In contrast
to the orthodox bourgeois view that prices are subjectively
determined, on the basis of the utility each consumer derives
individually from the acquisition of an additional unit, Marxists
argue that prices are merely the monetary expression of the value of
the commodity, a value which is not determined on the basis of
subjective valuation, but on the basis of the labour-time required
for its production. In the former case, the value of each individual
commodity unit, is different for each consumer, because each consumer
obtains varying degrees of utility from each commodity unit, compared
to some other consumer, and even compared to themselves under
different conditions.
For example,
I may like Mars Bars, and you may hate them. I would be prepared to
pay more money to acquire one than you, and indeed, you may not be
prepared to buy one at any price. Similarly, I may obtain a great
deal of utility from the first Mars Bar I eat during the day, but by
the time I am on to my tenth bar, I might feel sick at the sight of
another. I have dealt with this argument about Marginal Utility
theory elsewhere.
The orthodox theory essentially comes down to a theory that prices
are determined by demand, by what consumers are prepared to pay,
because they will not buy a commodity if it does not provide them
with the required utility at that price, whereas, by contrast, the
Marxist theory is that prices are actually determined by supply, by
what it costs to produce any commodity, because producers will not
continue to produce commodities for exchange unless they are able to
obtain an equal amount of value to that which they are giving up.
If I have
expended 10 hours of labour producing a commodity, and my labour and
yours are comparable, then I will expect to obtain commodities in
exchange that also require 10 hours of labour to produce. Although
the labour one worker provides will always be different to that of
some other worker, and even different today from yesterday even for
the same worker, as Marx says, quoting Edmund Burke, if the labour of
groups of workers is compared, even as few as five in a group, in
Burke's example, these individual differences are evened out. Even
if my labour, and your labour are not comparable, or in the aggregate
the labour say of tailors with the labour of carpenters, this still
applies, all that is required is that an appropriate adjustment to
the value produced in a given time by my labour to yours be made. If
my labour is seen to produce twice as much value as yours, then
commodities I produce in 5 hours, will exchange for commodities that
your labour produces in 10 hours.
If we put
this in the terms a capitalist understands, if a firm makes widgets that cost £1,000 to produce, and on average the rate of
profit is 10%, then the firm will expect to sell them at £1,100. If
it produces 1100 widgets, the individual price will be £1. But, if
consumers are only prepared to pay £0.90 per widget, and its
uneconomical for any firm to produce less than 1100 widgets, none
will be produced, because it would involve the producer not just
making no profit, but making a loss of £0.10 per widget. Capitalist
firms do not engage in business to meet consumers needs, but to make
profits, so the firm would stop producing widgets, and use the
capital to make some other commodity instead, on which it would hope
to make at least average profits.
In Part 6, I
will examine why both views about the determination of prices are
correct.
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