13.4 – The Corn Model: Production with a Surplus
Learning Objectives
By the end of this section, you will be able to:
- Analyze a corn model with a surplus and equal profit rate across sectors
- Explain how the corn model fits into the broader body of heterodox economic theory
In the previous section, we looked at the math of our corn model involving an economy that produces just enough output to have the inputs it will need in the next year to continue producing. But this only scratches the surface of what we can show with this model. Actual economies don’t simply produce just enough to keep going–that would be a very precarious situation, indeed. Instead, they produce a surplus. Considering first, as we did in the previous section, how an economy can undergo a process of simple reproduction helps to illustrate the concepts of viability and the Going Economy. A much more interesting and practical consideration is the case where an economy accumulates output as surplus, and does so period after period.
Recall that earlier in the chapter we stated that the Surplus Approach is defined by its emphasis on both the quantity and the quality of the surplus. Before we proceed with some arithmetic and charts to illustrate expanded reproduction in the case of surplus, let us consider some interesting qualitative aspects of an economy’s surplus.
First, the surplus – that is the output produced over and above that which is required to supply the various industries with the requisite materials and resources for reproduction – does not spring forth as ‘mana from heaven.’ Rather, it is the result of past investment decisions on the part of either private or public actors. These investments created new plant and equipment capable of transforming labor and other resources into other goods, and in the process changed the structure of interdependence for the economy as a whole. Specifically, the type of goods that result from that past investment and ultimately accrue as measured surplus output reflect the priorities for the economy attendant to that investment choice. One can envision a boundless array of potential investment choices a society can make. However, over a given time horizon, there is a finite and discrete set of possibilities for the way in which the surplus can be arranged, and those outcomes are ‘locked in’ by investments of a prior day. So in this sense, while we can measure quantitative changes in the value of the output of the surplus, we are only getting half the picture if that’s all we focus on. It’s important also to think about what the surplus provides for us in terms of resources, how the economy as a whole is arranged to produce them, and for whom they are produced.
Returning to our hypothetical economy, producing only corn and steel, suppose the following. The corn sector uses 20 tons of corn and 80 tons of steel to produce 420 tons of corn, while the steel sector uses 144 tons of corn and 4 tons of steel to produce 84 tons of steel. We