If the belief persisted, that was because it made good sense of business practice - in an era where the owners of most enterprises also personally managed them, and therefore could observe the work and its results in daily life.
[11] The book was edited together posthumously by Friedrich Engels, who tried to make a polished story out of a mass of draft manuscripts Marx left behind.
A production price for outputs in Marx's sense always has two main components: the cost-price of producing the outputs (including the costs of materials and equipment used, operating expenses, and wages) and a gross profit margin (the additional value realized in excess of the cost-price, when goods are sold, which Marx calls surplus value).
[26] According to Marx, the movements of different production prices relative to one another importantly affect how the total "cake" of new surplus value produced is distributed as profit among competing capitalist enterprises.
One source of interpretive difficulty is that Marx often assumes in his shorthand drafts that these different kinds of prices all refer to the same thing.
The reason for this conflation is probably that Marx's real analytical concern was not really with the pricing processes as such, but with the main factors influencing the realisation and distribution of new surplus-value produced, when sales occur.
Marx's theory is frequently confused with input-output economics and the marginalist theory of capital, in which total inputs and total outputs are always exactly equal in value, an equality accomplished by treating the factor income which is gross profit as an input, so that profit is both a cost and a revenue at the same time.
So from Marx's point of view, input-output economics really mystified the "capital-relationship", i.e. the ability of the bourgeoisie to capitalize on the surplus labour of the workforce in virtue of its ownership of the means of production[43] (in chapter 48 of Capital, Volume III, he refers satirically to the factors of production theory as the "holy trinity" of political economy).
[52] In grappling with these issues, it must also be remembered that when Marx lived there was little macro-economic statistical data available that would enable theoretical hypotheses to be tested and relativised.
[53] Marx had deduced the motions of capital essentially from an enormous amount of economic literature he read, plus available commercial and government statistics.
His discussion was limited to physical capital and labour employed, abstracting from ancillary costs and incomes unrelated to production which enterprises usually have (including tax imposts and subsidies), asset transactions, and changes in market prices.
[65] Emmanuel Farjoun [he] and Moshe Machover (1984) reject the whole idea that a "uniform rate of profit" would ever exist in reality, contrary to Marx's suggestion that competition would tend to establish at least a minimally "acceptable" average rate of profit on production capital invested to produce outputs, and returns proportional to capital size.
At best one could say that a particular type of commodity (for example, a good quality vacuum cleaner) exhibits a normal, average production price.
His argument is, that what industrial competition really revolves around, is principally the difference between the value of the new commodities produced, and their cost-prices, i.e. the potential surplus-value (the trading gain) which can be realized from them.
In the real world, When Marx created a simplified, abstract model of profit distributions, he was not primarily trying to prove that the two famous identities (total profit=total surplus value, and total product value=total production price) are compatible with price-value divergences and with profit distributions according to capital employed (to the contrary: for analytical purposes, Marx assumes that they are compatible).
Consequently, many of the criticisms can, according to some Marxists, be dispelled simply by a more exact definition of the cost, product and revenue aggregates used, and of the timing of transactions (see e.g. Temporal Single System Interpretation).
It never becomes quite clear how exactly these different ideas can all be easily reconciled, which makes it difficult for academics to understand the intention of Marx's theory.
Management then tried to estimate the cost and profit implications of different tasks and activities in production for the growth of capital, without full certainty of results.
That might be fine if the aim is to just investigate what profit an enterprise or sector would receive on average, having produced a certain output value with a certain capital composition.
In that case, there is again no formal proof of any necessary relationship between values and prices, and Marx's manuscript really seems an endless, pointless theoretical "detour" leading nowhere.
[90] All the conceptual and logical issues described in the above become crucial when attempts are made to model value and price aggregates mathematically to study capitalist competition.
Nevertheless, Marx argues that production prices are still determined by underlying product-values (i.e. the average current labour requirements for their supply).
Whatever view one takes on the theoretical issues, no one can evade the (either simultaneous or sequential) reciprocal effects of individual business behaviour and aggregate economic outcomes.
That is, Marx only illustrated with examples the general results towards which the competitive process would tend to move in capitalism as a social system.
[95] After some pioneering work by various scholars in the 1960s,[96] Luigi Pasinetti provided a methodological foundation for measuring the labour content of commodities, in this sense, which was developed further by Anwar Shaikh, Eduardo Ochoa, Ed Chilcote, Ara Khanjian and Lefteris Tsoulfidis.
[99] This was not so clearly realized during the 20th century, because economists could not grasp how, in the course of Marx's dialectical story, the meaning of the operative concept of value itself could undergo some important changes.
Mostly, economists have preferred to build abstract mathematical models on the basis of a bunch of assumptions, rather than comprehensively investigate available empirical data for the purpose of creating an empirically-based theory about economic life.
Since total wage costs are based on time-wages, it is simple math to understand that any measure of the net value added (gross labour compensation + gross profits) which Marx called the value product must necessarily show a strong positive correlation with the total labour hours worked.
What is statistically much more difficult to prove, is the relationship between prices and values in the actual distribution of net output (a traditional example mentioned, is that while in South Korea workers on average work the most working hours in the world, per capita per year, Korean value-added per capita has been much lower than might be expected; it is not so easy to explain, why this is the case).
"[114] Had Marxists been able to measure price-value relationships of products empirically much earlier in the controversy, they might not have given the issue so much weight and importance; but the econometric techniques to do it were perfected only from the 1980s onward.