The Social Construction of Value

When the financial crisis first blew up, I went around collecting examples of people – politicians, economists, business analysts, journalists, talking heads of various sorts – talking about “true value” and about how difficult it would be to establish what the “true value” of various sorts of assets “really was”. At the time, what struck me was the instant and intuitive crystallisation of one of the many discourses Marx analyses in Capital – a discourse that treats “value” as a sort of intrinsic inner property concealed within a thing. Related themes – even the very language of a “bubble”, or of a “market correction” – suggested that the financial system had strayed away from this bedrock substance, pretending the existence of “fictitious” value, and that a crisis would bring things back in line, whisk away the illusion, and reveal once more the objective value reality that always already underlay the “real” economy.

It’s generally unclear what this real crystal of “value” is meant to consist in. Is it something like “material wealth”? Is it, perhaps, labour time? Whatever its substance is meant to be, this real crystal was morally inflected in the discussions after the crisis broke – the true, objective, thing was contrasted in all its solidity and certainty (even if that certainty was regarded somewhat wistfully, as still outside our grasp), with the wayward fictions of the financial markets that behaved as though the financial sector possessed a sui generis freedom from what came to be called the “real economy”.

I would like to cite examples of the sort of discussion I have in mind, but I’m writing without my archives handy – I’ll do more work on this, more properly, at a later time. What I wanted to capture tonight was just a chain of rough associations on how Marx accepts neither this “objective crystal” conception of value, nor the conception that value can be produced by a sui generis process that can self-sufficiently manufacture its own conditions of possibility.

The latter issue I’ve written about recently in discussing the problems posed by some of the “new dialectic” interpretations of Capital, which, I have suggested, channel the sui generis conception of financial capital, without noticing that Marx is mocking this very conception in the passages cited as proof texts of some new dialectical interpretations.

The “objective crystal” interpretations are also mocked, although Marx’s critique here is a bit more complex – at least in the sense that spelling it out requires a longer run-up – than the critique of discourses related to interest-bearing capital, which Marx seems to think he can dispense with more quickly.

On the one hand, what Marx means by “value” is an “objective” thing, in the sense that he doesn’t regard it as something produced “subjectively” – or even “intersubjectively”, in the sense of arising from a process that is on its face intuitively meaningful for social actors. On the other hand, this is a peculiar sort of “objectivity” – not the objectivity of something that inheres intrinsically in material nature, but what Marx will treat as a “purely social” objectivity.

This purely social objectivity requires for its production the tandem actions of many, many different social actors. It is fluid, changeable, dynamic – and not quantifiable with reference to any directly observable material “input”, whether that input is labour-time expended directly in production, existing material wealth, or any other factor. Value is, instead, a social relation – something that transcends individual social actors, and even groups of social actors, but that results from nothing more than their aggregate interactions with one another.

The social character of the process is, on one level, particularly well appreciated by those who attempt to understand capitalism in terms of the financial markets. This appreciation, however, is accompanied by the false conclusion that, if a process is socially constructed, that process is infinitely constructible. This is the sort of perspective Marx is mocking in chapter 4 of Capital, which implicitly compares this notion with the fairy tale conception of the goose that lays the golden eggs.

By chapter 3 of Capital, Marx is already talking about specific sorts of “material limits” to the process of the social construction of value. These limits, however, are not the limits imposed by the “true” value that lies silent in every commodity’s material heart. They are instead limits related to the fact that the desire for any specific material good is finite – and limits related to the fact that the “effective demand” for a specific material good (the sort of demand expressible in money form) may be more limited still.

This sort of limit is not hard and fast. Desires can be stoked, and new desires created – by effective marketing, for example, or by planned obsolescence, or by spontaneous fashion, or by tolerance for waste, or by the discovery of as-yet-untapped markets. Similarly, real desires can go unmet, due to circumstances that prevent those desires from successfully gaining expression in the medium of hard cash. So, while this is a sort of “material limit” on the infinite expansion of markets, it’s a fluid and somewhat permeable one – just not fluid enough to justify the golden-egg-laying conception of interest-bearing capital.

But the capacity of markets both to expand and to saturate is important to Marx’s analysis of the crisis-ridden character of capitalist production, and important to his conception of value as a social relation.

For Marx, actual empirical production for a capitalist market is undertaken speculatively, without sure knowledge that this production – these commodities “casting their wooing glances” at money – will succeed in finding buyers at the right price, and thus successfully reproducing their own production in the future. High demand in a specific area will tend to attract more production to that area – possibly too much more – and then the resultant collapse in demand destroys the excess productive capacity after the fact – and possibly destroys too much productive capacity – and so the system lurches from over- to under-production. This process plays out on a small scale all the time, but sometimes plays out more dramatically and on an international scale.

Credit plays a crucial role, in Marx’s argument, both in the day-to-day functioning of capitalist economies, and in exaggerating the impact of large-scale crisis. Credit is part of what, on an everyday, mundane, causal level, imports a necessary future-orientation to the system as a whole – part of what makes expansion a necessary condition for simple reproduction. This part of the argument would be much clearer if Capital weren’t written as an inverted, “mirror-image”, topsy-turvy representation of how Marx sees capitalist production as actually working – but that’s a topic for another time…

Back to the point about value: the implication of Marx’s argument is that, as a social substance, reflecting the aggregate sum total of a particular kind of dynamic social relation that is constantly in flux, value is just as “real” at the height of bubbles as it is at depth of the most severe contraction. And just as “social” and “constructed” at both of those times as well. Marx talks about the value of a commodity being the attractiveness of that commodity for the universe of all other commodities – manifested in the capacity of that commodity to exchange for all others. This attractiveness transforms and mutates with every change in the global economy – but, at any given moment, what Marx calls the successful “transubstantiation” of an “earthly” commodity into money secures its owner socially effective possession of the amount of social power that quantity of money conveys. Even in the absence of this transubstantiation, the possession of the right kind of commodity – whether coats and linen, or pieces of paper conferring rights over shares in a company – can, in the right circumstances, confer an equivalent amount of social power. Unless the overarching relationship shifts, and unconverted “earthly” commodities are suddenly no longer convertible in the same ratios as before.

Both ends of this spectrum, for Marx, are equally “social” – equally expressive of the sum total of interactions of a large aggregate of social actors. Neither the top of the bubble nor the bottom of the crisis is more “real” than the other. But the experience of cycles of bubble and burst renders socially plausible the emergence of discourses about “true” value – and the perception, however flawed from Marx’s perspective, that the sudden shifts that characterise a crisis are “corrections” that will take us back to a fabled “true” value.

This faith in corrections as a means to establish truth can have devastating consequences on a policy level, particularly when combined with metaphors of economic “health”, where the harsh and inequitably distributed consequences of the crash are viewed as “tough medicine” that will help “us” “get better” – as though the crisis is a kind of fever that will eliminate a virus that is fundamentally exogenous to our economic body, as long as we don’t interfere with the body’s natural defense mechanisms too much. The cynicism involved in this kind of rhetoric, given who is, and who is not, allowed to suffer the consequences of this “treatment”, is mitigated only to a very small degree by the fact that an actual theoretical confusion may genuinely underlie it – at least for some analysts…

There’s much more to say on all this – I’m squeezing this post in too quickly, and therefore writing too casually… Hopefully I’ll have some time to return to the issue in proper detail at a later point…