Surplus-Value

So Marx addressed the question: if value is socially necessary labor time, so that labor produces all value, why does the market award incomes to people who do not work? His key insight was:

In a competitive capitalist economy, all commodities are priced at their values.
In a competitive capitalist economy, labor is a commodity.
Therefore, in a competitive capitalist economy, labor is priced at its value.

In other words: the wage paid for a labor-day would be the labor time socially necessary to produce the labor day. Suppose that it takes just half of a labor day to produce a labor day. Then workers will always be available for half a labor-day of pay, and employers, knowing this, will pay no more than half a labor-day of wages per labor-day. Half a labor day is left to the employers. It is "surplus-value" and is the source of profits, interest, and rent. Employers (and landowners and financiers) don't have to do anything to get it -- it is just "left over" after the competitive wage has been paid.

But what does it mean to talk about "producing" a labor-day? Let's put it this way. To attain a certain "standard of living," workers consume a certain amount of goods and services of various kinds. The "cost of production of labor" is the labor cost of producing those goods and services. Clearly, "subsistence" lets a lower limit to the workers' standard of living. Beyond this, what determines the worker's "standard of living?" We shall pass over the controversy surrounding this point.

Since each day of work produces a labor-day of value (under normal conditions) and costs less than a labor-day of value, there is a fraction of a labor-day left over, the surplus-value. Since labor produces all value, but gets only a part of what it produces, surplus-value is exploitation, in the Marxist conception.

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