Production with a Surplus — Subsistence Wage

  • J. E. Woods
Part of the Radical Economics book series (RAE)


It is now time to relax at least one of the assumptions of Chapter 2 — that the gross outputs of the economy are just enough to ensure reproduction and that the wage is at subsistence level. Clearly, the latter cannot be modified first. For, if the wage were raised above subsistence level but the technical coefficients were initially such that reproduction was just possible, the economy would be unable to produce enough to meet requirements: that is, more of both commodities would be used up than produced. So, it is necessary to relax, first of all, the assumption that the economy produces levels of gross output just sufficient to meet inter-industry requirements. Retaining the assumption that the wage is fixed (at subsistence level), advanced and incorporated into the input-output coefficients, I have as the two production processes:
$${\tilde X_{11}}\,{\rm{qr}}\,{\rm{wheat}} \oplus {\tilde X_{{\rm{21}}}}\,{\rm{t}}\,{\rm{iron}} \ominus {\tilde X_1}{\rm{ qr}}\,{\rm{wheat}}$$
$${\tilde X_{12}}\,{\rm{qr}}\,{\rm{wheat}} \oplus {\tilde X_{{\rm{22}}}}\,{\rm{t}}\,{\rm{iron}} \ominus {\tilde X_2}{\rm{ t}}\,{\rm{iron}}$$
where now:
$${\tilde X_1}\, \ge {\tilde X_{{\rm{11}}}}\, + {\tilde X_{12}}$$
$${\tilde X_2}\, \ge {\tilde X_{{\rm{21}}}}\, + {\tilde X_{22}}$$
with at least one strict inequality.1 Contrast these expressions with (2.1) and (2.2) respectively of Chapter 2. In the previous chapter, gross output levels were necessarily fixed from period to period. Now, if the economy is capable of producing a surplus, the possibility of accumulation arises. As I shall discuss growth in Chapter 7, I assume now that any surplus product is consumed. The system to be analysed in this chapter resembles that in the previous chapter, in the sense that gross output levels are fixed from period to period: the circulating capital used in production is replaced but there is no net investment. To ensure the absence of all dynamic elements from the economy, I also assume that the labour force is constant through time.


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© J. E. Woods 1990

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