Abstract
Sraffa’s elegant book transformed the treatment of prices of production. He showed that at a theoretical level prices of production and wage-profit curves were capable of complex movement, and the wage-profit frontiers could exhibit reswitching and reverse capital deepening. These results were used to criticize both neoclassical theory and Marx. The material in Sraffa’s archives came as a shock because it showed that he believed, before and after the publication of his book, that Marx was correct in thinking that labor value and price aggregates would be essentially the same at the empirical level. This chapter shows that major economic aggregates derived from six input-output tables between 1947 and 1998 are indeed very close at observed profit shares, and even within a wide range of socially feasible profit shares. Sraffa was correct about Marx being correct.
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Notes
- 1.
A longer and or more intense working day would count as a lower labor coefficient and hence as a lower unit labor value. Since Sraffa prices equal labor values at r = 0, this would lower their absolute levels.
- 2.
Sraffa shows that this problem arises solely from the difference between actual output proportions and standard ones. In the latter case, all aggregates have the same internal proportions (i.e. they are the same vector except for scale), so that any sets of prices will yield the same ratios. Hence keeping the value of money constant (keeping the price production of aggregate output equal to its value) will make all other price aggregates equal to their value counterparts.
- 3.
J. Doyne Farmer is Professor of Mathematics at Oxford University where he is Director of the Complexity Economics at the Institute for New Economic Thinking at the Oxford Martin School.
- 4.
Sources and methods for the 1947–1972 data are in Shaikh (1998) Appendix 15.2, and for 1998 are in Shaikh (2012) Data Appendix. In order to isolate the effects of changes in relative prices on various aggregate bundles, we must keep the price level constant. Total market price is defined as the market value of gross output, and total direct price and total price of production at any given profit rate are scaled to match total market price. This keeps the value of money the same across all three types of prices.
- 5.
US data has several advantages. The data is good, the time span is long, US economy is relatively closed (from 1977–2007 almost 90 percent of goods are produced domestically), and there are good domestic approximations to the input-output structure of imported commodities.
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Shaikh, A. (2021). Marx and the Other Sraffa: The Insignificant Empirical Effect of Price-Value Deviations on Economic Aggregates. In: Velupillai, K. (eds) Keynesian, Sraffian, Computable and Dynamic Economics . Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-58131-2_16
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