Saturday, February 21, 2009

Commodity relations and intellectual property

Intellectual "property" (using the term in its loosest, most colloquial sense) helps illuminate Marxian commodity relations.

Marx means "commodity" in a very restricted sense: It is something physical (trivial: everything is physical), bounded in space and/or time, and most importantly that physically embodies a more-or-less definite amount of actual labor time*. It's easy to see how a car, or a pair of shoes, or a bolt of cloth or a bar of gold is a Marxian commodity. It takes a certain amount of time to make a car, and when you've made the car, well, there it is. The car physically embodies (or "congeals") the time it took to make it. If I give you a car, I am, in a concrete, fairly obvious sense giving you the time it took to make that car.

*Technically socially necessary abstract labor time. Under ordinary circumstances, however, the actual labor time is close to the socially necessary abstract labor time.

Adam Smith first asserted that it is human labor, and only human labor, that creates value*. Marx realized that, everything else being equal (which is often not the case), when labor is physically embodied in a thing such as a car, then people will trade the car for some other thing that physically embodies the same amount of time. The exchange value of a commodity is the labor time embodied in that commodity.

*Watch for the fallacy of the converse. Smith says, "If there is value, then there is labor." Critics of the labor theory of value say that "If there is labor, there is value," and note the absurdity of this construction.)

As a corollary, Marx further realized that the use value of a commodity does not contribute to its exchange value (except by setting an upper bound). My computer is vastly more useful to me than my car — I certainly spend a lot more time using my computer than I do my car — but the exchange value of an ordinary new car is much higher (by an order of magnitude) than that of an ordinary new computer: it requires an order of magnitude more human labor to build a car than it does to build a computer.

Marx also realized that the exchange value of a commodity is the labor time embodied in the commodity without anyone ever actually calculating that labor time.

That commodities are exchanged according to the labor time embodied in each commodity is a description of equilibrium conditions. In just the same sense that thermodynamics says not that everything is the same temperature, but rather that things of different temperature will move inexorably towards equilibrium, the labor theory of exchange value doesn't say that all commodities are traded according to their labor time, but that the exchange value of a commodity will tend over time to its labor time, according to the law of supply and demand in a more-or-less free market.

In disequilibrium conditions where demand exceeds supply, the exchange value of a commodity will be higher than the labor time embodied in that commodity: when shoes are scarce, I'll work three hours to buy a pair of shoes that took two hours to create. Since the exchange value exceeds the actual time, it makes sense for more people to produce that commodity, increasing supply, until supply and demand stabilize where the exchange value is equal to the actual labor time. (Likewise if supply exceeds demand, it makes sense for some people to stop making that commodity.) Under some specialized circumstances, the labor cost of a commodity will rise to its exchange value rather than its exchange value falling to its labor cost. In either case, conditions will stabilize when the exchange value is equal to the labor cost.

Marx's most penetrating insight is that labor itself is a commodity. When I wake up in the morning, my body embodies a certain amount of labor power: the ability to labor to create value. This labor power has a cost as well: I (or someone else) must grow food, build and maintain a house, make clothing, fetch water, etc.; all of these activities require human labor. The cost of creating my labor power is less than the labor power actually created: The difference is the surplus value of labor.

In a capitalist economy, where labor is a commodity, capitalists can make a profit even under equilibrium conditions. They pay the workers the cost of the workers' labor power (variable capital), and they use that labor power to create commodities that embody all the workers' labor power. It takes 1,000 hours of labor to create a car, but that 1,000 hours of labor costs 500 hours to create. So I can create cars indefinitely, obtaining them for 500 hours each and exchanging them (with other capitalists) for 1,000 each.

There's a lot that you can do with this basic understanding of commodity relations: the theory of falling profit, the pressure for a capitalist economy to become imperialist, the analysis of consumer capitalism, etc.

Intellectual "property", however, is difficult to manage under commodity relations. By intellectual property, I the loose sense of the abstract content that is the product of human mind. Consider a physical book made of paper and ink. The exchange value of a book embodies the physical labor necessary to produce the physical book — manufacturing the paper, applying ink to the pages, binding the book, moving the book to its purchaser, etc. — irrespective of the way the ink happens to be arranged on the pages. The book is the commodity, the arrangement of the ink is the intellectual property.

Now Marx's proviso about socially necessary labor time becomes relevant. It of course takes human labor to create intellectual property. The socially necessary labor time to produce a commodity is (in one sense) the minimum amount of time necessary to produce an identical commodity. Since it is physically possible produce an identical copy of any book by only transcribing the content, which takes much less time than creating the content of the book, the socially necessary labor time embodied in a book represents the lower cost of transcribing the content, not the higher cost of creating the content.

It's worth repeating this point to emphasize it: the exchange value of a commodity is the socially necessary labor time necessary to create the commodity. For most commodities that are "things", the socially necessary labor time is the actual time. For commodities (such as books) that contain intellectual property, the socially necessary labor time includes only the time to duplicate the content, not to create it. The intellectual property — the cost to create the abstract content, the particular arrangement of ink — does not and cannot form the natural socially necessary labor time embodied in the book.

When the physical labor time necessary to create a physical book is very high relative to the time necessary to create the book's intellectual property, a publisher is annoyed but not devastated by someone else copying the intellectual property. The publisher makes his profit from the difference between the socially necessary labor time and the labor cost of the workers to create the book. In other words, she can sell the book at the same price as her competitor, who does not have to pay to create the content, and still make a profit. In this sense, the publisher indirectly commoditizes the intellectual property in the book.

Because intellectual property cannot be directly commoditized, the producer of intellectual property fundamentally has a service relation to her publisher. Services, i.e. the direct employment of human time, can be commoditized, in the form of the provider's body and brain over a specified period of time. Of course services follow ordinary commodity relations: the exchange value becomes equal to the cost of producing the service -- in this case the cost of feeding, housing, clothing, etc. and educating and training the producer of intellectual property, not the time she actually takes to create the content.

Of course, no capitalist likes to have even a tiny part of his profit margin compromised, so he employs artificial means to raise the socially necessary labor time to create the content, i.e. he uses the power of the state to create copyright laws. It's important to understand, though, that the extra surplus value created by copyright laws goes not to the producer of the intellectual property, but to the publisher.

There are several ways to deal profitably with intellectual property in a commoditized economy.

First, strengthen copyright law enforcement. This move would artificially commoditize intellectual property directly and raise the socially necessary labor time to duplicate content without permission at or above the time necessary to create content.

We can find new ways to indirectly commoditize intellectual property. For example, some musical bands release their songs for free. Their songs serve as advertising to promote live concerts. In this case the commodity is the band's appearance at the concert, embodied naturally in the band itself. The creation of the song is not itself a commodity; is becomes part of the socially necessary labor time to produce the use-value of the band's appearance.

We can produce intellectual property as "overhead"; in the model of the state-supported university, state (or private) grants to artists, or the ruling class themselves producing intellectual property.

It's not that intellectual property cannot be commoditized: of course it can. The problems are more subtle.

First, when labor is commoditized commodity relations in general lead to exploitation: however you inject the creation of intellectual property into commodity relations, those producing intellectual property will receive the cost of their labor power, and they'll generate surplus value for whoever owns the capital.

Some observe that many producers of intellectual property, especially those in information technology, are highly paid even though they cannot naturally embody their labor in a commodity. This observation is correct, but it does not contradict the overall economic laws of commodity relations any more the observation that my coffee is hotter than the surrounding air contradicts thermodynamics.

The demand for information technology presently exceeds the supply, so the price is higher. But commodity relations and the law of supply and demand predict that precisely because this disequilibrium exists, the supply should increase over time... as it has, in millions of new information technology workers appearing in India, Russia and China. Commodity relations predict that the price of information technology will over time approach the cost: the price should decrease and the cost — training and education — should increase until they are in equilibrium. Again, we have seen just this phenomenon, especially regarding low- and mid-level information technology workers: their pay has decreased, and their costs — four-year college degrees, classes and certifications, many of which (cough Microsoft) offer little value and exist merely to inflate costs — have increased.


  1. It's important to understand, though, that the extra surplus value created by copyright laws goes not to the producer of the intellectual property, but to the publisher.

    This is an incomplete analysis. The producer--being aware of the availability of that surplus value to the publisher--can negotiate for a share.

  2. For commodities (such as books) that contain intellectual property, the socially necessary labor time includes only the time to duplicate the content, not to create it.

    Nice insight, I've never considered that.


    The producer--being aware of the availability of that surplus value to the publisher--can negotiate for a share.

    That is true for all workers who can negotiate to get s share of the surplus value they create. The problem is that due to the commoditization of labour and the (always) greater supply of it, their negotiation power diminishes until they cannot negotiate anything more than the cost of their labour-time


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