New Left Review I/90, March-April 1975

Ian Steedman

“Value, Price and Profit”

In Capital Volume One Marx set out his theory of value and exploitation and showed, through his concept of the value of labour power, how ‘freedom’ of exchange is quite compatible with exploitation and the existence of surplus value. His argument was both strengthened and simplified by the assumption that commodities exchange at value. In Volume Three Marx turned to the more detailed question of how the profit rate and prices are determined when the organic composition of capital differs between industries and consequently commodities do not exchange at value. He was anxious to stress the idea that fundamentally profits and prices are just ‘transformed’ value quantities, so that the essence of the Volume One argument is unaffected by the Volume Three complications. Over the last 15 years or so, academic economics has generated a considerable discussion of questions which bear directly on Marx’s treatment of the relations between wages, profits, values and prices: relations which are clearly of importance for Marxist analyses of many issues in political economy. [1] Much of this discussion was provoked by Piero Sraffa’s Production of Commodities by Means of Commodities, Cambridge 1960; for a non-technical review see Joan Robinson, ‘Piero Sraffa and the Rate of Exploitation’, nlr 31, May/June 1965. The purpose of this article is to set out, by means of a simple numerical example, some of the conclusions which can now be drawn concerning Marx’s analysis of the connection between values, prices and profits. [2] I should like to thank Pat Devine, Maurice Dobb, Norman Geras, Phil Leeson, David Purdy and Bob Rowthorn for helpful comments. (On the basis of these conclusions we shall then make a number of points concerning the ‘law of the tendency of the rate of profit to fall’, but the latter is not the main focus of our attention.)

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