FW: question on economics

["Devine, James" <jdevine@xxxxxxx>]

I received the following question, the answer to which may be of interest:

>I am having trouble understanding Marx's labor theory of value. Is it true
that prices reflect the law of value because prices tend in the long term to
stay a certain price for some time relativly interupted by laws of supply
and demand ?(as Mandel says for example) From What i heard, prices cant
reflect labor inputs because a soda pop for example costs almost nothing to
build and costs 50 cents to sell which is acourse a high markup from the
costs of production. however Marxits say that the commodity prices reflect
the value of the imputs put in them. Who is right ?<

I think that the main distinction in Marx's CAPITAL is between appearances
and societal reality. "Appearances" are what the participants in the
capitalist system see: we see prices, wages, profits, interest, etc. (NOTE:
they aren't imaginary or illusory. Instead they represent reality as seen
from a partial perspective.) "Reality" is the hidden nature of capitalism as
an exploitative social system: most of the time, we don't see this very
well, so we can't just look out the window and see values, variable capital,
surplus-value, etc.

Sometimes price categories correspond to value categories, but most of the
time they don't. (As an example of correspondence, when the labor needed to
produce a commodity falls and the product is supplied competitively, if
nothing else changes, the price falls too.) However, at the societal (or
macro) level, they correspond. The sum of all revenues
received (prices) adds up to the sum of all values, the creation of
labor. The sum of all profits + interest + ground-rent received
(property income) adds up to the total surplus-value that the working
class as a whole produces via exploitation.

When there are deviations between prices and values, as with the example
of soda pop (which I assume is true), that means there's redistribution
of value and surplus-value going on: a company that can charge prices higher
than value and receive profits higher than the surplus-value they have had
produced is benefiting from a redistribution of value and surplus-value from
other sectors (which are losing). That is, the soda-pop capitalist is able
to claim more of the societal surplus-value than he or she has gotten
workers to produce.

Another way to say this is that Marx's theory is not a "labor theory of
price" (like Ricardo's theory) but is instead a labor theory of the origins
of profits, interest, and rent.

I had an article on this in RESEARCH IN POLITICAL ECONOMY in 1990, but
Charlie Andrews' FROM CAPITALISM TO EQUALITY (available at
www.laborrepublic.org) is a good place to start. He writes better than I do.


Jim Devine