Unspooling value
Price and value
Obviously, before getting to surplus value, we need to understand value.
Unspooling value
Price and value
Services
Manufacturing
Agriculture
Least developed countries
Developing countries
Middle income trap
Developed countries
A high value-added process is one whose resulting products sell for much more than their constituent inputs while a low added-value process barely marks up the resulting products.
Unspooling value
Price and value
More value added
Unspooling value
Price and value
More price added?
Unspooling value
Price and value
Price
Supply and demand
Price setting power (eg. monopolies)
Tariffs
Regulations
Market dynamics
Studied under economics
Because price is determined through supply and demand, of course taking into account both the price setting power of various market actors, regulations, taxes, tariffs and so on.
But no matter the case, price is what happens to a product after it came into being and describes its life in the market.
Price is studied by economics, but when determining industrial policy many other affine disciplines, like management or finance are taken into account.
It's not always clear how some conceptual frameworks are projected from one domain onto others. This ambiguity can be resolved by tracing the historical developments of these disciplines.
Unspooling value
Price and value
Value
Socially necessary labor time
Resource allocation at a societal level
Comes from political economy
Value is a category from classical political economy and it refers to the labor time necessary to create a particular commodity.
In the thought experiment Ricardo performed as he formulated the theory of the comparative advantage he didn't start from prices, but the number of workers needed to produce each commodity.
Marx further refined it as the socially necessary labor time to produce a given commodity with the generalized production process in a society.
Unspooling value
Price and value
Value related to price
Value != price
The term value cropping up from time to time in precise places where price is insufficient or inappropriate is a reminder that the two concepts are interlinked, but not synonymous, despite the efforts of modern economics to flatten the two.
Unspooling value
Price and value
Economix, Michael Goodwin & Dan E. Burr
Every product is the result of matter extracted from the environment which is then worked on by a person.
Every raw material, every processed material, every tool, every machine, every specialized skillset comes from composing natural resources with human effort, arranged in a web of dependencies.
Unspooling value
Price and value
Many Houses, Many Worlds, by Office of (Un)certainty Research
Many Houses, Many Worlds, by Office of (Un)certainty Research
Even if we were so inclined, it's almost impossible to determine what amount of whose labour ended up contributing to what particular commodity or service. Hence the need for money and prices to compare the value of heterogenous labours and their products, at least in our current society.
Even if we were so inclined, it's almost impossible to determine what labour process is the societal average one, when production happens in countless private environments, spread all over the globe. Hence the need for markets in our current society.
This whole arrangement also abstracts, at the societal level, any concrete feature of a particular kind of work performed in a particular place, by a particular person.
What remains is the physical and intellectual exertion of a person, during a measurable amount of time. This potential for physical and intellectual exertion is then bought as labour power, as if it were any other commodity.
Unspooling value
Price and value
Value related to price
Value != price
This doesn't mean we can replace price with value. No, the relation between them is complicated, complex and nuanced.
In the market economy price is a necessary mechanism for deciding the allocation of resources.
But this mechanism is necessary in the first place precisely because the value of commodities isn't arbitrary or subjective, rather it has a social objectivity.
Unspooling value
Profit and surplus value
Profit is simply the result of an accounting operation, the amount of money for which a company sells its products and services from which the price of materials, taxes and labor is then subtracted.
Unspooling value
Profit and surplus value
Where does profit come from?
Leadership "value"?
Shareholders risk?
Value-added by technology?
Knowing what profit is doesn't tell us where profit comes from.
Is it a result of the "value" leadership adds?
A compensation for the risks the shareholders take?
The value added by the technological and organizational process?
Mainstream explanations are plenty, but superficial. They are uninterested with profit formation and content with considering it just an accounting operation.
These are the performance of an explanation, in place only to make the system of economics appear like a complete system of knowledge.
Unspooling value
Profit and surplus value
\[
M - C - M'
\]
Unspooling value
Profit and surplus value
\[
\underbrace{M}_{\text{Money}} - \overbrace{C}^{\text{Commodity}} - \underbrace{M'}_{\text{Larger amount of money}}
\]
Unspooling value
Profit and surplus value
\[
M - C \begin{cases} L \\ MP \end{cases} {\dots P \dots} C'(C + c) - M'
\]
But knowing that value determines price, no matter how circuitously, means that somewhere in the circuit of capital a surplus of value appears.
Since we are talking, of course, about an exchange of equivalents not about fraud or speculation, this cannot happen at the level of circulation. The economy wouldn't be able to expand otherwise.
Unspooling value
Profit and surplus value
\[
M - C \begin{cases} \overbrace{L}^{\small \text{Labor}} \\ \underbrace{MP}_{\small \text{Means of production}} \end{cases} \overbrace{\dots P \dots}^{\small \text{Interruption for production}} C'(C + c) - M'
\]
Unspooling value
Profit and surplus value
\[
M - C \begin{cases} L \\ MP \end{cases} \color{#0c7d66} {\dots P \dots} C'(C + c) - M'
\]
It has to happen in the one place where the circuit is interrupted and the commodities bought consumed in order to reaper as different commodities of larger value.
This is the sphere of production.
Unspooling value
Profit and surplus value
\[
M - C \begin{cases} L \\ MP \end{cases} \color{#0c7d66} {\dots P \dots} - C'(C + c) - M'
\]
\[
C' > C \\
M' > M
\]
Production acts as a magician's hat performing this apparent miracle of outputting a more valuable object than the sum of its constitute inputs, but we can intuit what goes on in there when we observe that human labour is always among the necessary inputs.
Human labour is bought as a commodity, as labour power. The value of labour power is the value of every other commodity necessary for its reproduction.
Unspooling value
Profit and surplus value
\[
M - C \begin{cases} \color{#C59D71} L \\ MP \end{cases} \color{#0c7d66} {\dots P \dots} C'(C + c) - M'
\]
\[
C' > C \\
M' > M
\]
But we can intuit what goes on in there when we observe that human labour is always among the necessary inputs.
Human labour is bought as a commodity, as labour power. The value of labour power is the value of every other commodity necessary for its reproduction.
Unspooling value
Profit and surplus value
\[
M - C \begin{cases} \color{#C59D71} L \begin{cases} { \small \text{food} \\ \text{clothing} \\ \text{housing} \\ \text{moral needs} } \end{cases} \\ MP \end{cases} \color{#0c7d66} {\dots P \dots} C'(C + c) - M'
\]
\[
C' > C \\
M' > M
\]
A very short, if muddled, explanation would be that it's the cost of a working day so that the worker can return the next day as able to perform as they were in the one before.
Unspooling value
Profit and surplus value
But during the work day, the worker spends more time producing compared to what they would just to provide for their own sustenance, if it were somehow possible for a one worker to do all the activities that go into just baking the daily bread.
This supplementary time spent working results in a surplus product, which represents surplus value.
We can divide the working day into two parts, one where the worker reproduces the value of the labour power and one where they produce surplus value. This is done only to make the further analysis clearer.
Unspooling value
Profit and surplus value
Surplus value determines profit at a sectorial level.
Do note that the profitability of an individual firm is not directly determined by the rate at which it attempts to extract surplus value.
The production of surplus value determines that a whole economic sector is profitable.
Unspooling value
Surplus value production
Unspooling value
Profit and surplus value
The most obvious one is prolonging the working day and intensifying the work rhythm. We call this the production of absolute surplus value.
Unspooling value
Profit and surplus value
The working day can remain the same, but the ratio between the two parts of the day can be adjusted so that during the same time interval, the worker spends less time reproducing their labour force and more time producing surplus products.
This is called relative surplus value.
There are a number of ways in which this ratio can be shifted and understanding them is crucial for solving the problem of technology's impact over the economy.
Unspooling value
Profit and surplus value
Diminishing the value of labor power
Devaluing the components of the consumption basket
Lowering the contents of the consumption basket
Deskilling
Increasing productivity
The value of the labor power itself can be diminished.
This can be done by devaluing the products necessary for sustained life at an accustomed level of wellbeing, which is to say there is less socially necessary labour time needed to bake the daily bread, to sew our clothes, to generate electricity and so on.
On the other hand, this can be achieved by lowering that level of expected wellbeing to as low as the metabolic limit of the human organism.
Decreasing the value of the time interval necessary for reproduction can also be done by deskilling, lowering the amount of time a worker needs to be trained in order to perform a particular task or even opening up production processes for whole new categories of humans.
This is related to increased competition over a particular position, but not identical with it.
Unspooling value
Profit and surplus value
Since the value of the labor power oscillates slowly between the lower metabolic limit and the upper profitability limit increasing productivity also increases the ratio in favor of the period of the work day when surplus value is produced.
This can be done by improving the organization of work, by developing better techniques or by deploying better technology.
Unspooling value
Profit and surplus value
Diminishing the value of labor power
Devaluing the components of the consumption basket
Lowering the contents of the consumption basket
Deskilling
Increasing productivity
These phenomena are often related and rarely appear in isolation, but the relations between them twist and turn, escaping generalisation.
They can be assessed only when we study their concrete historical situations.
A more productive process can lower the value of the worker's consumption basket if it lowers the value of a common component, it can affect it only by a little if the product doesn't enter into the consumption of the average citizen.
It can even raise the value of labour power by turning what was otherwise a luxury object into an expected household item.
The introduction of technology can make a work process easier to train for, decreasing the value of the labour power or it requires specialized training and thus requires more valuable labor power.
Unspooling value
Profit and surplus value
Surplus relative value beyond the workplace
So-called primitive accumulation
Reproductive labour
Offloading work onto the consumers or the public See Nona Glazer, Servants to Capital (1983)
Next
Surplus value extraction doesn't happen only at the level of a wage relation.
Marx concludes the first volume of Capital with a chapter on the "So-called Primitive Accumulation".
Social reproduction theory explores the relation between the expenditure of labour in the household and capital.
Nona Glazer, during the 80s and 90s did promising work linking up these apparent exceptions, while showing how increasingly the customers and end-users themselves are sources of surplus labor.
These notions appear, after a fashion, even in mainstream economic frameworks under the name of externalities.
