Page 43: “Every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniences, and amusements of human life. But after division of labor has once thoroughly taken place, it is but a very small part of these with which a man’s own labor can supply him. The far greater part of them he must derive from the labor of other people, and he must be rich or poor according to the quantity of that labor which 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 labor which it enables him to purchase or command. Labor, therefore, is the real measure of the exchangable value of all commodities.”
And, immediately thereafter: “The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it.”
Labor is the real measure of exchange value, and, in the last analysis, the price of all things is labor. The argument is strong. The first implication that comes to my mind, then, is that if labor is the measure of all things, in what is labor measured? This was before the important distinction between labor and labor-power was discovered, and so there is some danger of confusion here. But there’s no point in getting ahead of myself. I’m going to just go with Smith and see where that leads.
Page 44: “…with money or with goods is purchased by labor as much as what we acquire by the toil of our own body. That money or those goods indeed save us this toil. The contain the value of a certain quantity of labor which we exchange…It was not by gold or by silver, but by labor, that all the wealther of the world 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 labor which it can enable them to purchase or command.” Based on earlier chapters, the measure of labor is time. Yet Smith says that all labor-time isn’t equal. This would imply to me that there is some multiplier, or, putting it another way, that there is or ought to be the concept of simple labor-time, in which exchange value is expressed. Other forms of labor (ie, with a machine that multiplies the efficiency of labor, or with highly skilled labor) could then be expressed in terms of simple labor-time.
Page 45: “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.”
The value of labor is adjusted “not by any accurate measure, but by the higgling and bargaining of the market.” It remains to point out (which Smith implies but doesn’t say) that this is a social question. The executive who leaves or threatens to leave his job for a higher-paying one, or the combination of workers striking or threatening to strike, or the employer moving or threatening to move his factory to a place where labor is cheaper, are all engaged in this “higgling and bargaining of the market.”
Here is an important point: “The greater part of people too understand better what is meant by a quantity of of a particular commodity, than by a quantity of labor. The one is a plain, palpable object; the other an abstract notion, which, though it can be made sufficiently intelligible, is not altogether so natural and obvious.” Or, in other words, while what is being exchanged in the market is the product of labor, and thus, in fact, labort; in a market economy this process is concealed. This is an important distinction between capitalism and earlier economic forms. The relationship between master and slave, or between fuedal lord and serf, is clear and obvious; the market, while permitting far more efficient use of labor, also makes it harder to see.
Page 47: “Equal quantities of labor, at all times and places, may be said to be of equal value to the laborer. In his ordinary state of health, strength and spirits; in the ordinary dgree of his skill and dexterity, he must always lay down the same portion of his ease, his liberty, and his happiness. The price which he pays must always be the same, whatever may be the quantity of goods which he receives in return for it….labor alone, therefore, never varying its own value, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared. It is their real price; money is their nominal price only.”
Page 48: “…therefore labor, like commodities, may be said to have a real and a nominal price.” This is very striking in that he says labor is LIKE a commodity, which clearly implies that, to Smith, it is NOT a commodity. This hints at a dilemma that was to trouble political economists for the next half century or more.
Later he begins to go into the whole subject of ground rents. Page 51: “But a rent reserved in any other commodity is liable, not only to the variations in the quantity of labor which any particular quantity of corn can purchase, but to the variations in the quantity of corn which be purchased by any particular quantity of that commodity.” He then speaks of the fluctuation periods of corn (ie, any grain) and silver, warning away from accepting rent in coin because of the tendency of coin to debase. This is interesting, but I look forward to seeing how he will analyze ground rent in terms of labor and the market; I imagine that will be later in the book.
Page 52: “Labor, therefore, it appears evidentally, is the only universal, as well as the only accurate measurement of value, or the only standard by which we can compare the values of different commodities at all times and at all places.”
“The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it.”
That doesn’t quite work. It did when people were paid by the hour or by the piece; if I wanted a toy, I had to work X hours to get the money to buy it, plus some effort to find and purchase it. But when the direct relationship between labor and income fails, it stops working. (How many hours of labor, writing books, does it take you to buy a pound of apples? If you spend that many more hours writing tomorrow, when will you be able to buy the apples?)
The value of my labour-time does vary. I’d rather spend an hour reviewing a scientific paper than an hour working in the garden (though perversely, I get paid more for the hours I put in as a scientist than I could get for putting in the same number of hours pulling up weeds). Yet on weekends, I volunteer in a role that is mainly light physical labour (sorting and packing books) rather than volunteering my professional knowledge (the book-sorting is more fun, but mainly because I’ve been working with my brain all week).
Similarly, I’d rather put in an hour’s labour at 11am than at 11pm, and would be willing to pay rather more to avoid an 11pm shift.
I’m reminded of the unit of currency in the Jack Vance Demon Prince series universe. As I recall the SVU is set as the value of an hour’s unskilled labor.
I wonder what the practical consequences of the use of this unit might be. It seems on the face of it almost impossible to really implement, due to the separate of the money from the actual labor; fluctuations in money supply, inflation, labor competition, regulation, capital, and other factors would tend to dissociate the monetry value from its supposed basis. Still, it’s interesting to think about.
You could imagine some extremely authoritarian society in which all labor is rated per hour or per production with a SVU equivalence, but in such a society, the meaning of money, such as it is, is simply imposed on a supine populace, so it doesn’t really have to have any basis at all besides bureaucratic force majeure.
“The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it.”
This ignores perceived value completely.
An hour of shingling is worth 3 apples to Mary, but it’s worth 4 apples to John because it rains more in his neighborhood.
A free bartering system works fine when two people can come to an agreement on trade. Why bother searching for a benchmark? Why use currency, or labor hours as a standard? Value fluctuates between individuals.
Sorry, I sometimes think my opinions are interesting, or important, and forget they are opinions.
PS I just finished reading The Sun, the Moon, & the Stars. I liked the fear and anxiety Gregg experiences through his creative process. I get that too, and enjoyed watching your characters go through it.
Price does ignore perceived value, and it should.
If the perceived value is less than the price, I won’t buy it. If the perceived value is more, I will.
The reason for having some sort of benchmark is that it lubricates trade. Mary wants her roof shingled, and she grows strawberries. John is a shingler, but he’s allergic to strawberries. So with a pure barter system, somebody has to find a third party who wants strawberries and produces something John likes, and there’s a 3-way negotiation (or 4-way or . . .). With a benchmark, only Mary and John have to agree on how much of that the shingling will cost.
“An hour of shingling is worth 3 apples to Mary, but it’s worth 4 apples to John because it rains more in his neighborhood.”
Which is why, when they go to their local grocery store to buy apples, they get to pay different prices for them. Oh, wait….
P.S.: Thanks kindly; it’s always a pleasure to hear from someone who liked that one.
The first quotation presented reminded me of Thoreau’s assertion in “Economy” that “Some things are really necessaries of life in some circles, the most helpless and diseased, which in others are luxuries merely, and in others still are entirely unknown.” In other words, the definition of necessity, convenience, and amusements” are themselves rather fluid. Perhaps more useful to the individual is to address the question of why we want what we want and whether or not our quality of life is actually improved by them or whether happiness couldn’t be better pursued in other ways. Smith points to the amount of our lives we are willing to trade for some thing as a measure of value, but doesn’t seem to address our underlying reasons for putting a particular value on our time compared to the value of the things our exchange of time can buy.
John: Maybe But you need to have necessities taken care of before you have the luxury to wonder if your necessities are luxuries.
“Every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniences, and amusements of human life.”
I was totally distracted from the discussion by the thought of removing the words ‘afford to’ from this sentence.
Affording such enjoyment is important, but not necessarily sufficient to the actual enjoyment, and without that enjoyment are the rich better off than the poor who *can* enjoy the lesser situation they have? But I have strayed off topic.