Production and circulation in a simple exchange economy

The article is methodological: it does not seek to analyze new economic phenomena; rather, its major aim is to study how these phenomena were formed and developed and how the market system was formed and developed with them. The actual subject of the study is a simple exchange economy model at the stage when production begins to be considered as its endogenous factor. This makes it possible to smoothly introduce the social division of labor into the analysis, to consider in the simplest form its combination with the differentiation of production functions in the framework of an individual household. We pay considerable attention to the analysis of socio-economic implications of the deepening of the social division of labor manifested in the transformation of the production of objects and means of labor into its independent links. We show why at this very stage of the study it becomes possible to provide a well-grounded substantiation for the mechanisms that form the market exchange value of consumer durables and means of labor, and, as a consequence, the interest rate. The introduction of the resource limitation factor into the analysis makes it possible to substantiate the need for the institution of ownership of such resources, the importance of absolute and differential natural rent for the normal functioning of the market economy, and to identify the specifics of formation of the market exchange value of land. We emphasize the importance of making the spatial dimension of the economy a full-fledged subject of analysis for pure economic theory. We touch upon a possible approach to the formulation of an initial model that would take into account the influence of space on the general parameters of economic activity. The main conclusion is that the model of a simple exchange economy helps to form a holistic view of all key categories (albeit in embryonic forms) reflecting the action of the market mechanism. At the same time, it becomes clear why further institutional transformations are required to realize all the potentials available in this form of economic activity organization.