This is part of "commentary" paper that I'm working on for
the Value Conf. in Boston. Comments, criticism, and
unwarrented praise are welcome.
Vanishing Value
A century after the publication of CAPITAL disagreement over what
Marx meant by value continues. To be sure, the work itself is a
criticism of Classical Political Economy and its labor theory of
value. Yet, modern interpretations of CAPITAL often identify
Marx's concept with that of the Ricardo. That is, value is
viewed ultimately as the labor time necessary to produce a com-
modity in both Marx's work and those of the classicals. Given
that interpretation of value, fatal flaws are found in CAPITAL.
That is, as Marx developed his transformation of values into
prices of production and the falling rate of profit, the errors
committed are not only obvious but also indicative of gross
stupidity.
Can Marx be so easily dismissed? We think not and hope to show
that by imputing the classical notion of value to Marx's argument
the immediate incompatibility of that concept with the Marxian
framework is ignored.
The standard interpretation of CAPITAL informs us that the value
of a commodity is determined by the past and present labor time
socially necessary for its production. The value of the means of
production or constant capital is seen as labor time spent in the
past and merely transferred to the commodity in the process of
production. The present labor time or living labor is the social
necessary labor time used in the production process itself.
The output itself, represented by w, is thus seen as the sum of
past labor time, c, and the living labor time, v+s, where v is
the value of the wages paid and s is the surplus labor time.
Thus,
(1) w = c + v + s
The rate of profit or profit margin, p, given all of the means of
production are used up in one period of production, is given by
(2) p = s/(c+v)
So far things seem simple enough. Let's look at a numerical
example. Assume that prices are proportional to values and that
each hour of labor is represented by $10. Suppose that the means
of production purchased have a value of $200 or 20 hours of
labor. And the living labor expended is 10 hours, represented by
$100. If the wages is $60, then using (1), we can write
(3) w = $100 + $60 + $40 = $200
Using (2), we see that
(4) p = $40/($100+$60) = 25 %
Now let us assume that after the capitalist purchases the means
of production, increases in productivity take place in the pro-
cesses that produce them. Fewer labor hours are expended in their
production. Let's assume that what once took 10 hours, now takes
4 hours. Hence, they now can be purchased for $40. Using (1)
and (2), we see that
(5) w = $40 + $60 + $40 = $140
and that
(6) p = $40 / ($40+$60) = 40%
On the one hand, the capitalist seems to be doing quite well as
his profit rate in (4) increases as we move to (6), an increase
of 15%. On the other hand, he actually invested $140 and, ac-
cording to (5), only got back $140. In his mind, he made noth-
ing. Indeed, where has all the value gone? Has the rate of
profit really increased?
John