Editing Surplus-value

'''Surplus-value''' is the [[value]] produced by workers in the [[Capitalism|capitalist system]] that is not paid in wages and is not used to cover the [[Constant capital|expenses of production]].<ref>{{Citation|author=[[Karl Marx]]|year=1876|title=Capital, vol. I|chapter=VIII: Constant capital and variable capital|quote=The action of labour-power, therefore, not only reproduces its own value, but produces value over and above it. This surplus-value is the difference between the value of the product and the value of the elements consumed in the formation of that product, in other words, of the means of production and the labour-power.|mia=https://www.marxists.org/archive/marx/works/1867-c1/ch08.htm}}</ref> Generally, surplus-value is the amount by which the value of the output of[[Capitalist mode of production| capitalist production]] exceeds the value of the input materials and labour costs.<ref name=":0">{{Citation|author=[[Karl Marx]]|year=1876|title=Capital, vol. I|chapter=[[Library:Capital,_vol._I/The_transformation_of_money_into_capital|IV: The transformation of money into capital]]|quote=The cotton originally bought for £100 is for example re-sold at £100 + £10, i.e. £110. The complete form of this process is therefore M–C–M’, where M´ = M + ΔM, i.e. the original sum advanced plus an increment. '''This increment or excess over the original value I call ‘surplus-value’.'''|mia=https://www.marxists.org/archive/marx/works/1867-c1/ch08.htm}}</ref> [[Karl Marx]] considered the pursuit of surplus-value by capitalists to be the driving force behind the capitalist economy.

In the simple case of agriculture with inexpensive instruments on unimproved land, the surplus-value is simply the difference between the crop produced by the labourers and the portion of it that is returned to them as payment for their work. This can be easily visualised in physical terms. For example, in the model corn economy of the classical economists, if the harvest is 1000 bushels and 600 bushels is given to the field hands for their sustenance, then the surplus-value is 400 bushels which goes to the lord or hiring farmer.

In industries where there are tools and other inputs to production that are not of negligible value, and where the workers are not paid `in kind', with the same physical commodity that they produce, the situation is not so simple but the same underlying principle applies. If we carry through the cost of the tools and other inputs to production, and subtract it from the output, and if we reckon the output and the wages in value terms rather than physical quantity terms such as bushels, it will generally be seen that the workers produce more than they receive &ndash; ie., they produce surplus-value.

In modern economies, surplus-value forms a sizeable portion of the total output. For example, a few years ago, Duncan Foley estimated the rate of surplus-value in the U.S. economy to be 1.5, meaning that the surplus-value was 1.5 times the amount paid in wages.<ref>Duncan Foley, ''Understanding Capital''. His figures are for 1983.</ref> In other words, if the total of all the [[necessary-value|value of labor power]] (VLP)  is 10, then the surplus value is 10 x 1.5 or 15. With the total value of VLP + surplus-value = 10 +15 = 25 and hence the percentage of the U.S. economy that is surplus-value is 15/25 or 60%. 

== Theory ==
In the circulation of [[capital]], M–C–M' (money-commodity-money plus increment) or C–C' (capital advanced, capital expanded), an increment to the initial value is added, which is the surplus-value.<ref name=":0" /> Considering the formula for capital, C' (or M') can be expressed as C' = (c + v) + s, where ''s'' is the surplus-value, ''c'' is [[constant capital]] (raw materials, maintenance of the machines, etc.) and ''v'' is [[variable capital]] (wages).<ref>{{Citation|author=[[Karl Marx]]|year=1876|title=Capital, vol. I|chapter=IX: The rate of surplus-value|quote=The capital C is made up of two components, one, the sum of money c laid out upon the means of production, and the other, the sum of money v expended upon the labour-power; c represents the portion that has become constant capital, and v the portion that has become variable capital. At first then, C = c + v: for example, if £500 is the capital advanced, its components may be such that the £500 = £410 const. + £90 var. When the process of production is finished, we get a commodity whose value = '''(c + v) + s''', where s is the surplus-value; or taking our former figures, the value of this commodity may be (£410 const. + £90 var.) + £90 surpl.|mia=https://www.marxists.org/archive/marx/works/1867-c1/ch08.htm}}</ref> Isolating the ''s'' in the formula, we get:
 s = C' — (c + v)
Surplus-value constitutes the source of profits of the capitalist class. It is taken by them on the rationale that their ownership of the [[Means of production|productive apparatus]] entitles them to the full value of its output after costs are paid. Labour is not regarded as having a similar fundamental claim on the output; it is paid whatever is necessary for its survival and reproduction as an efficient body of workers, plus a possible, contingent payment reflecting its bargaining success.

=== Absolute and relative surplus-value ===
These terms actually refer to ''changes'' in the rate of surplus-value. Absolute surplus-value is an increase in surplus-value obtained by increasing the time period worked without increasing the payment for it; eg., lengthening the working day without raising the daily wage. Another example would be taking away a worker's paid lunch break.

Relative surplus-value is an increase in surplus-value obtained by increasing the physical amount of commodity produced by the worker while keeping labour time the same and the wage initially the same. This can be achieved by introducing more efficient instruments of production or more efficient work routines. The initial effect of relative surplus-value is to yield super profits to the firm introducing the innovation. As the innovation becomes global, however, the price of the commodity falls to reflect the fact that less labour time is required to produce a given amount of it. As a result the means of subsistence become cheaper and the wage can be reduced while still enabling the worker to obtain the same amount of (now cheaper) means of subsistence as before. In other words, the real wage stays the same but the wage relative to society's total output falls. Karl Marx's account of absolute and relative surplus-value appears in ''Capital'', v. 1, ch. 16: `Absolute and Relative surplus-value'.

=== Rate of surplus-value ===
The formula for the rate of surplus-value, or rate of exploitation, can be expressed as:
        s
 e  =  ———
        v
where ''s'' is the surplus-value and ''v'' the variable capital.

The net output of society is thus divided into two parts: ''s'', the surplus-value, which goes to the capitalists; and ''v'', the variable capital, which goes to the workers. <span id="rate_of_surplus_value">The ratio of these amounts, S:V, is called the ''rate of surplus-value''</span>, and indicates the relative strength of the two sides in the contest for the `division of the spoils', the contest over who benefits from society's economic output.

If we assume that the capitalists make no significant contribution to production, that the workers do everything and the capitalists are purely parasitic, then the rate of surplus-value (S:V) also indicates the degree of exploitation of the workers by the capitalists; ie., the proportion in which the workers' labour and life energies are bled off by the parasitic, unproductive capitalists. For this reason, the rate of surplus-value is often also called the ''rate of exploitation'', and is conventionally abbreviated as '''e'''.

The capitalist class spends the surplus-value on three things. This has already been partly explained in passing but it is good to list them clearly here:<ol>
<li>'''Consumption'''. The acquisition of the necessities and niceties to which the members of the capitalist class are accustomed or attracted.</li>
<li>'''Maintenance of the non-productive economy'''. This includes maintenance of the police, state, and ideological apparatus that secures the capitalists in their privileged position. It also includes the often mutually confounding activities typical of trade and finance, performed by money managers and marketers, bankers and brokers, analysts and adjusters, salespeople, corporate raiders, lawyers, lobbyists, headhunters, hatchet-men, advertisers, arbitragers, and similar hardworking denizens of the rat race and the status treadmill, earnestly striving all for success and their competitors' failure.</li>
<li id="new_investment">'''New investment'''. The capitalist class usually spends some of the surplus-value to obtain new or better instruments of production, and to increase the quantity of materials, and sometimes of labour, used in conjunction with them, all with a view to increasing the outflow of production, and therefore of surplus-value, in the future. This process is known as '''expanded reproduction''' of capital, and the increase in the amount of capital is called capital '''accumulation'''. Expanded reproduction and accumulation are funded out of surplus-value. (Simple reproduction, which is the maintenance of production at just its present level, requires no funding from surplus-value because input costs &ndash; labour, replacement of stocks, and replacement of depreciated equipment &ndash; are by definition subtracted from output value to obtain surplus-value.)</li>
</ol>
==History of the concept of surplus-value==
Before Marx, [[United Kingdom of Great Britain and Northern Ireland|British]] [[Socialism|socialists]] such as Thomas Hodgskin and Bray (1839) extended the models of [[Political economy|political economist]] [[David Ricardo]] to develop a theory that workers are inevitably [[Exploitation|exploited]] under capitalism. The idea of surplus-value was implicit in their theory.<ref>"Basing their analysis on Ricardo's theories, Colqunhunn's statistics and contemporary evidence of popular distress, they developed the concepts of capitalist exploitation and, implicitly, of surplus value." -- Burkitt (1984), p 34.</ref> The [[French Republic|French]] socialist [[Pierre-Joseph Proudhon]] also acknowledged of extraction of the profits of social labor.<ref>{{Citation|author=Pierre-Joseph Proudhon|year=1840|title=What is property?|chapter=Labor as the efficient cause of the domain of property|quote=Whoever labors becomes a proprietor — this is an inevitable deduction from the acknowledged principles of political economy and jurisprudence. And when I say proprietor, I do not mean simply (as do our hypocritical economists) proprietor of his allowance, his salary, his wages, — I mean proprietor of the value which he creates, and by which the master alone profits.|mia=https://www.marxists.org/reference/subject/economics/proudhon/property/ch03.htm}}</ref>

{{Quote|The fund for the maintenance of the idle is the surplus produce of the labour of the industrious.|Piercy Ravenstone|A few doubts as to the correctness of some opinions generally entertained on the subjects of population and political economy|London, England, 1821}}{{Quote|Profits are purely and simply a portion of the product of labour which the capitalist, without any right other than that conferred upon him by law, takes for himself|Thomas Hodgskin|Labour defended against the claims of Capital|London, England, 1825}}

Marx, who developed his economic theory out of classical economics, especially that of [[Adam Smith]] and David Ricardo, grappled with the problem of accounting for the difference betweeen the output and input values of production. The [[Labor theory of value|labour theory of value]], used by Ricardo and Marx, holds that labour is the only creator of value. Therefore the increase in value cannot be attributed to the instruments and materials used, it must be due to labour.
{{Quote|Whence comes this surplus-value? It cannot come either from the buyer buying the commodities under their value, or from the seller selling them above their value. For in both cases the gains and the losses of each individual cancel each other, as each individual is in turn buyer and seller. Nor can it come from cheating, for though cheating can enrich one person at the expense of another, it cannot increase the total sum possessed by both, and therefore cannot augment the sum of the values in circulation. (...) This problem must be solved, and it must be solved in a purely economic way, excluding all cheating and the intervention of any force — the problem being: how is it possible constantly to sell dearer than one has bought, even on the hypothesis that equal values are always exchanged for equal values?|Friedrich Engels|Anti-Dühring|Part II, c. VII: Capital and Surplus Value}}<div style="float:right; width:38%">
<div style="margin:1em; background-color:#fdf8e3; padding:0.6em; border:1.3px solid brown">
"If the exchange-value of a product equals the labour-time contained in the product, then the exchange-value of a working day is equal to the product it yields, in other words, wages must be equal to the product of labour. But in fact the opposite is true. Ergo, this objection amounts to the problem, -- how does production on the basis of exchange-value solely determined by labour-time lead to the result that the exchange-value of labour is less than the exchange-value of its product? This problem is solved in our analysis of capital." <small>&mdash; Marx, ''Contrib. Critique of Pol. Econ., ch 1.<ref>[http://www.marxists.org/archive/marx/works/1859/critique-pol-economy/ch01a.htm Marxists Internet Archive]</ref>''</small>
</div>
</div>
By the labour theory of value, the value of that food, housing, clothing, etc. is the labour time necessary to produce it; so we have that the value of labour is the labour time necessary to produce labour. (This is consistent with the treatment of labour as a [[commodity]], the value of a commodity being the labour time necessary to produce that commodity.) It follows that if the labour time necessary to produce labour is less than the time that that labour can subsequently work; that is, if the cost of producing labour is less than the value that labour can produce, then there is an opportunity to obtain a gain in value &ndash; a surplus-value &ndash; by employing labour. It is this opportunity that the capitalist seizes.

Marx called the capacity of a person to do work their labour-power. As hypothesized above, its value is the value needed to produce it. Surplus-value, then, can be expressed as the difference between the value of labour-power and the value produced by labour. Another way of conceiving this is that the value of labour-power is the [[exchange-value]] of the labourer's services and the time worked by her is their [[use-value]]. With labour-power as with any other commodity, the capitalist pays the exchange value and obtains the use value.

By the above logic, Marx was able to formally square the existence of capitalist profits with certain conventional ideas about value and fair trade held by the bourgeoisie of his time. That is, he showed that the appropriation of surplus-value does not violate those ideas.
==Surplus product and surplus labour==
Surplus product is the actual physical output &ndash; tons of steel, bushels of corn, etc. &ndash; in excess of what is needed to replace inputs of production materials and workers' consumption goods. surplus-value is the value of the surplus product. (The reason we often think in value terms rather than about physical product directly is that the items that comprise the physical product are usually not commensurable &ndash; a kilogram of steel is not the same as a kilogram of corn &ndash; so we cannot arrive at a single, unified measure or number that expresses physical output. This is analytically awkward. However, by assigning each different commodity a value which supposedly expresses its economic significance, we can treat different commodities together mathematically [comparing, adding, etc.] which is analytically convenient.)  

Surplus labour is the labour that produces the surplus product. It can be measured in hours. If we hold a Marxian labour theory of value, then surplus labour (measured in hours of average socially necessary labour) corresponds exactly to surplus-value. In ''Capital'', volume I, Marx used the picturesque device of dividing the worker's work day up, conceptually, into two periods, during the first of which she produces the value that will be returned to her as wages, and during the second of which she produces the value that will go to the capitalist. The worker in effect works so many hours for herself and so many for the capitalist. The ratio of the two periods is exactly the same as the rate of exploitation. It is in the worker's interest to minimise the time she works for the capitalist &ndash; the surplus labour time &ndash; and the capitalists interest to maximise it.

<blockquote style="background-color:#fdf5dc">
"The history of capitalist production can be seen as the history of struggle over attempts by capital to increase, and attempts by the working class to resist increases in, the rate of surplus-value" <small>&mdash; Susan Himmelweit<ref>Susan Himmelweit, 'Surplus value', in Tom Bottomore, ''A Dictionary of Marxist Thought'', p 474.</ref></small>
</blockquote>
== Equalization of rates of surplus-value==
Competition between capitalists for labourers, and between labourers for jobs, creates a tendency for the wage, and consequently the rate of surplus-value, to be the same in all industries or sectors of an economy. At the abstract level, Marxian economics usually treats this tendency as being fully realised, ie., the rate of surplus-value as being equal in all sectors.
 
<blockquote style="background-color:#fdf8e3; padding:0.6em; border:1.3px solid brown">"If capitals that set in motion unequal quantities of living labour produce unequal amounts of surplus-value, this assumes that the level of exploitation of labour, or the rate of surplus-value, is the same, at least to a certain extent, or that the distinctions that exist here are balanced out by real or imaginary (conventional) grounds of compensation. This assumes competition among workers, and an equalization that takes place by their constant migration between one sphere of production and another. We assume a general rate of surplus-value of this kind, as a tendency, like all economic laws, as a theoretical simplification; but in any case this is in practice an actual presupposition of the capitalist mode of production, even if inhibited to a greater or lesser extent by practical frictions that produce more or less significant local differences, such as the settlement laws for agricultural labourers in England, for example. In theory, we assume that the laws of the capitalist mode of production develop in their pure form. In reality, this is only an approximation; but that approximation is all the more exact, the more the capitalist mode of production is developed and the less it is adulterated by survivals of earlier economic conditions with which it is amalgamated " - Capital Vol. 3, ch. 10, Pelican edition p. 275.
</blockquote>

Logically, the equalisation of the rate of surplus-value results if
#the wage rate is equalised, and
#the labour theory of value holds.

This is because the LTV equates value-added to labour time expended; and the equalised wage rate means labour time expended is in the same proportion to wages in all sectors. Value-added is then in the same proportion to wages in all sectors. It follows easily that the surplus-value, being simply their difference (value-added - wages) must be in the same proportion to each of them in all sectors: s/v = same in all sectors.
<table style="font-family:courier; font-size:103%">
<caption style="font-family:Times New Roman; font-size:108%; margin:0.85em 0 ">Argument for invariance of rate of surplus-value</caption>
<tr><td style="width:2em">1.</td><td> </td><td>wage rate, v/t</td><td style="padding:0.36em 0">same in all sectors</td><td>(by competition-justified assumption).</td></tr>
<tr><td>2.</td><td> </td><td> value-added, a</td><td style="padding:0.34em 0">&prop; t</td><td>(by LTV).</td></tr>
<tr><td>3.</td><td style="width:2.6em">&there4;</td><td>v/a</td><td style="padding:0.39em 0">same in all sectors.</td><td> </td></tr>
<tr><td>4.</td><td> </td><td>s</td><td>= a - v</td><td style="padding:0.36em 0"> (by definition).</td></tr>
<tr><td> 5.</td><td>&there4;</td><td> s/v =&nbsp;(v&nbsp;-&nbsp;a)/v =&nbsp;1&nbsp;-&nbsp;a/v</td><td style="padding:0.36em 0">same in all sectors. </td></tr>
<tr><td colspan="5" style="text-align:center; padding:0.36em 0">'''Q.E.D.'''</td></tr>
</table>



Competition and the migration of workers from one sector to another in pursuit of the best rate of pay is seen as the justification of the first assumption (wage equalisation), at least for unskilled labour. Skilled labour is accommodated for by regarding it as a multiple of unskilled, providing value proportionate to the extra pay received. (This leaves v/a unchanged in the argument above.) Whether the second assumption is reasonable has been discussed in several works.<ref>Roncaglia, A. 1974: 'Thr Reproduction of complex to simple labour'.<br />
Rowthorn, R. 1980: ''Capitalism, Conflict amd Inflation: Essays in Political Economy''.<br />
Tortajada, R. 1977: 'A Note on the Reduction of Complex Labour to Simple Labour'.<br />
All cited in Himmelweit, Susan, 'Surplus Value', in Tom Bottomore, ed., ''A Dictionary of Marxist Thought'', 1983.
</ref>

Marx believed that the long-term historical tendency would be for  rates of surplus-value to equalise, as commodification became ever more dominant, non-capitalist relations in the economy became ever less significant, and thus observed phenomena ever more closely to approximate the predictions of a "pure" theory of capitalism.<ref>Robert Albritton, ''Economics Transformed'', ''op cit.''</ref>

<blockquote style="background-color:#fdf8e3; padding:0.6em; border:1.3px solid brown">
"As far as the many variations in the exploitation of labour between different sphers of production are concerned, Adam Smith has already shown fully enough how they cancel one another out through all kinds of compensations, either real or accepted by prejudice, and how therefore they do not need to be taken into account in investigating the general conditions, as they are only apparent and evanescent (''The Wealth of Nations'', Bk. 1, Ch. 10). Other distinctions, for example in the level of wages, depend in large measure on the distinction between simple and complex labour... and although they make the lot of the workers in different spheres of production very unequal, they in no way affect the degree of exploitation of labour in these various spheres. if the work of a goldmsmith is paid at a higher rate than that of a day labourer, for example, the former's surplus labour also produces a correspondingly greater surplus-value than does that of the latter. And even though the equalization of wages and working hours between one sphere of production and another, or between different capitals invested in the same sphere of production, comes up against all kinds of local obstacles, the advance of capitalist production and the progressive subordination of all economic relations to this mode of production tends nevertheless to bring this process to fruition. Important as a study of frictions of this kind is for any specialist work on wages, they are still accidental and inessential as far as the general investigation of capitalist production is concerned and can therefore be ignored. In a general analysis of the present kind, it is assumed throughout that actual conditions correspond to their concept, or, and this amounts to the same thing, actual conditions are depicted only insofar as they express their general type." - Marx, Capital Vol. 3, ch. 8, Pelican edition p. 241-242.
</blockquote>

At a less abstract, more concrete level (eg in ''Capital''', volume III), Marx accounted for surplus-value being shared out at unequal rates between the capitalists in an economy. (See, for example, [[transformation problem]].

== The state obtains some of the social surplus== 
Marx's discussion focuses mainly on profit, interest and rent, largely ignoring taxation and royalty-type fees which were proportionally very small components of the national income when he lived. Over the last 150 years, however, the role of the state in the economy increased in almost every country in the world. Around 1850, the average share of government spending in GDP in the advanced capitalist economies was around 5%; in 1870, a bit above 8%; on the eve of [[World War I]], just under 10%; just before the outbreak of [[World War II]], around 20%; by 1950, nearly 30%; and today the average is around 35-40%. (see for example Alan Turner Peacock, "The growth of public expenditure", in ''Encyclopedia of Public Choice", Springer 2003, pp.&nbsp;594-597).''

The tax paid by a productive enterprise appears as a deduction from its profit margin, so the state's revenue appears to be a portion of surplus-value that the firm hands over to the state. It may be argued that not all of this tax revenue should be regarded as surplus-value, however, because the state will spend a portion of it on programs that benefit the working class (such as state-funded health care, and income supports such as social assistance) and that portion, since it goes to the working class, should properly be counted not as surplus-value but as variable capital that is paid by the firm to the workers through the intermediacy of the state. The validity of this argument depends on whether or not one holds a subsistence theory of wages. If one does, then the argument is invalid, because any state benefit to workers merely means that firms will lower their wage payments to the workers by the same amount, keeping workers at the subsistence level. The firm's saving in wages will exactly offset the amount it pays to the state for worker benefits, so its surplus-value acquisition is undiminished. The degree to which this is true; ie., the degree to which state-to-worker benefits are a substitute for, rather than a supplement to, wages, is a matter for empirical investigation. It might be remarked that if they are merely a substitute, then the [[Social democracy|social-democratic]] program of seeking such benefits is pointless &ndash; or perhaps even harmful because it obscures the fundamental antinomy between worker and capital, making it appear to the workers as though they are in a `socialist' or `socialised' system.

==Some finer distinctions ==
===Price is not value===
Surplus-value is a value. Consequently, if one holds a Marxian labour theory of value, the most natural unit to measure surplus-value in is the unit of labour time &ndash; say, hours. However, one also sees surplus-value stated in monetary units &ndash; &yen;, &euro;, &pound;, $, etc. &ndash; and in fact Marx himself often did this, for example in volume I of ''Capital''. Unfortunately, stating surplus-value in monetary units risks confusion and can trip up the unwary. This is because monetary units, strictly, express price not value, and price, while being strongly influenced by value also deviates from it because of various secondary influences. These include interfirm variation in labour:nonlabour cost ratio (see [[transformation problem]]), the effect of noncapitalist elements in the economy (state, household, peasant, volunteer, environmental, feudal holdovers, etc.), and growth- or crisis-induced disequilibria. The reason Marx could speak of values as prices in Volume I of ''Capital'' is that he was there working at a high level of abstraction, outlining what might be called the pure logic of capital.<ref>Robert Albritton (''Economics Transformed'', 2007, f.n., p. 5) refers to Marx's subject in the abstract parts of ''Capital'' I by various terms: the `theory of capital's inner logic', `theory of capital's deep structure', `dialectics of capital', or `theory of a purely capitalist society'. At this level, commodification and reification are complete, and non-capitalist influences and worker resistance are zero. This level must be connected to real world events via mid-level and historically specific (low-level) analyses.</ref> At that level of abstraction, the difference between value and price disappears. Where Marx there describes the finances of particular, usually hypothetical firms, he is presenting them as microcosms, or `typical cases': concrete, easy-to-understand embodiments of the abstract, generalised behavior of the system. This is permissible.<div {{Right_quotebox}}>"Surplus-value and the rate of surplus-value are... the invisible essence to be investigated, whereas the rate of profit and hence the form of surplus-value as profit are visible surface phenomena" - Karl Marx, ''Capital Vol. 3'', Pelican edition, p. 134</div> 
However, when we move to the consideration of actual firms in the actual economy, we must be aware that prices, which include all figures given in money terms in firms' financial statements, represent values only roughly. It is possible to calculate something that looks like surplus-value for a firm by subtracting monetary costs from its revenues, but this is very imprecise. At the national levl, Marxist economists do sometimes try to estimate the surplus-value produced in a country from its national accounts data (which is in money units). At this level of aggregation, some of the deviations of price from value average out.

=== Profit is not surplus-value===
Although surplus-value is most readily apparent in the profit of a productive enterprise, the two are not in general equal. It has already been mentioned that any rent, interest, and some or all of the tax paid by an enterprise also come from surplus-value, so clearly profit is only a partial measure of surplus-value. Another thing that needs to be considered is that not all of the value (and surplus-value) ''produced'' by a firm will necessarily be ''realised'' in the form of a sale. Unsold inventory yeilds no profit to the firm. Similarly, if inventory has to be dumped at a cut rate and also is never sold at value in subsequent transactions then a portion of its value is never realised (although its use-value may be).

If we are considering ''rates'' of profit and surplus-value, a further difference is that the rate of profit is equal to the profit divided by the total costs (labour and materials of production [m.p.]) whereas the the rate of surplus-value is equal to the surplus-value divided by the labour cost only. This causes enterprises that employ high levels of m.p. compared to labour (eg., the high-tech sector) to have rates of surplus-value much higher than their rates of profit.

 rate of profit         rate of surplus-value
 
       p                         S
 π = -----                  e = ---
     C + V                       V
 
 
            Where π is rate of profit;
                  p    profit;
                  C    constant capital (m.p.);
                  V    variable capital (labour);
                  e    rate of surplus-value;
                  S    surplus-value.
 
 Note that even if p and S are equal, the presence of
 constant capital in the formula for π distinguishes
 the formulae.

Finally we must consider the manner in which profit and surplus-value are stated. Profit is most often stated in monetary units. This is not obligatory; it can be stated as a value if one desires, and one can speak of the value of the profit realisd by a firm. (In general, any economic quantity can be looked at both as a value or as a price; the Marxist economist Junankar expresses this by saying we can operate analytically in the `value domain' or the `price domain'.) But, for the reasons stated in [[#Price is not value]] above, we should be careful not to mix price and value measurements indiscriminately. If profit expressed as a price is equated with surplus-value expressd as a value, we have an additional source of potential error.

===Do capitalists seek to maximise profit or surplus-value?===
Although Marx spoke of the pursuit of surplus-value as being the motivating force of capitalism, at the level of specifics it may be
that what capitalists consciously seek to maximise is profit. An increase in the rate of surplus-value is a necessary consequence, in most cases<ref>An
increase in the rate of profit (π) that is due to technical innovation does not increase the rate of surplus value if it occurrs in a luxury-goods industry. But an increase in π due to a reduction in the real wage, and increases in π due to technical innovation in the wage-goods sector, increase the rate of surplus value. According to Susan Himmelweit, ('Surplus value', in Tom Bottomore, ''A Dictionary of Marxist Thought'') increases in π due to technical innovation in capital-goods industries that feed wage-goods industries will also increase the rate of surplus value.
</ref>
of an increase in the rate of profit, but may not be the ''direct'' objective of the capitalist.  

=== Do they seek to maximise the mass or the rate?===
Most Marxist discussions focus on the ''rate'' of surplus-value, but for businessmen, the growth of the ''mass'' of surplus-value, or the gross profit ''volume'' produced (denoted here as ''P'') is just as important, or even more important. After all, according to US Internal Revenue Service statistics, the money paid out to corporate officers is equal to about one-third of that paid out to ordinary employees. The growth of ''P'' depends on the growth of the volume of output in an accounting period, and the volume of sales turnover. 

We can illustrate the point with a simplified example. If: 
*''K'' = total capital invested
*''P'' = total net profit volume realised
*''r'' = the rate of profit (i.e. ''P/K''),

and assuming (perhaps unrealistically) that a sum equal to ''P'' is ''reinvested'' (with or without the aid of credit) with zero price inflation, we can construct a series of annual business results. We take ''K'' to be 1 million at the start, and say that ''r'' is 10% initially but ''declines'' by a constant 0.1% per annum thereafter:
*year 1: ''K'' = 1,000,000; ''P'' = 100,000; ''r'' = 10%
*year 2: ''K'' = 1,100,000; ''P'' = 108,900; ''r'' = 9.9%
*year 3: ''K'' = 1,208,900; ''P'' = 118,472; ''r'' = 9.8%

We see here that within two years at least, an 18.5% increase in annual profit ''volume'' has occurred, even though the rate of profit ''decreased'' by 0.2%. In other words, there's nearly ''one-fifth more income'' to disperse among the owners of the capital, although the rate of profit return slightly fell .

What this simplistic example really implies is that, provided market sales keep growing and business expands, a slight fall in the profit rate on capital may not be a point of concern. After all, capital assets have grown, but more importantly, the total volume of ''revenue'' that can be distributed has grown.

However, if the total profit volume created in a capitalist economy stops growing, this becomes a real problem (as highlighted by [[Henryk Grossman]]). Because in that case, profitability must fall across the board, and business income is reduced everywhere. 

In some Marxist crisis theories (e.g. by [[Henryk Grossmann]], [[Louis C. Fraina]] and [[Paul Mattick]]), the root ''cause'' of economic crisis is precisely that the growth of profit ''volume'' is eclipsed by the decline of the profit ''rate'' in production, the result being that the total profit volume that can be distributed stagnates or falls.  

The overall implication is that ''market expansion'' is critical for the total ''volume'' of surplus-value that can be distributed as profit. Total business income can increase, even although the profit rate on capital invested falls, if markets keep growing. The logical outcome of that is [[globalisation]], i.e. the systematic removal of all barriers to trade worldwide to facilitate market expansion.
==Complicating factors in assessing surplus-value==
It is not easy to calculate surplus-value. This is partly because firms and governments gather and report data according to their own purposes and not for the purpose of Marxist analysis. As a result, the categories and definitions they use fit only roughly our needs for value analysis.

Other complicating factors in assessing surplus-value are:

*price [[inflation]] applying to wage goods, profit and capital goods;
*Backwardation of certain physical goods in which time and presence are drivers of price.
*[[creative accounting]] and [[tax]] avoidance or evasion techniques which misrepresent how much value has really been created.
*Government, business, and other financial data may include or exclude items at variance with real business practice. Some types of transactions are disregarded, while imputations are made for other transactions. Almost always tax data is the main source of generic profit estimates, but tax data typically understate true profitability.
* income obtained from what Marx called "[[fictitious capital]]" or what now are often called "bubble" phenomena.
*If profit is measured as the sum of [[value added]] and gains in [[fixed capital]], it is ignored that profit income includes more than value added, and capital asets include more than fixed assets. It is desirable to look at a variety of different data measures and ''sources'' (national accounts data, tax data, direct surveys, company reports and circumstantial evidence).
*state intermediation, where [[profit]] and [[wage]] income is [[tax]]ed on the one side, and supplemented on the other with subsidies and grants of various kinds. <small>(See `[[#The state obtains some of the social surplus|The state obtains some of the social surplus]] ', above.)</small>
*unsold inventories of net outputs which contain surplus-value. <small>(See `[[#Profit is not surplus value|Profit is not surplus-value]]', above.)</small>

==Measurement==
The first attempt to measure the rate of surplus-value was by [[Karl Marx|Marx]] himself in chapter 9 of [[Capital, vol. I (1867)|Capital]], using factory data of a spinning mill supplied by [[Friedrich Engels]] (though Marx credits "a Manchester spinner"). Both in published and unpublished manuscripts, Marx examines variables affecting the rate and mass of surplus-value in detail.

Since pioneering studies by Marxian economists like [[Eugen Varga]], [[Charles Bettelheim]], [[Joseph Gillmann]], [[Edward Wolff]] and [[Shane Mage]], there have been numerous attempts by Marxian economists to measure the trend in surplus-value statistically using national accounts data. A modern attempt is that of professors [[Anwar Shaikh]] &amp; Ahmet Tonak in the 1996 work ''Measuring the wealth of nations: the political economy of national accounts.''<ref>{{Citation|author=Anwar M. Shaikh & E. Ahmet Tonak|year=1996|title=Measuring the wealth of nations: the political economy of national accounts|lg=http://libgen.rs/book/index.php?md5=7F681B61F943A529B3F2B75927ABE59D}}</ref>

Ascertaining ''trends'' in surplus-value may be less problematic than ascertainig its absolute amount because errors, eg., in converting from national accounts to Marxian categories, may be fairly consistent throughout the time period considered and thus not invalidate obsevations of change.

It has been claimed that most time series of different profit measures from different sources show the same historical ''trends'' (see e.g. the research by Dumenil &amp; Levy).

The Marxian mathematicians [[Emmanuel Farjoun]] and [[Moshé Machover]] argue that "even if the rate of surplus-value has changed by 10-20% over a hundred years, the real problem [to explain] is why it has changed so little" (quoted from ''The Laws of Chaos; A Probabilistic Approach to Political Economy'' (1983), p.&nbsp;192). The answer to that question must, in part, be sought in artifacts (statistical distortion effects) of data collection procedures. Mathematical extrapolations are ultimately based on the data available, but that data itself may be fragmentary and not the "complete picture".

==See also==
*[[Analytical Marxism]]
*[[Capital accumulation]]
* [[Das Kapital]]
*[[Exploitation]]
*[[Labour theory of value]]
*[[Law of value]]
*[[Productive and unproductive labour]]
* [[Profit]]
*[[Relations of production]]
*[[Return on capital]]
* [[Superprofit]]
*[[Surplus labour]]
*[[Surplus product]]
*[[Surplus economics]]
*[[Valorisation]]
*[[Value added]]

==References==
<references />

==Further reading==
''Asterisk ('''*''') denotes work used directly as a source in writing this article.''

===On paper ===
*Bray, J F, 1839. ''Labour's Wrongs and Labour's Remedies: or the Age of Might and the Age of Right.'' Leeds, England.
*'''*''' Burkitt, Brian, 1984. ''Radical Political Economy.'' Brighton, Sussex, England.
*Hodgskin, T, 1825. ''Labour Defended Aainst the Claims of Capital.'' London, England.
*Marx, Karl, [http://www.marxists.org/archive/marx/works/1863/theories-surplus-value/ ''Theories of Surplus-Value'' (1863)]
*- [http://www.marxists.org/archive/marx/works/1865/value-price-profit/index.htm ''Value, Price and Profit'' (1865)]
* - [http://www.marxists.org/archive/marx/works/1867-c1/index.htm ''Capital'', Volume 1], [http://www.marxists.org/archive/marx/works/1885-c2/index.htm Volume 2], [http://www.marxists.org/archive/marx/works/1894-c3/index.htm Volume 3] [http://www.marxists.org/archive/marx/works/1894-c3/supp.htm#intro]
*[[Paul A. Baran]], The Political Economy of Growth.
*Helen Boss, Theories of surplus and transfer : parasites and producers in economic thought. Boston: Hyman, 1990.
*[[G.A. Cohen]] (1988), ''History, Labour and Freedom: Themes from Marx'', [[Oxford University Press]]
*Anders Danielson, The economic surplus : theory, measurement, applications. Westport, Connecticut: Praeger, 1994.
*John B. Davis (ed), The economic surplus in advanced economies. Aldershot, Hants, England/Brookfield, Vt., USA : Elgar, 1992.
*Emmanuel Farjoun and Moshe Machover, ''Laws of Chaos; A .Probabilistic Approach to Political Economy'', London: Verso, 1983. *[[Michal Kalecki]], "The Determinants of Profits", in ''Selected Essays on the Dynamics of the Capitalist Economy 1933-1970''.
*Shane Mage, ''The Law of the Falling Tendency of the Rate of Profit; Its Place in the Marxian Theoretical System and Relevance to the US Economy''. Phd Thesis, [[Columbia University]], 1963
*[[Ernest Mandel]], Marxist Economic Theory, Vol. 1 and Late Capitalism.
*Harry W. Pearson, "The economy has no surplus" in "Trade and market in the early empires. Economies in history and theory", edited by Karl Polanyi, Conrad M. Arensberg and Harry W. Pearson (New York/London: The Free Press: Collier-Macmillan, 1957).
*[[Anwar Shaikh (Economist)|Anwar Shaikh]] &amp; Ahmet Tonak, ''Measuring the Wealth of Nations''
*[[Piero Sraffa]], ''Production of Commodities by means of commodities''.

===On the internet===
*[http://web.archive.org/web/20080410180912/http://journal.ilovephilosophy.com/Article/The-Concepts-of-Alienation-and-Surplus-Value--A-Brief-Look/216 'The Concepts of Alienation and Surplus-value, a Brief Look' (Archive.org)]
*Gerard Dumenil &amp; Dominique Levy papers [http://www.jourdan.ens.fr/~levy/]
*Fred Moseley papers: [http://home.mtholyoke.edu/~fmoseley]

<div><div style="width:100%; text-align:center; margin:0">''Where did this article come from?''</div><br />
This article was originally copied from Wikipedia but was extensively modified at the former communist wiki Communpedia in January 2014 to consists primarily of new work. In Ma 2022 it was copied to Prolewiki and slightly modified.</div>

[[Category:Political economy]]
[[Category:Value]]
[[Category:Marxist economics]]
[[Category:Capital volume I concepts]]