Valorization: Definition & Social Role

Instructor: Joshua Wimmer

Joshua holds a master's degree in Latin and has taught a variety of Classical literature and language courses.

'Valorization' might sound awfully romantic, but it's actually about growth of worth and the value of labor rather than 'valor'. Find out how to maximize your capital in this lesson, where you'll see valorization defined and discover its role in society.

For What It's Worth: Valorization Defined

Say you wanted to open a lemonade stand; how would you know what to charge for each cup in order to make a profit? First, you'd probably have to sit down and figure out how much all your supplies (i.e. lemons, sugar, cups, etc...) cost and determine how much of each of those assets is required to make one cup of lemonade. But what if you had to pay your little brother to help you run your stand? What would be the cost of a cup of lemonade, then? Obviously, it would have to be higher than if you didn't have paid help, and in the world of economics, this phenomenon is known as valorization, or the growth in worth of invested assets resulting from the value of labor added during production.

Karl Marx (1818-1883), revolutionary German philosopher, economist, and sociopolitical theorist
Photo of Karl Marx

The term 'valorization' is most often used to translate the German verwertung ('changing worth') used by Karl Marx in Das Kapital, his famous treatise on the development of the capitalist political economy. First of all, he of course observed that the ultimate goal of a capitalist economy is to produce capital, which for Marx would've meant some amount of goods (monetary or otherwise) beyond what a person or business needs for survival. For instance, if you have three horses, but only need two and sell one, Marx would say that the third horse has been converted to capital. Similarly, you might not need to prevent scurvy with all the lemons you have lying around, so you could convert them to capital by opening a lemonade stand.

Now, let's say that you really did need your little brother's help running that stand. Maybe he squeezes the lemons, and you pay him $0.25 for every lemon he squeezes. His quarter-per-lemon wage now has to be added into the cost of production along with all your supplies. So, a cup of lemonade that you would've sold for $0.75 you might now have to sell for $1.00 or more to make any profit. For Marx, this didn't mean that the price just went up because you had to pay for labor. What it meant was that the labor performed (i.e. squeezing lemons) was actually 'changing the scope of the original investment's worth,' adding 'surplus-value' to the product that becomes capital through this process of valorization.

So how much value could your brother's grimy little hands actually squeeze-out of the finished product? To think about how much value is really added during valorization, let's consider a different example. Which one do you think would sell for more - a painting by a kindergartener or an original Picasso? While they might not look much different to us, the Picasso would obviously fetch a higher price than a kid's art project, even if they'd used exactly the same materials for the same price. Why? Well, Picasso is considered a highly skilled and practiced artist; therefore, the labor he puts into producing a painting adds more 'surplus-value' to it than that of an untrained child. So, in terms of the rate of valorization, the amounts of value you can add to something get larger as your employees' skill levels get higher.

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