►1. The rate of surplus value is surplus labor time divided by necessary labor time, or the ratio of surplus value to wages. An increase in the productivity of labor, such as shortening the labor time necessary to produce a given set of use-values or substituting existing products with new cheaper ones with the same use-value, will initially cause an increase in the rate of surplus value. When labor time is shortened but the surplus value of what is being produced remains the same, then the total amount of wages is decreased. Mathematically, it is obvious that this increases the rate of surplus value.
             The organic composition of capital is the value of constant capital, or materials and fixed costs embodied in production, divided by the variable capital, or wages. When there is an increase in the productivity of labor, the total wages of production decreases, and this causes the organic composition of capital to increase. An increasing organic composition means that the industry is going from a more labor intensive industry to a more capital intensive one.
             The rate of profit is the surplus value divided by the total capital invested in production, or in other words, the value embodied in the individual commodities that represents profit for the capitalist. The formula for the rate of profit includes two important variables: organic composition of capital and the rate of surplus value. Marx explains that an increase in organic composition, or capital accumulation, by itself causes wages to increase with the demand of labor power. With the rate of surplus remaining constant, an overall increase in the productivity of labor causes the rate of profit to decline.
             This is where Marx derived his law that shows a tendency for the rate of profit to fall due to growing productivity of labor and socialization. The major question among economists is if this law of tendency is still present when the rate of surplus value is variabl...