The economy produces a certain amount of goods and services or total product each year. This can be conceptually divided into two parts:
- Necessary product. The amount of goods and services needed to replace the inputs used up (workers, tools, and raw materials).
- Surplus product. Everything in excess of the necessary product.
surplus product = total product - necesssary product
The necessary product consists of two parts:
- The raw materials and capital goods needed to replace those used up in production.
- Necessary consumption. The goods and services needed to sustain the workers.
The surplus product can go to three things:
- Augment workers' consumption.
- Increase capital stock or use more workers. This results in increased production in the future, also called expanded reproduction.
- Maintenance of non-producers (eg., slaveowners, feudal lords, capitalists, and non-productive workers).
For an exploitive class to exist, there must be surplus product.
A less fundamental quantity called net product is also sometimes defined, as equal to the total product minus the raw materials and capital goods needed to replace those used up in production.
net product = total product - (raw materials used + capital depreciation)
Parallel with surplus and necessary product we can conceive of surplus and necessary labour: the amounts of labour required to produce the surplus and necessary product, respectively. Similarly, we can speak of surplus and necessary value: the value of the surplus product and the necessary product, respectively. IF we adopt a labour theory of value, surplus and necessary value are in the same proportion to each other as surplus and necessary labour.
See also: Surplus value.
Charles Barone, Radical Political Economy. M E Sharpe; Armonk, New York, USA; 2004. Pp 29-31.