The Standard Commodity as a Tool of Economic Analysis

Abstract

Sraffa, in his Production of Commodities by Means of Commodities (Sraffa, 1960), intended to achieve two purposes: to lay the foundation for a critique of neoclassical theory and to prepare for a return to the classical theory of accumulation by providing a modern formulation of a classical theory of value. He showed that prices are determined and vary in function of the rate of profit, if the quantities to be produced are given with the technology in use. On the one hand, the variations in the total value of capital goods so induced are incompatible with traditional views of a determination of distribution and employment through supply and demand for capital as a factor of production. On the other hand, room was made for a determination of the levels of output and employment, and of distribution, through non-neoclassical theories. As a matter of fact, a given real wage rate had been the key to the explanation of distribution in the Ricardian system (with profits being a residual in the surplus after the payment of rents), and with the level of accumulation reached in any period determining the number of workers then to be employed. The theory of distribution (Pivetti, 1985), of the level of output (effective demand, Garegnani, 1964/5) and of its composition (Chapter 14 in this volume) would have to be rather different under modern circumstances; the reconstruction of classical theory therefore remains a laborious task.