Simple answers please... Prices!

[tellyontellyon]

Hi,
I'm struggling to understand economics... I'm not all that good at maths!!

Right... so the value of something is determined by the amount of labour that has gone into making it right???

What is the difference between value (exchange value?) and price?

Do exchange value... the amount of labour... and the price all depend on each other?

What determines the price of a commodity?

How does supply and demand figure in this?

How come things like trainers or t-shirts made to the same standards and the same amount of labour sometimes have vastly different prices... e.g. brand name items?
If the price is determined by fashion fads how can we calculate how much workers are exploited by?

:confused:

[Luisrah]

Hi,
I'm struggling to understand economics... I'm not all that good at maths!!

Right... so the value of something is determined by the amount of labour that has gone into making it right???

What is the difference between value (exchange value?) and price?

Do exchange value... the amount of labour... and the price all depend on each other?

What determines the price of a commodity?

How does supply and demand figure in this?

How come things like trainers or t-shirts made to the same standards and the same amount of labour sometimes have vastly different prices... e.g. brand name items?
If the price is determined by fashion fads how can we calculate how much workers are exploited by?

:confused:

If a fairly paid worker works 1 hour on a t-shirt, and makes the t-shirt with expensive materials, the t-shirt will be expensive.

If a poorly paid worker works 1 hour on a t-shirt, and makes it with not so good materials, it will cost less.

Of course, some brands automatically ''add value'' to the t-shirt, and the supply and demand enter here as everywhere else.
When lots of people look for it, and there's little, the price goes up, and vice versa.

I'm not good on economics, but those are some basics.
There are a lot of variables in the price of something.
Price of the materials, worker wages, supply and demand, brands, time, taxes etc.

[Uppercut]

I should probably study more about socialist economics. I'm in the middle of reading Das Kapital but I should probably takes notes.

Basically, if 10yds of wool= 1 shirt, the shirt should be priced according to the value of the materials that make up that shirt. But like Luisrah stated, companies add an artificial value to the products they sell.

Of course, I don't know where wages would fit in with pricing under a socialist economy. I feel like a n00b...

[FSL]

Hi,
I'm struggling to understand economics... I'm not all that good at maths!!

Right... so the value of something is determined by the amount of labour that has gone into making it right???

What is the difference between value (exchange value?) and price?

Do exchange value... the amount of labour... and the price all depend on each other?

What determines the price of a commodity?

How does supply and demand figure in this?

How come things like trainers or t-shirts made to the same standards and the same amount of labour sometimes have vastly different prices... e.g. brand name items?
If the price is determined by fashion fads how can we calculate how much workers are exploited by?

:confused:


There aren't any "simple" answers to most of these questions. The transformation of values to prices is explained in the 3rd volume of das Kapital, so you can understand a lot of things must be clearly grasped before. Even so, a weakness existed in that presentation which led to the infamous "transformation problem" upon which lots have been written by bourgeois and marxist economists.

Mainly, one should understand that prices =/=values. Prices are the form of values. Prices aren't the same as values and in most cases aren't even proportional, though a positive correlation does exist.

Prices are decided by market forces and they fluctuate around equilibrium prices that would "clear" the market. They're the sum of the production prices (costs basically) + the monetary profit.
Values are determined by labor. They're the sum of dead labor (machinery, raw materials etc) and living labor (the value of labor power + surplus value).

If you don't mind being sloppy, you can consider that production prices represent the value of constant and variable capital while profit represents the surplus value, though things are more complicated.

Within the market, a part of surplus value is given to companies that make use of better technology (that have a higher organic composition of capital).
You can see that by looking at the profits, say, Toyota had a couple of years ago if you compare them to the profits Walmart had. Walmart exploited more workers but made less money per worker. A part of their surplus value was given to companies (sectors generally) like Toyota.




how can we calculate how much workers are exploited by?



That's the only thing that's easily done. Since surplus value only changes hands between capitalists, we only have to look at the economy as a whole. In most first world economies (their data is easier to find), the part of the national income that goes to workers ranges from time to time between 70% and 60%. The rest is the capital's share.

The workers' share was larger during the 70s with the "welfare state" and on a constant decline since then. Today, it's around 60% according to most estimations I've seen (they're done by IMF guys or bourgeois governments so if anything it's an overestimation).
That would mean that the rate of exploitation is s/v= 0.4/0.6= 2/3 or 66%. Or, in more plain terms,you spent 3 out of the 5 workdays for you and 2 for your boss.

[syndicat]

so the value of something is determined by the amount of labour that has gone into making it right???

According to the labor theory of value, which is a kind of costs of production theory of prices, prices will tend to correlate with the hours of labor.

But you also have to include the hours of labor needed to develop the skills of the workers. Things that require a lot of skilled labor will cost more for that reason.

Aniother problem with the labor theory of value is that is assumes perfect competition. But perfect competition doesn't exist. In fact prices are also a reflection of the market power of buyer and seller. Thus a monopoly or monopsony will distort prices.

For example, Wal-Mart and 3 other firms in USA control more than 60% of sale of garments. They can thus force down the prices received by producers of garments...thus driving sweapshot conditions, rampant wage theft etc in the garment industry.



What is the difference between value (exchange value?) and price?


Depends on whose theory you are talking about. If "exchange value" just means prices, then it's prices. But one might mean by "value" something like "those things that people actually value, and the degree of value they put on them." In that case prices and values can significantly differ.



Do exchange value... the amount of labour... and the price all depend on each other?

What determines the price of a commodity?

For Marx a "commodity" has to be something that is readily reproducible. Not everything bought and sold is a commodity in this sense. Land or rare art works are not commodities. Also, what do you mean by "determines"? Marx claims that there is a correlation between socially average labor hours of production and price. Note that this deos NOT mean the hours it took to produce X. Let's say a firm innovates and can produce X in fewer hours than other firms. It can still get the same price.



How does supply and demand figure in this?

There will be no market for products without demand. Once there is demand, labor hours correlates with price. But if the labor cost is too high relative to demand, the item won't be produced.



How come things like trainers or t-shirts made to the same standards and the same amount of labour sometimes have vastly different prices... e.g. brand name items?


This comes back to the point I made earlier about market power. companies build "brand identity" as part of their strategy to build market power.

[ZeroNowhere]

According to the labor theory of value, which is a kind of costs of production theory of prices, prices will tend to correlate with the hours of labor.Not really, capital isn't static. It moves around, so that if there is a higher rate of profit in an industry, capital will tend to move there and even things out. As such, prices basically tend to approach prices of production, which are equivalent to cost-price plus the average rate of profit profit. That is, prices would only equal values on an economy-wide scale. I went into this a bit here (http://www.revleft.com/vb/../../showpost.php?p=1640263&postcount=22).


fairly paid workerWhat's this bollocks, then?


value (exchange value?)They are different, as is explained well here (http://libcom.org/forums/thought/theories-value-06022008?page=2#comment-296094).



Basically, if 10yds of wool= 1 shirt, the shirt should be priced according to the value of the materials that make up that shirt.Well, yeah, you really should read some Marx. That has more in common with Proudhon, though even he was more coherent.


The workers' share was larger during the 70s with the "welfare state" and on a constant decline since then.That's not entirely true, I think, Kliman's recent paper on the fall in the rate of profit and the current crisis shows the wage share remaining fairly constant, and if anything increasing somewhat.

[FSL]

That's not entirely true, I think, Kliman's recent paper on the fall in the rate of profit and the current crisis shows the wage share remaining fairly constant, and if anything increasing somewhat.


I've seen studies such as this one http://www.imf.org/external/pubs/ft/wp/2006/wp06294.pdf

where the falling share is documented. I haven't looked again to see what's the situation during and after the crisis. Profits have fallen but so have wages and employment so I wouldn't expect any drastic changes.
Besides, a fall in the rate of profit doesn't mean profit in absolute terms will drop as well.