A valid measurement of total productivity necessitates considering all production inputs, and the surplus value calculation is the only calculation to conform to the requirement. The surplus value calculation is the only valid measure for understanding the connection between profitability and productivity or understanding the connection between real process and production process. The starting point is a profitability calculation using surplus value as a criterion of profitability. A model used here is a typical production analysis model by help of which it is possible to calculate the outcome of the real process, income distribution process and production process. It is worth noting that the maximum average productivity is not the same as the maximum of real income. The maximum average productivity is reached when the production volume is 3.0 units. In this illustrative example the maximum real income is achieved, when the production volume is 7.5 units. The maximum for production performance is the maximum of the real incomes.
The maximum for production performance is achieved at the volume where marginal productivity is zero.
The figure is a traditional expression of average productivity and marginal productivity. The differences between the absolute and average performance measures can be illustrated by the following graph showing marginal and average productivity. The real process and income distribution process can be identified and measured by extra calculation, and this is why they need to be analyzed separately in order to understand the logic of production and its performance. The production process and its sub-processes, the real process and income distribution process occur simultaneously, and only the production process is identifiable and measurable by the traditional accounting practices. Production output is created in the real process, gains of production are distributed in the income distribution process and these two processes constitute the production process. The customers’ well-being arises from the commodities they are buying and the suppliers’ well-being is related to the income they receive as compensation for the production inputs they have delivered to the producers. Consumers can be both customers of the producers and suppliers to the producers. In the interaction, consumers can be identified in two roles both of which generate wellbeing. Well-being is made possible by efficient production and by the interaction between producers and consumers. Similarly there are two kinds of actors, producers and consumers. The most important forms of production are market production public production household production In principle there are two main activities in an economy, production and consumption.
They are improving quality-price-ratio of goods and services and increasing incomes from growing and more efficient market production. In production there are two features which explain increasing economic well-being. The degree to which the needs are satisfied is often accepted as a measure of economic well-being. Economic well-being is created in a production process, meaning all economic activities that aim directly or indirectly to satisfy human wants and needs. It is the resource act of creating output, a good or service which has value and contributes to the utility of individuals. Production is a process of workers combining various material inputs and immaterial inputs (plans, know-how) in order to make something for consumption (the output).
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