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The Economics of Karl Marx

The first volume of Capital tries to bring out the essential nature of profit as surplus value produced by labour. All products exchange in proportion to the total labour embodied in their production. As Marx would say, the exchange value of labour power is bought and paid for but what is actually acquired is the use value of labour. Only a part of the workers’ working day is spent in replacing the equivalent of his own value,namely the wage goods that go to maintain him; during the remainder of the day, the workers work for the capitalists. Surplus value is nothing but unpaid labour. Surplus value can be increased either by lengthening the working day (absolute surplus value) or by raising the productivity of labour, thus lessening the time required to produce wage goods (relative surplus value). The rate of surplus value (the rate of exploitation) is a function of the direct labour employed. Constant capital in the form of machinery and raw materials only transmits its own value to the product; it does note create additional value. It differs from variable capital because it is bought and sold by capitalists, whereas variable capital is sold by workers and bought by capitalists, and it seemed obvious to Marx that the origin of surplus value cannot lie in an exchange between capitalists. The misdistribution of income under capitalism owing to the failure of real wages to rise as fast as output per man is, for Marx, the last cause of all crises. Marx thinks that capitalism tends continually to expand production without any reference to the effective demand that alone can give it meaning. The expansion of production does not automatically generate a proportionate increase in effective demand because the excessive rate of capital formation lowers the rate of profit, even while the innovation embodied in the increments of capital hold down wage rates by being largely laboursaving. Marx’s problem is to state how surplus value is reserved in an economy in which prices are determined by impersonal forces and the relation between employer and worker is based on contract rather than status. Under perfect competition, one might think that capitalists, whose individual contributions to total output are too small to influence market price, would expand output in the effort to reap more surplus value until wages are bid up so as to reduce the surplus to zero.The contradiction is that with a uniform rate of profit per unit of capital and with different values of organic composition of capital, we cannot have a uniform ratio of profits per man. Since the organic composition of capital differs between industries, so must the ratios of profits per man. This implies, however, that the net product of equal quantities of labour cannot sell for equal quantities of money, that is, relative prices cannot correspond to relative labour values. The labour theory of value does not claim that the price of a commodity is equal to the labour embodied in its production or that competition enforces such a distribution of productive resources between various industries that relative prices in the long run tend to be proportional to labour inputs. But a theory of value must explain how market forces produce such an equilibrium normal price.

 


Date: 2016-01-14; view: 385


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