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Marx's labour theory seems to define surplus value as being produced exclusively from human labour. One discussion of this concept stated:

Machinery, and tools of production do not create surplus value; they are a product of previous labour which store value, passing their value onto the finished commodities; they are ‘dead’ or ‘constant’ capital. Only labour (variable capital) can produce a surplus as human agency either stores the value in machinery or extracts it; in the process boosting efficiency and profit margins. source

As a simplification; If the value one assigns to a commodity is based on the human labour someone is willing to exert to obtain that commodity, then markets will tend towards an equilibrium where all commodities have relative value based on the time people are willing to invest to obtain them. The profit to be made on the production of each commodity is then derived by exploiting the workers such that the commodities they are given as wages have less value than the commodities they are creating. E.g. They are paid a wage equal to 4 hours of their work, even though they actually work for and thereby create a commodity worth 8 hours of time. The capitalist thereby gains the 4 hours of value from each employee without providing the requisite human labour. Leaving aside here arguments around trying to quantify the value of one workers hour of labour versus anothers.

However, I feel as though I don't fully understand this concept. As a thought experiment, imagine that a human workforce can produce 1000 units of value in commodities whilst only being paid 500 units of value. Here the capitalist who owns the means of production makes a 500 unit profit. Now suppose a machine was created for 100 units of value, which then produced the same 1000 units of value in commodities due to the machines ingenuity. Why isn't it possible to say that the capitalist profits 900 units of value here?

I appreciate that in the extreme of total automation of commodities there would be no employment under a capitalist system and therefore no one could buy the commodities and as such their value would fall to zero. Is this why it is said that surplus value can only come from human labour? I feel like there is more to it than this and I'm looking for an example which continues the story of this value creating machine and ultimately shows how that scenario actually creates no surplus value, without going to the extreme of total automation of commodities.

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In my example I use the terms 'profit' and 'surplus value' interchangeably, this probably highlights my misunderstanding of the term 'surplus value'. If someone can illuminate how and why these terms are different, in so far as they don't seem to correlate AND why surplus value does therefore not increase due to automation in my example, I would also consider this a great answer.

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    This question appears to be about an alternative economic theory rather than political philosophy, as such. – shane Aug 10 '14 at 11:40
  • Unfortunately, Marx's political philosophy is focussed on solving a problem. If has the problem wrong, it makes no sense. So his peculiar framing of economics, the terms in which he states the problem, is all part of the political philosophy. – jobermark Aug 9 '16 at 18:39
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Surplus value is a philosophical or at least critically scientific 'thing', it is in no way the same as monetary profit. Surplus value is a measure of exploitation in terms of value, i.e. the more surplus value I make from my workers, the more exchange value I create for myself.

Sometimes I do so without making a profit, as in your example. This means that the analysis of value defines something that is logically independent of price. Marx tries to show that the nature of surplus value means that capitalism must encounter periodic "crises."

One could object that it's only price that drives capitalism, and so his proof of economic crisis is not essential to capitalism. This would be bad for Marx.

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Human intervention is needed to run and maintain the machines, or at least to program and monitor them. If they did not run, they would produce nothing. So the machines only increase the leverage for this individual between profit and value. They produce nothing on their own, and there is still the need for human input.

But if this is now the new standard for leverage in producing this item, the profit to be made is temporary. Eventually, consumers will expect the price to come into line with the actual value invested in production. (Secrets are all eventually known, and then it is just a matter of making the right things.)

If value is a real thing, intrinsic to the product, it does not depend upon the timing of its production (except to the point age dissolves value, e.g. rotting food, etc.). So, in effect, Marx is focussed on the ultimate, real value an object would have in a long-term, steady-state economy, where all temporary fluctuations are evened out. (Such a thing may simply not exist. Capitalism may simply implode when not allowed growth, and start over.)

Profit is all about timing, but theoretically, it must eventually even out and align with value, once it is no longer possible for the consumer base to expand.

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It has been pointed out that the distinction between surplus value and profit is the crucial issue here. I will elaborate on what that means in relation to the original question.

Now suppose a machine was created for 100 units of value, which then produced the same 1000 units of value in commodities due to the machines ingenuity. Why isn't it possible to say that the capitalist profits 900 units of value here?

In this example, there are 900 units of profit and 0 units of surplus value. That can happen. But in the dynamic context of a capitalist economy, it will not last very long. The logical reason for this is very simple. Other capitalists will compete with the owner of this incredibly efficient machine. Many will start buying or producing them for themselves. In turn, the value of the commodity that is being produced will fall and fall as more and more units are produced more cheaply. The price of the commodity cannot stay at 900 units in a competitive market, because someone will be willing to charge 800. The price will go down and down until the profit approaches zero.

So to restate this in more analytical terms... When profits exceed surplus value, this is a form of rent. Technical innovations are a temporary source of rent for the innovator. As the technology is widely adopted, competition increases, rent decreases, and rate of profits are pushed down in line with rates of exploitation (surplus value). Other common sources of rent include political protections and subsidies, natural resources, etc.

The gap between surplus value and profit is related to a more general disconnect between value (meaning the labor time necessary for production) and price (the money paid according to the market dynamics of supply and demand). Trying to understand exactly how prices relate to values is commonly referred to in Marxian theory as "the transformation problem".

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"In my example I use the terms 'profit' and 'surplus value' interchangeably, this probably highlights my misunderstanding of the term 'surplus value'. If someone can illuminate how and why these terms are different, in so far as they don't seem to correlate AND why surplus value does therefore not increase due to automation in my example, I would also consider this a great answer."

"Profit" is an accounting category, while "surplus value" is a category within political economy. The latter is the whole amount of value that is created by labour and exceeds the original capital employed in production, and as such does not belong to any individual capitalist. The former is the amount of money that remains in the hands of an individual capitalist after the process of production (or of circulation; non-productive capitalists make profits also, while the labour they command does not produce value). So, for a given capitalist company, rents, interests, taxes, copyrights, etc., are expenses and as such do not belong to profit, even though they are necessarily part of surplus value. Besides, profits only exist as long as commodities are sold; surplus value is already embodied into commodities before they are sold. So, there are several differences: materially, profits do not coincide with surplus value, as some amounts of value (rents, etc.) belong to surplus value but not to profit; formally, profit only exists in the form of money, while surplus value exists before the sale of commodities; and, conceptually, each concept reflects different ways of looking at what happens in the economy, one from the ("microeconomic") point of view of the individual firm, the other from the ("macroeconomic") point of view of the global movement of capital.

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It is possible to say what ever you want, but the reality is a little more complicated that your example. Let's say that the 1000 units produced sell at $1 each, they make $1000, pay $500, reinvest $100 in a machine. Net profit from this transaction = $400. If you don't fire the workers, you now produce 2000 units. At this level of supply, the units sell for $0.50 each, they still make only $1000, if they pay $500 and don't reinvest, they only make $500 profit. Hopefully this oversimplified example is useful.

  • Marxism seems to indicate that if you can make the workers labour for longer hours for the same money, you increase your surplus value. But it also states that you do not increase your surplus value using automation. Since the increase in supply occurs in both scenarios, yet only one is said to increase surplus value, I don't think supply and demand are related to what this particular theory is saying about the very specific term of "surplus value". – LaserJesus Aug 12 '14 at 16:55
  • Capitalists DO increase their surplus value using automation. See the second and third bullet points here regarding the relative form of surplus value: en.wikipedia.org/wiki/Surplus_value#Absolute_vs._relative – Brian Z Oct 10 '14 at 2:17

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