Ajit Sinha

In defence of Adam Smith's theory of value

Abstract This paper defends Adam Smith against his critics on his ‘additive’ theory of value as well as his theory of ‘falling rate of profits’. It argues that Adam Smith did not forget the raw materials, and so forth, in his resolution of the price into wages, profits, and rent, and that the constraint binding on the total income was also taken into account by treating rent as the residual. It further argues that there is no fallacy of composition in Smiths explanation for the ‘falling rate of profits’. It was explained on the basis of rising real wages and the farmers’ inability to shift the burden of the rise in wages from profit to rent in the context of a growing economy.

The Transformation Problem: Is the Standard Commodity a Solution?

This paper attempts to closely investigate the relationship between Ricardos search for an invariable measure of value and Sraffas Standard commodity on the one hand and Marxs transformation problem and his notion of exploitation on the other. The paper argues that Marxs notion of exploitation is subtly different from the Sraffian notion of exploitation as suggested by Garegnani. And that the Standard commodity is not a solution to Marxs transformation problem as suggested by Eatwell. The paper is an attempt to initiate a fruitful dialog between Marxists and Sraffians on the question of labor as a unit of measure and its relation to the notion of exploitation.

Existence of the Standard System in the Multiple-Production Case: A Solution to the Manara Problem

In this paper we show that the Manara problem in the case of Sraffas generalized multiple-production case arises due to the presence of superfluous processes of production. We argue that ‘goods’ should be defined from the perspective of the system and not the observer. We provide a mathematical procedure to remove superfluous processes from the construction of Sraffas Standard system. Once this is done, the Manara problem disappears.

Can we meaningfully speak of changes in price under the regime of changes in techniques

Abstract This paper presents a simulation exercise on Sraffas system under various types of technical changes to show that the direction of changes in prices of commodities is contingent on the choice of the numeraire. Thus, such a comparison of prices in two systems turns out to be meaningless. This result points to the arbitrary nature of the neoclassical supply functions, as they inevitably compare prices across several Sraffa systems on the basis of an arbitrarily chosen numeraire. We anticipated such a result from our reading of Sraffa as part of his ‘prelude to a critique of economic theory’.

A New Perspective on Sraffa

In the ‘Preface’ to the Production of Commodities by Means of Commodities (PCMC) Sraffa makes four specific remarks that are essential to understanding his book. These remarks are: (i) do not think in terms of equi-librium of demand and supply; (ii) there is no assumption regarding returns to scale; (iii) this standpoint is the standpoint of classical political economy from Adam Smith to Ricardo; and (iv) this book is a prelude to a critique of modern economic theory and if the propositions of the book are proved to be correct then it might provide a foundation for launching a critique of the modern economic theory. Unfortunately, none of these clear-cut statements by Sraffa have been given careful attention either by his followers or his critics in interpreting his book. In this chapter, I discuss the above four points to develop a new perspective on Sraffa’s book. In Section ‘Equilibrium of supply and demand and returns of scale’, I take up points (i) and (ii) and try to motivate a new interpretation of Sraffa’s equations. In Sections ‘A standpoint of classical political economy’ and ‘The foundation for a new critique of modern economic theory’, points (iii) and (iv) are taken up respectively, albeit in a highly brief and provisional manner. Here I have decided to state my position without giving it too much of a controversial air, as I have already presented my refutations of the received interpretations else-where (Sinha, 2007, 2010, 2012; Sinha and Dupertuis, 2009a, b).

On Marx’s Law of the Falling Rate of Profit: Disentangling Some Entangled Variables

This paper argues that Marx’s law of the falling rate of profit applies to the problematic of choice of technique in the context of accumulation of capital, and not to the problematic of choice of technique in the context of technological change or new innovation as such. In this context, Marx’s “the law itself” is correct. It is, however, true that Marx does confuse the two contexts at times; but here he seems to be following in the footsteps of Ricardo, who had also made an identical mistake.

Book Review: The Economics of Karl Marx: Analysis and Application. Samuel Hollander; New York: Cambridge University Press, 2008, pp. 549:

quantitative data as well as formal mathematics could also be considered another weakness. While I have no desire to equate rigor with quantification and mathematics when discussing affinities between self-organization theory and dialectics, if the discussion is not to remain at the level of metaphors and analogies, mathematical models may be a necessary extension. The wish-list in the concluding chapter is to be lauded for its comprehension but would obviously require an intense and global level of political action. There is little discussion in the book of such politics, particularly, given the book’s Global North focus, politics of the type which seeks to challenge the “North-South divide.” Lastly, I found a plethora of typos, grammatical errors, and awkward sentence constructions which a good job of copyediting should take care of, and I would strongly advise the publishers to do this as the errors are frequent enough to be distracting. All said the book is a very stimulating read and I highly recommend it.

Book Review: Capital Controversy, Post-Keynesian Economics and the History of Economics: Essays in Honour of Geoff Harcourt, Volume 1:

A festschrift in three volumes comprising more than one hundred articles by a galaxy of scholars from around the world is a rare event indeed. It is, however, a fitting tribute to Geoff Harcourt. The volumes are a testimony to the quality of Harcourt’s contribution to economics, particularly heterodox economics, and his popularity among his fellow scholars across the schools and political divides. Just the first volume has contributions from such luminaries of orthodoxy as Samuelson, Solow, Baumol, and Bliss on one hand, and, of course, most of the leading names of heterodoxy on the other. The first volume of the festschrift spans more than five hundred pages altogether with thirty-nine articles, excluding foreword, introduction, and so on, on topics suggested by the title of the book, Capital Theory, Post-Keynesian Economics and the History of Economic Thought. The volume begins with a foreword by Meghnad Desai. It is a touching foreword to a book in honor of a dear friend. Desai takes up the problem of the historical decline of Cambridge economics and the rise of the Chicago school. He proposes an interesting albeit controversial thesis that the decline of Cambridge economics is due to its internal contradictions and a move away from practical problems to theoretical certitudes. Among the internal contradictions, the most important one in his opinion appears to be the AngloItalian attack on Keynes, that is, Garegnani’s critique of Keynes that suggested a move away from short-term theorizing based on the notion of uncertainty to the problem of longterm equilibrium and theoretical certitudes. In the same vein, Geoffrey Hodgson also blames the Garegnani-led critique of Keynes/Robinson as the main reason for the sterility of the Sraffian project. John Eatwell’s contribution stands up to this challenge in a way. In his piece titled “History versus Equilibrium,” Eatwell claims that Joan Robinson’s critique of equilibrium based on the notion of “historical time” as opposed to “logical time” is fundamentally flawed. He argues that a theory must abstract from the “real world” since the real world contains innumerable contingent factors. Thus, the prediction of a theory of value or prices can only be a “center of gravitation” around which the real market prices are supposed to fluctuate due to the contingent factors: “In this particular context, ‘history is bunk.’ ” Though Eatwell’s paper is an important contribution in the debate between the Garegnaniled Sraffians and the rest of the post-Keynesians, I wonder if his arguments would succeed in convincing his detractors. It is easy to accept his point that a theory must abstract from the “real.” However, the fundamental aspect of the notion of “center of gravitation” of classical economics is not that market prices scatter around it as a statistical phenomenon, but rather that a force field generates a pull factor for the market prices to approach toward this point. This is a theoretical proposition based on causality. Once this is admitted, then the question

Some Critical Reflections on Marx’s Theory of Value

What is value? What makes a thing valuable? An old family picture or a gift from a loved one could have great value for an individual, but no one else may be willing to give anything in exchange for these items. Such items, as we all know, have ‘sentimental value’ but no ‘economic value.’ Value in its economic sense is a social measure of the ‘worth’ of a thing. It is an objective measure in the sense that a thing’s worth is not measured by individual subjectivity but by the objective measure of how much of something else that can be obtained for it in exchange. If exchange between two commodities is sporadic, then the measure of the worth of the two commodities may still reflect idiosyncratic subjectivity. When exchange becomes regular, however, the relationship between the two commodities in exchange takes an objective form such as twenty-five goats for an ounce of silver. The problem of value is to answer this question: What determines such objective measures like twenty-five goats for an ounce of silver? This is essentially a static problem in the sense that the question relates to a particular point in time. Sometimes the problem of value gets mixed up with an entirely different question that seeks to inquire into the reasons for the changes in the exchange ratios of the commodities over a period of time. Of course, the correct answer to the first question is the prerequisite for a satisfactory answer to the second.