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Production of Commodities by Means of Commodities. Prelude to a Critique of Economic Theory.
... Tad deramesnis D. Ricardo problemos sprendimas nuo maržinalistinės revoliucijos laikų turėjo palaukti, kol italų ekonomistas, XX a. trečiajame dešimtmetyje iš Italijos emigravęs į Angliją, Piero Sraffa (1898Sraffa ( -1983, kuriam buvo lemta tapti vienu iš XX amžiaus intelektualinių lyderių, kuris gana jaunas paliko akademinį pasaulį, kad likusį savo gyvenimą pašvęstų K. Marx'o idėjų adaptavimui XX amžiui (apie D. Ricardo oficialaus biografo P. Sraffa'os vietą plėtojant ekonomikos teoriją žr. Meek, 1961;Blaug, 1988;Kurz, 2000), išleido savo garsiąją knygą "Prekių gamyba" (Sraffa, 1960), kurioje bandė atskleisti, kad senoji D. Ricardo problema iš esmės gali būti išspręsta kaip "nekintamą vertės matą" panaudojant jo pasiūlytą "standartinę prekę" (Blaug, 1997(Blaug, [1978). ...
... P. Sraffa dėmesį sutelkė į specialią, sudėtinę prekę, kurią pavadino standartine preke, ji turėjo vaidinti nekintamo vertės mato vaidmenį, kai D. Ricardo bandė surasti vieną šį vaidmenį atliekančią prekę. Pažymėtina, kad šios standartinės prekės nebūtina pagaminti, ji yra "grynai pagalbinis konstruktas" (Sraffa, 1960). ...
... Be to, P. Sraffa atskleidė įdomų ryšį pajamų paskirstymo aspektu, standartinę prekę priėmus kaip numérairepajamų paskirstymo tiesinį sąryšį (Kurose, Yoshihara, 2014). Knygoje "Prekių gamyba" (Sraffa, 1960) P. Sraffa įrodė "kapitalo kiekio", kaip vieno dydžio, nepriklausomo nuo paskirstymo, išmatavimo negalimumą ir problemos sprendimą susiejo su darbo užmokesčio-pelno-kainos rišlaus ryšio nustatymu (žr. Kurz, 2020). ...
Straipsnyje pateikiamas D. Ricardo veikaluose išreikšto siekio atrasti „nekintamą vertės standartą“ atsiradimo aplinkybių ir jo realaus aktualumo šiandienai teorinis tyrimas. Jis grindžiamas nuostata, kad visos pastangos suprasti šiuolaikinę visuomenę turėtų apimti dėmesingumą idėjų ir visuomenių istorijai. Atliekant tyrimą siekiama atskleisti D. Ricardo veikaluose taikytos „nekintamo vertės standarto“ sampratos paieškų aplinkybes, svarbiausius jos turinio aspektus bei parodyti jos realų aktualumą šiandienos ekonomikos teorijai ir ekonominei politikai. Tyrimo rezultatai atskleidžia, kad šiuose veikaluose D. Ricardo aiškiai parodė, kad pastovaus vertės mato atradimas yra neįmanomas tikslas, nes turi išlikti nepakitusi prekės gamybos technika, juk kintant produktų gamybos technologijoms, kinta ir prekių vertė.
... Karl Marx also engaged with this concept in his analysis of capitalist production. In the 20th century, circular production reappeared in the works of Sraffa (1960), Von Neumann's growth theory, and Leontief's input-output analysis, among others. On the other hand, the one-way representation gained prominence with the marginalist revolution of the 1870s. ...
... In Appendix D ('Reference to the literature'), Sraffa (1960) asserts that his work is connected to the theories of old classical economists and their representation of the 'system of production and consumption as a circular process.' Such a view, Sraffa comments, 'stands in striking contrast to the view … of a one-way avenue that leads from "Factors of Production" to "Consumption Goods". ...
... 5 Let us now analyse how we can extend this proposition to the general case of many commodities. Our point of departure is the price system developed by Sraffa (1960): 6 ...
... Once we consider the limitations of the neoclassical demand and supply apparatus to determine distribution, relative prices, output and employment, showed by Sraffa (1960), Garegnani (1970) and many others, a different framework for the study of tax incidence is required. This critique of the neoclassical approach implies abandoning the idea of a tendency towards full employment equilibria and with it also entails discarding the notion of Pareto efficiency (Garegnani, 2007). ...
... Hence, taxation of non-basic goods does not change the relation between the real wage and the rate of profits. As Sraffa (1960, p. 55) puts it "A tax on a basic product then will affect all prices and cause a fall in the rate of profits that corresponds to a given wage, while if imposed on a non-basic it will have no effect beyond the price of the taxed commodity...". The only real impact of taxation in this case would be on the real value of profits spent on the consumption of the non-basic good, as taxation will increase the relative price of the luxury good in terms of corn. ...
... 6 Note that this result could be readily extended to any number of (non self-reproducing) non-basic goods as indicated by the above quote from Sraffa (1960). ...
This paper discusses the distributive effects of indirect taxes on produced commodities in a Sraffian conflict inflation framework, in which we make use of a simple "Corn Model" to generalize some results from Okishio ([1958]1977) and apply them to the question of real tax incidence. We show that real tax incidence depends on whether the tax rate is levied on basic or non-basic goods and that in the case of a tax imposed on basic goods, different results in terms of real tax incidence depend on different assumptions about how firms increase prices and workers increase bargained money wages. Within this framework, income distribution, real tax incidence and cost-push inflation are jointly determined by the distributive conflict and the relative bargaining power of workers and firms, expressed objectively in terms of the size and frequency of price and money wage increases. From these results, we argue that a reduction in indirect taxes on basic goods could be a desirable anti-inflation policy, as such reduction, even if accompanied by revenue compensating increases in the in the taxation of non-basics, would increase both the real wage and the real rate of profits, while permanently lowering the rate of inflation.
... For instance, indirect payroll taxes may lead to the reduction of the levels of labor employment and output. Alternatively, taxes on wages may reduce the labor supply which could also reduce employment and output levels. 1 Once we consider the limitations of the neoclassical demand and supply apparatus to determine distribution, relative prices, output and employment, showed by Sraffa (1960), Garegnani (1970) and many others, a different framework for the study of tax incidence is required. 2 This critique of the neoclassical approach implies abandoning the idea of a tendency towards full employment equilibria and with it also entails discarding the notion of Pareto efficiency (Garegnani 2007). ...
... Note that this result could be readily extended to any number of (non self-reproducing) non-basic goods as indicated by the above quote fromSraffa (1960). ...
... Piero Sraffa goes back to the relationship between material and social interdependencies. He theorizes the influence of social relationships (primarily, in his case, between cap-italists and workers) for determining the rate of profit and the unit wage, and thus the relative prices at which the products should be exchanged for one another to allow material reproduction (Sraffa, 1960). In Sraffa's case, the relationship between the material and social conditions for reproduction is carried out in terms of 'horizontal' interdependencies between production processes and under institutional assumptions that suggest a perfectly competitive capitalist economy. ...
... A remarkable implication of this dual approach to production interdependence is that social interdependence appears to have a dual route to express itself (Cardinale, 2018). On the one hand, a circular representation coupled with the common assumption of uniform profit and wage rates leads to visualise a trade-off between the two, and therefore a conflict between receivers of profits and wages (Sraffa, 1960). On the other hand, a vertically integrated representation makes it possible to conceive different aggregations. ...
Political economy developed from profound transformations in economic and political life. The economic sphere extended from the management of individual units, such as households or the royal demesne , to a system defined as the collection of economic activities subject to sovereign authority, and characterized by widening webs of productive and social interdependencies across manifold units. In the political sphere, sovereign decisions came to be considered in the light of the material opportunities and constraints associated with productive interdependencies. Accordingly, the principle of economic life moved from the allocation principles of the household to system-level decision-making, guided by the correspondence between means and polity-level objectives and understood in the light of the material and social interdependences in the polity. The paper maintains that the relationship between economic structures and objectives at the systemic level should become again a central object of political economy. It goes on to argue that the development of structural economic analysis since the 20th century provides powerful analytical tools to investigate: (i) the systemic objectives that polities could pursue given their economic structure; (ii) the social aggregates that could form out of those which economic structure makes possible, and the particular objectives they could construe and pursue; and (iii) the constraints that economic structure imposes on the pursuit of all objectives, be they systemic or particular.
... 12 What classical economists like Smith and Mill, just to name a few, had in common, was the idea that an economist has good 'reasons to value many things other than income and wealth, which relate to the real opportunities to lead the kind of life we would value living' (Walsh, 2000, p. 5). The first contributor to the revival of the classical political economy was Sraffa (1960) who explored the 'analytical framework that explains the production and distribution of the economic surplus, which underpins the work of classical economists from Adam Smith (1776) to Karl Marx (1999)' (Martins, 2011, p. 112). This focus successively became a central issue also in the so-called Cambridge tradition. ...
... In this respect, Walsh's starting point was the idea of a standard of living. Although he highly regarded Sraffa (1960), Walsh emphasized that he did not say much on the classical idea of a subsistence wage that is relevant for talking about a certain standard of living. Because of this missing element, Walsh suggested a return to Sen (1980) and Nussbaum's (2000) earlier works where they talked about basic capabilities for making Sraffa's theory more applicable to the contemporary world through the consideration of physiological and social conditions concerning economic issues. ...
This paper offers a history of the capability approach from its origins to its more recent development. Sen himself refused to be defined as the capability theorist and despite this analysis, we will come to understand that Sen played an essential role in this history because he pioneered the approach, but that his role has probably been overestimated by the available literature. Two further ‘main characters’ provided a relevant contribution to the origins and development of the capability approach, namely Walsh and Nussbaum. Finally, this paper considers the two main groups that have developed since the capability approach, the capability approach centred perspective and the capability approach heuristic value perspective, in order to show how they follow these three main characters in their own development of the capability approach.
... the functional income distribution have been formally studied by Sraffa's (1960) system of price equations, which is conceived of as a representation of the long-period equilibrium under free competition and is known as underdetermined: in the system, the number of unknown variables is greater than that of equations, which implies that one of the wage and interest rates should be the parameter of the market mechanism, that must be determined outside of market competition in order to close the system of the equations. Such a structure of price determination under free competition is compatible with the classical and Marxian view that the wage rate is determined by historical and institutional factors, rather than the matching mechanism of demands and supplies in labor markets. ...
... Given the same features, Mandler (1999a) investigated Sraffa's indeterminacy claim for equilibrium with a non-stationary price vector. This equilibrium is defined by the zero-profit condition for a non-stationary price vector and the excess demand conditions for commodities and factors by reflecting Hahn's (1982) criticism of stationary prices and the lack of the demand side in the original model of Sraffa (1960). It has a similar structure to the above-mentioned sequential second-period equilibrium, in that the equilibrium production activity vector is non-arbitrarily fixed by the endowment vector of factors given at the beginning of this period. ...
In contrast to Mandler's (1999a; Theorem 6.1) impossibility result about the Sraffian indeterminacy of the steady-state equilibrium, we have proposed a simple example of overlapping generation economy in which generic indeterminacy occurs in the Sraffian steady-state equilibrium.
... This method, in fact, although considered by Garegnani to be equivalent to the "Surplus-equation method", finds no precedent in the work of "classical economists" and has only formal analogies with Marx's determination of the prices of production 4 . But, above all, it was developed 3 Indeed, what Sraffa explicitly recognised as a "standpoint" typical of "the old classical economists from Adam Smith to Ricardo" and successively "submerged and forgotten since the advent of the 'marginal' method" was merely an investigation of prices and distribution that "is concerned exclusively with such properties of an economic system as do not depend on changes in the scale of production or in the proportions of 'factors' " (Sraffa, 1960). 4 Marx did not deal with prices of production and the rate of profit as key concepts for his analysis of capitalist economies, as claimed by Steedman (1977). ...
This paper argues that the concern to determine the rate of profit, attributed by the modern surplus approach to the classics, was not the main focus in most classical authors before Ricardo and certainly did not have a central place in Marx’s analysis.
According to Marx, a uniform rate of profit was only one way to determine the
distribution of surplus value among the owners of capital, while the distribution of
income among capitalists and workers was strictly determined by the rate of surplus value.
Marx did not use his own version of the labour theory of value to determine the rate of profit and production prices, but to analyse the dynamics of economic aggregates and bring to light the inner social nature of production and distribution processes. In this context, Marx’s rate of profit was only an aggregate measure of the maximum potential growth rate.
... It is evident, from the change in the matrix structure from M to B , that the value transfer of fixed capital participating in reproduction is accompanied by an increase in service age, which corresponds to depreciation. This observation can be traced back to Sraffa (1960) distinguishing fixed capital according to service age. For example, in the case of newly acquired fixed capital (service age is 0), only general depreciation is considered: ...
Accelerated depreciation of fixed assets is a representative tax reduction policy. While existing empirical studies have primarily focused on the micro perspective, there is a lack of literature systematically quantifying its macro-level economic impact. Based on Marxist political economy and drawing on Okishio’s theory of accumulation, we propose an analysis framework integrating the reproduction of fixed capital into the overall reproduction of aggregate social capital. This study aims to examine whether, and to what extent, accelerated depreciation can promote economic growth, using China’s input-output data from 1981 to 2020. The findings reveal that accelerated depreciation positively impacts economic growth, primarily driven by new investments. This impact becomes more significant as the depreciation period shortens. However, it is essential to note that shortening the depreciation period also leads to a negative adjustment effect due to increased costs. Theoretical implications for policymaking need a systematic perspective on the role of accelerated depreciation and investment-driven growth.
... The Sraffian approach addressed here 5 originates from Piero Sraffa's contribution in the first half of the 20th century and is based on the resumption and critical development of the classical political economy of Smith, Ricardo, and Marx. In this sense, Sraffa not only pointed out the analytical difficulties present in the theory of value of these authors but also gave solutions for them by the simultaneous determinations of the endogenous distributive variable and the relative prices, as well as by the so-called "standard commodity" (Sraffa, 1960). ...
This paper aims to contribute to the understanding, in the field of heterodoxy, of the end of the Golden Age of Western capitalism. In this regard, this object is examined through a comparative analysis of three different theoretical approaches, which have in common the adoption of the Principle of Effective Demand and the influence of Marx’s framework: the regulation school and the neo-Kaleckian and Sraffian approaches.
KEYWORDS: Golden Age; political economy; Kalecki; regulation school; Sraffa
... 16. These "key" or "leading" sectors of the economy or "basic industries" as Sraffa (1960) put it, are commodities that enter directly or indirectly in the production of all commodities, which then spread novelty throughout the economy. Pasinetti (1981) extends the multi-sectoral conceptual framework to handle leading sectors and creative destruction. ...
This chapter is about radical innovation and disruptive technological change. Discovering the nature and mechanisms of disruptive technological change can help to understand the long-run dynamics of innovation and map profound transformation in socioeconomic systems. The chapter considers four concepts essential for the understanding radical and disruptive technological change: long waves, techno-economic paradigms, general purpose technologies (GPTs), and disruptive technologies. We conclude with some insights on the emerging technologies in the latest techno-economic paradigm. The tools and concepts given here remain the cornerstone of a useful theory of innovation and change even in our current complex socio-technical landscape.
... The labor theory of value is equivalent to assuming a Leontief price system, as is known since the influential revival of Ricardo's theory bySraffa (1960). Section 7 (Theorem 2) contains a slightly different, simple, derivation of the labor theory of value in which the profit rate does not appear explicitly, since profit is already included in cost of production, as it should be strictly speaking in the original classical treatment. ...
... Yet this is one of the most neglected areas of corporate governance. Marx's labour theory of value creation was largely forgotten and displaced by the marginalist theory of economics (Bryer 1994;Sraffa 1960). In the process the social relations of production are displaced by capital relations. ...
... It is evident that, all else being equal, the price of say commodity i increases (decreases) with a rise (fall) in the rate of profit, as a theoretical exercise to identify limits and possible price trajectories and not that the rate of profit can take on any values. However, Sraffa (1960) argued that as the number of commodities increases, the situation becomes considerably more complex. When capital is re-evaluated at new prices, certain commodities -especially those with a capital-labor ratio close to the economy's average-are more likely to shift from being capital-intensive to labor-intensive, or vice versa. ...
Smith’s theory of value and distribution, which emphasizes labor time as the determinant of prices, has been widely misunderstood. Ricardo misinterpreted it as relevant only to primitive societies, while Marx inaccurately aligned it with his own labor theory of value. In reality, Smith’s perspective oscillates between a labor-based and a labor-commanded approach to relative prices, intended for modern economies. Neoclassical economists further distorted Smith’s views by incorporating utility theory. Moreover, while Smith is often linked to the theory of a falling rate of profit due to competition, he actually attributed it to rising capital intensity. Contrary to the belief that Smith was a staunch advocate of free markets, he supported reasonable government intervention.
... The Classical Theory of Value (Sraffa, 1960) gives us clues about what could happen next. As is well known, (re-)production conditions and surplus distribution determine classical production prices. ...
... However, we would argue that developing democratic economic planning mechanisms to eliminate rebound effects, beginning at the supply chain level could be a pragmatic model for, or stepping stone towards, something more ambitious. Frederic Jameson quipped that it is "easier to imagine the end of the world than the end of capitalism;" perhaps the innocuous concept of a supply chain based on coordination and trust holds out an example of how to begin to pursue this, how to begin to enable visions such as Piero Sraffa's (1960) Production of Commodities by Means of Commodities, and even how to provoke other systemic changes such as the Table 1 Democratic economic planning models: planning mechanisms and institutions. ...
... Nowadays, this fundamental debate can be discussed via the angle of the generic (in)determinacy of market equilibria, as Mandler (1999aMandler ( , b, 2002 emphasized. The classical and Marxian views about the functional income distribution have been formally studied by Sraffa's (1960) system of price equations, which is conceived of as a representation of the long-period equilibrium under free competition and is known as underdetermined: in the system, the number of unknown variables is greater than that of equations, which implies that one of the wage and interest rates should be the parameter of the market mechanism, that must be determined outside of market competition in order to close the system of the equations. Such a structure of price determination under free competition is compatible with the classical and Marxian view that the wage rate is determined by historical and institutional factors, rather than the matching mechanism of demands and supplies in labor markets. ...
This paper studies the structure of the set of steady-state equilibria defined in quite generalized von Neumann economic models. First, it shows that in any von Neumann production economy, there is an admissible domain of non-negative interest rates such that for any interest rate within the domain, there exists an associated steady-state equilibrium. Second, for almost all interest rates within the domain, the associated steady-state equilibrium is indeterminate. Thus, in summary, for any von Neumann production economy, there is a dense subset of the admissible domain over which the set of steady-state equilibria consists of a finite number of one-dimensional continuums of those equilibria. This feature is observed regardless of whether the underlying economy is regular or not, which is a sharp contrast with the finite and discrete features of the other types of Walrasian equilibria in static as well as intertemporal regular economies. These main results suggest, as a new, future research agenda, the necessity of studying an appropriate equilibrium selection mechanism that should be applied before market competition. JEL Classification Code: B51, D33, D50.
... To «Πρόβλημα» του Κεφαλαίου. Περαιτέρω, όπως έχει οριστικά αποδειχθεί από τη μετά τον Sraffa (1960) θεωρία, η ανάκληση της υπόθεσης περί μοναδικού εμπορεύματος (αμετάβλητων όλων των άλλων υποθέσεων) συνεπάγεται ότι, στη γενική περίπτωση, η τεχνολογία της οικονομίας δεν δύναται να περιγραφεί, άνευ αντιφάσεων, από κάποια συναθροιστική (aggregate) συνάρτηση παραγωγής (για εμπεριστατωμένες πραγματεύσεις του ζητήματος, βλέπε Salvadori, 1995, Chap. 14, και Κurz, 2020). ...
... Για μία συνοπτική σημείωση επί της «πραγμοποίησης» στην (της) Πολιτική(ς) Οικονομία(ς), βλέπε το Παράρτημα ΙΙ του παρόντος. 8 O προαναφερθείς, κατ' ανάγκη υφιστάμενος, βαθμός ελευθερίας του συστήματος του Sraffa φωτίζει τα πραγματικά όρια των υποκείμενων αντιλήψεων περί ανταγωνιστικών ανακατανομών του κοινωνικού εισοδήματος (ειδικότερα, βλέπεSraffa, 1960, pp. 9-11, και Steedman, 1977. ...
... Despite an extensive literature questioning the treatment of capital as a homogeneous input (e.g., Robinson, 1953, Solow, 1955, Sraffa, 1960, previous studies have primarily focused on competition among multiproduct firms (e.g., Nocke and Schutz, 2018b) or capacity constraints in firms operating with a single production technology (Kreps and Scheinkman, 1983, Bresnahan and Suslow, 1989, Staiger and Wolak, 1992, Froeb et al., 2003. 7 This paper explores how diversification generates strategic complementarities within firms and across competitors. ...
We study firms' strategic interactions when each firm may own multiple production technologies, each with its own marginal cost and capacity. Increasing industry concentration by reallocating non-efficient capacity to the largest and most efficient firm can decrease market prices as it incentivizes the firm to outcompete its rivals. However, with large reallocations, the standard monotonic relationship between concentration and prices re-emerges as competition weakens due to the rival's lower capacity. Thus, we demonstrate a U-shaped relationship between market prices and industry concentration when firms are diversified. This result does not rely on economies of scale or scope. We find consistent evidence from the Colombian wholesale energy market, where strategic firms are diversified with fossil-fuel and renewable technologies, exploiting exogenous variation in renewable capacities. Our findings not only apply to the green transition but also to other industries and suggest new insights for antitrust policies.
... Moreover, given unpaid care work is indispensable to guarantee social reproduction not only intergenerationally but on a day-to-day basis, care work becomes a pre-condition for market-based production (Picchio, 1992;Folbre, 2021). The Sraffian "production of commodities by means of commodities" (Sraffa, 1960) becomes "the social (re)production of human beings" by means of human beings (Picchio, 2012). Or, as Tronto also put it, "citizens are produced and reproduced through care" (Tronto, 2013: 26, cited by Lynch (2021). ...
Paid and unpaid care provision underlies gender inequalities in the distribution of employment opportunities, incomes, and access to welfare. Three quarters of all care work in households is provided by women and two thirds of all care workers are women. This chapter draws on the contributions of Latin American feminist scholars to challenge the “care regime” concept proposing instead the “social organization of care” as an alternative (Faur, Organización social del cuidado infantil en la Ciudad de Buenos Aires: el rol de las instituciones públicas y privadas 2005–2008, 2009). It explores how a progressive care agenda has emerged and evolved at national, regional, and international levels, forged by coalitions of caregivers and care recipients and strongly supported by feminist movements (Esquivel, Care policies: Realizing their transformative potential. UNRISD, 2016). The focus is on the Latin American experience of “national care systems”. Following the Uruguayan experience, Latin American National Care Systems have been the preferred way to overcome care policies’ fragmentation and inequalities. By providing intra-state coordination and civil society participation mechanisms, some of these NCS have changed the relationship between state and citizens bringing about a reconfiguration of right holders and duty bearers. This chapter analyses the ways in which the NCS’s objective of contributing to gender equality moulds the design of care policies and ultimately whether they have been successful in supporting women’s social citizenship.
... The subsystem approach was proposed in a purely theoretical context by Sraffa (1960) and Pasinetti (1973) and some years later, the contributions of Siniscalco (1982, 1986) demonstrated that this methodological approach could also be adopted in empirical analyses of structural change. In line with recent studies (Di Berardino and Onesti 2021; Lábaj and Majzlíková 2022) we have extended the subsystem to a multi-country context, enabling to consider even the role played by the growing international linkages. ...
This study investigates the recent dynamics of deindustrialization and the
shift toward regionalization in the manufacturing value chains within four
major European economies: Germany, Spain, France, and Italy, during the
decade 2010–2020. We provide new empirical evidence highlighting a
nuanced picture of the manufacturing evolution, characterized by a slight
decline in employment shares and an increase in value-added shares,
suggesting a shift toward higher efficiency and a degree of reshoring of
activities. The total amount of activity generated domestically increased
slightly, suggesting reshoring over the last decade. The analysis
underscores the growing importance of services offshoring over
manufacturing, highlighting a strategic shift toward leveraging regional
strengths and integration. The study contributes to the understanding of
the evolving landscape of global value chains, regionalization, and the
strategic responses of major European economies in the face of global
shifts toward nearshoring and reshoring.
... This is the case when the most profitable project is the one with a less capital-intensive technique. The reswitching problem had been discovered bySraffa (1960). ...
... The Supermultiplier Model constitutes a macroeconomic way of conjugating the Keynesian-Kaleckian principle of effective demand in the long run with the Sraffian approach to value and distribution (Sraffa 1960), in line with the research started by Garegnani (1962) and then developed by Serrano (1995aSerrano ( , 1995b. In particular, the model puts emphasis on the role of autonomous demand growth in shaping the dynamics of output, where autonomous demand is defined as the sum of exports, public expenditure, credit-financed consumption and consumption financed out of accumulated wealth (Cesaratto, Serrano, and Stirati 2003). 1 In line with Serrano (1995b), we can list some of the main properties of the model: ...
In recent years, Supermultiplier models have attracted rising attention, highlighting the role of autonomous components of demand in shaping the long-run growth path of the economy. This paper aims to empirically test the implications of this approach in selected European economies, grouped according to the literature on welfare model classification. First, we outline the short-run adjustments and long-run relations between autonomous demand growth and output by estimating a vector error-correction model (VECM). Second, we assess if a causal relationship between the variables can be identified by estimating a structural model and computing the orthogonalized impulse response functions, focusing in particular on the effects of a demand shock on output. The empirical results confirm a positive and significant relation between autonomous demand and output in the long run for all countries considered. Moreover, we find that the causal direction runs from the former to the latter, corroborating the idea that autonomous demand shocks permanently affect the growth path of the economies under scrutiny.
... Keynes' and the Marxian-Kaleckian paradigms are considered incommensurable due to the different approaches they take in addressing the determination of relative prices and functional income distribution. According to Piero Sraffa's work on the Production of Commodities by Means of Commodities (Sraffa 1960), it is recognized that the system of relative prices can only be determined when functional income distribution is specified. In other words, the determination of either the real wage rate or the real profit rate is necessary to establish ("close") the distributional and price system (see e.g. ...
In a recent article, Tom Palley begins his critique of Keynesian
economics with the wellknown story of a drunkard who,
when searching for his lost keys, looks not in the darkness
of the nearby lawn where he misplaced them, but instead
under the light cone of a lamp post because, when asked, he
replies that’s where the light is. This story serves as a meta�phor for the field of economics attempting to understand the
workings of the capitalist economy solely through the lens of
Keynesian economics. However, this endeavor is ultimately
futile as comprehending capitalism requires a different analyt�ical approach: acknowledging social conflict as an essential
component of capitalism’s nature better addressed by
Kaleckian macroeconomics.
We attempt to illustrate that Palley is accurate in emphasizing the paradigmatic differences and even incommensurabilities between Keynes’ monetary production paradigm and the Marxian-Kaleckian social conflict paradigm. This suggests that any classification under the umbrella term “post-Keynesianism” is misleading. However,
Palley is mistaken in his assertion that this distinction aligns
Keynes’ economics with neoclassical (mainstream) economics,
as the acceptance or rejection of social conflict is not the only
fault line in terms of ontology. There are other ontological
divisions that can exist. Or, to use our metaphor, the lamp
post can be moved to different areas of the lawn, indicating
different ontological perspectives.
... For Hayek, money is neutral if, and only if, it does not interfere with relative prices. Sraffa (1960) criticises Hayek, stating that it is not possible to assume a neutral currency in a monetary economy, as described by Lawlor & Horn (1992). This fact would essentially equate to disregarding currency altogether, as it would eliminate all monetary influences on production. ...
This study examines the work of Friedrich Hayek, highlighting his unique position at the intersection between orthodox and heterodox economic theory, focusing on his approach to monetary theory. We analyse three essential pillars in his work: the relationship between the money supply and price levels, the necessity of backing for currency issuance, and the pursuit of economic equilibrium. Despite his association with the Austrian School, we identify an orthodox dimension in his thought, particularly in his analysis of economic crises and monetary policy. This article underscores how Hayek transcends the orthodoxy/heterodoxy dichotomy, offering valuable insights into the challenges of monetary regulation and the role of credit in the modern economy. Although Hayek exhibits orthodox elements, the study concludes that his approach incorporates heterodox perspectives, contributing to a richer understanding of economic cycles and policies to promote stability and economic growth.
... This is also due to the analytical weaknesses of the neoclassical theory of income distribution, highlighted by various scholars of the Cambridge school, including Pasinetti himself, in the wake ofSraffa (1960). On this point, seePasinetti (2000) and the video interviews conducted by Nadia Garbellini in Ferguson (2016). ...
This paper tries to highlight some essential elements that emerge from Luigi Pasinetti's work. Much of the research project that Pasinetti developed, especially in the 1981 book, was already present in nuce in the 1974 collection of essays. Here the theory of effective demand is presented for the first time, emphasizing the essential differences between sequential and simultaneous economic reasoning. The relevance of structural change is already apparent, and will be explored in a multisectoral scheme only in the 1981 book. The main insights that can be drawn from Pasinetti's reflections on open economic systems and his ethical stance suggest that ownership of the means of production not only confers rights but it also imposes responsibilities on the community. As an appendix to the text readers will find for the first time translated into English the entry Capital that Pasinetti wrote for the Dictionary on the Social Doctrine of the Church and a speech on the limits of the Italian growth model that he made in early 2000 at a Confindustria meeting in Saint Vincent.
... Only the primary activity requires land for the production of agricultural staples. The economy has K lands of different quality; the production process depends on the land used (Sraffa 1960;Kurz 1978). Production of manufactured goods requires an imported capital good that cannot be produced domestically (technological dependency). ...
The specialized literature on the political economy of income redistribution in Argentina usually focuses on economic limits. It discusses the incompatibility between redistributive policies and the external balance or their effect on the long-term growth rate. However, less attention has been paid to the political resistance exerted by the winners of international trade to sharing their gains and to the role of financial integration. In this paper, we develop a model, framed in the modern revival of Classical theory, of a small open economy with differential rent to account for these factors. First, we include interests as an income category to assess the impact of financial integration. Second, we introduce the concept of ‘political stalemate’ – the resistance of productive classes to economic policies that go against their economic interest. We show how financial integration and the political resistance of landowners are behind the failure of income redistributive policies in favor of workers. In this context, we analyze the necessary economic and political conditions for such policies to succeed.
... In particular, the conditions of Gantmacher can be useful to analyze the nature and properties of those commodities, called by Sraffa "non-basic commodities", and to analyze the construction and properties of what Sraffa calls "standard system". If A, square of order n and semipositive, is a matrix whose elements are the physical inputs per unit of physical outputs, then Sraffa (1960) calls "basic commodities" those commodities which enter, either directly or indirectly, in the production of all n commodities. The other commodities, which have not this property (i. ...
We give an elementary proof, by means of a basic characterization of nonsingular M-matrices, of a result of F. R. Gantmacher, concerning nonnegative decomposable square matrices.
In the seminar on Political Economy (at Toyama University, 11th November 2023), Professors Kurz and Salvadore raised the question why Okishio did not refer Sraffa in Okishio (2022). Okishio wrote book review on Sraffa (Production of commodities by means of commodities—prelude to a critique of economic theory. Cambridge University Press, Cambridge, 1960) just after its publication (Okishio in Kokumin-Keizai-Zasshi 103(3):104–112, 1961, 10.24546/00167714). He read Sraffa carefully and compared Sraffa's definition of basic commodity with Okishio's one. He resulted that his own definition is more useful than Sraffa's one.
Reflationists have argued that if the Bank of Japan (BOJ) sets a Japanese-style inflation target and supplies a large monetary base, inflation expectations will rise, thereby allowing deflation to end. We show that these reflationist claims are false and that, using Kalecki’s cost-determined price theory, what drives consumer prices (CPI) in Japan are costs, especially import prices. Hence, the 2% CPI inflation rate, which the BOJ under Kuroda could not achieve even after ten years, was easily achieved when imported inflation occurred after 2022. However, imported price inflation has caused consumption to stagnate through declines in real wages and real disposable income of the households. There is no basis for reflationists’ claim that overcoming deflation will revive the Japanese economy. The BOJ under Kuroda and reflationists have claimed that Abenomics and the monetary policy by the BOJ have revived the Japanese economy, citing rising stock prices, surging corporate profits, and an increase in the number of employed persons. We show that this is also a mistake and that the stagnation of the Japanese economy has advanced further.
Krishna Bharadwaj, following upon the work and insights of Sraffa, made substantial contributions to our understanding of what is implied in the neoclassical notion of change and its related notion of choice; in this respect she appears closer to the spirit of Sraffa’s critique of neoclassical theory than many others. She also supplemented important elements in building an alternative approach, based on classical political economy, which is free from the need to employ marginal magnitudes and does not require hypothetical or potential changes to determine the resting positions of economic variables. Moreover, the notion of choice is rescued from the parable of ‘preferences’ and given more meaningful contents, allowing for consideration of habits, customs and power relationships.
We review the production function and the hypothesis of equilibrium in the neoclassical framework. We notify that in a soup of sectors in economy, while capital and labor resemble extensive variables, wage and rate of return on capital act as intensive variables. As a result, Baumol and Bowen's statement of equal wages is inevitable from the thermodynamics point of view. We try to see how aggregation can be performed concerning the extensive variables in a soup of firms. We provide a toy model to perform aggregation for production and the labor income as extensive quantities in a neoclassical framework.
Neoclassical economics is heavily based on a formalistic method, primarily centred on mathematical deduction. Consequently, mainstream economists became overfocused on describing the states of an economy rather than understanding the processes driving these states. However, many phenomena arise from the intricate interactions among diverse elements, eluding explanation solely through micro-level rules. Such systems, characterised by emergent properties arising from interactions, are defined as complex. This Element delves into the complexity approach, portraying the economy as an evolving system undergoing structural changes over time.
Rationalität, dezentrale Koordination und Informationsverarbeitung durch den Preismechanismus, kollektive Entscheidungen durch Aggregation individueller Präferenzen und Wachstum als zentrales Lösungskonzept für gesamtwirtschaftliche Knappheitsprobleme prägen den intellektuellen Rahmen der Ökonomie. Der Autor konfrontiert diese Konzepte mit aktuellen Gefährdungen liberaler Ideen und demokratischer Institutionen, wie sie am Rande unserer Disziplin, in anderen Wissenschaften oder in der allgemeinen Öffentlichkeit diskutiert werden. Die Gegenüberstellung macht Defizite im ökonomischen Denkrahmen sichtbar und weist die Ökonomie auf neue Aufgabenstellungen hin. Im mikroökonomischen Bereich verschiebt sich die Perspektive von der ökonomischen Aktion und Interaktion unter gegebenen Präferenzen und Marktbedingungen hin zur Arbeit an den Grundlagen für mündiges Handeln und ein funktionsfähiges Zusammenleben freier Individuen. Für die gesamtwirtschaftliche Entwicklung verlagert sich der Fokus von der Expansion hin zu Fortschritt als gelungenem Wandel. Die mit dieser Verlagerung verbundenen Weichenstellungen werden anhand von zwei Beispielen diskutiert: der digitalen Revolution und der Klimakrise.
In this paper we compare the explanations of profits put forward by Piero Sraffa (1960) and by Nobuo Okishio ([1967] 2022). The two authors may be said to be comrade-in-arms as regards their general outlook on the problem under consideration, with Sraffa following essentially in the footsteps of the classical authors from Adam Smith to David Ricardo and Okishio in those of Karl Marx. They are also united as regards their critical attitude towards alternative explanations of profits and especially of marginal productivity theory. However, there are also a few important differences between them.
Shiozawa, Morioka and Taniguchi (2019)’s Microfoundations for Evolutionary Economics (Springer Japan) provided an alternative view (SMT view) of the economy to the orthodox equilibrium view of the economy. According to the SMT view, demand and supply are matched by quantity adjustment under fixed prices, and prices function as a transmitter of cost information downstream as well as a guide for choice and development of techniques. This paper examines the impacts of international trade on the SMT view based on the new theory of international values (NTIV). In a closed economy, prices are uniquely determined even if there are many choices of techniques by the minimal price theorem. With international trade, due to the multiplicity of wages, prices are not uniquely determined. Whether this fact allows demand to participate in the determination of prices is examined, and it is clarified that because of the disparity of real production possibility set from the hypothetical one, which is effective in determining prices, demand loses the power of equilibration. This fact opens up the possibility and even necessity of production taking place below the maximal boundary, which is accompanied by unemployment. Individual firms’ behavior in the choice and development of techniques and the process of price conversion that are consistent with the SMT view and the NTIV is formulated. A residual unsolved question of wage adjustment following technological changes is identified.
This paper examines Adam Smith’s use of counterfactual reasoning in his analysis of the “process of civilization” and its implications for modern economics. Smith, influenced by Isaac Newton, Robert Simson, Francis Hutcheson, and David Hume, employed counterfactual reasoning to critique the Mercantile System by comparing actual economic developments with the “natural course of events.” His physiocratic bias limited his engagement with emerging industrial advancements, yet his methodological contributions remain significant. Smith’s focus on “what if?” questions in policy discussions continues to shape modern economic thought, despite some limitations in fully realizing his theoretical framework.
This chapter explores the concept of production economy, or the contemporary version of plutology, the study of production and distribution of wealth originally found in classical economics, for the empirical analysis of industries as flows of specific value-carrying design information to the market. The concepts and logic discussed in this chapter include the following: industrial/manufacturing sites as basic economic agents; design information as the source of value-added; the combination of downward-sloping market demand curves and flat individual supply curves generated by design-based product differentiation; design as an additional variable to make profit and employment goals compatible; manufacturing capabilities and their evolutions; a substantial, flow-oriented view of industries; Sraffian steady-state price systems at the national level; the concept of industrial competitiveness; the Ricardian theory of international production cost comparison; design-based comparative advantage; the CAP (capability-architecture-performance) approach to industrial evolutionary analysis. The present framework of production economy is also applied to the case of global competition during the post-Cold-War era (1990s–2010s).
Production with produced means of production, that is, capital, is fraught with issues having to do with the capital being reproduced, depreciating, and its price being equal to its cost. We discuss the various efforts of neoclassical economists starting from Jevons, going to Böhm-Bawerk and Samuelson's exploration of a one-commodity world. We find that the measurement of capital goods in a way that is consistent with the requirements of the neoclassical theory of value and distribution reveals formidable problems, as was concluded in the famous capital theory controversies of the 1960s. Furthermore, we discuss some more recent developments connected to these debates
Karl Heinrich Marx (1818–1883) is renowned as a philosopher-economist and the visionary behind a revolutionary approach to both economic theory and societal change. His profound contributions span diverse domains, encompassing the labor theory of value and the generation of surplus value through the exploitation of labor, as well as the dynamics of capital accumulation and unemployment. Marx also investigated competition as a war-like process ultimately leading to the increasing concentration and centralization of capital. His work extensively explores the intricacies of the law of the falling tendency of the rate of profit, intimately connected with economic crises. Marx's extensive body of work serves as a catalyst for economic thought, venturing into unexplored territories such as issues on money and international trade, economic growth and crises, and the financial aspects of the economy. Additionally, he made notable contributions to the theory of rent, among other groundbreaking insights.
Classical economics, a term coined by Marx, encompasses economists from William Petty in England to Pierre Le Pesant de Boisguilbert in France, concluding with figures like Ricardo in England and Simonde de Sismondi in France. According to Marx, the central concern of classical economists was the determination of surplus (value), defined as the difference between the value of total output and the combined value of inputs used in production. The salient feature of this approach is the evaluation of both inputs and outputs in terms of prices determined by labor times. Classical economists collectively espouse the notion that labor employed in the sphere of production creates a surplus in the economy. The classical approach experienced a revival during the capital theory controversies in the 1960s, with Piero Sraffa playing a pivotal role in shaping and reshaping this perspective. Furthermore, input-output analysis and advanced mathematical and quantitative methods have enriched the classical economic analytical framework, allowing for distinct comparisons with neoclassical alternatives.
This paper formulates an environmental extension of the Kurz matrix demand multipliers for circular flow–positive-profit economies and, thus, provides a theoretical and empirical integration of income distribution–value, trade, effective demand and ‘green policy’ considerations. The findings highlight the complex ways in which environmental multiplier effects depend on the technical conditions of production, distributive variables, relative commodity prices, savings ratios out of wages and profits, direct and indirect tax rates, patterns of household consumption demand, physical composition of autonomous demand, and ultimately on the resulting socio-technical inter-country ‘backward’ linkages and leakages. On the one hand, then, the overall findings of this paper challenge the effectiveness of traditional effective demand management and environmental tax policies to reduce pollutant emissions, energy use or/and unemployment. On the other hand, however, they suggest an alternative, fairly general and flexible framework for studying environmental multiplier effects at the level of individual industries and sectors, both nationally and transnationally.
Clearly, the biological notion of the multi-cellular organism entailing multi-level evolution in terms of computational complexity is helpful for understanding society. This perspective enables the identification of the institutional factors and integrative character of modern evolving system s. The computational complexity, which is based on algorithms, engenders the possibility of the complex emergence of higher orders of institutions based on cooperation. In the case of the economy, the notion of “Markomata ” propounded by Mirowski (J Econ Behav Organ 63(2):209–242, 2007) plays a decisive role. Accordingly, the existence and competition between hierarchical economic institutions also implies problems of computational complexity, again with no definite direction or outcome as a likely result. Evolution itself is a profoundly complex process, and so it is when it happens to economic institutions. Economic institutions must serve as the coordinating device. Conversely, this device will function as a sensor mechanism for sustaining the underlying system. We have witnessed a number of debates centering on the polarity between Keynesian and Hayekian economic theories and on a “command and control” perspective versus an “unregulated market” perspective. A contemporary biologist, David Sloan Wilson, has proposed “e’v’onomics” (Wilson in Stop crying about the size of government. Start caring about who controls it. The Role of the State in the Economy, 2016) that highlights the significance of the multi-cellular organism. A multi-cellular organism is composed of trillions of cells that must be healthy at the cellular and organ levels for the multi-cellular organism to be healthy. In the same way, for a large-scale human society to work well, it must be organized as smaller-scale units that work well and are properly coordinated for the benefit of the whole. Clearly, the biological notion of the multi-cellular organism entailing multi-level evolution in terms of computational complexity is helpful for understanding society.
We now turn to a consideration of economic matters. In a previous section, we touched on the pioneering contributions of classical political scientists like William Harvey, William Petty, and François Quesnay, all of whom were medical doctors. These individuals conceptualized the economic system in a way that was similar to blood circulation as a kind of node-based network constituted by the circular processing of materials, resources, and services. Quesnay’s economic table was the first monumental achievement in this context. Over the course of the 20th century, the forms of this table have changed, as evidenced in Leontief’s input-output table and von Neumann-Sraffa’s production system. The input-output table has been selected here for empirical reasons.
A Classical theoretical model of temporary disequilibrium in a pure cash monetary system is formulated, in which each capitalist aims to maximize accumulation in her/his own sector, and prices and allocations are determined by the Cantillon rule. The dynamics generated by this economy are those of a sequence of temporary disequilibria, which are shown to be locally and globally unstable. Thus, government intervention is justified to avoid an economic crisis. The paper concludes by recommending an extension of the model considering alternative monetary systems.
This paper employs a dynamic multi-sector growth model with changing technology to study the relevance of the price and quantity dimensions involved in the technical substitution of carbon-intensive technology, that is, the low-carbon transition. For the framing of the transition, the stylized market dynamics by Flaschel and Semmler (1987. “Classical and Neoclassical Competitive Adjustment Processes.” The Manchester School 55 (1): 13–37) are used, who propose a cross-dual out-of-equilibrium adjustment process. The major empirical challenge to identify the adjustment speed for quantities and prices is to empirically estimate sector-specific adjustment coefficients. The transition speed is estimated for seven carbon-intensive sectors in six high-income economies (Germany, France, Italy, Netherlands, Japan, and the US) using a mixed-effects varying-slopes model on EU KLEMS data. Directed technical change is enforced by a revenue-neutral, pro-active fiscal policy of a tax–subsidy form, which has the effect to greatly accelerate the phase-out of carbon-intensive technology and the phase-in of green technology. The speed of green substitution that allows decarbonization is then evaluated analytically and computationally along four policy and time dimensions: cost advantage, a percentage tax on carbon-intensive output, a green subsidy rate, and initial investment ratios. Though the tax itself has an impact on the speed of decarbonization, it is significantly improved by green subsidies and green investments. The cost advantage of the green over the carbon technology is shown to have a negligible impact on decarbonization speed by itself. Without ambitious fiscal policy, especially in the form of green investment support, this substitution process appears to be too slow to reach decarbonization in a timely manner.
In this paper, we have argued how research and education in economics should be conducted under the current circumstances where the “crisis of capitalism” is being referred to in mainstream media. Though major research trends in mainstream economics are characterized by the development of piece-meal social engineering in recent days, research on an overarching theory of the capitalist economy and its educational dissemination should be still highly desired, to build an intellectual infrastructure for deliberative democratic decision-making by the public. Given this basic standpoint, we have discussed the importance of the issue of how to discuss capital from a bird’s eye view of the capitalist economy.
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