Surplus and Economic Development: An Introduction
Surplus as a concept in economics has a long history. From the Physiocrats and to the heights of classical economics manifested in the writings of David Ricardo and Karl Marx, surplus in one sense or another was at the core of the analysis. In fact, it can be argued that the very introduction of surplus into economic analysis changed the basic views of economic relations. Before the writings of Quesnay and de Mirabeau, the wealth of a nation was largely seen as a stock: the wealth of the ruler, or--for the Mercantilists--the amount of precious metals hoarded. 1 The Physiocrats' analysis changed all that. As discussed in more detail in Chapter 2, the focus of the Tableau Économique was on the produit net--output that constituted surplus in the sense that it was unnecessary for the maintenance of the current equilibrium of the economy. 2 This surplus constituted, according to the Physiocrats, the true wealth of a nation. 3 Quesnay's insight, which later proved rather fruitful, was that the wealth of a country is not a stock, an amount of resources that can be increased only at the expense of someone else's, but a flow, a share of the annual output that is not necessary for the continuation of the system. Hence, one, if not the, major contribution of the Physiocrats was to place production--if only agricultural production--at the center of economic theory.
The basic idea of surplus is very simple. If it is possible to determine the amount of resources the economic system needs to reproduce itself in subsequent periods, then it is also possible to calculate the surplus, which, of course, is simply the difference between total output and total reproduction requirements for any given period of time.
As an extremely simple illustration consider an economy in which corn is produced by labor and seed. Labor is paid a fixed wage per annum and the amount of corn sown is a fixed proportion of the number of laborers. Assume that the amount of corn needed as wages and seed to produce one unit of corn equals a. Denoting gross output of corn by Y, it follows that the amount aY is