A Computational Approach to the Marxian Circuit of Capital Model

The Marxian circuit of capital model is one useful analytical framework that allows us to identify the requirement for the reproduction of the capitalist economic activities over time. This paper revisits the core ideas of Marx-Foley-Basu’s mathematical model of the circuit of capital to replicate and simulate some analytical solutions and to extend the baseline model by accounting for the effect of financialization, corporate offshoring, and the realization crisis on the expanded reproduction and growth of domestic productive capital. The paper shows that the reproduction of capital-labor relation and/or the very process of capital accumulation at both simple and extended scale involves recurrent cyclical fluctuations in various measures of capital stock induced by the combination of both the change in the quantity of capital flows that link three capital stock measures and the absolute average time required for the transformation of one form of capital stock into other. The paper also shows that both financialization and corporate offshoring has detrimental effects on the accumulation of domestic productive capital stock, as the involuntary accumulation of inventory generates realization crisis