Prices of Production

Abstract

This expression is used by Marx, mainly in Volume III of Capital, to indicate the exchange values of commodities, when he fully takes into account the inconsistency between the uniformity of the rate of profits and an exchange in proportion to labour embodied. He accordingly tables the famous ‘problem’ of the ‘transformation of the Values of Commodities into Prices of Production’ – i.e., into prices which would include profits at a uniform rate on the whole capital advanced (c + v), and which would therefore differ from relative embodied labours, when commodities differ in the ‘organic composition of capital’ (c/v). The expression ‘prices of production’ (which Marx regards as synonymous with ‘cost-prices’, and with Smith’s ‘natural prices’) starts to be commonly used by Marx only some time after he had actually formulated the ‘transformation problem’, and provided his solution. In Theories of Surplus Value (1862–3), for instance, he would normally still employ its synonym ‘cost-prices’. But ‘prices of production’ is used in the 1893 draft plans for Volume III of Capital (printed in Marx 1862–3, I, pp. 414–16).

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