim was that value, labour, and markets, were not trans-historical — that is, existing throughout all history in the same form — but historically specific. That is to say, in Capitalism, labour, commodities, and even money had a special form unique to Capitalist society. Capitalism shapes labour, money, and markets in a way which transforms them into something new.
Marx was faced with an immediate problem. To justify his claim that Value was historically specific, he would have to structure the book in a way which did not rely on economic categories that were present throughout history, thereby undermining his starting point. How would he do this for the category of money? How would he do this for the category of labour?
Marx devised a method of presentation that was adequate to the task, but it would make Capital a particularly difficult book to read and understand correctly. He decided to structure the book in the way that Capitalism was structured, so that the book mirrors the internal logic of the system.
What Marx uncovered about Capitalism and the Value-form, and what that might mean for a possible overcoming of Capitalism, are explored in my next essay.
