Marx deals with this, also, in Theories of Surplus Value, Chapter 22, in relation to Ramsay, who makes the same error as the TSSI, based on the use of historic prices rather than current reproduction cost. By failing to grasp the difference between the two, and ending up with a version of a cost of production theory of value, it abandons the Labour Theory of Value, in the name of seeking to save it from a contradiction that is purely of their own construction and misunderstanding. In Theories of Surplus Value, Marx makes a similar point about the role of the Ricardians that sought to save Ricardo's system by, in practice, abandoning it.
Ramsay effectively identifies what appears to be a contradiction in the LTV, which is what is picked up on by the proponents of the TSSI, and use of historic pricing. It appears to show that where, for example, the value of the materials consumed in production has risen, this value is then transferred to the end product. So, if we have
c 1000 + v 250 + s 250 = 1500
and the value of c rises to 1200 before the end product is sold, its value rises to 1700. The capitalist has only paid, in total, 1250, leaving them an amount of profit of 450, not the 250 of surplus-value. Ramsay and the proponents of historic pricing see in this an apparent contradiction, because it appears that the source of this additional 200 of value, and surplus value is not labour, but is the constant capital itself. But, Marx explains that this is an illusion, because what appears, here, as a surplus value or profit is no such thing. It is simply a capital gain for this particular capitalist.
Moreover, as Engels notes above, in relation to wages and labour-power, and Marx notes in Theories of Surplus Value, Chapter 22, and Capital III, Chapter 47, the capitalist must physically reproduce the use values consumed in production, not simply the original value/historic price of those elements. So, as with workers' wages, if the price of the consumed materials has risen from 1000 to 1200, when these materials are replaced, the capitalist must, now, lay out 1200 not 1000 for their purchase. Out of the 1700 value of the end product, the capitalist must lay out 1200 for materials, and 250 for wages = 1450, leaving them not with 450 of profit, but only the 250 of actual surplus value. Indeed, as Marx describes, originally, the rate of profit was 250/1250 = 20%, but is now, only 250/1450 = 17.24%.
“Or on the other hand, if this production and reserve fund does in fact exist in the hands of the capitalist class, if it has in fact arisen through the accumulation of profit (for the moment we leave ground-rent out of account), then it necessarily consists of the accumulated surplus of the product of labour handed over to the capitalist class by the working class, over and above the sum of wages paid to the working class by the capitalist class. In this case, however, value is determined not by wages, but by the quantity of labour; in this case the working class hands over to the capitalist class in the product of labour a greater quantity of value than it receives from it in the payment of wages; and in this case the profit on capital, like all other forms of appropriation of the unpaid labour product of others, is explained as a simple component part of this surplus-value discovered by Marx.” (p 250)
In short, as Marx sets out in Capital II, under capitalism, the surplus product is, in aggregate, the physical equivalent of the surplus value produced by labour, and appropriated by capital, as realised in profit. The surplus product, i.e. that not required to reproduce the consumed materials, fixed capital and wages, is in the hands of the capitalists in the form of necessaries, luxuries and also of materials, fixed capital, and necessaries that can be used to expand the scale of production itself. The capitalists are able to buy the necessaries and luxuries for their own personal consumption (Department II a and b), because they have realised an equivalent amount of profit in the sale of their own commodities (Department I and II). But, in addition to that, the sale of their own commodities realises an equivalent amount of profit to that required to buy additional Department I goods (materials and fixed capital), and the additional wage goods (Department II a), required to employ the additional workers. (See Capital II, Chapter 21).
Ricardo opens his “Principles” with the clear and concise statement,
“The value of a commodity ... depends on the relative quantity of labour which is necessary for its production, and not on the greater or lesser compensation which is paid for that labour.“ (p 250)
The only deficiency, here, is that Ricardo does not distinguish between labour and labour-power. But, Engels notes that, in the whole of Duhring's “Course of Political Economy”, no mention of this statement is made. And, in The Critical History, we find Duhring's garbled statement,
““It is not considered” (by Ricardo) “that the greater or lesser proportion in which wages can be an allotment of the necessities(!) “must also involve ... a heterogeneous configuration of the value relationships!” (p 250)
As Engels comments, the reader can read anything into that, “and is on safest ground if he reads into it nothing at all.” (p 251)
In summary, Engels says that Duhring has served up five different varieties of value:
“the production value, which comes from nature; or the distribution value, which man’s wickedness has created and which is distinguished by the fact that it is measured by the expenditure of energy, which is not contained in it; or thirdly, the value which is measured by labour-time; or fourthly, the value which is measured by the cost of reproduction; or lastly, the value which is measured by wages. The selection is wide, the confusion complete, and the only thing left for us to do is to exclaim with Herr Dühring:
“The theory of value is the touchstone of the soundness of economic systems!”” (p 251)
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