Tuesday, 11 October 2016

Profit, Rent, Interest and Asset Prices - Part 4 of 19

Having then determined the objective basis for the value of labour-power, as the labour-time required for the reproduction of the worker, over their average lifespan, and having determined the normal working-day as an objective period that maximises the production of surplus value, that amount of surplus value can then itself be objectively determined. On the one hand, there is an objectively determined value of commodities required for the reproduction of labour-power, and whose alternative form is money wages, and on the other is the amount of new value that this labour-power produces during the normal working day. The mass of surplus value, is then objectively determinable as the difference between these two amounts.

But, having determined the mass of surplus value, it is then also possible to objectively determine the rate of profit too. The rate of profit is the relation between this mass of surplus value, and the capital laid-out for its production. In other words, it is the equivalent of the profit margin. As the rate of profit, it is expressed as s/c + v, and as the profit margin it is expressed as p/k. In this formulation, k is simply the cost of production, which in turn, is c + v, (or more correctly c + d + v) the amount of materials used in production, the wear and tear of the fixed capital, during the year, and the amount paid out as wages, whilst p is the amount of profit realised during the year.

But, the constant capital, c, is also comprised of commodities, whether those commodities be the raw and auxiliary materials consumed in production, or the machines, buildings and other fixed capital, a part of whose value is transferred, as wear and tear, during production. Consequently, the value of these commodities that comprise the constant capital is also, thereby, objectively determinable. Finally, the commodities required for the reproduction of labour-power, represented by the variable capital, have a value that is also objectively determinable by the labour-time required for their reproduction.

In short, Marx has shown that the value of c, v, and s are all objectively determinable, and so consequently not only is the amount of surplus value no longer an arbitrary, inexplicable quantum, but its relation to the capital required for its production is also now objectively determinable. Similarly, the value of the fixed capital that must be present for production to occur has already been determined. Consequently, the basis for calculating not just the rate of profit, but also the annual rate of profit, also exists.

The annual rate of profit is the relation between the surplus value produced in one turnover period, to the capital advanced for its production in one turnover period, multiplied by the number of times the circulating capital turns over during the year. On this basis, taking the whole social capital into consideration, an average rate of profit can then be also objectively determined.

For the first time, then, Marx provides an objective basis for the determination of all these relations, which in turn drive the other economic relations within the capitalist economy. On the basis of this sound, objective economic footing, he can then analyse the way this surplus value divides up into the specific forms of profit of enterprise, interest and rent.

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