Price, then, is the expression of value in terms of some other commodity, which, generally used for that purpose of expressing the value of other commodities, we call money. It is only an approximation of value, and subject to a much greater fluctuation than value itself. It may, for a time, fall far below or rise above value, but in a free market—the only condition in which the operation of the law may be judged—sooner or later the equilibrium will be regained. Where monopoly exists, the free market condition being non-existent, price may be constantly elevated above value. Monopoly-price is an artificial elevation of price above value, and must be considered separately as the abrogation of the law of value.
Failure to discriminate between value and its price-expression, or symbol, has led to endless difficulty. It lies at the bottom of the naïve theory that value depends upon the relation of supply and demand. Lord Lauderdale's famous theory has found much support among later economists, though it is now rather unpopular when stated in its old, simple form. Disguised in the so-called Austrian theory of final utility, it has attained considerable vogue.[172] The theory is plausible and convincing to the ordinary mind. Every day we see illustrations of its working: prices are depressed when there is an oversupply, and elevated when the demand of would-be consumers exceeds the supply of the commodities they desire to buy. It is not so easy to see that these effects are temporary, and that there is an automatic adjustment going on. Increased demand raises prices for a while, but it also calls forth an increase in supply which tends to restore the old price level, or may even force prices below it. In the latter case, the supply falls off and prices find their real level. The relation of supply to demand causes an oscillation of prices, but it is not the determinant of value. When prices rise above a certain level, demand slackens or ceases, and prices are inevitably lowered. Prices may and do fall with a decreased demand, but it is clear that unless the producers can get a price approximately equal to the value of their commodities, they will cease to produce them, and the supply will diminish or cease altogether. Ultimately, therefore, the fluctuations of price through the lack of equilibrium between supply and demand adjust themselves, and prices must tend constantly to approximate values.
Monopoly-price is, as already observed, an artificial price in the sense that the laws of free market exchange do not apply to it. The "unique utilities," things not reproducible by human labor, command what might be termed natural monopoly-prices. There are many other commodities, however, the price of which is not regulated by the quantity of social human labor necessary to produce them, but simply by the desire of the purchasers and the means they have of gratifying it and the power of the sellers to control the market and exclude effective competition. Since Karl Marx wrote, the exceptions to his law of value have become more numerous, as a result of the changes in industrial and commercial conditions. The development of great monopolies and near-monopolies has greatly increased the number of commodities which, for considerable periods, are placed outside the sphere of the labor-value theory, their price depending upon their marginal utility, irrespective of the labor actually embodied in them or necessary to their reproduction. It may, in the opinion of the present writer, be said in criticism of the followers of Marx that they have not carried on his work, but largely contented themselves with repeating generalizations which, true when made, no longer fit all the facts. But that is not a criticism of Marx, or of his work. What he professed to make was an analysis of the methods of production and exchange in competitive capitalist society. His followers have largely failed to allow for the enormous changes which have taken place, and go on repeating, unchanged, his phrases.
Professor Seligman has pointed out that Ricardo's contention that value is determined by the cost of production, and the contention of Jevons that value is determined by marginal utility, are not mutually exclusive, but, on the contrary, complementary to each other.[173] The present writer has long contended that the marginal utility theory and the Marxian labor-value theory are likewise not antagonistic but complementary.[174] This is not the place to enter into the elaborate discussion which this contention involves. Only a brief indication of the argument for the claim is here and now possible. First, as we have seen, Marx is very careful to insist that utility is essential to value, and that the utility must be a social utility. But social utility does not come of itself, from the skies or elsewhere. It is, so far as the vast majority of commodities is concerned, the product of labor. It is true that the value of a thing is never independent of its social utility; it is likewise true that this is determined by the social labor necessary to the reproduction of that utility. To regard the two theories as antagonistic, it seems to be necessary to say either (1) that the quantity of social labor necessary to produce certain commodities determines their value, utterly regardless of the amount of their social utility, or (2) that we estimate the social utility of commodities, estimate what we are willing to pay for them, utterly regardless of the labor necessary, on an average, for their reproduction. The latter contention would be absurd, and the former would involve the abandonment of the initial premises of the Marxian theory, contained in his definition of a commodity. In so far as the basis of social utility is the social labor necessary for its production, the labor-value theory of Marx may be said, I think, to include the marginal utility law, as one of the forms in which it operates.
V
Labor, the source and determinant of value, has, per se, no value. Only when it is embodied in certain forms has it any value. If a man labors hard digging holes and refilling them, his labor has no value. What the capitalist buys is not labor, but labor-power. Wages in general is a form of payment for a given amount of labor-power, measured by duration and skill. The laborer sells brain and muscle power, which is thus placed at the temporary disposal of the capitalist to be used up like any other commodity that he buys. The philosopher Hobbes, in his "Leviathan," clearly anticipated Marx in thus distinguishing between labor and laboring power in the saying, "The value or worth of a man is ... so much as would be given for the Use of his Power." The power to labor assumes the commodity form, being at once a use-value and an exchange-value. At first sight it appears that piecework is an exception to the general rule that the capitalist buys labor-power and not labor itself. It seems that when piece-wages are paid it is not the machine, the living labor-power, but the product of the machine, labor actually performed, that is bought. Superficially, this is so, of course, but it does not affect the principle laid down, because, as a matter of fact, the piecework system is only one of the means used to secure a maximum of labor-power. The average output of pieceworkers in a trade always tends to become the standard output for the time-workers, and, on the other hand, the average wage of pieceworkers tends to keep very near the standard of time-wages.
Now, as a commodity, labor-power is subject to the same laws as all other commodities. Its price, wages, fluctuates just as the price of all other commodities does, and bears the same relation to its value. It may be temporarily affected by the preponderance of supply over demand, or of demand over supply; it may be made the subject of monopoly in certain cases. There is, therefore, no such thing as an "iron law" of wages, any more than there is an "iron law" of prices for other commodities. Lassalle took the Ricardian law of wages and, by means of his characteristic exaggeration, distorted it out of all semblance to truth. Says Ricardo: "The natural price of labor, therefore, depends on the price of the food, necessaries, and conveniences required for the support of the laborer and his family. With a rise in the price of food and necessaries, the natural price of labor will rise; with the fall in their price, the natural price of labor will fall."[175] This Lassalle made the basis of his famous "iron law," according to which 96 per cent of the wage-workers were precluded from improving their economic position. Lassalle's chief fault lay in that he made no allowance whatever for either state interference, or the organized influence of the workers themselves. He also attaches too little importance to what Marx calls the traditional standards of living.[176] It is nevertheless true that the price of labor-power, wages, tends to approximate its value, just as the price of all other commodities tends, under normal conditions, to approximate their value.
And just as the value of other commodities is determined by the amount of social labor necessary on an average for their reproduction, so the value of labor-power is likewise determined. Wages tend to a point at which they will cover the average cost of the necessary means of subsistence for the workers and their families, in any given time and place, under the conditions and according to the standards of living generally prevailing. Trade union action, for example, may force wages above that point, or undue stress in the competitive labor market may force wages below it. While, however, a trade union may bring about what is virtually a monopoly-price for the labor-power of its members, there is always a counter tendency in the other direction, sometimes even to the lowering of the standard of subsistence itself to the minimum of things required for physical existence.
To class human labor-power with pig iron as a commodity, subject to the same laws, may at first seem fantastic to the reader, but a careful survey of the facts will fully justify the classification. The capacity of the worker to labor depends upon his securing certain things; his labor-power has to be reproduced from day to day, for which a certain supply of food, clothing, and other necessities of life is essential. Even with these supplied constantly, the worker sooner or later wears out and dies. If the race is not to be extinguished, a certain supply of the necessities of life must be provided for the children during the years of their development to the point where their labor-power becomes marketable. The average cost of production in the case of labor-power includes, therefore, the necessities for a wife and family as well as for the individual worker. Far from being the iron law Lassalle imagined, this law of wages is one of considerable elasticity. The standard of living itself, far from being a fixed thing, determined only by the necessities of physical existence, varies according to occupational groups; to localities sometimes, as a result of historical development; to nationality and race, as a result of tradition; to the general standard of intelligence, and the degree in which the workers are organized for the promotion of their economic interests. The advance in the culture of the people as a whole, expressing itself in legislation for compulsory education, the abolition of child labor, improvement of housing and general sanitary conditions, and so on, tends to raise the standard of living. Finally, the fluctuations in the price of labor-power due to the operation of the law of supply and demand are much more important than Lassalle imagined.