The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Consumption and Production

  • C. A. Gregory
Reference work entry


Neoclassical economic analysis is carried out within a conceptual framework that views the economic process as a ‘one way avenue’ leading from ‘factors of production’ to ‘consumption goods’ (Sraffa 1960, p. 93). This stands in striking contrast to the approach of classical political economy which views the system of consumption and production as a circular process. This perspective was first developed by Quesnay (1759) and elaborated by Marx (1859) in his analysis of the economy in general. Marx developed a distinction between ‘production and productive consumption’ and ‘consumption and consumptive production’ and related this to the concepts of exchange and distribution. This distinction fell into diuse with the rise of neoclassical economics but has been rehabilitated by Sraffa (1960) in his famous critique of modern economics. The concept ‘production and productive consumption’ provides the general conceptual framework within which his particular theory of commodities is elaborated (see Sraffa 1960, p. 3). Sraffa’s exposition not only advances our understanding of the theory of commodities, it also enables us to grasp the essence of Marx’s important distinction between consumption and production. Marx expressed himself in rather obscure Hegelian terms and Sraffa’s simple numerical examples clarify much of Marx’s argument.

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • C. A. Gregory
    • 1
  1. 1.