Equivalence, Principle of

in economics, the principle according to which a given amount of labor in one form is exchanged for an equal amount of labor in another. The principle of equivalence constitutes the internal basis of exchange proportions when exchange corresponds to the expenditure of socially necessary working time.

In the socioeconomic formations characterized by commodity production, the operative principle is that of value equivalence; where commodity production is absent (that is, under the primitive communal and communist modes of production), it is the principle of labor equivalence that is operative. The principle of value equivalence evolved in conjunction with the growing social division of labor and increasing exchange of commodities. In the initial stages of commodity exchange, when exchange transactions were sporadic and exchange proportions were random in character, the principle of equivalence lacked regulatory effect. It was only when exchange between individual private producers became a constantly repeated social act, representing an essential element of reproduction, that the prerequisites were created for the equivalence principle.

With the expansion of commodity-money relations and the establishment of the system of commodity production, in which the producers’ social interrelations take place exclusively through the market, “it is not exchange of commodities which regulates the magnitude of their value; but, on the contrary, it is the magnitude of their value which controls their exchange proportions” (K. Marx, in K. Marx and F. Engels, Soch., 2nd ed., vol. 23, p. 73). With the advent of money, the value of commodities acquires a uniform social form of expression, making it possible to assess and account for expenditures of abstract labor in the use value of the universal equivalent; the proportions of production and exchange are regulated by the law of value, the equivalence principle being a manifestation of the law.

The principle of equivalence operated to a limited extent in precapitalist socioeconomic formations, where production was primarily in kind and where the merchants’ exchange transactions were for the most part nonequivalent. Under the conditions of capitalist commodity production, the equivalence principle reaches full development.

The transformation of labor power into a commodity means that the purchase and sale of labor power are in accordance with the law of value—that is, they are based on the equivalence principle. The capitalist pays for labor power on the basis of value, and hence the equivalence principle retains its significance in the sphere of exchange. The use of labor power, however, entails not only the formation of new value but also an increase in value—that is, the production of surplus value.

The value of labor power and the value created by it are of different magnitudes. On the one hand, the equivalence principle is not violated, and the transaction between capitalists and hired workers is based on the law of value. In the production sphere, on the other hand, the increase in value is automatic, and a greater amount of live labor is exchanged for a lesser amount of embodied labor. Capitalist production is characterized by the exploitation and appropriation of the unpaid labor of hired workers. Consequently under capitalism the equivalence principle contradicts its own content.

In socialist society, the principle of value equivalence loses its general meaning. The dominance of public ownership excludes the exploitation of man by man. Labor power ceases to be a commodity and is joined to the means of production by a directly social method. Relations between society and individual members are regulated by the principle of labor equivalence: “the individual producer receives back from society—after the deductions have been made—exactly what he gives to it” (ibid., vol. 19, p. 18).

The law of distribution according to labor, which underlies the principle of labor equivalence, presupposes that the extent to which all working people share in the total consumption fund is determined by the magnitude of their labor input. Whereas in the case of value equivalence the exchange of equal values is observed only on the average, in the case of labor equivalence the amount of labor that the producer gives to society in a certain form is always returned to him in another form (ibid).

Together with the principle of labor equivalence, the principle of value equivalence is also preserved under socialism. The principle of value equivalence occupies a subordinate place in the system of socialist production relations; this is because social production is regulated not by the law of value but by the law of planned proportional development of the national economy. Nonetheless, the existence of commodity-money relations presupposes a value relationship between relatively separate enterprises as well as between the enterprises and society. The profit-and-loss accounting system represents such a value relationship. In profit-and-loss accounting relations, the operation of the equivalence principle does not negate the possiblity of planned deviation of prices from value in the interest of the socialist economy.

the assertion that the gravitational field in a small region of space and time is identical in its manifestation to an accelerated frame of reference. The essence of the equivalence principle is as follows. In a gravitational field all bodies move with the same acceleration, regardless of their mass and other properties (Galileo’s law). In the absence of a gravitational field, however, when an observation is made from an accelerated frame of reference, such as a rocket moving with an acceleration imparted by an engine, all bodies undergoing inertial motion also have the same acceleration with respect to the reference frame. In this sense, an accelerated reference frame is equivalent to a gravitational field.

The equivalence principle is called the weak equivalence principle only when applied to the laws of motion of bodies in space. In creating the general theory of relativity (the theory of gravitation), Albert Einstein assumed that not only mechanical motion but all physical processes, given identical initial conditions, proceed identically within and without a gravitational field but in an accelerated reference frame. This assertion is called the strong equivalence principle. The equivalence principle is local; that is, the identity of a gravitational field with an accelerated reference frame is valid only in the small region of space and time in which the gravitational field may be assumed homogeneous and constant in time. The equivalence principle has been proved experimentally to high accuracy (seeGRAVITATION).