Question regarding the laws of surplus value

[brand1866]

I am underway with Capital, Volume 1, and have met a problem I can't get my head around. I would like to resolve it before I read further, instead of building my understanding of this obviously marvelous work on a misconception. Hope you can help!

The value of labour power is determined by the sum of values necessary to reproduce the labourer, or the summed-up value of the means of subsistance he needs to reproduce himself in a normal condition, at a given standard in a given society, at a given time. Here is the question: If the exchange value of labour power decreases because of a fall in value of the means of subsistance, then why does only the variable capital decrease in value, and not the total amount of value created by the labourer?

Put differently; Let us imagiene a labourer that produces a value of 40$ an hour, that is paid a wage of 20$ an hour. If the value of the means of subsistance (and therefore also the wage, i.e. the variable capital) decreases from 20$ to 10$, the capitalist ends up with an increased surplus value of 30$ instead of 20$. But won’t the capitalist as well, in a market where he compets with other capitalists and is forced to act in accordance with the coercive laws of competition, have to take into account this fall in value of the commodity (the labour power) he has bought, and reduce the price of the commodity the labourer is producing for him correspondingly with the amount of surplus value he otherwise could have extracted from the labourer if the value of labour power had remained constant? Wouldn’t the capitalist, in competition with all other capitalists, have to take into account that the value of labour power is now 10$ instead of 20$, and that he therefore also must accept that the value produced (and therefore also, in accordance with the law of value, the price he is allowed to take for his commodity under normal conditions in a market in equilibrium) also drops with 10$ an hour, from 40 to 30$? The socially necessary labour time should, if I understand it correctly, now represent less value than before, because the value of labour power has decreased. 8 hours of work after the decrease in the value of labour power now produce a total value og 8x30$ = 240$/day, instead of the previous 8x40$ = 320$/day. I understand this as a result of an interaction between the law of value on the one hand, and a tendency of competition to force prices downward towards a minimum, on the other. This would, as I understand it, act out as a competition between the capitalists to survive in the role of capitalist on a minimal amount of constant and variable capital and, paradoxically, also on a minimal amount of surplus value, in order to be able to sell their commodities. The capitalist who can sell the commodity for the lowest price should win this ‘race’, and thus the surplus value should also be forced downwards, as it is a part of the total amount of value embodied in the commodity. This may for all I know be the case in reality, but I can’t see how it fits in to Marx’s theoretical framework. I understand that there is a divide between the exchange value of labour as the value of reproduction of labour on the on hand, and the use value of labour as the creator of surplus value on the other hand. What I don’t understand is the apparent detachment of these to types of value from each other in the case of labour power.

I’ve been struggling with this question for weeks now, but never get it to add up. I have a strong feeling that I am overlooking something obvious and simple in the divide between labour and labour power, between exchange and use value, between absolute or relative surplus value, or maybe in the relationship between the value of different commodities. But I would rather expose myself to the embarrasment of an unenlightened question and have progress in my studies, than to remanin proud and silent but dumb.

Hope that someone here is able to point out where my line of thought is short-circuiting, and willing to lead my out of this bewilderment, or could lead me to some texts where this issue is discussed.

[brand1866]

Furthermore, let us (as I think Marx does somewhere in Capital) for the sake of argument set constant capital = 0. The labourer does this transfer of value free of charge of the capitalist through the virtue of productive consumption.

Then we can study the value added in its pure form. The labourer works the same amount of time, but he is paid less per hour by the capitalist than before. Then it seems reasonable that the capitalist can lower the price of the commodity produced, in order to try to get an advantage compared with other capitalists. This because he now can extract a greater amount of surplus value than before, and can thus survive in the market by reducing the price on the commodities he command, offering that commodity at a lower price, but with the same amount of surplus as before.

Total value is the value of the constant capital that is transfered plus the new labor performed. Part of the new labor covers the wage and the rest is surplus labor.
What I don't understand is this 'rest' (surplus labour), and that it would not whither away in the competition between capitalists.


The amount of surplus value would be increased as long as one capitalist or a segment of capital had a competitive advantage, but were to be absorbed when the competition forced prices to the minimal amount acceptable for the capitalist:

Let us imagine three lines,
1) representing the value before the necessary amount of variable capital is reduced;
2) when the amount of variable capital is reduced, and the surplus is greater, and;
3) when competition negates the gain, and drive the total price downward (and this is what I can't understand within the theory).


a to b: the time necessary for reproducing the labourer (i.e. the wage, variable capital)
b to c: the surplus value
b' to b: the difference between the former and latter amount of variable capital when the value of labour power decreaces, and therefore also the change in the ratio of variable capital to surplus value.
c': the 'new minimum' of accepted surplus, pushed through by the coersive laws of competition (Is this where I am wrong?)


1) a------------b-----c
2) a--------b'--b-----c
3) a--------b'--b--c'


The amount of surplus value the capitalist ends up with is equal in line 1) and in line 3), he hasn't gained anything on decreasing the amount of variable capital needed. What he gained in increasing the relative surplus, he has lost in competition with all the other capitalists acting in the same manner.

[Kill all the fetuses!]

Hey,

Quite frankly, you've got everything right. When value of labour-power decreases, ultimately so does surplus value due to coercive laws of competition. You have to keep in mind that Marx is operating under the assumption of perfect competition - he is trying to show that capitalism is an exploitative, crisis-ridden system even under the best of conditions the bourgeois economists would want us to image.

So, for instance, what does Marx say happen to surplus-value once some capitalist has better capital to exploit his workers, i.e. more efficient machinery, which allows to produce and sell commodities cheaper than competitors? Well, ultimately every capitalist will employ the same machinery and so organic composition of capital will increase decreasing total surplus-value and the rate of profit. But even so, the motivation for capitalist to exploit his workers more efficiently is still there: while ultimately everyone will adopt the same methods and so total surplus-value will decrease for everyone, the time-span from the moment capitalist can exploit his workers more efficiently to the moment everyone does the same, means increased profits to that special snowflake, who was the first one to do so. As it is the case with more efficient capital, so it is with decreased value of labour-power.

Was it the answer you was looking for or did I misunderstand your question?

[brand1866]

What I'm really wondering about is the relations within the bourgeoisie, the capitalists. In a competitive market you would expect the most ascetic and most willing to sacrifice to win, forcing the total price of the commodity downward, a race between the capitalists on who's able to give up most of their value, in order to be the preferred supplier of a commodity in the market. Why doesn't competition force capitalists to give up their profit in a race against all other capitalists at supplying at the lowest price?

I understand that the value is determined by (socially necessary) labour time, but I do not understand how capitalists are able to keep a monetary profit if competition forces prices downward. Regardless of the value of a commodity, the competition of selling at the lowest monetary price should the way I understand it constantly force the capitalists to sell their commodity short of value and engage in an everlasting 'price war' that would push them towards giving up as much of their total profit as they physically can (regardless of the surplus value, that may very well be enormours!). All capitalists should then end up living and competing on a mere 'existence minimum', commodity prices floating around the lowest possible amount which allow them to survive in the market and repeat the cycle. But obviously this is not the case. Some segment of capital have huge profits, and the capitalist class generally live in abundance.
If I am correct about this, then how are capitalists able to utilize and actually capture that surplus value in the form of a profit when they engage in a competition that forces them to sell for as little as possible? Monetary prices should in a competitive market then constantly represent something that is less then the 'really existing value' embodied in the commodities, and force the capitalists to systematically sell short, giving up the surplus, unless in a privileged monopoly position.

Or maybe a better formulation of the question: What are these laws ensuring that the 'competition enforces the oscillation of market prices around prices of production', and not around the lowest price, the 'existence minimum', possible by any capitalist? I really don't understand how capitalists are able to make any profit within a theoretically perfectly functioning market, as they would ruin each others chances of catching the surplus value in a 'race to the bottom'. Empirically obviously wrong, but how to explain it in Marx's theory?

[Rudolf]

I'm currently working my way through vol 1 as well so my understanding is most likely flawed so bare that in mind.



The value of labour power is determined by the sum of values necessary to reproduce the labourer, or the summed-up value of the means of subsistance he needs to reproduce himself in a normal condition, at a given standard in a given society, at a given time. Here is the question: If the exchange value of labour power decreases because of a fall in value of the means of subsistance, then why does only the variable capital decrease in value, and not the total amount of value created by the labourer?

I don't see why a reduction in the value of labour-power necessarily corresponds to a reduction in the amount of value labour-power produces.

Let's say the value of labour-power drops immediately. This would not correspond to an immediate reduction in the price of that commodity. It would take time for the price to move back to be around the value of labour-power. Obviously the capitalists that reduce the price they're paying for labour-power sooner would increase their rate of surplus value. The capitalist could then lower the price of the commodities labour produces in order to try and drive out their competitors however this doesn't mean a reduction in the commodity's value as that value is determined by the amount of socially necessary labour time required for its production it's just the commodity will be sold at below its value.

For a reduction in the amount of value produced there would need to be a change in the concrete labour process for the production of that use-value. The increased rate of surplus value afforded to these quick capitalists could in turn be reinvested into the concrete labour process so as to kick out more commodities per hour and thus reduce the amount of value produced per commodity but this is through the altering of the concrete labour process.

If the concrete labour process remained the same (that is the capitalist did not get better machinery etc) so too should the value of the commodities produced regardless of whether or not the value of labour drops.

Having said that, a drop in the price of labour-power to below its value would result in a reduction of value produced without altering the concrete labour process. This would occur through the labour no longer being at the socially determined intensity, skill etc due to the effects of wages set at below what's necessary to reproduce the labourer resulting in worse health

[Comrade #138672]

I am underway with Capital, Volume 1, and have met a problem I can't get my head around. I would like to resolve it before I read further, instead of building my understanding of this obviously marvelous work on a misconception. Hope you can help!

The value of labour power is determined by the sum of values necessary to reproduce the labourer, or the summed-up value of the means of subsistance he needs to reproduce himself in a normal condition, at a given standard in a given society, at a given time. Here is the question: If the exchange value of labour power decreases because of a fall in value of the means of subsistance, then why does only the variable capital decrease in value, and not the total amount of value created by the labourer?Very good that you started studying Capital! Excellent. You seem to have a pretty good grasp of it so far, although I have to read the rest of your posts. I can already see that you are confusing a few things. This is, of course, nothing to be ashamed of. Learning is always confusing at first.

First of all, the total amount of value created by the worker is more than what the worker needs to sustain himself/herself. The latter tends to reflect variable capital. The total amount of value created minus what the worker needs to sustain himself/herself is the surplus labor. This is the basis of surplus-value. Without the existence of surplus-labor, i.e., being able to produce more than to sustain your existence, capitalism would not be able to exist.

The fundamental LTV formula is:

W = c + L = c + v + s

W = the value of a commodity
c = the constant capital required to produce the commodity
L = the total labor required to produce the commodity
v = the variable capital, i.e., what is needed to sustain the workers producing the commodities, so that they can continue producing commodities
s = the surplus-value, which more or less reflects surplus-labor

So, basically, you are confusing L and v. But, as we can see, L is more than v: L = v + s.

However, L is unaffected by v. Lowering v can only mean that s increases.

[Comrade #138672]

Also, there is a distinction to be made between value and price. Although price tends to reflect value, it is not the same thing.

[contracycle]

Or maybe a better formulation of the question: What are these laws ensuring that the 'competition enforces the oscillation of market prices around prices of production', and not around the lowest price, the 'existence minimum', possible by any capitalist? I really don't understand how capitalists are able to make any profit within a theoretically perfectly functioning market, as they would ruin each others chances of catching the surplus value in a 'race to the bottom'. Empirically obviously wrong, but how to explain it in Marx's theory?


Hence the tendency of the rate of profit to decline, about which capitalists can do nothing. which is why they squeeze labour ever tighter, which leads to workers, as the bulk of the population, not being able to consume what they produce. Which triggers a crash.

You seem to be asking a question which is implied but not stated: how can capitalism be stable, given Marx' previous analysis? And the answer is: it isn't. It can't be.

[brand1866]

I understand that I mixed up value and price, and maybe I’m just having a bit of trouble of understanding the velocity and the viscosity with which profits and prices adjusts themselves. But we’ll have to take Marx's argument of trying to criticize the perfectly functioning classical political economy seriously, as I understand he set out to do in Capital. Even under these utopian circumstanses capitalism is not stable, and that may be the real beauty of his book.


It may very well be debatable that capitalism hasn’t gone to shit, I am not arguing that it is a stable system. But what I’m trying to understand are the periods of functioning capital accumulation, which obviously for rather long periods of time have worked out for some segments of capital, like the Post-War boom of North America and parts of Europe (maybe at the expense of exporting over-production and displacing over-accumulation geographically, but I think that is another discussion)


In these periods of stable growth, large segments of capital are in relativly unregulated price markets able to capture a surplus as monetary profit, regardless of the problem of transformation of values into prices.



Now if we imagine this theoretical argument; that if capitalists (owners of capital and sellers of commodities) were able to instantly adjust their prices according to the instantly changed value of the means of subsistance, in a market with infinitely low viscosity and instant ability to react to market changes, would profit disappear? In a market with this utopian, political economical competiton, would one argue that even though value is created only by labour, making a profit is only possible from the gap in the differing competitiveness of capitalist and markets, i.e. that a perfectly functioning market with instant perfect rationality between all agents would not see a profit and collapse instantly?


P.S.: I’m sorry for the ever changing premise of the question, I’m sort of developing the argument as I go along...