Marx's theory of value doesn't explain equilibrium prices, or at least, it doesn't explain them directly. As per Volume III equilibrium prices are equal to the cost-price (c+V) of the commodity plus the average rate of profit. Price and value are only really equal at the level of society as a whole.
This arises from competition between capitals. Competition tends to establish an average rate of profit, since a higher rate of profit in one branch of industry will lead to more capital investment in that industry, increasing production relative to demand, and a lower than average rate of profit will lead to the opposite. This is a problem for the theory of value, because a strict relationship between price and value would mean that, given a constant rate of surplus-value, industries with a lower than average capital composition (that is to say, a lower rate of constant to variable capital) would have higher rates of profit, which obviously isn't the case. If it was, it would produce some weird phenomena, capitalists would probably tend to invest in industries with lower organic compositions of capital, which contradicts the tendency stated by Marx for the organic composition to rise (which is a thing that actually happens) bringing about a fall in the rate of profit.
This leads to the problem of 'transforming' values into prices of production. The problem is not just a mathematical but a theoretical one. If long run prices can be adequately explained by cost-price plus the average rate of profit, the question arises as why we even need a theory of a value which needs to be 'transformed' into real prices in the first place. A lot of commentators, starting from Bohm-Bawerk onwards, have claimed that there is a contradiction between the model of capitalism Marx gives in Volume I (where prices are for the most part equal to value) and the model he gives in Volume III (where prices are equal to their 'price of production'), and that the theoretical constructs of Volume I are basically useless - a product of Marx's naive enthusiasm for the classical economists perhaps, or of a certain moral and sentimental belief in the value of human labour, or perhaps a conscious recognition that the theory of value must somehow be maintained in order to maintain the theory of exploitation, which was his real concern.
The important thing to bear in mind is that fundamentally, Marx's value theory is not a theory of prices but a theory of the social relationships of capitalist production. There's even a letter where he weighs in on the value controversy, claiming that even if you skipped the first chapter, his description of the social relationships of capitalist production should be enough to help you understand the meaning of the theory. Marx was aware of the transformation problem as early as 1847 in his Poverty of Philosophy, and describes the essential procedure of transformation in the Grundrisse, ten years before the publication of Volume I. It is not a case of a Marx who elaborated a theory in Volume I which he then later ran up against difficulties with, but a case of the fundamental difference between the Marxist and Ricardian understanding of value.
The movement of classical political economy up to Ricardo was a move towards an ever more rigorous reduction of the various categories of economics to value, the substance of which is human labour in the abstract. But classical political economy never examined what Marx calls the 'value-form'. Commodities don't just walk around with the labour time it took to produce them marked on them, they walk around with a price, their value is always expressed in the form of the relationship of one commodity to another.
But this is a circumstance that is utterly peculiar. It is evident that commodities, as inanimate objects, cannot really have relationships with one another, only human beings can. What Marx the undertakes is to examine the historically specific form of society in which the products of human labour take the form of value, and the relationships between people take on the fantastic, but prosaically real appearance of relationships between things.
In every form of society, it is a requirement that human labour time is apportioned between various activities. Even Robinson Crusoe on his island has to divide his time between foraging for food, hunting, building a shelter and so on, for example. In capitalist society, this division of human labour is accomplished through market exchange, "The effect is the same as if the different individuals had amalgamated their labour-time and allocated different portions of the labour-time at their joint disposal to the various use-values."
Or as he expresses it in the Grundrisse:
The reciprocal and all-sided dependance of individuals who are indifferent to one another forms their social connection. This social bond is expressed in exchange value, by means of which alone each individual's own activity or his product becomes an activity or a product for him.
Gavin Hughes
Time rules man. "Time is everything, man is nothing; he is, at the most, time's carcass." (Poverty of Philosophy) In a society of mutually indifferent individuals, all producing in isolation from one another, the social character of their labour can only express itself in the form of value relations. The form of appearance of value, as a relationship between commodities, is a necessary form of appearance. Exchange is not a process in which the producers relate to one another as real individuals, it is a process in which they relate to one another as owners of commodities, and each commodity represents for its owner nothing other than human labour in the abstract.
Because Ricardo and Smith could never step outside bourgeois society to see it's historically specific nature, and the conditions in which the products of human labour become 'values' in the first place, they could never solve the problems that the theory of value throws up with regards to the discrepancy between value and price (a discrepancy which is more than just a question of oscillation around a point of equilibrium, but has to do with the fundamental nature of competition under capitalism, which always reduces profit down to an average rate).
Marx was not a Ricardian. His theory of value is, in some sense, essentially the same as his theory of fetishism or alienated labour.
As someone who has not quite finished their reading of Capital, this is my view. Marx was opposed to exploitation first, and then came up with the theory of value in order to argue within the context of economic discourse at the time, that workers are exploited.
To the capitalist, workers and machines are just inputs to production. I reject the idea that only labor creates value - both labor and capital inputs create value. My objection to capitalism is that I don't like being treated like a machine where you input A and are expected to output B, meanwhile being disciplined to make sure I am an efficient machine.
Doesn't this solve the transformation problem? If both workers and capital/machine inputs create value, then there is no contradiction where more labor-intensive firms would have to have higher profit. In my understanding, labor is just another machine input, and which particular inputs will depend on the nature of the good being produced.
Of course if we take this strategy then that means giving up on a lot of the technical details of Marx's argument, and resorting to a more humanistic critique of exploitation. Which is fine by me, because I think that there is a lot of Scientism present in Marx and he needs to be re-read and reinterpreted to fit the present day conditions of capitalism.
Justin Rivera
yes
Wyatt Garcia
I'm not entirely sure if your argument is significantly different from Marx's. If you inverted your belief would you still reach the same conclusion? Rather than machines and labour both producing value. Machines are simply labour performed at an earlier time.
Jonathan Walker
I think Marx had a somewhat more refined view of it, that capital being the result of labor (and other capital) had its own value and over time that value was transferred to the thing created during the process of production.
Jackson Lee
this
Michael Stewart
(OP) Whoever wrote this shit is a special kind of retard. This debate OP is as old as the first edition of Kapital. First of all Marx establishes that there are several uses of value, the allocation of profit to capital refers purely to use value (you can keep this definition of value regardless of the transformation problem, as it originates back to Adam Smith and refers to even basic commodities). Secondly the proposition of equilibrium of prices is a purely theoretical description of the regulatory way capital flows from one branch into another and thus, labor, from one branch of production into another, but profit rates fluctuate around it, usually with a falling tendency, which can be raised cyclically after crises but that's a bit beside the point. It's also different from the orthodox conception in the sense that this equilibrium cannot be attained, it always remains elusive.
if values explain nothing whats the point of having a theory of value.
Carter Bennett
Right, something like embodied dead labor time? But isn't his view that only labor can create additional value on top of the dead labor embodied in the capital inputs? I'm saying that no, both labor and capital inputs create surplus value beyond the value of the inputs themselves.
Parker Parker
Care to provide an example?
Kayden Price
How does that happen though? Where does this capital-value come from? Wouldn't this mean that you'd need to pay machinery in addition to maintaining it?
Jack Gomez
You are confusing prices and value, I don't blame you because this has been the primary rhetorical weapon to be used as anti-socialist propaganda by the neoclassicals in attacking Marx.
Marx never sets out a precise theory of prices, following Ricardo he merely sets out to say there is an equilibrium that explains the way capital is distributed and allocated (by the use of surplus value).
Secondly the retard that the OP posted never even makes the distinction of use value, exchange value and thirdly and most importantly the finally the price value that arises out of the aforementioned exchange. All three explain each other, but none of the three are identical qualitatively, It is a purely theoretical explanation, if you want to read about how prices actually arise out of capitalist competition and how the allocation of capital produces profit read Sraffa (which is why I posted the above text), which is wholly different theoretical model.
The extreme importance of the theory of value is QUALITATIVE and not one of quantity.
I reading the PDF. But I'd just like to know. What does the concept of value explain if not some sort of price? And if value and price are totally different why can we see prices generally being fairly close to values in our modern economy?
Joshua Sullivan
No. Suppose you had a machine that transformed inputs X with value V1 into outputs Y with value V2 > V1 without any labor being necessary. All that is necessary for the surplus value to be generated is that the capitalist owns and controls this machine. Labor is a confounding factor because it just happens to be necessary in most cases to perform the physical transformation of X into Y. But in my view it is not essentially different from a machine - just a very ubiquitous, plastic, and useful machine which has to be disciplined in order perform as one. A non-human machine creating value is no more mysterious than human machines creating value - they transform inputs with a certain value on the market into a different output which has a greater value on the market.
What, after all, is really the difference between labor and capital machinery in an age of automation? These two things are quickly merging and becoming one. Zizek has pointed out that increasingly, intellectual property is more determinant of economic value than labor - it is kind of like becoming a feudal lord over an abstract intellectual space and extracting rent (think Bill Gates getting money every time someone purchases a computer with Windows). When it is machines and not humans which are the things creating value, what will matter is who has ownership rights over the machines and can employ the force of the state to quash their competition.
Michael Cruz
Although I'm realizing now that in a way the Windows example could demonstrate the truth of the labor theory of value. When a piece of software can be replicated indefinitely without any expenditure of value, its economic value goes to zero and has to be propped up artificially with intellectual property laws.
Colton Bennett
Nobody argued that point, but then you have pure profit and zero payment going into the forces of production. You screw with a divide by zero if you want to calculate a rate of exploitation (zero or infinite depending on how you want to view it) but you're still not putting any money towards the capital itself, it's all going to capitalist surplus.
Carson Cooper
Then any concurrent could buy the same machine and sell Y for a value V3 such as V2 > V3 > V1. And so on and so forth.
Nathaniel Lopez
The difference is that machinery isn't going to buy your products, while a human is. Value is only an aspect of the social relation that is trade, don't forget that.
Benjamin Nelson
...
Gabriel Nelson
With what money?
Joshua Lee
But the law of value does explain price, they are not totally different, by way of labour time, the difference is between the price of labour of time and the price of the commodity, but these average out so as to produce surplus value.
Again, because socially determined labour time produces use value which is turned into exchange value, which is turned into price value.
Capital machinery like everything needs to be created, programmed, maintained and ultimately operated by a human worker. Full automation is impossible as it only fastens rate of profit to fall long term. Secondly a machine is referred to as dead labour because it is not a socially determined form of labour, it is artifice producing commodities.
No humans=no value
Of course you can say, are not microsoft windows producing value? 3D printing and robots in factories? Yes this is true inasmuch as this machine can be used by capitalists and workers to produce value, the machine cannot also design a commodity (that is value) it can only replicate commodities, so it is really as you say an abstract framework. The proper image of Marx idea of machine/worker relationship is that of the cyborg, not the robot from Metropolis.
Isaac Long
In understand the whole use vs exchange concrete vs abstract thing but what I want to know is in what way are exchange values "transformed" into real prices?
Jose Richardson
The ones you give them to work for you, of course. Just without the risk of them revolting.
Gavin Morales
You give money to robots? But who do the robots belong to?
Caleb Martinez
The capitalist state/the capitalists as a class.
They get treated as people by law.
James Lopez
Right, which is why intellectual property becomes more and more important with increasing automation. You have to make sure that no one else can buy and operate your machine, and you employ state violence to crush anyone who tries.
I am starting to see though that in the absence of intellectual property laws, a system without human labor would make everything tend towards being economically valueless.
Alexander Powell
Effectively, you don't need humans to act the role of the worker in trade if you can get something that simulates an average human's actions in the market and then protect them as humans with violence the same way you do the entire system to start with. The advantage of this is that they dont' ever threaten violence because you just don't program them to.
Kayden Fisher
Kind of like "Material relations between people become social relations between things"? I'm still working on unpacking this statement, there's a lot to it.
I also think that capitalists could potentially work around this by "paying" the robots to purchase goods, which they are programmed to select. Seems a bit far-fetched though, and I think the capitalist system would be in trouble without consumers to purchase goods.
Grayson Adams
wew
Joseph Bailey
Actually this is exactly the case, as empirical research has proven. Pic related.
The transformation problem isn't a problem at all, average prices actually do correlate with value one to one all the empirical research on this topic has shown this to be the case. This isn't the 19th century anymore, we don't have to keep circle jerking about metaphysical concepts we can go out an investigate the truth.
Jacob Flores
Profit rates don't completely equalize in real life but they do have a tendency to equalize which needs to be addressed thus transformation.
Oliver Long
bump
Ethan Powell
Whether profits tend towards equalization matters not, they tend towards equalization BECAUSE of capital investment and concentration, that is because lower capital industries have a higher rate of profit and thus encourage investment which decreases profit. Just look at the tech start up industry and how much investment gets thrown at it. New industries pop up and the cycle starts over again you're never going to run out of low capital concentration industries
Easton Mitchell
bump
David Nguyen
I see how the graph supports the falling rate of profit but not sure how it's related to the transformation problem.
Leo Bell
Are you saying you didn't read the pdf? the conclusion touches on it
