The individual cost of goods is determined by the costs of individual working time at individual enterprises. The value of the individual cost of the same goods in different enterprises is different. The best enterprises have it lower, the worst ones have it higher.
Social value is determined by the expenditure of socially necessary labor time.
Individual and social value do not coincide in magnitude. This is determined by the following reasons:
1) objective reasons (proximity of raw materials, level of specialization, level of mechanization and automation of production, capital intensity);
2) subjective reasons (poor organization of production, low labor discipline, overspending of raw materials and wages, low level of labor intensity, defective products).
Subjective reasons can be eliminated completely. Objective reasons can be smoothed out by creating economically equal economic conditions.
There is a contradiction between individual and social value. It is expressed:
– in competition, leading to a decrease in individual cost,
– a trade secret
– in the ruin and bankruptcy of enterprises in which the individual value of the goods is higher than the social value.
The value of the goods is determined by the following factors :
1) the level of labor productivity. Recall that labor productivity is expressed in the number of use values created by specific labor per unit of time. Therefore, the value of the cost of a unit of goods is inversely proportional to the level of labor productivity. The magnitude of the value of the total mass of commodities does not depend on labor productivity;
2) the level of labor intensity. The latter is measured by the cost of abstract labor per unit of time. Therefore, the magnitude of the value of the total mass of goods is directly proportional to the level of intensity of labor. The magnitude of the value of a unit of a commodity does not depend on the level of labor intensity;
3) the level of labor complexity. Simple labor is unskilled labor that any healthy person is able to perform without first acquiring any qualifications. Complicated labor is skilled labor, the performance of which requires prior training in some specialty. An example of simple labor is the labor of a digger or a lumberjack, and examples of complex labor are the labor of a turner, a locksmith, a jeweler.
3. The law of value, its content and functions
The relations of isolated commodity producers who exchange their goods are regulated by certain economic laws. The most important economic law of commodity production is the law of value. This is an objective economic law that regulates relations between commodity producers on the basis of the value of goods, the value of which is measured by socially necessary labor costs.
The essence of the law of value is as follows :
1) the value of goods is determined by the expenditure of socially necessary labor time;
2) there is an equivalent exchange of commodities, i.e., commodities for the production of which the same amount of socially necessary labor time has been expended;
3) individual labor costs are reduced to socially necessary, individual values – to social value, which is the basis of price.
In short, the law of value is the law of prices. The law of value is a general economic law. It arose along with commodity production and exchange about 7 thousand years ago.
The law of value is the law of commodity production, according to which the production and exchange of commodities must be carried out in accordance with the socially necessary expenditure of labor. In other words, the law of value is the law that the price must correspond to the value of the commodity.
The law of value performs a number of functions in commodity production :
1) the law of value performs the function of accounting for social labor through the formation of socially necessary labor costs. This function is consistently implemented throughout the market economic mechanism. The accounting function of the law of value makes value a measure of wealth, which is the totality of goods available in society. But since value is manifested through prices, it is they that are used to measure national wealth;
2) the law of value is the spontaneous regulator of commodity production. To satisfy the diverse needs of society, all social labor must be distributed in certain proportions among various branches. For example, coal mining should be in line with the smelting of ferrous metals; steel production – in accordance with the production of machines from this steel, etc. Due to the spontaneity of production, this proportionality is constantly violated. And each commodity turns out to be produced either in excess or in insufficient quantity.
The law of value spontaneously regulates the volume of commodity production and the correlation between the production of various commodities. Moreover, the tendency towards a proportional distribution of social labor is carried out only as an average result of permanent disproportions;
3) the law of value is the engine of the spontaneous development of the productive forces in the commodity economy . This is its stimulating function. The sale of commodities by value brings the greatest benefits to those commodity producers whose individual value of commodities is less than the social value. In this case, they not only compensate for the labor expended, but also receive additional income in addition.
The desire of commodity producers to obtain additional income stimulates them to reduce individual cost by introducing new technology. Competition encourages other producers to follow their example. As a result, the new technology will sooner or later become widespread. In such a spontaneous order, the law of value drives the development of the productive forces of society;
4) the law of value is the basis for the differentiation of commodity producers . The law of value does not determine the economic equality of commodity producers. On the contrary, it inevitably creates inequality among them. The reason for the differentiation of commodity producers lies in the discrepancy between individual and social values.
The enrichment of some commodity producers, the impoverishment of others, and even the ruin of still others—such is the inevitable result of the spontaneous operation of the law of value. The differentiation of commodity producers that occurs on the basis of the operation of the law of value leads to the spontaneous development of simple commodity production into capitalist production;
5) the law of value performs the function of conscious regulation of a highly associated economy . Society consciously uses the law of value in regulating prices, money circulation, commodity circulation, and in foreign trade. All this does not change the objective nature of the law of value. If the wind is carrying the boat, then the use of the rudder is already making adjustments to the direction of its movement. The use of sails further changes the direction of the boat. And the use of an engine in a boat, without canceling the elemental force of the wind, can provide the movement of the boat, directly opposite to the direction of the wind. With the conscious regulation of value relations, the objectivity of the operation of the law of value is also preserved.
The action of the law of value cannot be absolute, because its role in the market economy system is limited. This law quite convincingly explains the economic motives of the behavior of the commodity producer, the seller. But, remaining within the framework of this law alone, it is difficult, and in some cases impossible, to explain the economic behavior of another market entity – the buyer, the consumer. Indeed, when selling his commodity, the commodity producer would like to sell it at a price that would fully reimburse all his costs and bring the maximum profit. Consequently, the entire logic of its behavior is predetermined by the requirements of the law of value. The consumer of the product finds himself in a different position: the buyer is little or not at all interested in the producer’s costs for this product, his economic interest is that the price is low and the quality of the product is high, but the most important thing is that the buyer appreciates or does not appreciate the consumer qualities of the product. , its usefulness, necessity or uselessness for oneself. The behavior of this market subject cannot be explained by the requirements of the law of value. It requires knowledge of another law of the market – the law of supply and demand.