7. Malthus’s Vulgarised Definition of Value. His View of Profit as Something Added to the Price. His Polemic Against Ricardo’s Conception of the Relative Wages of Labour
Malthus adopts Smith's concept of value as being the amount of labour which a commodity can command.
““The estimation in which a commodity is held, founded upon its cost to the purchaser or the sacrifice which he must make in order to acquire it, which sacrifice is measured by the quantity of labour that he gives in exchange for it, or what comes to the same thing, by the labour which it will command” (op. cit., pp. 8-9).” (p 31)
And, Marx notes that Cazenove highlights the difference between Malthus and Ricardo.
““Mr. Ricardo has, with Adam Smith, adopted labour as the true standard of cost; but he has applied it to producing cost only… it is equally applicable as a measure of cost to the purchaser…” (op. cit., pp. 56-57).” (p 31)
But, Marx explains that, when stripped of its high-sounding language, what is being said here is trivial. All that is being said is that the value of a commodity is equal to what must be paid to buy it. What this triviality does not address is what determines this price, what determines the amount of money that must be paid for it! However, if the value of a commodity is equal to this normal price, the price around which the market price rotates, then all this is saying is that the value of a commodity is equal to its price of production. But, it's precisely upon that rock that Ricardo's theory of value founders.
“In other words: the value of a commodity is equal to the sum of money which the purchaser must pay, and this sum is best estimated in terms of the amount of ordinary labour which can be bought with it. But what determines the sum of money is, naturally, not explained. It is the quite ordinary idea of the matter that is prevalent in everyday life. A mere triviality expressed in high-flown language. In other words, it means nothing more than that cost-price and value are identical, a confusion which, in the case of Adam Smith, and still more in the case of Ricardo, contradicts their real analysis, but which Malthus elevates into a law. It is the conception of value held by the philistine who, being a captive of competition, only knows the outward appearance of value.” (p 32)
By starting from this point, of the superficial appearance of the market price, and the central point around which it fluctuates, it is impossible to obtain a solution, without asking more questions that simply go round in a circle. It's only by first understanding the source of surplus value, and the laws governing it, that it's possible to formulate the concept of the average rate of profit, and prices of production.
“What then determines the cost-price? The capital outlay plus profit. And what determines profit? Where do the funds for the profit come from, where does the surplus product in which the surplus-value manifests itself come from? If it is simply a matter of a nominal increase of the money price, then nothing is easier than to increase the value of commodities. And what determines the value of the capital outlay? The value of the labour contained in it, says Malthus. And what determines this? The value of the commodities on which the wages are spent. And the value of these commodities? The value of the labour plus profit. And so we keep going round and round in a circle.” (p 32)
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