Commodification

[Justin_D]

i have an optional assignement for a Economic History Class. Just looking for aid in approaching it and resources for thought.

“Commodification”

In an email exchange during the last two weeks, one of your fellow students and I have

been discussing the theme of commodification in American economic history. That is, the

ways in which goods and services are turned into commodities – things which have an

inherent value, and are transferable and exchangeable. Commodities have a value that can

be separated from their creators; think of the tobacco and cotton that was inspected in

Joyce Chaplin’s book. The only thing that tobacco buyers cared about was the quality of the

tobacco leaf – it did not matter who grew the seeds ‐ and the state helped facilitate this

particular market.

The idea that a good could become a commodity was a relatively new one in the 19th

century. It happened with not only tobacco and cotton, but to some extent the same was

happening with land, slaves, inventions, and other goods like livestock, lumber, coal,

tonnage on railroads, etc. Most importantly – along the lines of slavery – this was

happening with labor, as workers were paid for their time rather than their productivity or

their particular skills. The commodification of labor and goods drove inquiries into the

relationship between prices and values. This topic was investigated by Karl Marx and many

other economists and philosophers who have followed, including John Stuart Mill in his

1844 Principles of Political Economy.

Here is a link to Mill’s essay:

http://tinyurl.com/2fcljx4

In this paper, to be no more than five (5) doublespaced

pages long, I want you to discuss the

role of commodification in American economic history before the Civil War. We can find it

occurring in the labor market, in slavery, in the commodified products of slavery and in the

land on which those commodified products are grown. We can even find it in the

availability of transportation and finance.

Using the textbook, previously assigned readings, and any useful examples you may find in

the casebook Major Problems in American Business History, I expect you to engage in a

specific discussion of the process and ramifications of commodification in the pre‐Civil War

American economy.

[bcyclwutztht]

In an email exchange during the last two weeks, one of your fellow students and I have been discussing the theme of commodification in American economic history. That is, the ways in which goods and services are turned into commodities – things which have an inherent value, and are transferable and exchangeable.

Nothing has inherent value. The thesis that value is inherent in things is part of classical economic thinking, and was proven to be fallacious by Menger (and Jevons and Walras). That value is subjectively determined by individuals acting to satsify their wants, in an environment of relative scarcity, is the essence of Menger’s subjective value theory. This insight was the momentous analytical breakthrough of the so called “marginalist revolution” that Menger co-birthed

Commodities have a value that can be separated from their creators; think of the tobacco and cotton that was inspected in Joyce Chaplin’s book. The only thing that tobacco buyers cared about was the quality of the tobacco leaf – it did not matter who grew the seeds ‐ and the state helped facilitate this particular market.

Every good has a value that is separate from its creator—because value arises not from production, but consumption. The “commodities” your professor refers to are merely goods which have a wide market demand. There is nothing special about using the term “commodity” however—there’s no clear point of demarcation between goods with narrow vs. wide market demand.

The idea that a good could become a commodity was a relatively new one in the 19th century. It happened with not only tobacco and cotton, but to some extent the same was happening with land, slaves, inventions, and other goods like livestock, lumber, coal, tonnage on railroads, etc.

The reason why the idea of “commodity” arose in the 19th century was due to none other than the fact of the Industrial Revolution. For the first time, mass production and therefore mass markets arose. Again, “commodity” is only an arbitrary and ambiguous term for a good with a mass demand.

Most importantly – along the lines of slavery – this was happening with labor, as workers were paid for their time rather than their productivity or

their particular skills.

Free market economic theory says that this statement is false. Workers are paid according to their marginal productivity, as long as competition exists among employers seeking workers. Your professor seems to be something of a Marxist, with a capitalist exploitation theory world view.

I expect you to engage in a specific discussion of the process and ramifications of commodification in the pre‐Civil War American economy.

Again, the “process of commodification” is the process of the development of a mass demand for a good. So, you need to select a good and analyze the development of a mass market for it—and the consequences of this development (whatever this means…I don’t really understand what your professor is looking for here).

You could pick something provocative or unusual, like child labor. Check out Walter Block’s discussion of child labor in Defending the Undefendable. Or you could do something on banking or money (i.e. gold standard vs. fiat money—gold is a commodity whereas fiat money is not). Rothbard is all about the history of banking.

[JackCuyler]

Every good has a value that is separate from its creator—because value arises not from production, but consumption. The “commodities” your professor refers to are merely goods which have a wide market demand. There is nothing special about using the term “commodity” however—there’s no clear point of demarcation between goods with narrow vs. wide market demand.

You read that differently than I. I took “value that can be separated from their creator” to mean a generic good – something that’s value does not increase or decrease because of the name attached to the production. In today’s terms, hamburgers vs. McDonald’s hamburgers or coffee vs. Starbuck’s coffee.

[bcyclwutztht]

The difference is that a “specialized” hamburger or cup of coffee is a different type of good from a “regular” hamburger or cup of coffee, so at that point one is effectively comparing apples to oranges, or one type of good to a different one.

The professor’s attempted definition of “commodity” rests on the mistaken notion that “specialized iron ore”, for example (if there is such a thing), isn’t a commodity, but “regular iron ore” is a commodity. In fact, both are commodities (i.e. goods available for market exchange). The point of difference between the two is the fact that they are different goods.

edit: Above, I associate the term “commodity” with goods of “wide market demand”. Technically, I don’t think this is necessarily accurate. Sounds good, and may even be an apt definition, but I think “commodity” is generally used in reference to “goods available for market exchange”. I use this definition above, however, because this is what I believe the professor is ultimately referring to: i.e. goods with mass demand, in the new 19th century context of mass production and mass consumption.

[BrianAnderson]

Not related to the question, but what does your tattoo say?

[Justin_D]

Brian it says Laissez Faire.

Thanks for the input guys. I 'll run through some books for more ideas and will post up some ideas.

[bcyclwutztht]

I expect you to engage in a specific discussion of the process and ramifications of commodification in the pre‐Civil War American economy.

since the “process of commodification” is synonymous with industrialization, fundamentally its central mechanism is the spread or intensification of the division of labor. I can’t remember the source off hand, but I was reading an Austrian economics introductory textbook, and it mentions the book The Economy of Cities as being a work that includes a rich discussion and history of the growth and intensification of division of labor (presumably in its necessary relation to the growth of U.S. cities—I haven’t read it).

Just thought I would mention this.

[Esuric]

You can bullshit a paper like this and get an A. You don’t need to do any research. Just tell him what he wants to hear (capitalism causes the commodification of everything, makes society materialistic, labor alienation, first in the form of actual slavery, and our current condition of pseudo slavery, etc, etc).

[Zlatko]

From your teacher’s description I thought he was talking about commoditization in the sense that products that were previously seen as different goods became a single good in the eye of the consumer. But appearantly that is not what he is talking about. I looked at Wikipedia and commodification appearantly is a Marxist term. Pretty interesting that you use Marx’ theories to learn about economics in US universities. Anyways, I tried to translate the Marxist definition to common sense and I came up with this: “Commodification of a good or service occurs whenever someone first thinks of it as purchasable”

[Justin_D]

Zlat, I am sure many others on here can comment about the academia in the US being very leftist in economics. A personal statistic from me would be 1/6 being of the right, and I go to “business school” The numerator being 2 guys who had private sector experience and taught as adjuncts at night.

To be fair, I use Marx’s definition for capitalism, since ironically most Marxists/socialist get it wrong and leave capitalism just pertaining to the evils of businessi

This wll be a fun paper for sure. He is supposed to go over it today on more concrete terms.

[Justin_D]

So after asking him if my paper could be a disagreement with him he said fine. I defined what goods are and value and went from there citing the examples he listed.

He called me out as the austrian in class expecting me to know alot about trade tariffs.(i actually did).I doubt maybe 3/4 of the class knew what Austrian meant, they probably think I am European now.

He’s interested in the Murphy-Krugman debate too.

[Caley_McKibbin]

Everything that exists is a commodity.