In terms of exchange-values, then, as against values, there is no constituted “proportional relation”, only a constituting movement, because, not only are the values of commodities constantly changing, so that the proportional relations of the values to each other change, but the demand and supply for each commodity also constantly changes, bringing about changes in market prices, which drive movements of capital into and out of different spheres of production, which, in turn, drives changes in market values.
The way that arises has been previously described, and can be summarised as follows, some of which is also discussed in Marx's analysis of rent, and the concept of differential value, in Theories of Surplus Value, Chapter 12.
1) Where demand exceeds supply, market price rises. Profit rises above the average. Additional capital is applied, which may be existing capital expanding or new firms entering the sphere. In the long-run, as set out in Theories of Surplus Value, Chapter 9, marginal costs fall, as output expands, but this may not be true for short-run marginal costs. So, a number of possibilities exist.
(a) Existing firms cannot expand further without higher costs, so market values would rise.
(i) They may increase supply so that market prices fall, but not to their previous level
(ii) New firms, with existing costs enter the sphere, supply rises, and market price falls to previous level
(iii) New firms enter, but also with higher costs, so market price falls, but not to previous level
(iv) New firms enter with, new, more efficient production, so with lower costs, thereby reducing market value. Supply rises, market price falls, now, to lower than previous levels.
(b) Some existing, larger firms, or more efficient production, may be able to expand to meet demand. They gain from economies of scale, and so reduce their costs further. The market value falls, and some existing smaller, or less efficient, firms can't make sufficient profit. They leave, enabling the more efficient firms to expand further still, rationalising the sphere, bringing lower market values, and lower market prices, as supply expands.
(2) Supply exceeds demand, and market price falls, so capital leaves the sphere.
(a) Usually, the smaller, less efficient firms close, reducing supply, so market price rises.
(b) As less efficient firms are removed, market value falls, so, whilst market price rises, it does not rise to its previous level.
(c) As market value and market price is below its former level, demand is higher. As firms respond to the higher demand, the larger/more efficient gain economies of scale, and market value falls further, stimulating further increase in demand and concentration and centralisation of capital.
(3) In the longer run, higher levels of output produce lower marginal costs, and market values, via the development of new technologies, and so on, as as the development of new, large-scale developments, as described in Theories of Surplus Value, Chapter 9.
As Marx notes, therefore,
“If M. Proudhon admits that the value of products is determined by labour time, he should equally admit that it is the fluctuating movement alone that in society founded on individual exchanges make labour the measure of value. There is no ready-made constituted “proportional relation,” but only a constituting movement.” (p 62)
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