The Story of a Great Discovery, Vygodsky, 1965

Chapter 6

Market-value and its law of motion. The "false social value". The discovery of production-price. Two kinds of competition and the twofold movement of the equalization of prices. The method of scientific abstraction in Marx's investigations.

From value to price of production

We turn now to the parts of "Theories of Surplus-Value" in which Marx worked out the theory of average profit and price of production. We shall see how Marx, step by step, progressed from value to market-value and from this to the price of production.

In "Theories of Surplus-Value", Marx characterizes value as "a specific social form of human activity (labour)..."[1] The social character of labour is quite definitely stressed here. "As values", says Marx, "commodities are social magnitudes, that is to say, something absolutely different from their `properties' as `things '. As values, they constitute only relations of men in their productive activity."[2]

When value-creating labour is characterized in the qualitative respect as social labour, its quantitative distinctness automatically follows from this. It consists in the fact that commodities only contain that quantum of labour or labour-time which is socially necessary to produce them.

To be able to progress from value to price of production, Marx first of all had to specify the concept of value for the conditions of the capitalist mode of production since under these conditions value continues to develop. Marx noted that "thus the full potential of this quite simple category does not emerge historically in the most advanced phases of society..."[3] Indeed, only in capitalism does the commodity form of the labour-product become generalized, only here does it become the basis of the mode of production itself. Even labour-power becomes a commodity. "Thus in capital", writes Marx, "the independent existence of value is raised to a higher power than in money."[4] This is why it is precisely from the conditions of capitalist production that Marx develops the law of value.[5]

Marx shows that commodities, as products of capitalist production, differ considerably from the commodities produced in a simple commodity economy. The product of private labour appears in the capitalist mode of production as part of the total social production not just because it is some part of the total quantity of goods. This was also the case before the predominance of capitalist production relations. In capitalism, "Each individual commodity represents a definite portion of capital and of the surplus-value created by it."[6] In capitalism, social division of labour develops to such an extent that the mass of labour-products enter the production process as commodities, as articles of trade, and emerge again from it as commodities. This establishes a close connection between all branches of capitalist production. To realize the whole of the surplus-value created in the production process and embodied in the commodities, the whole mass of the commodities of the branch in question must be sold at a social value corresponding to the value of the capital advanced in this branch plus the surplus-value. It is necessary here that all the commodities of the branch should be sold at this value. If only some of the commodities are sold, this means in actual fact that each commodity is sold at less than its value and that consequently the surplus-value is not realized, or not in full, in the branch in question. It may even be that the capital advanced cannot be fully replaced.

Therefore, in the capitalist mode of production, the concept of socially necessary labour-time undergoes a fundamental change. Even when only the socially necessary labour-time has been expended for the individual part of the total product of the branch in question but the quantity of labour for the branch as a whole was too much, i.e., exceeded the socially necessary quantum, then the social value of the commodities of this branch is less than the sum of their individual values.

Marx thus investigates how the value is specified by the conditions of capitalist production, drawing a distinction between the social and the individual value of the product. The value of the individual product is constituted by the social value of the total mass of products of the branch in question. The social value of the product-unit is equal to the total social value produced in the branch divided by the number of product-units.

As Marx shows, it is also necessary to distinguish between socially necessary and individually necessary labour-time.[7] The one is based on the social, the other on the individual value. When a surplus quantum of products is produced in the branch in question, although only the (individually) necessary labour-time has been expended for every product-unit, the total quantum of the individually necessary labour-time is greater than the socially necessary labour-time. In this case, the social value of the product of the branch in question is less than its individual value.

The social value of the commodities of a branch determined in this manner was termed 'market-value' by Marx. "This common value is the market-value of these commodities: the value at which they appear on the market."[8]

Marx stresses above all the social character of market-value.

Market-value is the product of specifically capitalist conditions, the result of capitalist competition within the branch in question. "But the fact that the average of production conditions determines the market-price and thus raises the price of production, which is less than this average, above its price and even value (Marx means here the individual value of the product-V. V.) derives from the competitive nature of capitalist production and is consequently not a natural but a social law."[9]

Marx speaks here of the "average of the production conditions" which determine the market-value in the branch in question when they coincide with the general conditions of production of the branch in question. Market-value is thus not always and under all conditions determined by average conditions. Marx divides the individual or special production conditions of the branch in question into three main groups: 1. Producers who produce under better conditions than the average: the productivity of their labour is above the average of their branch; 2. Producers who work under individual conditions of production which coincide with the general or average conditions of the branch: the productivity of their labour is at the average level of the branch; 3. Producers who work under conditions which are worse than the average: the productivity of their labour is less than the average of the branch. The market-value can fluctuate within the limits which are set by the individual value of the products of the first group and the individual value of the products of the third group.

Competition within the branch establishes a certain level of market value within these limits. In this connection, Marx notes that "It will accordingly depend on the numerical relation or the proportional ratio of size of the classes (as to) which (of them) definitively settles the average value."[10]

Marx stresses that market-value cannot exceed the limits mentioned: "This market-value itself can never be greater than the individual value of the product of the least productive class. If it were higher this would only show that the market-price is higher than the market-value. The market-value, however must represent real value."[11]

It is, of course, clear that market-value can never be less than the individual value of the most productive class either.

The limits within which market-value can fluctuate are determined by the determination of market-value itself since market-value is determined by "the total of the social labour-time which the total of commodities of this particular social production sphere requires . . ."[12] Within which limits does the total social labour-time vary? If it is assumed that all the capitalists of the branch in question belong to the third group, then the total social labour-time is equal to the sum of the individual labour-times which all the capitalists have expended.

This is the maximum total amount of social labour-time which is possible at all. Conversely, if all the capitalists of the branch in question belong to the first group, the total social labour-time is at the minimum level and is equal to the sum of the individual labour-times which the capitalists of this group have expended. In the normal state of affairs where all, three groups of capitalists exist in the branch of production in question, the total social labour-time is somewhere between the minimum and the maximum levels. It then depends on the, share of the one or other group of capitalists in the total product of the sphere of production as to whether the total labour-time tends towards its minimum or maximum figure.

From Marx's definition of market-value, it follows that the magnitude of total socially necessary labour-time and thus the magnitude of market-value also depend on the specific importance of the particular branch in the system of social production as a whole. When average production conditions predominate in the branch in question but the total quantity of products exceeds the socially necessary time which has been `allocated' to this branch in the system of social production, the market-value of the products is not measured by the average but by the best production conditions, irrespective of the fact that the majority of products of the branch have been produced under average conditions.

But be that as it may, the market-value can only vary within the same limits as the individual value of the products of the branch in question. "Market-value", Marx emphasized, "cannot be higher than, itself."[13] The difference between market-value and individual value accordingly does not at all imply a violation of the law of value-it "can never follow from the value being independently determined by the labour quantum which is used in this sphere in general."[14]

Having defined in this way market-value and the limits within which it can fluctuate, Marx analyzes competition within a branch of production. This competition establishes the standard market-value for the branch in question and enables capitalists belonging to the first group to achieve a surplus profit, an extra surplus-value. Under the conditions of free competition, this surplus profit is of a temporary, transient character: it disappears as soon as the 'backward' groups of capitalists succeed in introducing new technical developments, in improving production .conditions, in overcoming their backwardness and thus in drawing level with the capitalists of the first group. But the fact that the extra surplus-value is transient in nature does not mean that it disappears as such. It is only that now it is no longer the prerogative of the individual capitalist but of all the capitalists.

In other words, there is a constant change in the composition of the three main groups of producers mentioned above. Under the conditions of totally unrestricted competition, it is possible for every capitalist to achieve surplus profit. The struggle for this surplus profit is the chief driving force of competition within each sphere of production.

The capitalists of the first group have the best conditions for the competitive struggle within the branch. They have the highest labour productivity and dominate the market from which they force out the products of other capitalists since the market-value tends towards the individual value of the first group.

From all this there follows an important characteristic of market-value: it is not a factor in the redistribution of value and surplus-value; it represents the value actually produced, but produced under capitalist conditions with all the contradictions which result therefrom.

Under the conditions of capitalist competition, the social character of value can be expressed solely by the fact that a uniform market-value emerges for commodities of the same kind. As is shown by Marx, this necessarily follows from the fact that market-value in capitalism is not infrequently a "false social value". In the third volume of "Capital"; Marx writes that : "This is determination by market-value as it asserts itself on the basis of capitalist production through competition; the latter creates a false social value"[15]

In the capitalist mode of production, the market-value of the product is dissociated from the labour-time actually contained in it; social value, market-value, becomes distinct from individual value. This results from the-fact that the contradictions inherent in capitalism between abstract and concrete labour, between value and use-value, have developed further.

Marx illustrates the process in which the "false social value" is formed by two examples.[16]

Assuming that there are four groups of capitalists with different production conditions in the branch in question; let us say that the second group supplies 60 % of all the products of the branch, which is why it will also determine market-value. With the aid of the following table, Marx now explains how market-value is established.

The market-value of a product-unit is equal to 30 money-units while the average value (540: 20) only equals 27 units. The gap between the market-value and the individual value appears here as a difference in relation to the amount of 60 money-units. In forming differential rent under the specific conditions of capitalist agriculture, this gap is significantly greater.

From this gap between individual and market-value, it follows that the products of the branch in question are not sold for the labour-time actually expended but for a higher price. Society loses part of its resources with which it pays the surplus profit of the capitalists. This explains the contradictory character of market-value as well and led Marx to call it "false social value".

Another example. Let it be assumed that the market-value of the product-unit is equal to 20 money-units; the capital, for which the individual value of the product coincides with the market-value, may be said to create a value of 80c + 20v + 20s = 120 and to produce 6 product-units. The value of the product-unit is 20 units: four units replace the constant capital. Assuming that new machines are brought in so that with the same quantum of constant capital 10 instead of 6 product-units could be produced, the individual value of the product-unit in this case is 12 while the market-value is 20, as before. To replace the constant capital, 4 product-units are required as before and not 6⅔ (80: 12) which would be necessary if the product were not sold at the market-value but at an individual value. In this way, the part of the product which under the previous conditions was needed to replace the value of the constant capital-assuming that the product was sold at its individual value-is converted into surplus-product.

How is this calculated? 6⅔ - 4 = 2⅔ product-units with an (individual) total value of 2⅔ x 12 = 32 money-units is converted into surplus-product. Previously, 80 money-units of constant capital were required for the production of 6 product-units; now only (80: 10) x 6 = 48 money-units are needed. Consequently 80 - 48 = 32 money-units of the constant capital become available for conversion into surplus-product.

Marx notes the general character of this change which is present "with all surplus-profit".[17] It illustrates the contradictory character of market-value which, in capitalism, is a means for individual capitalists to enrich themselves at the expense of society.

Even in "Grundrisse" Marx draws attention to the fact that with the same amount of capital invested in the various branches of production the quantity of surplus-value which is produced will vary and that, the main reason for this is that the organic composition of this capital is not the same in every case (Marx abstracts here from the sphere of circulation). From this it follows that the values of the commodities which are produced by capital advancements of the same magnitude differ considerably from each other and that when the commodities arc sold at their values this would lead to different profit-rates. Now, in the manuscript of 1861/63 (in the "Theories of Surplus-Value"), Marx works out the basis which enables him to make a more thorough investigation of the problem of average profit and price of production.

While Marx was investigating market-value, he took competition within the branch of production in question as his point of departure. Now he analyzes competition between capitalists of different branches of production where the capital advancements in the various branches appear as parts of the total social capital.

The share of the capital of a particular branch in total surplus-value, its profit, is regulated by its share in total capital. This regulating process follows from the competition 'between capitalists of the different branches of production and effects a redistribution of the surplus-value already produced. Marx writes "that it is the endeavour of the capitalists (but this endeavour is the competition) to distribute among themselves the quantum of unpaid labour which they squeeze out of the working class, not in the ratio in which a particular capital directly produces surplus labour but in the ratio, firstly, in which this particular capital- forms an aliquot part of total capital, secondly, in the ratio in which the total capital itself produces surplus labour".[18]

Marx consequently shows that the category of " average profit", unlike the category of "market-value", is a category of the distribution of the surplus-value between the different branches of production. The levelling of the surplus-value as average profit changes nothing as regards the total mass of surplus-value : the sum of the average profits is equal to the total surplus-value. Thus there is no violation here of the law of value. The average profit - through the agency of total surplus-value - is based on the fact that value is determined by labour-time. The magnitude of the average profit is also fixed by this. Marx writes that "The determination of this surplus-value follows only from the determination of the value of the labour-time. Without this, average profit is the -average of nothing, mere fancy. And it could then be just as easily 1,000 as 10 p.c."[19]

Marx had now established all the conditions necessary for investigating the category of "price of production", i.e., the converted form of value which, in the capitalist mode of production, forms the centre around which market-prices fluctuate. In capitalism (assuming unrestricted competition), commodities cannot be sold at their values-they have to be sold at their prices of production. Marx writes "that it is precisely because the value of a commodity is determined by labour-time that the average price of a commodity ... can never be equal to its value, although this determination of average price is only derived from the value based on the determination by labour-time."[20]

Price of production is equal to cost-price plus average profit. If Marx spoke before of individual and market value, he now draws a distinction between individual and market production price. Later (in Volume III of "Capital"), he stresses that "everything said concerning it (i.e., market-value) applies with appropriate modifications to the price of production..."[21]

Marx demonstrates that the surplus profit (extra surplus-value), which individual groups of capitalists in the various branches of production achieve, is equal to the difference between the individual and the market price of production. "Individual cost-price ...varies ... in the same ratio as individual value"[22], "... surplus-profit" is "always only excess of the market cost-price over individual cost-price, or excess of market value over individual value..."[23]

Let us take an example to explain this thesis of Marx. The market-value of the product of a particular branch is assumed to be 80c + 20v + 20s = 120. When in this branch a particular individual capital includes machines of a more advanced standard, its organic composition is consequently above the average in the branch (it can be double the average, for instance) and so its surplus-value rate is also higher. The individual value of the product of this capital is then 80c + 10v + 20s -= 110. The difference between individual value and market-value is 10. This difference coincides with the difference between market cost-price and the individual cost-price (100-90).

Let it be assumed that the average profit rate is 15%. The market price of production is then 115 while the individual production-price is 103.5 (90 + (15/100 x 90)). The difference between the individual and the market price of production is 11.5, i.e., it does not coincide exactly with the difference between the individual value and the market-value of the product and is not the same as the difference between the individual cost-price and the market cost-price either. This is explained by the fact that the difference 'between the individual and the market price of production is regulated not only by the difference between the individual and the market cost-price but also by the level of the general profit rate. With a low general profit rate (say 10 %), this difference would amount to 11; if the. general profit rate were 5 %, the difference between the individual production-price and the market production-price would be 10½, i.e., it would be closer still to the difference between the individual and the market value of the product.

A brief indication can now be given of the results which Marx obtained in his investigation of average profit and price of production. In "Theories of Surplus-Value", he states that the twofold effect of competition (within a particular branch and between different branches) results in two kinds of capital migration and a "twofold movement in the levelling[24] of prices.

The first kind of capital migration produces "the general level of price in the same employment and the general level of profit between different employments".[25] The individual values of the commodities are converted into market-values and prices of production. These movements should not be conceived as though the individual values were first converted into market-values and that then market-value was converted into market price of production.

Competition within the various branches and competition between them act simultaneously. The most important consequence of- this simultaneous action is that the values are converted into prices of production. So that a correct analysis of these relations can be made, Marx first examines competition within the various branches and then between them. This clearly shows that competition within the individual branches converts the individual values into market-value and that competition between the various branches, on the other hand, converts individual values into individual prices of production- and market-value into the market price of production. The overall result of the twofold action of competition is that the values are converted into, prices of production but this is not the total effect.

The -second kind of capital migration, which is likewise the result of the twofold action of competition and was called a "surface movement"[26] by Marx, causes market-prices (Marx terms them "real market-prices"[27] because they are the prices which actually exist on the surface-on the commodity market) to be levelled out with the prices of production which now form the centre around which market-prices fluctuate.

In its totality, the effect of this migration of capital is that it converts the values into prices of production and levels out deviations of the market-prices from the prices of production under the concrete conditions of capitalist competition so " that the total mass of the social labour-time is distributed according to social need among the different spheres of production".[28]

It will have already been noted that, from time to time and to the extent that the material accumulates, digressions from the general course of the description are made to illustrate the method used by Marx in his economic enquires. This is also the case at this point.

Of course it is primarily the task of philosophy to study Marx's method in all its aspects. In the present book, only a few of the characteristic features of Marx's method of concrete economic research will be examined.

The point of interest here is how Marx applies the method of abstraction in concrete economic research. Marx and Lenin have described this method of economic research in a number of places. Marx writes that "In the analysis of economic forms, moreover, neither microscopes nor chemical reagents are of use. The force of abstraction must replace both."[29] And Lenin remarks that "Thinking which progresses from the concrete to the abstract-when it is correct-does not move away from the truth but moves closer to it ... all scientific ... abstractions reflect Nature more profoundly, more correctly and more completely. From actual observation to abstract thinking and from this to action-this is the dialectical approach to the perception of truth, to the perception of objective reality."[30] This indicates that Lenin considered the method of abstraction to be a correct method of theoretical research, correct also in the sense that a theory evolved from the correct application of this method is also a true reflection of reality. Marx repeatedly states that political economy is the theoretical expression of the capitalist mode of production, referring of course to the scientific political economy of capitalism.

Why is it not possible to do without abstraction in scientific investigations? Because the essential nature and the outward manifestations of things do not coincide. Understanding the essential nature of things is precisely the task of science. One way of performing this task is the use of the method of scientific abstraction.

Of course, it is not enough simply to characterize Marx's method of economic research as a method of scientific abstraction. If this method is to be described in full, special attention must be devoted to the question of the extent to which abstraction is employed in any particular case.

There is no ready-made answer to this problem, but one thing is certain: Marx always abstracts only from those circumstances which are of secondary importance for the case in question and only hinder investigation of economic phenomena. Without this abstracting, it would simply be impossible to study economic problems since the nature of the phenomenon would remain hidden under numerous features of minor significance. It should be noted, however, that the secondary circumstances from which Marx abstracts are only secondary in a specific connection. Seen from another aspect, on the other hand, they can be of first-rate importance so that abstracting from them would be quite inadmissible.

Let us take an example which illustrates this. If it is a question of abstract. examination of bourgeois society, foreign trade must be disregarded.[31] Foreign trade does indeed play a mighty role in capitalism but is an external factor as regards this question. This is why Marx, in all major aspects, sets out the theory of the capitalist mode of production without reference to foreign trade. It is sufficient to recall how successfully Marx was able to explain the process of extended reproduction in capitalism solely from its internal conditions. Lenin defended and justified this thesis of Marx in his struggle against the Narodniki.

Marx certainly abstracts from foreign trade but emphasizes at the same time that foreign-trade and the world market are "at once the pre-condition and the result of capitalist production".[32] Considered realistically, in its concrete conditions of existence, it would be extremely difficult for capitalist production if there were no foreign trade. Marx writes as follows about this: "If surplus labour or surplus-value were represented only in the national surplus product, then increase of value for the sake of value and therefore exaction of surplus-labour would be restricted by the limited, narrow circle of use-values in which the value of the (national) labour would he represented. But it is foreign trade which develops its (the surplus product's) real nature as value..."[33] Without foreign trade and the world market, it would be extremely difficult for capitalists to make a profit.

The concrete, historical character of the scientific abstractions which Marx makes is clearly evident in this example. Foreign trade, which is a secondary and incidental factor in the theory of extended reproduction, for instance, moves to the fore when it is a question of the concrete examination of the operating mechanism of capitalist production.

The function of abstraction is thus, at each stage of economic research, to disregard those factors which are external to the subject of investigation in question and to concentrate attention on the essential (inner) features of the phenomenon. For Marx, the general methodological principle was that capitalist production had to be analyzed in a pure form and this is apparent in his analysis of surplus-value in particular. As we have already seen, the starting point for Marx here is that surplus-value is to be considered in its ' pure' state, apart from its special forms.

Like many natural laws as well, all economic laws and categories and indeed all social laws take effect in real life as tendencies. Marx assumes, however, that the theoretical categories exactly reflect economic phenomena and accurately correspond to them, without forgetting for even a second that this agreement is only. approximate.

Without this exception, theoretical analysis would be completely impossible. This is illustrated by the example of average profit of which Marx says that it "never appears as something directly given, but only as the average result of contradictory oscillations" and exists "only as a determining tendency in the movement of equalisation of the real, different rates of profit"[34]. Nevertheless, Marx assumes in theory that average profit is a quite specific magnitude which can be measured exactly.

This special feature of Marx's method of abstraction is expressed most clearly in his assumption of the identity of the value and market-price of commodities. He says that "The price of these commodities may he assumed as equal to their value"[35] and that the value and price of commodities are "still set as identical here..."[36] This "here" applies not only to the "Theories of Surplus-Value" but also to the first three volumes of "Capital".

In the third volume of "Capital", Marx writes that "We proceed in this entire analysis from the assumption that the rise or fall in prices expresses actual fluctuations in value.[37] He does not yet consider here the conversion of value into prices of production. In the latter case, it would have had to be mentioned in the theory that market-prices and prices of production coincide.

At first sight, it seems that this condition contradicts the foundations of the Marxist theory of value. As we know, a basic thesis of this theory states that value and price arc fundamentally different. In the first volume of "Capital", Marx writes that the "possibility, therefore, of quantitative incongruity between price and magnitude of value, or the deviation of the former from the latter. is inherent in the price-form itself."[38] It is precisely this difference between market-prices and value which illustrates the law of value under the conditions of a spontaneous capitalist commodity economy. Nevertheless, the pre-condition that the market-prices and the values of the commodities or - on a higher level of analysis - the market-prices and the prices of production of the commodities coincide is of major significance for Marx's theory of value. What is Marx saying exactly?

Primarily, he is saying that in the capitalist commodity economy the value of a commodity can only be expressed by its price, i.e., by the money-form of value. Value as such cannot be represented except by price. Price is the expression of the value since, to use Marx's words,[39] "... the expression of the equivalence of a commodity with the sum of money constituting its price, is a tautology ..."[40] What causes the deviations of prices from values ? These follow from the spontaneity of the capitalist commodity economy, from the conditions under which commodities are realized, from the conditions under which they are sold. "... This exchange ratio of the commodity", writes Marx, "may express either the real magnitude of that commodity's value or the quantity of gold deviating from that value, for which, according to circumstances, it may be parted with."[41] When price deviates from the value of a commodity, it is naturally no longer an adequate expression of the value.

When Marx sets himself the task of developing the theory of value although value, in capitalist commodity production, exists only in its expression as money, in the price-form, it is clear that he has to assume the coincidence of price and value since only in this case is the price an adequate form of expression of value.

Just as market-prices inevitably deviate from values in capitalist production, it is absolutely necessary to disregard these deviations and to assume that value is identical to market-price when it is a question of formulating the theory of abstract value. In this case, the conditions of realization of commodities-like foreign trade in the analysis of reproduction-are an incidental feature which obscures the real relationship.

With the theory of labour-value, Marx bases all the processes which take place in capitalist production on value. From this it follows that the categories associated with the direct production process must adequately reflect value (or the surplus-value as part of value). In the theory, account is taken of this requirement by the assumption that such categories directly express value. If they differ from value, then this is already a factor of distribution or redistribution, a circumstance of secondary importance. In this case, the theory of value requires that the total sum of the prices of production, for instance, or of market-prices is equal to the sum of values. An analogy can be drawn with the relation between value and market-price. Any deviation of the price from value means that value which has already been produced is redistributed. Only on the condition that price coincides with value does the price adequately express value and is a category of the direct production process. The theory of value can specify this requirement for the category of "market-price' because, under normal conditions of free competition, it is impossible for market-price to deviate permanently from the-value. If the converse were true, price would cease to be the adequate expression of value.

This also applies to the other categories of political economy which-reflect the direct production process. Profit, for example, although the converted form of surplus-value, is equal to the surplus-value and Marx notes that "surplus-value and profit are actually the same thing..."[42] As regards the conversion of profit into average profit and value into production-price, this is - as Marx proves - only a question of "the distribution of the surplus-value made by capital as a whole among the different trades or different capitals in different spheres of production"[43] Thus, in contrast to market-value and profit, average profit is. a category of distribution; the total sum of the average profits is, fully in accordance with the theory of value, equal to the total sum of the surplus-values. Consequently, average profit is ultimately determined by value and surplus-value... if it is not determined in this way, "average profit is the average of nothing, mere fancy".[44]

Price of production, on the other hand, is of a twofold character. It expresses the direct production process since one of its component-parts is the cost-price but; at the same time, it is also a category of distribution since it includes the average profit. The same applies to the relation between profit and surplus-value. Here it becomes apparent that distribution is only another aspect of production which is why exactly the same categories express both the production and also the distribution relations.

There is, however, a considerable difference between the categories of market-price, market-value and profit on the one hand and the categories of average profit and production-price on the other. Assuming normal conditions of competition, market-price is usually equal to value and profit equal to surplus-value. Average profit and production-price, however, are only the same as surplus-value and value in exceptional cases; as a rule, they deviate from surplus-value and from value. This also characterizes them as categories of distribution.

Two quotations of very great methodological interest from "Grundrisse" may supplement these remarks: "The fact that in practice, both as a general tendency and directly by means of price… capital seeks to cheat necessary labour by reducing it to below its level, both its natural level and that at a certain state of society, is not relevant here. We have to assume everywhere here that the economically justified labour-wage is paid, i.e., the wage determined by the general laws of economics. The contradictions must follow here from the general relations themselves; not from the swindles of individual capitalists. What further shape this takes in reality belongs to the doctrine of wages."[45] The second quotation reads as follows: "In the determination of price (as we shall see from profit as well) fraud, mutual swindle, is added to this. The one can gain in exchange what the other loses; they can distribute only the surplus profit among themselves..."[46]

The condition that market-prices are equal to values appears here as one of the most important requirements of Marx's theory of economics. The antagonistic contradiction between the working-class and the class of capitalists does not follow from the capitalist cheating the worker by selling him commodities at prices which are above their value, although this swindle too is widespread in capitalist reality. The antagonism between labour and capital derives from the surplus-value which the capitalist appropriates for himself without equivalent and, as Marx shows, despite this in strict accord with the law of the exchange of equivalents, with the law or value. The profit of the capitalists is also based on surplus-value. The profit which results from the fact that the market-prices of the commodities do not coincide with their values signifies only a redistribution of surplus-value.

In analysing the reproduction process, Marx abstracts from the disproportions associated with the capitalist form of this process. In capitalist reality, however; proportional production is "naturally never exactly the case..."[47] Nevertheless, in his investigations Marx assumes that proportional production does take place in capitalism: "... in this entire enquiry" it is "naturally always assumed that commodities are sold and sold at their values."[48] Realization as the main question of the theory of reproduction is therefore not a roughly understood problem of sales, as can be understood from the remarks made by Marx just quoted. In the theory of reproduction, it is much more a question of how all the component-parts of the product in their natural form and in a value-form are to be replaced and how the mutual agreement between the component-parts of the total social product can be established.

In his analysis of the process whereby average profit and production-price are formed, Marx abstracts from the fact that the working day is not equally long in the different branches of production.[49] If account is taken of these differences, it must also be accepted that the masses of surplus-value in the different branches are not the same either. The task, however, is to demonstrate what influence the different organic compositions have on the mass of surplus-value produced in the individual branches. This is why one must abstract from all the other factors which likewise have an effect on the magnitude of the surplus-value achieved in the branch in question.

In the theory of surplus-value and of profit, Marx also abstracts from "profit on alienation". But the real profit which the capitalists achieve in actual fact is "largely profit on alienation".[50] But in this case only the total profit is redistributed among individual capitalists which is why "profit on alienation" must be disregarded in the examination of the profit derived from the creation of surplus-value.

Footnotes

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