[c) Torrens and the Conception of Production Costs]
It is a merit of Torrens, Marx says, that he raises the question of production costs. This issue was discussed earlier by Marx. It is the distinction between the production costs for the capitalist, and the production cost for society. The difference between these two things is the surplus value appropriated by the capitalist. In other words, the production cost for the capital is only what they lay out as capital, which is equal to the consumed constant and variable capital, plus the wear and tear of fixed capital. But, from a social standpoint, the production cost comprises the value of the consumed constant capital (including wear and tear) plus the new value added by the immediate labour.
“Ricardo continually confuses the value of commodities with their production costs (insofar as they are equal to the cost-price) and is consequently astonished that Say, although he believes that prices are determined by production costs, draws different conclusions. Malthus, like Ricardo, asserts that the price of a commodity is determined by the cost of production, and, like Ricardo, he includes the profit in the production costs. Nevertheless, he defines value in a different way, not by the quantity of labour contained in the commodity, but by the quantity of labour it can command.” (p 79)
There is a further issue here, in relation to the question of the advanced as opposed to laid-out capital, which is the reason for the difference between the rate of profit and the annual rate of profit. If a capital turns over say four times in a year, the capitalist advances, say, £1,000 for materials and £1,000 for labour-power. At the end of three months, this capital comes back to the capitalist, in the sale of the commodity. To this extent, the cost of production, for the capitalist, for every subsequent period of the year is zero. As elsewhere, apart from where Marx is specifically dealing with the rate of turnover, or the difference between the rate of surplus value and rate of profit, as against the annual rate of surplus value and annual rate of profit, he proceeds, here, on the basis that the capital turns over once during the year.
Torrens understands production costs, in the sense that a capitalist does, as being the capital laid out for materials, wear and tear, and wages and upon which they calculate their rate of profit/profit margin.
If a commodity is sold at its value, it sells at its production cost for society, i.e. the labour-time required for the production of the constant capital consumed in its production, plus the immediate labour expended upon its production. The difference between this selling price, and the price that the capitalist actually pays to produce it is equal to the surplus value. If all production is considered, i.e. total social output, then this condition applies. But, for each sphere of production, the selling price, or price of production is equal, not to the cost of production plus surplus value, but to the cost of production plus the average profit. This means that commodities produced in some spheres will sell at prices that are higher than the cost of production plus surplus value, but this is cancelled out by other commodities that sell at prices that are lower than the cost of production plus surplus value.
In other words, because the price of production is equal to the cost of production plus average profit, these commodities that contain higher than average amounts of surplus value will sell at lower prices, so that the share of the total social profits will be less than the surplus value they contribute to that total social surplus, and vice versa.
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