PRICES AND VALUES.

Otago Daily Times, Issue 21019, 7 May 1930, Page 9

PRICES AND VALUES.

TO THE EDITOR. Sir, —Your correspondent “ Greg's '• further request that “ I should furnish the necessary explanation as to how the exvalue of commodities is determined ” necessitates an understanding—first, of the technical term “ ex-value.” “ Ex,” being a prefix, signifies a reference to a previous position or condition that has passed out. as “ ex-president," etc. As a prefix to value when applied in ecotnomics it denotes that the surplus value has passed out from the possessor who originally produced it, and is now in the hands of others who. when ethically considered, did not produce it. It is an important subject, as it forms the crux of the labour problem from which arises the cause of the dispute between Labour and Capital. The visible indications of a surplus value manjfest themselves in an increased production, the result of personal skill arising from discovering and applying mechanical means that yield an increased margin of profit without increasing the price to the consumer. The relations between prices and values are therefore seen to bo unaffected until the increased production forms a supply in excess of former demand, when a fall in prices becomes necessary in order to widen the circle of consumers whose power to buy is limited by their income. Prices, or cost of commodifies to the • consumer are therefore governed by the purchasing power of money, and reach their limit when everybody can satisfy their wants from their income, which implies that prices must fall. To select a commodity as illustration. The production of wheat forms an article of diet which everybody consumes in the form of bread or fancy cake. An increased production in the volume of wheat in New Zealand would, therefore, have no power to widen the circle of consumer even if the price of wheat were to fall’ a surplus would only glut the local market and discourage further production which, if in short supply, would then cause the price of wheat to rise locally and widen the margin of profit to the wheat grower without reducing the price to the consumer, unless free importation

of wheat were permitted to counteract the rise. Here we see that an increased production confers no certain benefit to either producer or consumer, the surplus value being only the means of discouraging further production, which is controlled by cost, and cannot be reduced in the production of wheat any more than cost can be reduced in producing wool, muttom. butter, cheese, etc. When such a position is reached the increment or surplus value becomes ex-value; that is, the accruing value has passed from the producers to a different set of persons whose occupation has no direct connection with the source from which they derive their income, yet their income is nevertheless derived from surplus value produced directly from the industrial system. The explanation of this-paradox is, however, quite simple. When the farmers’ profit increases as a result of the rise in the price of their produce abroad the local source of taxation expands, which enables the Government to collect a larger revenue from which grants to public service or works are annually appropriated for the benefit of the State Thus the increment or surplus value which is exclusively produced from within the industrial system furnishes the only source from which a revenue can be - derived for the purpose of supplying free education, old age pensions, military, police, civil service, etc., the expenses of which are entirely derived from taxation levied upon tangible commodities produced by the primary and secondary industries, in contradistinction to the wages of labour which are derived from the price paid for commodities* produced. The position will be more clearly seen when it is understood that only members indispensable to production within the industrial system produce a direct surplus value; all others outside of the industrial system are non-producers of surplus value. The farmer produces tangible commodities which have exchange value. School teachers, on the other hand, do not produce tangible commodities of commercial value, hence their salaries must be .levied upon the product of industrial workers.

If this explanation lias been sufficiently clear the difference between prices and values is seen in the service performed, and indicates that the importance of the farming community and the secondary industries far surpasses the importance of every other occupation in the community. —1 am, etc., W. Sivertsox.