HOSTILE BROTHERS: 

MARX’S THEORY OF THE DISTRIBUTION OF SURPLUS-VALUE 

IN VOLUME 3 OF CAPITAL

by Fred Moseley
Mount Holyoke College

December 1996

Capitalists are like hostile brothers who divide among themselves the loot of other people’s labor.
					TSV.II. 29	C.I.	  	Capital, Volume 1.
	C.II.	  	Capital, Volume 2.
	C.III.	  	Capital, Volume 3.
	G.	  	Grundrisse.
  	MECW.33.      Marx‑Engels, Collected Works, Volume 33.
         	SC.  	   	Selected Correspondence.  
       	TSV.II.	Theories of Surplus‑value, Volume 2.
       	TSV.III.     	Theories of Surplus‑value, Volume 3.
	WPP		Wages, Price, Profit 

In Book III we come to the transformation of surplus-value into its different forms and separate component parts.  
					SC. 191

Rent, interest, and industrial profit are only different names for different parts of the surplus-value of the commodity, or the unpaid labor enclosed in it, and they are equally derived from this source, and from this source alone.
					WPP. 215

The capitalist who produces surplus-value, i.e. who extracts unpaid labor directly from the workers and fixes it in commodities, is admittedly the first appropriator of this surplus-value, but he is my no means its ultimate proprietor.  He has to share it afterwards with capitalists who fulfil other functions in social production taken as a whole, with the owner of land, and with yet other people.  Surplus-value is therefore split up into various parts.  Its fragments fall to various categories of person, and take on various mutually independent forms, such as profit, interest, gains made through trade, ground rent, etc.  We shall be able to deal with these modified forms of surplus-value only in Volume 3.  

					C.I. 709 HOSTILE BROTHERS: 
MARX’S THEORY OF THE DISTRIBUTION OF SURPLUS-VALUE 
IN VOLUME 3 OF CAPITAL

	It is argued in this paper that the main subject of Volume 3 of Capital is the distribution of surplus-value, i.e. the division of the total amount of surplus-value into individual component parts, first into equal rates of profit across branches of production and then the further division of surplus-value into commercial profit, interest, and rent.  This subject is clearly stated in the various quotations at the beginning of this paper.       
	The paper argues further that Marx’s analysis of the distribution of surplus-value is based on the fundamental premise that the total amount of surplus-value has already been determined by the prior analysis in Volume 1.  The main question addressed in Volume 3 is how this predetermined total amount of surplus-value is divided up into its component parts.  The analysis of these individual component parts does not in any way affect the magnitude of the total surplus-value, since this total surplus-value is taken as a predetermined given in this analysis.  We will see that this key premise is explicitly stated and emphasized in Marx’s analysis of all the different forms of surplus-value, and especially in the important concluding Part 7 on “Revenue and its Sources”.  (Marx’s discussions of this key premise in the earlier drafts of Capital are examined in (Moseley 1997c).)
	Marx expressed this fundamental premise of his theory - the prior determination of the total amount of surplus‑value - in terms of the distinction between "capital in general" and "competition" (or "many capitals").  Capital in general refers to the essential properties that all capitals have in common.  The most important common property of capitals is their capacity for self‑expansion, i.e. their ability to produce surplus‑value.  Since these common properties are shared by all capitals, the analysis of capital in general is necessarily an analysis of all the capitals taken together, that is of the total social capital.  Therefore, the main question addressed in the analysis of capital in general is the determination of the total amount of surplus‑value produced in the capitalist economy as a whole.  Competition refers to the relations among individuals capitals, and, in particular, to the distribution of surplus‑value among capitals.Since the general rate of profit is nothing but the ratio of the total amount of surplus-value to the total amount of capital employed by the capitalist class, we are not concerned here with the different branches into which surplus value is divided, such as industrial profit, interest, rent.  Since all these different forms of surplus value are only components of the total surplus value, one part may increase because the other declines.  We are concerned here, however, with a fall in the rate of the total surplus value.  (MECW.33. 104)
Part 2 is discussed after Part 1 because of the logical connection between “the transformation of surplus-value into profit” in Part 1 and “the transformation of profit into average profit” in Part 2.  Surplus-value is first transformed into profit by relating it to the total capital, and then profit is further transformed into average profit by the equalization of profit rates across industries.  Marx argued that the second transformation is a necessary consequence of the first transformation.  Since capitalists measure surplus-value in relation to the total capital and attempt to maximize the rate of profit rather than the rate of surplus-value, competition among capitals tends to equalize rates of profit across industries.  Therefore, Part 2 is discussed after Part 1 in order to maintain this necessary connection between these two transformations of surplus-value into profit.  But the distinction between capital in general and competition would have been clearer if the order of Parts 2 and 3 had been reversed.   Part 3 will not be discussed further in this paper because it is not directly related to the distribution of surplus-value.   
	In Hegelian terms, which Marx emphasized throughout Volume 3, Marx’s theory of the distribution of surplus-value explains the individual parts of surplus-value - industrial profit, merchant profit, interest, and rent - as “forms of appearance” of the unifying substance of surplus-value, which is produced by the unpaid labor of workers.The distinguishing feature of the Marxian exposition in the chapters which developed the division of profit into various forms of revenue like the profit of the merchant, interest, the profit of enterprise and rent, is his use of the metaphor of substances which change their form, i.e. his theory of the forms of value.  The origin of this metaphor is ... Hegel ...    However, Schefold does not mention that related to this explanation of the various forms of surplus-value as “necessary forms of appearance” of a unifying substance is Marx’s key premise of the prior determination of the total amount of surplus-value.  These different forms of surplus-value appear to the agents of capitalist production - and in general also to economists - to be separate and independent sources of value and income.  But Marx’s theory demonstrates that these forms of income are all derived from the same source:  the surplus-value produced by productive workers.  In other words, Marx’s theory demonstrates the “inner connection” of the different forms of appearance of surplus-value.  Furthermore, Marx’s theory explains how the illusion that these individual parts of surplus-value are independent sources of value and income is a “necessary appearance,” i.e. an appearance, although false, that necessarily arises on the basis of capitalist production.  Therefore, the purpose of Volume 3 is not only to explain these important phenomena related to the distribution of surpus-value; it is also able to explain why these phenomena appear differently to the agents of capitalist production (and to economists).  Marx announced his intention to explain these more concrete forms of appearance in the first paragraph of Volume 3:

Our concern is rather to discover and present the concrete forms which grow out of the process of capital’s movement as a whole...  The configurations of capital, as developed in this book, thus approach step by step the form in which they appear on the surface of society, in the action of different capitals on one another; i.e. in competition, and in the everyday consciousness of the agents of production themselves.  (C.III. 117)

	These key points about Marx’s theory of the distribution of surplus-value in Volume 3 have not been sufficiently recognized in the Marxian literature.  Sweezy’s classic Theories of Capitalist Development discussed Part 2 (the “transformation problem”) and Part 3 ( the “falling rate of profit”), but did not discuss the rest of Volume 3, and presents no interpretation of the overall structure of Volume 3 and it relation to the first two volumes.  Mandel’s Introduction to the Penguin (1981) edition of Volume 3 mentions, but does not emphasize, that the subject of Volume 3 is the distribution of surplus-value, and does not explicitly discuss Marx’s key premise of the prior determination of the total amount of surplus-value.  At an international conference on Volume 3 in 1994 in Bergam, Italy (commerating the 100th anniversary of the publication of Volume 3), there was very little discussion of Volume 3 as a whole as a theory of the distribution of surplus-value and only two papers discussed Marx’s key premise of the prior determination of the total amount of surplus-value, Andrew Kliman’s (Kliman 1997) and my own (Moseley 1997b).  The main exceptions to this general neglect of these key aspects of Volume 3 have been Mattick, Rosdolsky, and Foley.  But no one has yet presented a comprehesive and detailed interpretation of Volume 3 as a whole as a theory of the distribution of surplus-value.  
	In particular, the currently dominant neo-Ricardian interpretation of Marx’s theory has not presented any interpretation of Volume 3 as a whole and its relation to Volumes 1 and 2.  Usually, only Part 2 of Volume 3 (the infamous “transformation problem”) is discussed, in isolation from the rest of Volume 3.  And, in the neo-Ricardian interpretation of Part 2, the fundamental premise of the prior determination of the total amount of surplus-value is ignored; indeed this interpretation is based instead on an opposing premise: the simultaneous determination of the rate of profit and prices of production.  Therefore, I argue that the neo-Ricardian interpretation of Marx’s theory of prices of production in Part 2 is a fundamental misinterpretation, which leads to erroneous conclusions regarding the logical consistency of Marx’s theory. 
	This paper will review Marx’s theory of each of the individual components of surplus-value in Volume 3, and will also briefly discuss the few neo-Ricardian interpretations of individual parts of Volume 3.   

PART 1:   PROFIT AND THE RATE OF PROFIT   

Profit is for us first of all only another name or another category of surplus value.  As owing to the form of wages, the whole of labor appears to be paid for, the unpaid part of labor seems necessarily to come not from labor but from capital, and not from the variable part of capital but from capital as a whole.  In this way surplus value assumes the form of profit, without any quantitative difference between the one and the other.   (SC. 191-92)

	Part 1 of Volume 3 provides a transition from Marx’s analysis of capital in general to his analysis of competition.  Before Marx analyzed the division of the total surplus-value into individual parts, he first derived new “forms of appearance” acquired by surplus-value - profit and the rate of profit.  Profit is explained by Marx as surplus-value which is related to the total capital invested (including constant capital), rather than just to the variable capital only, which acording to Marx’s theory is the source of surplus-value.   The rate of profit expresses this relation mathematically, as the ratio of surplus-value to the total capital, as distinguished from the rate of surplus-value which is the ratio of the same surplus-value to the variable capital only, the source of surplus-value.
	Marx emphasized, in all the drafts of this part of Volume 3, that in this analysis of profit and the rate of profit, the amount of surplus-value has already been determined, and is now taken as given in this further analysis of profit.  Profit is thus the same magnitude as surplus-value, and this magnitude has already been determined by the previous analysis of capital in general in Volume 1.  The amount of surplus-value obviously does not change is this expression of the same amount of surplus-value as profit.  The same amount of surplus-value is simply related to the total capital, rather than just to the variable capital.

When in general we speak of profit or the rate of profit, then surplus-value is supposed to be given.  The influences therefore which determine surplus-value have all operated.  This is the presupposition.   (TSV.III. 228)

Capital is now posited as the unity of production and circultion and the surplus-value it creates in a given period of time ...  In a definite period of time, ... capital produces a definite surplus-value ...  A capital of a certain value produces in a certain period of time a certain surplus-value.  Surplus-value thus measured by the value of the presupposed capital, capital thus posited as “self-realizing value” - is profit ...   (G. 746-46).  

The surplus value produced within a given period of circulation  ...  when measured against the total capital which has been advanced is called - profit...
Considered with respect to its material, profit is absolutely nothing but surplus value itself.  Considered with respect to its absolute magnitude, it therefore does not differ from the surplus value produced by capital over a particular turnover time.  It is surplus value itself, but calculated differently.  (MECW.33. 69)

Profit ‑ as the first transformation of surplus‑value ‑ and the rate of profit in this first transformation ‑ expresses surplus‑value in proportion to the individual overall capital of which it is the product ‑ treating all parts of this overall capital as uniform, and relating to the whole of it as a homogeneous sum of value, without regard to the organic relation in which the different components of this capital stand towards the creating of its surplus‑value. (MECW.33. 100)

As this supposed derivative of the total capital advanced, the surplus-value takes on the transformed form of profit.  (C.III. 126)
This assumption of a given, predetermined amount of surplus-value remains Marx’s basic premise throughout the remainder of Volume 3.  

	Marx emphasized further that, in these forms of appearance of profit and the rate of profit, the source of surplus-value is obscured and not recognized by capitalists.  Profit appears to arise from both constant capital and variable capital equally.  Marx argued that this illusion is not an accident; rather it necessarily appears to capitalists because capitalists make no distinction between constant capital and variable capital; to capitalists, both components of capital are equally “costs” and therefore surplus-value appears to arise equally from both of these “costs”. Profit, as we are originally faced with it, is thus the same thing as surplus‑value save in a mystified form, though one that necessarily arises from the capitalist mode of production.  Because no distinction between constant capital and variable capital can be recognized in the apparent formation of the cost price, the origin of the change in value that occurs in the course of the production process is shifted from the variable capital to the capital as a whole.  (C.III. 127)

Surplus value however necessarily assumes the form of profit in the bourgeois mind - and this is not just a way of looking at things.  The relation of surplus value as a relation of profit dominates bourgeois production and determines the distribution of the capitals in the different branches of production ...  (MECW.33 72)

PART 2:   GENERAL RATE OF PROFIT AND PRICES OF PRODUCTION

(The general) rate of profit ... can be nothing else but the surplus value produced (annually) by the capitalist class in relation to the total capital advanced by society as a whole.  For instance, if the social capital =  400c + 100v and the surplus value annually produced by it = 100s, then ... the rate of profit is 20 per cent.  
This is the general rate of profit.    (SC. 193)

	Part 2 is the beginning of  Marx’s analysis of competition and the distribution of surplus-value.  The distribution of surplus-value is first considered across different branches of production.  Marx assumed more or less as an empirical fact that the rates of profit in different branches of production tend to be equalized as a result of competition among capitalists (although he certainly recognized the many obstacles to this equalization.  The important point is that this empirical fact of equal rates of profit (or at least a tendency toward equality) appears to contradict the labor theory of value and surplus-value, because profit appears to arise from the total capital, rather than just from the variable capital.  This apparent contradiction between the labor theory of value and equal rates of profit was of course the main “stumbling block” of Ricardian economics.  Marx called attention to this apparent contradiction in Chapter 11 of Volume 1 of Capital, and promised to explain this contradiction at a later stage of his analysis, according to his logical method of first determining the total amount of surplus-value and then later determining the individual component parts of surplus-value, such as the average profit collected in each industry.  Marx commented that “for the solution of this apparent contradiction, many intermediate terms are still needed.”  (C.I. 421)  The main “intermediate term” that is needed for the explanation of this apparent contradiction is the determination of the total amount of surplus-value and the general rate of profit prior to the explanation of equal profit rates across industries.  
	The equalization of profit rates across industries is accomplished through the determination of the prices of production of individual commodities, which are different form the values of individual commodities.  Therefore, Marx’s explanation of the equalization of profit rates across industries is necessarily concerned with the determination of these prices of production.  The key point that I wish to emphasize is that Marx’s theory of prices of production and the equalization of profit rates is based on the premise that the general rate of profit to which individual rates of profit are equalized has itself already been determined prior to the determination of prices of production, and is taken as given in this determination of prices of production.  The general rate of profit (R) is equal to the ratio of the total amount of surplus-value (S) to the total capital invested (C) in the capitalist economy as a whole; i.e. (R = S/C) (see the quotation from Marx’s 1868 letter at the beginning of this section).  The total amount of surplus-value is determined by the prior analysis of capital in general in Volume 1 of Capital, and the total capital invested is taken as given in this prior analysis of capital in general, as the amount of money-capital (M), invested in the first phase of the circulation of capital (M-C ... P ... C’-M’) in the capitalist economy as a whole (see Moseley 1993 and 1997b for a further discussion of the initial givens in Marx’s theory as quantities of money-capital).

The prerequisite [of prices of production] is the existence of a general rate of profit ... (C.III. 257)    

The general rate of profit is formed through the total surplus‑value produced being calculated on the total capital of society (of the class of capitalists).  
(TSV.II. 427)

Empirical or average profit ... relates the total amount of surplus‑value, hence the surplus‑value realized by the whole capitalist class, to the total capital, or the capital employed by the whole capitalist class, in exactly this way ‑ it relates the total surplus‑value as profit to that total capital of society, without regard to the organic relation in which the individual components of that total capital have participated directly in the production of that total surplus‑value ... 
(MECW.33. 100) 

The average rate of profit is nothing other than the total surplus‑value related to and calculated on this total capital.  (MECW.33. 104)

	Prices of production are then determined according to the following equation:
(1)		Pi   =   Ki   +   R Ci
where R is taken as predetermined by the prior aggregate analysis of capital in general.  
Ki is the costs of production of the given commodity (the sum of constant capital and variable capital) (a flow variable) and Ci is the total stock of capital invested in the given industry.  The magnitudes of individual capitals consumed and invested in each industry (Ki  and Ci) are taken as given, as the sums of money which initiate the circulation of capital in each industry.  Therefore, prices of production are determined by adding the average profit to the given costs of production for each commodity, with the average profit determined as the product of the general rate of profit and the given capital invested in each industry, and the general rate of profit determined by the prior analysis of capital in general.  In this way, the total amount of surplus-value is distributed in such a way that all industries receive the same rate of profit.

If the limits of value and surplus-value are given, it is easy to grasp how the competition of capitals transforms values into prices of production and still further into commercial prices, transforming surplus-value into average profit.  But without these limits, there is absolutely no way of seeing why competition should reduce the general rate of profit to one limit rather than to another, to 15 per cent instead of 1,500 per cent.   (C.III. 429)

The formula that the price of production of a commodity = k + p, cost price plus profit, can now be stated more exactly; since p = kp' (where p' is the general rate of profit), the price of production = k + kp'.  (C.III. 265)  [Marx is here ignoring the difference between the stock and flow of capital; FM]

The prices of production arise from an adjustment of commodity values under which, after the reimbursement of the respective capital values consumed in the various spheres of production, the total surplus‑value is distributed, not in the proportion in which it is produced in the individual spheres of production, ... but rather in proportion to the size of the capitals advanced...  It is the constant tendency of capitals to bring about, by competition, this adjustment of the total surplus‑value which the total capital produces ...  (C.III. 895)

	The average profit included in the price of each commodity (= R Ci) will in general not be equal to the amount of surplus‑value actually contained in that commodity, and hence the price of production of each commodity will in general not be equal to its value or proportional to the labor‑time required to produce it.  However, the total amount of surplus‑value is not altered by this redistribution of surplus‑value among the individual industries according to the total amount of capital invested.  Taken all together, the divergences of individual profits from individual surplus‑values balance out so that the sum of individual profits is equal to the total amount of surplus‑value (S), as determined in the Volume 1 analysis of capital in general. This can be trivally shown as follows:
		E(R Ci)   =   R E(Ci)   =   RC   =   (S/M) M   =   S
where E stands for summation.   This result follows from Marx’s logical method employed in the determination of prices of production.  Because the total amount of surplus-value is taken as given in the determination of prices of production, the total amount of surplus-value cannot change as a result of this determination.

The transformation of values into prices of production does not abolish the limits on profit, but simply affects its distribution among the various particular capitals of whch the social capital is composed ...    (C.III. 1000)

The equalization of the surplus‑values in the different spheres of production does not affect the absolute size of this total surplus‑value; but merely alters it distribution among the different spheres of production.  The determination of this surplus‑value itself, however, only arises out of the determination of value by labor‑time.  (TSV.II. 190-91)

We have thus an absolute limit for the value component that forms surplus‑value ..; this is determined by the excess of the unpaid portion of the working day over its paid portion, i.e. by the value component of the total product in which this surplus labor is realized.  If we call this surplus‑value whose limits are thus determined profit, when it is calculated on the total capital advanced, as we have already done, then this profit, considered in its absolute amount, is equal to the surplus‑value, i.e. it is just as regularly determined in its limits as this is.  It is the ratio between the total surplus‑value and the total social capital advanced in production.  If this capital is 500 ... and the surplus‑value is 100, the absolute limit to the rate of profit is 20 percent.  The division of the social profit as measured by this rate among the capitals applied in the various different spheres of production produces prices of production which diverge from commodity values and which are the actual averages governing market prices.  But this divergence from values abolishes neither the determination of prices by values nor the limits imposed on profit by our laws...  This surcharge of 20 per cent ... is itself determined by the surplus‑value created by the total social capital, and its proportion to the value of this capital; and this is why it is 20 percent and not 10 percent or 100 percent.  The transformation of values into prices of production does not abolish the limits to profit, but simply affects its distribution among the various particular capitals of which the social capital is composed ... (C.III. 999‑1000; emphasis added)

	The equalization of profit rates across industries further obscures the origin of surplus-value.  Because profit is in fact distributed across industries according to the total capital invested, and not according to the amount of variable capital, profit appears to come equally from both the constant capital and variable capital components of the total capital.  Marx argued that this illusion is a “necessary form of appearance” in capitalism because competition enforces the equalization of profit rates of across industries.  

It is now purely accidental if the surplus-value actually produced in a particular sphere of production, and therefore the profit, coincides with the profit contained in the commodity’s sale price...   The actual difference in magnitude between profit and surplus-value in the various spheres of production ... now completely conceals the true nature and origin of profit, not only for the capitalist, who has a particular interest in deceiving himself, but also for the worker.   (C.III. 267-68).  

Profit does not merely seem to be different, but is now in fact different from surplus-value ...   Capitals of equal magnitude yield equal profits; in other words, profit is proportional to the size of the capital.  Or profit is determined by the value of the capital advanced.  The relation of profit to the organic composition of capital is completely obliterated and no longer recognizable in all these formulae.
(TSV.III. 483)

	Marx argued that Ricardo and his followers were not able to provide a satisfactory explanation of equal rates of profit and prices of productioin precisely because they failed to follow the logical method of the prior determination of the general rate of profit.  Instead, Ricardo simply assumed equal rates of profit and prices of production in the very first chapter of his Principles without first explaining how the rate of profit is determined.  

Instead of postulating this general rate of profit, Ricardo should have examined how far its existence is consistent with the determination of value by labor‑time and he would have found that instead of being consistent with it, prima facie, it contradicts it, and that its existence would therefore have to be explained through a number of intermediary stages, a procedure very different from merely including it under the law of value.   (TSV.II. 174; emphasis added)

The most important "intermediary stage" omitted by Ricardo is the prior determination of the total amount of surplus‑value and the general rate of profit, which is then taken as given in the subsequent determination of prices of production.
	Marx’s determination of prices of production summarized above is quite simple and straightforward, and it is fundamentally different from the neo-Ricardian interpretation.  According to the neo-Ricardian interpretation, prices of production are determined simultaneously with the rate of profit, and both are derived from given technical conditions and the real wage, according to the well known equation:
(2)		p = (1 + r) (pA + pBL)
where A is the given input-output matrix (the technical conditions of production) and B is the given vector of wage-goods.  A and B, defined in terms of physical quantities of goods, play no role in Marx’s theory of prices of production given in equation (1) above.
	I have argued more fully in Moseley (1993) that, if the interpretation of Marx’s logical method presented here is accepted, including the key premise of the prior determination of the general rate of profit, then the following conclusions follow: (1) Marx’s theory of prices of production is not “incomplete”, i.e. Marx did not fail to transform the inputs of constant capital and variable capital from values into prices of production, because these inputs are taken as given as quantities of money capital, not derived as the values or prices of production of given means of production and means of subsistence.  The SAME quantities of money capital taken as given in Marx’s theory of surplus-value in Volume 1 and in his theory of prices of production in Volume 3.  The only difference  is that in Volume 3 the disaggregated quantities of constant capital and variable capital in each industry are taken as given, rather than the aggregate quantities of constant capital and variable capital, as in Volume 1 (the sum of the disaggregated quantities of capital are by assumption equal to the aggregate quantities of capital).  (2) Marx’s two aggregate equalities both are true simultaneously, as Marx himself concluded.  (3) The rate of profit does not change as a result of the determination of prices of production.  Instead, the rate of profit is taken as given in Marx’s theory of prices of production, as determined in the prior aggregate analysis of capital in general in Volume 1.  (4) The labor theory of value is not “redundant”, because values as defined by Marx cannot be derived from the technical conditions of production.  The prices of production as determined by Marx’s theory are different from the prices of production determined by the technical conditions of production (as in the Sraffian interpretation of Marx’s theory), or in Sraffian theory.  The question remains which of these two theories provides a better explanation of prices of production, but it is not true that these two theories are the same, and therefore that the value theory is redundant.

Part 4:   COMMERCIAL PROFIT 

Previously we have dealt only with productive capital.  Now modifications occur caused by merchant capital. ... Let the merchant capital = 100.  The 100s has now to be calculated on 600 instead of 500.  The general rate of profit if therefore reduced from 20 per cent to 16 2/3 per cent.   (SC. 194)

	The next component of surplus-value explained in Volume 3 is commercial profit, or the profit collected by commercial capital.  Commercial capital  is capital which functions solely in the sphere of circulation, i.e. performs only the pure circulation functions of buying and selling, and activities related to buying and selling (accounting, advertising, credit, etc.).  Since according to Marx's theory, these functions by themselves are "unproductive", i.e. produce no value or surplus‑value (see Moseley 1992, Chapter 2, for a further discussion of Marx's concept of unproductive labor), the existence of commercial profit seems to contradict this assumption of unproductive labor.  Marx called attention to this apparant contradiction between the labor theory of value and commercial profit in Chapter 5 of Volume 1, and again promised to explain this apparent contradiction at a later stage of his theory, according to his logical method of first determining the total amount of surplus-value and then later determining the individual parts of surplus-value, such as commercial profit.  Marx remarked that in order to explain these apparently contradictory phenomena, “a long series of intermediate steps” is necessary, which are “entirely absent” in the analysis so far.  

In the course of our investigation, we will find that merchants’ capital and interest-bearing capital are derivative forms [of industial capital].   (C.I. 267)

	Marx's explanation of this apparent contradiction is that commercial capital receives its profit as a deduction from the surplus‑value produced by industrial capital.   The general mechanism through which this deduction of commercial profit from the total surplus‑value occurs is through the difference between commercial capital's buying price and its selling price.  Commercial capital buys commodities at less than their price of production and then sells these commodities at their price of production.  This difference enables commercial capital to recover its cost and to collect the average rate of profit.

Since commercial capital does not itself produce any surplus‑value, it is clear that the surplus‑value that accrues to it in the form of the average profit forms a portion of the surplus‑value produced by the productive capital as a whole.  The question now is this:  How does commercial capital attract the part of the surplus‑value produced by productive capital that falls to its share? ...  

It is clear that the merchant can obtain his profit only from the price of the commodities he sells, and also that this profit which he makes on the sale of his commodities must be equal to the difference between his purchase price and his sale price; it must be equal to the excess of the latter over the former.  (C.III. 395‑96; emphasis added)

Commercial capital does not have a direct effect on the creation of profit or surplus-value and it enters as a determining element into the formation of the general rate of profit only is so far as it draws its dividends from the mass of profit that industrial capital produces, according to the proportion that it forms in the total capital.  
(C.III. 424)

If the limits of value and surplus-vaue are given, it is easy to perceive how the competition between capitals transforms values into prices of production and still further into commercial prices, transforming surplus-value into average profit.
(C.III. 429)

	How then are the purchase price and the selling price of commercial capital determined?  
With the inclusion of commercial capital, the general rate of profit (R') is now determined as the ratio of the predetermined total amount of surplus‑value to the sum of industrial capital (Cp) and commercial capital (Cc), not just to the industrial capital as before:
(3)		R'  =  S / (Cp +Cc)  <  R  =  S / C
Therefore, the general rate of profit is less than what it was in the absence of commercial capital (as stated in the letter quoted at the beginning of this section).
	Commercial capital's "wholesale" price (WP) (or industrial capital's selling price) is then determined as follows (considering both the total industrial capital and the total commercial capital, rather than individual capitals):
(4)       	WP  = Kp + R'(Cp)
where Kp is the cost of production (the sum of variable capital and constant capital consumed).  Since R' < R, the average profit added to the costs of production by industrial capital is less than in the absence of commercial capital.  In this way, industrial capital appropriates a smaller share of the total surplus‑value.  
	The remainder of the total surplus‑value is then received by commercial capital by adding the average profit to its buying price to determine its selling or "retail" price (RP):
(5)		RP  =  WP + R'(Cc)
This then is Marx's explanation of how commercial capital receives a share of the total surplus-value even though it produces no surplus‑value.  It is trivial to show that the sum of industrial profit (R’CP) and commercial profit (R’CC) determined in this way is equal to the predetermined total amount of surplus‑value:
		R’ CP  + R’ CC   =  R’ (CP + CC)   =   S / (CP + CC) *  (CP + CC)   =   S

The only difference is that a portion of this total amount of surplus-value is now collected by commercial capital rather than by industrial capital by means of the above relative price mechanism.  (Marx presented a numerical example of this method of determination on p. 398 of Volume 3, and gave a similar example in the 1868 letter to Engels quoted throughout this paper.)

Commercial capital does not have a direct effect on the creation of profit or surplus-value and it enters as a determining element into the formation of the general rate of profit only in so far as it draws its dividends from the mass of profit that industrial capital produces, according to the proportion that it forms in the total capital.  (C.III. 424)

	In Volume 2 of Capital, Chapter 6 (“The Costs of Circulation”), Marx stated that the “general law” for these costs of circulation is that they are recovered out of the surplus-value produced by productive capital, which is taken as given in this analysis of commercial profit.

The general law is that all circulation costs that arise simply from a change in the form of the commodity cannot add any value to it.  They are simply costs involved in realizing the value or transferring it from one form to another.  The capital expended in these costs (including the labor it commands) belongs to the faux frais of capitalist production.  The replacement of these costs must come from the surplus product, and from the standpoint of the capitalist class as a whole it forms a deduction of surplus-value ... (C.II. 225-26; emphasis added)

	The collection of profit by commercial capital further obscures the origin of surplus-value.  Since commercial profit receives a profit proportional to its total amount, just like industrial capital, it looks like profit is produced by commercial capital as well as by industrial capital.  This illusion is enhanced by the effect that the rate of turnover of commercial capital has on the rate of profit, e.g. a faster rate of turnover of commercial capital increases the rate of profit (see Chapter 18 of Volume 3).  Again, these illusions arising from circulation necessarily arise in capitalism because the products of capitalism are commodities which must pass through the phases of circulation and because capital must be invested to carry our these necessary functions of circulation, even though these functions do not themselves directly product surplus-value.  As the reader will have recognized in dismay, the analysis of the real, inner connections of the capitalist production process is a very intricate thing and a work of great detail; it is the task of science to reduce the visible and merely apparent movement to the actual inner movement.  Accordingly, it will be self-evident that, in the heads of the agents of capitalist production and circulation, ideas must necessarily form about the laws of production that diverge completely from these laws and are merely the expression in consciousness of the apparent movement.  The ideas of a merchant, a stock-jobber or a banker are necessarily quite upside-down.     (C.III. 428)

	There has been one attempt to integrate commercial profit into a Sraffian interpretation of Marx’s theory - by L. Cuyvers (1978).  Cuyvers attempts this integration by adding a commercial technology input matrix and a commercial labor input vector to the production technology input matrix and the production labor input vector.  According to Cuyvers’ interpretation, the initial givens in Marx’s theory are still assumed to be the physical quantities of inputs and outputs, but now the physical quantities also include commercial inputs as well as production inputs.  Relative prices and the rate of profit are then determined simultaneously as before by the following equation, which is a modification of equation (2) above to include these additional commercial inputs:
(6)		p   =   (1 + r) (pAp + pBLp + pAu + pBLu)
	Again we can see the fundamental differences between Marx’s logic and the Sraffian 
 interpretation of Marx’s logic.  In this Sraffian interpretation, the rate of profit is not determined prior to the determination of prices of production, but is instead determined simultaneously with price of production.  Furthermore, commercial profit is not a deduction from a predetermined total amount of surplus-value.  Indeed, there is no explanation at all of how commercial capital as a entity separate from productive capital receives its profit.  There is no determination of wholesale prices as the means by which commercial capital recovers its costs and collects its profit as a portion of the total surplus-value produced by productive capital.  Only retail prices of production are determined.  Furthermore, it appears to be impossible within the Sraffian interpretation to determine wholesale prices because this requires a prior determination of the rate of profit (see equations (3) and (4) above) and in the Sraffian interpretation, the rate of profit is not determined prior to prices, but is instead determined simultaneously with retail prices of production. Therefore, Cuyvers’ Sraffian interpretation of commercial profit is clearly contrary to Marx’s own theory of commercial profit.
PART 5:   INTEREST

Next comes the splitting up of this profit into entrepreneur’s profit and interest.   (SC. 195).

	The next component part of surplus-value explained by Marx in Volume 3 is interest. According to Marx's theory, interest is simply a part of the total surplus‑value which the "functioning" capital (either industrial capital or commercial capital) has to pay to the lenders of capital for the use of the lenders' capital.  Again, the total amount of surplus‑value is predetermined and taken as given in the analysis of the division of this surplus-value into "profit of enterprise" and interest.  Interest ... is ... nothing but a part of the profit, i.e. the surplus‑value, which the functioning capitalist, whether industrialist or merchant, must pay to the owner and lender of capital is so far as the capital he uses is not his own but borrowed. 
(C.III. 493)

Where a given whole such as profit is to be divided into two, the first thing that matters is of course the size of the whole to be divided ...  And the circumstances that determine the magnitude of the profit to be divided, the value produce of unpaid labor, are very different from those that determine its distribution among these two types of capitalist ... (C.III. 482; emphasis added)

The ratio in which profit is divided, and the different legal titles by which this division takes place, already assume that profit is ready-made and presuppose its existence... (P)rofit is produced before this division takes place and before there can be any talk of it.  (C.III.  504-05)

With the division into interest and profit of enterprise, the average profit itself sets the limit for the two together.  It supplies the given amount of value they have to share between them, and this is all they have to share. (C.III. 1001; emphasis added)

Interest is therefore nothing but a part of the profit (which, in turn, is itself nothing by surplus‑value, unpaid labor), which the industrial capitalist pays to the owner of the borrowed capital with which he "works", either exclusively or partially.  Interest is a part of profit ‑ of surplus‑value ‑ which, established as a special category, is separated from the total profit under its own name, a separation which is by no means based on its origin, but only on the manner in which it is paid out or appropriated. (MECW.32. 469; TSV.III. 470‑71; emphasis added) 

	Marx argued that there are no general, systematic laws that determine the rate of interest, as there is with the rate of profit.  Therefore, there are no general laws that determine the relative shares of "profit of enterprise" and interest in the total surplus‑value.  The rate of interest is instead determined by the supply of and demand for capital as borrowed funds.  The most relevant point for our purposes is that the maximum rate of interest is the rate of profit.  This relation between the rate of interest and the rate of profit follows from the determination of the rate of profit prior to the division of the total surplus‑value into "profit of enterprise" and interest.  
	Marx called interest the “most fetishistic form of surplus-value,” because interest appears to arise solely for the nature of capital itself, with no necessary relation to labor or even production.  Marx argued that this fetishism necessarily arises in capitalism because of the actual emergence of loan capital and the consequent actual division of the total surplus-value into interest and profit of enterprise.  Even capitalists who do not operate with borrowed capital nonetheless often divide their “gross profit” into interest and “net profit.”      Martha Campbell’s paper in this volume presents a much more positive assessment of Part 5 and discusses the same important theoretical points that I have emphasized.  Campbell also emphasizes that Marx’s theoretical analysis of interest provids the basis for his more concrete analysis of the credit system.  

The division of profit into profit of enterprise and interest ... completes the autonomization of the form of surplus-value, the ossification of its form as against its substance, its essence...  (I)nterest then seems independent both of the wage- labor of the worker and the capitalist’s own labor; it seems to to derive from capital as its own independent source.   (C.III. 968)

It is in interest-bearing capital - in the division of profit into interest and profit - that capital finds its most objectified form, and the nature of surplus-value is presented as something which has altogether lost its identy.  Capital - as an entity - appears here as an independent source of value ...   (TSV.III. 498-99)

	There has been one attempt to integrate interest into a Sraffian interpretation of Marx’s theory - by Carlo Panico (1980).  Panico attempts this integration by adding to the technology input matrix and the labor input vector a “credit input vector” (Q), which is “the amount of loans per unit of output of each industry,” and a “deposit input vector” (D), which is “the amount of amount of deposits per unit of output of each industry.”  Both of these input vectors are measured by the money value of the loans and deposits, deflated by money wages.  The initial gives in Marx’s theory are thus still interpretated to be the physical quantities of inputs to production, but now there are additional givens - these financial quantities measured in labor-time units.  
	There are also now two additional variables to be determined - the rate of interest on loans (i) and the rate of interest on deposits (j).  Therefore, two additional equations are needed to close the system of equations.  Panico takes the rate of interest on deposits as given (d0) and adds the following equation for the total amount of loans (Q):
(7)		Qi   =   (pKb + pLbB) (1 + r)   +   Br   +  Dj
where Kb and Lb are the material and labor input vectors, respectively, of the credit sector.  The price of production equation for the industrial sector then becomes:
(8)		p   =   (1 + r) (pA + pBL)   +   Qi  -  Dj
	We can see once again the fundamental differences between Marx’s logic and the Sraffian interpretation of Marx’s logic.  In this Sraffian interpretation, the rate of profit is not determined prior to the determination of prices of production, but is instead determined simultaneously with price of production.  Furthermore, interest is not a deduction from a predetermined total amount of surplus-value, but is instead the rate of interest is determined simultaneously with the rate of profit.  The rate of interest is not determined by the supply of and demand for loans, but is instead determined by the whole system of equations including production inputs, etc.  Therefore, Panico’s Sraffian interpretation of interest is clearly contary to Marx’s own theory of interest and the rate of interest.  

PART 6:   RENT    Transformation of surplus profit into rent.   (SC. 195)

	The final component of surplus-value explained by Marx in Volume 3 is land rent.    Rent is explained as a part of the total surplus‑value which landlords are able, by their monopoly of the land (and other natural resources), to appropriate for themselves, rather than this surplus‑value being distributed among all capitalists.  In this theory of rent, the total amount of surplus‑value is again taken as a given magnitude, as determined by the prior analysis of capital in general.  This total amount of surplus‑value is "split" into profit and rent, and rent does not enter into the equalization of profit rates across industries.  

All ground-rent is surplus-value, the product of surplus labor.   (C.III. 772-73)

The analysis of landed property in its various historical forms lies outside the scope of the present work.  We are concerned with it only in so far as a portion of the surplus‑
value that capital produces falls to the landowner.  (C.III. 751; emphasis added)

In our analysis of ground‑rent, we intend to proceed first of all from the assumption that products that pay a rent of this kind ‑ which means that a part of surplus‑value... 
is reducible to rent ‑ are sold like all other commodities at their prices of production...  
(C.III. 779; emphasis added)

	Marx’s theory of rent assumed that agriculture is organized on a capitalist basis, and that capital invested in agriculture receives the same average rate of profit as all other industries.  However, agriculture is unique in that productivity differentials of different lands are due in part to unequal natural fertilities, which cannot be eliminated by competition and the transfer of capital.  As a result, the price of production of agricultural goods is determined by the labor‑time requirements on the least fertile land, rather than the labor‑time requirements on the land of average fertility.  The greater quantity of goods produced by the same amount of labor on the more fertile lands will sell at the same price as goods produced on the least fertile land.  Therefore, the goods produced on the more fertile land will contain a sustainable "surplus profit", i.e. a profit over and above the average rate of profit.  This surplus profit is transformed into (differential) rent that must be paid to landlords because of the landlords' private ownership of the land and thus their monopolization of the benefits of the greater natural fertility.  

Capital-profit (profit of enterprise plus interest) and ground-rent are thus nothing but particular components of the surplus-value; categories in which this surplus-value is distinguished according to whether it accrues to capital or landed property; desesignations which in no way affect its essence.  Added together, they form the total of surplus-value.  Capital directly pumps from the workers the surplus labor that is expressed in surplus-value and surplus product.   (C.III. 959-60)

This ownership [of natural resources] is a means of obstructing the process which takes place in the rest of the capitalist spheres of production, and of holding on to this surplus‑value created in this particular sphere, so that it is divided between the capitalist and the landowner in that sphere of production itself. (MECW.31. 276; TSV.II. 42).

	The collection of rent by landlords further obscures the origin of surplus-value because it makes it appear as if surplus-value arises from the natural fertility of the land.  Indeed to some, like the Physiocrats, it even appears that all of surplus-value, not just rent, originates from the natural fertility of the land.

Finally, besides capital as an independent source of surplus-value, there appears landed property, as a limit to the average profit which transfers a portion of the surplus-value to a class that neither works itself not directly exploits workers, and cannot even, like interest-bearing capital, launch forth in edifying homilies about the risk and sacrifice in lending capital.  Since in this case one part of the surplus-value seems directly bound up not with social relations but rather with a natural element, the earth, the form of mutual alienatioin and ossification of the various portions of surplus-value is complete, the inner connection definitively torn asunder and its source completely buried, precisely through the assertion of their autonomy vis-s-vis each other by the various relations of production which are bound up with the different material elements of production process.  (C.III. 968)

	There have been no explicit attempts to integrate rent into the Sraffian interpretation of Marx’s theory, but there has been a recent attempt to present a theory of rent within the framework of Sraffian theory - by Bill Gibson and various co-authors (1983a and 1983b).  Gibson, et al. do not explicitly say that this could be an interpretation of Marx’s theory of rent, but rather present it as an extension of Sraffa’s theory.  However, if there were to be a Sraffian interpretation of Marx’s theory of rent, it would have to be essentially the same as Gibson, et al.’s extension of Sraffian theory.  
	Gibson, et al. extend Sraffian theory to include rent by distinguishing between two sectors - industry and agriculture - and by adding to the technology input matrix and the labor and wage goods input vectors a land input vector (T), which is the amount of land per unit of output, measured in acres.  The initial givens are still assumed to be the physical inputs to production, but in the case of agriculture, these inputs now include land.  There is also an additional variable to be determined - the rent of land (g) (measured per acre).  Therefore, an additional equation is needed to close the system of equations.  Gibson, et al. provide different additional equations for the two different cases of “intensive” rent (rent for the same quality of land, but with different capital inputs) and of “extensive” rent (rent for different qualities of land).  In the case of “intensive” rent, the additional equation describes an alternative method of production on the same quality of land.  Relative prices, the rate of profit, and the rate of rent are then determined simultaneously by the following system of equations, with the third equation representing the alternative method of production in agriculture.  
(9)		p = (1 + r) (pA + pBL)
(10)		p = (1 + r) (pA + pBL) + gT1
(11)		p = (1 + r) (pA + pBL) + gT2
	The case of “extensive” rent is more complicated and leads to a surprising conclusion.  The further complication arises because the additional equation for agriculture now includes yet another variable to be determined - the rent on the second quality land (g2) and so on for the third quality of land (g3), etc.  The system of equations is finally closed by assuming that there is no rent on the least fertile land, i.e. that there is no “absolute” rent.  In other words, this Sraffian theory requires that there be no “absolute” rent.  This theory takes us back to Ricardo, who argued that rent on the least fertile land is impossible, or can only be explained as a monopoly rent.
	Thus we can see once again very clearly how different this Sraffian theory of rent is from Marx’s theory of rent.  In this Sraffian theory, the rate of profit is not determined prior to prices of production, but is instead determined simultaneously with prices of production.  Rent is not explained as a part of a predetermined total amount of surplus-value, but is instead determined simultaneously with the rate of profit and prices.  And this Sraffian theory of rent requires that there there be no absolute rent.  Marx’s theory, on the other hand, argues that absolute rent is possible because  because the composition of capital in agriculture may be less than the average composition for the total economy, in which case the value of agricultural goods will be greater their price of production.  Hence the price of agricultural goods may rise above their price of production without necessarily being greater than their value, and this excess of the actual price over the price of production is the source of absolute rent on the least fertile land (see Moseley 1997a for a further discussion of Marx’s theory of absolute rent).  Therefore, Gibson, et. al.’s Sraffian theory of rent is completely different from Marx’s theory of rent.

PART 7:  REVENUE AND ITS SOURCES   

At last we have arrived at the phenomena which serve as the starting point for the vulgar economist: rent originating from the land, profit (interest) from capital, wages from labor.  But from our point of view the thing now looks differently.  The apparent movement is explained.   (SC. 195)

	We come finally to Part 7, entitled “Revenue and its Sources,” which is seldom discussed in the literature, but which I think is very important.  Part 7 provides a culmination of Marx’s theory of the distribution of surplus-value in Volume 3 of Capital.  It makes very clear the main points of Volume 3: the distribution of surplus-value into its component parts, the prior determination of the total amount of surplus-value, and the necessary appearance of the individual parts of surplus-value as separate and independent “sources” of value. 
	As we have seen, Marx’s theory of the distribution of surplus-value in Volume 3 explains the different forms of income - industrial profit, commercial profit, interest, and rent - as component parts or “forms of appearance” of the underlying substance of surplus-value.  We have seen that the premise throughout Volume 3 is that the total amount of surplus-value is determined prior to its division into individual parts.  This premise is once again emphasized in the culminating Part 7.  

Profit (profit of enterprise plus interest) and rent are nothing more than characteristic forms assumed by particular portions of the surplus‑value in commodities.  The size of the surplus‑value sets a quantitative limit for the parts it can be broken down into.  (C.III. 971)

The sum of average profit plus ground‑rent can never be greater than the quantity of which these are parts, and this is already given before the division. (C.III. 972) 
We have thus an absolute limit for the value component that forms surplus‑value and can be broken down into profit and ground‑rent; this is determined by the excess of the unpaid portion of the working day over its paid portion, i.e. by the value component of the total product in which this surplus labor is realized. (C.III. 998‑99)

	Marx’s theory of the total amount of surplus-value, presented in Volume 1, is of course based on the labor theory of value.  The labor theory of value is itself based on essentially the same premise - that the total amount of value, or the total price, is determined prior to its division into individual parts, or individual forms of income.  Leaving aside the constant capital component of the total price, the total new-value produced in a given period may be divided into wages plus the various forms of surplus-value discussed in Volume 3.  Marx emphasized repeatedly in Part 7 (and especially in Chapter 50) that the labor theory of value assumes that the total amount of new-value is determined prior to its division into wages plus profit plus rent, etc.  

The distribution rather presupposes this substance as already present, i.e. the total value of the annual product, which is nothing more than objectified social labor.
(C.III. 961)

Apart from lue by the addition of three independent values, thus converting the aggregate value, from which rent, profit, and interest are derived, into an arbitrary magnitude.   
(p. 216-17)

(I)t is correct to say that the value of a commodity, in so far as it represents freshly added labor, is always reducible to three elements, wages, profit, and rent, which constitute the three forms of revenue, while the respective value magnitudes, i.e. the aliquot parts that these form of the total value, are determined by different specific laws that have already been developed.  It would be wrong however to say that the value of wages, the rate of profit and the rate of rent are independent constituent elements of value, with the value of the commodity ... arising from their combination; in other words, it would be wrong to say that these from constituent components of commodity value or the price of production.   (C.III. 993)

Thus if the portion of commodity value representing labor freshly added ... breaks down into different portions, which assume mutually independent shapes in the form of revenues, this does not in any way mean that wages, profit, and ground‑rent are now to be considered as the constituent elements, with the governing price of commodities ... itself arising from their combination or sum ...  In actual fact commodity value is the quantitative premise, the sum total value of wages, profit and rent, whatever their relative mutual magnitudes might be.  In the false conception considered here, however, wages, profit and rent are three independent value magnitudes, whose total produces, limits and determines the magnitude of commodity value.  (C.III. 1002; emphasis added)

This new value of 100 is all that is available for division into the three forms of revenue.    If we call wages x, profit y and ground-rent z, the sum of x+y+z, in our present case, is always = 100.  In the minds of the industrialists, merchants and bankers, and the vulgar economists as well, things proceed quite differently.  For them it is not the commodity value that is given as 100, after this 100 then being divided up into x, y, and z.  Instead, the price of the commodity is simply put together out of the value magnitudes of wages, profit, and rent, which are determined independently of the commodity’s value and of one another ...   (C.III. 1007)

	Marx argued that this illusion (the opposite view) necessarily arises in capitalism because individual capitalists, in their everyday practical calculations, do in fact regard these different forms of income as given and independent magnitudes, i.e. as the magnitudes then prevailing in the economy.  Individual capitalists are not interested in a scientific analysis of value and distribution.  They simply take the forms of income as given, as they actually exist in the economy.  These forms of income appear to be determined in separate and independent ways, and the total price appears to be determined as the sum of these individual parts.

The breakdown of surplus-value, that is, of part of the value of commodities, into these special headings or categories, is very understandable and does not conflict in the least with the law of value.  But the whole matter is mystified because these different parts of surplus-value acquire an independent form, because they accrue to different people, because the titles to them are based on different elements, and finally because of the autonomy with which certain parts of surplus-value confront the production process as its conditions.  From parts into which value can be divided, they become independent elements which constitute value ...   How their apparent independence as conditions of the process is regulated by the inherent law and that they are only apparently independent, does not become evident at any moment in the course of the production process, nor does it act as a determining motive.  The highest consistency which can be assumed by this semblance of results taking the form of independent conditions becomes firmly established when parts of surplus-value - in the form of conditions of production - are included in the price.  (TSV.III. 511)

	Marx also argued in Part 7 that “vulgar economics” simply took these everyday perceptions of individual capitalists at its starting point and tried to give these perceptions some coherence and profundity. 

Vulgar economics actually does nothing more than interpret, systematize, and turn into apolegetics the notions of agents trapped within bourgeois relations of production.  (C.III. 956)

(T)he vulgar economist does nothing more that translate the peculiar notions of the competition-enslaved capitalist into an ostensibly more theoretical and generalized language, and attempt to demonstrate the validity of these notions.  (C.III. 338)

	Therefore, at the end of Volume 3, Marx arrived at the point that he promised in the first paragraph of Volume 3 - the explanation of the forms of appearance of capital on the surface of capitalist society and in the consciousness of individual capitalists. 

	This last part of Volume 3 has never been discussed from the perspective of Sraffian theory, so far as I know.  We can see from the above that there is good reason for this neglect.  The main themes of this part are so clearly contrary to the Sraffian interpretation of Marx’s theory - the prior determination of the total amount of surplus-value and the “inner connection” of industrial profit, commercial profit, interest, and rent, as “necessary forms of appearance” of the prior determined surplus-value.  If the Sraffian interpretation of Marx’s theory is accepted, then what Marx is saying in Part 7 of Volume 3 is complete nonsense.  Indeed, since Part 7 is a summary of the main points of Volume 3 as a whole, if the Sraffian interpretation is accepted, then Marx is talking nonsense in all of Volume 3.  However, I have shown in this paper that the Sraffian interpretation of Marx’s theory is fundamentally and thoroughly mistaken.  It is not Marx’s Volume 3 that is nonsense, but the Sraffian interpretation of Volume 3 and of Marx’s theory as a whole.  

CONCLUSION
	This paper has presented a considerable amount of textual evidence to support the interpretation (1) that the main subject of Volume 3 of Capital is the distribution of surplus-value into its individual component parts; (2) that this analysis of the distribution of surplus-value is based on the fundamental premise that the total amount of surplus-value has already been determined by the prior analysis of capital in general in Volume 1; and (3) that Marx explained these components parts as “necessary forms of appearance” of the common substance of surplus-value.  This paper has also shown that the Sraffian interpretation of Volume 3 and of Marx’s theory as a whole is fundamentally mistaken.  This interpretation does not explain the different form of revenue discussed in Volume 3 as the necessary form of appearance of a predetermined amount of surplus-value (predetermined by the surplus labor of workers), but instead explains each of these forms of revenue as part of a general system of equations in which all variables are determined simultaneously.  Therefore, the Sraffian interpretation of Marx’s theory, which currently dominates Marxian scholarship, should be rejected, and Marx’s theory should be thoroughly reexamined on its own terms, i.e. in terms of its own logical method, which presumes that the total amount of surplus-value is determined prior to its division into individual parts.

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ENDNOTES