“The same value can be embodied in very different quantities [of commodities]. But the use-value—consumption—depends not on value, but on the quantity. It is quite unintelligible why I should buy six knives because I can get them for the same price that I previously paid for one."
the situation here describes Marx's theory of overproduction succinctly. Capitalist production has increased productivity so that knives can now be produced far more efficiently. The labour-time required to produce six knives is now what was formerly required just to produce one. The market value of knives, thereby falls to a sixth of what it was previously. If the price of a knife was previously £6, it is now only £1. But, as a consumer, I may only require one knife. The fact I can now buy it for £1, whereas previously it would have cost me £6, is now simply a bonus. I can use the remaining £5 to buy other commodities, if they are available, or else I can simply hold on to the £5 as saving. As Marx also says,
“At a given moment, the supply of all commodities can be greater than the demand for all commodities, since the demand for the general commodity, money, exchange-value, is greater than the demand for all particular commodities, in other words the motive to turn the commodity into money, to realise its exchange-value, prevails over the motive to transform the commodity again into use-value.” (TOSV2 p 505)
But, the problem for the producer of knives is that where, at their previous level of production, all of their knives could be sold, now they have six times as many knives to sell, and if every other potential consumer of knives looks at the situation in the same way that I do, then they will be unable to sell five-sixths of their production. In reality, of course, the lower market-value will mean that additional consumers may be tempted to buy knives to take up some of this spare production, but that will still leave a lot of this additional production unsold. If the capitalists producing knives want to sell all of this additional production, they will have to reduce the market-price even below this much reduced market-value, that has resulted from the increase in productivity. Depending upon the elasticity of demand, the price of a knife might have to fall to £0.30 to be able to encourage consumers to buy the additional knives. But, at that price, at least for some of the producers, not even the costs of production will be covered, the capital used in producing the knives will be unable to be reproduced. There will have been overproduction of capital.
Understanding this is fundamental to understanding Marx’s theory of overproduction. Unfortunately, because this element of Marx's theory of demand could only be developed after he had laid the groundwork for analysing the relation of demand and supply, it remained relatively undeveloped, and later Marxists have themselves ignored it, essentially basing themselves only on the equality of value relations, instead of taking into consideration, Marx's analysis whereby supply is based on value, but demand is based on use value.
“It is quite incomprehensible, therefore, why industry A, because the value of its output has increased by 1 per cent while the mass of its products has grown by 20 per cent, must find a market in B where the value has likewise increased by 1 per cent, but the quantity of its output only by 5 per cent. Here, the author has failed to take into consideration the difference between use-value and exchange-value.”
(Theories of Surplus Value 3)
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