question about wages and prices

[RedMaterialist]

Suppose a worker makes $10 in wages and produces a value of $12. The capitalist appropriates the surplus value of $2. Now, the worker needs to purchase $10 of value to live on. He buys $10 from the capitalist, leaving the capitalist with the $2 of surplus value. What happens to the $2, how does the capitalist "convert" the surplus value into money profit?

I believe Marx says in the Grundrisse that it is a mistake to think that the capitalist sells the $10 value to the worker for $12. This mistake led Proudhon to conclude that overproduction in a capitalist society was impossible.

Any ideas on what happens to the $2 surplus value?

[Yet_Another_Boring_Marxist]

A Canadian social credit economist called this the A+B problem, essentially the remainder of a worker's wage can me suplemented by credit and various financial schemes tied to the stock market (certain forms of pensions and 401ks function like this I believe).

These supplements are fragile and flawed and hence the tendency for crisis.

[RedMaterialist]

A Canadian social credit economist called this the A+B problem, essentially the remainder of a worker's wage can me suplemented by credit and various financial schemes tied to the stock market (certain forms of pensions and 401ks function like this I believe).

These supplements are fragile and flawed and hence the tendency for crisis.

I had thought along those same lines: the worker borrows from the capitalist the extra $2 to buy the $12 value. I don't recall, however, Marx anywhere mentioning credit as a way for the capitalist to extort the additional profit/value from the worker.

Also, I think Keyensianism might be an attempt by capitalism to make up the $2 lack of demand, or purchasing power, of the worker.

[Blake's Baby]

There is more than one worker and more than one capitalist.

The original capitalist sells his products to the employees of other capitalists.

Obviously, in total, the equation still falls down. This is why Luxemburg wrote 'The Accumulation of Capital' (pdf version - http://www.marxists.org/archive/trotsky/1939/07/progressive.htm or web version - http://www.marxists.org/archive/luxemburg/1913/accumulation-capital/index.htm here), arguing that workers and capitalists between them were unable to buy back the products of capitalism, since profit has to come from somewhere. The inability of the capitalists and the workers to buy back the products of capitalism is, in the end, the explanation Luxemburg uses for economic crisis (structural impossibility of buying capitalism's overproduction).

Of course there's also the Grossman/Mattick explanation for the crisis, which contradicts Luxemburg. I don't understand it myself.

[The Jay]

Suppose a worker makes $10 in wages and produces a value of $12. The capitalist appropriates the surplus value of $2. Now, the worker needs to purchase $10 of value to live on. He buys $10 from the capitalist, leaving the capitalist with the $2 of surplus value. What happens to the $2, how does the capitalist "convert" the surplus value into money profit?

I believe Marx says in the Grundrisse that it is a mistake to think that the capitalist sells the $10 value to the worker for $12. This mistake led Proudhon to conclude that overproduction in a capitalist society was impossible.

Any ideas on what happens to the $2 surplus value?

Well, from my understanding, you are equating value with price. That is a no-no. If you changed the question to, "if a worker produces $12 worth of goods and gets paid $10 for that the capitalist gets $2 in surplus value where does profit come from?" you may see the answer - one that you supplied yourself - is.

As for how value becomes profit, I don't know yet. I'm still reading Capital.

[RedMaterialist]

Well, from my understanding, you are equating value with price. That is a no-no. If you changed the question to, "if a worker produces $12 worth of goods and gets paid $10 for that the capitalist gets $2 in surplus value where does profit come from?" you may see the answer - one that you supplied yourself - is.

As for how value becomes profit, I don't know yet. I'm still reading Capital.

What about this? When the worker buys his food, etc. for $12 from the capitalist (meant generally, not as an individual capitalist) the capitalist then ends up with $12, not just an additional $2 (so you get M-M'.)

But the product sold by the capitalist has a value of $12 and the worker only has $10 to buy it. The only way this can happen is if the worker buys on credit, (and, the worker is always only paid after he performs his work.) See Marx, Capital, Vol 1, Chapter Six, notes 13,14.

[Psy]

What about this? When the worker buys his food, etc. for $12 from the capitalist (meant generally, not as an individual capitalist) the capitalist then ends up with $12, not just an additional $2 (so you get M-M'.)

But the product sold by the capitalist has a value of $12 and the worker only has $10 to buy it. The only way this can happen is if the worker buys on credit, (and, the worker is always only paid after he performs his work.) See Marx, Capital, Vol 1, Chapter Six, notes 13,14.
The problem is this model is just too simple.

It works more like this, you have a capitalists that produces food, his workers produces $12 worth of food, the workers consume $10 worth of widgets and $2 worth of food gets split between the capitalist and reinvestment in production.

The expansion of production is what really gaps what workers earn in wages and what they can consume, this is why capitalism goes into crisis whenever its growth slows and can't stabilize on stagnant growth like federalism was able to do prior.

[RedMaterialist]

The problem is this model is just too simple.

It works more like this, you have a capitalists that produces food, his workers produces $12 worth of food, the workers consume $10 worth of widgets and $2 worth of food gets split between the capitalist and reinvestment in production.

.

How does the $2 worth of food get converted into money for reinvestment?

I'm not sure the simplicity of the model is a problem. After all, Marx reduced the model of work and profit to the simple model of: a worker needs 6 hrs a day of work to live on, but he can work 12 hrs, thus he works 6 hrs for free.

I still can't get my head around how that works in a modern wage economy.

[Red Banana]

How does the $2 worth of food get converted into money for reinvestment?

By selling it.

[Psy]

How does the $2 worth of food get converted into money for reinvestment?

I'm not sure the simplicity of the model is a problem. After all, Marx reduced the model of work and profit to the simple model of: a worker needs 6 hrs a day of work to live on, but he can work 12 hrs, thus he works 6 hrs for free.

I still can't get my head around how that works in a modern wage economy.

An example would be $2 going to feed more animals of burden for the next production cycle so the capitalist can increase production.

In a modern example we'd need to expand the model even more by having two capitalists, one producing food and another producing equipment to the first capitalist so the first capitalist can expand production.

[RedMaterialist]

An example would be $2 going to feed more animals of burden for the next production cycle so the capitalist can increase production.

In a modern example we'd need to expand the model even more by having two capitalists, one producing food and another producing equipment to the first capitalist so the first capitalist can expand production.

So, the first capitalist buys $2 animal feed; that capitalist buys $2 in corn to produce the feed, and so on. The $2 can also be divided into interest, capitalist consumption, rent, bribes to politicans etc.

Then, in this simplistic model, where does the system break down in a crisis?

[Psy]

So, the first capitalist buys $2 animal feed; that capitalist buys $2 in corn to produce the feed, and so on. The $2 can also be divided into interest, capitalist consumption, rent, bribes to politicans etc.

Then, in this simplistic model, where does the system break down in a crisis?
That the 'stability' comes from perpetual growth yet you get diminished returns each production cycle as investments in production generates less output.

For example even if you had unlimited land for livestock to graze, eventually you reach a peak rate of profit where every new animal would return less profit due to each new livestock lowering the value of everyone's livestock. This is where you get into the problem of overproduction where capitalists flood the market with commodities to the point the rate of profit collapses. Yet if capitalists hold back on expansion of production then the rate of profit falls because the surplus has nowhere to go thus capitalists are in a lose-lose situation where the rate of profit will fall regardless of their action.