The following comment, Marx says, is the only new contribution that Bailey makes on this question.
““… although we have arranged commodities under three divisions,” [this, i.e., the three divisions, is again taken from the author of the Verbal Observations] (these three divisions depend on the existence of absolute monopoly, limited monopoly, as is the case with corn, or completely free competition) “yet they are all, not only promiscuously exchanged for each other, but blended in production. A commodity, therefore, may owe part of its value to monopoly, and part to those causes which determine the value of unmonopolised products. An article, for instance, may be manufactured amidst the freest competition out of a raw material, which a complete monopoly enables its producer to sell at six times the actual cost” (p. 223).
“In this case it is obvious, that although the value of the article might be correctly said to be determined by the quantity of capital expended upon it by the manufacturer, yet no analysis could possibly resolve the value of the capital into quantity of labour” (pp. 223-24).” (p 166)
This remark is correct, Marx says, but it is not relevant, in relation to an analysis of value and price of production. Questions of monopoly and competition are relevant to market prices, and the implications for distribution. Marx's comment, here, also shows the error of those supporters of the Temporal Single System Interpretation, who argue that Marx did not believe it was necessary to transform input prices, simultaneously with output prices. Marx writes,
“It is clear that the conversion of value into cost-price works in two ways. First, the profit which is added to the capital advanced may be either above or below the surplus-value which is contained in the commodity itself, that is, it may represent more or less unpaid labour than the commodity itself contains. This applies to the variable part of capital and its reproduction in the commodity. But apart from this, the cost-price of constant capital—or of the commodities which enter into the value of the newly produced commodity as raw materials, auxiliary materials and machinery [or] labour conditions—may likewise be either above or below its value. Thus the commodity comprises a portion of the price which differs from value, and this portion is independent of the quantity of labour newly added, or of the labour whereby these conditions of production with given cost-prices are transformed into a new product. It is clear that what applies to the difference between the cost-price and the value of the commodity as such—as a result of the production process—likewise applies to the commodity insofar as, in the form of constant capital, it becomes an ingredient, a pre-condition, of the production process. Variable capital, whatever difference between value and cost-price it may contain, is replaced by a certain quantity of labour which forms a constituent part of the value of the new commodity, irrespective of whether its price expresses its value correctly or stands above or below the value. On the other hand, the difference between cost-price and value, insofar as it enters into the price of the new commodity independently of its own production process, is incorporated into the value of the new commodity as an antecedent element.” (p 167)
In other words, this restates the points made by Marx in Capital III, that, for any producer – capitalist or non-capitalist – the prices they pay for inputs constitute their cost of production. Where they buy these inputs from a capitalist producer, the prices of these inputs/commodities are already prices of production, not exchange-values, and so it is this price of production, not exchange-value which enters the cost of production for this producer, whether a capitalist or non-capitalist producer. Already, therefore, the output price of this producer is accordingly modified. And, this applies with labour-power too. If the price of production of wage goods is higher than their exchange-value, then workers will have to pay this higher price to reproduce their labour-power. The value of labour-power rises, and a larger part of the working-day is taken up as necessary labour, so that surplus value falls. As surplus value falls, so the rate of profit also falls, which is why the rate of profit differs under transformed prices, compared to exchange-values.
“The difference between the cost-price and the value of the commodity is thus brought about in two ways: by the difference between the cost-price and the values of commodities which constitute the pre-conditions of the process of production of the new commodity; by the difference between the surplus-value which is really added to the conditions of production and the profit which is calculated [on the capital advanced]. But every commodity which enters into another commodity as constant capital, itself emerges as the result, the product, of another production process. And so the commodity appears alternately as a pre-condition for the production of other commodities and as the result of a process in which the existence of other commodities is the pre-condition for its own production. In agriculture (cattle-breeding), the same commodity appears at one point of time as a product and at another as a condition of production.
This important deviation of cost-prices from values brought about by capitalist production does not alter the fact that cost-prices continue to be determined by values.” (p 167-8)
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