Problems of Distribution and Price Formation

The level of and changes in prices depend not only on the conditions of production that influence the value of output, but to a considerable extent also on the conditions of distribution and other factors linked with the monetary form of production and circulation costs. This stems from the fact that prices do not reflect the expenditure of socially necessary labor directly, but are the monetary expression of value. The growth of social labor productivity and the reduction in the value of goods are the source and decisive factor in the decrease of prices. However, they do not lead to this decrease automatically. As an analysis of the change in the level of production costs and prices over a period of almost forty years (from 1922 to 1960) reveals, changes in prices have corresponded more closely to changes in production costs and far less to changes in the social costs of production, although it is the latter that determines the level of prices.