For Marx, the value of a commodity is determined by the socially necessary labor time, or the time “necessary to produce an article under the normal conditions of production and with the average degree of skill and intensity.” [12] It is important to note that, unlike classical political economy, Marx rejects any notion of the “value of labor” or the “price of labor.” Instead, it is labor itself (more precisely, abstract labor or general human labor) that is constitutive of value, the substance of value. Therefore, it is not labor but labor power (the general human capacity for labor) that has value[13] – a value that, as with any other commodity, is determined by the labor time necessary for the production and, therefore, for the reproduction of that particular article. [14] The importance of labor is its ability to maintain the value of capital, increase pre-existing value, and create entirely new value. The way an individual usually looks at a particular product cannot change this social evaluation at all; It is simply a “social fact” in the same way that the “state of the market” is a social fact, although some products can be exchanged at any time at prices above or below their socially determined value. Marx`s real concern was to understand and analyze how the law of value determines or regulates exchange, that is: how the balance between the production of products and the demand for production can be achieved in a society based on a universal market such as capitalism, and how this is regulated by labor time. [ref. Marx`s theory specifically aims to grasp capital in motion, that is, how the circulation and competitive dynamics of capital reconcile (or cannot reconcile) the changing expenditures of social labor with the evolution of social needs. [ref. needed] In the third volume of Das Kapital, he wants to show how competition for the profits of production is limited by the law of value and how this shapes the model of development of capitalist production. [ref.
needed] He concludes that the law of value cannot directly regulate commodity prices in capitalist production, but only indirectly (production prices are limited by comparative labor-time costs). [ref. needed] Traders would therefore try to use this difference to their advantage, with the usual motto “buy cheap, sell expensive”. This promotes the internationalization of the company. The result, according to some Marxists, is an international transfer of value from countries with a weaker negotiating position to those with a stronger negotiating position. [Note 21] The difference in job evaluations becomes a source of profit (see also global labour arbitration). In Capital, Marx generally thinks of the quantity of labor that determines the value of the product as the ratio between the average total amount of labor needed to produce a reproducible good and the corresponding average amount of labor needed to produce a unit of gold (see also gold standard). [8] [Note 3] Already in 1844, long before writing Das Kapital, Marx was very aware of credit money. [Note 4] [Note 5] While “commodity money” (coins or bars) played an important role in the early stages of capitalist development, the growth of integrated capital markets meant increased use of credit money. Marx considered that the initial acceptance of gold-money as a measure of value was justified in order to analyze capitalist relations of production and distribution. So here`s how: However, market price and value are two different (though closely related) concepts. While the market price is determined by the immediate supply and demand of a product, these prices act as signals to producers and consumers.
When prices are high, this encourages producers to earn more (increased supply) and discourages buyers (reduced demand) or vice versa. As a result, prices should tend to fluctuate around long-term value. A second criticism is that goods that require the same amount of labor to produce often regularly have very different market prices. Moreover, the observed relative prices of goods fluctuate considerably over time, regardless of the amount of labour devoted to their production, and often do not hold or tend towards a stable ratio (or natural price).
