Commodity: anything that people use or want and which is made in order to be sold on the market.
Exchange value: the value of a commodity expressed in terms of how much of any other commodity you can trade it for.
Sections 1 & 3: Engles’ Introduction and “What are wages? How are they determined?”
Labor vs. labor-power
Capitalist owners and managers say that they buy a worker’s labor. If your wage is $10 per hour, your boss would tell you that $10 is the price she pays you for one hour of work. Furthermore, it is often thought that the wages you make are paid for by the money that your boss gets when he or she sells the product you made.
But you get your wages regardless of whether your boss actually sells the product, and regardless of how much she got for it. When your boss paid your wages, she was just buying another commodity, just like when she bought the equipment that you use at work. That commodity was your ability to work, or your labor power.
If, for example, you work at a small shoe store, the owners pay for all the stuff needed to sell their products: they rent the space, buy shoes, the display shelves, pay for utilities, and pay for your ability to work the store. It doesn’t matter if no one comes to the store during your shift or if 100 people do; you still get the same wage. Paying for your labor power is part of the capitalists’ investment into production.
This means that labor power, your ability to work, is a commodity that you sell to capitalists. This is the “freedom” that the market gives to workers: we are “free” to sell our labor to whichever capitalist will buy it, and to quit whenever we choose to. However, we are not free to quit selling our labor power altogether, or we will starve:
“[T]he worker, whose only source of income is the sale of his labor-power, cannot leave the whole class of buyers, i.e., the capitalist class, unless he gives up his own existence. He does not belong to this or that capitalist [as under slavery or feudalism], but to the capitalist class.”
Summary: labor is the actual work you do, labor power is your ability to work. Capitalists don’t pay you for your labor; they purchase your ability to work.
Section 4: “By what is the price of a commodity determined?”
Supply and demand
Sellers compete with each other; each one wants to have as many buyers as possible. This competition between sellers drives prices down.
Buyers compete with each other; if buyers want more of a product than what is available, sellers can get away with raising the price. Competition between buyers drives prices up.
So, supply and demand makes prices fluctuate up and down. But what determines the typical, average price? How do we know, for example, that $50 would be an extremely high price for a water bottle and an extremely low price for a computer, regardless of how imbalanced supply and demand might be at a given moment?
Cost of production
No capitalist is going to invest in producing something if the cost of producing it is higher than what he could expect to get back from it. Capitalists want to make profit, and this happens when the price of something is higher than its cost of production.
This cost of production, then, is the baseline for the price of a commodity. If the price is much higher than the cost of production, then profits will be large, and many capitalists will want to invest in it. But this will tend to increase supply and thus decrease the price. If the price is lower than the cost of production, then capitalists will lose money by investing in the commodity, and so they’ll abandon it for others. But this will decrease supply and raise the price.
The bourgeois law of supply and demand states that the equilibrium price is reached when the number of sellers who are willing to sell at that price equals the number of buyers who are willing to buy at that price. Marx is saying that the cost of production determines the equilibrium price, but that the dynamics of supply and demand cause fluctuations above and below that price. It’s not clear to me if these contradict each other, since the cost of production is implied in the concept of “the number of sellers who are willing to sell” — presumably that would be very small if the price was below the cost of production.
Section 5: “By what are wages determined?”
The cost of production of labor-power
Wages are the price of workers’ labor-power. Just as other commodities’ prices are determined by their cost of production, wages are determined by the cost of production of labor power. This is the cost of educating and training workers, maintaining their ability to continue working, and eventually replacing them with new workers.
If the cost of maintaining and replacing workers is an important thing in determining wages, what does this mean for the relationship between “women’s work,” such as housework and childrearing, and capitalist production?
Supply and demand of labor-power
Just as with any other commodity, competition between buyers and sellers affects the price of labor power. In this instance, workers are the sellers and capitalists are the buyers. The same dynamics are at play here as above: if there is a lot of competition among the capitalists for labor-power, wages will rise. If there is a lot of competition among workers to sell their labor-power, wages will go down.
What does this say about how unions can affect wages?