Glamor Economics

Chapter 26

Chapter 4 Section 7 What Governs Price Movements—The Law of Value

A hairdresser named Paul International in Zhengzhou set an astonishing record. Two customers charged 12000 yuan for a haircut, an average of 6000 yuan per person.Under the condition of market economy, as a paid service, haircut must be priced according to the basic principle of the law of value, that is, the price should not be too far away from the value. The sky-high price of "1.2 yuan" for a haircut undoubtedly deviates from the basic value of the haircut service, which is obviously a consumer fraud by the merchant.As a result, sky-high haircuts are no longer simply exorbitant commodity prices, but suspected crimes.

The law of value tells us that commodity value is the essence of price, and price is only the monetary expression of commodity value.Prices fluctuate up and down around value, that is, prices above or below the value of a commodity are manifestations of the law of value.In fact, it is accidental that the price of a commodity agrees with its value, but it happens frequently that it does not.This is because, although the price of a commodity is based on its value, it is also affected by many factors and causes it to change, but the price cannot deviate too much from the value of the commodity.Under market economy conditions, the vast majority of commodities implement market-adjusted prices.Therefore, some producers and operators think that they can determine the prices of their commodities at will, but in fact, their pricing must follow the law of value and relevant laws.

The law of value plays an important role in our life.

1. Regulatory effect.The law of value regulates the distribution of means of production and labor in various branches of production.The law of value requires the exchange of commodities to implement the principle of equivalent exchange, and equivalent exchange is realized through the two-way restriction of price and supply and demand.Therefore, when the supply exceeds demand, the price will rise, thereby expanding production; if the supply exceeds demand, the price will fall, thereby reducing production.Here the law of value is like an invisible baton, directing the flow of production materials and labor.When the supply of a commodity exceeds the demand, the law of value directs the means of production and labor to flow out of the sector that produces the commodity; on the contrary, it directs the flow of the means of production and labor to the sector that produces the commodity.Of course, the spontaneous function of the law of value will also cause a huge waste of social labor, which requires the state's macro-control.

2. Stimulating effect.Since the law of value requires commodities to be exchanged according to the value determined by socially necessary labor time, whoever improves technical equipment first has higher labor productivity, and the individual labor time for producing commodities is less than socially necessary labor time, and whoever makes more profits.Therefore, there must be competition in the same industry in the same sector. This situation will stimulate commodity producers to improve production tools, increase labor productivity, strengthen management, reduce consumption, and reduce individual labor hours.

3. Sieve effect.In a commodity economy, due to competition, commodity producers find ways to shorten individual labor time, increase labor productivity, and survive the fittest.This is independent of human will.

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The law of value is the basic economic law of commodity production and commodity exchange.That is, the value of commodities depends on the socially necessary labor time, and commodities are exchanged with each other according to the principle of equal value.It is worth noting that the law of value is the basic law of the commodity economy, but it is not the only economic law in the commodity economy.As the basic law of commodity economy, the law of value, like any other law, is objective and independent of human will.

(End of this chapter)