Oxford University Press is collaborating with JSTOR to digitize,
preserve and extend access to Oxford Economic
Papers.http://www.jstor.orgValue and Distribution in the Classical
Economists and Marx Author(s): P. Garegnani Source:Oxford Economic
Papers, New Series, Vol. 36, No. 2 (Jun., 1984), pp.
291-325Published by:Oxford University PressStable
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ConditionsOxfordEconomicPapers 36 (1984), 291-325
VALUEANDDISTRIBUTIONINTHE CLASSICALECONOMISTSANDMARX' By P.
GAREGNANI I. Introduction 1.THEtheoryof value and distributionis at
presentin a situationof unease and uncertainty:we no longer findthe
same general agreementabout its basic elementswhichobtained untila
few decades ago. Two main theoreti- cal developmentshave
underminedthe dominanttheorywhich explained distributionand
relative prices by means of the "equilibrium" of the two "opposing
sets of forces",demand and supplyfor factorsof production. The
firstdevelopmentin orderof timehas been Keynes's refutationof the
doctrineaccordingto which a competitiveeconomic systemtends towards
the full employmentof labour, i.e. towardsthat equilibriumbetween
"de- mand and supply" of labour, which was to determinethe wage.
Keynes' concentrationon the shortperiod, and the persistencein the
General Theory of many traditionalpremisesfavouredthe successive
attemptsto reconcile his results with orthodox long-periodanalysis:
but the weakening of the
dominanttheorywhichnonethelessresultedfromhis workcan be seen both
in the uneasiness which,in ever-changingforms,characterizesthe
renewed orthodoxy,and in the tendencyof Keynes'
directfollowerstowardsa more radical
departurefromtraditionaltheory. The second developmentconsistsin
the critiqueof the notionof capital as a"factor of production"
measurable independentlyof distribution.2This critiquehas shownthe
invalidityof some propositionsof the theory,like the
inverserelationbetween the rate of interest(rate of profit)and the
"quan- tityof capital" per worker,which are basic for the
explanationof distribu- tion in termsof demand and supplyfor
"factorsof production". Theuncertaintywhich has resulted from these
developmentsfinds its expressionin authorswho thinkthat new
theoreticalapproaches should be explored. It is also revealed by
the natureof some of the work carriedout by those who adhere to the
traditionalapproach.3 1 This paper whichdevelops under the impactof
Sraffa's productionof commoditiesby means of commoditiessome
propositionscontainedin a Ph.D dissertationof 1955-1958, is based
on notes delivered at a conferenceon "Marx's Transformationof
Values into Prices of Produc- tion" held in Siena in 1972, and used
thenforlecturesgivenin Cambridgeand elsewheresince 1973-4: in the
meantime,referencesto the ideas contained in them have appeared in
other works.I would like to acknowledgethe benefitI
derivedfromdiscussionswithPiero Sraffa and
fromcommentsfrommanypeople and in particularby K. Bharadwaj, A.
Campus, B. Cutilli, H.Kurz, and M. Pivetti.Financial assistance by
the 'Consiglio Nazionale delle Ricerche' is gratefullyacknowledged.
2Thisline of criticism,hints of which may be found in Sraffa's 1951
p. XXII,was first broughtto lightin printby Robinson 1953. (See
also Robinson, 1973, p. 195.) 3 Thus, the attemptto avoid the
difficultiesbesettingthe theoryappears to have led to an
abandonment of the method basedon"long-period positions" of the
economic system, characterizedby auniformrate of profit.This notion
had been central to the theory of competitivedistributionand value
since the very inceptionof systematiceconomic analysis. (See
Garegnani, 1976, pp. 26-29.) This content downloaded from
143.107.170.200 on Sat, 08 Aug 2015 17:16:40 UTCAll use subject to
JSTOR Terms and Conditions292VALUEANDDISTRIBUTION It is
perhapsnaturalthatwhen thiskindof uncertaintyarisesin a scientific
field,there should also arise a tendencyto go back into the
historyof the subject, and see when and how theorizingtook the turn
leading to the presentdifficulties.When we do so and look back over
the two centuriesof systematiceconomic analysis,we findthat, at the
cost of severe simplifica- tion, we can distinguishtwo successive
approaches to the theoryof value and distribution.The
moderndemand-and-supplyapproachhad in factbeen preceded by a
differentapproach whichhad its centrein a notionof "social
surplus". This earlier approach found its firstsystematicexpression
in Quesnay's Tableau Economique of 1758, became dominantwiththe
English Classical economistsfromSmithto Ricardo, and was then taken
over and developed by Marx at a time when the main streamof
economic analysis was already movingin a differentdirection. 2. The
purpose of this paper will beto consider this earlier "surplus
approach" to value and distribution.Section IIwill examine the
premises which distinguishit fromthe later
demand-and-supplyapproach. Sections IIIand IVthen set forththe
problem of "measuring-value"which arose withinit and led to
Ricardo's and Marx's explanationof value in termsof the labour
necessaryto produce the commodities.At the end of Section IV,
Marx's errorwithregardto prices of productionwill be seen as
arisingfrom treatingas integralpartsof a
singlemethodfordeterminingthe rate of profit and relative prices,
what can be developed as two equivalent but distinct methods for
this determination:what we shall call the "Price-equations method"
and the "Surplus-equationmethod". The solution based on the
firstmethod will be considered in Section V, where it will be shown
to consist of the price equations in Sraffa'sProductionof
Commoditiesby Means of Commodities,1960. The two
solutionsobtainable on the basis of the "Surplus-equation method"
will then beexamined, respectively,in Section VI, dealing withthe
"Integratedwage-goods sector", and in Section VIIdealing with
Sraffa's"Standard system". II.The "core" of the surplustheories 3.
The notion of social surpluscharacteristicof the classical
theoriescan perhaps be seen in its simplestform in Quesnay's
Tableau Economique, where we findits
firstsystematicexpression.Quesnay saw that if the social
product-whichheconsideredtoconsistentirely ofagricultural
commodities-4was to repeat itself year after year withoutincrease
or diminution,a part of it had to be put back into
production.Besides the necessaryreplacementof the means of
production,this part included the subsistence of the
agriculturallabourers. What remained of the annual
productafterdeductingthis part constituteda "surplus", or
"produitnet", 4As is well known,Quesnay excluded
manufacturedcommoditiesfromthe social producton the groundthat
theywere a mere transformationof agriculturalproducts. This content
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use subject to JSTOR Terms and ConditionsP.GAREGNANI293 of which
society could dispose without impairingthe conditions of its
survival. The fact that the subsistenceof workerswas considered
necessaryfor reproductionestablisheda directlink between the
analysisof reproduction and that of the distributionof the product
among the classes into which societyis divided.Thus Quesnay
linkedthe surplusto the landowners'share of the social product.
Andwhen Smith extended Quesnay's notion of surplusby showingthat
surplusoriginatedfromproductionin general and not
fromagriculturalproductionalone, profitsemergedas a second compo-
nent of the surplusalongside the rent of land, thus providingthe
basis for the English classical economists'theoryof distributionup
to Ricardo. The determinationof the size of the social surplus was
accordinglythe centre around which these theories revolved.
Inprinciple this way of determiningthe non-wageshares is simple.Two
magnitudesare assumed to be known prior to the determinationof the
surplus.They are: (i) the real wage, i.e. the quantitiesof the
several commoditiesconstitutingthe wage rate,5(ii) the social
product,i.e. the aggregateof the commoditiesproduced in the year.
Since (iii) the technicalconditionsof productionof the various
commoditiesare also known prior to the determinationof the
surplus,a knownsocial productimpliesa knownnumberof
labourersemployed.6By multiplyingthe numberof labourersby the
knownphysicalwages, we obtain the part of the product that goes to
the labourers, which we may call "Necessary consumption",usinga
phrase by Ricardo (1951-58, VI, p. 108). The surplus,i.e. the share
of the product going to the classes of society otherthanthe
labourers,can thenbe determinedby subtractingthe "Neces- sary
consumption"from the Social product, taken net of the means of
production;7that is: Social product-Necessary consumption = Shares
otherthanwages (surplus)(1) 'Weare followingthe authorshere
discussed in assuminga single "average" or "natural" wage and thus
homogeneous labour. As is well known,the possibilityof
reducinglabour to homogeneityrestson the suppositionof a
constancyin the ratiosbetweenthe wages forlabour of
differentqualities: see Ricardo, 1951-1958 I, pp. 20-23 on the
constancy of relativewages (see also Smith, 1910, bk. i ch X vol.
I, p. 130). These ratios were in fact leftto be studied
outsidewhatwill be indicatedbelow as "core" of these theories.(The
difficultyraised by taking these ratios as knownin the face of
differentphysicalcompositions of the wages for different kindsof
labour, seems to have been implicitlydealt withby takingthe known
real wage to be that of common unskilledlabour and then
supposingthat the wages of other kinds of labour will tend to
remain a constantproportionof it in termsof value.) 6 We are at
presentassumingthateach commoditycan be producedby means of one
method only. The considerationof alternativemethods of production
of the same commodity, which providesone of the two bases forthe
notionof a substitutabilitybetween factorsof production
characteristicof moderntheory(cf. par. 7 below), can on the other
hand only affectwhat has been said here by makingthe employmentof
labour associated with a given physicalsocial product depend on the
wage rate as well: under the hypothesisadopted in this paper the
tendencyto adopt cheaper methodswill bringthe economyto a
definitetechniquethat giving the highestwage for the given rate of
profit.(See Garegnani, 1972, p. 266-7 and 281). 7Theassumption that
the means of production are physicallyreproduced has the sole
purpose of postponingthe complicationsarisingout of errorsin
Smithand Ricardo's notionof capital (par. 12 below). This content
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use subject to JSTOR Terms and Conditions294VALUEANDDISTRIBUTION an
equation where "shares otherthan wages" is the only unknown(see
also the diagramFig. 1 below). \Techniques -Labor Einpl. Surplus
=shares/ t\~~~~~~~~~~~~otherthanS \\A