If you want to find the secrets of the universe, think in terms of energy, frequency and vibration.
The Greek letter phi is our chosen symbol for value in use
In the opening pages of Das Kapital, Marx adopts a proven framework for the scientific analysis of the concept of exchange value. When two things are exchanged for one another in a given proportion, he argued, there must exist,
“in equal quantities something common to both. The two things must therefore be equal to a third, which in itself is neither the one nor the other. Each of them, so far as it is exchange-value, must therefore be reducible to this third” (Marx).
What is the common denominator between commodities? The “substance” that is present in equal measure in two exchangeable commodities but is neither. A third thing that is called exchange value. As Marx says “ghostly crystals of this common societal substance, the commodities are values”.
In seeking to identify this common element, Marx reasons that it “cannot be a geometrical, physical, chemical or other natural property of commodities”. For Marx, there is not an ounce of matter in exchange value:
“ The value of commodities is the very opposite of the coarse materiality of their substance, not an atom of matter enters into its composition. Turn and examine a single commodity, by itself, as we will, yet in so far as it remains an object of value, it seems impossible to grasp it.”
In search of the solution to the exchange value question Marx was looking for something in equal measure. However, from a value in use perspective, we are looking for something that exists in both objects but in unequal measure. After all, there is no reason to exchange things of equal value in use. As Adam Smith reminds us “Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog”. In trying to make a different point, Smith had stumbled on something.
When things are exchanged for one another or transformed, such that a new thing is created, what exists in both things but in different proportions?
Examine any commodity or thing and its usefulness appears tied to the physical properties of the object. Shoes are for wearing, chairs are for sitting, books are for reading, money is for exchanging etc. At face value, these uses have nothing in common and therefore there appears no common denominator by which to compare their value in use. It appears an impossible exercise.
However, consider the purpose of sitting, reading and buying and we do find a common end. In each case, the thing is used to produce some socially beneficial change. The shoe protects, the chair supports, the book enlightens and the money buys. Could the object that exist in all, but in different proportions, be the ability to do some kind of work to produce change in the sense that, after a given transaction, an individual can do more than she could do previously. Both things can do work but it is the prospect that the product of the exchange, the thing which will replace that which she started with can do more work.
The onlooker to the market sees things being exchanged of equal exchange value. But to the participants, what they are doing is exchanging things of unequal value. Co-coordinating, what I will describe later in this series as entropy, to produce change in the form of the mutual substitution of the worth more for the worth less. Enabling each participant to do more than they could do prior to the exchange. From the perspective of value in use, it is no stretch of the imagination to describe capitalism as a system for co-coordinating entropy for social benefit.
Marx was convinced that there was not atom of matter in exchange value, but if we pay attention, our experience tells us that there is more than a curious pound of force to change the world in values in use.
Each thing that possesses value in use shares the ability to do work or effect change. Money buys once, a shoe protects for years and if you’re Aristotle, a book enlightens for Millennia. The cardinal scale by which we measure the value in use of a thing is the objective ability to do more work after a given transformation than before ( and not subjective preference). If our capacity to do work increases value in use increases. Conversely, if our capacity to do work decreases value in use decreases.
In each example, value in use is concentrated in the object and is a function of the thing. Based on the properties of the object, that value can be transferred to produce some meaningful change or not. Value in use can thus be defined as the ability of a thing to perform socially useful work that results in change that is generated in the presence of difference.
In as much as equilibrium is the focus of value in exchange, disequilibrium and difference are the focus of value in use. But before you call me contrarian , I ask that you suspend judgement until reading part 7 in the series that examines the physics of value in use. Like Carnot, we discover the motive force that lies within difference found between things.
Critically those things do not have to have a physical existence to generate change. As illustrated by the other champion of the classical value problem, the property of a thing to produce change is not limited to physical things such as commodities. Adam Smith begins the Wealth of Nations describing a pin factory:
‘I have seen a small manufactory of this kind where ten men only were employed, and where some of them consequently performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day”
Smith says that if the ten workers did every step themselves, they could only produce 10 or 20 pins per day.
What magic is this?
Basic physics tells us that there can be no work or change without the transfer of energy. Maxwell (1872), states “energy is that which allows a change in the configuration of a system, as opposed to a force that resists to this change”. Energy is “what to provide to a material system, or remove from, to change or modify it”.
Something must be doing the work of 4,800 pin makers and the money that would be paid in wages to them. If all the physical variables remain the same, the same men, the same raw ingredients, the same working capital - what is doing the work and what is responsible for the corresponding change in the number of pins produced?
Economists describe this now as the “Solow residual” or that portion of growth in output which cannot be explained by growth in labour or tradeable assets . The magic is described by economists innovation, but in the absence of understanding why growth occurs in its presence, innovation is just another word for magic.
If I am to avoid appealing to vague metaphysical notions like the economists, the obvious answer is that the power to produce change must be present on the factory floor:
stored in both material things ( natural and manufactured capital) and immaterial things (intellectual capital) expressed in the form of the division of labour;
capable of being transferred from those things to perform useful work; and
existing in each form of capital in different proportions in terms of the amount of useful work performed and over what time.
While physics is traditionally concerned with physical forms of energy, Adam Smith had illustrated that there was a social equivalent to energy found in pins, pin makers, iron and ideas that also could all do work and produce enormous change. (though did not answer whether the change was socially beneficial and therefore useful). Smith was unaware of his discovery having written decades before Carnot, but what he was accurately describing was the transformation of useful energy it its social form, value in use.
But, Smith is far from alone. Generations of value in exchange problem solvers have failed to grasp the immense significance of what was taking place in pin factory.
In Adam Smith’s example, the idea does more work than thousands of men. What’s more the idea does not lose its capacity to do work through use or time in the same way as the money paid in wages. Ideas do not sleep or eat but still turn up for work. Relative to manufactured capital, intellectual capital appears to hold its value for longer and even appreciate. The pin dulls with use and the idea sharpens. Likewise, trust expressed as social capital and promises expressed as relational or promissory capital all can do work that results in physical change that can work longer and harder than their physical equivalents. All are “Solow residuals”. Value in use therefore exists not only in things made of matter or otherwise but in different amounts and over different time scales.
From value in use perspective, what brings iron, pin makers and ideas into a relationship is the possibility that, by substituting (and perhaps destroying) one for another, we have increased the capacity to effect change in our lives. But this is not a given. For example, if money can do less work that that which was destroyed in its production, no value in use has been created. Moreover, if that which is destroyed could increase its value in use through use, value has been destroyed into perpetuity. Compare that to the money into which it is transformed, that will see its value in use collapse into nothing on first use. If some things can do orders of magnitude more work than commodities and money, why is the production of things with the greatest value in use not the central organizing principle of capitalism, corporations and civil society?
The first key to solving the Millennia Challenge is understanding that value in use, expressed as the capacity to effect change, can exist in all things and not just the things accountants and economists count or can even conceive. The theory of value in use is ultimately a change theory of value based on difference.