Mill wants to explain the divergence of prices from exchange-values, in respect of capitals that turn over more slowly on this same basis, i.e. the capital is being compensated for having to wait longer to be able to realise the profit. In order to explain what is, in fact, the rule, that prices of production differ from exchange-values, Mill wants to explain it only on the basis of it being an exception to the rule.
“Everything which compels capital in a particular sphere of production to renounce conditions which would produce a greater amount of surplus-value in other spheres, is regarded here as grounds for compensation. Thus, if more fixed and less circulating capital is employed, if more constant than variable capital is employed, if it must remain longer in the circulation process, and finally, if it must remain longer in the production process without being subjected to the labour process—a thing which always happens when breaks of a technological character occur in the production process in order to expose the developing product to the working of natural forces, for example, wine in the cellar. Compensation ensues in all these cases and the last mentioned is the one which Mill seizes on, thus tackling the difficulty in a very circumscribed and isolated way.” (p 86-7)
Bailey is quite right in his summing up of Mill's position, when he says,
““The author […] has made a curious attempt to resolve the effects of time into expenditure of labour. ‘If,’ says he,” (p. 97 of the Elements, second ed., 1824) “‘the wine which is put in the cellar is increased in value one-tenth by being kept a year, one-tenth more of labour may be correctly considered as having been expended upon it.’… a fact can be correctly considered as having taken place only when it really has taken place. In the instance adduced, no human being, by the terms of the supposition, has approached the wine, or spent upon it a moment or a single motion of his muscles” ([Samuel Bailey,] A Critical Dissertation on the Nature, Measures, and Causes of Value etc., London, 1825, pp. 219-20).” (p 87)
In order to reconcile reality to the theory, reality is effectively denied, by reducing what is the rule to being merely an exception. Instead of recognising the weakness in the theory and dealing with it by uncovering and analysing the missing links between value and price of production, the attempt is merely to deal with the contradictions within the confines of the existing theory.
“This moreover is to be brought about by a verbal fiction, by changing the correct names of things. (These are indeed “verbal disputes”, they are “verbal”, however, because real contradictions which are not resolved in a real way, are to be solved by phrases.) When we come to deal with McCulloch, it will be seen that this manner, which appears in Mill only in embryo, did more to undermine the whole foundation of the Ricardian theory than all the attacks of its opponents.” (p 88)
This method was also discussed in Chapter 17. Reality comprises contradiction, because reality is dynamic; it is in a constant state of flux, and this dynamism is itself a consequence of contradictions. A journey comprises a point of departure and a point of arrival. These two points are inextricably linked by the path between them, but they are clearly not identical points. They are not the same point, but in fact, two opposite poles of a contradictory unity. They form a unity, because there can be no point of arrival without there being a point of departure.
And, as was seen in Chapter 17, the whole basis of crises under capitalism arises from a number of such contradictory unities. The commodity is a contradictory unity between use value and exchange value; commodity exchange implies a separation of production from consumption, of selling and buying, and whilst demand is also supply and supply is demand, so, as a consequence of the intermediation of money, these two poles of this contradictory unity can fall apart. Sellers, having obtained money, may not, in turn, become buyers of other commodities.
But, Mill who is the original proponent of Say's Law, responds to this contradictory reality by denying it, by seeing only the unity of opposites, and rejecting the idea that they can become separated, that the unity can fall apart.
“He transforms the unity of opposites into the direct identity of opposites.” (p 88)
And, as Marx illustrated in Chapter 17, the consequence of this is to provide an analysis of capitalism in which all of these actual contradictions are removed, so that instead of an analysis of capitalism, what is provided is an analysis of commodity production and exchange prior to capitalism, but more than that even prior to the development of money economies. In other words, it is an analysis of commodity production and exchange under systems of barter, which
“then, however, smuggles categories borrowed from circulation into [his description of] barter. See also what I wrote there about Mill’s theory of money, in which he employs similar methods.
In James Mill we find the unsatisfactory divisions—“Production”, “Distribution”, “Interchange”, “Consumption”.” (p 88)
Marx, in his comment here, refers back to what he wrote in relation to Mill in "A Contribution to the Critique of Political Economy".
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