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Negative net products with positive profits


  • Freeman, Alan


This unpublished paper was developed out of a numerical example posted on the PEN-L list in June 1995 and submitted to Review of Political Economy in September 1996. It demonstrates that, contrary to the ‘Fundamental Marxian Theorem’ (FMT) and the claims of the surplus (post-Sraffian) school, a positive net product is not a necessary condition for a positive profit. That is to say, a positive profit may arise even though society produces less than it consumes of at least one good. Given technical progress, negative net products are not a pathological exception but a perfectly normal and indeed, rather usual state of affairs. Technical progress implies that society replaces one product with another –steam with internal combustion, mechanical transmission with electrical power, the abacus with the computer, or simply the 286 chip with the 386, the 586, the Pentium, and so on. The principal consequence of technological obsolescence, in short, is that as a product is phased out, society will cease producing it but continue consuming it. That is, capitalism, as a normal aspect of its functioning, produces negative net products. For the surplus school this makes exploitation inexplicable, since this school relies on the FMT to derive exploitation – the ‘theorem’ that in Steedman’s (1997:53) words The conditions for profitability, production of physical surplus and ‘production’ of surplus labour are … identical. This paper established for the first time that this statement is false. This subsequently became central to the 2007-2008 controversy between Mohun, Veneziani, Kliman and Freeman, cf ‘Replicating Marx: a reply to Mohun’, Capital and Class No. 88, Spring 2006, pp 117-123, and ‘Simultaneous Valuation vs. the Exploitation Theory of Profit: A summing up’, Capital and Class No. 94, Spring 2008.

Suggested Citation

  • Freeman, Alan, 1995. "Negative net products with positive profits," MPRA Paper 9010, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:9010

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    References listed on IDEAS

    1. J.S. Metcalfe, 2001. "special issue: Consumption, preferences, and the evolutionary agenda," Journal of Evolutionary Economics, Springer, vol. 11(1), pages 37-58.
    2. Waka Cheung & Yew-Kwang Ng, 2004. "The different consumption functions of products and product differentiation," Econometric Society 2004 Australasian Meetings 318, Econometric Society.
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    More about this item


    Value; Price; Money; Labour; Marx; MELT; Okishio; TSSI; temporalism; rate of profit;

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology


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