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What does it mean to be a left wing economist today? |
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Page 6 of 38
The labor power sold by the workers to the capitalist has the peculiar property that when the capitalist consumes the commodity he has purchased by putting the workers to work, that particular commodity (labor power) produces a product with a higher value than its own value.
The letter P in the diagram stands for “production.” The arrows stand for market transactions. Where there is an arrow, somebody buys something and somebody sells something. The first arrow, the one between M and C, stands for the capitalist buying the commodities needed to run production, whatever they may be, but always including, among others, labor power. The worker sells labor power. Around P there are no arrows. There is just a row of dots on one side and a row of dots on the other side.
Production is not a buying and selling transaction. It is not the circulation of commodities that takes place in markets. It happens inside the factory. It happens when the peculiar commodity the capitalist has purchased is consumed. The capitalist consumes the merchandise purchased not as he or she would consume a recently purchased cup of coffee, by drinking it, but rather in the way one consumes labor power one has purchased, by putting it to work. The outcome is more commodities, C´. What is remarkable about C´ is that when it is sold for its value it yields a quantity of money, M´, which is greater than the initial M. The secret of profit making is that labor power is a commodity whose consumption yields a value higher than its cost. The exact reason why Marx asserts this to be the case is set out in Capital, but in this summary I do not discuss it. Intuitively, Marx’s assertion is plausible because if the capitalist did not believe that the product of labor would be worth more than the cost of labor, the capitalist would not have hired the laborer in the first place.
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