Vulgar Economy--TSS (Part II)

Xxxx Xxxxxx xxxxxxxxxx at
Thu Mar 1 19:46:10 MST 2001

Continued: Vulgar Economy--TSS (Part II)

2. The Surplus Approach to the Theory of Value and Distribution

Temporal Single System Marxism is by no means a homogeneous body of
doctrine; but common to all of its adherents is a strong antipathy to
interpretations of Marx that derive from Piero Sraffa's (1951, 1960)
conceptualization of classical political economy, or that, as with
Bortkiewicz, anticipate insights associated with Sraffa's work.
Bortkiewicz's critique is said to be directed at a caricature of Marx's
argument, in which Marx is wrongly viewed as carrying forward a
theoretical project that was initiated by Adam Smith and David Ricardo,
and then clarified and refined by Sraffa in the twentieth century.   It
would not be inaccurate to say that Sraffa is the real target of
Non-equilibrium Marxism, with Bortkiewicz being identified as a
proto-Sraffian.  Let's begin then with a summary of the Sraffian
interpretation of the classicals and Marx.

The interest of the classical economists in understanding the forces
that regulate the profit rate stemmed from their belief that its
magnitude determines the rate of capital accumulation.  Classical
political economy saw competition as the central coordinating mechanism
within capitalism. In the absence of impediments to the mobility of
resources, intersectoral capital flows push outputs and market prices
toward their long-period normal levels, so that the profit rate will
tend to equalize across all lines of enterprise.  The constellation of
prices, outputs and the real wage consistent with the establishment of a
uniform profit rate reflects the dominant and systematic forces
operating on prices and distribution; these forces were regarded by the
classicals as the proper object of scientific inquiry.  Deviations
between the actual position of the economy and the long-period position
were viewed as the result of random and unsystematic causes which,
precisely because of their accidental character, are of negligible
scientific interest.

A distinctive feature of the classical analysis of distribution is the
central role it assigns to the opposition of class interests - in
particular between workers and capitalists, but also, as in Ricardo's
writings, between capitalists and landowners.  Within this framework,
the share of aggregate income received by the owners of capital and land
represents a surplus obtained after deducting from the social product
the consumption goods necessary for the sustenance and reproduction of
the working class, and the commodities used up in the production process
(including depreciated capital).  The profit rate depends upon the
magnitude of this surplus  - or at any rate the part of it that goes to
capitalists - relative to the quantity of capital utilized in

Here a complication arises.  To see the difficulty, let us leave rents
out of consideration.   The social product, the consumption of workers,
and the fixed and circulating capital that enter into production are not
scalars: they are vectors comprised of numerous different types of
commodities.  Before the profit rate can be established as a ratio of
the surplus to the quantity of capital utilized in production, these
vectors must be made commensurable.  An obvious way to proceed would be
to weight the components of the vectors by their long-period prices of
production, so that the numerator and denominator of the ratio appear as
magnitudes of monetary value.  But since a normal return on capital is
an element of cost, prices themselves depend upon the profit rate and
therefore cannot be treated as known prior to the determination of the
latter.   The solution to this puzzle, as is now well known, requires
that relative prices and the profit rate be determined simultaneously
(see Sraffa 1960: 6).  Simultaneous equation systems and the tools of
linear algebra were not available to Ricardo or Marx, however, and they
had to look elsewhere for a solution.

In the Principles (1821), Ricardo supposed that commodities exchange
approximately in proportion to the quantities of labor that enter into
their production.  On this assumption the profit rate can be determined
as a ratio of quantities of labor-time.  Ricardo realized that this
solution was imperfect since, owing to sectoral differences in capital
structure, commodities do not generally exchange in proportion to the
quantities of labor embodied in them.  His unsuccessful search, almost
to the moment of his death, for an invariable measure of value was an
attempt to overcome the limitations of the labor-embodied approach.
Still, despite its limitations, that approach enabled him to establish
important results that are now known to be correct.  Ricardo was the
first theorist clearly to grasp: (i) that the profit rate and the real
wage are related to one another in a systematic way, and that the
properties of the trade-off between them depend upon the technical
conditions of production; (ii) that a commodity's price varies not only
with the quantity of labor required to produce it, but also with changes
in distribution; and (iii) that the direction and magnitude of the
variations in a particular commodity's price, consequent upon a change
in distribution, depends upon the proportions in which labor and
produced inputs enter into the production of that commodity relative to
the proportions in which they enter into the production of the

Xxxx Xxxxx Xxxxxx
Ph.D Student
Department of Political Science
SUNY at Albany
Nelson A. Rockefeller College
135 Western Ave.; Milne 102
Albany, NY 12222

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