Therealdifficultyinformulatingthegeneraldefinitionofsupplyanddemandisthatitseemstotakeontheappearanceofatautology。Firstconsiderthesupply——theproductavailableinthemarket，orthatwhichcanbedeliveredtoit。toavoiddwellinguponuselessdetail，weshallhereconsideronlythemassannuallyreproducedineverygivenbranchofproductionandignorethegreaterorlesserfacultypossessedbythedifferentcommoditiestobewithdrawnfromthemarketandstoredawayforconsumption，say，untilnextyear。Thisannualreproductionisexpressedbyacertainquantity——inweightornumbers——dependingonwhetherthismassofcommoditiesismeasuredindiscreteelementsorcontinuously。Theyarenotonlyuse-valuessatisfyinghumanwants，buttheseuse-valuesareavailableinthemarketindefinitequantities。Secondly，however，thisquantityofcommoditieshasaspecificmarket-value，whichmaybeexpressedbyamultipleofthemarket-valueofthecommodity，orofitsmeasure，whichservesasunit。
Thus，thereisnonecessaryconnectionbetweenthequantitativevolumeofthecommoditiesinthemarketandtheirmarket-value，since，forinstance，manycommoditieshaveaspecificallyhighvalue，andothersaspecificallylowvalue，sothatagivensumofvaluesmayberepresentedbyaverylargequantityofonecommodity，andaverysmallquantityofanother。Thereisonlythefollowingconnectionbetweenthequantityofthearticlesavailableinthemarketandthemarket-valueofthesearticles:Onagivenbasisoflabourproductivitytheproductionofacertainquantityofarticlesineveryparticularsphereofproductionrequiresadefinitequantityofsociallabour-time；althoughthisproportionvariesindifferentspheresofproductionandhasnoinnerrelationtotheusefulnessofthesearticlesorthespecialnatureoftheiruse-values。Assumingallothercircumstancestobeequal，andacertainquantityaofsomecommoditytocostblabour-time，aquantitynaofthesamecommoditywillcostnblabour-time。Further，ifsocietywantstosatisfysomewantandhaveanarticleproducedforthispurpose，itmustpayforit。Indeed，sincecommodity-productionnecessitatesadivisionoflabour，societypaysforthisarticlebydevotingaportionoftheavailablelabour-timetoitsproduction。Therefore，societybuysitwithadefinitequantityofitsdisposablelabour-time。Thatpartofsocietywhichthroughthedivisionoflabourhappenstoemployitslabourinproducingthisparticulararticle，mustreceiveanequivalentinsociallabourincorporatedinarticleswhichsatisfyitsownwants。However，thereexistsanaccidentalratherthananecessaryconnectionbetweenthetotalamountofsociallabourappliedtoasocialarticle，i。e。，betweenthealiquotpartofsociety’stotallabour-powerallocatedtoproducingthisarticle，orbetweenthevolumewhichtheproductionofthisarticleoccupiesintotalproduction，ontheonehand，andthevolumewherebysocietyseekstosatisfythewantgratifiedbythearticleinquestion，ontheother。
Everyindividualarticle，oreverydefinitequantityofacommoditymay，indeed，containnomorethanthesociallabourrequiredforitsproduction，andfromthispointofviewthemarket-valueofthisentirecommodityrepresentsonlynecessarylabour，butifthiscommodityhasbeenproducedinexcessoftheexistingsocialneeds，thensomuchofthesociallabour-timeissquanderedandthemassofthecommoditycomestorepresentamuchsmallerquantityofsociallabourinthemarketthanisactuallyincorporatedinit。Itisonlywhereproductionisundertheactual，predeterminingcontrolofsocietythatthelatterestablishesarelationbetweenthevolumeofsociallabour-timeappliedinproducingdefinitearticles，andthevolumeofthesocialwanttobesatisfiedbythesearticles。Forthisreason，thesecommoditiesmustbesoldbelowtheirmarket-value，andaportionofthemmayevenbealtogetherunsaleable。Thereverseappliesifthequantityofsociallabouremployedintheproductionofacertainkindofcommodityistoosmalltomeetthesocialdemandforthatcommodity。Butifthequantityofsociallabourexpendedintheproductionofacertainarticlecorrespondstothesocialdemandforthatarticle，sothattheproducedquantitycorrespondstotheusualscaleofreproductionandthedemandremainsunchanged，thenthearticleissoldatitsmarket-value。Theexchange，orsale，ofcommoditiesattheirvalueistherationalstateofaffairs，i。e。，thenaturallawoftheirequilibrium。Itisthislawthatexplainsthedeviations，andnotviceversa，thedeviationsthatexplainthelaw。
Nowletuslookattheotherside——thedemand。
Commoditiesareboughteitherasmeansofproductionormeansofsubsistencetoenterproductiveorindividualconsumption。Itdoesnotaltermattersthatsomecommoditiesmayservebothpurposes。Thereis，then，ademandforthemonthepartofproducersherecapitalists，sincewehaveassumedthatmeansofproductionhavebeentransformedintocapitalandofconsumers。
Bothappearatfirstsighttopresupposeagivenquantityofsocialwantonthesideofdemand，correspondingontheothersidetoadefinitequantityofsocialoutputinthevariouslinesofproduction。Ifthecottonindustryistoaccomplishitsannualreproductiononagivenscale，itmusthavetheusualsupplyofcotton，and，othercircumstancesremainingthesame，anadditionalamountofcottoncorrespondingtotheannualextensionofreproductioncausedbytheaccumulationofcapital。Thisisequallytruewithregardtomeansofsubsistence。Theworking-classmustfindatleastthesamequantityofnecessitiesonhandifitistocontinuelivinginitsaccustomedaverageway，althoughtheymaybemoreorlessdifferentlydistributedamongthedifferentkindsofcommodities。Moreover，theremustbeanadditionalquantitytoallowfortheannualincreaseofpopulation。
Thesame，withmoreorlessmodification，appliestootherclasses。
Itwouldseem，then，thatthereisonthesideofdemandacertainmagnitudeofdefinitesocialwantswhichrequirefortheirsatisfactionadefinitequantityofacommodityonthemarket。Butquantitatively，thedefinitesocialwantsareveryelasticandchanging。Theirfixednessisonlyapparent。
Ifthemeansofsubsistencewerecheaper，ormoney-wageshigher，thelabourerswouldbuymoreofthem，andagreatersocialneedwouldariseforthem，leavingasidethepaupers，etc。，whosedemandisevenbelowthenarrowestlimitsoftheirphysicalwants。Ontheotherhand，ifcottonwerecheaper，forexample，thecapitalists’demandforitwouldincrease，moreadditionalcapitalwouldbethrownintothecottonindustry，etc。Wemustneverforgetthatthedemandforproductiveconsumptionis，underourassumption，ademandofthecapitalist，whoseessentialpurposeistheproductionofsurplus-value，sothatheproducesaparticularcommoditytothissoleend。Still，thisdoesnothinderthecapitalist，solongasheappearsinthemarketasabuyerof，say，cotton，fromrepresentingtheneedforthiscotton，justasitisimmaterialtothesellerofcottonwhetherthebuyerconvertsitintoshirtingorgun-cotton，orwhetherheintendstoturnitintowadsforhisown，andtheworld’s，ears。Butthis。doesexertaconsiderableinfluenceonthekindofbuyerthecapitalistis。Hisdemandforcottonissubstantiallymodifiedbythefactthatitdisguiseshisrealneedformakingprofit。Thelimitswithinwhichtheneedforcommoditiesinthemarket，thedemand，differsquantitativelyfromtheactualsocialneed，naturallyvaryconsiderablyfordifferentcommodities；
whatImeanisthedifferencebetweenthedemandedquantityofcommoditiesandthequantitywhichwouldhavebeenindemandatothermoney-pricesorothermoneyorlivingconditionsofthebuyers。
Nothingiseasierthantorealisetheinconsistenciesofdemandandsupply，andtheresultingdeviationofmarket-pricesfrommarket-values。
Therealdifficultyconsistsindeterminingwhatismeantbytheequationofsupplyanddemand。
Supplyanddemandcoincidewhentheirmutualproportionsaresuchthatthemassofcommoditiesofadefinitelineofproductioncanbesoldattheirmarket-value，neitherabovenorbelowit。Thatisthefirstthingwehear。
Thesecondisthis:Ifcommoditiesaresoldattheirmarket-values，supplyanddemandcoincide。
Ifsupplyequalsdemand，theyceasetoact，andforthisveryreasoncommoditiesaresoldattheirmarket-values。Whenevertwoforcesoperateequallyinoppositedirections，theybalanceoneanother，exertnooutsideinfluence，andanyphenomenatakingplaceinthesecircumstancesmustbeexplainedbycausesotherthantheeffectofthesetwoforces。Ifsupplyanddemandbalanceoneanother，theyceasetoexplainanything，donotaffectmarket-values，andthereforeleaveussomuchmoreinthedarkaboutthereasonswhythemarket-valueisexpressedinjustthissumofmoneyandnoother。Itisevidentthattherealinnerlawsofcapitalistproductioncannotbeexplainedbytheinteractionofsupplyanddemandquiteasidefromadeeperanalysisofthesetwosocialmotiveforces，whichwouldbeoutofplacehere，becausetheselawscannotbeobservedintheirpurestate，untilsupplyanddemandceasetoact，i。e。，areequated。Inreality，supplyanddemandnevercoincide，or，iftheydo，itisbymereaccident，hencescientifically=0，andtoberegardedasnothavingoccurred。Butpoliticaleconomyassumesthatsupplyanddemandcoincidewithoneanother。
Why？Tobeabletostudyphenomenaintheirfundamentalrelations，intheformcorrespondingtotheirconception，thatis，istostudythemindependentoftheappearancescausedbythemovementofsupplyanddemand。Theotherreasonistofindtheactualtendenciesoftheirmovementsandtosomeextenttorecordthem。Sincetheinconsistenciesareofanantagonisticnature，andsincetheycontinuallysucceedoneanother，theybalanceoutoneanotherthroughtheiropposingmovements，andtheirmutualcontradiction。
Since，therefore，supplyanddemandneverequaloneanotherinanygivencase，theirdifferencesfollowoneanotherinsuchaway——andtheresultofadeviationinonedirectionisthatitcallsforthadeviationintheoppositedirection——thatsupplyanddemandarealwaysequatedwhenthewholeisviewedoveracertainperiod，butonlyasanaverageofpastmovements，andonlyasthecontinuousmovementoftheircontradiction。Inthisway，themarket-priceswhichhavedeviatedfromthemarket-valuesadjustthemselves，asviewedfromthestandpointoftheiraveragenumber，toequalthemarket-values，inthatdeviationsfromthelattercanceleachotherasplusandminus。
Andthisaverageisnotmerelyoftheoretical，butalsoofpracticalimportancetocapital，whoseinvestmentiscalculatedonthefluctuationsandcompensationsofamoreorlessfixedperiod。
Ontheonehand，therelationofdemandandsupply，therefore，onlyexplainsthedeviationsofmarket-pricesfrommarket-values。Ontheother，itexplainsthetendencytoeliminatethesedeviations，i。e。，toeliminatetheeffectoftherelationofdemandandsupply。Suchexceptionsascommoditieswhichhaveapricewithouthavingavaluearenotconsideredhere。Supplyanddemandmayeliminatetheeffectcausedbytheirdifferenceinmanydifferentways。Forinstance，ifthedemand，andconsequentlythemarket-price，fall，capitalmaybewithdrawn，thuscausingsupplytoshrink。Itmayalsobethatthemarket-valueitselfshrinksandbalanceswiththemarket-priceasaresultofinventionswhichreducethenecessarylabour-time。Conversely，ifthedemandincreases，andconsequentlythemarket-pricerisesabovethemarket-value，thismayleadtotoomuchcapitalflowingintothislineofproductionandproductionmayswelltosuchanextentthatthemarket-pricewillevenfallbelowthemarket-value。Or，itmayleadtoapriceincrease，whichcutsthedemand。Insomelinesofproductionitmayalsobringaboutariseinthemarket-valueitselfforashorterorlongerperiod，withaportionofthedesiredproductshavingtobeproducedunderworseconditionsduringthisperiod。
Supplyanddemanddeterminethemarket-price，andsodoesthemarket-price，andthemarket-valueinthefurtheranalysis，determinesupplyanddemand。
Thisisobviousinthecaseofdemand，sinceitmovesinadirectionoppositetoprices，swellingwhenpricesfall，andviceversa。Butthisisalsotrueofsupply。Becausethepricesofmeansofproductionincorporatedintheofferedcommoditiesdeterminethedemandforthesemeansofproduction，andthusthesupplyofcommoditieswhosesupplyembracesthedemandforthesemeansofproduction。Thepricesofcottonaredeterminantsinthesupplyofcottongoods。
Tothisconfusion——determiningpricesthroughdemandandsupply，and，atthesametime，determiningsupplyanddemandthroughprices——mustbeaddedthatdemanddeterminessupply，justassupplydeterminesdemand，andproductiondeterminesthemarket，aswellasthemarketdeterminesproduction。[2]
Eventheordinaryeconomistseefootnoteagreesthattheproportionbetweensupplyanddemandmayvaryinconsequenceofachangeinthemarket-valueofcommodities，withoutachangebeingbroughtaboutindemandorsupplybyextraneouscircumstances。Evenhemustadmitthat，whateverthemarket-value，supplyanddemandmustcoincideinorderforittobeestablished。Inotherwords，theratioofsupplytodemanddoesnotexplainthemarket-value，butconversely，thelatterratherexplainsthefluctuationsofsupplyanddemand。TheauthoroftheObservationscontinuesafterthepassagequotedinthefootnote:”Thisproportion”betweendemandandsupply，”however，ifwestillmeanby’demand’and’naturalprice’，whatwemeantjustnow，whenreferringtoAdamSmith，mustalwaysbeaproportionofequality；foritisonlywhenthesupplyisequaltotheeffectualdemand，thatis，tothatdemandwhichwillneithermorenorlessthanpaythenaturalprice，thatthenaturalpriceisinfactpaid；consequently，theremaybetwoverydifferentnaturalprices，atdifferenttimes，forthesamecommodity，andyettheproportion，whichthesupplybearstothedemand，beinbothcasesthesame，namely，theproportionofequality。”Itisadmitted，then，thatwithtwodifferentnaturalpricesofthesamecommodity，atdifferenttimes，demandandsupplyarealwaysableto，andmust，balanceoneanotherifthecommodityistobesoldatitsnaturalpriceinbothinstances。Sincethereisnodifferenceintheratioofsupplytodemandineithercase，butadifferenceinthemagnitudeofthenaturalpriceitself，itfollowsthatthispriceisobviouslydeterminedindependentlyofdemandandsupply，andthusthatitcanleastofallbedeterminedbythem。
Foracommoditytobesoldatitsmarket-value，i。e。，proportionallytothenecessarysociallabourcontainedinit，thetotalquantityofsociallabourusedinproducingthetotalmassofthiscommoditymustcorrespondtothequantityofthesocialwantforit，i。e。，theeffectivesocialwant。
Competition，thefluctuationsofmarket-priceswhichcorrespondtothefluctuationsofdemandandsupply，tendcontinuallytoreducetothisscalethetotalquantityoflabourdevotedtoeachkindofcommodity。
Theproportionofsupplyanddemandrecapitulates，first，therelationofuse-valuetoexchange-value，ofcommoditytomoney，andofbuyertoseller；and，second，thatofproducertoconsumer，althoughbothofthemmayberepresentedbythirdparties，themerchants。Inconsideringbuyerandseller，itsufficestocounterposethemindividuallyinordertopresenttheirrelationship。Threeindividualsareenoughforthecompletemetamorphosisofacommodity，andthereforefortheprocessofsaleandpurchasetakenasawhole。AconvertshiscommodityintothemoneyofB，towhomhesellshiscommodity，andreconvertshismoneyagainintocommodities，whenheusesittomakepurchasesfromC；thewholeprocesstakesplaceamongthesethree。Further，inthestudyofmoneyithadbeenassumedthatthecommoditiesaresoldattheirvaluesbecausetherewasabsolutelynoreasontoconsiderpricesdivergentfromvalues，itbeingmerelyamatterofchangesofformwhichcommoditiesundergointheirtransformationintomoneyandtheirreconversionfrommoneyintocommodities。Assoonasacommodityhasbeensoldandanewcommodityboughtwiththereceipts，wehavebeforeustheentiremetamorphosis，andtothisprocessassuchitisimmaterialwhetherthepriceofthecommodityliesaboveorbelowitsvalue。Thevalueofthecommodityremainsimportantasabasis，becausetheconceptofmoneycannotbedevelopedonanyotherfoundation，andprice，initsgeneralmeaning，isbutvalueintheformofmoney。Atanyrate，itisassumedinthestudyofmoneyasamediumofcirculationthatthereisnotjustonemetamorphosisofacertaincommodity。Itisratherthesocialinterrelationofthesemetamorphoseswhichisstudied。Onlythusdowearriveatthecirculationofmoneyandthedevelopmentofitsfunctionasamediumofcirculation。Buthoweverimportantthisconnectionmaybefortheconversionofmoneyintoacirculatingmedium，andforitsresultingchangeofform，itisofnomomenttothetransactionbetweenindividualbuyersandsellers。
Inthecaseofsupplyanddemand，however，thesupplyisequaltothesumofsellers，orproducers，ofacertainkindofcommodity，andthedemandequalsthesumofbuyersorconsumersbothproductiveandindividual
ofthesamekindofcommodity。Thesumsreactononeanotherasunits，asaggregateforces。Theindividualcountshereonlyaspartofasocialforce，asanatomofthemass，anditisinthisformthatcompetitionbringsoutthesocialcharacterofproductionandconsumption。
Thesideofcompetitionwhichhappensforthemomenttobeweakerisalsothesideinwhichtheindividualactsindependentlyof，andoftendirectlyagainst，themassofhiscompetitors，andpreciselyinthismanneristhedependenceofoneupontheotherimpresseduponthem，whilethestrongersideactsalwaysmoreorlessasaunitedwholeagainstitsantagonist。
Ifthedemandforthisparticularkindofcommodityisgreaterthanthesupply，onebuyeroutbidsanother——withincertainlimits——andsoraisesthepriceofthecommodityforallofthemabovethemarket-value，whileontheotherhandthesellersuniteintryingtosellatahighmarket-price。
If，conversely，thesupplyexceedsthedemand，onebeginstodisposeofhisgoodsatacheaperrateandtheothersmustfollow，whilethebuyersuniteintheireffortstodepressthemarket-priceasmuchaspossiblebelowthemarket-value。Thecommoninterestisappreciatedbyeachonlysolongashegainsmorebyitthanwithoutit。Andunityofactionceasesthemomentoneortheothersidebecomestheweaker，wheneachtriestoextricatehimselfonhisownasadvantageouslyashepossiblycan。Again，ifoneproducesmorecheaplyandcansellmoregoods，thuspossessinghimselfofagreaterplaceinthemarketbysellingbelowthecurrentmarket-price，ormarket-value，hewilldoso，andwilltherebybeginamovementwhichgraduallycompelstheotherstointroducethecheapermodeofproduction，andonewhichreducesthesociallynecessarylabourtoanew，andlower，level。Ifonesidehastheadvantage，allbelongingtoitgain。Itisasthoughtheyexertedtheircommonmonopoly。Ifonesideisweaker，thenonemaytryonhisownhooktobecomethestrongerforinstance，onewhoworkswithlowercostsofproduction，oratleasttogetoffaslightlyaspossible，andinsuchcaseseachforhimselfandthedeviltakethehindmost，althoughhisactionsaffectnotonlyhimself，butalsoallhisbooncompanions。[3]
Demandandsupplyimplytheconversionofvalueintomarket-value，andsofarastheyproceedonacapitalistbasis，sofarasthecommoditiesareproductsofcapital，theyarebasedoncapitalistproductionprocesses，i。e。，onquitedifferentrelationshipsthanthemerepurchaseandsaleofgoods。Hereitisnotaquestionoftheformalconversionofthevalueofcommoditiesintoprices，i。e。，notofamerechangeofform。Itisaquestionofdefinitedeviationsinquantityofthemarket-pricesfromthemarket-values，and，further，fromthepricesofproduction。Insimplepurchaseandsaleitsufficestohavetheproducersofcommoditiesassuchcounterposedtooneanother。Infurtheranalysissupplyanddemandpresupposetheexistenceofdifferentclassesandsectionsofclasseswhichdividethetotalrevenueofasocietyandconsumeitamongthemselvesasrevenue，and，therefore，makeupthedemandcreatedbyrevenue。Whileontheotherhanditrequiresaninsightintotheover-allstructureofthecapitalistproductionprocessforanunderstandingofthesupplyanddemandcreatedamongthemselvesbyproducersassuch。
Undercapitalistproductionitisnotmerelyamatterofobtaininganequalmassofvalueinanotherform——beitthatofmoneyorsomeothercommodity——foramassofvaluesthrownintocirculationintheformofacommodity，butitisratheramatterofrealisingasmuchsurplus-value，orprofit，oncapitaladvancedforproduction，asanyothercapitalofthesamemagnitude，orproratatoitsmagnitudeinwhicheverlineitisapplied。Itis，therefore，amatter，atleastasaminimum，ofsellingthecommoditiesatpriceswhichyieldtheaverageprofit，i。e。，atpricesofproduction。Inthisformcapitalbecomesconsciousofitselfasasocialpowerinwhicheverycapitalistparticipatesproportionallytohisshareinthetotalsocialcapital。
First，capitalistproductionisinitselfindifferenttotheparticularuse-value，anddistinctivefeaturesofanycommodityitproduces。Ineverysphereofproductionitisonlyconcernedwithproducingsurplus-value，andappropriatingacertainquantityofunpaidlabourincorporatedintheproductoflabour。Anditislikewiseinthenatureofthewage-laboursubordinatedbycapitalthatitisindifferenttothespecificcharacterofitslabourandmustsubmittobeingtransformedinaccordancewiththerequirementsofcapitalandtobeingtransferredfromonesphereofproductiontoanother。
Second，onesphereofproductionis，infact，justasgoodorjustasbadasanother。Everyoneofthemyieldsthesameprofit，andeveryoneofthemwouldbeuselessifthecommoditiesitproduceddidnotsatisfysomesocialneed。
Now，ifthecommoditiesaresoldattheirvalues，then，aswehaveshown，verydifferentratesofprofitariseinthevariousspheresofproduction，dependingonthedifferentorganiccompositionofthemassesofcapitalinvestedinthem。Butcapitalwithdrawsfromaspherewithalowrateofprofitandinvadesothers，whichyieldahigherprofit。Throughthisincessantoutflowandinflux，or，briefly，throughitsdistributionamongthevariousspheres，whichdependsonhowtherateofprofitfallshereandrisesthere，itcreatessucharatioofsupplytodemandthattheaverageprofitinthevariousspheresofproductionbecomesthesame，endvaluesare，therefore，convertedintopricesofproduction。Capitalsucceedsinthisequalisation，toagreaterorlesserdegree，dependingontheextentofcapitalistdevelopmentinthegivennation；i。e。，ontheextenttheconditionsinthecountryinquestionareadaptedforthecapitalistmodeofproduction。Withtheprogressofcapitalistproduction，italsodevelopsitsownconditionsandsubordinatestoitsspecificcharacteranditsimmanentlawsallthesocialprerequisitesonwhichtheproductionprocessisbased。
Theincessantequilibrationofconstantdivergencesisaccomplishedsomuchmorequickly，1themoremobilethecapital，i。e。，themoreeasilyitcanbeshiftedfromonesphereandfromoneplacetoanother；2themorequicklylabour-powercanbetransferredfromonespheretoanotherandfromoneproductionlocalitytoanother。Thefirstconditionimpliescompletefreedomoftradewithinthesocietyandtheremovalofallmonopolieswiththeexceptionofthenaturalones，those，thatis，whichnaturallyariseoutofthecapitalistmodeofproduction。Itimplies，furthermore，thedevelopmentofthecreditsystem，whichconcentratestheinorganicmassofthedisposablesocialcapitalvis-a-vistheindividualcapitalist。
Finally，itimpliesthesubordinationofthevariousspheresofproductiontothecontrolofcapitalists。Thislastimplicationisincludedinourpremises，sinceweassumedthatitwasamatterofconvertingvaluesintopricesofproductioninallcapitalisticallyexploitedspheresofproduction。
Butthisequilibrationitselfrunsintogreaterobstacles，whenevernumerousandlargespheresofproductionnotoperatedonacapitalistbasissuchassoilcultivationbysmallfarmers，filterinbetweenthecapitalistenterprisesandbecomelinkedwiththem。Agreatdensityofpopulationisanotherrequirement——Thesecondconditionimpliestheabolitionofalllawspreventingthelabourersfromtransferringfromonesphereofproductiontoanotherandfromonelocalcentreofproductiontoanother；
indifferenceofthelabourertothenatureofhislabour；thegreatestpossiblereductionoflabourinallspheresofproductiontosimplelabour；
theeliminationofallvocationalprejudicesamonglabourers；andlastbutnotleast，asubjugationofthelabourertothecapitalistmodeofproduction。Furtherreferencetothisbelongstoaspecialanalysisofcompetition。
Itfollowsfromtheforegoingthatineachparticularsphereofproductiontheindividualcapitalist，aswellasthecapitalistsasawhole，takedirectpartintheexploitationofthetotalworking-classbythetotalityofcapitalandinthedegreeofthatexploitation，notonlyoutofgeneralclasssympathy，butalsofordirecteconomicreasons。For，assumingallotherconditions——amongthemthevalueofthetotaladvancedconstantcapital——tobegiven，theaveragerateofprofitdependsontheintensityofexploitationofthesumtotaloflabourbythesumtotalofcapital。
Theaverageprofitcoincideswiththeaveragesurplus-valueproducedforeach100ofcapital，andsofarasthesurplus-valueisconcernedtheforegoingstatementsapplyasamatterofcourse。Inthecaseoftheaverageprofitthevalueoftheadvancedcapitalbecomesanadditionalelementdeterminingtherateofprofit。Infact，thedirectinteresttakenbythecapitalist，orthecapital，ofanyindividualsphereofproductionintheexploitationofthelabourerswhoaredirectlyemployedisconfinedtomakinganextragain，aprofitexceedingtheaverage，eitherthroughexceptionaloverwork，orreductionofthewagebelowtheaverage，orthroughtheexceptionalproductivityofthelabouremployed。Asidefromthis，acapitalistwhowouldnotinhislineofproductionemployanyvariablecapital，andthereforeanylabourerinrealityanexaggeratedassumption，wouldnonethelessbeasmuchinterestedintheexploitationoftheworking-classbycapital，andwouldderivehisprofitquiteasmuchfromunpaidsurplus-labour，as，say，acapitalistwhowouldemployonlyvariablecapitalanotherexaggeration，andwhowouldthusinvesthisentirecapitalinwages。Butthedegreeofexploitationoflabourdependsontheaverageintensityoflabouriftheworking-dayisgiven，andonthelengthoftheworking-dayiftheintensityofexploitationisgiven。Thedegreeofexploitationoflabourdeterminestherateofsurplus-value，andthereforethemassofsurplus-valueforagiventotalmassofvariablecapital，andconsequentlythemagnitudeoftheprofit。Theindividualcapitalist，asdistinctfromhissphereasawhole，hasthesamespecialinterestinexploitingthelabourershepersonallyemploysasthecapitalofaparticularsphere，asdistinctfromthetotalsocialcapital，hasinexploitingthelabourersdirectlyemployedinthatsphere。
Ontheotherhand，everyparticularsphereofcapital，andeveryindividualcapitalist，havethesameinterestintheproductivityofthesociallabouremployedbythesumtotalofcapital。Fortwothingsdependonthisproductivity:
First，themassofuse-valuesinwhichtheaverageprofitisexpressed；
andthisisdoublyimportant，sincethisaverageprofitservesasafundfortheaccumulationofnewcapitalandasafundforrevenuetobespentforconsumption。Second，thevalueofthetotalcapitalinvestedconstantandvariable，which，theamountofsurplus-value，orprofit，forthewholecapitalistclassbeinggiven，determinestherateofprofit，ortheprofitonacertainquantityofcapital。Thespecialproductivityoflabourinanyparticularsphere，orinanyindividualenterpriseofthissphere，isofinterestonlytothosecapitalistswhoaredirectlyengagedinit，sinceitenablesthatparticularsphere，vis-a-visthetotalcapital，orthatindividualcapitalist，vis-a-vishissphere，tomakeanextraprofit。
Here，then，wehaveamathematicallypreciseproofwhycapitalistsformaveritablefreemasonsocietyvis-a-visthewholeworking-class，whilethereislittlelovelostbetweenthemincompetitionamongthemselves。
Thepriceofproductionincludestheaverageprofit。Wecallitpriceofproduction。ItisreallywhatAdamSmithcallsnaturalprice，Ricardocallspriceofproduction，orcostofproduction，andthephysiocratscallprixné；cessaire，becauseinthelongrunitisaprerequisiteofsupply，ofthereproductionofcommoditiesineveryindividualsphere。Butnoneofthemhasrevealedthedifferencebetweenpriceofproductionandvalue。Wecanwellunderstandwhythesameeconomistswhoopposedeterminingthevalueofcommoditiesbylabour-time，i。e。，bythequantityoflabourcontainedinthem，whytheyalwaysspeakofpricesofproductionascentresaroundwhichmarket-pricesfluctuate。
Theycanaffordtodoitbecausethepriceofproductionisanutterlyexternalandprimafaciemeaninglessformofthevalueofcommodities，aformasitappearsincompetition，thereforeinthemindofthevulgarcapitalist，andconsequentlyinthatofthevulgareconomist。
Ouranalysishasrevealedhowthemarket-valueandeverythingsaidconcerningitapplieswithappropriatemodificationstothepriceofproduction
embracesasurplus-profitforthosewhoproduceinanyparticularsphereofproductionunderthemostfavourableconditions。Withtheexceptionofcrises，andofoverproductioningeneral，thisappliestoallmarket-prices，nomatterhowmuchtheymaydeviatefrommarket-valuesormarket-pricesofproduction。Forthemarket-pricesignifiesthatthesamepriceispaidforcommoditiesofthesamekind，althoughtheymayhavebeenproducedunderverydifferentindividualconditionsandhencemayhavedifferentcost-prices。Wedonotspeakatthispointofanysurplus-profitsduetomonopoliesintheusualsenseoftheterm，whethernaturalorartificial。
Asurplus-profitmayalsoariseifcertainspheresofproductionareinapositiontoevadetheconversionofthevaluesoftheircommoditiesintopricesofproduction，andthusthereductionoftheirprofitstotheaverageprofit。Weshalldevotemoreattentiontothefurthermodificationsofthesetwoformsofsurplus-profitinthepartdealingwithground-rent。
FOOTNOTES1。ThecontroversybetweenStorchandRicardowithregardtoground-rentacontroversypertainingonlytothesubject；infact，thetwoopponentspaynoattentiontooneanother，whetherthemarket-valueorratherwhattheycallmarket-priceandpriceofproductionrespectivelywasregulatedbythecommoditiesproducedunderunfavourableconditionsRicardo[OnthePrinciplesofPoliticalEconomy，andTaxation，Thirdedition，London，1821，pp。661——
Ed。]，orbythoseproducedunderfavourableconditionsStorch
[Coursd’economiepolitique，ouexpositiondesprincipes，qudeterminentlaprosperitedesnations，tomeII，St-Petersbourg，1815，pp。78-79——
Ed。]，resolvesitselfinthefinalanalysisinthatbotharerightandbothwrong，andthatbothofthemhavefailedtoconsidertheaveragecase。CompareCorbet[AnInquiryintotheCausesandModesoftheWealthofIndividuals，London，1841，pp。42-44——Ed。]onthecasesinwhichthepriceisregulatedbycommoditiesproducedunderthemostfavourableconditions——”ItisnotmeanttobeassertedbyhimRicardothattwoparticularlotsoftwodifferentarticles，asahatandapairofshoes，exchangewithoneanotherwhenthosetwoparticularlotswereproducedbyequalquantitiesoflabour。By’commodity’wemusthereunderstandthe’descriptionofcommodity’，notaparticularindividualhat，pairofshoesetc。ThewholelabourwhichproducesallthehatsinEnglandistobeconsidered，tothispurpose，asdividedamongallthehats。Thisseemstomenottohavebeenexpressedatfirst，andinthegeneralstatementofthisdoctrine。”
ObservationsonCertainVerbalDisputesinPoliticalEconomy，etc。，London，1821，pp。53-54。
2。Thefollowingsubtilityissheernonsense:”Wherethequantityofwages，capital，andland，requiredtoproduceanarticle，arebecomedifferentfromwhattheywere，thatwhichAdamSmithcallsthenaturalpriceofitisalsodifferent，andthatprice，whichwaspreviouslyitsnaturalpricebecomes，withreferencetothisalteration，itsmarket-price；because，thoughneitherthesupply，northequantitywanted，mayhavebeenchanged”——bothofthemchangehere，justbecausethemarket-value，or，inthecaseofAdamSmith，thepriceofproduction，changesinconsequenceofachangeofvalue——”thatsupplyisnotnowexactlyenoughforthosepersonswhoareableandwillingtopaywhatisnowthecostofproduction，butiseithergreaterorlessthanthat；sothattheproportionbetweenthesupplyandwhatiswithreferencetothenewcostofproductiontheeffectualdemand，isdifferentfromwhatitwas。Analterationintherateofsupplywillthentakeplaceifthereisnoobstacleinthewayofit，andatlastbringthecommoditytoitsnewnaturalprice。Itmaythenseemgoodtosomepersonstosaythatasthecommoditygetstoitsnaturalpricebyanalterationinitssupply，thenaturalpriceisasmuchowingtooneproportionbetweenthedemandandsupply，asthemarket-priceistoanother；andconsequently，thatthenaturalprice，justasmuchasthemarket-price，dependsontheproportionthatdemandandsupplybeartoeachother。””ThegreatprincipleofdemandandsupplyiscalledintoactiontodeterminewhatA。Smithcallsnaturalpricesaswellasmarket-prices。”——Malthus。[PrinciplesofPoliticalEconomy，London，1820，p。75——Ed。]ObservationsonCertainVerbalDisputes，etc。，London，1821，pp。60-61。Thegoodmandoesnotgraspthefactthatitispreciselythechangeinthecostofproduction，andthusinthevaluewhichcausedachangeinthedemand，inthepresentcase，andthusintheproportionbetweendemandandsupply，andthatthischangeinthedemandmaybringaboutachangeinthesupply。
Thiswouldprovejustthereverseofwhatourgoodthinkerwantstoprove。
Itwouldprovethatthechangeinthecostofproductionisbynomeansduetotheproportionofdemandandsupply，butratherregulatesthisproportion。
3。”Ifeachmanofaclasscouldneverhavemorethanagivenshare，oraliquotpart，ofthegainsandpossessionsofthewhole，hewouldreadilycombinetoraisethegain”；hedoesitassoonastheproportionofdemandtosupplypermitsit”thisismonopoly。Butwhereeachmanthinksthathemayanywayincreasetheabsoluteamountofhisownshare，thoughbyaprocesswhichlessensthewholeamount，hewilloftendoit；thisiscompetition。’
AnInquiryintoThosePrinciplesRespectingtheNatureofDemand，etc，，London，1821，p。105。
Capital，Vol。3，Chapter11KarlMarxCAPITALVol。III
THEPROCESSOF
CAPITALISTPRODUCTIONASAWHOLEPartII
CONVERSIONOFPROFITINTOAVERAGEPROFITCHAPTERXI
EFFECTSOFGENERALWAGEFLUCTUATIONS
ONPRICESOFPRODUCTION
Lettheaveragecompositionofsocialcapitalbe80c20v，andtheprofit20%。Therateofsurplus-valueisthen100%。Ageneralincreaseofwages，allelseremainingthesame，istantamounttoareductionintherateofsurplus-value。Inthecaseofaveragecapital，profitandsurplus-valueareidentical。Letwagesrise25%。Thenthesamequantityoflabour，formerlysetinmotionwith20，willcost25。Weshallthenhaveaturnovervalueof80c25v15p，insteadof80c20v20p。Asbefore，thelaboursetinmotionbythevariablecapitalproducesavalueof40。Ifvrisesfrom20to25，thesurpluss，orp，willamounttoonly15。Theprofitof15
onacapitalof105is142/7%，andthiswouldbethenewaveragerateofprofit。Sincethepriceofproductionofcommoditiesproducedbytheaveragecapitalcoincideswiththeirvalue，thepriceofproductionofthesecommoditieswouldhaveremainedunchanged。Awageincreasewouldthereforehavecausedadropinprofit，butnochangeinthevalueandpriceofthecommodities。Formerly，aslongastheaverageprofitwas20%，thepriceofproductionofcommoditiesproducedinoneperiodofturnoverwasequaltotheircost-priceplusaprofitof20%onthiscost-price，therefore=kkp’=k20k/100。Inthisformulakisavariablemagnitude，changinginaccordancewiththevalueofthemeansofproductionthatgointothecommodities，andwiththeamountofdepreciationgivenupbythefixedcapitaltotheproduct。Thepriceofproductionwouldthenamounttok142/7k/100。Letusnowselectacapital，whosecompositionislowerthantheoriginalcompositionoftheaveragesocialcapitalof80c20vwhichhasnowchangedinto764/21c2317/21v；say，50c50v。Inthiscase，thepriceofproductionoftheannualproductbeforethewageincreasewouldhavebeen50c50v20p=120，assumingforthesakeofsimplicitythattheentirefixedcapitalpassesthroughdepreciationintotheproductandthattheperiodofturnoveristhesameasinthefirstcase。Forthesamequantityoflaboursetinmotionawageincreaseof25%meansanincreaseofthevariablecapitalfrom50to621/2。Iftheannualproductweresoldattheformerpriceofproductionof120，thiswouldgiveus50c621/2v71/2p，orarateofprofitof62/3%。Butthenewaveragerateofprofitis142/7%，andsinceweassumeallothercircumstancestoremainthesame，thecapitalof50c621/2vmustalsomakethisprofit。Nowacapitalof1121/2makesaprofitof161/14atarateofprofitof142/7%。Therefore，thepriceofproductionofthecommoditiesproducedbythiscapitalisnow50c621/2v161/4p=1288/14。Owingtoawageriseof255，thepriceofproductionofthesamequantityofthesamecommodities，therefore，hashererisenfrom120to1288/14，ormorethan7%。
Conversely，supposewetakeasphereofproductionofahighercompositionthantheaveragecapital；say，92c8v。Theoriginalaverageprofitinthiscasewouldstillbe20，andifweagainassumethattheentirefixedcapitalpassesintotheannualproductandthattheperiodofturnoveristhesameasincasesIandII，thepriceofproductionofthecommodityisherealso120。
Owingtotheriseinwagesof25%thevariablecapitalforthesamequantityoflabourrisesfrom8to10，thecost-priceofthecommoditiesfrom100to102，whiletheaveragerateofprofitfallsfrom20%to14
2/7%。but100:142/7=102:144/7。Theprofitnowfallingtotheshareof102istherefore144/7。Forthisreason，thetotalproductsellsatkkp’=102144/7=1164/7。Thepriceofproductionhasthereforefallenfrom120to1164/7，or33/7。
Consequently，ifwagesareraised25%:
1thepriceofproductionofthecommoditiesofacapitalofaveragesocialcompositiondoesnotchange；
2thepriceofproductionofthecommoditiesofacapitaloflowercompositionrises，butnotinproportiontothefallinprofit；
3thepriceofproductionofthecommoditiesofacapitalofhighercompositionfalls，butalsonotinthesameproportionasprofit。
Sincethepriceofproductionofthecommoditiesoftheaveragecapitalremainedthesame，equaltothevalueoftheproduct，thesumofthepricesofproductionoftheproductsofallcapitalsremainedthesameaswell，andequaltothesumtotalofthevaluesproducedbytheaggregatecapital。
Theincreaseononesideandthedecreaseontheotherbalancefortheaggregatecapitalontheleveloftheaveragesocialcapital。
IfthepriceofproductionrisesincaseIIandfallsincaseIII，theseoppositeeffectsalone，whicharebroughtaboutbyafallintherateofsurplus-valueorbyageneralwageincrease，showthatthiscannotbeamatterofcompensationinthepricefortheriseinwages，sincethefallinthepriceofproductionincaseIIIcannotcompensatethecapitalistforthefallinprofit，andsincetheriseofthepriceincaseIIdoesnotpreventafallinprofit。Rather，ineithercase，whetherthepricerisesorfalls，theprofitremainsthesameasthatoftheaveragecapital，inwhichcasethepriceremainsunchanged。Itisthesameaverageprofitwhichhasfallenby55/7，orsomewhatover25%，inthecaseofIIaswellasIII。ItfollowsfromthisthatifthepricedidnotriseinIIandfallinIII，IIwouldhavetosellbelowandIIIabovethenewreducedaverageprofit。Itisself-evidentthat，dependingonwhether50，25，or10per100unitsofcapitalarelaidoutforwages，theeffectofawageincreaseonacapitalistwhohasinvested1/10ofhiscapitalinwagesmustbequitedifferentfromthatononewhohasinvested1/4or1/2。Anincreaseinthepriceofproductionontheoneside，afallontheother，dependingonacapitalbeingbeloworabovetheaveragesocialcomposition，occurssolelybyvirtueoftheprocessoflevellingtheprofittothenewreducedaverageprofit。
Howwouldageneralreductioninwages，andacorrespondinggeneralriseoftherateofprofit，andthusoftheaverageprofit，nowaffectthepricesofproductionofcommoditiesproducedbycapitalsdeviatinginoppositedirectionsfromtheaveragesocialcomposition？WehavebuttoreversetheforegoingexpositiontoobtaintheresultwhichRicardofailstoanalyse。
I。Averagecapital=80c20v=1OO；rateofsurplus-value=100%；priceofproduction=valueofcommodities=80c20v20p=120；rateofprofit=20%。Supposewagesfallbyone-fourth。Thenthesameconstantcapitalissetinmotionby15v，insteadof20v。Thenthevalueofcommodities=80c15v25p=120。
Thequantityoflabourperformedbyvremainsunchanged，exceptthatthevaluenewlycreatedbyitisdistributeddifferentlybetweenthecapitalistandthelabourer。Thesurplus-valuerisesfrom20to25andtherateofsurplus-valuefrom20/20to25/15，orfrom100%to1662/3%。Theprofiton95now=25，sothattherateofprofitper100=266/19。Thenewcompositionofthecapitalinpercentisnow844/19c1515/19v=100。
II。Lowercomposition。Originally50c50v，asabove。Duetothefallofwagesbyone-fourthvisreducedto371/2，andconsequentlytheadvancedtotalcapitalto50c371/2v=871/2。Ifweapplythenewrateofprofitof266/19%tothis，weget100:266/19=871/2:231/38。Thesamemassofcommoditieswhichformerlycost120，nowcosts871/2231/38=110
10/19，thisbeingapricereductionofalmost10%。
III。Highercomposition。Originally92c8v=100。Thereductionofwagesbyone-fourthreduces8vto6v，andthetotalcapitalto98。Consequently，100:266/19=98:2516/19。Thepriceofproductionofthecommodity，formerly10020=120，isnow，afterthefallinwages，982515/19=123
15/19，thisbeingariseofalmost4。
Itisevident，therefore，thatwehavebuttofollowthesamedevelopmentintheoppositedirectionwiththeappropriatemodifications；thatageneralreductionofwagesisattendedbyageneralriseofsurplus-value，oftherateofsurplus-valueand，othercircumstancesremainingthesame，oftherateofprofit，evenifexpressedinadifferentproportion；afallinthepricesofproductionforcommoditiesproducedbycapitalsoflowercomposition，andariseinthepricesofproductionforcommoditiesproducedbycapitalsofhighercomposition。Theresultisjustthereverseofthatobservedforageneralriseofwages。[1]Inbothcases——riseorfallofwages——itisassumedthattheworking-dayremainsthesame，andalsothepricesofthemeansofsubsistence。Inthesecircumstancesafallinwagesispossibleonlyiftheystoodhigherthanthenormalpriceoflabour，oriftheyaredepressedbelowthisprice。
Thewayinwhichthematterismodifiediftheriseorfallofwagesisduetoachangeinvalue，andconsequentlythepriceofproductionofcommoditiesusuallyconsumedbythelabourer，willbeanalysedatsomelengthinthepartdealingwithground-rent。Atthispoint，however，thefollowingremarksaretobemadeonceandforall:
Shouldtheriseorfallinwagesbeduetoachangeinthevalueofthenecessitiesoflife，amodificationoftheforegoingfindingscantakeplaceonlytotheextentthatcommodities，whosechangeofpriceraisesorlowersthevariablecapital，alsogointotheconstantcapitalasconstituentelementsandthereforeaffectmorethanjustthewagesalone。Butiftheyaffectonlywages，theaboveanalysiscontainsallthatneedstobesaid。
Inthisentirechapter，theestablishmentofthegeneralrateofprofitandtheaverageprofit，andconsequently，thetransmutationofvaluesintopricesofproduction，areassumedasgiven。Thequestionmerelywas，howageneralriseorfallinwagesaffectedtheassumedpricesofproductionofcommodities。Thisisbutaverysecondaryquestioncomparedwiththeotherimportantpointsanalysedinthispart。ButitistheonlyrelevantquestiontreatedbyRicardo，and，asweshallsee，hetreateditonesidedlyandunsatisfactorily。
FOOTNOTES1。ItisverypeculiarthatRicardo[OnthePrinciplesofPoliticalEconomy，andTaxation，Thirdedition，London，1821，pp。36-41——Ed。]whonaturallyproceedsdifferentlyfromus，sincehedidnotunderstandthelevellingofvaluestopricesofproductiondidnotonceconsiderthiseventuality，butonlythefirstcase，thatofawageriseanditsinfluenceonthepricesofproductionofcommodities。Andtheservumpecusimitatorum[Horace，Epistles，BookI，Epistle19——Ed。]didnotevenattempttomakethisextremelyself-evident，actuallytautological，practicalapplication。
Capital，Vol。3，Chapter12KarlMarxCAPITALVol。III
THEPROCESSOF
CAPITALISTPRODUCTIONASAWHOLEPartII
CONVERSIONOFPROFITINTOAVERAGEPROFITCHAPTERXII
SUPPLEMENTARYREMARKS
I。CAUSESIMPLYINGACHANGEINTHEPRICEOFPRODUCTION
Therearejusttwocausesthatcanchangethepriceofproductionofacommodity:
First。Achangeinthegeneralrateofprofit。Thiscansolelybeduetoachangeintheaveragerateofsurplus-value，or，iftheaveragerateofsurplus-valueremainsthesame，toachangeintheratioofthesumoftheappropriatedsurplus-valuestothesumoftheadvancedtotalsocialcapital。
Ifthechangeintherateofsurplus-valueisnotduetoadepressionofwagesbelownormal，ortheirriseabovenormal——andmovementsofthatkindaretoberegardedmerelyasoscillations——itcanonlyoccureitherthrougharise，orfall，inthevalueoflabour-power，theonebeingjustasimpossibleastheotherunlessthereisachangeintheproductivityofthelabourproducingmeansofsubsistence，i。e。，inthevalueofcommoditiesconsumedbythelabourer。
Or，throughachangeintheproportionofthesumofappropriatedsurplus-valuestotheadvancedtotalcapitalofsociety。Sincethechangeinthiscaseisnotcausedbytherateofsurplus-value，itmustbecausedbythetotalcapital，orratheritsconstantpart。Themassofthispart，technicallyconsidered，increasesordecreasesinproportiontothequantityoflabour-powerboughtbythevariablecapital，andthemassofitsvaluethusincreasesordecreaseswiththeincreaseordecreaseofitsownmass。Italsoincreasesordecreases，therefore，proportionatelytothemassofthevalueofthevariablecapital。Ifthesamelaboursetsmoreconstantcapitalinmotion，ithasbecomemoreproductive。Ifthereverse，thenlessproductive。Thus，therehasbeenachangeintheproductivityoflabour，andtheremusthaveoccurredachangeinthevalueofcertaincommodities。
Thefollowinglaw，then，appliestobothcases:Ifthepriceofproductionofacommoditychangesinconsequenceofachangeinthegeneralrateofprofit，itsownvaluemayhaveremainedunchanged。However，achangemusthaveoccurredinthevalueofothercommodities。
Second。Thegeneralrateofprofitremainsunchanged。Inthiscasethepriceofproductionofacommoditycanchangeonlyifitsownvaluehaschanged。Thismaybeduetomore，orless，labourbeingrequiredtoreproducethecommodityinquestion，eitherbecauseofachangeintheproductivityoflabourwhichproducesthiscommodityinitsfinalform，orofthelabourwhichproducesthosecommoditiesthatgointoitsproduction。Thepriceofproductionofcottonyarnmayfall，eitherbecauserawcottonisproducedcheaperthanbefore，orbecausethelabourofspinninghasbecomemoreproductiveduetoimprovedmachinery。
Thepriceofproduction，aswehaveseen，=kp，equaltocost-priceplusprofit。This，however，=kkp’，inwhichk，thecost-price，isavariablemagnitude，whichchangesfordifferentspheresofproductionandiseverywhereequaltothevalueoftheconstantandvariablecapitalconsumedintheproductionofthecommodity，andp’istheaveragerateofprofitinpercentageform。Ifk=200，andp’=istheaveragerateofprofitinpercentageform。
Ifk=200，andp’=20%，thepriceofproductionkkp’=20020020/100=20040=240。
Thispriceofproductionmayclearlyremainthesame，inspiteofachangeinthevalueofthecommodities。
Allchangesinthepriceofproductionofcommoditiesarereduced，inthelastanalysis，tochangesinvalue。Butnotallchangesinthevalueofcommoditiesneedexpressthemselvesinchangesinthepriceofproduction。
Thepriceofproductionisnotdeterminedbythevalueofanyonecommodityalone，butbytheaggregatevalueofallcommodities。AchangeincommodityAmaythereforebebalancedbyanoppositechangeincommodityB，sothatthegeneralrelationremainsthesame。
II。PRICEOFPRODUCTIONOFCOMMODITIESOFAVERAGECOMPOSITION
Wehaveseenhowadeviationinpricesofproductionfromvaluesarisesfrom:1addingtheaverageprofitinsteadofthesurplus-valuecontainedinacommoditytoiscost-price；2thepriceofproduction，whichsodeviatesfromthevalueofacommodity，enteringintothecost-priceofothercommoditiesasoneofitselements，sothatthecost-priceofacommoditymayalreadycontainadeviationfromvalueinthosemeansofproductionconsumedbyit，quiteasidefromadeviationofitsownwhichmayarisethroughadifferencebetweentheaverageprofitandthesurplus-value。
Itisthereforepossiblethateventhecost-priceofcommoditiesproducedbycapitalsofaveragecompositionmaydifferfromthesumofthevaluesoftheelementswhichmakeupthiscomponentoftheirpriceofproduction。
Suppose，theaveragecompositionis80c20v。Now，itispossiblethatintheactualcapitalsofthiscomposition80cmaybegreaterorsmallerthanthevalueofc，i。e。，theconstantcapital，becausethiscmaybemadeupofcommoditieswhosepriceofproductiondiffersfromtheirvalue。Inthesameway，20vmightdivergefromitsvalueiftheconsumptionofthewageincludescommoditieswhosepriceofproductiondivergesfromtheirvalue；inwhichcasethelabourerwouldworkalonger，orshorter，timetobuythembacktoreplacethemandwouldthusperformmore，orless，necessarylabourthanwouldberequiredifthepriceofproductionofsuchnecessitiesoflifecoincidedwiththeirvalue。
However，thispossibilitydoesnotdetractintheleastfromthecorrectnessofthetheoremsdemonstratedwhichholdforcommoditiesofaveragecomposition。
Thequantityofprofitfallingtothesecommoditiesisequaltothequantityofsurplus-valuecontainedinthem。Forinstance，inacapitalofthegivencomposition80c20v，themostimportantthingindeterminingsurplus-valueisnotwhetherthesefiguresareexpressionsofactualvalues，buthowtheyarerelatedtooneanother，i。e。，whetherv=l/5ofthetotalcapital，andc=4/5。Wheneverthisisthecase，thesurplus-valueproducedbyvis，aswasassumed，equaltotheaverageprofit。Ontheotherhand，sinceitequalstheaverageprofit，thepriceofproduction=cost-priceplusprofit=kp=ks；i。e。，inpracticeitisequaltothevalueofthecommodity。
Thisimpliesthatariseorfallinwageswouldnotchangethepriceofproduction，kp，anymorethanitwouldchangethevalueofthecommodities，andwouldmerelyeffectacorrespondingoppositemovement，afallorarise，intherateofprofit。Forifariseorfallofwageswereheretobringaboutachangeinthepriceofcommodities，therateofprofitinthesespheresofaveragecompositionwouldriseabove，orfallbelow，thelevelprevailinginotherspheres。Thesphereofaveragecompositionmaintainsthesamelevelofprofitastheotherspheresonlysolongasthepriceremainsunchanged。Thepracticalresultisthereforethesameasitwouldbeifitsproductsweresoldattheirrealvalue。Forifcommoditiesaresoldattheiractualvalues，itisevidentthat，otherconditionsbeingequal，arise，orfall，inwageswillcauseacorrespondingfallorriseinprofit，butnochangeinthevalueofcommodities，andthatunderallcircumstancesariseorfallinwagescanneveraffectthevalueofcommodities，butonlythemagnitudeofthesurplus-value。
III。THECAPITALIST’SGROUNDSFORCOMPENSATING
Ithasbeensaidthatcompetitionlevelstheratesofprofitofthedifferentspheresofproductionintoanaveragerateofprofitandtherebyturnsthevaluesoftheproductsofthesedifferentspheresintopricesofproduction。Thisoccursthroughthecontinualtransferofcapitalfromonespheretoanother，inwhich，forthemoment，theprofithappenstolieaboveaverage。Thefluctuationsofprofitcausedbythecycleoffatandleanyearssucceedingoneanotherinanygivenbranchofindustrywithingivenperiodsmust，however，receivedueconsideration。Thisincessantoutflowandinflowofcapitalbetweenthedifferentspheresofproductioncreatestrendsofriseandfallintherateofprofit，whichequaliseoneanothermoreorlessandthushaveatendencytoreducetherateofprofiteverywheretothesamecommonandgenerallevel。
Thismovementofcapitalsisprimarilycausedbythelevelofmarket-prices，whichliftprofitsabovethegeneralaverageinoneplaceanddepressthembelowitinanother。Merchant’scapitalisleftoutofconsiderationasitisirrelevantatthispoint，forweknowfromthesuddenparoxysmsofspeculationappearingincertainpopulararticlesthatitcanwithdrawmassesofcapitalfromonelineofbusinesswithextraordinaryrapidityandthrowthemwithequalrapidityintoanother。Yetwithrespecttoeachsphereofactualproduction——industry，agriculture，mining，etc——thetransferofcapitalfromonespheretoanotheroffersconsiderabledifficulties，particularlyonaccountoftheexistingfixedcapital。Experienceshows，moreover，thatifabranchofindustry，suchas，say，thecottonindustry，yieldsunusuallyhighprofitsatoneperiod，itmakesverylittleprofit，orevensufferslosses，atanother，sothatinacertaincycleofyearstheaverageprofitismuchthesameasinotherbranches。Andcapitalsoonlearnstotakethisexperienceintoaccount。
Whatcompetitiondoesnotshow，however，isthedeterminationofvalue，whichdominatesthemovementofproduction；andthevaluesthatliebeneaththepricesofproductionandthatdeterminetheminthelastinstance。Competition，ontheotherhand，shows:1theaverageprofits，whichareindependentoftheorganiccompositionofcapitalinthedifferentspheresofproduction，andthereforealsoofthemassoflivinglabourappropriatedbyanygivencapitalinanygivensphereofexploitation；
2theriseandfallofpricesofproductioncausedbychangesinthelevelofwages，aphenomenonwhichatfirstglancecompletelycontradictsthevaluerelationofcommodities；3thefluctuationsofmarket-prices，whichreducetheaveragemarket-priceofcommoditiesinagivenperiodoftime，nottothemarket-value，buttoaverydifferentmarket-priceofproduction，whichdivergesconsiderablyfromthismarket-value。Allthesephenomenaseemtocontradictthedeterminationofvaluebylabour-timeasmuchasthenatureofsurplus-valueconsistingofunpaidsurplus-labour。Thuseverythingappearsreversedincompetition。Thefinalpatternofeconomicrelationsasseenonthesurface，intheirrealexistenceandconsequentlyintheconceptionsbywhichthebearersandagentsoftheserelationsseektounderstandthem，isverymuchdifferentfrom，andindeedquitethereverseof，theirinnerbutconcealedessentialpatternandtheconceptioncorrespondingtoit。
Further。Assoonascapitalistproductionreachesacertainlevelofdevelopment，theequalisationofthedifferentratesofprofitinindividualspherestogeneralrateofprofitnolongerproceedssolelythroughtheplayofattractionandrepulsion，bywhichmarket-pricesattractorrepelcapital。Afteraverageprices，andtheircorrespondingmarket-prices，becomestableforatimeitreachestheconsciousnessoftheindividualcapitaliststhatthisequalisationbalancesdefinitedifferences，sothattheyincludetheseintheirmutualcalculations。Thedifferencesexistinthemindofthecapitalistsandaretakenintoaccountasgroundsforcompensating。
Averageprofitisthebasicconception，theconceptionthatcapitalsofequalmagnitudemustyieldequalprofitsinequaltimespans。This，again，isbasedontheconceptionthatthecapitalineachsphereofproductionmustshareproratatoitsmagnitudeinthetotalsurplus-valuesqueezedoutofthelabourersbythetotalsocialcapital；or，thateveryindividualcapitalshouldberegardedmerelyasapartofthetotalsocialcapital，andeverycapitalistactuallyasashareholderinthetotalsocialenterprise，eachsharinginthetotalprofitproratatothemagnitudeofhisshareofcapital。
Thisconceptionservesasabasisforthecapitalist’scalculations，forinstance，thatacapitalwhoseturnoverisslowerthananother’s，becauseitscommoditiestakelongertobeproduced，orbecausetheyaresoldinremotermarkets，neverthelesschargestheprofititlosesinthisway，andcompensatesitselfbyraisingtheprice。Orelse，thatinvestmentsofcapitalinlinesexposedtogreaterhazards，forinstanceinshipping，arecompensatedbyhigherprices。Assoonascapitalistproduction，andwithittheinsurancebusiness，aredeveloped，thehazardsare，ineffect，madeequalforallspheresofproductioncf。Corbet；butthemorehazardouslinespayhigherinsurancerates，andrecovertheminthepricesoftheircommodities。Inpracticeallthismeansthateverycircumstance，whichrendersonelineofproduction——andallofthemareconsideredequallynecessarywithincertainlimits——lessprofitable，andanothermoreprofitable，istakenintoaccountonceandforallasvalidgroundforcompensation，withoutalwaysrequiringtherenewedactionofcompetitiontojustifythemotivesorfactorsforcalculatingthiscompensation。Thecapitalistsimplyforgets——orratherfailstosee，becausecompetitiondoesnotpointitouttohim——thatallthesegroundsforcompensationmutuallyadvancedbycapitalistsincalculatingthepricesofcommoditiesofdifferentlinesofproductionmerelycomedowntothefactthattheyallhaveanequalclaim，proratatothemagnitudeoftheirrespectivecapitals，tothecommonloot，thetotalsurplus-value。Itratherseemstothemthatsincetheprofitpocketedbythemdiffersfromthesurplus-valuetheyappropriated，thesegroundsforcompensationdonotlevelouttheirparticipationinthetotalsurplus-value，butcreatetheprofititself，whichseemstobederivedfromtheadditionsmadeononeoranothergroundtothecost-priceoftheircommodities。
InotherrespectsthestatementsmadeinChapterVIIconcerningthecapitalists’assumptionsastothesourceofsurplus-value，applyalsotoaverageprofit。Thepresentcaseappearsdifferentonlyinsofarasasavingincost-pricedependsonindividualbusinessacumen，alertness，etc。，assumingthemarket-priceofcommoditiesandtheexploitationoflabourtobegiven。
Capital，Vol。3，Chapter13KarlMarxCAPITALVol。III
THEPROCESSOF
CAPITALISTPRODUCTIONASAWHOLEPartIII
THELAWOFTHETENDENCY
OFTHERATEOFPROFITTOFALLChapterXIII
THELAWASSUCH
Assumingagivenwageandworking-day，avariablecapital，forinstanceof100，representsacertainnumberofemployedlabourers。Itistheindexofthisnumber。Suppose£；100arethewagesof100labourersfor，say，oneweek。Iftheselabourersperformequalamountsofnecessaryandsurplus-labour，iftheyworkdailyasmanyhoursforthemselves，i。e。，forthereproductionoftheirwage，astheydoforthecapitalist，i。e。，fortheproductionofsurplus-value，thenthevalueoftheirtotalproduct=£；200，andthesurplus-valuetheyproducewouldamountto£；100。
Therateofsurplus-value，s/v，would=100%。But，aswehaveseen，thisrateofsurplus-valuewouldnonethelessexpressitselfinverydifferentratesofprofit，dependingonthedifferentvolumesofconstantcapitalcandconsequentlyofthetotalcapitalC，becausetherateofprofit=
s/C。Therateofsurplus-valueis100%:
Ifc=50，andv=100，thenp’=100/150=662/3%；
c=100，andv=100，thenp’=100/200=50%；
c=200，andv=100，thenp’=100/300=331/3%；
c=300，andv=100，thenp’=100/400=25%；
c=400，andv=100，thenp’=100/500=20%。1Thisishowthesamerateofsurplus-valuewouldexpressitselfunderthesamedegreeoflabourexploitationinafallingrateofprofit，becausethematerialgrowthoftheconstantcapitalimpliesalsoagrowth——albeitnotinthesameproportion——initsvalue，andconsequentlyinthatofthetotalcapital。
Ifitisfurtherassumedthatthisgradualchangeinthecompositionofcapitalisnotconfinedonlytoindividualspheresofproduction，butthatitoccursmoreorlessinall，oratleastinthekeyspheresofproduction，sothatitinvolveschangesintheaverageorganiccompositionofthetotalcapitalofacertainsociety，thenthegradualgrowthofconstantcapitalinrelationtovariablecapitalmustnecessarilyleadtoagradualfallofthegeneralrateofprofit，solongastherateofsurplus-value，ortheintensityofexploitationoflabourbycapital，remainthesame。
Nowwehaveseenthatitisalawofcapitalistproductionthatitsdevelopmentisattendedbyarelativedecreaseofvariableinrelationtoconstantcapital，andconsequentlytothetotalcapitalsetinmotion。Thisisjustanotherwayofsayingthatowingtothedistinctivemethodsofproductiondevelopinginthecapitalistsystemthesamenumberoflabourers，i。e。，thesamequantityoflabour-powersetinmotionbyavariablecapitalofagivenvalue，operate，workupandproductivelyconsumeinthesametimespananever-increasingquantityofmeansoflabour，machineryandfixedcapitalofallsorts，rawandauxiliarymaterials-andconsequentlyaconstantcapitalofanever-increasingvalue。Thiscontinualrelativedecreaseofthevariablecapitalvis-a-vistheconstant，andconsequentlythetotalcapital，isidenticalwiththeprogressivelyhigherorganiccompositionofthesocialcapitalinitsaverage。Itislikewisejustanotherexpressionfortheprogressivedevelopmentofthesocialproductivityoflabour，whichisdemonstratedpreciselybythefactthatthesamenumberoflabourers，inthesametime，i。e。，withlesslabour，convertanever-increasingquantityofrawandauxiliarymaterialsintoproducts，thankstothegrowingapplicationofmachineryandfixedcapitalingeneral。Tothisgrowingquantityofvalueoftheconstantcapital——althoughindicatingthegrowthoftherealmassofuse-valuesofwhichtheconstantcapitalmateriallyconsistsonlyapproximately——correspondsaprogressivecheapeningofproducts。Everyindividualproduct，consideredbyitself，containsasmallerquantityoflabourthanitdidonalowerlevelofproduction，wherethecapitalinvestedinwagesoccupiesafargreaterplacecomparedtothecapitalinvestedinmeansofproduction。Thehypotheticalseriesdrawnupatthebeginningofthischapterexpresses，therefore，theactualtendencyofcapitalistproduction。Thismodeofproductionproducesaprogressiverelativedecreaseofthevariablecapitalascomparedtotheconstantcapital，andconsequentlyacontinuouslyrisingorganiccompositionofthetotalcapital。Theimmediateresultofthisisthattherateofsurplus-value，atthesame，orevenarising，degreeoflabourexploitation，isrepresentedbyacontinuallyfallinggeneralrateofprofit。Weshallseelater[Presentedition:Ch。XIV——Ed。]whythisfalldoesnotmanifestitselfinanabsoluteform，butratherasatendencytowardaprogressivefall。
Theprogressivetendencyofthegeneralrateofprofittofailis，therefore，justanexpressionpeculiartothecapitalistmodeofproductionoftheprogressivedevelopmentofthesocialproductivityoflabour。Thisdoesnotmeantosaythattherateofprofitmaynotfalltemporarilyforotherreasons。Butproceedingfromthenatureofthecapitalistmodeofproduction，itistherebyprovedlogicalnecessitythatinitsdevelopmentthegeneralaveragerateofsurplus-valuemustexpressitselfinafallinggeneralrateofprofit。Sincethemassoftheemployedlivinglabouriscontinuallyonthedeclineascomparedtothemassofmaterialisedlaboursetinmotionbyit，i。e。，totheproductivelyconsumedmeansofproduction，itfollowsthattheportionoflivinglabour，unpaidandcongealedinsurplus-value，mustalsobecontinuallyonthedecreasecomparedtotheamountofvaluerepresentedbytheinvestedtotalcapital。Sincetheratioofthemassofsurplus-valuetothevalueoftheinvestedtotalcapitalformstherateofprofit，thisratemustconstantlyfall。
Simpleasthislawappearsfromtheforegoingstatements，allofpoliticaleconomyhassofarhadlittlesuccessindiscoveringit，asweshallseeinalaterpart。[K。Marx，Theorienü；berdenMehrwert。K。Marx/F。
Engels，Werke，Band26，Teil2，S。435-66，541-43——Ed。]
Theeconomistsperceivedthephenomenonandcudgelledtheirbrainsintortuousattemptstointerpretit。Sincethislawisofgreatimportancetocapitalistproduction，itmaybesaidtobeamysterywhosesolutionhasbeenthegoalofallpoliticaleconomysinceAdamSmith，thedifferencebetweenthevariousschoolssinceAdamSmithhavingbeeninthedivergentapproachestoasolution。Whenweconsider，ontheotherhand，thatuptothepresentpoliticaleconomyhasbeenrunningincirclesroundthedistinctionbetweenconstantandvariablecapital，buthasneverknownhowtodefineitaccurately；
thatithasneverseparatedsurplus-valuefromprofit，andneverevenconsideredprofitinitspureformasdistinctfromitsdifferent，independentcomponents，suchasindustrialprofit，commercialprofit，interest，andground-rent；
thatithasneverthoroughlyanalysedthedifferencesintheorganiccompositionofcapital，and，forthisreason，hasneverthoughtofanalysingtheformationofthegeneralrateofprofit——ifweconsiderallthis，thefailureto。
solvethisriddleisnolongersurprising。
Weintentionallypresentthislawbeforegoingontothedivisionofprofitintodifferentindependentcategories。Thefactthatthisanalysisismadeindependentlyofthedivisionofprofitintodifferentparts，whichfailtotheshareofdifferentcategoriesofpeople，showsfromtheoutsetthatthislawis，initsentirety，independentofthisdivision，andjustasindependentofthemutualrelationsoftheresultantcategoriesofprofit。
Theprofittowhichweareherereferringisbutanothernameforsurplus-valueitself，whichispresentedonlyinitsrelationtototalcapitalratherthantovariablecapital，fromwhichitarises。Thedropintherateofprofit，therefore，expressesthefallingrelationofsurplus-valuetoadvancedtotalcapital，andisforthisreasonindependentofanydivisionwhatsoeverofthissurplus-valueamongthevariouscategories。
Wehaveseenthatatacertainstageofcapitalistdevelopment，wheretheorganiccompositionofcapitalc:vwas50:100，arateofsurplus-valueof100%wasexpressedinarateofprofitof662/3%，andthatatahigherstage，wherec:vwas400:100，thesamerateofsurplus-valuewasexpressedinarateofprofitofonly20%。Whatistrueofdifferentsuccessivestagesofdevelopmentinonecountry，isalsotrueofdifferentcoexistingstagesofdevelopmentindifferentcountries。Inanundevelopedcountry，inwhichtheformercompositionofcapitalistheaverage，thegeneralrateofprofitwould=662/3%，whileinacountrywiththelattercompositionandamuchhigherstageofdevelopmentitwould=20%。