Capital III, Chapter 9 - Part 5

The fact that the cost price of one commodity includes the price of production of those commodities used in its production, and therefore, the profit realised in these prices, does not contradict the statement that the sum of values equals the sum of prices. A's profit will be included in the price charged to B for the raw material supplied to them, just as B's profit will be included in the price of the machine they sell to A. But, neither A nor B count their own profit as part of their own cost price. So, if the total of cost prices were totalled, and the total of profits were totalled, the result would be the total of prices of production.

“There is no difference between surplus-value and profit, as long as, e.g., A's surplus-value passes into B's constant capital. It is, after all, quite immaterial to the value of the commodities, whether the labour contained in them is paid or unpaid. This merely shows that B pays for A's surplus-value. A's surplus-value cannot be entered twice in the total calculation.” (p 161)

The only difference, as pointed out earlier, is that the profit attaching to any particular capital will be bigger or smaller than the surplus value depending upon its organic composition, but also for that same reason, the prices of those commodities that form its constant capital, and that comprise the necessities of its workers – and hence indirectly its variable capital – will also be higher or lower than their exchange value, and so will cause its cost price to be also higher or lower.

“Aside from the fact that the price of a particular product, let us say that of capital B, differs from its value because the surplus-value realised in B may be greater or smaller than the profit added to the price of the products of B, the same circumstance applies also to those commodities which form the constant part of capital B, and indirectly also its variable part, as the labourers' necessities of life. So far as the constant portion is concerned, it is itself equal to the cost-price plus the surplus-value, here therefore equal to cost-price plus profit, and this profit may again be greater or smaller than the surplus-value for which it stands. As for the variable capital, the average daily wage is indeed always equal to the value produced in the number of hours the labourer must work to produce the necessities of life.” (p 161)

So, clearly Marx understood that the values of these input prices also needed to be transformed. The value of those commodities which form the constant capital is the same as previously described. It is the cost-price plus the average profit. But, now this cost-price is not a cost-price determined by exchange value, but a cost price determined by price of production. Consequently, the amount laid out will move up or down according to whether, in the particular case, the price of production, of these inputs, is higher or lower than their exchange value.

“So far as the constant portion is concerned, it is itself equal to the cost-price plus the surplus-value, here therefore equal to cost-price plus profit, and this profit may again be greater or smaller than the surplus-value for which it stands.” (p 161)

Similarly, the value of labour-power is determined by the number of hours labour the worker must work to produce an equal amount of value to cover the cost of the necessities required for their reproduction.

“But this number of hours is in its turn obscured by the deviation of the prices of production of the necessities of life from their values.” (p 161)

If, on the basis of exchange values, the price of bread, clothing, shelter etc. come to £1 per week, then, depending upon the organic composition of the capitals producing these necessities, this might fall to £0.75, or rise to £1.25, for example. In the former case, the value of labour-power would fall, and in the latter it would rise. This, as seen earlier, would not change the value produced by this labour, but it would change the proportion in which the new value created was divided between workers and capital. If prices of production for necessities were overall lower than their exchange values, the value of labour-power would fall, and surplus value would rise, and vice versa. But, this change in the amount and rate of surplus value, would in turn, impact the general rate of profit.

“However, this always resolves itself to one commodity receiving too little of the surplus-value while another receives too much, so that the deviations from the value which are embodied in the prices of production compensate one another. Under capitalist production, the general law acts as the prevailing tendency only in a very complicated and approximate manner, as a never ascertainable average of ceaseless fluctuations.” (p 161)

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