The value of products/commodities is not determined by the labour-time used in their production, i.e. their historic cost, but by the labour-time currently required to produce them, i.e. their current reproduction cost.
“Every new invention that enables the production in one hour of that which has hitherto been produced in two hours depreciates all similar products on the market. Competition forces the producer to sell the product of two hours as cheaply as the product of one hour. Competition carries into effect the law according to which the relative value of a product is determined by the labour time needed to produce it. Labour time serving as the measure of marketable value becomes in this way the law of the continual depreciation of labour. We will say more. There will be depreciation not only of the commodities brought into the market, but also of the instruments of production and of whole plants.” (p 62)
This is the basis of moral depreciation of fixed capital, as set out by Marx in Capital III, Chapter 6, and also in Theories of Surplus Value, Chapter 23. It is a fundamental basis of raising the rate of profit, as a means of ending a crisis of overproduction of capital, as also discussed in Capital III, Chapter 15. Marx cites Ricardo's comment,
“By constantly increasing the facility of production, we constantly diminish the value of some of the commodities before produced.” (p 63)
Sismondi saw in this, also, the basis of a generalised overproduction of commodities, leading to crises – a result that Ricardo, Say and Mill rejected. As Marx says in Theories of Surplus Value, Chapter 9,
“Sismondi is only right as against the economists who conceal or deny this contradiction.)”
Marx quotes Sismondi's account of the ever rising productivity on reducing the current value of commodities, and causing overproduction.
“Mercantile value,” he says, “is always determined in the long run by the quantity of labour needed to obtain the thing evaluated: it is not what it has actually cost, but what it would cost in the future with, perhaps, perfected means; and this quantity, although difficult to evaluate, is always faithfully established by competition....
“It is on this basis that the demand of the seller as well as the supply of the buyer is reckoned. The former will perhaps declare that the thing has cost him 10 days' labour; but if the latter realizes that it can henceforth be produced with eight days' labour, in the event of competition proving this to the two contracting parties, the value will be reduced, and the market price fixed at eight days only. Of course, each of the parties believes that the thing is useful, that it is desired, that without desire there would be no sale; but the fixing of the price has nothing to do with utility." (p 63)
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