ABSTRACT
The effect of an increase in the demand for a given commodity on its price has been a central problem of economic analysis since the original formulation of the neo-classical conception at the end of the nineteenth century. The issue is specific to the neo-classical mode of analysis of economic relations and, indeed, constitutes its defining feature both with respect to the treatment of the pure exchange system and with respect to the treatment of commodity production. With regard to the latter it is the determination of the shape of the supply curve for the particular commodity which is central. The conditions within which this problem is originally formulated involve the association between an increase in demand for a given commodity and a rise in its price brought about by increasing costs of production; therefore the conditions of 'rising supply price.' This increase in the supply price is brought about by the increasing cost of scarce factors the price of which rises with the intensity of demand for their employment in production. This connection is the central theme of the neo-classical treatment of capital and production and it is in connection with this contention that the deficiences of the neo-classical conception of value, capital, and distribution are revealed to be fundamental. The absence of an inverse relation between the quantity of capital and the rate of return undermines the conception of the economic process as a mechanism of 'resource allocation,' the same conception which is embedded in the idea of rising supply price. In particular, it is not possible to sustain the idea of scarcity of capital where the quantity of capital is not taken to be a given datum fixed with respect to the price system but is constituted, instead, as both pre-condition and result of the totality of the economic process. With the constitution of the quantity of capital as a function of the system of economic relations as a whole both as regards its intrinsic measure and as regards its formation, capital can no longer be conceived to be a 'scarce factor of production.'
