“If we take society at any one moment, there exists simultaneously in all spheres of production, even though in very different proportions, a definite constant capital—presupposed as a necessary condition of production—that once for all belongs to production and must be given back to it, as seed must be given back to the land, It is true that the value of this constant part can fall or rise, depending on whether the commodities of which it is composed have to be reproduced at less or greater cost. This change in value, however, never alters the fact that in the process of production, into which it enters as a condition of production, it is a postulated value which must reappear in the value of the product. Therefore this change of value of the constant capital can here be ignored. In all circumstances it is a definite quantity of past, materialised labour, which passes into the value of the product as a determining factor.” (p 109)
Again, this is where the advocates of historic pricing confuse themselves, and trap themselves in a dilemma, by failing to distinguish between the need to reproduce use values, on a like for like basis, as against the value that must be reproduced to do so. The labour required to reproduce 100 kilos of seed may have been, say 10 hours, and this cannot be changed in considering the value of grain produced from that seed, but, if there is a rise in social productivity, so that now, instead of 1,000 kilos of grain requiring 90 hours of current labour to produce it (1,000 kilos equals 10 hours plus 90 hours current labour = 100 hours = 0.1 hrs/kilo) only 40 hours are required, so (1000 kilos = 10 hours seed + 40 hours current labour = 50 hours = 0.05 hrs/kilo. It is this current value that is determinant of the value of the 100 kilos that must be physically reproduced as seed, and not the historic cost, i.e. it is 5 hours not 10 hours.
In other words, when we use Marx's labour theory of value, and not Smith's cost of production theory of value, what we end up with, when we come to examine the resolution of the value of the 1000 kilos of grain is the following. To replace the constant capital i.e. 100 kilos of seed, 5 hours, and to replace the labour 40 hours. Out of the 50 hours of value of output that leaves an additional 5 hours of value, which is what confused Ramsay and also confuses the proponents of historic pricing.
But, as Marx sets out, in Theories of Surplus Value, Chapter 22, it is apparent where this additional 5 hours comes from. It comes from the fact that, to physically reproduce the 100 kilos of seed, now only 5 hours of social labour-time are required, not 10. There has been a release of 5 hours value of capital, or put another way, 5 hours of social labour-time is now no longer required to reproduce the material balances. That five hours of released value is available as additional revenue, or to be used for additional accumulation. It does not constitute additional profit, because no change in the rate or mass of surplus value has occurred. But, as Marx describes in Theories of Surplus Value, Chapter 22, and in Capital III, Chapter 6, it is precisely this fall in the value of the constant capital, the amount of social labour-time required to reproduce means of production that means that, even with no change in the rate or mass of surplus value, the rate of profit rises. Put another way, the ratio of the surplus social labour-time to that required to reproduce the constant capital rises. But, that conclusion of Marx only applies on the basis of the use of current reproduction costs, not the historic price of the capital to be replaced.
To avoid that confusion, Marx assumes no change in social productivity, and no accumulation, so that the question becomes solely one of where the fund and the demand comes from to replace the consumed constant capital, which, here, includes also the wear and tear of fixed capital.
“For the question here centres on that part of the constant capital which is actually consumed within the year, and therefore also must be replaced within the year.” (p 109)
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