[OPE-L:7451] [OPE-L:984] Re: Marx's Concept of Prices of Production

John R. Ernst (ernst@PIPELINE.COM)
Thu, 13 May 1999 06:03:09


Again, a post or two you quoted Sraffa's 87:

"87 If land is all of the same quality and is in short supply,
this by itself makes it possible for two different processes of
methods of cultivation to be used consistently side by side on
similar lands determining uniform rent per acre. While any two
methods would in these circumstances be formally consistent, they
must satisfy the economic condition of not giving rise to a
negative rent: which implies that the method that produces more
corn per acre should show a higher cost per unit of product, the
cost being calculated at the ruling levels of the rate of profits,
wages and prices.
The production of corn would thus be represented in the
general system by two equations with the two corresponding
variables of the rent of land and the price of corn
Both equations would enter the Standard system, although with
coefficients of opposite signs and of such values as would in the
aggregate eliminate the land from the means of production of that
system." (Sraffa in *PCMC*, p. 75)

Comment: You take this to mean that Sraffa can deal with absolute
rent in his PCMC. I mistakenly took this passage as a description
of differential rent. Why? Given the 2 methods I looked at the
rent per unit output rather than the overall rent paid. That said,
let me make a few additional points here.

a. Sraffa's absolute rent is different than Marx's.

b. Sraffa's absolute rent requires the existence of two methods of
production; Marx's does not.

c. In his treatment of this type of rent, Sraffa must maintain that
the producer with the greater output must be the higher cost producer.
Marx faced no such restriction.

d. I actually think Sraffa is rather clever in coming up with all this
and used a simple example to better understand what he is saying.

Inputs Outputs
(1) 6 Corn ----> 10 Corn
(2) 10 Corn ----> 15 Corn

Inputs Outputs

Replacement Profit Rent

(1) 6 Corn ----> 6 Corn 1.5 Corn 2.5 Corn
(2) 10 Corn ----> 10 Corn 2.5 Corn 2.5 Corn

The rate of profit is 25% for each capitalist. In his 88, Sraffa
suggests that "the existence side by side of the two methods can
be regarded as a phase in the course of a progressive increase of
production on the land."

In terms of my example, Sraffa would suggest that this represents a
movement from (1) to (2). Indeed he does so in his 80.

Here I think there is a significant assumption that goes unstated.
Namely, Sraffa requires that the landlord and the capitalist be
different entities. That is, Sraffa is clear that the movement from
(1) to (2) can be seen as "a process of 'intensive' diminishing returns."
What would happen if the capital and land were owned by the
same entity? We are then faced with a choice of technique problem.
If you are the capitalist in (1), your overall return would be
measured by

Profit+Rent 1.5 + 2.5
(1) ------------- = ------------ = 2/3
Investment 6

The capitalist in (2) would earn

(2) 2.5 + 2.5
______________ = 1/2


Clearly, capitalists who produce on land they own would have no incentive
to move from (1) to (2). Sraffa's construction on absolute rent thus
requires that one entity owns the land and that another carry out
the production on that land. This seems strange although historically
true in *some* countries. Needless to say, Marx's concept of absolute
rent has no such restriction.