Question

According to Marx, in a capitalist economy, commodities are exchanged:

• A. In terms of their labour time involved
• B. In terms of their prices of production
• C. In terms of their value and prices of production
• D. In terms of the organic composition of capital

Answer 1

Answer:

B. In terms of their prices of production

Marxian Economic Theory: Price of Production

• Core Concept: Karl Marx differentiates between Value (based on socially necessary labor time) and the Price of Production. In the third volume of Das Kapital, Marx argues that as capitalism matures, commodities do not exchange at their direct labor values but at prices that account for the average rate of profit.

• Mechanism: The price of production is defined as the sum of constant capital (c), variable capital (v), and the average profit accrued on the total capital invested. Mathematically, it is expressed as k + p, where 'k' is the cost price and 'p' is the average profit.

• Transformation Problem: This concept addresses how the law of value (where value is determined by labor) translates into market prices. Marx explains that capital flows from sectors with lower profit rates to those with higher profit rates until an equalization of the rate of profit across different industries is achieved.