Por razones extraordinarias, presentaré éste texto primeramente en inglés, pero pronto pondré la versión en español (se infiere de ello que a partir de ahora, se buscará que éste blog sea bilingüe).
The following text presents the impressions of an undergraduate student in economics (me) of Piero Sraffa's book, Production of Commodities by Means of Commodities. Until now I have read the preface and the first 3 chapters.
The preface presents us the object of investigation and some important assumptions in a way that's very straightforward:
"No changes in output and (at any rate in Parts I and II) no changes in proportions in which different means of production are used by an industry are considered, so that no question arises as to the variation or constancy of returns. The investigation is concerned exclusively with such properties of an economic system as do not depend on changes in the scale of production or in the proportions of 'factors'." p.v
Since, as we progress further in the book, the economic system we analyse will produce a surpuls to be distributed, we can only conclude, that to have a positive net product (net product>1), no changes in proportions are needed; this does not means that Sraffa rejects that in economic reality these changes occur, neither he denies that such changes affect economic relations, but he do recognises that a surplus exists, even in their absence.
To continue, in chapter 1, we find ourselves in front of an economic system that produces just for subsistence, the key aspect here is that, in order for this economic system -which produces no surplus yet- to keep functioning, the produced commodities must re-enter the next production process in the same exact quantity that they entered the previous one, to achieve this, there exists only one set of prices -called exchange values by Sraffa-, "such values spring directly from the methods of production." p. 3
Let's keep this in mind as we keep on advancing: prices do not emerge from supply and demand, but from methods of production.
However, when we do have a surplus, a new feature comes into scene, "the surplus (or profit) must be distributed in proportion to the means of production (capital) advanced in each industry; and such a proportion between two aggregates of heterogeneous goods (in other words, the rate of profits) cannot be determined before we know the prices of the goods...The result is that the distribution of the surplus must be determined through the same mechanism and at the same time as are the prices of the commodities." p. 6
In the previous paragrapgh, a hint towards what we know the capital controversies can be seen; also, and most importantly, because of this simultaneous determination, we can see how the system opens itself to socio-institutional closure (see 1) (see 2).
Something which drew my attention, and cannot fully explain, is that the rate of profits "must be uniform for all industries" p. 6
This chapter also presents us with a distinction of commodities in two categories, those that enter into the production of all commodities are called basic commodities, and those that don't, are called non-basic commodities.
Another distinction, in this case about the wage, is included in this chapter; it is recognised that wages can have a share of the surplus, hence, being more than those of subsistence, following this, the surplus wage can be considered a variable element, in spite of this recognition, Sraffa tells us "We shall, nevertheless, refrain in this book from tampering with the traditional wage concept and shall follow the usual practice of treating the whole of the wage as variable" p. 10
This results in having "the necessaries of consumption" (goods the workers consume) as non-basics; so, in the system, taking the place of quantities of subsistence, we have quantities of labour employed.
Once having this explicited in chapter 2, the next chapter begins by posing the question of what happens when wages are reduced (not necessarily as to met their subsistence level).
We see that if proportion between labour and means of production is the same through all industries, in other words, if we have the same methods of production, then a change in the wage won't change prices; let's see this from another position, the position where proportions are unequal, in this case, because of some industries having less labour employed in respect to capital, what is paid less because of wages is not enough for to cover extra payments of benefit (and viceversa when proportions are the other way). Seeing that unequal proportions divide industries into 2 groups, they're called deficit industries and surplus industries, this division being made "It follows that, with a wage-reduction, price-changes would be called for to redress the balance in each of the 'deficit' and in each of the 'surplus' industries" p. 14
One might think that the previous argument is enough, but it isn't, Sraffa goes further and he explains that, in order to see how prices move, we must not only take into account the proportions between labour and means of productions in every industry, we must recognise that these industries use means of production which were also produced by means of a prior combination of labour and means of production, this affecting price determination, in other words, "the relative price-movements of two products come to depend, not only on the 'proportions' of labour to means of production by which they are respectedly produced, but also on the 'proportions' by which those means have themselves been produced" p. 15
Hence, we now have commodities produced by commodities.
Given the inequality of proportions between industries, we could still talk about the existence of a critical proportion dividing the two types of industries, this proportion would be one that if it existed in one industry, such an industry would not see its price affected by changes in distributive variables (this industry would also need, in order to be a critical industry, to have all its means of production made by processes which used the same critical proportion). Important is to notice that we are not claiming that the prices of such an industry would be invariant to changes in proportions used, here we must remember the key assumption presented in the preface.
It is precisely the topic if this proportion the one that closes the third chapter.
"It follows that the only 'value-ratio' which can be invariant to changes in the wage, and therefore is capable of being 'recurrent' in the sense defined in s21, is the one that is equal to the rate of profits which correspond to zero wage. And that is the 'balancing' ratio.
We shall call Maximum rate of profits the rate of profits as it would be if the whole of the national income went to profits. And we shall denote by a single letter, R, the two coincident ratios" p. 17
One final note, in the following quote I think there is neither an explicit nor implicit assumption about demand (leaving it as an open issue), but I cannot see if the same happens about competition, in other words, does the following paragraph includes an underlying assumption about competition?
"A further effect of the rise in the price of the product would of course be to help a given quantity of product to go a longer way towards achieving the required rate of profit" p. 14
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16/02/2012
Further notes:
1.- I think I have found a tentative answer about my doubt of the uniform rate throughout all industries, this must happen because we are in a competitive context.
2.- The classical notion of competition is quite different from the marginalist notion, this must be taken into account in order to avoid understanding incorrectly when I speak about competition, my next post should cover that up.
