Saturday, 1 October 2016

Capital III, Chapter 48 - Part 4

ii) Orthodox bourgeois economic theory sees each factor of production – land, labour and capital – contributing to the production of value. Each contributes to the output in the form of the marginal physical product, and when multiplied by the price, this gives the marginal revenue product of that factor. Each factor of production is employed up to that point where its marginal cost is equal to this marginal revenue product. At that point, the cost of employing the last unit of that factor is equal to the value it adds to production.

In this way, the revenue obtained by capital as interest, by land as rent, and by labour as wages, in each case is equal and proportionate to the value it has added to production.

“Secondly. In the formula: capital — interest, land — ground-rent, labour — wages, capital, land and labour appear respectively as sources of interest (instead of profit), ground-rent and wages, as their products, or fruits; the former are the basis, the latter the consequence, the former are the cause, the latter the effect; and indeed, in such a manner that each individual source is related to its product as to that which is ejected and produced by it. All the proceeds, interest (instead of profit), rent, and wages, are three components of the value of the products, i.e., generally speaking, components of value or expressed in money, certain money components, price components.” (p 816)

In other words, for bourgeois economics it is these historical prices of the factors of production, which determine the value of the commodity.  And, indeed on the basis of Say's Law, that supply creates its own demand, for bourgeois economic theory this should be sufficient, if its assumed that income = expenditure, and the value of output can be resolved into just these factor incomes.

But, the concept here, capital – interest, land – rent, labour – wages, even if we take the material representation of these things, i.e. physical means of production, a piece of land, and a worker, is irrational. These material representations are use values, whereas the revenues – interest, rent and wages are values. To compare amounts of use value with amounts of value, is like comparing the length of a table against the weight of a chair!

“Land, e.g., takes part as an agent of production in creating a use-value, a material product, wheat. But it has nothing to do with the production of the value of wheat. In so far as value is represented by wheat, the latter is merely considered as a definite quantity of materialised social labour, regardless of the particular substance in which this labour is manifested or of the particular use-value of this substance.” (p 816) 

Land takes part in the production process, but it does so as a use value, not as an amount of value. How much use value the land possesses depends upon its fertility, i.e. on the quantity of products obtained from it, for any given quantity of labour and capital applied to it. But, this in no way determines the value of that product. In fact, the more fertile the soil, the more products obtained from it for any given quantity of labour, and so the lower the value of each of the individual products.

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