Wednesday, 8 February 2017

Theories of Surplus Value, Part I, Chapter 3 - Part 28

Marx, in Capital III, demonstrated that as capitalist production commenced, in the 15th century, there was an infinite range of prices between the cost price (c + v) of a commodity, and its value (c + v + s), at which any commodity could sell and produce a profit. The aim of the capitalist was to maximise their annual rate of profit (s/C), and so provided this rate of profit remained higher, by continuing to produce more of commodity A, rather than investing in the production of some other commodity, they would continue to invest in additional production of A. But, as the supply of A thereby continued to rise, above its previous level, the consequence must be to cause the price of A to fall, and so also the rate of profit on A. That will continue until the rate of profit, on A, is no longer higher than on some alternative investment.

Rather than the market value of the commodity being determined by c + v + s, it will then be determined by the cost of production (c + v, or k) plus the average profit (p). The natural price of the commodity will then be equal to k + p, or what Marx calls the Price of Production. It is then around this point that market prices will fluctuate, in accordance with changes in supply and demand.

If we take the commodity in Marx's example, with a value of £0.25, this may divide into £0.20 for wages, and £0.05 for surplus value, or as Smith has it, profit. That is the profit accounts for 20% of the value, or 25% of the necessary labour.

“It would be correct to say that the magnitude of value of the commodity determined independently of wages and profit, or its natural price, can be resolved into four shillings wages (the price of the labour) and one shilling profit (the price of the profit). But it would be wrong to say that the value of the commodity arises from adding together or combining the price of the wages and the price of the profit which are regulated independently of the value of the commodity. If this were the case there would be absolutely no reason why the total value of the commodity should not be 8 shillings, 10 shillings, etc., according to whether one assumes the wages to be 5 shillings and the profit 3 shillings, and so on.” (p 96)

When Marx talks of the “price of the wages” or “price of the profit” here, he simply means the money form of this exchange value. The point he is making here is the same as that made previously that the value of a commodity is determined by the labour-time required for its production, and it is this value which thereby produces the fund for the reproduction of the capital expended on its production. This is quite different, as was shown earlier, to saying that the value of the commodity is equal to the value of the revenues obtained by the various owners of factors of production. If that were the case, then if the value of labour-power rose, so that wages increased, this would cause the price of the commodity to rise, rather than the profit to fall, and vice versa.

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