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Research Field: Economics

Paper Topic: Absolute Surplus vs. Relative Surplus
 
Requirements: Analyze the following: for Karl Marx, what is the difference between Absolute and Relative Surplus? You are not limited in the choice of references. Be sure you include all the references into the bibliography. MLA style citations required. I must have A+ paper.

Actual Paper: 
 
Introduction. 
 
In his monumental Das Kapital, Marx stresses an important distinction between the simple feudal economy and the capitalist order. The simple labor process involves the production of 'use-value,' and the relevant dimension of this process is the use of the socially necessary, qualitative and specific labor. However, the capitalist does not produce the use-value for its own sake. Indeed, the single most important facet of the capitalist production is the adding of new value, and above all the maximizing of the surplus component in its structure. We will now dwell on these aspects in greater detail. 
 
General Background. 
 
The underlying premise of the value theory a la Marx suggests that the exchange value of all goods should properly be determined in terms of labor (exactly the socially necessary labor) used as an input in its production [151]. In this light, the socially necessary labor embedded in the product acts as the unit or equivalent of, and basis for, exchange, and for that matter the use of the market vehicle. In particular, there will be an inverse relationship between the good's [exchange] value amounting to the necessary labor content, and the productivity of labor [157]. Among other problematic issues involved, Marx elaborates a mechanism of reducing the compound (sophisticated) labor to simple labor, or standard units [163-165].
 
The use-value is another facet of the output produced, and the capitalist will be interested in maximizing it. The use-value is created in the process of transferring the value of the means and otherwise inputs used, labor included. The production process, therefore, is actually represented by several aspects. First, the labor process refers to employing labor in the process of value creation. Qualitative or socially necessary labor is used as an integral whole, yet only in the labor process and use-value creation process [166]. What pertains to the process of surplus value creation is the quantitative aspect of labor, in which dimension labor is not consumed as a whole but only used to generate specific pieces of value added. Second, value creation involves the preserving of value, the transferring of value, and the adding of surplus value [171]. Indeed, different means used in the process transfer their value (which is the only way of preserving it) in different fashions. Raw materials and inventory, for instance, are consumed entirely within one full production cycle. In contrast, machinery transfers its value gradually over several production cycles [171]. These inputs can be referred to as the product of past labor; their exchange value was accordingly determined in the past exchange processes, and so one recursively all the way down to the initial labor process. 
 
Capital Accounting. 
 
The total mass of capital consists of the machinery and raw materials as well as the labor employed and expended in the current process. Consequently, Marx provides an accounting framework defining the composition of capital that transfers its value [179-180]:

Value [t=1]=C[t=0]+V[t=0]+S[t=1],

where C, V and S refer to the constant and variable constituents of capital, and S to the surplus value created.

Note that the presence of the surplus component, referring to the self-growing capacity of capital, is the single most important qualifying feature distinguishing the capitalist production from simple reproduction. In the latter case, the value in the next period would only comprise the past labor and the current socially necessary labor:
 
Value=C+V, 
 
where C refers to the transferring and preserving property of means used up, and V to the standard of living, or the equivalent of labor used, just enough to earn the laborer his subsistence. For instance, it may take him 6 hours to generate an equivalent of his subsistence. However, the capitalist will likely set a longer working day, say 12 hours, in which event the residual 6 hours of labor participate in the creation of surplus value. The total value added will amount to V+S, but the surplus component will be solely appropriated by the capitalist. 
 
Surplus. 
 
Forcing the employee work longer hours is but one way in which the capitalist would maximize the surplus value. Marx suggest a useful taxonomy of the mass of surplus versus the rate of surplus [179-181]. The mass corresponds to the S as above, while the rate is defined as a ratio of S/V. Marx argues that the past labor or constant capital C does not constitute part of value added, even though it does remain a component of the value of the product. Interestingly, these readily apply to the national income accounting on a macro level, the value added V+S corresponding to the nation's GDP. One additional taxonomy proposed in the Capital splits the surplus into the absolute and the relative components. The former pertains to increasing the surplus labor time, by means of increasing the length of the working day. The latter refers to reducing the necessary labor time, which enables the capitalist to cut the wages or reduce the cost of living. There are the lower and the upper bounds on manipulating the hours worked, though. On the one hand, the worker may not be allowed to work fewer hours than those necessary for him to reproduce his human capital. Alternatively, this lower bound can be thought of as the production possibilities frontier, which determine the average social productivity of labor. On the other hand, the worker cannot be forced to put in 24 hours, for that would amount to deteriorating standard of living. 
 
Therefore, the capitalist's incentive driving his propensity to innovate and augment the society's productive forces can now be traced to his propensity to maximize the surplus, in particular its relative component. In this case, the very structure of value added V+S will change: indeed, even if the total value added remains the same (the laborer working the same hours), the fraction of S/(V+S) now increases as V/(V+S) goes down. The capitalist is interested in gaining a competitive cost advantage, by having his individual necessary labor cost decrease against the average (or socially necessary) labor cost. At the same time, we may relax the fixed-hours assumption, in which case the total value added V+S may increase in absolute terms, not only in relative (structure) terms.
 
Concluding Remarks. 
 
This taxonomy could provide a simple yet elegant framework for studying the crucial controversy between the symbiotic as well as parasitic relationship that the two classes engage in. On the one hand, the capitalist's incentive to maximize the surplus value will encourage him to improve the productivity and efficiency, which could amount to less labor necessary to reproduce value. However, that need not translate into a higher standard of living for the workers ...
 

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