Difference between value and price

[benhur]

It's said value is different from price. Then why is value always explained in terms of money, when it should be represented by (labor) time? Further, how is time in this instance converted to money, what's the basis? Doesn't all this contradict the view that value and price are distinct?

[mikelepore]

The value of a commodity is the level about which the price fluctuates due to supply and demand. Both capitalist and Marxian economics agree that s&d make the price fluctuate. Capitalist economics doesn't say that the fluctuation occurs about any particular positive number, and never mentions the issue of around what line the fluctuation occurs. The problem with that is we know a time-oscillating price can't be centered around a long term average of zero, because the price never goes negative at any time during its cycle. The offset due to s&d must be making the instantaneous price depart from from some positive quiescent level. Generally, although there are exceptions, this base line is the value.

The value isn't the same thing as the socially necessary labor time. The value is *determined* by, and tracks with, the socially necesary labor time.

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"You would be altogether mistaken in fancying that the value of labor, or any other commodity whatever, is ultimately fixed by supply and demand. Supply and demand regulate nothing but the temporary fluctuations of market prices. They will explain to you why the market price of a commodity rises above or sinks below its value, but they can never account for that value itself." --- Marx, in _Value, Price and Profit_ (1865)

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"What then is the relation between value and market prices, or between natural prices and market prices? You all know that the market prices is the same for all commodities of the same kind, however the conditions of production may differ for the individual producers. The market price expresses only the average amount of social labour necessary, under the average conditions of production, to supply the market with a certain mass of a certain article. It is calculated upon the whole lot of a commodity of a certain description. So far the market price of a commodity coincides with its value. On the other hand, the oscillations of market prices, rising now over, sinking now under the value or natural price, depend upon the fluctuations of supply and demand." -- Ibid.

[benhur]

The value of a commodity is the level about which the price fluctuates due to supply and demand. Both capitalist and Marxian economics agree that s&d make the price fluctuate. Capitalist economics doesn't say that the fluctuation occurs about any particular positive number, and never mentions the issue of around what line the fluctuation occurs. The problem with that is we know a time-oscillating price can't be centered around a long term average of zero, because the price never goes negative at any time during its cycle. The offset due to s&d must be making the instantaneous price depart from from some positive quiescent level. Generally, although there are exceptions, this base line is the value.

The value isn't the same thing as the socially necessary labor time. The value is *determined* by, and tracks with, the socially necesary labor time.



Thanks, you've been helpful, as always. But I am still confused, hope you'll bear with me. If value is determined by the socially necessary labor time, what's it mean when it's expressed in terms of money? How is the conversion from time to money done, then?

[mikelepore]

Thanks, you've been helpful, as always. But I am still confused, hope you'll bear with me. If value is determined by the socially necessary labor time, what's it mean when it's expressed in terms of money? How is the conversion from time to money done, then?

I don't know Marx's answer, but I think it makes sense only if it's because of the ability of investment capital to move from one product to another. I would recommend a hypothetical comparison between two products that are are economically similar in every way except for one variable, the quantity produced for a given amount of labor. Suppose a farmer has a choice between using a given amount of labor to produce one bushel of barley or three bushels of wheat, because those are the given yields of the earth. Then that same three-to-one ratio appearing in the prices per bushel will be the only equilibrium situation. If the price of one crop went up any further relative to the other, the farmers would find that growing that one crop is the only logical choice, and the other crop would become more scarce, causing the price of the other one to rise relative to this one, and the original ratio would then be restored.