Marx said of the science of political economy as he found it:—
"She saw the phenomenon (of the falling rate of profit) and was agonized by attempts at conflicting explanations. It may be said, however, that because of the great importance of this law for capitalistic production, this law forms the great mystery about the solving of which the whole science of political economy revolves ever since the days of Adam Smith. And that the difference between the different schools of the science since Adam Smith consists in the different attempts to solve this problem."
There is no such mystery, however, when the Marxian theory of value sheds its light on the underlying basis of the capitalistic mode of production, and the laws of its development are exposed to the light of day. Not only does the Marxian theory offer a satisfactory explanation, but such explanation flows naturally and of necessity therefrom. And it is as simple and as clear as daylight.
The capital employed by a capitalist "producer" in his business is divided into two parts:—One which he spends for his place, fixtures, machinery, raw goods, etc.; and the other which he spends in paying wages to his men, in "employing labor" as it is euphoniously styled. Let us call the capital of the first category "constant" capital, and that of the second category "variable" capital. The reason for these appellations is that according to the Marxian theory, the first kind of capital remains constant, unchanged by the process of production, whereas the second kind of capital varies, changes, to be more specific, increases in that process. As was already shown, only labor creates value, and the capitalist's profits come from the "surplus" value. When a capitalist receives a profit out of the process of production,—his capital increases in the operation,—that variation is due to the capital invested in paying for labor; the other part of his capital, the raw materials and other things can not vary themselves, they are merely reproduced, they remain a constant quantity. Let
