Saturday, 19 November 2016

Capital III, Chapter 50 - Part 12

The total value of the national output of the commodity-capital, therefore, cannot be derived by treating the value of wages, profit, interest and rent independently, based upon historic prices paid for the respective factors, and then adding them together.

“In reality, the commodity-value is the magnitude which precedes the sum of the total values of wages, profit and rent, regardless of the relative magnitudes of the latter.” (p 862)

Marx then goes through the conundrum that arises if the commodity value is considered to be determined by the historic prices of wages, profits, interest and rent.

“In the first place it is evident that if wages, profit and rent were to form the price of commodities, this would apply as much to the constant portion of the commodity-value as to the other portion, in which variable capital and surplus-value are incorporated. Thus, this constant portion may here be left entirely out of consideration, since the value of the commodities of which it is composed would likewise resolve itself into the sum of the values of wages, profit and rent. As already noted, this conception, then, denies the very existence of such a constant portion of value.” (p 862-3)

In other words, this conception of value leads directly to the fallacy of Smith's Trinity Formula, in which the value of the commodity product comprising c + v + s is, at the same time, dissolved into just the revenues of wages, profits, interest and rent, i.e. v + s.

“It is furthermore evident that value loses all meaning here. Only the conception of price still remains, in the sense that a certain amount of money is paid to the owner of labour-power, capital and land. But what is money? Money is not a thing, but a definite form of value, hence, value is again presupposed.” (p 863)

This is yet a further problem with historic prices, because it assumes that there has been no change in the exchange value of the money in which the historic prices were denominated, compared to the value of the money in which current commodity prices are denominated. But, its clear that if there has been no change in productivity, and so values, historic prices, and current reproduction costs will be the same, but if there has been such a change, the exchange value of money (or what is actually the same, the exchange value of commodities expressed in money, i.e. their prices) will thereby have changed, and so comparing these historic money prices with current money prices is like comparing apples with oranges.

“Let us say, then, that a definite amount of gold or silver is paid for these elements of production, or that it is mentally equated to them. But gold and silver (and the enlightened economist is proud of this discovery) are themselves commodities like all other commodities. The price of gold and silver is therefore likewise determined by wages, profit and rent. Hence we cannot determine wages, profit and rent by equating them to a certain amount of gold and silver, for the value of this gold and silver, by means of which they should be evaluated as in their equivalent, should be first determined precisely by them, independently of gold and silver, i.e., independently of the value of any commodity, which value is precisely the product of the above three factors. Thus, to say that the value of wages, profit and rent consists in their being equivalent to a certain quantity of gold and silver, would merely be saying that they are equal to a certain quantity of wages, profit and rent.” (p 863)

In essence, this comes down to the situation Marx described in Capital I, whereby the determination of value by wages, leads to a contradiction, because if the value of commodities is determined by wages, as the price of labour, the question then arises what determines the value of labour. The value of labour is like all other commodities determined by the price of labour! Even if we say it is determined by the value of the commodities required for its production, this does not help because the value of those commodities is then also determined by the price of labour, so the same circular argument exists whereby the price of labour is determined by the price of the commodities required for its production, and the price of those commodities is determined by the price of labour.

The only difference here is that instead of determining the price of commodities by just the price of labour – wages – it is determined by the price of labour, capital and land, i.e. by wages, profit, interest and rent. But, this leads into the same conundrum when we come to enquire into these prices.

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