Neri Salvadori

Representing the production and circulation of commodities in material terms: On Sraffa's objectivism

Abstract The paper discusses Sraffas interpretation of the classical economists and, following their lead, his elaboration of an objectivist, surplus-based theory of value and distribution. The emphasis is on the twin concepts of physical real costs and social surplus on the one hand and that of a circular flow of production on the other. In order to determine relative prices within such an analytical scheme, the tool of simultaneous equations is indispensable. It is then argued that fixed capital turned out to be a formidable obstacle: whereas the circulating part of capital allows one to entertain the idea of a material-cum-value transmigration into the product, this idea loses much of its appeal with regard to the durable part. Sraffa eventually overcame the difficulty in terms of the joint-products approach.

The Elgar companion to classical economics

This reference provides an account of the classical approach to economics. It contains 200 short entries in a dictionary format on all the significant areas of this school of thought. Together, the two volumes offer analytical and historical views of old and modern classical economics.

Von Neumann's growth model and the ’classical‘ tradition

The paper shows that the conventional neoclassical interpretation of von Neumanns growth model cannot be sustained. Other than in models in the tradition of Walras and Cassel, in his model there is no given ‘capital’ endowment that constrains productive capacity and provides the basis, in terms of its relative ‘scarcity’, for a determination of the interest rate. Von Neumanns model is rather fully compatible with, and has been anticipated in all relevant aspects by, authors whose contributions can be strictly located within, the classical tradition. This concerns in particular the asymmetric treatment of the distributive variables. Finally it is argued that von Neumanns model may be interpreted as containing inter alia, an answer to the ideas put forward by his fellow-mathematician Robert Remark. Both circumstantial evidence and a careful textual comparison of Remaks paper on ‘superposed price systems’ and von Neumanns analysis support this interpretation.

The ‘Standard commodity’ and Ricardo’s Search for an ‘Invariable Measure of Value’

Even three decades after the publication of Piero Sraffa’s Production of Commodities by Means of Commodities (1960) and in spite of extended discussions on the matter there does not yet exist a commonly accepted view as to the meaning of the ‘Standard commodity’ and the role it plays in Sraffa’s analysis. Moreover, it seems to be still unclear what is the relationship between this concept and Ricardo’s search for an ‘invariable measure of value’.1

The ‘New’ Growth Theory: Old Wine in New Goatskins

With the inception of systematic economic analysis in the time of the classical economists the problem of what determines the dynamism and growth performance of the economy became a major focus of research in social sciences. Since that time it has always been felt that in order to understand the nature and causes of the wealth of nations and its growth one ought to study first and foremost the ‘causes of improvement in the productive powers of labour’, as Adam Smith put it, or the factors affecting the development of the ‘productive powers of society’, to use Karl Marx’s concept. It has also always been understood that there is an endogenous side to this process of improvement in social productivity. Reading authors such as Smith, Charles Babbage, Marx or Alfred Marshall one indeed gets the impression that there is no such thing as a purely exogenous change in productive powers. These are seen to rather depend on the actions of individuals and the impact these actions have in fostering economic growth. These actions and their ‘growth effectiveness’ are envisaged as being shaped by a variety of factors including cultural norms, social institutions, and a nation’s policy.1 In these authors’ works, technological and organisational change is portrayed consistently as being essentially endogenous. For example, in Smith’s concept of the division of labour, the pace at which capital accumulates (and thus markets expand) is singled out as the factor that is most important for the growth in labour productivity and income per capita (see Smith (1976) bk I, chs i— III; see also Negishi, 1993). The endogeneity of technological progress was also stressed in more recent times by authors such as Allyn Young and, particularly, Nicholas Kaldor, who even attempted — albeit with only limited success — to put the relationship between productivity growth and capital accumulation into algebraic form, in his so-called ‘technical progress function’. It was clear to these authors that ‘human capital’ and ‘technological knowledge’ do matter, and that improvements in the ‘skill, dexterity, and judgment with which labour is applied in any nation’ (Smith) are favourable to growth.

Fund-flow versus flow-flow in production theory: Reflections on Georgescu-Roegen's contribution

Abstract The paper discusses Nicholas Georgescu-Roegen’s contribution to production theory, comparing it with the contributions of John von Neumann and Piero Sraffa and emphasizing the problem of the choice of technique. It is shown that Georgescu-Roegen’s fund–flow approach, in which fixed capital is taken to be an “immutable agent”, can be misleading and cannot address issues that are easily handled by the alternative flow–flow approach that reduces fixed capital to circulating within a joint-products framework and allows adequate treatment of the wear and tear of machines as well as the problem of capital utilization.

Economic dynamics in a simple model with exhaustible resources and a given real wage rate

The paper elaborates a dynamic input‐output model with exhaustible resources. Discoveries of new deposits and technical progress are set aside. It is assumed that there is a ‘backstop technology’ (based on solar energy), which implies that exhaustible resources are not indispensable in production. Given the real wage rate and the consumption pattern of profit and royalty recipients, it is then shown that the paths followed by the royalties paid to the owners of resources, the quantities produced of the different commodities, and their prices are determined once a sequence of nominal profit rates is given.

Input-Output Analysis from a Wider Perspective: a Comparison of the Early Works of Leontief and Sraffa

Abstract This paper compares Leontiefs 1928 PhD thesis and Sraffas work in Cambridge in 1927–1928 as reconstructed from Sraffas unpublished papers. Both authors showed that relative prices and the interest rate can be determined exclusively in terms of the observable amounts of commodities produced and used up during a year – without any reference to demand and supply. While Sraffa continued to elaborate a comprehensive objectivist, surplus-based alternative to the marginalist theory, Leontiefs interest shifted towards applying the new tool of input-output to practical problems. However, his assumption of given value added coefficients in his price equations cannot be sustained.

The Dynamic Leontief Model and the Theory of Endogenous Growth

This paper shows that the dynamic Leontief model can be interpreted as a linear model of endogenous growth. The long-term rate of growth is determined within the economic system - either as the outcome of the saving and investment behaviour of agents or as the outcome of some planners maximization of some objective function.

Theories of ‘Endogenous’ Growth in Historical Perspective

Whenever someone claims a major intellectual breakthrough, this claim should be subject to close scrutiny. Economics is no exception. Throughout history, economists have carefully examined the novelty of ideas in economics. In fact, the main objective of the history of economic thought as an academic discipline is to critically examine claims to originality in economic analysis.