Capital III, Chapter 9 - Part 7

In a sense, trying to identify the exchange value, at this stage, becomes pointless. What remains true is that the Law of Value remains in operation. But, just as this law operated in a different form prior to commodity exchange, so now it adopts a different form under capitalism as commodities exchange not at their exchange values but at their prices of production.

Society cannot escape the fact that it has limited social labour-time. Using more for the production of one commodity means less for some other. If the labour-time required to produce one commodity rises, its value still rises, but how this is ultimately now manifest depends on a series of intervening factors that determine its price of production.

Marx recognises this change and writes,

“For all other purposes, the statement that the cost-price is smaller than the value of a commodity has now changed practically into the statement that the cost-price is smaller than the price of production.” (p 165)

In other words, prices have now replaced values as the determining factor. It may even now be possible for the value of a commodity to fall, i.e. less labour-time be required for its production, and yet its price rise, depending on what happens with the prices of production of all those other commodities that make up its cost price. For example, the value of input A might fall because of the introduction of some new machine. But, the producer of A will obtain the same rate of profit on their total capital employed. If the general rate of profit rises, A's profit will rise with it, and so will the price of their commodity. Buyers of A's commodity will then see their cost prices rise even though now less social labour-time is required for its production. That will then carry through to the price of production of their own commodity.

For example,

c 200 + v 400 + s 400 = 1000;

an average rate of profit of 50%, gives a selling price, however, of 900, i.e. 200 + 400 = 600, p' = 50%, profit = 300, selling price = 600 +300 = 900.

c 400 + v 200 + s 200 = 800; 

an average rate of profit 60%, gives a selling price of 960, i.e. 200 + 400 = 600, p' = 60%, profit = 360, selling price = 600 + 360 = 960.

So, although the exchange value of A has fallen from 1000 to 800, the selling price has risen from 900 to 960.

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