Production Of Commodities

Production Of Commodities By Means Of Commodities

The most important inheritance Ricardo and the classical economists left us is that of the representation of the economic system as a circular flow of production and consumption based on the concept of the surplus, which Sraffa brought to light again in his edition of Ricardo's work and which he perfects analytically in Production of Commodities (1960).

This book, as already noted, has a dual purpose: that of providing the basis for criticism of the marginalist theory and that of analytically perfecting the classical economists approach. This explains some apparent 'openings' in the book which have deceived the many interpreters who have thought it possible to reduce Sraffa's analysis to a special case within the marginalist theory. In fact, if we introduce into Sraffa's analysis two hypotheses which he does not make use of-those of constant returns to scale and equilibrium between demand and supply for all commodities we arrive at the above interpretation. On the one hand this is necessary if we wish Sraffa's analysis to serve as a logical internal criticism of marginalist theory and have the destructive strength that an external criticism could not claim. On the other hand, as far as the constructive contribution to the theory of price and distribution is concerned, those hypotheses violate Sraffa's own conceptual framework.

This framework is closely connected to that of the classical economists. In Sraffa's analysis, as in that of the classical writers, the equilibrium condition on which the determination of produc­tion prices is based (the classical 'natural prices') consists simply in the equality of the rate of profits in each sector. This hypothesis, together with the consideration of the physical costs of production (that is of the quantity of the various means of production necessary to obtain a given quantity of production) is sufficient to determine the relationship between distributive variables, rates of profits and wages, and prices of production. This is, therefore, an approach based on objective data, in complete opposition to the marginalist theory which is based on consumer 'preferences'.
If we wish to summarise the conceptual framework of the Sraffian and classical analyses, it is enough to record the following factors:

(i) The relation between prices and distributive variables is determined at each point in time by current technology.

(ii) This datum is valid only for the moment under consideration, for technology undergoes continuous change. Analytically the situation of a certain economic system is considered as it might appear from a 'photograph' taken at a given moment.

(iii) All economic magnitudes which are not the object of the analysis may be considered as data, and the theoretician can concentrate his or her attention on the virtual (hypothetical) movements of magnitudes and on their mutual relationships which appear as 'isolated in vacuo'.

(iv) In the case ot Production of Commodities (1960), Sraffa has chosen the relationship between production prices and distributive variables (rate of profits and wage rate) as the objects of the analysis. All other variables (technology, levels of output, structure of industry etc.) are taken as data.

(v) This choice, however, does not imply an a priori refusal of the possibility of analysing the problems of technological development, levels of output, strategy of the firms and so forth. This choice simply stems from the necessity of analysing the different problems one by one, and each in isolation.

(vi) The necessary assumptions and methods of analysis are not necessarily identical for all problems; for each of them only what is relevant should be included, leaving aside those elements which, as Ricardo said, simply 'modify' the analysis but do not change it substantially.