[citation needed] The concept of a cost structure refers to the (direct and indirect) current labour inputs required to make a product, reflected in its price level.
[15]: 751–1026 [non-primary source needed] World market prices for primary products can at any time be strongly influenced by the yield of harvests and mines in different countries, regardless of labour effort.
According to Marx, the knowledge that the law of value existed, expressed in one form or another, sometimes more clearly and sometimes less, was very ancient—it reached right back to the first nomadic traders in food, crafts, services and minerals.
[note 8] In fact, three hundred years before the Scottish and English political economists, Ibn Khaldun had already formally presented a fairly sophisticated understanding of the law of value.
[30] According to the classical economists, however, such shifts in trading ratios would quickly cause a switch from beaver-hunting to deer-hunting or vice versa; short-term fluctuations in demand could not usually change the labour-costs of hunting as such, except if new technologies suddenly made it possible to capture more game in less labour-time, or if the herds of animals had become seriously depleted.
[citation needed] Both Smith and Ricardo deeply believed that price structures for products were determined by the law of value; but, Marx argued, neither of them could explain how that value-price relationship operated, without contradicting themselves.
However, because these three types of relationships co-exist and interact objectively independent of individuals, it may appear that economic value is an intrinsic property of products, or alternately, that it is simply a characteristic that results from negotiations between market actors with different subjective preferences.
[note 12] Thomas T. Sekine has interpreted Marx's law of value as a purely theoretical principle of market equilibrium which has no application to empirical reality.
A capitalist economy was therefore in "equilibrium" so long as it could reproduce its social relations of production, permitting profit-making and capital accumulation to occur, but this was compatible with all sorts of market fluctuations and disequilibria.
Only when shortages or oversupply began to threaten the existence of the relations of production themselves, and block the accumulation of capital in critical areas (for example, an economic depression, a political revolt against capitalist property or against mass unemployment), a genuine "disequilibrium" occurred; all the rest was just ordinary market fluctuations.
[citation needed] Marx argues that, as economic exchange develops and markets expand while traditional methods of production are destroyed and replaced by commercial practices, the law of value is modified in its operation.
Marx claims that this trend happens "with the necessity of a natural law"; producers had no choice about doing what they could in the battle for productivity, if they wanted to maintain or increase sales and profits.
Yet, Marx argues, this whole process is nevertheless still regulated by the law of value; ultimately, relative price movements for products are still determined by comparative expenditures of labour-time.
[45][page needed] The economic crisis means that price and value relationships have gotten badly out of kilter, causing a breakdown of the normal trading process.
The postulate of the law of value does however lead to the Marxian historical prediction that global prices of production will be formed by world competition among producers in the long term.
[59][60] Stalin was primarily concerned at the time with the problem of wasted labour, in an economy where workers often could not be easily fired (they had a constitutionally guaranteed right to a job, and there was considerable featherbedding of employees), and where there was often no clear relationship between salary-levels, work performance and actual output.
Stalin's theory of the law of value was critically discussed by Włodzimierz Brus in The market in a socialist economy[61] and by Mao Zedong in A Critique of Soviet Economics.
According to Fred L. Block, nowadays "Contemporary scholarship rejects the assumption...that state and market are distinct and opposing modes of organizing economic activity.
"[63] Supporters of the theory of state capitalism in the Soviet Union (such as Tony Cliff and Chris Harman) and scholars such as Andre Gunder Frank have also believed that the law of value operated in Soviet-type societies.
[71] Rudolf Hilferding regarded state capitalist theories as conceptually incoherent, because – he argued – the law of value presupposed market competition among private enterprises.
"[83] In socialist Cuba, Che Guevara adopted the view that if more resources were directly allocated to satisfy human needs, instead of commercially supplied, a better life for people would result.
[87] He rejects the claim by Engels that the law of value is associated with the entire history of economic exchange (trade), and modified when the vast majority of inputs and outputs of production have become marketed, priced commodities.
So a better approach, it is argued, is to regard the application of the law of value as being modified in the course of the expansion of trade and markets, including more and more of production in the circuit of capital.
Thus, while integrated labour accounts are certainly useful to have as a planning tool, allocating resources according to the labour-time they represent is most likely not useful as a general economic principle (it could be useful in specific areas of activity).
[103] Ecologists and environmentalists have criticized Marx on the ground that natural resources have (or should have) a value which has nothing to do with production costs in labour time, because in fact they are entropic non-reproducible goods.
[123] This interpretation is not accepted by all Marxist scholars, because—the critics argue—all price-value differentials among different outputs are necessarily and by definition cancelled out at the aggregate level, not just in an assumed theoretical model, but in reality.
Product-values manifest themselves and can only be expressed as trading ratios, (ideal) prices, or quantities of labour-time, and therefore the academic "transformation controversy" is according to many modern Marxist theorists misguided; it rests simply on a false interpretation of the relationship between the value-form of commodities and the price-form.
[130] Thus, Marx's value theory offers an interpretation, generalisation or explanation concerning the "grand averages" of the relative price movements of products, and of economic behaviour in capitalist production as a social system, but it is not possible to deduce specific real product-prices from product-values according to some mathematical function, among other things because, to find labour-values, a relationship between product-prices and labour hours worked must already be assumed.
This means that human labour is no longer regarded as the mainspring of wealth-creation, and it raises the question of how the law of value could, in that case, be a regulative force in the allocation of resources, or how it could determine prices.
[142] In his pamphlet Wages, price and profit (1865), Marx argues that the way economic relationships observably appear to the individual is often the inverse of the real process, considered as a whole.