Average Rate of Profit and Production Price

Abstract

If commodities are sold at their value, the profit rate will be lower in those production spheres where the capital composition is high and higher in those with a low capital composition. When the movement of capital is free, capital will shift to those spheres with a higher rate of profit. This means that the quantity of capital in those spheres increases, as does the quantity of commodities supplied. And the opposite is the case for spheres with a lower rate of profit. The result of this is that in the former spheres, prices and the rate of profit fall, with the opposite holding true in the latter spheres. In this way, for commodity prices in all spheres, there is a convergence towards the same rate of profit. The commodity price that brings about this average rate of profit is the «production price». However, the capital composition in each sphere is constantly fluctuating as individual capital continually increases the productive power of labour in pursuit of surplus profits, and since individual capital always accumulates unequally, what exists is a constant equalisation of incessant inequalities. Under capitalist production, this is the way in which value determines overall production.