Production: mutual exchange between

There are two main ways in which reproduction is made possible. First, the two departments have complementary requirements. Department 2 exchanges 2,000 units of its output of consumption goods for 2,000 emits of means of production produced by Department 1. These 2,000 emits of con-seimption goods fulfil the variable capital (1,000) and capitalist consumption (1,000) requirements of Department 1. And the 2,000 units of means of production supplied by Department 1 allow capitalists in Department 2 to replace used-up constant capital. Reproduction is facilitated by mutual exchange between the two departments. 

The circulation of money in Nell s model has some resemblance to Marx s analysis of mutual exchange between departments of production, as discussed in Capital, volume 2 (Marx 1978 474-8). Marx provides a similar example in which capitalists in the capital goods sector (Department 1) advance a sum of 1,000 to workers. He writes ... 

All nondegenerate reactions must obey the requirements a)-c). For the degenerate transformations (in which a simple exchange of positions of equivalent nuclei occurs), the symmetry considerations admit of supplementary, in comparison with the structures of the reactants and the products, symmetry elements in transition state structures provided that the symmetry operations corresponding to these elements lead to the mutual exchange between nuclear configurations of the reactants and the products [6]. 

The key difference is that Department 1 produces 6,000 units of capital goods, but only 5,500 are required to replace constant capital in the two departments.3 Department 2 now requires 1,500 units of capital goods in order to replace the amount it uses up. But Department 1 continues to produce a surplus of 2,000 units of capital goods (equivalent to 1,000 variable capital plus 1,000 surplus value) over and above the 4,000 it needs to replace constant capital. Therefore, the mutual exchange that took place between the two departments under simple reproduction, where surplus consumption goods were swapped for surplus capital goods, is only partially fulfilled. Marx (1978 587) explains that in each period of production the surplus of capital goods produced by Department 1 remains to be realized .4... 

The most basic proportions embedded in the reproduction schema are established under simple reproduction. This was touched on in our introduction to the schema in Chapter 2, and in establishing the mutual exchange which takes place between departments of production in the circulation of money (Chapter 4). These proportions can be formally derived, in Table 6.1, by displaying the elements of Marx s numerical example (Table 2.1) alongside the Marxian algebraic symbols.3... 

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