Capital III, Chapter 10 - Part 7

Marx then examines the situation where demand is either above or below the supply of a commodity at its market value, and also where production is dominated by worse, better or average conditions of production. To be honest, I think this section suffers from the fact that, at this point, the marginalist analysis of price movements had not occurred. Marx certainly understood the principle of elasticity of demand, so for example, he writes,

“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.”

(TOSV 3 Chapter 20, p 119)

But Marx, at this point, has no mathematical tools, as the marginalists developed, for being able to determine how many more knives I might buy, as the price falls, or how much the price would have to fall to persuade me to buy all 6. Instead, Marx moves from a fairly solid position of determining market value on the basis of the average necessary labour-time, to a fairly shaky position, in which a series of market values are determined, dependent upon the state of demand and supply, and the distribution of production according to average, better or worse conditions. It also involves the introduction of some ill-defined concepts such as “ordinary demand” (p 178), which are pretty meaningless because as Marx himself says, demand will move up or down according to market prices, and also because demand is subject to shifts, as a result of changes in consumer preferences, e.g. with the introduction of some new commodity.

Moreover, the introduction of these other market values based upon conditions of the worst producers, where demand exceeds supply, and the best producers where supply exceeds demand, is really unnecessary, because, as Marx sets out, where demand exceeds supply at the market value, the higher market prices that result mean that the more efficient producers make above average profits, encouraging them to increase supply and thereby restore the demand-supply balance at market value. The same thing applies in reverse, where supply exceeds demand, at the market value.

It would only be where it is impossible to raise the level of supply that this would not be the case, but, even then, for the supply actually sent to market, its value has not really changed, as defined on page 182.

“The matter will be most readily pictured by regarding this whole mass of commodities, produced by one branch of industry, as one commodity, and the sum of the prices of the many identical commodities as one price. Then, whatever has been said of a single commodity applies literally to the mass of commodities of an entire branch of production available in the market. The requirement that the individual value of a commodity should correspond to its social value is now realised, or further determined, in that the mass contains social labour necessary for its production, and that the value of this mass is equal to its market-value.”

In other words, the market value is the mean value of all the output.

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