Sraffa Method Theory Definition

Sraffa’s Method, Sraffa’s Theory and Results

Sraffa develops his analysis of prices within this conceptual framework. The first step is the demonstration that in a system of subsistence production which 'produces just enough to maintain itself and where 'commodities are produced by separate industries', there must be a 'unique set of exchange values which, if adopted by the market, restores the original distribution of the products and makes it possible for the process to be repeated; such values spring directly from the methods of production'.

If the economy produces a surplus, that is, an excess of commodities produced over commodities used up in the produc­tion process and as workers subsistence, then the distribution of this surplus must 'be determined through the same mechanism and at the same time as are the prices of production'. If the wage rate is allowed to be higher than the subsistence level, relative prices and one of the distributive variables (wage rate or rate of profits) may be simultaneously determined, given the technology and the other distributive variable. The higher the wage rate, the lower the rate of profits.

Sraffa then analyses 'the key to the movement of relative prices consequent upon a change in the wage! As the classical economists and Marx already knew, this key lies 'in the inequality of the proportion in which labour and means of production are employed in the various industries!. If these proportions were to be the same in all industries no price change could ensue, while 'it is impossible for prices to remain unchanged when there is inequality of "proportions"

In the course of his analysis, taking up the classical distinction between necessities and luxuries, Sraffa introduces the terms 'basic' and 'non-basic' commodities. The former are commodities directly or indirectly necessary to all the productive processes of the system; the latter are not used as means of production, or are used only in their own production or that of other non-basic commodities. This categorisation is important in the case of technological change. If the technique of production related to a basic commodity changes there are general repercussions on all relative prices and on the relationship between wage and profit rates; while if the change simply concerns the technique of producing a non-basic commodity, the repercussions are re­stricted to the exchange ratios concerning non-basics and do not extend to the exchange ratios between basics or to the relationship between wage and profit rates.

As mentioned earlier, Sraffa also constructs a particular analytical tool - the standard commodity - which enables him to resolve, after suitable redefinition, the Ricardian problem of the 'invariable standard of value'. The analysis of prices of produc­tion is completed by the examination of the case of joint products (into which category the case of fixed capital - where commodity output plus a 'used machine' are jointly produced-can be placed) and the case where there are non-reproducible scarce factors like land. The book concludes with a chapter on choice between alternative methods of production at different profit rates, and some appendices in which Sraffa specifically likens himself to the classical economists.

The constructive aspect of the book therefore consists of the solution of a number of problems which the classical economists and Marx left unresolved. It is concerned with questions which are crucial for the acceptability of the classical economists' theoretical formulation. In addition the solution of these prob­lems does not involve substantial modifications to the classical writers' frame of reference.

The criticism of marginalist (or neoclassical) theories is re­presented by a series of propositions, which can be used as a basis for a criticism of neoclassical attempts to think of capital as of a uni-dimensional magnitude, independent of distribution. This concept of capital is essential to all versions of the marginalist theory (including disaggregated versions like that of Walras), in order to determine the rate of profits as the 'price' of a specific factor of production, homogeneous in nature, identified with 'capital'. This criticism destroys the attempts, developed in the course of a century by marginalist economists, to resolve the problem of distribution between wages and profits as part of the theory of long-run equilibrium prices, based on data such as technology, availability of resources and consumer tastes.


At this point we may come to some provisional conclusions. Summarising what has gone before, we can distinguish three directions integrated with each other in the more than fifty years of Sraffa's research: the criticisms of the marginalist theory, with its basis in a subjective conception of value; the rediscovery oflhe conceptual and analytical picture of the classical framework, based on the conception of the productive process as a circular flow of production, distribution and consumption and on the notion of surplus; and the integration and partial modification of this analysis with new contributions to the theory of prices of production and their effect on the distributional variables.
For all three areas, the results Sraffa arrived at are considered by many economists as conclusive; but, as is normal in any science, agreement is far from unanimous and the force of tradition is still strong. So, from the publication of Production of Commodities by Means of Commodities in 1960 the debate has become ever livelier and has extended into many other areas -from the history of economic thought (in particular the interpre­tation and evaluation of Marxism) to the pure theory of international trade. But, above all, the rediscovery and integ­ration of classical theory accomplished by Sraffa in the particular but vital area of the theory of value has re-proposed the classical framework as the basis for research in all fields of economic science, from the theory of the firm to that of distribution, from the theory of growth to that of technical change - with results of