Surplus Value Production and Realization in Marxian Theory - Applications to the U.S., 1987-2015

This paper highlights the separation between surplus value production and realization in Marx's work. A new method of estimating surplus value production at the industry level is proposed and implemented. Marx's procedure of transforming labor values into prices of production shows that capitalist competition to equalize the profit rate entails transfers of surplus value across industries, thus differentials between surplus value created and surplus value realized as profit can exist at the industry level. These types of transfers can also exist between productive and unproductive activities in the circuit of capital. First, to trace out these transfers, a framework linking money value added to surplus value production by industry is established. Second, data on value added by industry for the U.S. are used to estimate surplus value production at the industry level. The analysis allows comparison of surplus value production and realization in each industry. The pattern of differentials between surplus value creation and realization across industries points to a potential source of instability for capitalist economies.