Reproduction (economics) - Theoretical Approach

Theoretical Approach

As an approach to studying economic activity, economic reproduction contrasts with equilibrium economics, because economic reproduction is concerned not with statics or with how economic development gravitates towards an equilibrium, but with dynamics, i.e. the motion of an economy. It is not concerned with the conditions of a perfect match of supply and demand under idealised conditions, but with quantitative proportions between different economic activities or sectors which are necessary in any real economy so that economic activity can continue and grow. And it is concerned with all the conditions for that, including social and technical conditions necessary for the economic process.

Wassily Leontief developed Marx's idea further in his input-output economics (see also input-output model). However, there is a big difference between Leontief and Marx. By treating gross profit as a "factor input" as well as a factor output, the respective values of the input and output in Leontief's model are always exactly equal. In Marx's model, the output in an accounting period is normally always higher in value than the input; that is what Marx believed capitalists to be in business for - to produce a product sold at a higher value than the sum of input costs, thus generating profit. The profit in Marx's theory is not an "input" (it is not part of capital advanced), but a business result, the yield of capital upon investment.

In Marx's view, economic reproduction in any society has five main features:

• the production of reproducible products (goods or services) replacing, maintaining or adding to the stock of society's physical assets.
• the physical maintenance of the (working) population and their dependents through household consumption.
• the reproduction and growth of the total population, including procreation and childrearing.
• the reproduction, enforcement and maintenance of social relations, in particular the relations of production which characterize the social hierarchy, and property rights.
• the maintenance and reproduction of trading and distribution relations (the systems, institutions and organizations enabling market trade and non-market allocation of resources).

What is specific to capitalist society is that these reproduction processes are accomplished primarily via the intermediary of commercial trade - they are mediated by the market. Reproduction on a larger and larger scale becomes conditional on successfully making money. It means that these processes tend to be reorganized more and more, to bring them in line with the requirements of the accumulation of capital.

Marx's argument is that by producing an output value with their labour which equals the equivalent of their own wage plus a surplus value (or gross profit) appropriated by capitalists, waged workers accomplish many of the processes involved at the same time. Part of the role of the state is to secure those general (collective) conditions for the reproduction and maintenance of society which individuals and private enterprise cannot secure by themselves for one reason or another (for example, because they transcend competing interests, because they are too costly for private agencies, because it is technically not possible to privatize them, or because they are not sufficiently profitable or too risky). Ecologists would nowadays probably add as a "reproduction condition" good stewardship for the physical environment. Sustainable development cannot occur, if the natural environment is constantly depleted without being restored.

All these six features are always the subject of much political controversy in society. Many different opinions always exist about their relative importance, and their effects on each other. Economists and businesspeople are often primarily concerned with the economic effects, but other intellectuals and workers are often more concerned with the non-economic effects for the health, security and wellbeing of citizens. Thus, governments usually have both economic policies and social policies, population policies, environmental policies etc.