value in actuality, which is the case with the economic model above. Nevertheless, this all needs to be translated into a monetary expression, namely the monetary rate of profit and / or prices of production. So revisiting the simple reproduction model above, three more columns can be added to indicate prices of production, the monetary rate of profit and the value rate of profit. The value rate of profit is calculated by adding the constant capital and variable capital for each individual department and multiplying this by each of their individual rates of profit, i. e.( C + V) multiplied by IRP( Individual Rate of Profit), which for department 1 is 16.666 % and for department 2 is 75 %. The value rate of profit for department 1 is equivalent to its initial surplus value price, i. e., 1000 units of surplus capital-value; and the value rate of profit for department 2 is as well equivalent to its initial surplus-value price, i. e., 3000 units of surplus capital-value. Again, price and value equate for both departments, akin to what Marx suggests should be the case.
On the other hand, the monetary rate of profit is calculated by adding constant and variable capital for each individual department and multiplying this by the general rate of profit, i. e.( C + V) multiplied by GRP( General Rate of Profit), which in this case is 40 %. The calculation for department 1 is 6000 units of total capital-value multiplied by 40 % giving a monetary rate of profit of 2400 units of profit-value. The calculation for department 2 is 4000 units of total capital-value multiplied by 40 %, giving a monetary rate of profit of 1600 units of profit-value. And akin to the value rate of profit for department 1 and department 2, the monetary rate of profit for department 1 and department 2 combined is 4000 units of profit-value and / or surplus money.
Following suit, the price of production, as per the definition outlined above, is the cost of production plus average profit expressed in monetary terms, i. e. the monetary rate of profit. So for department 1 the price of production equals 6000 units of total capital-value plus the monetary rate of profit for this specific department, i. e., 2400 units of profit-value, the result is a price of production that equals 8400 units, reflecting the production-cost plus the average profit. Similarly, for department 2, the price of production equals 4000 units of total capital-value plus the monetary rate of profit for this specific department, i. e., 1600 units of profit-value, the result is a price of production that equals 5600 units, which reflects the production-cost plus the average profit.
Constant + Variable + Surplus Value = Total Value | C + V | S / V | P = S / C + V | Value Rate of P | Monetary Rate of P | Price of Production a) Department 1 | 4000 | 2000 | 1000 | 7000 | 6000 | 50 % | 16.666 % | 1000 | 2400 | 8400 | b) Department 2 | 3000 | 1000 | 3000 | 7000 | 4000 | 300 % | 75 % | 3000 | 1600 | 5600 | c) Total Price | 7000 | 3000 | 4000 | 14000 | 10000 | 133 % | 40 % | 4000 | 4000 | 14000 ______ |
All in all, with this last and final addition of columns, one can see Marx’ s self-enclosed economic value / price apparatus in full bloom and in full operation, where Marx’ s fundamental equalities nicely equate with one another in the sense that total value equals total price, i. e. total prices of production equals total value, namely 14000. The rate of profit articulated in value equals the rate of profit articulated in money, namely 4000, and finally the total profit of the economic model equals the total surplus value of the economic model, namely 4000. Albeit, of course, this whole simple reproduction economic model is predicated on the basic assumptions that value is scientifically quantifiable, value is solely the product of labor-power, and that exact sums of scientifically quantifiable value are the fundamental sources for price determinations, price being, for Marx, the monetary expression of value etc.[ 44 ]
Even so, the importance of prices of production in Marx’ s economic model is that prices of production, i. e., the average market price of a set of specific commodities, pertaining to specific spheres of production, provide a relatively stable marker, free of the fluctuations of supply and demand, by which market prices revolve and tend to reflect. Only the law of socially necessary labor-time influences prices of production in the sense that“ value at any given time is measured by the labor socially necessary to produce them”[ 45 ]. According to Marx,