dominated by the law of value^ it is quite appropriate, under these circumstances, to regard the value of commodities not only theoretically, but also historically, as existing prior to the prices of production. This applies to conditions, in which the laborer owns his means of production, and this is the con- dition of the land-owning farmer and of the craftsman in the old world as well as the new. This agrees also with the view formerly expressed by me that the development of product into commodities arises through the exchange between differ ent communes, not through that between the members of the same commune. ^^ It applies not only to this primitive con- dition, but also to subsequent conditions based on slavery or serfdom, and to the guild organisation of handicrafts, so long as the means of production installed in one line of production cannot be transferred to another line except under difficulties, so that the various lines of production maintain, to a certain degree, the same mutual relations as foreign countries or communistic groups.
In order that the prices at which commodities are ex- changed with one anotlier may correspond approximately to their values, no other conditions are required but the follow- ing: 1) The exchange of the various commodities must no longer be accidental or occasional, 2) So far as the direct ex- change of commodities is concerned, these commodities must be produced on both sides in sufficient quantities to meet mu- tual requirements, a thing easily learned by experience in trading, and therefore a natural outgrowth of continued trad- ing, 3) So far as selling is concerned, there must be no acci- dental or artificial monopoly which may enable either of the contracting sides to sell commodities above their value or com- pel others to sell below value. An accidental monopoly is one which a buyer or seller acquires by an accidental proportion of supply to demand.
The assumption that the commodities of the various spheres of production are sold at their value implies, of course, only *T In 1 865, when Marx wrote these lines, they expressed as yet merely his " view." Today, since we have the extended researches into the nature of primi- tive societies made from Maurer to Morgan, these things are accepted facts which hardly anyone cares to deny. — F. E.
N 2IO Capitalist Production.
that their value is the center of gravity around which prices fluctuate, and around which their rise and fall tends to an equilihriuni. We shall also have to note a marlict value, which must he distinguished from the individual value of the commodities produced by the various producers. Of this more anon. The individual value of some of these commod- ities will be below the market-value, that is to say, they re- quire less labor-time for their production than is expressed in the market-value, while that of others will be above the mar- ket-value. We shall have to regard the market-value on one side as tlie average value of the commodities produced in a certain sphere, and on the other side as the individual value of commodities produced under the average conditions of their respective sphere of production and constituting the bulk of the products of that sphere. It is only extraordinary com- binations of circumstances under which commodities produced under the least or most favorable conditions regulate the market-value, which forms the center of fluctuation for the market-pi,[cto which are the same, however, for the same kind of commodities. If the ordinary demand is satisfied by the supply of commodities of average value, that is to say, of a value midway between the two extremes, then those com- modities, w^hose individual value stands below the market- value, realise an extra surplus-value, or surplus-profit, while those, whose individual value stands above the market-vahie cannot realise a portion of the surplus-value contained in them.
It does not do any good to say that the sale of the com- modities produced under the most unfavorable conditions proves that they are required for keeping up the supply. If the price in the assumed case were higher than the average market-value, the demand would be greater. At a certain price, any kind of commodities may occupy so much room on the market. This room does not remain the same in the case of a change of prices, unless a higher price is accompanied by a smaller quantity of commodities, and a lower price by a larger quantity of commodities. But if the demand is so strong that it does not let up when the price is regulated by Market Prices and Market Values. 211 the value of the commodities produced under the most un- fav^orable conditions^ then these commodities determine the market-value. This is not possible unless the demand exceeds the ordinary, or the supply falls below it. Finally, if the mass of the produced commodities exceeds the quantity which is ordinarily disposed of at average market-values, then the commodities produced under the most favorable conditions regulate the market-value. These commodities may be sold exactly or approximately at their individual values, and in that case it may happen that the commodities produced under the least favorable conditions do not realise even their cost- prices, while those produced under average conditions realise only a portion of the surplus-vak.^e contained in them. The statements referring to market-value apply also to the price of production, if it takes the place of market-value. The price of production is regulated in each sphere, and this regulation depends on special circumstances. And this price of i)ro(luc- tion is in its turn the center of gravity around which the daily market-prices fluctuate and tend to balance' "or o another within definite periods. (See Ricardo on the determination of the price of j^roduction by those who produce under the least favorable conditions.)
Xo matter what may be the way in which prices are regu- lated, the result always is the following: / 1) The law of value dominates the movements of prices, since a reduction or increase of the labor-time required for production causes the prices of production to fall or to rise. It is in this sense that Eicardo (who doubtless realised that his prices of production differed from the value of connnodi- ties) says that " the inquiry to which he wishes to draw the reader's attention relates to the effect of the variations in the relative value of commodities, and not in their absolute value."
2) The average profit which determines the prices of pro- duction must always be approximately equal to that quantity of surplus-value, which falls to the share of a certain indi- vidual capital in its capacity as an aliquot part of the total social capital. Take it that the average rate of profit, and therefore the average profit, are expressed by an amount of 212 Capitalist Production.
money of a higher value than the money-value of the actual average surplus-value. So far as tlie capitalists are concerned i/i that case, it is immaterial whether they charge one an- t'ther a profit of 10 or of 15%. The one of these percentages Iocs not cover any more actual commodity-value than the i)ther, since the overcharge in money is mutupl. But so far as-the laborer is concerned (the assumption being that he re- ceives the normal wages, so that the raising of the average profit does not imply an actual deduction from his wages, in other words, does not express something entirely different from the normal surplus-value of the capitalist), the rise in the price of commodities due to a raising of the average profit must be accompanied by a corresponding rise of the money- expression for the variable capital. As a matter of fact, such a general nominal raising of the rate of profit and the average profit above the limit provided by the proportion of the actual surplus-value to the total invested capital is not possible with- out carrying in its wake an increase of wages, and also an in- crease in the prices of the commodities which constitute the constant capital. The same is true of the opposite case, that of a reduction of the rate of profit in this way. l^ow, since the total value of the commodities regulates the total surplus- value, and this the level of the r.verage profit and the average rate of profit — always understanding this as a general law, as a principle regulating the fluctuations — it follows that the law of value regulates the prices of production.
Competition first brings about, in a certain individual sphere, the establishment of an equal market-value and mar- ket-price by averaging the various individual values of the commodities. The competition of the capitals in!he different spheres then results in the price of production which equal- ises the rates of profit between the different spheres. This last process requires a higher development of capitalist pro- duction than the previous process.
In order that commodities of the same sphere of produc- tion, the same kind, and approximately the same quality, may be sold at their value, the following two requirements must be fulfilled: Market Prices and Market Values. 213 1) The different individual values must have been avei-- aged into one social value, the above-named market-value, and t\\W implies a competition between the producers of the same kind of commodities, and also the existence of a com- mon market, on which thej oifer their articles for sale. In order that the market-price of identical commodities, which however are produced under different individual circum- stances, may correspond to the market-value, may not differ from it by exceeding it or falling below it, it is necessary that the different sellers should exert sufficient pres- ure upon one another to bring that quantity of commodities on the market which social requirements demand, in other words, that quantity of commodities whose market-value so- ciety can pay. If the quantity of products exceeds this de- mand, then the commodities must be sold below their market- value; vice versa, if the quantity of products is not large enough to meet this demand, or, what amounts to the same, if the pressure of competition among the sellers is not strong enough to bring this quantity of products to market, then the commodities are sold above their market-value. If the mar- ket-value is changed, then there will also be a change in the conditions under which the total quantity of commodities can be sold. If the market-value falls, then the average so- cial demand increases (always referring to the solvent de- mand) and can absorb a larger quantity of commodities within certain limits. If the market-value rises, then the solvent so- cial demand for commodities is reduced and smaller quanti- ties of them are absorbed. Hence if supply and demand reg- ulate the market-price, or rather the deviations of market- prices from market-values, it is true, on the other hand, that the market-value regulates the proportions of supply and de- mand, or the center around which supply and demand cause the market-prices to fluctuate.
If we look closer at the matter, we find that the conditions determining the value of some individual commodity become effective, in this instance, as conditions determining the value of the total quantities of a certain kind. For, generally speak- ing, capitalist production is from the outset a mass-production.
214 Capitalist Production.
And even other, less developed, modes of production carrj small quantities of j)roducts, the result of the work of many small producers, to market as co-operative products, at least in the main lines of production, concentrating and accumulat- ing them for sale in the hands of relatively few merchants. Such commodities are regarded as co-oi3erative products of an entire line of production, or of a greater or smaller part of this line.
We remark by the way that the " social demand," in other words, that which regulates the principle of demand, is es- sentially conditioned on tlie nuitual relations of the different economic classes and their relative economic positions, that is to say, first, on the proportion of the total surplus-value to the wages, and secondly, on the proportion of the various parts into which surplus-value is divided (profit, interest, ground- rent, taxes, etc.). And this shows once more that absolutely nothing can be explained by the relation of supply and de- mand, nnless the basis has first been ascertained, on which this relation rests.
Although both commodity and money represent units of exchange-value and use-value, we have already seen in volume I, chapter I, 3, that in buying and selling both of these func- tions are polarised at the two extremes, the commodity (seller) representing the nse-value, and the money (buyer) the ex- change-value. It was one of the first conditions for the sale of a commodity that it should have a use-value and satisfy some social need. The other essential condition was that the quantity of labor contained in a certain commodity should represent socially necessary labor, so that its individual value (and what amounts to the same under the present assumption, its selling price) should coincide with its social value.^^ Xow let us apply this to the mass of commodities on the market, which represent the product of a whole sphere of production. The matter will be most easily explained by re- garding this whole mass of commodities, coming from one line of production, as one single commodity, and the sum of the prices of the many identical commodities as one price. In **Karl Marx, Critique of Political Economy, Berlin, 1859.
Market Prices and Market Values. 215 that case the statements made in regard to one individual com- modity apply literally to the mass of commodities sent to the market by one entire line of prodnction. The postulate that tlie individual value of a commodity should correspond to its social value has then the significance that the total quan- tity of commodities contains the quantity of social labor neces- sary for its production, and that the value of this mass is equal to its market-value.
Now let us assume that the bulk of these commodities has been produced under approximately the same normal condi- tions of social labor, so that this social value is at the same time identical with the individual value of the indivdual com- modities constituting this mass. In that case, a relatively small portion of tliese commodities may have been produced below, and another above, these conditions, so that the indi- vidual value of the one portion is greater, and that of the other smaller, than the average value of the bulk of the com- modities, but in such proportions that these extremes balance one another. The average value of the commodities in these extremes is then equal to the average value of the great bulk of average commodities. Under such circumstances, the mar- ket-value is determined by the value of the commodities pro- duced under average conditions. ^^ The value of the entire mass of commodities is equal to the actual sum of the values of all individual commodities combined, no matter whether they were produced under average conditions, or under con- ditions above or below the average. In this case, the market- value, or the social value^ of the mass of commodities — the necessary labor time contained in them — is determined by the value of the average bulk.
Let us assume, on the other hand, that the total mass of commodities brought to market remains the same, while the value of the commodities produced under the least favorable conditions is not balanced by the value of the commodities produced under the most favorable conditions, so that the mass of commodities produced under the least favorable con- ditions constitutes a relatively large quantity, compared to the 29 Karl Marx, Critique of Political Economy^ Berlin, 1859, 2i6 Capitalist Production.
average mass as well as to the other extreme. In that case the mass produced under the least favorable conditions de- termines the market-value, or social value.
Take it, finally, that the mass of commodities produced under the most favorable conditions is considerably in excess of the mass produced under the least favorable conditions, and is large even compared with the average mass. Then the mass produced under the most favorable conditions deteraiines the market-value. We leave aside the question of a trans- fer of the market, whenever the mass of commodities pro- duced under the most favorable conditions regulates the mar- ket-price. We are not dealing here with the market-price in so far as it differs from the market-value, but with the various modes of determining the market-value itself.^*^ In fact, assuming the strictest case (which, of course, is realised only approximately and with a thousand mod- ifications) of our first illustration, the market-value reg- ulated by the average values of the total mass of commodities is equal to the sum of their individual values, although this market-value is forced as an average value upon the commodi- ties produced at the extremes. Those who produce under the worst conditions must then sell their commodities below their individual values; those producing under the best conditions sell them above their individual values.
In the second case, the two lots of commodities produced '" The controversy between Storch and Ricardo, incidental to their discussion of ground rent (a controversy which is merely referring to the same object, while the two opponents take no notice of one another) whether the market- value (or rather what they call market-price and price of production respectively) is regulated by the commodities produced under the least favorable conditions (Ricardo), or by those produced under the most favorable circumstances (Storch), resolves itself into the fact that both are right and both wrong, and that both (f them have left out of consideration the average case. Compare Corbett on the cases, in which the price is regulated by the commodities produced under the most favorable conditions. — " It is not meant to be asserted by him (Ricardo) that two particular lots of two different articles, as a hat and a pair of shoes, exchange with one another when those two particular lots were produced by equal quantities of labor. By ' commodity ' we must here understand the ' description of commodity,' not a particular individual hat, pair of shoes, etc. The whole labor which produces all the hats in England is to be considered, for this pur- pose, as divided among all the hats. This seems to me not to have been expressed at first, and in the general statements of this doctrine. (Observations on some verbal disputes in Political Economy, etc. London, 1821, pages b'A, 5-JJ Market Prices and Market Values. 217 at the two extremes do not balance one another. The lot produced under the worst conditions decides the question. Strictly speaking, the average price, or the market-value, of everj individual commodity, or of every aliquot part of the total mass, would now be determined by the total value of the mass as ascertained by the addition of the values of the commodities i^roduced under different conditions, and by tlie aliquot part of this total value falling to the share of the in- dividual commodity. The market-value thus ascertained would be above the individual value, not only of the commodi- ties belonging to the most favorable extreme, but also of those belonging to the average lot. But still it would be below the individual value of the commodities produced at the most un- favorable extreme. The extent to which this market-value would approach the individual value of this extreme, or coincide with it, would depend entirely on the volume occu- pied in that sphere of commodities by the lot of commodities produced at the unfavorable extreme. If the demand exceeds the supply but slightly, then the individual value of the un- favorably produced commodities regulates the market-price.
Finally, if the lot of commodities produced at the most favorable extreme occupies the greatest space, as it does in the third case, compared not only to the other extreme, but also to the average lot, then the market-value falls below the average value. The average value, computed by the addition of the sum of values of the two extremes and of the middle, stands here below that of the middle, and approaches it or recedes from it, according to the relative space occupied by the favorable extreme. If the demand is weak compared to the supply, then the favorably situated part, whatever may be its size, makes room for itself forcibly by contracting its price down to its individual value. The market-value cannot coin- cide with this individual value of the commodities produced under the most favorable conditions, except when the supply far exceeds the demand.
This mode of determining market-values, which we have here outlined abstractly, is promoted on the real market by competition among the buyers, provided that the demand is 2i8 Capitalist Production.
just large enough to absorb the quantity of commodities at the values fixed in tiis manner. And this brings us to the second point.
2) To say that a commodity has a use-value is merely to say that it satisfies some social want. So long as we were dealing simply with individual commodities, we could as- sume that the demand for any one commodity — its price im- pl^dng its quantity — existed without inquiring into the ex- tent to which this demand required satisfaction. But this question of the extent of a certain demand becomes essential, whenever the product of some entire line of production is placed on one side, and the social demand for it on the other. In that case it becomes necessary to consider the amount, the quantity, of this social demand.
In the foregoing statements referring to market-value, the assumption was that the mass of the produced commodities re- mains the same given quantity, and that a change takes place only in the proportions of the elements constituting this mass and produced under different conditions, so that the market- value of the same mass of commodities is differently regii- lated. Let us suppose that this mass is of a quantity equal to the ordinary supply, leaving aside the possibility that a portion of the produced commodities may be temporarily withdrawn from the market. K'ow, if the demand for this mass also remains the same, then this commodity will be sold at its market-value; no matter which one of the three aforemen- tioned cases may regulate this market-value. This mass of commodities does not only satisfy a demand, but satisfies it to its full social extent. On the other hand, if the quantity is smaller than the demand for it, then the market-prices differ from the market-values. And the first differentiation is that the market-value is always regulated by the commodity pro- duced under the least favorable circumstances, if the su])ply is too small, and by the commodity produced under the most favorable conditions, if the supply is too large. In other words, one of the extremes determines the market-value, in spite of the fact that the proportion of the masses produced under different conditions ought to bring about a different re- Market Prices and Market Values. 2ig suit. If the difference between demand and supply of tlie product is very considerable, then the market-price will like- wise differ considerably from the market-value in either di- rection. Now, the difference between tlie quantity of the produced commodities and the quantity of commodities which fixes their sale at their market-value may be due to two reasons. Either the quantity itself varies, by decreasing or increasing, so that there would be a reproduction on a different scale than the one which regulated a certain market-value. If so, then the supply changes while the demand remains un- changed, and we have a relative overproduction or underpro- duction. Or, the reproduction, and the supply, remain the same, while the demand is reduced or increased, which may take place for several reasons. If so, then the absolute mag- nitude of the supply is unchanged, while its relative magni- tude, compared to the demand, has changed. The effect is the same as in the first case, only it acts in the opposite direc- tion. Finally, if changes take place on both sides, either in opposite directions, or, if in the same direction, not to the same extent, in other words, if changes take place on both sides which alter the former proportion between these sides, then the final result must always lead to one of the two above- mentioned cases.