Piero Sraffa Biografia 1898 1983

Piero Sraffa (1898-1983)—A Solution to Ricardo's Invariant Measure Problem

Piero Sraffa Biografia (Biography) and Theory

Piero Sraffa published Production of Commodities by Means of Commodities in 1960. His work added significantly to economic thought because he solved Ricardo's problem of finding an invariant measure of value whose price always perfectly reflects its labor value (based on the labor theory of value including Marx's two equations: total value equals total price and total surplus value equals total profit).

In analyzing effects of differing organic compositions (i.e. ratios of labor to capital or means of production), Sraffa first defined surplus in terms of both wages and profit instead of in terms of only profit like Marx. Next, Sraffa determined that in order for prices of a commodity to reflect only its labor inputs and not to change when the wage rate changed, it was necessary for the commodity and all other commodity inputs used for its production to only include a socially average ratio of labor. His results showed that crucial for the labor theory of value was a determination of the rate of profit over the economy as a whole by using technical conditions of production in a standard industry constructed with basic commodities.
The important thing was that by using the rate of profit that prevailed over the economy as whole, one could determine all prices without ever considering utility or marginal analysis and it did not require any assumption about productive returns to scale. Thus, the standard commodity sought for by both Marx and Ricardo appeared to function as the ideal "average commodity." The weakness of Sraffa's result was that it did not solve Marx's transformation problem. This was because the price of the standard commodity was invariant to changes in wage and profit rates only when it was expressed in terms of its own means of production and not in terms of any other commodity. Also, the form of the standard commodity became modified with technological changes.