According to Karl Marx, what is the meaning of the organic composition of capital?

Solution

Definition of Terms:

• Constant Capital (c): Money spent on the means of production—machinery, tools, buildings, and raw materials. It is "constant" because it transfers its own value to the final product without adding new value.
• Variable Capital (v): Money spent on wages (labor power). It is "variable" because labor creates new value during the production process, exceeding the cost of the wages paid (the source of surplus value).

The Two Components of Organic Composition: Marx defines the organic composition as the value composition of capital, insofar as it is determined by, and reflects the changes in, the technical composition:

• Technical Composition: The physical ratio between the mass of the means of production and the mass of labor necessary for their use.
• Value Composition: The ratio of the value of constant capital to the value of variable capital (c:v).

Why it Matters: Marx argued that as capitalism develops, the organic composition of capital tends to increase. This happens because capitalists introduce more machinery to increase productivity, leading c to grow faster than v. This "rising organic composition of capital" is a primary factor in Marx’s theory of the Tendency of the Rate of Profit to Fall, as profit is derived only from the exploitation of living labor (v), which becomes a smaller portion of the total investment. Why other options are incorrect:

• Option A describes the rate of profit or general accumulation, but not the specific "organic" structure of the capital itself.
• Option C describes only the technical composition of capital, ignoring the value aspect (c/v) which is essential to the "organic" definition.
• Option D refers to the "Prices of Production" and the equalization of profit rates, which is a consequence of capital mobility rather than the definition of its composition.