In some types of production, the replacement of capital and fixed capital occurs in terms of its value, and use value, simultaneously. A farmer, for example, reproduces the value of the seed they consume in production, with the corn etc. they grow. But, a portion of this corn is then physically set aside, as seed, to replace that consumed in its production. A machine maker uses machines to produce machines, and sets aside some of their production of machines, to physically replace the machines they have used up in that production, and so on.
“Jones’s remark that the additional capital must be “reproduced” (of course from the sale of the product or in kind), “in the time it wastes away” simply means that the commodity must replace the wear and tear embodied in it. In order to begin production anew, all the value elements contained in the commodity must be replaced by the time when its reproduction is to begin again. In agriculture, this reproduction time is given as a result of natural conditions, and the period of time in which the wear and tear must be replaced is given, in exactly the same way as the time in which all the other value elements of grain, for example, have to be replaced.” (p 438)
The reproduction of use values is not simply a question of their consumption – either productive or unproductive – because each type of use value has a lifespan. It is more or less durable.
“They decay, and finally they disintegrate. If their use-value is destroyed, then their exchange-value goes down the drain and that puts an end to their reproduction. The final limits of their circulation time are therefore determined by the natural times and periods of reproduction proper to them as use-values.” (p 438)
As Marx described in Capital II, for production to be continuous, capital must be allocated in appropriate proportions. Suppose it takes 1,000 hours of labour to produce a car gearbox, and the car producer produces 10 cars in 1,000 hours. There is no point employing only 1,000 hours in producing gearboxes, because this would not meet the car maker's demand for them.
Where very large amounts of fixed capital are used, the output must be such that the value transferred to output, over its lifetime, is sufficient to cover its replacement. This is why such firms depend on keeping the fixed capital fully employed.
A large amount of capital is tied up, for example, in a ship, but, if, for whatever reason, the ship is not fully employed, moving cargo, it will not return sufficient funds to cover its own reproduction. But, this also applies where the lifespan of a piece of fixed capital is cut short. A ship may sink, having only been in operation for six months, and so on. This is why insurance is required in such businesses, to cover capital losses. But, the same thing applies to moral depreciation. A firm may have only bought a machine year ago, but then finds that a newly developed machine makes it obsolete, causing it to suffer a capital loss that cannot be recovered in the value of output.
The other aspect of the question raised by Jones is the motivation of the capitalist for introducing a machine in place of labour, or what amounts to the same thing, a new machine in place of an existing machine. The motivation is profit.
“Nowhere does Jones explain how he conceives the genesis of this profit. But since he merely derives it from labour, and the profit yielded by the auxiliary capital simply from the increased efficiency of the labour of the workmen, it must consist of absolute or relative surplus labour.” (p 439)
But, the additional profit here is not the same thing as a higher rate of profit, though that might be the case in the short term. The firm that introduces a new machine, does so, because competition drives it to do so. It must ensure that it steals a march on its competitors so as to reduce the individual value of its output, and thereby gain increased market share, or at least avoid losing market share were its competitors to also introduce such a machine. For the individual firm, as it gains market share, by selling at a price marginally beneath the market value, it increases both its mass and rate of profit. When other firms introduce the machine, so that the market value falls, because now less labour is employed relatively, the rate of profit will fall, but, with the market value of the commodity having been reduced, this will result in the demand for it rising. The market will thereby expand, so that even though each firm may now obtain a lower rate of profit, they each obtain an increased mass of profit as a result of more capital in total being employed.
For any individual firm, as as set out above, the actual basis of this profit is that it reduces the individual value of its output below the market value, whilst it continues to sell its output at the market value or marginally below it. In terms of prices of production, the firm sells its output at the price of production, but its cost of production (c + v) falls. Consequently, its profit rises above the average profit, in a similar way to how a farmer on more fertile soil obtains a surplus profit. The difference is that the farmer's surplus profit goes into the pocket of the landlord, as differential rent, whereas the surplus profit of the manufacturer goes into his own pocket. The surplus profit only disappears when other manufacturers introduce the machine so that the market value of the output is reduced.
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