Sraffa’s Silenced Revival of the Classical Economists and of Marx

Abstract

The standpoint of the old classical economists as well as of Marx “has been submerged and forgotten since the advent of the ‘marginal’ method”—to borrow Sraffa’s own words. The neoclassical (or ‘marginal’) paradigm, in fact, triumphantly dominated over the twentieth century (and is still dominating even now).

A serious step towards the rehabilitation of the paradigm of the old classical economists was made by Sraffa (“Introduction”, The works and correspondence of David Ricardo, edited by Piero Sraffa with the collaboration of M. H. Dobb, Cambridge University Press, Cambridge, 1951) with his remarkable ‘Introduction’ to Ricardo’s Principles, his seminal 1960 book Production of Commodities by Means of Commodities (PCMC) followed a few years later, as a logical completion of his long-standing work.

The chapter here proposed argues that (Sraffa, P., Production of commodities by means of commodities. Prelude to a critique of economic theory. Cambridge University Press, Cambridge, 1960) contribution has so far been mainly interpreted and used as a highly powered tool for destroying the foundations of neoclassical theory from a logical point of view, with the confident belief that attacking the logical side of the theory would have been sufficient to bring about its definite dismissal, which, instead, did not happen. As a consequence of all this, the revival of the classical economists and of Marx—which is one of the most characterizing feature of (Sraffa, P., Production of commodities by means of commodities. Prelude to a critique of economic theory. Cambridge University Press, Cambridge, 1960) contribution—was automatically silenced and this very fact precluded Sraffa’s theoretical framework from being used in a constructive way as a real alternative ‘vision’ to that proposed by the neoclassical market-centred paradigm.

The aim of the chapter is to underscore the crucial importance of Sraffa’s revival referred to above, by emphasizing its usefulness in providing a genuine alternative perspective and a radically different representation of the economy, compared with that provided by neoclassical theory. An attempt will be made to show the main features of the Sraffian framework in providing such an alternative ‘vision’ which, it will be argued, is now much needed, not least for suggesting far more sensible alternative economic policies than those so far pursued in the ceaseless turmoil of present day world economies.

Comment

1.1 A Comment on Sraffa’s ‘Silenced Revival of the Classical Economists and of Marx’

Nuno Ornelas Martins

Professor Guglielmo Chiodi provides in his chapter a very concise and interesting account of the key themes surrounding Piero Sraffa’s revival of the standpoint of the classical political economists and Karl Marx. In this carefully argued chapter, Chiodi explains that Sraffa’s Production of Commodities by Means of Commodities (PCMC) brought a new way of thinking, which reshaped the classical and Marxian standpoint in a robust analytical framework. Furthermore, PCMC is also radically different from neoclassical economics regarding the very language used, and the way mathematics is used. This new way of thinking is underpinned by a different vision to that advanced in neoclassical economics.

Chiodi notes, however, that Sraffa’s PCMC has been interpreted and used essentially as a tool for destroying the foundations of neoclassical economics, rather than in a constructive way, as a basis for the development of the alternative vision it provides. He suggests a more constructive use of Sraffa’s PCMC, while outlining some of the key topics addressed by the classical political economists whose standpoint is recovered by Sraffa. The starting point for such a project consists in the idea that the society or the community is the basis for the overall vision to be advanced. The starting point is not the single individual or “automaton” of neoclassical economics. Once this vision is adopted, we can then address notions such as the social product, a notion developed more systematically by Adam Smith, by generalizing the physiocrats’ produit net to the whole economy (rather than circumscribing it to agriculture), and developing also a theory of value for measuring it.

The wage is taken as exogenous data from the point of view of economic theory, which means that it can be seen as ultimately determined by social and political factors. The wage plays a central role in the process of social reproduction, a process that, according to Chiodi, has been more emphasised by David Ricardo than by Adam Smith. Karl Marx, in turn, highlights the historicity of the capitalist mode of production, noting how the social and political factors that determine the social product, the wage, and the process of social reproduction, depend upon an historical context. As Chiodi notes, Marx identifies various forms of exploitation in various historical contexts, even if Marx’s analysis is centred on the capitalist mode of production. In this context, Chiodi suggests that the labour theory of value should be seen only as an analytical instrument for understanding capitalist exploitation, rather than as a correct theory of prices.

Furthermore, Chiodi notes that Sraffa’s PCMC shows how decisions regarding quantities can be taken before the production process starts, since quantities do not depend on prices. Thus, it is not necessary to address the problem of prices when discussing the social, political and institutional factors that determine quantities in an economic system, contrarily to what happens in neoclassical economics or, as Chiodi calls it, neo-vulgar economics. The reason for calling the approach “neo-vulgar” economics is because it is actually a continuation of what Marx called “vulgar economy”, focused on superficial phenomena such as supply and demand, rather than on the underlying conditions for the reproduction of the socio-economic system, as the classical authors did. I must add that I agree with this terminology. In fact, I have suggested it too (Martins 2015, p. 163).

The significance of production prices, however, lies in the fact that they are the prices that enable the reproduction of the existing social and economic system. In this context, Chiodi argues that production prices have a deeper meaning in Sraffa’s system, since they are connected to the livelihood of the community, while making possible the distribution of the surplus. This deeper meaning reflects the underlying vision of the society, as noted above, which Sraffa expresses using a language that is in synchrony with the one used by the classical political economists and Marx. The use of such a language is, for Chiodi, an important pedagogical feature of Sraffa’s PCMC that has been relatively neglected. Another important aspect is the use of constructivist mathematics.

Chiodi is certainly right in pointing out that Sraffa’s contribution provides a very significant breakthrough in various dimensions, including the theory it advances, the methods it employs, and the language it uses. All these elements are essential for recovering the standpoint of the classical political economists and Marx, and Sraffa’s capacity for recovering all these elements into his unique contribution is an astonishing endeavour. Furthermore, it also provides the ground for the advancement of a constructive approach, as an alternative to neoclassical economics.

According to Chiodi, the reason why this constructive approach has not been as prominent as it should is because Sraffa’s PCMC was used essentially as a tool for destroying the foundations of neoclassical economics on logical grounds. This seems to suggest that there is an excessive focus on a critique of neoclassical economics, rather than on a more constructive alternative. While I think there is much merit in this hypothesis advanced by Chiodi, I would like to add some details to this overall thesis. In particular, I think that it is important to understand why the critique of neoclassical economics was not followed by a revival of the classical political economists and Marx.

The role of language and methodology highlighted by Chiodi plays a central role here. In a nutshell, what happened is that the critique of neoclassical economics successfully identified the internal inconsistencies of neoclassical economics. But the neoclassical economists interpreted this critique in terms of their own methods and language. In so doing, they failed to note the problems associated with the underlying methodology and language used. This led, naturally, to the belief that once the internal inconsistencies of neoclassical economics would be acknowledged, as Paul Samuelson (1966) did, there would be no need of revising the underlying methodology and language.

Chiodi notes that Robert Solow (2014, p. 63) found the mathematics used by Sraffa a set of “primitive tools”, while being surprised that Sraffa made so much progress in the study of “Simple Leontief Models” using those tools. Solow, like Samuelson, always interpreted Sraffa’s (1960) contribution in terms of linear programming models. One must remember that Samuelson and Solow were students of Wassily Leontief, who were developing linear programming models with Robert Dorfman (Backhouse 2014, p. 256), leading to their book Linear Programming and Economic Analysis (Dorfman et al. 1958).

This helps understand why in the article mentioned by Chiodi, Solow (2014, p. 63) contrasts Sraffa’s (1960) “primitive” use of Simple Leontief Models with Generalised Leontief Models that allow for choice of technique within each industry. Solow’s reference to Generalised Leontief Models that allow for choice of technique within each industry implies that Sraffa’s (1960) contribution is a particular case where the same technique is applied to each industry. A similar misunderstanding had been made by Frank Hahn (1975, p. 362), who saw Sraffa’s (1960) contribution as a particular case of general equilibrium theory instead, for example when he writes that “there is not a single formal proposition in Sraffa’s book which is not also true in a General Equilibrium model constructed on his assumptions.”

Hahn’s comment is made in a subsequent stage of the Cambridge controversies in the theory of capital, when the debate had already moved from a discussion on the production function to general equilibrium theory (Cohen and Harcourt 2003). But the basic misunderstanding is the same as the one made by Solow. Both Solow and Hahn interpret Sraffa’s equations in terms of a functional relationship between the quantities of inputs and the quantities of outputs, as if the quantities of inputs determined the quantities of outputs. But in Sraffa’s (1960) analysis, there is no functional relationship between the quantities of inputs and the quantities of outputs. Rather, both the quantities of inputs and the quantities of outputs are taken as exogenous data which, together with the distribution of income between profits and wages, leads to a set of prices that are consistent with the reproduction of the economic system.

Sraffa’s (1960) system is thus compatible with any technology, and there is no need of moving into generalised Leontief models for characterizing the technologies of each industry mathematically, or general equilibrium models. In fact, Sraffa’s (1960) system is much more general than generalised Leontief models or general equilibrium models precisely because it does not assume that the relationship between the quantities of inputs and the quantities of outputs has to be determined mathematically. Neoclassical economists find this very difficult to understand because they presuppose that scientific analysis must assume the form of mathematico-deductivist models (Lawson 1997).

Samuelson’s (2010) last stand on the controversies in capital theory is particularly symptomatic of this tendency. Samuelson (2010) simply assumes that the activity of self-interest optimizers would lead to a convexification of technologies that would make the neoclassical presuppositions adequate (Martins 2016), which again shows that no effort is made for understanding the methodological implications of the standpoint adopted by Sraffa. Joan Robinson (1970, 1975) still tried to emphasise the methodological aspects involved, but her methodological critique did not generate the same debate as her earlier critique of the neoclassical production function (Robinson 1953–1954).

So I would argue that the reason why the critique of neoclassical economics did not lead to a revival of the classical political economists and Marx is because the methodological presuppositions of Sraffa’s conception have not been fully grasped by the neoclassical economists. This means that Chiodi’s emphasis on the pedagogical nature of Sraffa’s contribution is certainly a very important aspect, which has been neglected, as Chiodi rightly notes. But the reason why the more constructive critique advocated by Chiodi has not been pursued stems essentially from the fact that the more destructive critique was not as successful as it is usually believed. The more destructive critique of neoclassical economics succeeded in identifying inconsistencies in neoclassical economics, but failed to change the terms of the debate, while allowing the neoclassical side to interpret Sraffa’s contribution in terms of their own methods and language. The revival of the classical political economists and Marx requires, as Chiodi rightly notes, taking into account the theory, methods and language carefully employed by Sraffa (1960).