An interactive educational tool to understand Karl Marx's economic theories
Marx's theory of surplus value explains how capitalists profit from workers' labor. Workers produce more value during their working day than they receive in wages. The difference is surplus value, which is the source of profit in capitalism.
The sliders above put a wage next to the value a worker produces. Those are two different things, and the reason they differ is one of Marx's central points: a worker does not sell their labour -- they sell their labour-power.
The capacity to work -- your strength, skill and ability to do a job for a stretch of time.
This is what the employer buys, and what the wage is the price of.
Actually working -- the activity itself, hour after hour, once the employer puts that capacity to use.
This is what creates new value.
The value of labour-power is what it costs to keep a worker able to work: food, housing, clothing, raising the next generation of workers, plus whatever counts as a normal standard of living in that society (Marx called this the historical and moral element). That is what the wage is set against.
How much value the labour creates is a different question. It depends on how long the worker works and how productively. Nothing makes the two equal, and profit exists because an hour's labour typically creates more value than it costs to have the capacity to work that hour.
Marx's puzzle was how profit can arise when everything is bought and sold at its value. His answer: the worker is paid the full price of their labour-power -- nothing is stolen at the point of sale -- but the employer then gets to use it, and using it produces more value than it cost. The exploitation is in the use, not in a swindle at the exchange. It is also why wages are easy to misread: paying by the hour makes it look as if every hour of labour is paid for, when what was bought was the capacity to work.
What this page simplifies: it treats the hourly wage as the price of labour-power and the "Price" slider as the value an hour of labour adds. Real wages are not pinned to the cost of living -- bargaining and class struggle push them above or below the value of labour-power. And real output also carries value from machinery and materials, which the "Living vs. Dead Labor" tab covers.
Labour-power: The capacity to work. This is what a worker actually sells, and what the wage is the price of.
Labour: The activity of working itself. Once the employer has bought labour-power, labour is what it is used for -- and what creates new value.
Wage: What the worker is paid per hour -- the price of their labour-power, and the cost of labor to the capitalist.
Price: What the worker's hourly output actually sells for -- independent of the wage. The gap between the two is where surplus value comes from.
Necessary Labor Time: The time needed to produce value equal to the worker's wage.
Surplus Labor Time: The additional time the worker works beyond necessary labor time, creating surplus value for the capitalist.
Rate of Exploitation: The ratio of surplus value to wages (s/v), showing how much unpaid labor is extracted from workers.
Every commodity has two sides. Its use-value is what it's actually good for — a coat keeps you warm, linen makes cloth. Use-values are different in kind and can't be measured against each other on any single scale. Its exchange-value is the ratio it trades for other commodities in — and Marx argued that ratio is set by something the two commodities do share despite their totally different use-values: the socially necessary labour time it took to produce each one.
Use-Value: The usefulness of a commodity, what it does for you. This is qualitative and specific to each type of item.
Exchange-Value: The proportion in which one commodity exchanges for another, expressed as price. Determined by socially necessary labor time.
Socially Necessary Labor Time: The average time required to produce a commodity under normal conditions with average skill and intensity -- in practice, an empirical question about the whole supply chain, not something a single number can capture precisely.
There are two distinct ways to increase surplus value. Absolute surplus value comes from lengthening the working day itself — more total hours, so more surplus hours directly. Relative surplus value comes from raising productivity in the industries that produce workers' wage-goods, which cuts the necessary labour time needed to earn the same real wage — without touching the length of the day at all. Marx treats these as historically distinct strategies: absolute surplus value dominates early capitalism (and has a hard physical limit — a day only has 24 hours); relative surplus value, driven by competitive pressure to mechanise, dominates once that limit is reached.
Absolute surplus value: extra surplus hours from a longer day. Has a hard ceiling — 24 hours.
Relative surplus value: extra surplus hours from a shorter necessary portion of the same-length day, via higher productivity in what workers consume.
Living labour is work being done right now — the only thing, in Marx's account, that creates new value. Dead labour is labour from the past, congealed in machinery and raw materials (constant capital, c). When production uses up that machinery and those materials, their existing value is transferred into the product — not multiplied, not recreated, just carried over. Adding more machinery adds more transferred value; it never by itself creates a single unit of new value. Only the living labour of workers — split between wages (v) and surplus (s) — does that.
Dead labour (c): passed through unchanged. Raising this bar never creates new value.
Living labour (v + s): the only source of the day's new value, whichever way it then gets split between wages and surplus.
The organic composition of capital is the ratio of constant to variable capital, c/v — roughly, how much machinery and materials stand behind each worker. As capitalists compete by mechanising, this ratio tends to rise. That matters because the rate of profit is r = s / (c + v), which is exactly the same thing as r = (s/v) / (c/v + 1) — the rate of surplus value divided by one plus the organic composition. Hold the rate of exploitation fixed and raise c/v, and r falls purely mechanically. This identity is the mechanism behind Marx's law of the tendency for the rate of profit to fall.
r = ROSV / (1 + OCC): exactly the identity this project's own real-data tools use — this module is the mechanism, in miniature, behind that chart.
Moving only the OCC slider (leaving ROSV fixed) shows the fall in r is not a story about lower exploitation — it's purely the growing denominator.
Coming soon! This module will explore how competition between capitalists drives the adoption of labour-saving technology, even though it tends to lower the average rate of profit for capital as a whole.
Coming soon! This module will compare rates of exploitation and profitability across different countries.