Value, Law of

an objective economic law of commodity production, which regulates the exchange of commodities in accord with the amount of socially necessary labor expended on the production of such commodities, that is, in accord with the social value of the commodities.

In conditions of commodity production based on private ownership of the means of production, when anarchy and competition hold sway in society, the law of value acts as a spontaneous regulator of all social production. The regulating mechanism of the law of value consists in the fluctuation of prices and in the deviation of prices from social value as a consequence of the competitive struggle, both under the impact of supply and demand. An excess of market price over value stimulates supply and, thus, brings an increase in the production of commodities. A deviation below value brings a reduction in the production of commodities. “Whatever the manner in which the prices of various commodities are first mutually fixed or regulated, their movements are always governed by the law of value” (K. Marx, in K. Marx and F. Engels, Soch., 2nd ed., vol. 25, part 1, p. 194).

If the work (labor) time expended on the production of a commodity happens to shrink, prices fall; if it increases prices rise, provided all other conditions remain the same. The market value of commodities is the center of gravity around which prices fluctuate.

The spontaneous fluctuation of prices around value inevitably results in the ruin of the basic mass of small and medium-size commodity producers, transforming them into proletarians and leaving them bereft of the means of production and compelled to hire themselves out to the owners of enterprises. At the same time, a small number of commodity producers grow rich and are transformed into capitalists, exploiters of the labor of others. The commodity producers whose individual expenditures are greater than those socially necessary are ruined; those whose expenditures are lower grow rich. The position of commodity producers whose individual expenditures are at the level socially necessary is unstable: with the progress of productive forces and, consequently, with reduction in the socially necessary expenditures of labor, they usually come to ruin. In private commodity production, the law of value leads to the stratification of commodity producers.

In an unregulated commodity economy, the law of value plays a great role in the growth and improvement of production, in increases in the productivity of labor, and in the reduction of the value of commodities, for the law’s effect stimulates commodity producers to reduce the individual expenditures of labor relative to what is socially necessary. As a result of the spontaneous action of the law of value, the antagonistic contradictions of a commodity economy grow sharper. In capitalism, the law of value is modified to become the law of the price of production. “Since the total value of the commodities regulates the total surplus value, and this in turn regulates the level of average profit and thereby the general rate of profit—as a general law or a law governing fluctuations—it follows that the law of value regulates the prices of production” (K. Marx, ibid., p. 197).

In socialism, whose economic basis is public ownership of the means of production, the law of value takes effect under different conditions. It is here governed by the economic laws of socialism, and it is used by society in planned fashion, so that its form and content manifest themselves differently. It is by no means a regulator of social production. Its effect is manifested primarily in the need for a value-form for the calculation of labor expenditures, inasmuch as commodity-money relations persist in socialism. By the establishment of planned prices, enterprises are guided toward socially necessary expenditures of labor, and the reduction of such expenditures is stimulated. Using the law of value in planned fashion, socialist society proceeds from the starting point of national economic efficiency of production. Social labor and the means of production are distributed among the various branches of the economy so as to achieve the fullest possible satisfaction of material needs and the comprehensive development of all members of society. Socialist society also uses the law of value to quicken technological progress, doing so by means of the concentration of the overwhelming portion of the surplus product in the hands of the state.

The price formation system is linked with rational deviations of price from value, a feature that reflects the objective need for the action of the law of value. Since all production and distribution are planned, changes in the magnitude of value resulting from shifts of labor productivity do not in themselves regulate the proportions of the national economy. Socialist society determines the proportions of the national economy, primarily with reference to the fundamental economic law of socialism and the law of planned proportionate development. Society considers that the magnitude of value underlies the prices of commodities and that prices are stimulative of production. However, the law of value is in no sense contradictory to planning. It constitutes an element of the planned economy, since value itself takes form under the regulating effect of society.

The role of the law of value, like that of commodity-money relations, is historically circumscribed. With the disappearance of commodity-money relations and with society’s transition to calculation of social labor directly in terms of labor time, the law of value will cease to exist.