# law of value

James Miller jamiller at igc.apc.org
Wed Nov 29 10:51:40 MST 1995

```ERNST AND THE LAW OF VALUE

I appreciate John's effort to get back to me and
defend his interpretation of Marx's law of value.
In his latest post John quoted from _Capital_,
Vol. I, Chap. 12, on the effect of the changing
productivity of labor on the value of the product.
To summarize briefly, Marx argued that when the
productiveness of labor doubles, and nothing else
changes in the conditions of production, the new
value added per hour by a given number of workers
is the same as before, only this value is now
spread over twice as many products. So that, as
far as the new value is concerned, each product
of labor has one-half of the former amount. In the
example quoted from Chap. 12, the new value added
per unit of product was reduced from 6p. to 3p.
when productivity doubled.
Given that not all firms within a sphere of
industry can introduce the labor-saving technology
at the same time, the capitalist who innovates first
will be able to undersell his competitors, because
the individual value of his products will be lower
than the social average product value, which is
determined by the productive technology which still
prevails within the sphere.
For the innovator within a sphere, it is possible
to sell products below their social value, yet above
their individual value, and make more profit than the
average prevailing in the sphere.

Initial condition:

6 c + 3 v + 3 s = 12 product value

Following innovation:

6 c + 1.5 v + 1.5 s = 9 product value

However, twice as many products per day are produced

Initial condition:

12 products per day at 12 value each = 144 daily value
(social value)

Following innovation:

24 products per day at 9 value each = 216 daily value
(individual value)

The innovating capitalist pays the same daily wages
as the others, but the wage per product is only half as
much as for the others. Thus the innovating capitalist
may sell the product for any amount above the individual
value but below the social value. Let us say he sells
for 10 per product, when the individual value is 9 and
the social value is 12. In this case the daily output
of 24 products will sell for 10 each, for a daily total
of 240.
In the case of the innovating capitalist selling the
product for 10, while the social value is still 12, he
will make a superprofit. While the other capitalists are
still making 12 products per day at 3 profit per product,
their daily surplus value is 36. The innovator, selling
24 products per day at 10 each still has to pay 1.5 wages
per product, plus 6 constant value, so is able to reap a
profit of 2.5 each on the products, for a daily total of
60 in surplus value. Of course, if he sold at the individual
value of 9, he would only reap 24 X 1.5 s = 36 surplus
value per day, the same as the other capitalists.
But why would he sell at 9 and gain no superprofit?
True, he would undersell the other capitalists much more
drastically, but he wouldn't be able to profit by it. On
the other hand, he could sell at 12 and make an even bigger
superprofit, but would not be able to undersell his
competitors, and would not gain market share. So he sells
at 10 or 11. If he sold at 11, his daily surplus value
would be 11 - 6 c - 1.5 v = 3.5 profit each X 24 products
= 84 daily surplus value.

To summarize the basic points:

1. New technology is labor-saving, i.e. it means that more
products can be produced with a given amount of labor time.

2. When new technology is introduced, the individual products
have less labor time represented in them than formerly, so
that they have a lower value per product than formerly.

3. The social value of products within a sphere is determined
by the prevailing level of the productivity of labor within
that sphere.

4. When one capitalist within a sphere innovates, and improves
labor productivity, the individual value of the product made
in his factory will be lower than the prevailing social value
in the sphere.

5. The innovating capitalist can sell his products at a price
lower than the social value, but above the individual value,
and thus reap a superprofit.

Are you still with me John? Let me know.

Jim Miller
Seattle

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