Sraffa and Calculation

Thu Aug 4 11:16:05 MDT 1994

     I would like to comment on a few themes which have been
touched upon in recent postings.

     While this is certainly not the place to embark on a
lengthy dissection of Sraffa's contributions, it is true that
impressive attempt to reinvigorate Ricardian economics.
Alas, Sraffa proceeds according to the same basic,
problematic assumptions as his Ricardian and Marxian
forebears.  Sraffa views labor as homogeneous (no distinction
once again, between quantitative and qualitative dimensions),
"input-coefficients" as fixed, costs as constant, the scale
of production as unchanging, and the economy as closed.  He
further assumes a given level of technique, a somewhat
arbitrary distinction between "basic" and "nonbasic"
commodities, and constant returns to scale.  He fully accepts
all of the premises of modern, neoclassical, Walrasian
general equilibrium analysis.  His approach is SOOOO static
as to bear no relation to the real world.  All of the
objections which Austrians have raised against their
classical Ricardian and Marxian adversaries, stand with
regard to the Sraffian approach.

     Now, as for the relation between value and the
calculation problem:

     It is true that Mises's original argument conceded that
labor value MIGHT be one means to facilitate exchange.  He
did not dispute that at a very low level of technological
development, "labor coupons" could be exchanged for a given
quantity of consumption goods.  But in a highly technological
society, involving an advanced capital goods sector, it is
"an illusion," according to Mises, that "calculations in
kind" could substitute for "calculations in terms of money."
Hayek added that since prices transmit knowledge of relative
scarcities and since they are crucial for any social
discovery process, any policy which disconnected prices from
a dynamic market context, would lead to predictable
distortions in the complex, sophisticated, and integrated
structure of production.  Because the economy is always-in-
process, not even an advanced computer could resolve
production problems.  Its millions of simultaneous
calculations and equations would be based upon virtually
obsolete data and the practically useless assumption of

     In the War Communism era of Soviet history, central
planners prohibited private trade, labor employment, land
leasing, private enterprise, private ownership, and private
banking.  They virtually destroyed the currency.  Between
1918 and 1921, money in circulation increased 100 fold, and
prices rose 8000 times as high.  Deliberate inflation was
viewed by the planners as a means to destroy "bourgeois"
society.  With the market system dislocated, the Bolsheviks
attempted to introduce a new, fixed unit of accounting
loosely based upon the law of value.  The inevitable failures
of the War Communism period led to a "New Economic Policy"
and the reintroduction of certain market categories.

     Granted... the early Soviet system's attempts to develop
a "labor coupon" method bear almost no relation to the
original Marxian project, especially since the Soviet system
itself beared virtually no relation to Marx's vision of
communism.  Hence, Stalin himself, attempted to tie Soviet
price policy to a "transformed" law of value.  Prices of
production were founded upon quantitative cost-based notions
of equilibrium.  This price policy masked systemic inflation,
and created systemic shortages and massive economic
discoordination.  Planners used to joke that as long as one
capitalist, market economy were retained in the world order
for the purposes of reference, they would be able to continue
their policies of price-setting.  Bribery, corruption, under-
the-counter sales, and hoarding were the inevitable
"spontaneous" consequences of such irrationality.

                              - Chris

Dr. Chris M. Sciabarra
Visiting Scholar, N.Y.U. Department of Politics
INTERNET:  sciabrrc at
BITNET:    sciabrrc at nyuacf


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