This is the basis of all factor cost theories of value.
“All other revenue is ultimately derived from some one or other of these.” (Book I, Ch. 6, p. 48.)” (p 376)
Smith argues, here, that the revenues of anyone else is wholly derivative from these revenues. But, Marx shows this is wrong, and he illustrates this at greater length in Theories of Surplus Value, Chapter 4, in examining productive labour. Productive labour is that which exchanges with capital and produces surplus value, but that does not mean that unproductive labour dos not itself produce new value, and so contribute to society's social product. A prostitute may not be a productive labourer in the sense of not being employed by capital and producing surplus value (though they may if employed by a capitalist brothel) just as with a tutor who provides education in return for payment, but the labour of the prostitute and the tutor creates new value, it is value creating labour, and it is for that value, embodied in the use value of the labour-service they provide that the buyer hands over the equivalent in exchange-value. It is an exchange of revenue with revenue.
“To that extent their revenues are materially derived from wages (of the productive labourers), profit, and rent, and appear therefore as derivative vis-à-vis those primary revenues. But on the other hand the recipients of these revenues, derived in this sense, draw them by virtue of their social functions — as a king, priest, professor, prostitute, soldier, etc., and they may, therefore, regard these functions as the original sources of their revenue.” (p 376)
This is important in considering questions of total social product and GDP, today. A few years ago there were revisions of GDP, because it was realised that a lot of revenues going to sex workers were not being captured in official data. There is also the question of the continued large amount of new value created by household labour.
“and here Adam Smith’s ridiculous blunder reaches its climax. After starting by correctly defining the component parts of the value of the commodities and the sum of the value-product incorporated in them, and then demonstrating how these component parts form so many different sources of revenue, after thus deriving the revenues from the value, he proceeds in the opposite direction — and this remains the predominant conception with him — and turns the revenues from “component parts” into “original sources of all exchangeable value,” thereby throwing the doors wide open to vulgar economy.” (p 376-7)
Engels, as editor, makes the following note.
“I reproduce this sentence verbatim from the manuscript, although it seems to contradict, in its present context, both what precedes and immediately follow. This apparent contradiction is resolved further down in No. 4: Capital and Revenue in Adam Smith.”
What Engels refers to is that Marx, in this later section, shows that Smith's argument is correct if only society's consumption fund is considered, and then only in the specific conditions of capitalism. Marx's main consideration, here, was to show Smith's blunder in unconsciously moving from his labour theory of value, in which the value of commodities is determined objectively by labour-time, with this value then resolving into revenues, to the reverse, where he starts with revenues – which he further identifies with natural prices or necessary prices, required by the owners of these factors of production to bring them to market – and then adding them together to produce the value of the commodity.
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