This unpublished paper demonstrates that, contrary to the ‘Fundamental Marxian Theorem’ (FMT) and the claims of the surplus (post-Sraffian) school, a positive net product is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.