Born in Trier, Prussia (now Germany) Studied philosophy at universities in Bonn and Berlin PhD from...

Born in Trier, Prussia (now Germany)Studied philosophy at universities in Bonn and BerlinPhD from Jena at the age 23

Karl Marx1818-1883

Adopted radical ideas early onYoung HegeliansNewspaper editorFled to Paris in 1843Developed lifelong friendship with Friedrich Engels.

Marx moved to London in 1849

Never really had a job and was supported by Engels

Attributed the unfolding of concepts of reality in terms of the pattern of dialectical reasoning

(thesis — antithesis — synthesis)

Georg Wilhelm Friedrich Hegel (1770-1831)

Hegel introduced a system for understanding the history of philosophy and the world itself, often described as a progression in which each successive movement emerges as a solution to the contradictions inherent in the preceding movement.

Hegel

The Left Hegelians, also known as the Young Hegelians, interpreted Hegel in a revolutionary sense, leading to an advocation of atheism in religion and liberal democracy in politics.

Hegel

In this environment, some of the most influential thinking of the last 160 years was nurtured - the radical critique and fierce debates of the Young Hegelians inspired and shaped influential ideas of atheism, humanism, communism, anarchism and egoism.

Hegel

Reform Movements

Utilitarianism or philosophical radicalism

Anarchism

Socialism

Nature has placed mankind under the governance of two sovereign masters, pain and pleasure. It is for them alone to point out what we ought to do, as well as to determine what we shall do. On the one hand the standard of right and wrong, on the other the chain of causes and effects, are fastened to their throne. They govern us in all we do, in all we say, in all we think: every effort we can make to throw off our subjection, will serve but to demonstrate and confirm it.

Jeremy Bentham -- Utilitarianism

In words a man may pretend to abjure their empire: but in reality he will remain. subject to it all the while. The principle of utility recognizes this subjection, and assumes it for the foundation of that system, the object of which is to rear the fabric of felicity by the hands of reason and of law. Systems which attempt to question it, deal in sounds instead of sense, in caprice instead of reason, in darkness instead of light.


By the principle of utility is meant that principle which approves or disapproves of every action whatsoever. according to the tendency it appears to have to augment or diminish the happiness of the party whose interest is in question: or, what is the same thing in other words to promote or to oppose that happiness. I say of every action whatsoever, and therefore not only of every action of a private individual, but of every measure of government.


It is in vain to talk of the interest of the community, without understanding what is the interest of the individual. A thing is said to promote the interest, or to be for the interest, of an individual, when it tends to add to the sum total of his pleasures: or, what comes to the same thing, to diminish the sum total of his pains.


An action then may be said to be conformable to then principle of utility, or, for shortness sake, to utility, (meaning with respect to the community at large) when the tendency it has to augment the happiness of the community is greater than any it has to diminish it.



Generally consistent with classical liberalism which tries to circumscribe the limits of political power and to define and support individual liberty and private property.

Anarchism

Various political philosophies and social movements that advocate the elimination of all forms of government and social hierarchy.

No centralized political structures or exploitative economic institutions

Social relations based upon voluntary interaction and self-management, and aspire to a society characterized by autonomy and freedom.

Anarchism

A society based on voluntary interaction of free individuals, and the idea that communities and individuals have a say in decisions to the degree that they are affected by their outcomes.

Production would be generally self-managed by and for the workers and the communities it would affect, and thus need the products it produced.

Anarchism

Workers councils, assemblies, and larger organs of worker control could link up to form organizations that could settle broader issues on a regional, national, and even international level.

Anarchism -- Early Leaders

William Godwin

Pierre-Joseph Proudhon

Johann Kaspar Schmidt (Max Stirner)

The means of production are owned by the workers.

Socialism

The system of ownership is both collective and individual in nature.The system is collective because society can control production for the common good rather than for individual profit.

The system is individual because workers are no longer a 'collective' mob of alienated non-owners employed by a minority of owners.

Work becomes a free and self-affirming activity for each worker and they receive the full fruits of their labor.

Socialism

The personally empowering and cooperative nature of socialist ownership underpins similar changes in other aspects of life.

Socialism means full participation by each individual in the intellectual, cultural and political life of society.

Early Forms of Socialism

Charles Fourier

Robert Owen

Claude Henri de Saint-Simon

Charles Fourier(1772-1837)

Fourier detested the English for their rapidly emerging industrial society and for men like Smith, Ricardo, Malthus, and other political economists who helped rationalize the system. He held in special contempt the rationally calculating individualism of the utilitarians. They were too intellectual, too rational. In their place, Fourier foresaw a community tied together by the bonds of emotion.

Charles Fourier

Fourier proposed a Garden of Eden of joyous labor, which he termed the phalanstere.

A social unit of five to seven persons with similar tastes pursuing a common profession.

Five or more groups would constitute a series and a union of series would constitute as phalanstere.

Fourier’s phalanx was to become a self-contained community housing 1,620 members with a myriad of subdivisions designed to encourage a dynamic interplay of various human passions.

Charles Fourier

The 1,620 members comes from 810 different psychological types

The Law of Passional Attractions would be allowed to operate unfettered for the first time in history.

la Papillone or love of variety.

Charles Fourier

A worker quickly tires of one kind of task, just as lovers, in spite of their initial attraction, soon find themselves looking elsewhere.

He hated Adam Smith’s vision of a society of specialists, doing the same thing over and over all in the name of the division of labor.

Distributive passions, or la Cabaliste, had to do with rivalry and conspiracy.

Charles Fourier

Productive teams would compete with one another to produce the most delicious peaches or the best pair of shoes. The need to compete would satisfy a natural passion, for all men, by nature, are competitive.

The harmful aspects of competitive commerce in civilization would not be reproduced because production would keep the overall good of society in mind, rather than encouraging individual profit in the market.

la Composite, or the distributive passion

Charles Fourier

A combination of two or more different varieties of passions

This passion requires in every action a composite allurement or pleasure of the senses and of the soul, and consequently the blind enthusiasm which is born only of the mingling of the two kinds of pleasure.

Owen hated the modern factory system, so he decided to revolutionize it.

Robert Owen1771-1858

Establishment of a utopian community resembling the phalanx of Fourier but without the dynamics of the Theory of Passional Attractions. Owen called these settlements, Villages of Cooperation.

Self-contained agricultural communities

Robert Owen

New Lanark, Scotland

New Harmony, Indiana

Concerned with the dangers inherent in uncontrolled individualism.

Claude Henri de Saint-Simon(1760-1825)

Idealized productivity, organization, efficiency, innovation and technological discovery.

Reorganization of labor and the application of technology to it.

Claude Henri de Saint-Simon

The highest positions of prestige and authority would be assumed by a meritocratic elite of intelligence and creativity: the technocracy.

Condemned kings, nobles and the clergy as useless and parasitical.

Promoted social solidarity, cooperation and interdependent responsibility.

Marx and SocialismNo essential change is possible in the system of the distribution of wealth without a complete change in the system of production and property relations

Throughout history, constitutional changes have been conditioned by technological ones

Socialism is the outcome of inevitable historical laws

The organization of capitalist society is in contradiction with the state of development of productive forces

Marx and Socialism

Wages, under capitalism, tend naturally to remain at the minimum level consistent with survival

Competition and the anarchic system of production lead inevitably to exploitation, overproduction crises, poverty, and unemployment

Technical progress leads to social disaster, not for inherent reasons, but because of the property system

Marx and Socialism

The working class can free itself only by its own efforts

Political freedom is of little value if the mass of society is enslaved by economic pressure

The Above Conditions Lead To

The abolition of private ownership of the means of production

A planned economy subordinated to social needs, and eliminating competition, anarchy and crises

The right to work as a basic human entitlement

The abolition of class divisions and social antagonisms

The whole-hearted, voluntary cooperation of associated producers

Marx and Socialism

Free education of children at public expense

Abolition of division of labor and degrading consequences of specialization

All around development of the individual and free opportunity for the use of human skills in every direction

Abolition of the difference between town and country

Political power replaced by economic administration

The Communist Manifesto

The history of all hitherto existing society is the history of class struggles.


Freeman and slave, patrician and plebeian, lord and serf, guild-master and journeyman, in a word, oppressor and oppressed, stood in constant opposition to one another, carried on an uninterrupted, now hidden, now open fight, a fight that each time ended, either in a revolutionary reconstitution of society at large, or in the common ruin of the contending classes.

The Principles of Communism

What is Communism?

Communism is the doctrine of the conditions of the liberation of the proletariat.

What is the proletariat?

The proletariat is that class in society which lives entirely from the sale of its labor and does not draw profit from any kind of capital; whose weal and woe, whose life and death, whose sole existence depends on the demand for labor – hence, on the changing state of business, on the vagaries of unbridled competition. The proletariat, or the class of proletarians, is, in a word, the working class of the 19th century.


Proletarians, then, have not always existed?

No. There have always been poor and working classes; and the working class have mostly been poor. But there have not always been workers and poor people living under conditions as they are today; in other words, there have not always been proletarians, any more than there has always been free unbridled competitions.


How did the proletariat originate?

The Proletariat originated in the industrial revolution, which took place in England in the last half of the last century, and which has since then been repeated in all the civilized countries of the world.



This industrial revolution was precipitated by the discovery of the steam engine, various spinning machines, the mechanical loom, and a whole series of other mechanical devices. These machines, which were very expensive and hence could be bought only by big capitalists, altered the whole mode of production and displaced the former workers, because the machines turned out cheaper and better commodities than the workers could produce with their inefficient spinning wheels and handlooms.



The machines delivered industry wholly into the hands of the big capitalists and rendered entirely worthless the meagre property of the workers (tools, looms, etc.). The result was that the capitalists soon had everything in their hands and nothing remained to the workers. This marked the introduction of the factory system into the textile industry.



Labor was more and more divided among the individual workers so that the worker who previously had done a complete piece of work now did only a part of that piece. This division of labor made it possible to produce things faster and cheaper. It reduced the activity of the individual worker to simple, endlessly repeated mechanical motions which could be performed not only as well but much better by a machine. But at the same time, they also fell into the hands of big capitalists, and their workers were deprived of whatever independence remained to them.



The industrial revolution has entirely transformed the condition of the workers; and two new classes have been created which are gradually swallowing up all the others. These are:

The class of big capitalists, who, in all civilized countries, are already in almost exclusive possession of all the means of subsistence and of the instruments (machines, factories) and materials necessary for the production of the means of subsistence. This is the bourgeois class, or the bourgeoisie.



The industrial revolution has entirely transformed the condition of the workers; and two new classes have been created which are gradually swallowing up all the others. These are:

(ii) The class of the wholly propertyless, who are obliged to sell their labor to the bourgeoisie in order to get, in exchange, the means of subsistence for their support. This is called the class of proletarians, or the proletariat.


Under what conditions does this sale of thelabor of the proletarians to the bourgeoisie take place?

Labor is a commodity, like any other, and its price is therefore determined by exactly the same laws that apply to other commodities. In a regime of big industry or of free competition – as we shall see, the two come to the same thing – the price of a commodity is, on the average, always equal to its cost of production. Hence, the price of labor is also equal to the cost of production of labor.


Under what conditions does this sale of thelabor of the proletarians to the bourgeoisie take place?

But, the costs of production of labor consist of precisely the quantity of means of subsistence necessary to enable the worker to continue working, and to prevent the working class from dying out. The worker will therefore get no more for his labor than is necessary for this purpose; the price of labor, or the wage, will, in other words, be the lowest, the minimum, required for the maintenance of life.


In what way do proletarians differ from slaves?

The slave is sold once and for all; the proletarian must sell himself daily and hourly.

The individual slave, property of one master, is assured an existence, however miserable it may be, because of the master’s interest. The individual proletarian, property as it were of the entire bourgeois class which buys his labor only when someone has need of it, has no secure existence. This existence is assured only to the class as a whole.


In what way do proletarians differ from slaves?

The slave is outside competition; the proletarian is in it and experiences all its vagaries.

The slave frees himself when, of all the relations of private property, he abolishes only the relation of slavery and thereby becomes a proletarian; the proletarian can free himself only by abolishing private property in general.


In what way do proletarians differ from serfs?

The serf possesses and uses an instrument of production, a piece of land, in exchange for which he gives up a part of his product or part of the services of his labor.

The proletarian works with the instruments of production of another, for the account of this other, in exchange for a part of the product.


In what way do proletarians differ from serfs?

The serf gives up, the proletarian receives. The serf has an assured existence, the proletarian has not. The serf is outside competition, the proletarian is in it.

The serf liberates himself in one of three ways: either he runs away to the city and there becomes a handicraftsman; or, instead of products and services, he gives money to his lord and thereby becomes a free tenant; or he overthrows his feudal lord and himself becomes a property owner.


In what way do proletarians differ from handicraftsmen?

BLANK


In what way do proletarians differ from handicraftsmen?

In contrast to the proletarian, the so-called handicraftsman, as he still existed almost everywhere in the past century and still exists here and there at present, is a proletarian at most temporarily. His goal is to acquire capital himself wherewith to exploit other workers. He can often achieve this goal where guilds still exist or where freedom from guild restrictions has not yet led to the introduction of factory-style methods into the crafts nor yet to fierce competition


In what way do proletarians differ from manufacturing workers?

The manufacturing worker of the 16th to the 18th centuries still had, with but few exception, an instrument of production in his own possession – his loom, the family spinning wheel, a little plot of land which he cultivated in his spare time. The proletarian has none of these things.

The manufacturing worker almost always lives in the countryside and in a more or less patriarchal relation to his landlord or employer; the proletarian lives, for the most part, in the city and his relation to his employer is purely a cash relation.


What were the consequences of the industrial revolution and of the division of society into bourgeoisie and proletariat?

First, the lower and lower prices of industrial products brought about by machine labor totally destroyed, in all countries of the world, the old system of manufacture or industry based upon hand labor.



Second, wherever big industries displaced manufacture, the bourgeoisie developed in wealth and power to the utmost and made itself the first class of the country. The result was that wherever this happened, the bourgeoisie took political power into its own hands and displaced the hitherto ruling classes, the aristocracy, the guildmasters, and their representative, the absolute monarchy.



Third, everywhere the proletariat develops in step with the bourgeoisie. In proportion, as the bourgeoisie grows in wealth, the proletariat grows in numbers. For, since the proletarians can be employed only by capital, and since capital extends only through employing labor, it follows that the growth of the proletariat proceeds at precisely the same pace as the growth of capital.



Big industry created in the steam engine, and other machines, the means of endlessly expanding industrial production, speeding it up, and cutting its costs. With production thus facilitated, the free competition, which is necessarily bound up with big industry, assumed the most extreme forms; a multitude of capitalists invaded industry, and, in a short while, more was produced than was needed.



As a consequence, finished commodities could not be sold, and a so-called commercial crisis broke out. Factories had to be closed, their owners went bankrupt, and the workers were without bread. Deepest misery reigned everywhere.


After a time, the superfluous products were sold, the factories began to operate again, wages rose, and gradually business got better than ever.


But it was not long before too many commodities were again produced and a new crisis broke out, only to follow the same course as its predecessor.


After a time, the superfluous products were sold, the factories began to operate again, wages rose, and gradually business got better than ever.

What follows from these periodic commercial crises?

That all these evils are from now on to be ascribed solely to a social order which no longer corresponds to the requirements of the real situation; and


That it is possible, through a new social order, to do away with these evils altogether.

What will this new social order have to be like?

Above all, it will have to take the control of industry and of all branches of production out of the hands of mutually competing individuals, and instead institute a system in which all these branches of production are operated by society as a whole – that is, for the common account, according to a common plan, and with the participation of all members of society.It will, in other words, abolish competition and replace it with association.


What will this new social order have to be like?

Moreover, since the management of industry by individuals necessarily implies private property, and since competition is in reality merely the manner and form in which the control of industry by private property owners expresses itself, it follows that private property cannot be separated from competition and the individual management of industry. Private property must, therefore, be abolished and in its place must come the common utilization of all instruments of production and the distribution of all products according to common agreement – in a word, what is called the communal ownership of goods.



In proportion as the bourgeoisie, i.e., capital, is developed, in the same proportion is the proletariat, the modern working class, developed — a class of labourers, who live only so long as they find work, and who find work only so long as their labour increases capital. These labourers, who must sell themselves piecemeal, are a commodity, like every other article of commerce, and are consequently exposed to all the vicissitudes of competition, to all the fluctuations of the market.


Owing to the extensive use of machinery, and to the division of labour, the work of the proletarians has lost all individual character, and, consequently, all charm for the workman. He becomes an appendage of the machine, and it is only the most simple, most monotonous, and most easily acquired knack, that is required of him. Hence, the cost of production of a workman is restricted, almost entirely, to the means of subsistence that he requires for maintenance, and for the propagation of his race.


Now and then the workers are victorious, but only for a time. The real fruit of their battles lies, not in the immediate result, but in the ever expanding union of the workers. This union is helped on by the improved means of communication that are created by modern industry, and that place the workers of different localities in contact with one another.


This organization of the proletarians into a class, and, consequently into a political party, is continually being upset again by the competition between the workers themselves.

But it ever rises up again, stronger, firmer, mightier. It compels legislative recognition of particular interests of the workers, by taking advantage of the divisions among the bourgeoisie itself. Thus, the ten-hours’ bill in England was carried.


The Communists disdain to conceal their views and aims. They openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions. Let the ruling classes tremble at a Communistic revolution. The proletarians have nothing to lose but their chains. They have a world to win.

Working Men of All Countries, Unite!

Labor Theories of Value

In that early and rude state of society which precedes both the accumulation of stock and the appropriation of land, the proportion between the quantities of labour necessary for acquiring different objects seems to be the only circumstance which can afford any rule for exchanging them for one another. If among a nation of hunters, for example, it usually costs twice the labour to kill a beaver which it does to kill a deer, one beaver should naturally exchange for or be worth two deer. It is natural that what is usually the produce of two days or two hours labour, should be worth double of what is usually the produce of one day's or one hour's labour. (Adam Smith, The Wealth of Nations, Book I, Chapter 6)

If the one species of labour should be more severe than the other, some allowance will naturally be made for this superior hardship; and the produce of one hour's labour in the one way may frequently exchange for that of two hours labour in the other. (Adam Smith, The Wealth of Nations, Book I, Chapter 6)


Or if the one species of labour requires an uncommon degree of dexterity and ingenuity, the esteem which men have for such talents, will naturally give a value to their produce, superior to what would be due to the time employed about it.(Adam Smith, The Wealth of Nations, Book I, Chapter 6)

In this state of things, the whole produce of labour belongs to the labourer; and the quantity of labour commonly employed in acquiring or producing any commodity, is the only circumstance which can regulate the quantity of labour which it ought commonly to purchase, command, or exchange for. (Adam Smith, The Wealth of Nations, Book I, Chapter 6)


As soon as stock has accumulated in the hands of particular persons, some of them will naturally employ it in setting to work industrious people, whom they will supply with materials and subsistence, in order to make a profit by the sale of their work, or by what their labour adds to the value of the materials.(Adam Smith, The Wealth of Nations, Book I, Chapter 6)



In exchanging the complete manufacture either for money, for labour, or for other goods, over and above what may be sufficient to pay the price of the materials, and the wages of the workmen, something must be given for the profits of the undertaker of the work who hazards his stock in this adventure. The value which the workmen add to the materials, therefore, resolves itself in this case into two parts, of which the one pays their wages, the other the profits of their employer upon the whole stock of materials and wages which he advanced. (Adam Smith, The Wealth of Nations, Book I, Chapter 6)


The real value of all the different component parts of price, it must be observed, is measured by the quantity of labour which they can, each of them, purchase or command. Labour measures the value not only of that part of price which resolves itself into labour, but of that which resolves itself into rent, and of that which resolves itself into profit. (Adam Smith, The Wealth of Nations, Book I, Chapter 6)

The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people. What is bought with money or with goods is purchased by labour, as much as what we acquire by the toil of our own body. That money or those goods indeed save us this toil. They contain the value of a certain quantity of labour which we exchange for what is supposed at the time to contain the value of an equal quantity. (Adam Smith, The Wealth of Nations, Book I, Chapter 5)


Labour was the first price, the original purchase-money that was paid for all things. It was not by gold or by silver, but by labour, that all the wealth of the world was originally purchased; and its value, to those who possess it, and who want to exchange it for some new productions, is precisely equal to the quantity of labour which it can enable them to purchase or command. (Adam Smith, The Wealth of Nations, Book I, Chapter 5)



Exceptions

Scarcity (old master paintings)

Fixed resources (fertile land)

Monopoly power

Rent, Land, and Labor

Ricardo

The most fertile, and most favorably situated, land will be first cultivated, and the exchangeable value of its produce will be adjusted in the same manner as the exchangeable value of all other commodities, by the total quantity of labour necessary in various forms, from first to last, to produce it, and bring it to market. When land of an inferior quality is taken into cultivation, the exchangeable value of raw produce will rise, because more labour is required to produce it. (Ricardo, On the Principles of Political Economy and Taxation, Chapter 2)

Ricardo on Rent, Land, and Labor

It is true, that on the best land, the same produce would still be obtained with the same labour as before, but its value would be enhanced in consequence of the diminished returns obtained by those who employed fresh labour and stock on the less fertile land. Notwithstanding, then, that the advantages of fertile over inferior lands are in no case lost, but only transferred from the cultivator, or consumer, to the landlord, yet, since more labour is required on the inferior lands, and since it is from such land only that we are enabled to furnish ourselves with the additional supply of raw produce, the comparative value of that produce will continue permanently above its former level, and make it exchange for more hats, cloth, shoes, &c. &c. in the production of which no such additional quantity of labour is required. (Ricardo, On the Principles of Political Economy and Taxation, Chapter 2)

Ricardo on Rent, Land, and Labor

It is the labor required for production on marginal land that determines the normal price or value of agricultural products.

The surplus of production on more fertile land is absorbed by rent. Landowners don't have to do anything to earn this rent -- they get it automatically as a result of the competition for fertile land.

Marx and Socially Necessary Labor Time

Socially necessary labour time is the amount of labour time required by a worker of average skill and productivity, working with tools of the average productive potential, required to produce a given commodity.

Thus if the average productivity is that of a skilled worker, and a skilled worker produces a commodity in one hour, and an unskilled worker produces a commodity in four hours; then, the unskilled worker will have only contributed one hour's worth of value in terms of socially necessary labour time. The excess hours worked by the unskilled worker do not produce social value.

Marx and Socially Necessary Labor Time

We have seen that the labourer, during one portion of the labour-process, produces only the value of his labour-power, that is, the value of his means of subsistence.

Marx and Surplus ValueCapital, Volume 1, Chapter 9

Now since his work forms part of a system, based on the social division of labour, he does not directly produce the actual necessaries which he himself consumes; he produces instead a particular commodity, yarn for example, whose value is equal to the value of those necessaries or of the money with which they can be bought.

The portion of his day’s labour devoted to this purpose (producing value of his means of subsistence), will be greater or less, in proportion to the value of the necessaries that he daily requires on an average, or, what amounts to the same thing, in proportion to the labour-time required on an average to produce them.

Marx and Surplus Value

Marx and Surplus Value

During the second period of the labour-process, that in which his labour is no longer necessary labour, the workman, it is true, labours, expends labour-power; but his labour, being no longer necessary labour, he creates no value for himself. He creates surplus-value which, for the capitalist, has all the charms of a creation out of nothing. This portion of the working-day, I name surplus labour-time, and to the labour expended during that time, I give the name of surplus-labour.

Therefore, the means of production can never add more value to the product than they themselves possess independently of the process in which they assist.

Marx and Value of Capital

However useful a given kind of raw material, or a machine, or other means of production may be, though it may cost £150, or, say, 500 days’ labour, yet it cannot, under any circumstances, add to the value of the product more than £150. Its value is determined not by the labour-process into which it enters as a means of production, but by that out of which it has issued as a product.

If labour is the only source of value, then capital merely contributes stored labour-value to product

Marx and Value of Capital

Surplus Value Theory

Labour is the only source of profit

Capitalism is based on exploitation

Value is measured in terms of labour hours

Predictions of Surplus Value Theory

Increasing use of capital over time due to forces of competition between capitalists

Collective rate of profit would fall, even though technical change might initially advantage capitalist who introduced it

Socialism inevitable product of contradictions of capitalism

capitalists pay workers below value, to restore profits

Fall in profit leads to class conflict

Class conflict leads to overthrow--socialism


c: constant capital; depreciation on fixed capital and raw materials

v: variable capital; wages, subsistence

k: total capital outlays (flow); k = c+v

y: total value of gross output; y = c + v + s

s: surplus value; s = y - c - v

n: total value of net output; n = v + s


Value Surplus of Rate:v

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Note that n = value of net output = v + σv, or wages plus a markup on wages

Surplus Value TheoryOops! A Problem

Relative prices should depend on relative labour values

Net product of equal quantities of labour would sell for equal quantities of money

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Surplus Value TheoryRelative prices should depend on relative labour values

valuesurplus of rate same or the price Equal

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If the rate of surplus value is the same, but the organic composition of capital is different then profits must be different.

Now rewrite profit in the following useful way

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Surplus Value TheoryIf the rate of surplus value is the same, but the organic composition of capital is different then profits must be different.

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Industries with a high organic composition of capital will have a lower rate of profit than industries with a low organic composition of capital

The rate of profit will vary inversely with the organic composition of capital or the ratio of constant capital to total capital.

Capital will tend to move over time to equalize the rate of profit

So prices must equalize rates of profit


So for equilibrium, profit rate must be same across all industries

High surplus-value in labour-intensive industries must somehow be moved to capital-intensive industries to equalize profit rates

“Value” therefore diverges from price

Surplus Value TheoryIndustry c v k s y σ(%) q r(%)

A 100 100

B 190 10


A 100 100 200

B 190 10 200


A 100 100 200 100

B 190 10 200 10


A 100 100 200 100 300

B 190 10 200 10 210


A 100 100 200 100 300 100

B 190 10 200 10 210 100


A 100 100 200 100 300 100 0.5

B 190 10 200 10 210 100 0.95


A 100 100 200 100 300 100 0.5 50

B 190 10 200 10 210 100 0.95 5

Same rate of surplus value, different rates of profit

A+B 290 110 400 110 510 100 0.725 27.5


y: total value of gross output; y = c + v + s = c + v + σ

pp:prices of production; pp = c + v + r(c+v) = c + v + s

Surplus Value TheoryIndustry c v s y σ(%) r(%) pp

A 100 100 100 300 100 27.5

B 190 10 10 210 100 27.5

A+B 290 110 110 510 100 27.5


A 100 100 100 300 100 27.5 255 pp<y

B 190 10 10 210 100 27.5

A+B 290 110 110 510 100 27.5


A 100 100 100 300 100 27.5 255 pp<y

B 190 10 10 210 100 27.5 255 pp>y

A+B 290 110 110 510 100 27.5 510

The Transformation Problem

Incompatibility of Equal Exchange and Equal Profit Rates

Marx proposed to let money prices may be higher or lower than value (in terms of labor)

But aggregate value added in the economy is an expression of total social labor time

But if some outputs are used as inputs in other industries, this leads to different prices for a good as an output and an input.

Date post:	24-Dec-2015
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Born in Trier, Prussia (now Germany) Studied philosophy at universities in Bonn and Berlin PhD from...

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