IV – Supply and Demand
Weston only argued against rising wages on the basis of the supposed negative economic consequences that flowed from it for workers themselves. But, as part of this argument, he spoke in purely subjective terms about wages being high or low. However, to talk about wages being high or low is meaningless, unless it is stated against what they are being compared, and also, to state what metric is being used. If we take temperature, then, measured in centigrade, the boiling point of water is 100 and freezing 0. In Fahrenheit, however, it is 212, and 32. So, to say that 100 degrees is hot is meaningless, unless we know whether this is 100 degrees Centigrade or Fahrenheit. However, 100 degrees of either may be described as hot compared to 0 degrees of the same metric, but is meaningless without this comparison.
It is not the whim of makers of thermometers that determines the boiling point is 100 degrees centigrade, and the freezing point 0 degrees. They are determined by natural laws. As Marx sets out, in Capital and elsewhere, the values of commodities, of which labour-power is one, are determined, not by natural, but by economic laws. It only makes sense to describe wages as high or low when compared to such objectively determined value.
“He will be unable to tell me why a certain amount of money is given for a certain amount of labour. If he should answer me, “This was settled by the law of supply and demand,” I should ask him, in the first instance, by what law supply and demand are themselves regulated.” (p 35)
Supply and demand, as Marx sets out in Capital, and Theories of Surplus Value, can never explain the actual value or price of a commodity, including labour-power. They can only explain movements of market prices, up or down. If demand exceeds supply, market prices move up, and vice versa. But, this movement, up or down, implies a movement away from some other price, a price at which both supply and demand would be equal – the equilibrium price, as orthodox economics calls it.
But, then, at this price, the power of demand and supply to explain anything ceases, because it is no longer a question of explaining why the market price moves up or down, but of explaining why it is £1 rather than £10, or £100. To say, as the subjectivists, like Samuel Bailey, or the neoclassical economists, did that it is because, at this price, the sellers of commodities are prepared to sell, just as much of the given commodity as consumers want to buy is no answer at all, because it simply pushes the analysis back a further step to the question of why sellers are prepared to sell that quantity, at that price, and why buyers demand that quantity at that price. Marx sets this out, at great length, in Theories of Surplus Value, Chapter 20.
The reason that sellers are prepared to sell a given quantity, at a particular price, is that the commodity, itself, has an objectively determined value, which, in a money economy, takes the form of a cost of production. The producer of the commodity will not, willy-nilly, produce the commodity in quantities that can only be sold at prices below this cost of production. The value/cost of production of the commodity, then, becomes the determining factor. If suppliers can sell the commodity at this value, they will produce and supply it. If not, some of the least efficient suppliers will go out of business, and supply will be reduced, so that market prices will rise, and remaining producers can sell their output. If demand exceeds the supply, so that suppliers get more than the cost of production, they will be incentivized to produce more, and additional suppliers will enter production.
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