Theories of Surplus Value, Part II, Chapter 10 - Part 19

Marx undertakes a similar investigation in Capital III, Chapter 11, where he looks at the effects of changes in wages on the prices of production of capitals with different organic compositions. The basic argument he makes is this. A rise in wages does not change the value of commodities, only the division between wages and profit. But, a general rise in wages causes the average rate of profit to fall. Because the price of production is cost price plus average profit, k + p, prices of production will rise where the rise in k, caused by higher wages, is greater than the fall in p. In that case, a rise in wages will cause the price of production of capitals with a high organic composition to fall, for those of average composition to stay the same, and for those of lower composition to rise. Overall, the level of prices remains constant. A further consideration of this indicates that for the prices of the commodities produced with higher organic compositions to fall, capital must move into these spheres, and move out of lower organic spheres. This is why large-scale capital tends to benefit from rising wages, relative to small capital.

However, as Marx points out, this effect of changes in wages, is only minor in determining the variations in the price of production, relative to the value. Far more significant is the actual organic composition itself, and the value of the commodities that comprise the constant capital.

“These variations in the cost-prices of commodities resulting from a rise or fall in wages are insignificant compared with those variations in the same cost-prices which are brought about by changes in the values of commodities, that is changes in the quantity of labour employed in their production (Ricardo is far from expressing this truth in these adequate terms). One can therefore, by and large, “abstract” from this and, accordingly, the law of value remains virtually correct. (He should have added that the cost-prices remain unintelligible without values determined by labour-time.)” (p 193-4)

Remember that where Marx talks about “cost-price” here, he actually means price of production.

“In fact it is clear that despite the transformation of the values of commodities into cost-prices, the latter having been assumed, a change in cost-prices—in so far as it does not arise from a permanent fall or rise, a permanent alteration, in the rate of profit which can only establish itself in the course of many years—can only and solely be caused by a change in the values of commodities, in the labour-time necessary for their production. {And these cost-prices must not be confused with market-prices: they are the average market-prices of the commodities in the different branches of production.” (p 194) 

As Marx says, this market price is already an average price, in that, within any sphere, different capitals will produce at different levels of efficiency. They will have different individual values, cost prices, and prices of production. But, the market price revolves around an average price of production for that sphere, which is equal to that of the average mean production. That is different to what Ricardo assumes with rent, where he assumes that the market price is determined by the marginal product.

“A certain amount of the supply is therefore not sold above this price. Otherwise the demand would fall. Those whose conditions of production are not average but below average, must therefore often sell their commodity not only below its value but below its cost price.}” (p 194) 

Back To Part 18

Forward To Part 20