spend the sum of their wages and profits on consumption in order to reproduce themselves . Furthermore , the total value of department 1 must also equal the total price of constant capital for both departments combined in order to indicate that as constant capital is used up in both departments , it is replenished evenly by both . The reason for this , according to Marx , is that in order to have simple reproduction “ production [ has to ] proceed continuously on the same scale …[ and ] conditions [ must ] remain … the same ”[ 33 ], meaning that they must equalize , the total price and the total value for both departments must be of the same magnitude , size and quantity at the end .
Inserting numbers in the simple reproduction departmental model outlined above , one sees that the numbers do equalize , pending a rate of exploitation / surplus-value being 50 % for department 1 and 300 % for department 2 . To note , the rate of surplus value is defined by Marx as the “ ratio of the surplus value to the variable capital … expressed by S / V ”[ 34 ]. This formula measures the magnitude , intensity and duration of labor-power in relation to how much the capitalist pays for labor-power in general . It is a measurement for the rate of exploitation by the capitalist over the workers that he or she employs . Consequently , because this departmental economic model is divided into two industrial sectors , both have different rates of surplus value . Subsequently , inserting numbers according to the criteria of a simple reproduction model , representing a large economic system ( organized in trillions of dollars ), one sees stability and relative equilibrium across the simple reproduction model as total price and total value equate at the end of each yearly turnover .
Constant + Variable + Surplus Value = Total Value a ) Department 1 | 4000 | 2000 | 1000 | 7000 | b ) Department 2 | 3000 | 1000 | 3000 | 7000 | c ) Total Price | 7000 | 3000 | 4000 | 14000 |
This simple reproduction model indicates that both departments produce the same amount of total value and that their total values combined equal the total price produced throughout the year , i . e ., 14000 . And what is different between the two giant departments , despite the fact that both produce the same sum of total value , i . e . 7000 , is their different organic composition of capital , namely , according to Marx , “ the composition of capital [ invested ]… between variable and constant capital ”[ 35 ].
The different organic composition of capitals between the two departments produce both different rates of surplus-value and different rates of profit . First , department 2 has a higher rate of exploitation / surplus-value in relation to department 1 , due to the fact that the surplus value in department 2 far exceeds its initial variable capital advance at the beginning of the production period . In fact , the rate of exploitation for department 2 is 300 %. In department 1 , the variable capital advanced is greater than the surplus value received at the end of the production period , resulting in a lower rate of exploitation in relation to department 2 . As a result , department 2 produces more value than department 1 , pertaining to the yearly production period . Department 2 is able to do this because it produces more fresh capital-value than department 1 . In fact , department 2 produces 1000 units of fresh capital-value more than department 1 . The equation that determines new capital-value produced in a yearly production period is variable + surplus value ; if department 1 produces 2000 units of variable capital-value plus only 1000 units of surplus capitalvalue , its overall sum , per yearly production period , is 3000 units of fresh capital-value . In contrast , if department 2 produces 1000 units of variable capital-value plus 3000 units of surplus capital-value , its overall sum , per yearly production period , is 4000 units of fresh capital-value . The difference between the two departments is 1000 units of excess capital-value in favor of department 2 . Moreover , for every dollar of variable capital advanced in department 2 three excess dollars are returned , meaning that every dollar fetches 2 dollars of surplus value on top of its initial variable capital investment . Department 2 is able to squeeze more value for less than can department 1 . Contrarily , department 1 only receives 50 % on top of its initial variable capital advanced , meaning every dollar produced only gets 0.50 cents in return on top of