[OPE-L:5745] Re: RE: Re: why are we on this list?

From: Ajit Sinha (ajitsinha@lbsnaa.ernet.in)
Date: Sat Jun 02 2001 - 04:13:07 EDT


Rakesh Narpat Bhandari wrote:

> As for Sraffa's relation to Ricardo, I cannot
> say. I haven't studied Sraffa, but I do await a Sraffian reply to
> Blaug's recent critique.

___________________

Here is a rough draft of my critique of Blaug. I have sniped all the quotes from
Sraffa's unpublished works housed at Trinity College because i don't have explicit
permission from Garegnani to publish them. But I hope the point will get through.
Almost all such quotations were used only in the beginning of the paper. But in any
case, if you have any problem, please ask me and I'll try to explain in my own
words. My reference to Blaug's paper is from his unpublished manuscript, which is
now out in HOPE. All the footnotes have been lost in copy and paste procedure.Sorry
about the length of this post. Cheers, ajit sinha

^ÓMisunderstanding Classical Economics^Ô: A Critique of Mark Blaug
Ajit Sinha


Recently Professor Mark Blaug (Forthcoming in History of Political Economy)
presented a forcefully worded critique of the ^ÓSraffian^Ô interpretation of
classical economics. He argued that the Sraffian interpretation of classical
economics is a rational reconstruction of the classical theory from the point of
view of Sraffa^Òs Production of Commodities by Means of Commodities (PCMC from now
on). In other words, Balug is suggesting that Sraffians (which includes Sraffa for
him) are ^ÑWhig historians^Ò who ^Óview history as a relentless march of progress from
past errors to present truths^Ô. In this particular context, it is Sraffa^Òs PCMC
that is considered the embodiment of truth and read retrospectively into classical
economics, particularly into Ricardo and Marx. He identifies two versions of the
Sraffian interpretation of classical economics: one is the ^Ósoft version^Ô, which he
likes, the other is the ^Óhard version^Ô, which is the object of his attack. A closer
inspection, however, shows that this characterization is misleading because the
^Ósoft version^Ô stands for a theory of accumulation and the ^Óhard version^Ô for a
theory of value and distribution. Thus they are for the most part on two different
subject matters and not soft and hard versions of the same thing. For the most part
Blaug plays the classical theory of accumulation against the Sraffian
interpretation of the classical theory of value and distribution. In this paper I
argue that Blaug^Òs critique is misplaced because it stems from a confusion about
the status of time in different theoretical problems. Since Blaug includes Sraffa
in the group of Sraffians in his sights, I decided to rely to a large extent on
Sraffa^Òs own writings (mostly his unpublished notes kept at Wren library in Trinity
College, Cambridge; from now on they will be referred to as PSP) for my rebuttal.

First of all, it is simply incorrect to characterize Sraffa as a ^ÑWhig historian^Ò.
In the introduction to his lectures on the ^ÑAdvanced Theory of Value^Ò given at
development has been reached, a conventional degree of prodigality, which is also
an exhibition of wealth, and consequently a source of credit, becomes a business
necessity of the unfortunate capitalist. Luxury enters into capital^Òs expenses of
reproduction.^Ô (Marx 1977, pp. 381 & 741). Here in lies the methodological dilemma.
Sraffa^Òs solution to this problem lies in his critique of the ^Óprinciple of
sufficient reason^Ô. As Sraffa argues, [snip] (PSP, D3/12/7, dated August 22, 1931).
In other words, the production of the ^Ñsurplus^Ò cannot be explained from within the
defined field of political economy itself. Garegnani^Òs ^Ócore^Ô is defined from the
point of view of the capitalist subject; however, the core does not contain the
cause of the surplus product, which lies outside the core, in the realm of history
and culture. As Marx argued, it is history and culture that determine real wages,
and the length of the working day is determined by the class struggle. Together
they determine the surplus product. Thus the distinction between the core and
outside the core has methodological significance. Outside the core is not
peripheral to the theory but is rather the realm that provides the cause for the
existence of surplus, which is the subject matter of the core.
>From here on, most of Blaug^Òs critique is devoted to showing that a large part of
classical economics is concerned with changes in the technology of production, the
volume and composition of output, and the real wage rate^×the three givens in
Garegnani^Òs core. As I have suggested above, the crucial question with regard to
Sraffa^Òs interpretation of classical economics is not whether classical economics
was interested in the question of changes in the given parameters of Garegnani^Òs
^Ñcore^Ò but rather what kind of theory of value should be attributed to classical
economics. In his early notes written on July 15, 1928, Sraffa admits that [snip]
(PSP D3/12/7, dated 15.7.28). It may seem that time plays the central role in the
distinction of the two cases. Sraffa, however, thinks otherwise. The distinction
between the two is due to the differences in the givens of the first problem. For
example, the case of differences in values of the same commodities in domestic
market and foreign market foots the bill for the nature of the problem of the
second kind, even though the comparison is made for the same point in time. Thus
the two problems are entirely different. The first problem is about explaining the
differences in values of different commodities at an instant of time given that the
rate of profits and wages for the same grade of workers are equal. Thus the
solution must find some cause or causes other than wages and profits that would
explain the difference in value. The second problem, on the other hand, is about
finding the cause or causes that explain the changes in rate of profits and wages.
As Sraffa explains:
[Snip] (PSP D3/12/7, dated 15.7.28).

In the concluding section of his paper, Blaug writes: ^ÓSo, is there a ^Ñcore^Ò of
classical economics? Obviously, yes if by ^Ñcore^Ò we mean a central strand by which
we recognise a work as belonging to ^Ñclassical economics^Ò, the strand that unites
Adam Smith in 1776, John Stuart Mill in 1848 and Karl Marx in 1867. It is made up,
all commentators agree, of a particular theory of value and distribution. Firstly,
classical value theory focusses on long period equilibrium prices characterised by
a uniform rate of profit on capital, uniform rates of pay for every different type
of labour, and uniform rents per acre for every qualitatively different type of
land, in short, what Smith called ^Ñnatural prices^Ò in contrast to ^Ñmarket prices^Ò,
subject to the vagaries of demand and supply.^Ô (pp. 23-24). So where does this
leave Blaug^Òs critique of the Sraffian interpretation of classical theory of value
and distribution? The critique then boils down to the insistence that the Sraffians
do not emphasize what Sraffa had referred to as the general confusion between two
distinct problems of explaining differences in values of two commodities at a point
in time and changes in value of the same commodity over time. This would be a lame
criticism at best. It seems Blaug himself is unable to maintain the distinction
between the two questions, as is revealed by his statement: ^ÓThe peculiar feature
of Ricardo^Òs approach, which sets it apart from the common run of value theories,
is its concern with ^Å intertemporal rather than intratemporal comparisons of
value.^Ô (p. 16), which stands in stark contrast to his above quoted statement from
the concluding section. Time and again we come across such statements as: ^ÓOn the
very first page of his Principles, Ricardo announced that all the language of value
comparisons in his work referred to commodities located at different points of time
and not in different places at the same time.^Ô (p. 16). Thus it would be fair to
suggest that Blaug^Òs statement in the concluding section is a product of his mixing
two separate questions into one. His considered opinion, however, seems to be that
Ricardo^Òs theory of value was concerned with changes in the value of same commodity
over time rather than establishing the exchange ratios between different
commodities at a given point in time.
Blaug thinks that Ricardo needed a theory of value to establish the relationship
between diminishing returns in agriculture and the falling rate of profit: ^ÓThere
is ample evidence in Ricardo^Òs Principles that he had in mind a moving equilibrium
along which the increased marginal cost of growing corn alters the terms of trade
between corn and cloth so as to depress the rate of profit on capital^Å^Ô. (p.13). As
Caravale and Tosato (1980), however, have shown, the above proposition can be
established without any theory of value, not even the labor theory of value, on the
assumption that real wages remain constant over time. Even if we assume that real
wages are falling over very long period of time, which in my opinion was Ricardo^Òs
position,  the above propositions can easily be argued without any theory of value.
Since a fall in real wages is only compatible with a fall in the rate of growth of
population, which in turn is only compatible with a lower rate of profit and
accumulation for the moving equilibrium positions. The causality in Ricardo^Òs
theory works as follows: increasing population leads to cultivation on less fertile
land, which lowers the rate of profit and accumulation, given the real wage. The
fall in the rate of accumulation leads to an over-supply of labor and therefore a
fall in wages, bringing the rate of growth of population on a par with a lower rate
of profit. Thus, if Blaug^Òs interpretation of Ricardo is correct, one cannot fail
to wonder why Ricardo placed so much emphasis on his theory of value, calling it
^Óthe sheet anchor on which all my propositions are built.^Ô (Ricardo to Mill, 30
Dec. 1815, Sraffa 1952 vol. VI, p. 348). His position invariably leads to the same
conclusion as Caravale and Tosato^Òs, who interpret Ricardo in a similar fashion as
Blaug, that Ricardo^Òs problematic of value stems from ^Óhis incomplete awareness of
the analytical implications of his own theoretical model.^Ô (Caravale and Tosato
1980, p. 45). In other words, Ricardo was not very bright^×a conclusion most Ricardo
scholars will have a hard time swallowing. Even more importantly, one needs to make
some sense of Ricardo^Òs near obsession with the ^Ñinvariable measure of value^Ò. A
clear understanding of this problem should throw significant light on the nature of
Ricardo^Òs problematic of value.
Blaug^Òs position on this crucial issue remains unclear. In the present paper he
does not broach this issue; however, in his earlier piece (Blaug 1987) he sent
confusing signals. First, he suggested that ^Ówhat Ricardo later put in place of the
missing corn model was the ^Ñinvariable measure of value^Ò^Ô, which confirms Sraffa^Òs
position. But later in the same paragraph he goes on to add, ^ÓIn Ricardo, the
divining rod of the invariable measure is supposed to be invariant (as Ricardo kept
saying) not just to changes in wages and profits but also to changes in its own
methods of production.^Ô (p. 439). It is not clear whether he thinks the two
problems are theoretically separate or not. Caravale and Tosato (1980) and Nai-Pew
Ong (1983) have also challenged Sraffa^Òs reading of Ricardo from a dynamic
perspective, similar to Blaug^Òs (and whom Blaug approvingly cites), and have taken
exception to Sraffa^Òs interpretation of Ricardo^Òs search for an ^Ñinvariable measure
of value^Ò. Below I shall argue that their positions on this crucial matter are
untenable in the light of Ricardo^Òs writings.
Caravale and Tosato (1980) claim that real wages in Ricardo^Òs theoretical framework
remains fixed both for short and long periods. Thus by changes in wages Ricarodo
means changes in money wages due to changes in the technology of production of the
wage goods. The Sraffian problem that analyzes the effects on prices of changes in
real wages, given the technology of production and total output, therefore, has no
playing room in Ricardo^Òs framework: ^ÓThe former type of analysis [i.e.
Sraffa-type], however, is precisely what the assumption of fixed real wages
exclude.^Ô (p. 16). Caravale and Tosato go on to claim that Ricardo^Òs ^Ñinvariable
measure of value^Ò was about finding a measuring rod that would remain invariable in
the face of changes in technology in wage goods production, i.e. diminishing
returns in agriculture. Both these claims, however, are false. In Ricardo's
framework real wages are not fixed in the long-period context. His fixed
subsistence wage is defined for the stationary state, where the rate of growth of
population is equal to zero. Since Ricardo believed that the contemporary economy
was far from the stationary state, he envisaged a falling real wage over a long
period of time^×Hicks and Hollander (1977) have provided ample evidence in Ricardo^Òs
writings to refute a fixed-wage hypothesis in Ricardo^Òs long-period framework.
Furthermore, there is ample evidence in Ricardo that he contemplates changes in
real wages completely independently of any changes in technology. To give just one
example, in the rough draft of ^ÑAbsolute Value and Exchangeable Value^Ò Ricardo
writes:
It [the rate of profits] not only depends on the relative value of the finished
commodity to the necessaries of the labourer, which must always be replaced, to put
the master in the same condition as when he commenced his yearly business but it
depends also on the state of the market for labour (or on the quantity of the
necessaries which competition obliges the master to give for these necessaries),
for if labour be scarce the workman will be able to demand and obtain a great
quantity of necessaries (or which is the same thing to the master luxuries) and
consequently a greater quantity of the finished commodity must be devoted to the
payment of wages and of course a less quantity remains as profit for the master.
The profits of the master depend then on two circumstances first on the comparative
value which necessaries bear to the finished commodity, secondly on the quantity of
necessaries and enjoyments which the labourer by his position can command. ( Works
vol. IV, p. 366).

It is equally false to suggest that Ricardo^Òs ^Ñinvariable measure of value^Ò was
supposed to remain invariable in the context of changing technology and not in the
context of given technology. If this was the case, then Ricardo^Òs life-long quest
to define an ^Ñaverage commodity^Ò loses all its meaning. The very idea of an
^Ñaverage commodity^Ò is simply meaningless when one is looking at two sets of
technological configurations. Thus, when Ricardo argues, ^ÓMay not gold be
considered as commodity produced with such proportions as of the two kinds of
capital as approach nearest to the average quantity employed in the production of
most commodities?^Ô (Works vol.I, p. 45), he clearly is talking about the gold
sector having the average composition of capital given the technologies of all the
commodities. The question of changes in technologies does not even arise here.
Thus Ricardo^Òs identification of ^Ñinvariable measure of value^Ò with the commodity
produced with average composition of capital leaves us with no other choice than to
conclude, with Sraffa, that:
This preoccupation with the effect of a change in wages arose from his [Ricardo^Òs]
approach to the problem of value which, as we have seen, was dominated by his
theory of profits. The ^Ñprincipal problem in Political economy^Ò was in his view the
division of the national product between classes and in the course of that
investigation he was troubled by the fact that the size of this product appears to
change when the division changes. Even though nothing has occurred to change the
magnitude of the aggregate, there may be apparent changes due solely to changes in
measurement, owing to the fact that measurement is in terms of value and relative
values have been altered as a result of a change in the division between wages and
profits. ^Å Thus the problem of value which interested Ricardo was how to find a
measure of value which would be invariant to changes in the division of the
product; for, if a rise or fall of wages by itself brought about a change in the
magnitude of the social product, it would be hard to determine accurately the
effect on profits. (This was, of course, the same problem as has been mentioned
earlier in connection with Ricardo^Òs corn-ratio theory of profits.) (Sraffa 1951,
p. xlviii-xlix).

Nai-Pew Ong (1983) argues that Ricardo was interested in establishing the labor
theory of value in a dynamic context. That is, he wanted to establish a one to one
relationship between a change in the ^Ñdifficulty of production^Ò of a commodity and
its prices of production. Since an increase in the difficulty of production in the
agricultural sector leads to changes in the distribution of income, which has an
independent impact on the prices of production, Ricardo^Òs intended ^Ñinvariable
measure of value^Ò, or what Ong calls the divining rod, was somehow supposed to
separate out all the complications caused by the latter factor.  Ong^Òs conclusion
is that a solution to Ricardo^Òs problem is a theoretical impossibility. This is
because in an interlocking input-output system an increase in the direct labor-time
element in the production of a commodity may lead to either a rise or a fall in its
price of production, depending on how the consequent fall in the rate of profits
affects the cost of indirect, or dated, labor elements^×the argument is similar to
Sraffa^Òs reswitching argument.
Though Ong^Òs argument is correct for Sraffa^Òs analysis in the PCMC, he is simply
wrong in the case of Ricardo. Ricardo never assumed that ^Ñcorn^Ò or agricultural
goods in general entered the manufacturing sector as raw materials or inputs, nor
did he assume that the manufacturing sector provided inputs to the agricultural
sector. In other words, he did not have a Sraffa-type interlocking input-output
system.  The two sectors were interconnected only because the wage basket contained
both agricultural and manufacturing goods. In this case a rise in the difficulty of
production in the agricultural sector would not affect the dated labor content of
the manufacturing sector. Had Ricardo been working with an interlocking
input-output system, then his assumption ^Óthat in production of our money ^Åthe same
quantity of labour should at all times be required^Ô  would become meaningless. This
is because a rise in the difficulty of production in the agricultural sector would
affect the indirect labor content of the measuring rod as well. Thus maintaining
the ^Ósame quantity of labour at all times^Ô would amount to constant and artificial
adjustments in the production technology of the money commodity to keep its total
labor content constant. Clearly Ricardo was bright enough to see this much, and
there is no evidence in his writings to show that he meant anything other than
constant technology by the condition of ^Ósame quantity of labour at all times^Ô.
Thus again we have no other option than to conclude with Sraffa that:
Ricardo starts (in ed. I of the Principles) by applying the concept to the problem
of two commodities which have changed in relative value as a result of a change in
the difficulty of production: absolute value is then the criterion for deciding in
which of the two the real changes has occurred. He ends (in his last paper on
value) by bringing this criterion to bear upon another problem, namely the
distinction between two causes of changes in exchangeable value: for, ^Ñdifficulty
or facility of production is not absolutely the only cause of variation in value[,]
there is one other, the rise or fall of wages^Ò, since commodities cannot ^Ñbe
produced and brought to market in precisely the same time^Ò. Absolute value,
however, reflects only the first type of change and is not affected by the latter.
(Sraffa 1951, p. xlvi).

After this long and necessary digression, let us get to the final criticism made by
Blaug in the paper under review. Blaug has charged the Sraffians with completely
neglecting the classical conception of competition: ^ÓWe read Dobb, Garegnani, Kurz,
Salvadori, Eatwell, Roncaglia, Schefold, de Vivo and Bharadwaj in vain looking for
so much as a reference to the classical conception of competition.^Ô (p. 20). This,
I think, is simply incorrect. Garegnani^Òs (1976) interpretation of classical
^Ónatural prices^Ô as gravitational points entirely rest on the notion of classical
competition. It may not be as rich and colorful as Adam Smith^Òs but it definitely
is there.
Blaug, however, is right when he says ^Óthere is no competition of any kind in
Sraffa, not even of the perfect competition variety.^Ô (p. 21). The reason for it
can be found in Sraffa^Òs early notes. As early as 1931, during apparent preparation
for the PCMC, Sraffa wrote: [snip] (PSP D3/12/15). One, however, needs to keep in
mind that the PCMC was not supposed to be a book on the history of economic
thought. Sraffa nowhere denies that competition plays an important role in
classical economics.
So, is there anything positive that Sraffians could get from Blaug^Òs critique? I
think there is. Up until now Sraffians have almost exclusively devoted their energy
to developing the theory of the ^Ñcore^Ò and a Sraffa-based critique of neoclassical
economics. It is high time that some of their energy was devoted to developing
theories that relate areas outside of the ^Ñcore^Ò to the ^Ñcore^Ò^×i.e. to put flesh on
the bare bones. Such theories by the nature of the problem must be more descriptive
and less mathematical, exactly the kind of things that Blaug finds in classical
writings but missing in Sraffian literature. From this point of view, the nature of
Blaug^Òs criticisms should be seen as positive and not negative by the Sraffians.

REFERENCES

Blaug, Mark. (1987), ^ÓClassical Economics^Ô, The New Palgrave: A Dictionary of
Economics, eds. J. Eatwell, M. Milgate and P. Newman. London: Macmillan.

Blaug, Mark. (Forthcoming), ^ÓMisunderstanding Classical Economics^×The Sraffian
Interpretation of the Surplus Approach^Ô, History of Political Economy.

Caravale, Giovanni and Domenico Tosato. (1980), Ricardo and the theory of value
distribution and growth. London: Routledge & Kegan Paul.

Garegnani, Pierangelo. (1976), ^ÓOn a Change in the Notion of Equilibrium in Recent
Works on Value and Distribution^Ô, Essays in Modern Capital Theory, eds. M. Brown,
K. Sato and P. Zarembka. Amsterdam: North Holland.

Garegnani, Pierangelo. (1984), ^ÓValue and Distribution in the Classical Economics
and Marx^Ô, Oxford Economic Papers 36(2): 291-325.

Garegnani, Pierangelo. (1987), ^ÓSurplus Approach Economics^Ô, The New Palgrave: A
Dictionary of Economics, eds. J. Eatwell, M. Milgate and P. Newman. London:
Macmillan.

Hicks, John. (1985), ^ÓSraffa and Ricardo: A Critical View^Ô, The Legacy of Ricardo,
ed. G.A. Caravale. Oxford: Basil Blackwell.

Hicks, John and Samuel Hollander. (1977), ^ÓMr. Ricardo and the Moderns^Ô, Quarterly
Journal of Economics 91(3): 351-369.

Marx, Karl. (1977). Capital vol.I. New York: Vintage.

Ong, Nai-Pew. (1983), ^ÓRicardo^Òs invariable measure of value and Sraffa^Òs ^Ñstandard
commodity^Ò^Ô, History of Political Economy 15(2): 207-227.

Ricardo, David. (1951), The Works and Correspondence of David Ricardo vols. I & IV,
ed. P. Sraffa. Cambridge: The University Press.

Ricardo, David. (1952), The Works and Correspondence of David Ricardo vol. VI, ed.
P. Sraffa. Cambridge: The University Press.

Sinha, Ajit. (1999), ^ÓSurplus Approach to Political Economy^Ô, Encyclopedia of
Political Economy vol.2, ed. P.A. O^ÒHara. London: Routledge.

Sraffa, Piero. (1951), ^ÓIntoduction^Ô, The Works and Correspondence of David Ricardo
vol.I, ed. P. Sraffa. Cambridge: The University Press.

Sraffa, Piero. (1960), Production of Commodities by Means of Commodities.
Cambridge: The University Press.

Sraffa, Piero. Unpublished Piero Sraffa Papers. Cambridge: Wren Library, Trinity
College.



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