Latest Study
Articles
Capitalist Exploitation and the Law of
Value. April, 2003
submitted to a foreign journal.
Revitalizing Marx's Value-Form, September, 2002
being submitted to a foreign bulletin.
Value-form, Money, and Abstract labour, 2001.
| Abstract The paper is aimed at the critique of the monetary approach proposed by Carterier, Williams and Dixon & Kay in the Cambridge Journal of Economics (1992, 1995, 1998). By reformulating Marx's value-form, it deals with the derivation of money-form from the expanded form, and with the necessity of money to be grounded on the commodity gold. Then the author attempts to solve a dilemma caused by Rubin's value theory which is supposed to affect their approach: how can value be produced by abstract labor when abstract labor is constituted by exchange?, by resetting the issue of substance of value later in the production process of capital. |
| The recent debates between Carterier (1991),
Williams (1992,1998) and Dixon &
Kay
(1995) on the Cambridge Journal of
Economics
are quite stimulating, touching on
hot issues
in Marxist theory of value such as:
a difficulty
with development of value-form from
the expanded
into the general value-form, the rejection
of commodity money, the postulate of
money
without value theory, the denial of
commodity
labor-power, and so on. Despite many
differences
of opinion among the three, they share
the
same position, called 'monetary approach',
that money should be postulated at
the outset
of the theory of capitalism, rejecting
the
derivation of money from commodity
exchange.
And Cartrier and Williams go forward
to the
denial of the labor theory of value,
disagreeing
to Marx's value theory in the opening
chapter
of Capital. Objecting to them, Dixon
&
Kay try to defend Marx's labor value
theory
by proposing a new ' second theory'
which
sees the order of commodity, money,
and capital
not as a logical derivation but as
a logical
interconnection deduced from a complete
capitalist
society or the industrial capital. What forms a background for their propositions seems a lot of insolvable attempts to prove the embodied labor theory of value in mathematical terms (so-called transformation problem), or Sraffian's assertion for redundancy of labor theory of value. Those devoted to the problem based on Bortkiewich formula or Sraffians start their reasoning with two assumptions that embodied labor is value, and that production-prices are given along with a uniform rate of profit. However, if Marx's position is that a uniform rate of profit and production-prices are not given as actual facts, but the concepts only derived from value and surplus value on the basis of the law of value, operating as an inner law at the level of the production and reproduction process of capital(Capital 1), clearly distinct from that of competition of capitals, their attempts to prove or disprove Marx's labor theory of value would turn out to prove or disprove what is quite different form Marx's. In this context it is understandable that a new approach has emerged criticizing them as ' New Ricardians' and reconstructing Marx's theory of capitalism, because a uniform rate of profit is, for Ricardo, a given fact like a phenomenon produced by natural law. Propositions by Cartrier, Williams and Dixon & Kay will be conceived to belong to the approach. A feature of the approach is that some kind of influence by Rubin's theory of value can be discerned over their argumentation. And this causes many a new problems, it seems to me, difficult to solve 1. １ Carterier claims that money should be presupposed at the very outset of the theory, denying Marx's derivation of the money-form from the simple, the expanded, through the general value-form. As he quotes, the task of tracing the genesis of the money-form has long been regarded by Marxist economics as one of prominent achievements Capital attained. He submits an evidence to discredit Marx's theory of value-form by showing 'an economy with at least three private producers and three commodities' (Carterier, p. 259). ' the schema ...clearly shows that the reversal of the expanded form dose not generate anything but the expanded form itself! ...as before, a general equivalent is lacking. The universal equivalent cannot be deduced by any manipulation of the expanded form.' Surely Marx did not succeed in deriving the money-form from the expanded. However, to reject the theory of value-form on this account is like cutting Gordian knot, which is a solution by the conqueror, not by a scientist. We should inquire into the reason why Marx failed, and try to reconstruct the theory of value-form by correcting his errors. To solve this Gordian knot, firstly the source of the failure should be sought in the fact that Marx confounded the expanded value-form with the total one. As far as commodities in the equivalent form are chosen by a commodity owner in the relative value-form, the number of commodities as equivalents are limited depending his/her desire. Therefore, commodities can never be total ones except the commodity s/he has. The second problem to solve is whether the reversal of value-form contradicts the logic of value-form or not. If it does, the procedure of the reversal itself becomes wrong. In order to undo the intricate knot, we return to the simple value-form, for problems with the expanded value-form and the general value-form are conceived to originate from the simple. Although Carterier takes notice of the irreversibility of value-form (Carterier, p. 258), he neglects the effort to go by a roundabout way. Let us look into the simple value-form more closely than Capital did, since, as Marx put it, 'whole mystery of the value-form lies hidden in this simple form. Our real difficulty, therefore, is to analyze it'(Marx , 1976, p. 139). 20 yards of linen = 1 coat means that the owner, not necessarily the producer as Carterier puts it, of linen wants now 1 coat s/he desires in exchange for 20 yards of linen of his/her own. This offer of exchange is made without consultation with the owner of coat unilaterally. When the owner of coat wishes to express the value of his/her commodity, s/he may choose another kind of commodity. Even when s/he chances to want linen, he may want 21 yards in exchange for one coat. Then the value expression changes into 1 coat = 21 yards of linen. Thus, 20 yards of linen = 1 coat does not necessarily include 1 coat = 20 yards of linen. That is to say, value-form equation cannot be reversible. Marx's remark that ' 20 yards of linen = 1 coat ...also includes its converse' (Marx, 1976, p.140) is wrong. Therefore, 20 yards of linen = 1 coat is an exchange relation, but it is mistaken to conceive of the relation as that of two commodities which has been exchanged, or as 20 yards of linen never failing to exchange for 1 coat. Value expression is a one-sided offer of exchange prior to realization of exchange. Marx's failure to make sure this relation stems from his determination of value substance prior to the value-form in the first section (two factors of the commodity). As far as both 20 yards of linen and 1 coat are presupposed to have the same quantity of value determined by socially necessary labor, this delicate relation of two commodities never fails to be obscured. Value expression without reference to labor must not be confounded with value expression without value. When the linen owner offers his linen in exchange for one coat, s/he accounts in mind like this: with 21 yards s/he is advantageous, but the exchange will be difficult; with 19 yards it will be easier, but s/he feels disadvantageous. As a result of wavering in judgment 20 yards of linen has been decided. What determines 20 yards, neither 19 nor 21,is the relation between the value of 20 yards linen and that of 1 coat. In this way value determines value expression (exchange-value or exchange rate in offer), not vice versa. Marx correctly points out the vital point of the value-form when he states '...the form of value, that is, the expression of the value of a commodity, arises from the nature of commodity-value, as opposed to value and its magnitude arising from their mode of expression as exchange-value' (Capital1,152). However, his understanding is based on socially necessary labor embodied in both commodities. What is crucial to the value-form is to grasp 'the nature of commodity-value' without recourse to the substance of value. In fact, already Ricardo had clearly recognized that value as expended labor determines exchange value, not vice versa. If the advance of Marx over Ricardo lies in the value-form, another aspect should be taken into consideration. Indeed it will be very hard to grasp value without recourse to embodied labor for Marxist economists long prejudiced in favor of the embodied labor theory of value, but it must be done in order to grasp the concept of value in the theory of commodity. In the value-form values of two commodities appear only in this value expression by the linen owner. Value cannot exist apart from, or prior to, value expression, but only within it. This explains why the value expression in price, the money-form, which is the completed value-form, is made by sellers of commodity subjectively prior to the sale one-sidedly without consultation with buyers. Pricing always includes seller's expectation. That value expression is subjective never means that value is subjective. Carterier proposes 20 yards of linen __ 1 coat in place of = , to illustrate the one-sidedness of value expression. But as the owner of linen thinks both have equal values, s/he express the value of his/her own with 1 coat, Marx is not wrong in this denotation. What is crucial is that in the value-form their equality in value exists only in the mind of the linen owner, not yet justified in an exchange. If = means that equal amount of labor is embodied in both commodities and that they can exchange their positions of the relative or equivalent form, the denotation turns out wrong. Dixon & Kay say 'since exchange is a quantitative relation....never simply corn and for iron, but always so much corn for so much iron' (Dixon & Kay, 515). This is right, but not sufficient. In the value-form so much iron is decided first by the corn owner, and then so much of his/her corn is counted in coordination with so much iron. In the simple value-form, when it is said that the value of linen is expressed in the use-value of coat, the use-value means that the coat is an object of his desire or choice. Since the linen owner may not want two coats, it is erroneous to deduce, from 20 yards of linen = 1 coat, automatically 40 yards of linen = 2 coats, 200 yards of linen = 10 coats, and so on. Therefore, such an example of value-form as linen = coat or 10 yards of linen = a half of coat, demonstrated in Capital, constitutes by no means value expression, because coat in no definite quantity or a half of coat cannot be a use-value for the owner of linen. Consequently, such denotation as x quantity of A commodity = y quantity of B commodity can be misleading, unless the above-mentioned content in the simple value-form is fully appreciated. The denotation in general terms applies to the money-form or value expression in money. In regard to the equivalent form in the simple value-form, Marx states that the natural form (material) of coat obtains direct exchangeability with linen. However, in the simple form 1 coat has direct exchangeability only so far as 1 coat is desired by the linen owner, so the material of coat itself has not yet the ability. Only one coat that is desired i.e. turned into use-value has the power. In the money-form gold for the first time obtains direct exchangeability as material without becoming the object of desire of commodity owner. Marx's simple value-form is full of such logical flaws as to carry into the simple form the concepts which are established for the first time in the money-form. I call those flaws the error of pre-emption of concept. As is shown above, the simple value-form is an extremely restricted value expression. Marx calls it 'the isolated or accidental form' (Marx, 1976, p.139). Its meaning should not be understood that the exchange of two commodities occurs in isolation or by accident, but that with the simple form the value is expressed in a severe situation. In order for the value expression to become freer from these restrictions the value-form has to develop further. 2 I try to reformulate Marx's attempt to derive from the expanded to the general form and the money-form in a more consistent way. It becomes self-evident that the expanded value-form cannot be the total one as Carterier presupposed following Marx. Each commodity owner chooses, as equivalents in expressing the value, commodities of his/her choice. The number of equivalent commodities differs depending on his/her liking and the quantity of commodity of his/her possession. It never happens that all commodities except one of his/her own are placed in the equivalent form. Therefore the expanded form in Capital, in which the same 20 yards of linen remain on the left side of the value equation, is out of the question. Uno rewrites it as follows (Uno,1973, p. 35): 10 yards of linen = 5 pounds of tea 20 yards of linen =1 coat 40 yards of linen = 1 ton of iron I would like to add 1000 yards of linen = a car, 10000 yards of linen = a variety of jewelry. What is interesting to the value-form is that an equivalent commodity begins to shift from daily necessary one to the luxurious one for every commodity owner. How far it proceeds depends on how many or much of his/her commodity s/he has, that is, how rich s/he is. Eventually commodities chosen for equivalents come to be limited to luxuries or prestigious commodities including precious metals, such as silver, gold. Picking up one out of such equivalents, we get a group of commodity owners selecting, for example, silver as an equivalent in common. This is the general value-form. This form can be deduced from the expanded form, and must not by means of its reversal. During development of value-forms linen should remain on the left side, in the relative form. This does not mean that linen cannot become an equivalent, but that it can soon be expelled out from the position of the equivalent form due to its being one of necessaries. Therefore, the general value-form cannot be universal, for commodities on the left side are limited in number, and the existence of one group presupposes that of another along side. Within each group the value of every commodity can be expressed in the same term, for example, in the quantity of silver. However between different groups, value expression in a uniform term cannot function. This constitutes the limitation of the general value-form. There arises a competition among those precious metals, so to speak for elite equivalents to win a wider acceptance as a general equivalent. There are many qualifications for those commodities to win through this competition, such as being non-perishable, dividable, combinable, precious, and so on. In general, the more precious a commodity is, the more promising it is. And this competition necessarily ends up with only one universal equivalent form. This is the money-form, which finally overcomes limitations of the general value-form. With the money-form the development of value expression from the simple form completes. In history, gold has obtained this position. Value expression in the use-value or the quantity(weight) of gold is the money-form, or value expression in price (pricing). Marx says that 'fundamental ('essential' will be better, wesentlich in the original) changes have taken place in the course of transition from form A to form B, and from B to form C. as against this, form D (the money-form) differs not at all from C (the general form), except that now instead of linen gold has assumed the universal equivalent form' (Marx, 1976, p.162). As against Marx, I wish to emphasize an essential change here. In the simple, the expanded and the general form, an indispensable qualification to become an equivalent is to be chosen as a use-value by owners in the relative form, whereas in the money-form gold appears as an absolute equivalent having a direct exchangeability for all commodities by nature. In value expression commodity owners no longer put forth their choice to the use-value of an equivalent commodity, gold. Consequently value expression is totally free from constraints by use-value. This means that every commodity owner express the value of his/her own commodity in one unit of its use-value, such as 1 yard of linen = x gram of gold (x' $), 1 coat = y gram of gold (y' $), 1 lb. of tea = z gram (z' $), and so on. This scheme of the money-form, different from Marx's in which the same 2 ounces of gold occupies the equivalent form, was for the first time proposed by Uno (Uno, 1977, p.8). In money-form, if 1 yard of linen is worth $ 2, then value expressions such as 2 yard = $ 4, 100 yard = $ 200, 1000 yards = $ 2000, and so on, are established, and the owner is able to freely express all commodities in his/her possession. In the value expression in money, pricing, as against that in the simple value-form, the owner starts with deciding the amount of commodities s/he wants to exchange, and then coordinate the amount of money or gold s/he wants to get. For example, s/he wants to exchange 200 yards of linen advantageously for $ 210 first, but at that price s/he feels the exchange improbable; then for $ 190 it will be probable but s/he feels disadvantageous; finally s/he decides to put commodities on sale with a tag of $ 200. Even in the value expression in money, or pricing prior to exchange, the determination of price by value operates in this way. Given the value of money or gold, the determination by value emerges in his/her mind in price coordination being forced toward a definite price. Though value expression is subjective, s/he cannot set the price of his/her commodity arbitrarily. When we conceive of the price determination by value as that by embodied labor at this stage as Marx did, we fail to capture this crucial nature of market economy 2. Williams rejects the logic to derive the money-form from commodity gold, saying that money gold is 'contingent' or 'a special manifestation of the money-form or 'abstract money', and is 'neither necessary nor sufficient for the reproduction of the developed bourgeois system (Williams, 1992, p.440). At least in the theory where a purely capitalist prevails, money gold functions like an anchor for the commodity circulation, the monetary institution and the banking or credit system. The theory has the grounding in the history of 19th century English capitalism where the gold standard system operated. For the reproduction of developed bourgeois system money gold is necessary, and money gold cannot be understood without recourse to the logic of derivation from commodity gold. The derivation never means 'the dubious notion of historical necessity'. The existence of gold, born in the nature based on natural law, concerns natural science, so it is contingent in the sense it is given to political economy. However, since it is capitalism that has selected gold among numberless materials as money as the center of bourgeois system, the necessity of gold money must be sought in capitalism. In this regard gold money is not contingent for political economy the aim of which is to explore capitalism. Once value expression in money or pricing has been established, the simple value-form i.e. value expression in the use-value of another commodity disappears. No longer the exchange relation between two commodities appears as that between commodities, but just that between two use-values, barter. Thus there appears 'a plurality of individuals connected by money (in fact a monetary system or institutions) determining their relative wealth through a network of monetary flows', based on the theory of value-form, not discarding theory of value as Carterier propounds (Carterier , 1991, p.261). As Marx puts it, 'the movement through which this process has been mediated vanishes in its own result, leaving no trace behind' (Marx, 1976, p.187). Only logical analysis of an established monetary system can trace it. Criticizing Carterier, Williams asserts 'money can and should be derived from the value-form', but, based on the monetary approach, rejects its derivation from the exchange relationship between commodities, as Marx did it in the theory of value-form. Since in my view value-form is the logic to derive the money-form from the exchange relationship between commodities (prior to exchange), his argument is confusing. His denial of commodity money and his assumption of 'abstract money' derived from his value-form (Williams, 1992, p.439), are also confusing. Supposing from his 'refusing any commitment to the existence of value substance or determinate value magnitudes prior to or independent from the value-form expressed in monetary quantities and prices' (Williams,1998, p.197), he seems to think of value-form only in monetary terms, in other words in price-form. I agree to his refusal of any commitment to the value substance prior to, or independent from, value-form, but not to his denial of value expression or value-form between commodities. To conclude from the fact that in capitalism value expression (value-form) appears only in price (price-form) that value-form between commodities is erroneous, leads to a misunderstanding of value-form for price-form. This is a similar error to the one Samuel Bailey committed in identifying price as value (Bailey,1825). 3 Commodities are exchanged only for money, and unilaterally by the action of money owner, because money is the universal equivalent form having absolute power of direct exchange, as the logic of value-form has explained. Commodity exchange now breaks up into two opposite aspects, active and passive, respectively purchase and sale. Commodities are acknowledged to have values only after they have been exchanged. Their values are determined or measured by money in being bought, the sale. As a logical consequence that values are expressed unilaterally by commodity owners prior to exchange, the purchase or the measurement of values is made unilaterally by money owners in realization of exchange (buying and selling). In the case of weight, we express and measure it simultaneously with two materials put on the scale, whereas in the case of value, we express it before the exchange and measure it after the exchange. They are distinguished in terms of both time and concept. This is the reason why the expression of value, including money-form, belongs to the value-form in the theory of commodity, whereas the measure of value to the theory of money. We should take care that Marx failed to make explicit the reason because he treated of value expression in money-form in the measure of value (the chapter of the money). The monetary approach, which rejects the value-form in the theory of commodity for the reason that both expression and measure of value take place in monetary terms in capitalism, is unable to clarify the distinction and the relation between the two. The value expression in money, or price, cannot be understood unless it is deduced from the exchange relation between commodity and commodity, as Marx attempted it in the value-form. The theory of money without the foundation of that of commodity runs the risk of throwing the theory of value aside, as Carterier did it. In the expression and the measure of a commodity value the value of money always appears as a given definite magnitude, just as in the case of weight the counter-weight, or in the case of length the yardstick, is fixed in weight or length. In the theory where the gold standard is presumed to prevail, the value of money is given by that of a commodity gold. Here money without the basis of a commodity cannot function as either the measure, the means of circulation, the fund as store of value, or the means of payment or credit. The fact that in measurement of value in purchase or sale the value of money is given does not mean the value of gold is postulated at the outset in theory. The value of commodity gold is determined in the exchange just like those of other commodities. Since gold is a special commodity with a universal equivalent form entwined with its natural form (material), so it is neither priced nor sold, entirely buying priced commodities. Obviously in most of exchanges between gold and other commodities (buying and selling) gold functions as money. Among them, however, is always included gold as a commodity, desired and consumed as a use-value, such as: goods for luxury, object of art, teeth and means or material of production. In this case exchange between gold and other commodities implies that between commodity and commodity. In this exchange the value of gold is determined simultaneously with that of other commodities. Just like other commodities the value of commodity gold too changes , so the value of money is subject to change. Money as the measure of value is so to speak a yardstick changing in length. But this peculiarity dose not undermines the function of value measurement, since the change of value in money affects all commodities uniformly and simultaneously 3. Since money as the measure of value functions at the value given by the commodity gold, and since gold is not the object of consumption (use-value) for sellers, gold as money can be replaced by another cheap commodity or worthless material such as paper under the authority of government. Such money is merely a representative of money gold, so convertibility into gold in any amount at any time ensured by the state is an indispensable qualification. Marx deals with replacement of money gold by its proxy in the means of circulation, but I think it should be taken up first in the measure of value and qualified more concretely later in the means of circulation. Williams who opposes to gold money in theory in favor of 'abstract money' says, the value of money 'is determined as the reflex of the value of all commodities' (Williams, 1998, p.190). Since under the so-called managed currency system paper money is no longer convertible into gold, in actuality such a phenomenon has been established in contemporary capitalism. But under gold standard system which the theory presupposes, the value is given by that of commodity gold, and the price of all commodities is the reflex of the relation between the value of money and those of all commodities. What is crucial at this stage in theory is that the reflected price is determined in the course of buying and selling, and not prior to, or independently from, the course. Values are not decided, without the mediation of the course, directly based on labors requisite to produce gold or commodities. The labor theory of value without this mediation of circulation forms commits a fatal error. In the measure of money the determinacy of price by value is firstly revealed in realized exchange, in other words, when a commodity has been sold. Only the price of a commodity having a value can be sold. Prior to the sale nobody knows whether his/her commodity has a value or not; after the sale everybody knows it had value. It is value inherent in the commodity that decides the success in sale. In this sense a realized price represents the value of the commodity. When commodities sell well in high demand, the owner raises their price. It is impossible for the price to rise indefinitely, because a high price induces a bigger supply, and at a point where supply exceeds demand the price begins to fall. When a commodity sells badly in decreased demand, the owner is forced to lower its price. It is neither possible for the price to fall indefinitely, because a lowering price decreases supply and increases demand. At a point where supply gets smaller than demand, the price begins to turn up. However, this oscillation of price has a nature to converges on a certain price, at least in a purely capitalist economy. More concretely, the determination of price by value appears in the fact that fluctuating prices gravitates toward so to speak a center price in repetition of sale of the same kind of commodity. More concretely, it is this price that represents a value, rather than a price which is realized in selling at one time. Commonly, the center price is referred to as value. Therefore, being higher or lower than the center price is dubbed as the deviation of price from value. But since value and price are different concepts, it is incorrect to compare value and price directly on the same dimension in mathematical terms. Precisely it is a price determined by value, because settling down of the price is brought about by the congruity between the value of a commodity and that of money. When we understand the relation between value and price correctly, the common usage of the term such as gravitating of price toward value or the deviation of price from value is not wrong. If we think that money and commodity have values determined, for example by labor, prior to, or apart from, the sale or purchase just like weight in material, and that the center price is decided by the equality of two labors embodied, this conception is wrong, because neither commodity nor money can has a value prior to, or apart from, the sale or purchase. It is only in this sale or purchase and through movement of price gravitation that the existence of value is established and recognized. Dixon & Kay says, ' if we replace this (Marx's) mechanical theory of equal exchange with the condition ...that a given amount of money must purchase commodities of the same value, there is nothing in Marx's theory of exchange which requires the money-object to be a commodity itself' (Dixon & Kay, p.512). Rejecting the notion that money gold is based on commodity gold, Dixon & Kay lost sight of the necessity for 'money-object to be a commodity itself and to have a value. With money having no value, why can 'a given amount of money purchase commodities of the same value'? In order for 'a given amount of money to be able to purchase commodities of the same value', those commodities have to be priced beforehand. If money has no value, the owner of commodity can neither set the price, which is an exchange proportion between commodity and money, nor express its value in price. S/he thinks both his/her commodity and money have values in his/her mind, so s/he can put a definite price to the commodity on sale, although the price is a hopeful and subjective one. The purchase, accordingly the value of money as well, must not be an assumption nor a postulate. When paper money is convertible into gold, it is as clear as noonday that money has a definite value given by the commodity gold. However, when it becomes inconvertible under contemporary capitalism, has it lost value and become mere 'reflex of values of all commodities'? Without doubt, when inconvertible, nobody knows what amount of gold a unit of paper money represents. But this does not mean that paper money has lost value, but that nobody knows exactly how much value it has. Consequently there is no other means left by which to know its value indirectly and vaguely than through the price index of commodities. This new born situation, different from a purely capitalist society the theory presupposes, gives the government an option to manage the value of paper money within some range by controlling the quantity of paper money. This monetary policy gives rise to an appearance that money has no value, but mere reflex of commodity values, or that the government gives paper money the value. Even under contemporary capitalism paper money can purchase commodities, because it has a certain amount of value, which nobody knows exactly. Marx's view is not erroneous that 'money must have the same value as that of the commodity it purchases'. Rather, his error lies in his failure to make clear that the two having the same value can appear only in the price gravitating toward the center. And this error originates from the flaw in the method of Capital, which expounds that value is congealed labor at the opening prior to the value-form. This is the reason why Marx's theory of exchange has come to be interpreted as 'mechanical theory of equal exchange' in Marxist value theory of the 20th century. The latter presupposes that commodities have values given by production prior to, and independently from, the sale, and later exchange takes place based on equal 'labor values' or embodied labors. In the measure of money Marx tells as follows : 'The possibility of a quantitative incongruity between price and magnitude of value, i.e. the possibility that the price may diverge from the magnitude of value, is inherent in the price-form itself, this is not a defect but, on the contrary, it makes this form the adequate one for a mode of production whose laws can only assert themselves as blindly operating averages between constant irregularities' (Marx, 1976, p.196) . If this keen insight into the relation between value and price-form were deepened further, his remaining mechanical theory of exchange, which is nothing other than the value theory of the classical political economy, would be overcome, and the question would emerge as to whether the presentation of value substance at the opening be consistent with the theory of value-form and price-form. In the current conjuncture where mathematical proof or disproof of transformation problem persists, I wish to stress that the price-form and the oscillation of price is not only ' adequate' but also necessary form to value concept. Value can neither exist, nor be grasped apart from the value-form and price-form. As soon as an economist dares to grasp and present it apart from these forms, value slips away or changes into totally different thing 4. The same applies to the issue of supply and demand. While this issue is dealt with later in the production process of capital and more concretely in the production-price, its fundamental formal aspect should and can be explained in the theory of money, for supply and demand in capitalism revolve on the axis of money through price-form, as the term 'effectual demand' shows . Marx states, 'the ratio of supply to demand does not explain that market-value, but conversely, the latter rather explains the fluctuations of supply and demand' (Marx, 1959, p.188). In my expression rather, the ratio of supply and demand does not determine value, but conversely, the latter regulates the fluctuations of supply and demand. That value is determined at the point where supply and demand equilibrate with each other dose not mean the issue of supply and demand should be expelled out of the value theory. Traditional Marxist theory of value has an inclination to shut out the issue along with price fluctuation. This tradition has, I think, made Marxist value theory stereotyped and infertile. 4 Those opposing to the New Ricardian's assertion, redundancy of labor theory of value, found in Rubin's theory of value a new ground for criticizing it. Rubin emphasized that abstract labor creating the value of a commodity cannot be established until the commodity has been exchanged. Based on this theory, all value theories, in favor of Marx or not, starting with an assumption of embodied labor theory of value turns out wrong, because they assumed abstract labor prior to exchange or sale. On this basis attempts to reformulate Marx' labor theory value has begun, stressing the necessity of value-form to value or the primacy of money in capitalist economy. 'Monetary approach by Carterier, Williams and Dixon & Kay can be seen as an extension of this trend. However, this approach has fallen into a dilemma. According to Dixon & Kay,' How can value be directly produced by abstract labour when abstract labour is constituted by exchange? How can prices be determined by the amounts of abstract labour which commodities contain, when these amounts are not set until prices are established?' (Dixon & Kay, p. 509). Their views are supposedly proposed to avoid this dilemma. For example, Williams says, 'if monetary exchange relations constitute the social character of value, then value constitutes, only ex post, what private labours have in common. The systemic problem of any substance of value pre-existing universal exchange then disappears' (Williams, 1992, p.441). The task to come to grips with the dilemma should start with disentanglement of two different problems twisted in the dilemma: the first, how can value be grasped prior to exchange when value is constituted by exchange? ; the second, how can abstract labor create the value of a commodity? The former is a problem in the doctrine of circulation forms, whereas the latter belongs to the second doctrine of capitalist production. Rubin started with the presupposition conventional in Marxist value theory that the value of a commodity is nothing but abstract or socially necessary labor embodied in it, following Marx's presentation of value as congealed labor at the opening of Capital. I think this is a source of the dilemma. When Dixon & Kay says ' value dose not pre-exist exchange, but is constituted by it' (Dixon & Kay, p.513) in favor of Williams, the first problem is presented. Exchange constitutes value, but if a commodity has no value exchange cannot realize. Without any commitment to abstract labor the dilemma can be exposed in a nutshell like this. The key to solve it lies in the logic of value-form. It is true that only a commodity exchanged, to be more precise, sold, can have a value. But what the sale does is only the proof that the commodity has a value, the existence of which nobody knows prior to the sale, not the determination of value. It is one thing to say that value is determined only in the sale, it is another that only sale determines value. More concretely, the fact that sale determines the price, not value, is demonstrated in the phenomenon that through repetition of sales a fluctuating price is drawn by value to a center price. In this sense the expression that exchange constitutes value, which is the same expression that price constitutes value, is misleading. That only a commodity having a value can be bought does not mean the value pre-exists prior to, apart from, the sale. The point at issue is the determinacy of price by value. In order to explain this relationship, it is necessary that value concept precedes price in a logical sense, since price-form presupposes value. The same logic applies to the relation between value and value-form. To say that value-form constitutes value denying the priority of value to value-form as Williams and Dixon & Kay do it, is wrong. It is quite right that value cannot exist apart from value-form, as they stress it. But this dose not imply that value concept preceding value-form is wrong. This logical sequence shows merely the determinacy of value-form by value. Dixon & Kay's remark that 'value and value-form are established simultaneously and constitutes each other' is still questionable. In the sense that value and value-form, or value and price (in purchase and sale), or more broadly, commodity, money and capital, are all categories logically abstracted out of pure capitalism, it is correct to say they are established simultaneously. But merely saying so produces no solution to clarifying the interconnections between them. The method of derivation from the more abstract form to the more concrete, based on the priority of value, which Dixon & Kay refuses, is essential to clarify their interconnections. Rubin's value theory, which asserts that abstract labor forming value cannot exist prior to exchange, formed an antithesis to such a Marxist value theory as assuming embodied labor theory of value without value-form or price-form. Therefore, the former is to some extent effective in the critique of the latter. However, just as the latter is one-sided conception of value, the former as well is so in an opposite direction. Let us move on to the second problem: how abstract labor creates or forms the substance of value. First of all, it should be confirmed that this is a problem to arise and to be solved at the production process of capital in the second doctrine, not in the first doctrine, as Marx and Rubin believed it. In the theory of commodity and money only commodity-form and money's functional forms have been demonstrated, and the problem of how labor constitutes the substance of value is not yet in place. The substance of value cannot be dealt with until capital regulates totally production based on commoditified labor-power i.e. the industrial capital appears on stage. It is in the second doctrine of capitalist production that the law of value operates fully with the value of commodity based upon socially necessary or abstract human labor. The task of the first doctrine which treats of commodity-form, money-form, and capital form is to clarify these circulation forms in which the law of value operates later in capitalist production. The second doctrine of capitalist production begins with the labor process and then moves to the value forming or valorization process, in a similar way as Marx proceeds in Capital1 after transformation of money into capital. It is at this valorization process that the substance of value is demonstrated and proved. If this logic is made clear, abstract labor will be defined as universal to production in general, not specific to commodity production, because the social division of labor as universal requirements of society can be demonstrated in the labor process. This insight, potentially included Capital's recognition of the substance of value, will undermine Rubin's belief that abstract labor creating value is specific to capitalism. It is this belief that gives rise to the view that abstract labor is constituted by exchange. If abstract labor is confirmed to be universal together with socially necessary labor, it will be made explicit that the meaning of the substance of value is the value of a commodity is determined by socially necessary or abstract labor requisite for its production. What means by the expression that labor forms or creates value is this determination of value by the labor. This is not the same as the proposition that abstract labor literally forms value, or labor congeals into value as embodied labor. Therefore, with this understanding the expression is correct, but without it the expression is misleading. In this context, the criticism, by Rubin followers or monetary approach, of the embodied theory of value, it seems to me, inconclusive. It takes much space to explain how abstract labor creates value and surplus value exactly, I look forward to another opportunity of presentation. Concluding remarks There still remains other interesting issues Carterier, Williams and Dixon & Kay have submitted: how M---C---M ' can be derived from C---M---C ', the simple circulation of commodity; whether the labor power is a commodity or not; how the exploitation of surplus value should be explained by the law of value; how the value is interconnected with the production price, and so forth. However, since the aim of the paper is to reinstate fundamental problems in the value theory prerequisite for reconstructing those issues, I wish to conclude the paper with a few comments. The difficulties with the value-form and the money, which the monetary approach cited as their starting-point, can be solved by reformulating theory of commodity and money without reference to the substance of value. The cause of Rubin's value theory falling into a dilemma can be seen that he believed the value-form to be the value expression of abstract labor. The value-form is the expression of value itself, not of abstract labor, Therefore, the dilemma consequent on Rubin's value theory should be resolved into two distinct problems: the relation between exchange and value, and that between abstract labor and value. The former can be solved in a rehabilitated value-form. The latter should be solved at the valorization process in the production process of capital. This paper concerns mainly the former to prepare for the solution to the latter. Notes 1 The author supports the stand-point that capitalism should be analyzed with three level approach: the theory of pure capitalism or the principles of political economy, the stage theory and historical empirical studies; the principles consist of three levels or doctrines: the circulation-forms (the forms of commodity, money and capital), the production process of capital and the distributional forms of surplus value. This method was first proposed by Kozo Uno and is shared with Uno followers in Japan including T. Sekine and M. Itoh. At present, so-called Uno school has ramified into several groups. This paper represents my own view. 2 In the simple value-form, Marx supposes that the owner of linen can express the value of linen with any amount of coat regardless of his/her desire toward to it. However this value expression without desire to use-value of an equivalent commodity can be established for the first time in the money-form. Only in the money-form can the material, not the use-value, of an equivalent commodity have the power of direct exchange. Value expression x quantity of A commodity = y quantity of B commodity the most appropriately applies to the money-form. In the simple value-form, Marx committed an error in pre-empting the equivalent form of the money-form. His analogy, the relation of king to subjects, cited in the equivalent form of the simple value-form (Marx, 1976, p.149) is regarded suitable to the money-form, for in the world of commodities money is the king attended by commodities as his subjects. 3 Based on his embodied labor theory of value Marx pointed out that the value of gold is determined on the first entry into circulation at the mining site. On top of this we should take note that the supply of gold is not confined to a new product. Gold as luxury goods that can freely flow in and out the spheres of circulation and consumption can join the supply. So the determination of the value of gold at the mining site can be affected by this part of supply. 4 Marx's statement in Capital 3 shows that he has reached almost this perception of price-form. 'The assumption that the commodities of the various spheres of production are sold at their value merely implies, of course, that their value is the center of gravity around which their prices fluctuate, and their continual rises and drops tend to equalize' (Marx, 1957, p.173). However he concluded from this that in Capital 1 the congruity of value with price being presupposed, the deviation of value from price should be excluded there. And this method has greatly lent itself to the interpretation of 'mechanical theory of exchange'. In my view deviation and fluctuation of price should have been incorporated into the theory of measure of value, therefore into Capital 1. 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