Theories of Surplus Value, Part II, Chapter 10 - Part 16

What Ricardo has done is to smuggle in the concept of an average rate of profit without first analysing how this average rate of profit comes about. In fact, Ricardo cannot determine how such an average rate of profit comes about, because he does not analyse surplus value. Consequently, the average rate of profit is just an arbitrary figure introduced into his theory, which each capital expects to receive.

“If one did not take the definition of value as the basis, the average profit, and therefore also the cost-prices, would be purely imaginary and untenable. The equalisation of the surplus-values in different spheres of production does not affect the absolute size of this total surplus-value; but merely alters its distribution among the different spheres of production. The determination of this surplus-value itself, however, only arises out of the determination of value by labour-time. Without this, the average profit is the average of nothing, pure fancy. And it could then equally well be 1,000 per cent or 10 per cent.” (p 190) 

The great achievement of Marx is, for the first time, he sets out the objective basis for surplus value, and consequently the rate of profit, so that it is no longer possible for that rate of profit to be some arbitrary amount. As Marx says, the objective basis is the value of commodities. The value of a commodity, and so of the total social commodity-capital, or value of output, is c + v + s. The constant capital,c, is comprised of commodities, and the value of those commodities is determined by the labour-time required for their reproduction. The remainder of the value consists of the value added to that constant capital by labour, which again is an objectively determinable figure, amounting to the actual amount of abstract labour performed. 

But, this labour must itself be reproduced, and capital must be advanced for that purpose. Out of the new value created by labour, therefore, an objectively determined portion must go to reproduce the labour-power, which provides the labour. The new value created consists of commodities that have an objectively determined value; the value of labour-power that undertakes this labour is itself a commodity, with an objectively determined value; and, consequently, the surplus value, as the difference between the value of that labour-power, and the new value it creates, is itself an objectively determined value. Because the rate of profit is the relation between this surplus value, and the constant and variable capital, it is itself an objectively determined amount.

“How from the mere determination of the “value” of the commodities their surplus-value, the profit and even a general rate of profit are derived remains obscure with Ricardo. In fact the only thing which he proves in the above illustrations is that the prices of the commodities, in so far as they are determined by the general rate of profit, are entirely different from their values. And he arrives at this difference by postulating the rate of profit to be law.” (190-1)

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