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3 3

to to

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43 43

all all

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Introduction Introduction

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to to Nonetheless, Nonetheless,

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of of

its its

bourgeois bourgeois

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neo-Ricardians, neo-Ricardians,

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of of

terms, terms, variation variation

premises, premises, terrain-a terrain-a

difference difference

would would

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analysis. analysis. than than

modem modem establish, establish,

stand stand economics. economics. 44 Shaikh 45 will generate different answers. And these answers, it turns out, favour the products of private autonomous labours carried out inde­ Marx much more than they do the neo-Ricardians. . . pendently of one another, but within and through the social division In the discussion which follows, I will therefore examme I~some of labour. 'Hence, lacking any conscious assignment or distribution detail the neo-Ricardian arguments concermng the redundancies and on the part of society, individual labour is not immediately an inconsistencies in Marx's theory of value. Since t~eirtreatment of articulation of social labour; it acquires its character as a part ... of both joint production and fixed capital are embellishments on thetr aggregate labour only through the mediation of exchange relations or main argument, and since they are dtscussed by Emmanuel Far]OUn the market.'2 in this volume, I shall ignore them here: An adequate treatment would We know of course that commodity production is generalized only in any case require a separate analysts. under capitalism, hence only when labour-power becomes a Throughout this discussion, the dtfference between value and form­ commodity. But the very fact that commodity production is of-value is crucial. Thus all prices are distinct from values bec:'u~e generalized gives rise to a paradox. It rests on private autonomous price is always money price, the monet.ary expression of value wtt~m labours carried out independently of one another with only exchange, the sphere of circulation. From thts pomt ofvtew, the transformatiOn generally exchange for profit, in mind. In order to be undertaken, each brought about by the tendential equalization ?f profit rates IS a constituent labour must presuppose, must risk, the existence and transformation in the form-of-value: from dtrect pnces, pnces reproduction of other such labours, along with the reproduction of proportional to values, to prices of production. All price differences their social basis. In other words, each such independent labour must are thus differences between existing prices and dnect pnces. be undertaken on the presupposition of the social division of labour. Nonetheless, in deference to traditional usage, I will frequently spea~ In order actually to be reproduced, however, private and of 'price-value' and 'profit-surplus-value' deviations, when wh~tIS apparently anarchic labours must somehow end up being allocated in meant is respectively the deviations between pnces ~nddnect pnces, specific proportions and quantities consistent with the social division and profits and direct profits (money profit proportiOnal to surplus- of labour. It is precisely through exchange that this presupposition is value). . . realized, that private independent labours are forcibly articulated Lastly, I should mention that thts paper IS a prelude to a m?re into a social division of labour. Exchange is the process by which, as general critique of the neo-Ricardians, the first thrust of wh,tch IS a Marx puts it, the contradictions of commodity production are 'both 3 direct confrontation with then maJor clatms. Ian Steedm~ns book exposed and resolved'. And since the generalization of commodity Marx after Sraffa provides a welcome opportunity to take Issue ~tth production implies the generalization of exchange. at the same time it the neo-Ricardians, which I do in a recently pubhshed paper entitled .; ; implies the generalization of the forcible articulation of private 'The Poverty of Algebra'. 1 independent labour into a social division of labour. The necessity of this forcible articulation then appears to the individual agents as an 'inner law, ... as a blind natural force .. .'4 Thus the society comes to possess particular and peculiar laws of motion, which assert II. Production, Reproduction and Exchange themselves in-and-through the collision of the producers in 5 1. The Contradiction of Commodity Production exchange.

In all societies, the objects required to satisfy huma~needs_ i~ply_a 2. The Double Role of Exchange certain allocation of society's labour-time, its productive actJvt~tes,m specific proportions and quant!ties. Otherwise the reproductiOn of Exchange now appears in a double role. On the one hand, because society is impossible. The relatwnshtp of people to ?ature must be exchange is the mediating process, the outcome of exchange is the reproduced if society is to be reproduced. But m the case of immediate regulation of reproduction. It is through the movements of commodity production, the products of labour whtch con.stJtute the wages, prices and profits that the immediate regulation of social material basis of this reproduction process are produced wtthout any production is accomplished. On the other hand, it is precisely because direct connection to social needs. They are produced for exchange, as exchange functions to articulate private independent labours into the A

of

in

47

its

in

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rise

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The

3.

intrinsic

immediate 46

relative

double

conditions

and

social labour

I I

of of

to to

in in

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49 49

the the the the

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and and

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total total

host host

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bourgeois bourgeois

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51 51

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15 15

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18 18

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16 16

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50 50

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53 53 so so

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handed handed

referring referring prices. prices.

of of that, that,

the the

value, value,

prices prices

production production

Obviously, Obviously,

transferred transferred distinct: distinct:

direct direct while while

words, words,

circulation circulation for for

The The variable variable

limits-vary limits-vary value value

determined determined 3. 3. this this

approaches approaches

distributed, distributed,

character character

the the distribution distribution

distribution, distribution,

52 52 of of

here here simply simply

value value

different different argues argues it

of

of

is

of

55

in

as

of

of

of

of

of

as

its

all

the

the

and the

will

how

24

inde­

more

value

these

profit

at

of

size

actual

money

on

overall

relative

relative

itself

result

of

opposite

surplus- between

be

are

prices

then

difference

circuit

this

as

because

the that

Where

show

than

the

Value

the

pattern

value.'

the

re-invested

to the

magnitudes.

revenue

no

variations

Total

the

to will

of

production surplus-value

is

the

capitalists

discussions

in

that

only

values

is

that

of

25

surplus-value

of

of

depends

all.

the

regardless

such,

noted,

by

values,

expresses

(or

value

combined

it

not

the

surplus

revenue.

once

at

to

which

also

be

As

expressed

profits

grasped.

magnitudes

'This phenomenon

there

resultant

mass

concept

of

of

the

determined

Marxist

circuit

which

from

surplus-value

to

23

therefore,

grows

is

from

but

from reproduction),

profits,

the

in

and

proportional

the

then

discussion

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the

deviations.

limits

implies

been

conditions

direct

this

second,

surplus-value

should

transfer

most on

surprise

consumed

necessarily

to

circuit

extent

profit

on

of

deviate

the

amount

the

all

to

profits

himself.

direct

is

has no

circulation

circulation.

simple

deviate

of

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from

the complexly

only

any

manner

profits

the

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the

its

and

only

in

magnitude

the

of

preceding

revenue

prices total

capital

as

is

Shaikh

hand, not

of

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direct

on

circulation.

of production,

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price-value

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of

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surplus-value, (as

mystery

the

to

of

profits size

on

circulation

amount

reproduction),

in

price

into Since

a

(money

when

from

of

equal

distribution

other

come

of

from

of

the

deviations.

depend

from

consequently

surplus-value

circuit

consumption

form-of-value

the

depends

the

actual

capitalists,

limited.

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case,

relative

mystery

that

it of

capital

conditions depends

created

profits

individual

of

profits

on necessarily the and

on

sphere

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themselves

should

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it

no

expanded

evidently

and

words,

they express they

of

independently

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this

evident

the

is,

circulation.

are

are

is

is

specific mode

is,

the

circulation

is

expressions.

in

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strictly

for

on

autonomy

from

this

was

in

among

actual

its

it

illusion

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articles

of price-value

is

other

it

also which

independently

value

they of

revenue

of

=direct

nature

on

deviation

in

the

to

and revenue.

must,

no

categories

but

maximum

money

decreases)

vary

issue,

factors.

depend

relative

conversion

transfer

and

also

in

None

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phenomenon

this the

creates between case

magnitudes, pendence value autonomy value their

Profits, magnitudes

surplus-value can

the autonomy but

concrete,

revenue-that Intuitively, deviation two capitalists' relative articles-that distributed individual extent

capital any also maximum. surplus-value

(as

profits capitalist

size

I

,

a

22 of IS

to

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of

as

I I I

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I

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)

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thts

as

they

_,.

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as

actual

rise

by

devtate

pnce

mystery

mass profit.

sell~rs

ctrcmt

capttahst

gains capitalist

capitalist

art1cle~

article~

what

differences

cap1tahsts

of

the

___ I :

I

:

give

of

though

.1.

of

under

the

the

which

accounts

pnces

d1~ect

the

as

one

given

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their

of

proftts.

accounts

as

same

(by

a

mass

what

for

another

out

cucutt

circuit

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what

below

the

that

encompassed

course,

analysed,

LP

value).

dtrect

business

too,

profit

the

deviations

is

the

pnce

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hence

personal

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business

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pnc~

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the

themselves

anses.

variable

a

is

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and

in

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capital:

and

in

direct

for. !owe~ a

their

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purchase

c. transferred

1 a

up

of

and

profits.

mysterious

is

m

~o

as

to

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lower

circulation

m-

price-value

below capital

LP.

through

manifest

consider

difference

show

is

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reproduction,

of

value

Figure

circuit

form MOP

itself

direct

to

and

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profits

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of

revenue,

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of

revenue

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profit

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and

as

in in

social

of

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to circuit

surplus-product

proportional

MOP

of

extent

shows

manifest

sellers

'

lose

whole

the

itself

in

money

now

actual

circulation

M------)

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profit

MOP------.\

other

explicitly

transfers as

appears

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circuit

profit

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of

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internal

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a

capitalists

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the

not

lose

analyses

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own

<

once

these

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manifests

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consumers

into

case

by

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amount

is

remain

values

as

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this

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revenue, between

However transfers

revenue

surplus-value disappea;s.

from transfer profit

circumstances lower

capital

gain

consumption.

in amount

C'

54 gained M'

capitalists' commodity-capital MOS consumption.

loses capitalist-investor

of of

57 57

(2) (2)

(3) (3)

on on

for for

the the

but but

this this

rate rate

(3a) (3a)

from from

latter latter

price­

prices prices

actual actual

rate rate

profit­

bF, bF,

proper proper

money money

relative relative

roughly roughly

and and

formula formula

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of of

results results

the the

cost-price cost-price

the the

paper, paper,

differ differ

P P

growth growth

bill, bill,

to to

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(when (when

given given

W, W,

time. time.

average average

prices prices

n n

average average

above above

resulting resulting

would would

M, M,

W) W)

wage wage

present present

at at

capital, capital,

the the

the the

definition definition

+ +

preceding preceding

average average

the the

the the

values values

profit-surplus-value profit-surplus-value

goods. goods.

Let Let

the the

profit profit

bF, bF,

sell sell corresponding corresponding

total total

the the

the the

turnover turnover

fixed fixed

the the

of of

profits profits

r(M r(M

of of

arbitrarily arbitrarily

of of

that that

in in

= =

the the

the the

period, period,

lower lower

at at

profit. profit.

and and

and and

relative relative

-0.064. -0.064.

n n

(given (given scope scope

ratio ratio

goods goods

64% 64%

dfrect dfrect of of

all all

extend extend

up, up,

for for

magnitude magnitude

even even

the the

12%, 12%,

the the

the the

rate rate

can can

of of

equal equal

used used consumption consumption

postwar postwar

-10% -10%

differences differences

an an

1t 1t

Shaikh Shaikh

turnover turnover

stand stand

we we

the the

Hence Hence

M+W+rr M+W+rr

roughly roughly

whence whence

incidentally, incidentally,

of of

the the

of of

po po

beyond beyond

and and

-6%. -6%.

= =

simply simply

values), values),

orders orders

W. W. prices prices

roughly roughly be be

is is

from from

respectively, respectively,

effort effort

W W

is is

imply imply P P

consumption consumption

case case

over over

order order

1t 1t

r r

1t 1t

+ +

W', W',

capitalist capitalist

M+ M+

was was

than than

production production

, ,

these these

capital capital

M M the the

0

more more

the the

would would

of of

roughly roughly

of of

relative relative

factors factors

prices, prices,

M

to to

of of

profit profit

For For

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lower lower

of of

taxes) taxes)

r r =

by by

fixed fixed

little little

remembering, remembering,

let let

capitalist capitalist

of of

abstracting abstracting

economy economy

26 26

a a

these these

when when

profit profit

values values

were were

advanced) advanced)

sum sum

of of

~9% ~9%

from from

are are

US US

4%.

of of

rate rate

deviation deviation

that that

only only

(before (before

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profits profits deviation deviation

values). values).

worth worth

inclusion inclusion would

we we

the the

money money

mass mass

is is

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surplus surplus

roughly roughly

means means profits profits

actual actual

For For (0.1/1.10) (0.1/1.10)

deviations deviations

value value

treatment treatment

(=capital (=capital

Since Since

their their

prices. prices. the the

'equal' 'equal'

the the

deviation. deviation.

aggregate aggregate

aggregates aggregates

abstracts abstracts

average average

It It

I I

:' :'

i i

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to to

of of

be be

of of

in in

to to

IV IV

(1) (1)

the the

the the

the the

the the

rate rate

total total

zero. zero.

F, F,

total total

profit profit

small. small.

of of

of of

also also

profits profits

be be profits profits

to to

growth growth

of of

useful useful

the the

weighted weighted

arbitrary arbitrary

power power

of of

deviation deviation

variety variety

section section

individual individual

+g) +g)

derived derived

can can

is is

to to

good, good,

production production

price-value price-value growth growth

a a

price-value price-value

will will

quite quite

capitalists. capitalists.

for for

rate rate exactly exactly

it it

for for

F, F,

consumption consumption

(I) (I)

as as

actual actual

of of

1 1

wide wide

that that implies

is is

i-th i-th by by

be be

b(l/1 b(l/1

average average

a a

of of

holds holds

to to

investment investment

the the

deviation deviation

money-value money-value average average

=If~ =If~ negative negative

Then. Then.

range range

therefore therefore purchasing purchasing

of of

price-value price-value

uniform uniform

=the =the

reserved reserved

course course

F F

deviation deviation

involved, involved,

individual individual

equation equation

the the

capitalist capitalist

g g

percentage percentage

deviations. deviations.

is is

product product

invested invested

total total

fraction fraction

of of

be be

result result

likely likely

the the

of of

of of

fraction fraction

of of

a a

and and

wide wide

~nd ~nd

of of

to to

that that

-

=the =the

encompass encompass

prices prices

is is

is is

a a

r r

this this

total total

aggregate aggregate

average average

that that

percentage percentage

ratio ratio

profits profits

l, l,

b b

actually actually

capitalists. capitalists.

=the =the

average average

positive positive

ratio ratio

have have

l+g l+g

--DF --DF

of of

goods, goods,

the the

so so

b b

that that

the the

means means

direct direct

the the

goods goods

the the

condition condition

that that

price-value price-value

by by

goods goods

= =

positive positive

having having

profits) profits)

deviation deviation

the the

will will

and and

for for +g),;; +g),;;

consumption, consumption,

capitalists. capitalists.

and and

these these

that that

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point point

latter latter

determinants determinants

1t 1t

thing, thing,

bF=the bF=the

being being

also also

r. r.

of of

fraction fraction

(1/1 (1/1

issue issue

profits, profits,

on on

direct direct

n,;_no n,;_no

--

is is

many many

magnitudes magnitudes

average average

constant, constant,

this this

therefore, therefore,

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the the

the the

r),;; r),;;

rate rate it it

actual actual

and and

this this

negative negative

same same

shown shown

consumed consumed

at at

industries industries

is is

of of

+ +

the the

deviation deviation

capitalist capitalist

price-value price-value

consumption consumption

to to

(from (from

on on

held held

be be b) b)

analysed. analysed.

the the in in

their their

consumption consumption

of of

'money 'money

that that

profit profit

is is

(l/1 (l/1

restriction restriction

where where

be be be be

noted noted

refer refer

general, general,

can can

(1-

1, 1,

expenditure expenditure

constant. constant.

articles articles

expenditures expenditures

it it

then then

be be

Pi Pi

In In

economy, economy,

towards towards

will will

individual individual

average average

only only

what what

capitalist capitalist

b,;; b,;;

of of

that that

idea idea an

A, A,

held held

p,, p,,

=actual =actual

price-value price-value

percentage percentage discussion discussion

of of

paper, paper,

as as therefore therefore

average average

produced produced

capitalist capitalist

or, or,

as as the the

n n

is is

the the

0,;; 0,;;

product product

goes goes

get get

surplus-value surplus-value

of of

of of

should should

the the

this this

capitalist capitalist

To To

which which

It It

to to

recognize recognize

profits, profits,

of of

follows follows Further Further g g

written written

deviations. deviations.

deviations deviations

(bF) (bF)

conditions, conditions,

and and

weighted weighted

where where

objects objects

money money

Insofar Insofar

prices, prices, social social average average

deviation deviation

value), value), from from goods. goods.

in in rate rate 56 56

consumption consumption

appendix appendix the the

average average

average average

which which · · Shaikh 59 58 need to clarify a bit further the inner relation between value rate of whence profit and its monetary expression.

" " =-- r (4) 4. Prices of Production: 7he Profit Rate p M+W+rr l+r The preceding discussion was based on more or less arbitrary prices. (4a) In order to derive more precise results, we must now restrict ourselves specifically to prices of production. In this regard, since we have already established in (5) that even in the general case there exists an where r=the average money rate of profit with actual prices and r' = intrinsic connection between profit mass deviations and profit rate the average money rate of profit with prices proportional to values= deviations, it is sufficient to deal with the latter alone. the average value rate of profit. We begin by noting that for given conditions of the labour process, 0 Finally, since the sum of prices is hdd constant, P = P • Dividing (2) the value rate of profit r' can always be expressed as a steadily by P and applying (4), we can, after a little manipulation (see appendix increasing function of the rate of surplus-value: A), write: r 0 s (6) =--C+V An 0 -e")r- +- M f-f where S =surplus-value, V =value of labour-power. Let L =V +S= - = " " (5) r r value added by living labour (ifN =the number of workers employed, r(~")+l. and h =the length of the working day in hours, L = Nh). Let k=C/L=the ratio of dead to living labour. Then Intuitively, given that the sum of prices is held constant, if price-value 0 deviations cause " to be below rr , they must also cause (M + W) to be 0 ) (3)). above (M'+ W (see equation This means that the average rate (7) of profit will be lower than the value rate because its numerator (rr) is lower and also because its denominator (M+ W) is higher, which in turn implies that profit rate deviations will tend to be a bit larger than profit mass deviations Arrjrr. This is exactly what (5) tells us, and if we Since k depends only on the technology and the length of the working use the previously calculated magnitudes of Arr/rr;;;. -0.064 along day h, when these conditions of the labour process are given r0 will with the previously given value off;;;.0.12, we get vary directly with the rate of surplus-value. Thus the value rate of profit is a monotonic increasing function of the rate of surplus-value. Arr In recent years, several authors have shown that when direct prices - 0.07 > - = - 0.064. are transformed into prices of production, though the transformed " money rate of profit r will in general deviate from the value rate (we It is important to understand what this numerical result implies: have explained how and why in the preceding section of this paper), nonetheless this transformed rate is also a monotonic increasing given that r;;;.O.l2, (5) implies that r' ;;;.0.13! Such a difference, 27 incidentally is considerably less than the probable error in any function of the rate of surplus-value. But once it is recognized that empirical measurement ofr, and we may as well say that for empirical the value rate of profit r' and the transformed rate r both increase as purposes rand r' (as well as" and rr') are virtually indistinguishable­ S/V increases, it follows at once that they must move together: when providing, of course, that our estimate of price-value deviations is of the value rate of profit rises (or falls) its reflection in the sphere of the correct order of magnitude. Before we come to that, however, we circulation, the transformed rate of profit, also rises (or falls).

is is

is is

61 61

the the

the the

the the

and and

As As

) )

to to

0

actual actual

merely merely

r

average average

average' average'

between between

approxi­

that that

coverage coverage

r,though r,though

ro ro

weights weights

individual individual

individual individual

individual individual

essentially essentially

discussion. discussion.

other. other.

the the

between between

magnitudes magnitudes

rare rare

of of

Their Their

composition composition

composition composition

of of

in in

of of

than than

the the

'only 'only

a a

29 29

--r --r

'social 'social

set set

that that

each each

insists insists

set set

relation relation

be be

industry industry

profit profit

us us

corresponds corresponds

to to

the the

determines determines

one, one,

central central

larger larger

to to

the the

each each

behave behave

of of

preceding preceding

the the

difference difference

to to

respective respective

is is

around. around.

tells tells

Marx Marx

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perceives perceives

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powerful, powerful,

exactly exactly

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have have

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therefore, therefore,

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rate rate

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28 28

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rate rate

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output output

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III.3, III.3,

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32 32

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30 30

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34 34

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33 33

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64 64

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67 67

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Edward Edward

below below

1963 1963

-

-

••• •••

.~...t~ .~...t~

(0.01498) (0.01498)

0.96809 0.96809

5 5

by by

1947 1947

(0.02602) (0.02602)

0.99078 0.99078

_i.2j221: _i.2j221:

1 1

+ +

• •

data. data.

+ +

0.800 0.800

preceding preceding

2~2 2~2

0.95814 0.95814

-2~-

0.94894 0.94894

• •

-

Excluded] Excluded]

data: data:

,x-

• •

the the

significant significant

= =

= =

Figure Figure

1 1

. . 1947 1947

z:z: z:z:

• • 2 2

2 2

1.200 1.200

available available

parentheses parentheses

no no

R

R

,...:; ,...:;

-

(0.01457) (0.01457)

0.01380 0.01380

Rental Rental

83-order 83-order

-0.00095 -0.00095

(0.0106) (0.0106)

. .

repeat repeat

lme lme

in in

= =

Table. Table.

_,...... _,......

Cross-Sectional: Cross-Sectional:

made made

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= =

Leontiefs Leontiefs

to to

and and

on on

• •

Cross-Sectional: Cross-Sectional:

-

•/ •/

are are

/ /

(P;;) (P;;)

for for

(P;;) (P;;)

data data

I I

able able

indicates indicates

/ /

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Estate Estate

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table, table,

-45" -45"

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test test

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errors errors

Input-Output Input-Output

basis basis

(192-0rder) (192-0rder)

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to to

. .

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~ ~

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76 76

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-

parametric parametric

-2.100 -2.100

-

University, University,

data) data)

(standard (standard

input-output input-output

identical identical

6:-0.600 6:-0.600 ..5 ..5

it it

of of

79 79

to to

as as

of of

of of

to to

to to

to to

by by

far far

the the

the the

the the

but but

are, are,

and and

own own

price price

us us

differ differ

show show inner inner

issues issues

profit profit

by by

small, small,

that that

incon­

Marx's Marx's

rate rate

remain remain

relative relative

relative relative

distinct distinct

enables enables

that that

(such (such

to to

of of

capitals, capitals,

critics critics

how how

period period

any any

can can

values) values)

their their

that that

possible possible

refuse) refuse)

us us

the the

necessarily necessarily

thus thus

and and

these these

a a

quite quite

examine examine

of of

extended extended

the the

regulated regulated

in in

that that

relative relative to to

quite quite

rate rate

conventional conventional

enables enables

of of

which which

also also

result result

of of

Marx. Marx.

be be

8-10%. 8-10%.

to to

is is

magnitude magnitude

(or (or

rate rate

properties properties

be be

To To

only only

the the

to to

prices prices

over over

of of

us us

between between

by by

in in

but but

then then

Marxists Marxists

is is

then then

value value

requires requires

conclude conclude

becomes becomes

divorce divorce

grasp grasp

transformed transformed

it it

time time lack lack

are are

concept concept

consideration consideration

it it

to to

profit. profit.

how how

likely likely

corresponding corresponding

These These

the the

order order

exist, exist,

important important

prices prices

value value

properties properties

emphasize emphasize

the the

enable enable

is is

of of

us us

downturns, downturns,

redundancies redundancies

they they

same same

modern modern

accepting accepting

proportional proportional

of of

different different

of of

the the

the the

are are

to to

and and

can can

mathematical mathematical

transformed transformed

reproduction reproduction

for for

whole whole

approach approach

because because

superior superior

Marx's Marx's

rate rate

anticipated anticipated

complete complete

set set

of of

them. them. in in

the the

Further Further

effect effect

autonomy autonomy

a a

cause cause

cycle cycle

its its

subjects, subjects,

a a

a a

Even Even

relative relative

7%) 7%)

and and at at

why why

many many

tried tried

This This

(prices (prices

as as

which which

so-called so-called

in in

circulation, circulation,

and and

value value

because because

transfer transfer

vastly vastly

of of

those those

yet yet

these these

Shaikh Shaikh

conceptions conceptions

a a

somewhat somewhat

stressed stressed

difference difference

of of

break, break,

relative relative

prices. prices.

exhibit exhibit

general general

have have

a a

the the

uncover uncover

a a

business business

(about (about

well-known well-known

on on

prices prices

and and

circulation, circulation,

of of

variations variations

profit profit

magnitude magnitude

I I

a a

work work

in in

limited. limited.

had had

of of

overall overall

and and

to to

of of

exactly exactly

is is

of of

economy economy

displacement displacement

in in

production production

such such image, image,

mirror mirror the the

understand understand

it it

determination. determination.

deviations, deviations,

the the

variations variations

the the

will will

direct direct

concerning concerning

preceding preceding

implies implies

the the

values values

enough enough

the the

in in

notion notion

rate rate

mediate mediate

to to

be be

seems, seems,

of of

the the

large large

paper, paper,

why why

strictly strictly

values values particularly particularly

sphere sphere

the the

it it

for for

from from

neo-Ricardians neo-Ricardians

in in

formulations formulations

even even

from from

from from

are are

will will

small small

same same formulations formulations

they they

conditions conditions

and and

capitalist capitalist

and and

and\onclusions and\onclusions

Ricardians. Ricardians.

value value

this this

the the

necessary necessary

displaced displaced

example, example,

have have

differences differences

But the the But

of of

I I

the the

source source

a a

that that

of of

by by

are are

underlying underlying

the the

price-value price-value

difference difference

these these

the the

an an

possible possible

between between

arguments arguments

production production

neo-

how how

results results

deviate deviate

as as

to to

years years

effects effects

Ricardo, Ricardo,

of of

of of

this this

Moreover, Moreover,

together: together:

to to

that that

that that

that that

because because

take take

the the

typical typical

argue argue

its its

major major

turbulent turbulent

only only

Summary Summary

to to

To To

These These

values. values.

the the

variations variations

the the becomes becomes

V. V.

several several

Steedman). Steedman).

than than

mathematical mathematical

autonomy autonomy

sistencies sistencies

them. them.

status status

from from

conception conception

systematically systematically

Throughout Throughout

moreover, moreover, show show

hidden hidden

conceptions conceptions us us why why

show show not not

move move

Marx, Marx, appears appears

with with prices prices

transformation transformation

right right

essentially essentially

individual individual profit profit

connection. connection.

a a

of of

In In

by by

an an

we we

the the

the the

will will

non­

case. case.

10%, 10%,

much much

under under

cross­

corre­

profit­

on on

typical typical

~ ~

data data

a a

that that

be be

the the

yields yields

when when

JF JF

the the

deviations deviations

and and

to to

even even

production production

get get

with with

typical typical

price price

just just

the the

of of

commodity commodity

of of

that that

consumed consumed

that that

we we

inter-temporal inter-temporal

Finally, Finally,

deviations deviations

is is

implies implies

summarized. summarized.

the the

that that

to to

profit profit

prices, prices,

likely likely

it it

O.o7 O.o7

0.09 0.09

0.10 0.10

0.07 0.07 0.12 0.12

0.04 0.04

0.02 0.02

the the

is is

price price

Variation Variation

regression regression

this this

categories. categories.

that that

data, data,

find find

values values

market market

1919-1938 1919-1938

those those

1963. 1963.

means means

% %

briefly briefly

correlated correlated

the the

we we

positive positive

individual individual

as as that that

the the

market market

words, words,

while while

for for

Relative Relative

be be

price price

value value

bundle bundle

assumption assumption

for for

aggregate aggregate

an an

20% 20%

implies implies

for for

for for

Cycles Cycles

and and

find find

± ±

absolute absolute

now now

highly highly the the

4 4

such such

this this

other other

1959, 1959,

for for

6 6

=0.95 =0.95

and and

and and

Prices, Prices,

we we

of of

of of

2

In In

be be

market market

Schwartz, Schwartz,

can can

For For

for for

R

course course

cross-sectional cross-sectional

JF JF

that that

estimate estimate

of of the

to to

moderate: moderate:

of of

And And

For For

negative negative

justifies justifies

to to

the the 80%. 80%.

Figure Figure

Evidence Evidence

is is

order order

and and

fact fact

Jacob Jacob

± ±

Level, Level,

17-19%; 17-19%;

Average Average

=0.87 =0.87

corresponding corresponding

sum sum

section section

20% 20%

65) 65)

2

Goods Goods

likely likely

This This

production production

of of

by by

± ±

the the

± ±

data, data,

R

The The

commodities commodities

1947 1947

values. values.

=0.92. =0.92.

deviation deviation

of of

prices) prices)

(the (the

2 2

of of

because because

of of

their their

on on

are are Price Price

in in

of of

of of

R

(seep. (seep.

for for

of of

net net

and and

Empirical Empirical

order order

other. other.

Trough Trough

is is

previous previous

an an

utilized utilized

prices prices

20% 20%

the the

from from

order order

to to

the the

the the

20-25%. 20-25%.

sum sum

± ±

prices prices

1967 1967

Prices Prices

each each

Foods Foods

earlier earlier

± ±

=0.96 =0.96

of of

bundle bundle

production production

on on

deviation deviation

data data

deviation deviation

of the the of 2

Average Average

both both

in in

the the

then then

yields yields

variations variations

of of

is is

for for

Wholesale Wholesale

of of

R

Peak Peak

a a

of the the of

Foods Foods

Prices Prices

than than

the the

by by

used used

deviation deviation for for

Materials Materials offset offset

is is

Iron Iron

I I

of of

it it

to to

Semi-Manufactured Semi-Manufactured

deviations deviations

results results

typical typical

price price

order order

=0.92 =0.92

Summary Summary

Raw Raw

A A

Retail Retail

(Simple) (Simple)

Farm Farm

Wholesale Wholesale Pig Pig

Wholesale Wholesale

2

78 78

R

the the tend tend

regression regression

percentage percentage

rate rate

For For

typical typical

variations variations

The The

data data

sectional sectional

deviation deviation

smaller smaller divided divided

which which basis basis

sponding sponding

capitalists, capitalists,

consider consider

general, general, 4. 4. Shaikh 81 80 By definition, direct prices are prices proportional to value. These can be between regions 'and even between nations. Here too, it becomes expressed as: possible to argue on both theoretical and empirical grounds that these deviations are strictly limited in magnitude ( ± 20% for the po = po(A+bl)+no (2) I absolute value of the typical deviation) and even more limited in I scope since deviations of this magnitude necessarily imply a high eo­ wh~~'epo= row vector of unit direct prices l variation of prices and values. This latter concept of eo-variation is p 0(A + bl) = row vector of unit direct cost-prices I very important because Marx's argument (and Ricardo's also) that n° = row vector of unit direct profits. the variations in prices are dominated by variations in values can be I expressed in terms of the correlation between the two. Theoretical Lastly, outputs in reproduction can be written as: considerations developed in this paper provide strong support for x = (A+bl)x · (l+g)+f (3) Marx's argument, and what is more, a variety of empirical tests of the relations involved fully bear out the theoretical expectations. As a where x = column vector of industry outputs typical result, for both prices of production and market prices, f = column vector of commodities consumed by the roughly 93% of both cross-sectional and inter-temporal variations in capitalist class these prices can be explained by the corresponding variations in g = the rate of growth. values. As I noted earlier, these are results which can be derived from the In simple reproduction, f absorbs the whole surplus product (i.e. very same framework that the neo-Ricardians themselves use to f = x- (A+ bl)x), whereas at the other extreme of maximum expanded criticize Marx. It is a great irony that this so-called Ricardo-Marx reproduction, f = «11(where «11is a null vector). If we hold the sum of prices (the purchasing power of money) as constant,· tradition is so adamant in its opposition to these fundamental theses then: of Ricardo and Marx, while at the same time its own ties to orthodox 42 economics are seldom explicitly acknowledged. p0x = px (4) In ending, I rriight note that the issues I have analysed here are only a small part of those that could be treated in a similar manner. I have Multiplying (3) by p and p0, respectively, subtracting the latter from the not treated fixed capital or joint production, for example, nor indeed former, and recalling (4), we get: the striking absence of money in an algebraic framework which 1 claims to represent the formation of prices. Each of these issues can 0 (p-p )(A+bl)x = [- -1n-p")f (5) and must be addressed, and when they are, even the algebra behind l+g_f which the neo-Ricardians hide will become increasingly transparent. On the other hand, multiplying (I) and (2) by x, subtracting, and recalling (4), we get: Appendix A (p-p 0 )(A+bl)x = n°x-nx (6)

In the case of a circulating capital model, prices reflecting arbitrary positive The first term on the right-hand side of(6) is the mass of direct profits and the 0 profits can be written as: second is the mass of actual profits. Designating these scalars by IT and n, respectively, and combining (5) and (6): p = p(A+bl)+n (l)

1 0 where p = row vector of unit prices rr'-n =- -(p-p )f (7) A = input-{)utput coefficients matrix l+g b = column vector of wage-goods per worker Let PiJ pp,and fi represent the i-th components ofp, p0 f, respectively, for I = row vector of labour coefficients ,and 1, , n. 7t = row vector of profits per unit output. i= ... Then: a

is

=

of

of

83

1

the

the

be

l?

•

terms

vector

inverse

A

define

to

through

in

(ABC)-

then:

1

its

let

the

1

of

L*)

may )-

we

1

L*,

year

]-

pi:

If

1

we

relation

sector,

order:

the

(A*,

)-

and

measured

1

its

in

matrices;

given

this,

coefficients:

year.

is each prices

are

a

1

output.

L)to

production

in

reverse

in

]-

three

1

output,

unit

(A,

From

j-th

1

what

-I

the

given

labour

of

of in

a

(1-(P;)A(P)-

employed

-(P,)A(P

in

the the

1

1

1

output

and

in

of

relate

total coefficients

[1/(Pfj)]

j

are [(p,x,;)/(Pf;)]

of

dollar

produced

used year

of

[1-A]-

"'

i

product =

j,

labour

·

can

L(P)-

inverses,

per

(P;)A(P;)

I(P,)-

Shaikh

)(P;)-

dollar

commodity. write:

1

L

=

the

we

dol1ar

given

represent

[a~] [LtJ

=

per

1

vector

the

is

a [(P

elements

direct

costs

[(P;)(I-A)(P;)-

1

their

l

l*

may

=

1

= per

L* A*

of commodity

in that

of

the

input-output

are

of

j,

of

input

we L*

commodity

A*

commodity

does

,

whose

price

1

of

that:

of

brackets

i-th

L(P,)-

L(P;)-

noting

derive

L*[I-A*J-

=

=

what (Pi)

the

however,

by

product

=

money

of

may

is,

requirements

coefficients

l*

).*

square

production

worker-years

amount commodity

amount

l*

therefore,

the we

in

as:

=

=

cost

=

begin

matrix

1

..

'J

practice,

I

whose

l*

l=(P,)(P,)-

i. pj=the

labour

x· this

We

In

term

question

dollar

3. follows,

2.

c-~u-IA-'=

therefore

The

Since,

where The vector It

the diagonal matrix

direct

From

where

t

of

to

all

of

in

the

the

and

The

class,

pro­

data. for

by

latter

in

year

values

Cross­ vector

0

of

price likely

r=0.40,

=

the

individual Economia

t, is

r

the

row

F·=O

te~

deviation i-th

explained

r=0.85.

negative

the

the

capitalist

prices relative

year

for

Nelf

to

the

the

of

noted,

Since

determined

the

for

of

1959

be

using

r=O reasons

wage-prices.

wage-price,

by

because

F

class,

FP

relative

by

being

price-value

Then:

For

average

formed

from

p,)f,

corresponding

should

Produttivita

wage-price),

-

way,

P;

1959

dividing

it

average

o

are

reciprocal

the

de

commodities.

good.

weights

by (p, (pp-p;)

deviation

other.

profit

consumed

individual

capitalist

the

(the

average

the

same

~

~..- and

however.

of

;~1

[x,jxj]

the

[1/xj] weighted to i-th

and

A

the

the

each

a

the

=

the

dividing

1

=

+gi=:l

goods

various

wage

the

deviation,

l

rates

is

--

in

by

of

Variazioni

production

data,

by

on

the

[lj] l+gll individual

on

r=0.80, =

offset [aij] relative

of

for

matrix

represents

1977)

This

r=0.40.

o

is

of sign

=

are:

=-~-~I

to = 1

1967

deviations,

n

money

Varri,

L

formed L

;W

A

represents .

formed

prices

average

typical

value

profit

n- tend

TI the

are

goods.

consumed

a

is

are listed

of

no-n Paolo

Bologna

wage-price

to

expenditure expenditures

midpoint,

wi11

not

clearly

summation

relative

than

input-output

percentage

data

simple

notation,

rate

and

i-th values

money

the

These

a

an

are

corresponding

the

the

Calculation

sign

price

relative

ones.

as

=the in

of capitalist the

Marzi

B

consumption

Varri's select

smaller

1967).

!959-1967,

relative

deviations

labour-coefficients

of

I

by

which

theory,

= F

1967

maxiinum

term

Pli=Fi=their

pf

In

text

1959,

much

Marzi-

the

expressing

Cross-sectional

direct

Inter-temporal

1.

82

Let

and

price/direct The pattern

goods

summation be

capitalist positive

Appendix

(Graziella ltaliana:

the

In production

(t= actual

by

calculated sectional by Techniques

duction

of 84

'l* = L(P;)- 1 (P;)(I-A)- 1(P;)- 1 4 l* = {L(I-A)- 1)(P;)-t l* = l(P;)- 1 Thus, thej-th element -'t=)-/Pi That is, each element of the row vector l* is /Marx, Sraffa and the Neo-Classicals in fact the ratio of total labour requirements per unit output. Clearly, this in Context ratio is independent of any choice of the unit of output (lbs., tons, etc.)

4. The preceding results point to a simple way of deriving the data necessary for our calculatioris. Beginning with the empirical input-output Hector Guillen Romero matrix A* and the corresponding vector L * direct labour requirements per dollar of output, we can immediately calculate).*, total labour requirements per dollar of each sector's output. These correspond to the data we used from I. Introduction Leontief. The elements of).* are -ljpi Hence if we know the gross sales pjx,for each sector, we can tmmedtately denve the total labour requirements A·X· Although the terms 'neo-Ricardian school' or 'Cambridge school' are which correspond to these sales (even though we do not at any time actuai'ly sometimes applied to the contribution on growth theory of Joan define any units of output x). Robinson, Nicholas Kaldor, Luigi Pasinetti and others, in this work I X deal almost exclusively with the theory of prices elaborated by Piero AjXj = ~ PjXj = -lj(PjXj) Sra1Ta.1 The school's methodological foundations can be found in the works of Dmitriev and von Bortkiewicz, who wrote at the turn of The last operation gives us total labour requirements A-x-ih worker-years and the century.2 These authors' importance has grown recently following total prices (gross sales) PfJ in dollars. J J the publication of Sraffa's work. The neo-Ricardian school can be assessed either in relation to 5. Two data sets were used, in which A.= Xx. and p = px. are derived in . d' d. J rJ J J J Marxist value theory or in relation to neo-classical theory, whether in manner m tcate m 4 above. Defining the average value of the dollar as~= 0 its vulgar form (Jevons, Menger, Marshall) or its general equilibrium a;:Aj)/(L P), w~can then use this to define total dire.ct prices Pj =(1MAi" Fmally, both P1 and Pj are expressed as pnces relattve to thetr respective form (Arrow, Hahn, Malinvaud, Walras). ".';,erage prices P 0 =(L PY/Nl and P=(L PjN). Note that by construction, p =P. . The first data set is based on Leontiefs 1947 data, from W. Leontief, 1. N eo-classicals and N eo-Ricardians Input-Output Economics, Oxford, New York, 1966, appendix Ill, pp. The neo-Ricardian school rejects subjective individualism and the 129-133. Total Sales Pj were taken from US 1947 input-output table, 192- role of supply and demand in the determination of income distri­ order. bution. A recognition of the class division of society is central to its The second set was provided by Edward Wolff of New York University. In analysis. 3 It makes an internal critique of vulgar economics, showing this ~ata,the direct labour requirements vector was computed in two ways: first, m worker-years of undifferentiated labour requirements; and second, in that many of its propositions are inconsistent with its own assump­ a skill-weighted index of worker-years where relative wages were used as tions. In particular Sraffa shows that neo-classical capital theory is weights (for lack of better indexes). The latter data are the ones actually incoherent and indeterminate in its vulgar version. This critical wing, shown, but the regression results are substantially the same with either set. fully developed since Sraffa's book appeared, seemed to have Lastly, both the graphs and regressions leave out the real estate and rental culminated in the works of the Cambridge school on macro economic sector, since on theoretical grounds within both the Ricardian and Marxist production functions and problems related to the choice of theories of rent, though the magnitude of rent can be derived from value techniques.• relations it is not related to any labour-time expended in the collection of While these attacks are fundamentally internal, the neo-Ricardians rent (in the real estate and rental sector). Once again, however, this makes make a basically external critique of general equilibrium theory. little difference to the log-regression results. 85

, ,

' '

1 1

of of

of of

3, 3,

for for

of of 8. 8.

by by

my my

this this

the the

the the

267 267

the the

' '

64, 64,

p. p.

these these

cost­

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Cambridge Cambridge

the the

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266-300. 266-300.

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1973, 1973,

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pp. pp.

4, 4,

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351. 351.

1978, 1978,

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173. 173. Theones Theones

222-223. 222-223.

that that

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Alfredo Alfredo

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280. 280.

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273. 273.

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Algebra', Algebra', 14-15. 14-15.

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1860-1970', 1860-1970',

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106-137). 106-137).

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14. 14.

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23. 23.

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25. 25.

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27. 27.

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Critique Critique

11 11

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pp.266-300. pp.266-300.

different different

Capital', Capital',

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Harmondsworth Harmondsworth

Value, Value,

(abstract) (abstract)

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Lenin, Lenin,

106--137. 106--137.

Schwartz, Schwartz,

demand demand

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pp.174-175. pp.174-175.

and and

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pp. pp.

production production

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Kugelmann, Kugelmann,

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regulating regulating

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185. 185.

198. 198.

nature nature

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socially socially

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198. 198.

187. 187.

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163. 163.

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pp.l63, pp.l63,

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socially socially

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Marx, Marx, type type

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Monica, Monica,

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Ibid., Ibid.,

Ibid., Ibid.,

Ibid., Ibid.,

Ibid., Ibid.,

(Capital, (Capital, Ibid., Ibid.,

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Steedman, Steedman,

Karl Karl

Steedman, Steedman,

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Karl Karl

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Ibid., Ibid.,

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499-507). 499-507).

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l. l.

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ll. ll. tO. tO.

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3. 3.

2. 2.

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6. 6.

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9. 9.

86. 86.

266 266

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aspects, aspects, demand: demand: is

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it

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pp.

356;

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69

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