Abstract
The article looks critically at Piero Sraffa's theory of price and implied theory of money against a backdrop of renewed interest in the great economist's work. The focus is the theory of price in his Production of Commodities by Means of Commodities. It is argued that for all its apparent logical (read mathematical) rigor, Sraffa's explanation of prices (and implied theory of money) is (are) essentially flawed. The flaws are traced to his concern to eliminate the labor theory of value from this explanation. It is this concern that causes Sraffa to make the numerous dubious assumptions and constructs which underpin his explanation of prices and that ultimately brings into question its validity as an explanation of actual price magnitudes and their movement.
Highlights
The writings of the great Italian economist, Piero Sraffa, are hardly ever to be found on the reading lists of most university economics courses, there can be no doubting the contribution his work has made, and continues to make, to economic theory
Even a cursory reading of Sraffa’s Production of Commodities by Means of Commodities (PCMC) suggests his work is squarely located in the sphere of Classical political economy, and in particular that of David Ricardo, whose work he painstakingly edited over some considerable period of time, and Karl Marx
Defining a standard system as a sub-system of the actual economic system comprising only basic commodities as both inputs and outputs, as well as taking wage goods as part of the surplus product along with profits, allows Sraffa to argue that changes in the wage share can have a direct impact on the rate of profit and via this on relative prices, but that the exact impact will be unpredictable given that inputs into production can be regarded as comprising successive layers, and the ratios of wages to non-labor inputs can be seen as varying between layers
Summary
The writings of the great Italian economist, Piero Sraffa, are hardly ever to be found on the reading lists of most university economics courses, there can be no doubting the contribution his work has made, and continues to make, to economic theory. Defining a standard system as a sub-system of the actual economic system comprising only basic commodities as both inputs and outputs, as well as taking wage goods as part of the surplus product along with profits, allows Sraffa to argue that changes in the wage share can have a direct impact on the rate of profit and via this on relative prices, but that the exact impact will be unpredictable given that inputs into production can be regarded as comprising successive layers, and the ratios of wages to non-labor inputs can be seen as varying between layers.
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