Marx's Legacy Revisited
Chapter 12: Production Prices and Imperfect Competition, Part I
In Part I of the book, we have shown that in Smith’s “early and rude state of society”—in which labor is the only means of production—the “commodity law of exchange” (Foley 2011; Foley and Mohun 2016) holds and there exist well-defined relationships between labor values and prices, such that one can conclude that labor values determine relative (natural or labor commanded) prices. But this is not true in a capitalist economy with produced means of production, in which natural prices and labor costs diverge in general. The commodity law of exchange is superseded by the “capitalist law of exchange” (Foley 2011; Foley and Mohun 2016), specified as the determination of prices that support an equalized rate of profit. This raises doubts on the standard, predictive interpretation of the LTV as a theory of the determination of relative prices but, as we have argued throughout the book, it does not necessarily mean that the classical-Marxian theory of prices and values is irremediably flawed.
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