In this section—which is subtitled "The Two Factors of the Commodity: Use- Value and Value (Substance of Value, Magnitude of Value)"—Marx introduces us to his analysis of commodities. A commodity is an external object that satisfies a human need either directly or indirectly. He says that useful things can be looked at from the point of view of quality and quantity. They have many attributes and can therefore be used in many ways. He uses the term use-value in relation to commodities' quality. "The usefulness of a thing makes it a use-value." A commodity's use-value is a trait of the thing itself, and is independent of the amount of labor needed to make the commodity useful.
Exchange-value is the proportion by which use-values of one kind exchange for use-values of other kinds. It is a constantly changing relation, and is not inherent to the object. For example, corn and iron have an exchange relation, which means that a certain amount of corn equals a certain amount of iron. Each must therefore equal a third common element, and can be reduced to this thing. The common element cannot be a natural property of the commodity, but rather must be abstracted away from its use-value. Discarding use-values, only one property remains—the commodities are the products of abstract human labor. They are "congealed quantities of homogenous human labor." This common factor in the exchange-value of the commodity is its value.
Thus, a use-value only has exchange-value when it consists of abstract human labor. This is measured by the amount of labor-time socially necessary to produce it. A commodity's value would stay constant if the labor-time also stayed constant. With greater productivity, it takes less labor to produce a commodity, and thus, less labor is "crystallized" in the product, leading to a decrease in value. "The value of a commodity, therefore, varies directly as the quantity, and inversely as the productivity, of the labor which finds its realization within the commodity." Something can be a use-value without being a value. This occurs when something's usefulness is not produced through labor. However, nothing can be a value without also being a use-value; if something is useless, so is the labor contained in it.
Marx presents several definitions that will be important throughout his work, so it is very important to be clear on their meanings. A use-value corresponds to the usefulness of an object, and is internal to that object. For example, a hammer is a use-value because of its contributions to building. Its use-value comes from its usefulness. In contrast, a hammer's exchange-value comes from its value relative to other objects. For example, a hammer might be worth two screwdrivers. An object doesn't have an exchange value in itself, but only in its relationship with other objects.
However, the fact that the hammer and screwdriver can be exchanged at all suggests that there must be something common between them, some means of comparison. Marx says that this is the object's value. Value means the amount of labor it takes to make the commodities. This labor theory of value is very important to Marx's theory. It implies that the price of commodities comes from how much labor was put into them. One implication of this is that objects with natural use-value, such as forests and other natural resources, do not have value because no labor went into them. One problematic question, then, is how such natural resources can have exchange-value (people do spend money on them) without benefiting from labor. It is also important to consider how Marx's conception of the roots of exchange value differs from modern economic theory. In modern theory, something's exchange value is rooted in people's subjective preferences. While the amount of labor required would be linked to the supply curve of a commodity, its exchange value is also determined by the demand curve. Marx focuses exclusively on labor.
This section also gives a general sense of Marx's approach in Capital. Here he dissects one aspect of the modern capitalist system and presents a schema for understanding why it functions as it does. Later Marx will analyze things like the role of money and the capitalist. While this book makes many historical and sociological arguments, it is largely a book of economic theory and its implications.