Marxian Value Analysis

Abstract

For Marx, the labour theory of value was not a theory of price, but a method for measuring the exploitation of labour. The exploitation of labour, in turn, was important for explaining the production of a surplus in a capitalist economy. In a feudal economy, the emergence of a net product, surplus to the consumption of producers and to the inputs consumed in production, was palpable. For the serf reproduced himself on his family plot of land during part of the week, and then worked for the lord, doing demesne or corvée labour during the other part. There was a temporal and physical division between production for subsistence or reproduction, and production which generated an economic surplus and was appropriated by the lord. Under capitalism, with the division of labour, such a demarcation no longer existed. If capitalism is characterized by competitive markets, where each factor is paid its true ‘value’, and no one makes a windfall profit by cheating his partner in exchange, how could a surplus emerge? In what manner could a sequence of equal exchanges transform an initial set of inputs into a larger quantity of outputs, with the surplus being appropriated systematically by one class, the capitalists? Marx’s project was to explain the origin of profits in a perfectly competitive model, where each factor, including labour, received its competitive price in exchange.

This chapter was originally published in The New Palgrave: A Dictionary of Economics, 1st edition, 1987. Edited by John Eatwell, Murray Milgate and Peter Newman