The Consumer Price Index, as calculated by the BLS, is “a measure of the average change over time in the prices paid by urban consumers for a representative basket of consumer goods and services”, or more succinctly, a “cost-of-living framework”. As I’ve noted before, there’s a ton of issues with the way the BLS calculates CPI which makes it a misleading (at best) or dangerously pro-inflationary (usually) metric, especially when it comes to the “Shelter good” consumption category that makes up around a third of the index overall. Interestingly, the CPI documents an issue that is central to classical economics – that of the value of labor as a commodity. This one is going to necessitate a bit of a tangent through classical political economy. Sorry.
David Ricardo begins his The Principles of Political Economy and Taxation by contending with both Adam Smith and Thomas Robert Malthus on a fundamental point. First, Ricardo cites Smith approvingly, agreeing that, in an “early and rude state” of society prior to the “accumulation of stock and the appropriation of land” (and, crucially, money, or at least a common numeraire) “the real price of every thing…is the toil and trouble of acquiring it”.1 Simply put, at bottom, the value of a commodity in exchange is derived from the amount of labor invested in its extraction or production. So far so good. But already, Ricardo must admonish Smith for his unrigorous treatment of this basic insight: “Some times he speaks of corn [as a standard of value], at other times of labor, as a standard measure; not the quantity of labor bestowed on the production of any object, but the quantity it can command on the market: as if these were two equivalent expressions”.2 To fix this issue, Ricardo improves upon Smith, noting that value is not a function of wages paid, but of the time spent by the worker in production of the commodity. Again, here we are in the basement of classical political economy, sitting in the foundations, asking a basic question: how do commodities exchange, and for how much?
Going a bit further, Ricardo deepens his critique. He writes:
“If I have to hire a laborer for a week, and instead of ten shillings I pay him eight, no variation having taken place in the value of money, the laborer can probably obtain more food and necessaries, with his eight shillings, than he before obtained for ten: but this is owing, not to a rise in the real value of his wages, as stated by Adam Smith, and more recently by Mr. Malthus, but to a fall in value of the things on which his wages are expended”.3
In other words, Ricardo is offering up a basic understanding of what a wage is. The real wage is best thought of as a reciprocal and relational interaction between the worker’s “necessaries” (purchased in the sphere of exchange as consumption goods) and the amount of labor expended by them in the course of the working day. And, to go one step further, the necessaries and the value of money itself are turbulently related, and finally, the value of the real wage a worker receives does not command a constant purchasing power of necessities in the market.
Given that I don’t hate myself as much as it may appear, I’m not going to discuss the “transformation problem” of values into prices here, and also because I don’t care. Suffice to say for the moment that there is a relationship between Ricardo’s variability in the purchasing power of the real wage, all of which is relative to the value of labor time in his schema, and the CPI, which measures purchasing power through the back door (that is, in exchange and not in production) by offering up a simple report of aggregate prices for the necessaries that Ricardo saw had significance as a barometer for the value of labor time. Both seek to measure in their own way the vagaries of this relationship – that is, changes over time and rates of purchasing power are somehow important.
As you may imagine, Marx writes on the capacity of the working class to obtain access to necessaries quite a bit. At this point in the discussion, I could refer to these necessaries as the “conditions of social metabolic reproduction”, as István Mészáros does in Beyond Capital, or “means of reproduction” as Marx does often, but since I don’t want to type all that shit out, I’ll use the more generic “needs”. Keep in mind these are exclusively needs that can, in the capitalist mode of production, only be fulfilled via the purchase of commodities – that is, by selling their labor power (not labor time!) in exchange for money. Again, basic stuff here. Bear with me.
For Marx, it is crucial to forefront his own insistence that these needs are not psychological desires, but are reflective of the social and historical landscape which defines that which is necessary to ensure their continued existence. It is also not abstract, given the needs an individual experiences are limited by their class position. He puts it best, in my opinion, in the Grundrisse, writing: “hunger is hunger, but the hunger gratified by cooked meat eaten with a knife and fork is a different hunger from that which bolts down raw meat with the aid of hand, nail, and tooth”. Another good one, a few lines later: “production not only supplies a material for the need, but it also supplies a need for the material. As soon as consumption emerges from its initial state of natural crudity and immediacy…it becomes itself mediated as a drive by the object”.4 This is all to say that in Marx, the smaller perturbations in the relationship between wages and needs are part of a much vaster historical movement, led along by production in the first instance. An ever-expanding, ever-modulating palette of use-values required for reproduction presents itself arrayed before each individual possessor of money-wages (and capitalists too, but let’s ignore them for now).5 The appearance of these use-values are a function of technological development in the production process insofar they contribute to an increase in productivity, and thus, a depletion of the socially necessary labor required to produce their use-values. Drawing this out, since labor-power is also a commodity in the capitalist mode of production, its value is likewise tethered to social necessity (called abstract labor). Thus, growing productivity, which results in lower amounts of labor power required for the production of needed use-values, drives down the value of labor power – an insight Ricardo grasped way back when. At the same time, the ‘bundle’ of needs required for reproduction does not diminish, and may in fact on a small enough time scale remain constant, at the same time the required amount of labor power to produce that same tranche of use-values falls. Less and less labor time is required to be spent, in the course of capitalist development, on basic reproduction – meaning that, as less and less labor power is directly communicated in each need-commodity, these same commodities return a greater and greater profit (surplus labor time) to their sellers. Thus: even if we assume a market scenario in which inflation does not exist, all else remaining equal, profits accrue to capitalists in larger and larger quantities solely as workers purchase the need-commodities required to sustain their existence.
What, then, of housing? Really, what we have to talk about here is construction of housing as a specialized production process engaged in the production of shelter as a use-value. However, this seems counterintuitive; what is our quanta for the basic fulfillment of “shelter”? Unlike industrial production, housing is not and will never be subjected to assembly line style production of a great number of identical commodities. Marx writes about this, in a way, in Wage Labor and Capital:
“A house may be large or small; as long as the surrounding houses are equally small it satisfies all social demands for a dwelling. But let a palace arise beside the little house, and it shrinks from a little house to a hut. The little house shows now that its owner has only very slight or no demands to make; and however high it may shoot up in the course of civilization, if the neighboring palace grows to an equal or even greater extent, the occupant of the relatively small house will feel more and more uncomfortable, dissatisfied, and cramped within its four walls”.
Here, he is writing about the social and relative determination of needs, pursuing a point about relative vs. absolute poverty (the former may increase as the latter decreases) which I will ignore here for the sake of brevity. Instead, I would like to make an argument: though construction outputs vary widely, owing to the particularities of site, uniqueness of the construction process, and the client’s parameters for the final product, I venture that at least within a national construction market, all construction takes place under the auspices of the same general level of technological development. It is, of course, relatively low to industrial production in general (with a lasting reliance on hand tooling, in particular), but that this general level constitutes the basic ‘profit landscape’ any construction capital must face.
To relate this to the above discussion, and keeping in mind construction capital creates a commodity with a use-value which satisfies a worker’s need for shelter (including all modern accepted requirements, such as electricity, plumbing, heat, etc. as well as just keeping the elements out), we may say that the purchase or rental of a commodity which satisfies the shelter basics constitutes an enormous robbery of the purchaser or renter regardless of the actual commodity purchased or rented. It is a luxury masquerading as a necessity. The use-value of such a shelter commodity, and thus the labor power embodied within it, is vanishingly small relative to the price of production or “natural price”, lets say, and thus prices (and their inflationary increase or otherwise turbulent movements) as encountered by any given person in the housing search process are realized almost entirely as profits to the owner of that commodity. In “Results of the Immediate Process of Production” in Capital Volume 1, Marx notes that “Luxury is the opposite of the naturally necessary. Necessary needs are those of the individual himself reduced to a natural subject. The development of industry suspends this natural necessity”. Here, the development of industry has resulted in a historical transition from housing as a naturally necessary need in favor of a housing as a largely aesthetic luxury experience by which class position can be clearly communicated.
Lastly, this is not to argue for a reduction of shelter to some imagined primitive hut or any sort of enforced austerity per se. Rather, it is to highlight the absurd mutations that “need-commodities” may undergo when capitalist production, as a process by which surplus value is extracted, drives consumption. We see this in more readily understood terms when a person encounters, say, different brands of coffee selling at different prices in accordance with their cultural cachet. I venture that when it comes to the shelter-commodity the situation is much different: on the whole, the use-value core of what constitutes shelter survives as a marginal remainder in the modern apartment or house, as the entire market now trades in luxury goods of varying degrees and the actual provision of shelter as a use-value is, perhaps, incidental. As such, we are left to deal with rents and “home values” as prices, shorn almost entirely of the actual value embodied within them.
This “early and rude state” is pretty much a schematic analogue to Marx’s “Simple Commodity Production” in Capital.
Ricardo, David. On the Principles of Political Economy and Taxation. John Murray, 1819, p.10.
Ibid., p. 15.
Marx, Karl. Grundrisse: Foundations of the Critique of Political Economy. Translated by Martin Nicolaus. Revised ed. edition. London: Penguin Classics, 1993, p. 92.
Note above I wrote “use-values required for production”. Another foundationally simple but crucial detail. The needs qua commodities a worker purchases are only purchased because their use-values are deemed crucial to the continued existence of the worker. Again, this is what the CPI purports to measure, though it does so by taking the exchange prices thereof, and thus its usefulness is forever limited.