Rakesh Narpat Bhandari wrote: > As for Sraffa's relation to Ricardo, I cannot > say. I haven't studied Sraffa, but I do await a Sraffian reply to > Blaug's recent critique. ___________________ Here is a rough draft of my critique of Blaug. I have sniped all the quotes from Sraffa's unpublished works housed at Trinity College because i don't have explicit permission from Garegnani to publish them. But I hope the point will get through. Almost all such quotations were used only in the beginning of the paper. But in any case, if you have any problem, please ask me and I'll try to explain in my own words. My reference to Blaug's paper is from his unpublished manuscript, which is now out in HOPE. All the footnotes have been lost in copy and paste procedure.Sorry about the length of this post. Cheers, ajit sinha ^”Misunderstanding Classical Economics^‘: A Critique of Mark Blaug Ajit Sinha Recently Professor Mark Blaug (Forthcoming in History of Political Economy) presented a forcefully worded critique of the ^”Sraffian^‘ interpretation of classical economics. He argued that the Sraffian interpretation of classical economics is a rational reconstruction of the classical theory from the point of view of Sraffa^“s Production of Commodities by Means of Commodities (PCMC from now on). In other words, Balug is suggesting that Sraffians (which includes Sraffa for him) are ^—Whig historians^“ who ^”view history as a relentless march of progress from past errors to present truths^‘. In this particular context, it is Sraffa^“s PCMC that is considered the embodiment of truth and read retrospectively into classical economics, particularly into Ricardo and Marx. He identifies two versions of the Sraffian interpretation of classical economics: one is the ^”soft version^‘, which he likes, the other is the ^”hard version^‘, which is the object of his attack. A closer inspection, however, shows that this characterization is misleading because the ^”soft version^‘ stands for a theory of accumulation and the ^”hard version^‘ for a theory of value and distribution. Thus they are for the most part on two different subject matters and not soft and hard versions of the same thing. For the most part Blaug plays the classical theory of accumulation against the Sraffian interpretation of the classical theory of value and distribution. In this paper I argue that Blaug^“s critique is misplaced because it stems from a confusion about the status of time in different theoretical problems. Since Blaug includes Sraffa in the group of Sraffians in his sights, I decided to rely to a large extent on Sraffa^“s own writings (mostly his unpublished notes kept at Wren library in Trinity College, Cambridge; from now on they will be referred to as PSP) for my rebuttal. First of all, it is simply incorrect to characterize Sraffa as a ^—Whig historian^“. In the introduction to his lectures on the ^—Advanced Theory of Value^“ given at development has been reached, a conventional degree of prodigality, which is also an exhibition of wealth, and consequently a source of credit, becomes a business necessity of the unfortunate capitalist. Luxury enters into capital^“s expenses of reproduction.^‘ (Marx 1977, pp. 381 & 741). Here in lies the methodological dilemma. Sraffa^“s solution to this problem lies in his critique of the ^”principle of sufficient reason^‘. As Sraffa argues, [snip] (PSP, D3/12/7, dated August 22, 1931). In other words, the production of the ^—surplus^“ cannot be explained from within the defined field of political economy itself. Garegnani^“s ^”core^‘ is defined from the point of view of the capitalist subject; however, the core does not contain the cause of the surplus product, which lies outside the core, in the realm of history and culture. As Marx argued, it is history and culture that determine real wages, and the length of the working day is determined by the class struggle. Together they determine the surplus product. Thus the distinction between the core and outside the core has methodological significance. Outside the core is not peripheral to the theory but is rather the realm that provides the cause for the existence of surplus, which is the subject matter of the core. >From here on, most of Blaug^“s critique is devoted to showing that a large part of classical economics is concerned with changes in the technology of production, the volume and composition of output, and the real wage rate^◊the three givens in Garegnani^“s core. As I have suggested above, the crucial question with regard to Sraffa^“s interpretation of classical economics is not whether classical economics was interested in the question of changes in the given parameters of Garegnani^“s ^—core^“ but rather what kind of theory of value should be attributed to classical economics. In his early notes written on July 15, 1928, Sraffa admits that [snip] (PSP D3/12/7, dated 15.7.28). It may seem that time plays the central role in the distinction of the two cases. Sraffa, however, thinks otherwise. The distinction between the two is due to the differences in the givens of the first problem. For example, the case of differences in values of the same commodities in domestic market and foreign market foots the bill for the nature of the problem of the second kind, even though the comparison is made for the same point in time. Thus the two problems are entirely different. The first problem is about explaining the differences in values of different commodities at an instant of time given that the rate of profits and wages for the same grade of workers are equal. Thus the solution must find some cause or causes other than wages and profits that would explain the difference in value. The second problem, on the other hand, is about finding the cause or causes that explain the changes in rate of profits and wages. As Sraffa explains: [Snip] (PSP D3/12/7, dated 15.7.28). In the concluding section of his paper, Blaug writes: ^”So, is there a ^—core^“ of classical economics? Obviously, yes if by ^—core^“ we mean a central strand by which we recognise a work as belonging to ^—classical economics^“, the strand that unites Adam Smith in 1776, John Stuart Mill in 1848 and Karl Marx in 1867. It is made up, all commentators agree, of a particular theory of value and distribution. Firstly, classical value theory focusses on long period equilibrium prices characterised by a uniform rate of profit on capital, uniform rates of pay for every different type of labour, and uniform rents per acre for every qualitatively different type of land, in short, what Smith called ^—natural prices^“ in contrast to ^—market prices^“, subject to the vagaries of demand and supply.^‘ (pp. 23-24). So where does this leave Blaug^“s critique of the Sraffian interpretation of classical theory of value and distribution? The critique then boils down to the insistence that the Sraffians do not emphasize what Sraffa had referred to as the general confusion between two distinct problems of explaining differences in values of two commodities at a point in time and changes in value of the same commodity over time. This would be a lame criticism at best. It seems Blaug himself is unable to maintain the distinction between the two questions, as is revealed by his statement: ^”The peculiar feature of Ricardo^“s approach, which sets it apart from the common run of value theories, is its concern with ^Ň intertemporal rather than intratemporal comparisons of value.^‘ (p. 16), which stands in stark contrast to his above quoted statement from the concluding section. Time and again we come across such statements as: ^”On the very first page of his Principles, Ricardo announced that all the language of value comparisons in his work referred to commodities located at different points of time and not in different places at the same time.^‘ (p. 16). Thus it would be fair to suggest that Blaug^“s statement in the concluding section is a product of his mixing two separate questions into one. His considered opinion, however, seems to be that Ricardo^“s theory of value was concerned with changes in the value of same commodity over time rather than establishing the exchange ratios between different commodities at a given point in time. Blaug thinks that Ricardo needed a theory of value to establish the relationship between diminishing returns in agriculture and the falling rate of profit: ^”There is ample evidence in Ricardo^“s Principles that he had in mind a moving equilibrium along which the increased marginal cost of growing corn alters the terms of trade between corn and cloth so as to depress the rate of profit on capital^Ň^‘. (p.13). As Caravale and Tosato (1980), however, have shown, the above proposition can be established without any theory of value, not even the labor theory of value, on the assumption that real wages remain constant over time. Even if we assume that real wages are falling over very long period of time, which in my opinion was Ricardo^“s position, the above propositions can easily be argued without any theory of value. Since a fall in real wages is only compatible with a fall in the rate of growth of population, which in turn is only compatible with a lower rate of profit and accumulation for the moving equilibrium positions. The causality in Ricardo^“s theory works as follows: increasing population leads to cultivation on less fertile land, which lowers the rate of profit and accumulation, given the real wage. The fall in the rate of accumulation leads to an over-supply of labor and therefore a fall in wages, bringing the rate of growth of population on a par with a lower rate of profit. Thus, if Blaug^“s interpretation of Ricardo is correct, one cannot fail to wonder why Ricardo placed so much emphasis on his theory of value, calling it ^”the sheet anchor on which all my propositions are built.^‘ (Ricardo to Mill, 30 Dec. 1815, Sraffa 1952 vol. VI, p. 348). His position invariably leads to the same conclusion as Caravale and Tosato^“s, who interpret Ricardo in a similar fashion as Blaug, that Ricardo^“s problematic of value stems from ^”his incomplete awareness of the analytical implications of his own theoretical model.^‘ (Caravale and Tosato 1980, p. 45). In other words, Ricardo was not very bright^◊a conclusion most Ricardo scholars will have a hard time swallowing. Even more importantly, one needs to make some sense of Ricardo^“s near obsession with the ^—invariable measure of value^“. A clear understanding of this problem should throw significant light on the nature of Ricardo^“s problematic of value. Blaug^“s position on this crucial issue remains unclear. In the present paper he does not broach this issue; however, in his earlier piece (Blaug 1987) he sent confusing signals. First, he suggested that ^”what Ricardo later put in place of the missing corn model was the ^—invariable measure of value^“^‘, which confirms Sraffa^“s position. But later in the same paragraph he goes on to add, ^”In Ricardo, the divining rod of the invariable measure is supposed to be invariant (as Ricardo kept saying) not just to changes in wages and profits but also to changes in its own methods of production.^‘ (p. 439). It is not clear whether he thinks the two problems are theoretically separate or not. Caravale and Tosato (1980) and Nai-Pew Ong (1983) have also challenged Sraffa^“s reading of Ricardo from a dynamic perspective, similar to Blaug^“s (and whom Blaug approvingly cites), and have taken exception to Sraffa^“s interpretation of Ricardo^“s search for an ^—invariable measure of value^“. Below I shall argue that their positions on this crucial matter are untenable in the light of Ricardo^“s writings. Caravale and Tosato (1980) claim that real wages in Ricardo^“s theoretical framework remains fixed both for short and long periods. Thus by changes in wages Ricarodo means changes in money wages due to changes in the technology of production of the wage goods. The Sraffian problem that analyzes the effects on prices of changes in real wages, given the technology of production and total output, therefore, has no playing room in Ricardo^“s framework: ^”The former type of analysis [i.e. Sraffa-type], however, is precisely what the assumption of fixed real wages exclude.^‘ (p. 16). Caravale and Tosato go on to claim that Ricardo^“s ^—invariable measure of value^“ was about finding a measuring rod that would remain invariable in the face of changes in technology in wage goods production, i.e. diminishing returns in agriculture. Both these claims, however, are false. In Ricardo's framework real wages are not fixed in the long-period context. His fixed subsistence wage is defined for the stationary state, where the rate of growth of population is equal to zero. Since Ricardo believed that the contemporary economy was far from the stationary state, he envisaged a falling real wage over a long period of time^◊Hicks and Hollander (1977) have provided ample evidence in Ricardo^“s writings to refute a fixed-wage hypothesis in Ricardo^“s long-period framework. Furthermore, there is ample evidence in Ricardo that he contemplates changes in real wages completely independently of any changes in technology. To give just one example, in the rough draft of ^—Absolute Value and Exchangeable Value^“ Ricardo writes: It [the rate of profits] not only depends on the relative value of the finished commodity to the necessaries of the labourer, which must always be replaced, to put the master in the same condition as when he commenced his yearly business but it depends also on the state of the market for labour (or on the quantity of the necessaries which competition obliges the master to give for these necessaries), for if labour be scarce the workman will be able to demand and obtain a great quantity of necessaries (or which is the same thing to the master luxuries) and consequently a greater quantity of the finished commodity must be devoted to the payment of wages and of course a less quantity remains as profit for the master. The profits of the master depend then on two circumstances first on the comparative value which necessaries bear to the finished commodity, secondly on the quantity of necessaries and enjoyments which the labourer by his position can command. ( Works vol. IV, p. 366). It is equally false to suggest that Ricardo^“s ^—invariable measure of value^“ was supposed to remain invariable in the context of changing technology and not in the context of given technology. If this was the case, then Ricardo^“s life-long quest to define an ^—average commodity^“ loses all its meaning. The very idea of an ^—average commodity^“ is simply meaningless when one is looking at two sets of technological configurations. Thus, when Ricardo argues, ^”May not gold be considered as commodity produced with such proportions as of the two kinds of capital as approach nearest to the average quantity employed in the production of most commodities?^‘ (Works vol.I, p. 45), he clearly is talking about the gold sector having the average composition of capital given the technologies of all the commodities. The question of changes in technologies does not even arise here. Thus Ricardo^“s identification of ^—invariable measure of value^“ with the commodity produced with average composition of capital leaves us with no other choice than to conclude, with Sraffa, that: This preoccupation with the effect of a change in wages arose from his [Ricardo^“s] approach to the problem of value which, as we have seen, was dominated by his theory of profits. The ^—principal problem in Political economy^“ was in his view the division of the national product between classes and in the course of that investigation he was troubled by the fact that the size of this product appears to change when the division changes. Even though nothing has occurred to change the magnitude of the aggregate, there may be apparent changes due solely to changes in measurement, owing to the fact that measurement is in terms of value and relative values have been altered as a result of a change in the division between wages and profits. ^Ň Thus the problem of value which interested Ricardo was how to find a measure of value which would be invariant to changes in the division of the product; for, if a rise or fall of wages by itself brought about a change in the magnitude of the social product, it would be hard to determine accurately the effect on profits. (This was, of course, the same problem as has been mentioned earlier in connection with Ricardo^“s corn-ratio theory of profits.) (Sraffa 1951, p. xlviii-xlix). Nai-Pew Ong (1983) argues that Ricardo was interested in establishing the labor theory of value in a dynamic context. That is, he wanted to establish a one to one relationship between a change in the ^—difficulty of production^“ of a commodity and its prices of production. Since an increase in the difficulty of production in the agricultural sector leads to changes in the distribution of income, which has an independent impact on the prices of production, Ricardo^“s intended ^—invariable measure of value^“, or what Ong calls the divining rod, was somehow supposed to separate out all the complications caused by the latter factor. Ong^“s conclusion is that a solution to Ricardo^“s problem is a theoretical impossibility. This is because in an interlocking input-output system an increase in the direct labor-time element in the production of a commodity may lead to either a rise or a fall in its price of production, depending on how the consequent fall in the rate of profits affects the cost of indirect, or dated, labor elements^◊the argument is similar to Sraffa^“s reswitching argument. Though Ong^“s argument is correct for Sraffa^“s analysis in the PCMC, he is simply wrong in the case of Ricardo. Ricardo never assumed that ^—corn^“ or agricultural goods in general entered the manufacturing sector as raw materials or inputs, nor did he assume that the manufacturing sector provided inputs to the agricultural sector. In other words, he did not have a Sraffa-type interlocking input-output system. The two sectors were interconnected only because the wage basket contained both agricultural and manufacturing goods. In this case a rise in the difficulty of production in the agricultural sector would not affect the dated labor content of the manufacturing sector. Had Ricardo been working with an interlocking input-output system, then his assumption ^”that in production of our money ^Ňthe same quantity of labour should at all times be required^‘ would become meaningless. This is because a rise in the difficulty of production in the agricultural sector would affect the indirect labor content of the measuring rod as well. Thus maintaining the ^”same quantity of labour at all times^‘ would amount to constant and artificial adjustments in the production technology of the money commodity to keep its total labor content constant. Clearly Ricardo was bright enough to see this much, and there is no evidence in his writings to show that he meant anything other than constant technology by the condition of ^”same quantity of labour at all times^‘. Thus again we have no other option than to conclude with Sraffa that: Ricardo starts (in ed. I of the Principles) by applying the concept to the problem of two commodities which have changed in relative value as a result of a change in the difficulty of production: absolute value is then the criterion for deciding in which of the two the real changes has occurred. He ends (in his last paper on value) by bringing this criterion to bear upon another problem, namely the distinction between two causes of changes in exchangeable value: for, ^—difficulty or facility of production is not absolutely the only cause of variation in value[,] there is one other, the rise or fall of wages^“, since commodities cannot ^—be produced and brought to market in precisely the same time^“. Absolute value, however, reflects only the first type of change and is not affected by the latter. (Sraffa 1951, p. xlvi). After this long and necessary digression, let us get to the final criticism made by Blaug in the paper under review. Blaug has charged the Sraffians with completely neglecting the classical conception of competition: ^”We read Dobb, Garegnani, Kurz, Salvadori, Eatwell, Roncaglia, Schefold, de Vivo and Bharadwaj in vain looking for so much as a reference to the classical conception of competition.^‘ (p. 20). This, I think, is simply incorrect. Garegnani^“s (1976) interpretation of classical ^”natural prices^‘ as gravitational points entirely rest on the notion of classical competition. It may not be as rich and colorful as Adam Smith^“s but it definitely is there. Blaug, however, is right when he says ^”there is no competition of any kind in Sraffa, not even of the perfect competition variety.^‘ (p. 21). The reason for it can be found in Sraffa^“s early notes. As early as 1931, during apparent preparation for the PCMC, Sraffa wrote: [snip] (PSP D3/12/15). One, however, needs to keep in mind that the PCMC was not supposed to be a book on the history of economic thought. Sraffa nowhere denies that competition plays an important role in classical economics. So, is there anything positive that Sraffians could get from Blaug^“s critique? I think there is. Up until now Sraffians have almost exclusively devoted their energy to developing the theory of the ^—core^“ and a Sraffa-based critique of neoclassical economics. It is high time that some of their energy was devoted to developing theories that relate areas outside of the ^—core^“ to the ^—core^“^◊i.e. to put flesh on the bare bones. Such theories by the nature of the problem must be more descriptive and less mathematical, exactly the kind of things that Blaug finds in classical writings but missing in Sraffian literature. From this point of view, the nature of Blaug^“s criticisms should be seen as positive and not negative by the Sraffians. REFERENCES Blaug, Mark. (1987), ^”Classical Economics^‘, The New Palgrave: A Dictionary of Economics, eds. J. Eatwell, M. Milgate and P. Newman. London: Macmillan. Blaug, Mark. (Forthcoming), ^”Misunderstanding Classical Economics^◊The Sraffian Interpretation of the Surplus Approach^‘, History of Political Economy. Caravale, Giovanni and Domenico Tosato. (1980), Ricardo and the theory of value distribution and growth. London: Routledge & Kegan Paul. Garegnani, Pierangelo. (1976), ^”On a Change in the Notion of Equilibrium in Recent Works on Value and Distribution^‘, Essays in Modern Capital Theory, eds. M. Brown, K. Sato and P. Zarembka. Amsterdam: North Holland. Garegnani, Pierangelo. (1984), ^”Value and Distribution in the Classical Economics and Marx^‘, Oxford Economic Papers 36(2): 291-325. Garegnani, Pierangelo. (1987), ^”Surplus Approach Economics^‘, The New Palgrave: A Dictionary of Economics, eds. J. Eatwell, M. Milgate and P. Newman. London: Macmillan. Hicks, John. (1985), ^”Sraffa and Ricardo: A Critical View^‘, The Legacy of Ricardo, ed. G.A. Caravale. Oxford: Basil Blackwell. Hicks, John and Samuel Hollander. (1977), ^”Mr. Ricardo and the Moderns^‘, Quarterly Journal of Economics 91(3): 351-369. Marx, Karl. (1977). Capital vol.I. New York: Vintage. Ong, Nai-Pew. (1983), ^”Ricardo^“s invariable measure of value and Sraffa^“s ^—standard commodity^“^‘, History of Political Economy 15(2): 207-227. Ricardo, David. (1951), The Works and Correspondence of David Ricardo vols. I & IV, ed. P. Sraffa. Cambridge: The University Press. Ricardo, David. (1952), The Works and Correspondence of David Ricardo vol. VI, ed. P. Sraffa. Cambridge: The University Press. Sinha, Ajit. (1999), ^”Surplus Approach to Political Economy^‘, Encyclopedia of Political Economy vol.2, ed. P.A. O^“Hara. London: Routledge. Sraffa, Piero. (1951), ^”Intoduction^‘, The Works and Correspondence of David Ricardo vol.I, ed. P. Sraffa. Cambridge: The University Press. Sraffa, Piero. (1960), Production of Commodities by Means of Commodities. Cambridge: The University Press. Sraffa, Piero. Unpublished Piero Sraffa Papers. Cambridge: Wren Library, Trinity College.
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