[OPE-L:4796] Re: Re: modified significance of the cost price

From: Fred B. Moseley (fmoseley@mtholyoke.edu)
Date: Sat Jan 27 2001 - 13:32:22 EST

In Rakesh's (4786), he presents an equation - equation (2b) - that is
supposed to express my interpretation of Marx's theory of value (I have
already discussed Rakesh's equation (2a) in my last post):

(2b)  	Value of money needed to purchase MP  +  Lc  =  V

This equation is NOT an accurate expression of my interpretation of Marx's
theory.  All the variables in this equation (as I understand them) are in
units of labor-time.  But I don't think Marx's theory of value is about
labor-time alone.  Rather, it is about a determinative relation between
money and labor-time.  The monetary variables in Marx's theory of value
are missing in Rakesh's equation (2b).  

So Rakesh's equation (2b) brings us back to the fundamental issue of the
meaning of value in Capital, an issue we have discussed before, but
evidently we still need to discuss some more.

My equation for Marx's theory of value, as I have discussed many times, is
the following:

(2c)	W =  C + N
	  =  C + m Lc

In this equation, W and C are monetary variables, Lc is a labor-time
variable, and m expresses how much money-value is produced per
labor-hour.  Marx's theory of value explains the aggregate price of
commodities (W) on the basis of the given constant capital ( C) and the
quantity of current labor (Lc).  Marx's theory of value is not about
labor-times only, with no money in the theory at all.  I think Marx would
turn over ...

2.  Labor-time is indeed the SUBSTANCE of value, but money is the
necessary FORM OF APPEARANCE of value.  After Marx derived money as the
necessary form of appearance of value in Chapter 1 of Volume 1, from then
on, whenever Marx discusses the "value" of commodities, without further
qualification, he almost always means money, or the form of appearance of

This monetary meaning of "value" is clear, for example, at the beginning
of Volume 3, where Marx summarized his theory of value and surplus-value,
already presented in Volume 1.   The value of commodities is discussed
throughout as a quantity of money, e.g. $600.  This value of $600 is
determined by the equation:

	W  =  C + N

	   =  C + V + S

	$600  = $400 + $100 + $100

A part of this value of $600 just replaces the capital advanced of
$500.  The excess of the value of commodities over the capital expenditure
(or the cost price) is the surplus-value ($600 - $500 = $100).  The value
of commodities produced is repeatedly compared with the capital
expenditure.   The capital expenditure is surely in terms of money,
right?  Then, if these quantitative comparisons between value and price of
production are to be meaningful, the value of commodities must also be
defined in terms of money, right?

Let's review these important initial paragraphs of Volume 3 of Capital.

After the first introductory paragraph, Chapter 1 begins with the
following concise summary of Marx's theory of value, which is expressed in
terms of money:

"The VALUE of any commodity C produced in the capitalist manner can be
depicted by the formula: C = c + v + s.  If we subtract from the value of
this product the surplus-value s, there remains a mere equivalent or
replacement value in commodities for the CAPITAL VALUE c + v LAID OUT on
the elements of production.

Let us say that the production of a certain article requires a CAPITAL
EXPENDITURE of $500: $20 for wear and tear of the instruments of labor,
$380 for raw materials and $100 for labor-power.  If we take the rate of
surplus-value as 100 per cent, the VALUE of the product is 400c + 100v +
100s = $600."

Please note: "the VALUE of the product IS ... $600."

Marx then defined the important concept of cost price, also in terms of
money (that part of the value of commodities that replaces the capital

"After deducting the surplus-value of $100, there remains a commodity
value of $500, and this simply replaces the CAPITAL EXPENDITURE of
$500.  This part of the VALUE of the commodity that replaces the PRICE of
the means of production consumed and the labor-power employed, simply
replaces what the commodity cost the capitalist himself and is therefore
the COST PRICE of the commodity, as far as he is concerned.

...  If we call the cost price k, the formula c + v + s is transformed
into the formula C = k + s, or commodity value = cost price +

Marx then went on to emphasize that the concept of cost price has nothing
to do with the determination of value; both cost price and value continue
to be discussed as sums of money:

"Yet the category of COST PRICE has nothing to do with the formation of
commodity VALUE or the process of capital's valorization.  If I know that
five-sixths of a commodity VALUE of $600, i.e. $500, is simply an
equivalent, a replacement value, for the CAPITAL OF $500 THAT HAS BEEN
SPENT, and that this is therefore just sufficient to buy back the material
elements of this capital, I shall neither know how this five-sixths of the
commodity's value which forms its cost price was produced, nor can I
explain the origin of the last sixth that forms its surplus-value.   

Please note that in the first sentence in this passage, the "FORMATION OF
VALORIZATION".  The "process of capital's valorization" is obviously a
monetary process: M becomes M + dM.  Likewise, the "formation of commodity
value" is also a monetary process: the price of commodities is greater
than their cost price.  

Marx then presented another concise summary of his theory of value, again
in terms of money, and explicitly cites his theory of value and
surplus-value in Volume 1:

"We know from Volume 1 (Chapter 9, p. 320) that the VALUE of the product
newly formed, in this case $600, is composed of (1) the reappearing value
of the constant capital of $400 spent on the means of production, and
(2) a newly produced value of $200."  

Algebraically: W = C + N.

Marx then went on to compare the value of commodities with the capital
advanced, both of which are sums of money:

"If we now compare CAPITAL ADVANCE on the one hand and COMMODITY VALUE on
the other, we have:

I.  CAPITAL ADVANCE of $500 = $400 in capital spent on means of production
(price of the means of production) + $100 in capital spent on labor ...

II.  COMMODITY VALUE of $600 = cost price of $500 ($400 price of the means
of production + $100 price of the 666  working days) + $100 surplus-value.

Again, this comparison is nonsense unless commodity value is defined in
terms of money.

And on and on, all in terms of money.  Marx does not ever say in this
chapter anything like (as Rakesh seems to suggest): "value is a quantity
of labor-time, which can be illustrated indirectly by money, on the
assumption that m = 1."  What Marx is discussing in this chapter (and
elsewhere) is not quantities of labor-time, but rather quantities of
money-capital in circulation - quantities of money-capital advanced to
purchase means of production and labor-power and quantities of
money-capital recovered through the sale of commodities.  That is the
essence of capitalism, and that is what Marx's theory of value and
surplus-value is about.  The analytical framework of Marx's theory of
value and surplus-value is the circulation of capital: M - C ...  (M +
dM), which is a monetary process.  

Similarly, we have seen in previous posts that in Part 2 of Volume 3 that
Marx repeatedly compared the VALUE of commodities and the PRICE OF
PRODUCTION of commodities, both for individual commodities and for the
total social capital.  The price of production of commodities is clearly a
monetary variable, right?  Therefore, as in the comparisons of value and
capital expenditure discussed above, so also in these many comparisons of
value and price of production, such a quantitative comparison makes sense
only if value is also defined in terms of money.  All the algebraic
formulations on pp. 263-65 discussed in my last post (including especially
in the "missing paragraph") would be meaningless if values were
defined in units of labor-time and price of production in units of money.  

So I conclude that when Marx says "value IS $600" or "value = $600", that
is exactly what he means.  He does NOT mean that value is 600 labor-hours
which, under the assumption of m = 1, can be illustrated by $600.  Marx's
theory of value is about quantities of money-capital in circulation.  

I will argue in a subsequent post that Rakesh's three criticisms of
"my" equation (2b) do not in fact apply to my own equation (2c).  But I
think the above discussion of the fundamental issue of the meaning of
value is enough for now.  

I look forward to replies and comments and further discussion.


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