[OPE-L:7524] RE: Fred's remarks on Marx, Sraffa & Rents

From: mongiovg (mongiovg@stjohns.edu)
Date: Tue Aug 20 2002 - 15:03:53 EDT

I've been out of town; hence the slightly delayed response to Fred.

>Gary, can Sraffa's theory explain absolute rent, i.e. rent on the least
>productive land (or mines)?  It is my understanding that it cannot (just
>like Ricardo's theory could not).  Sraffa (like Ricardo) assumes that the
>least productive land pays no rent.  But this is clearly false
>empirically.  Please correct me if I am wrong about Sraffa's theory
>inability to explain absolute rent.

I'm no expert on Sraffa & rents, but I believe the answer to Fred's question 
is no, Sraffa's theory does not explain what Marx calls absolute rents.  I 
don't believe that means that the framework rules out the possibility of 
absolute rents, or that absolute rents, explained by some mechanism external 
to the model, cannot be incorporated into the framework.

>Gary, has anyone incorporated differential rent into Sraffa's theory in a
>more general way, including both agricultural and non-agricultural
>commodities, and including a numeraire and the determination of relative
>prices, and including the simultaneous determination of both rent and the
>rate of profit?

Let's be clear: the phenomenon of rent arises in Sraffa (and Ricardo) in 
connection with the scarcity of INPUTS; what those scarce inputs are used to 
produce is irrelevant. So Fred's distinction between agricultural & 
non-agricultural PRODUCTS isn't really pertinent to the discussion, at least 
as far as we are concerned with Sraffa.  Sraffa does develop his analysis of 
rent in terms of the scarce input land (and his example happens to involve the 
agricultural product corn).  But the argument generalizes to any non-produced 
scarce input: at the end of the chapter Sraffa mentions obsolete machines as 
falling within the analysis.  Petroleum, metal ores, natural gas, coal, would 
also fall within it.

The most general treatments of rent from a Sraffian perspective are:

(1) H.D. Kurz (1978): "Rent Theory in a Multisectoral Model," Oxford Economic 
Papers, (Vol. 30), pp.16-37.

(2) G. Montani (1975) "Scarce natural Resources and Income Distribution," 
Metroeconomics (Vol. 27), pp.68-101.


>I argue that Marx's logical method of the prior determination of the rate
>of profit is fundamentally different from Sraffas logical method of
>simultaneous determination.  Marx was not trying to develop the method of
>simultaneous determination; rather Marx was trying to develop the method
>of the prior determination of the rate of profit. This prior determination
>is the basic premise of the whole Volume 3 of Capital.
>It is not just a matter of Sraffa having "more sophisticated
>tools" (e.g. matrix algebra) than Marx.  If Marx had known matrix algebra,
>he would have rejected it, because it assumes that the rate of profit is
>determined simultaneously with prices of production, rather than prior to
>prices of production.

This, of course, is the central question at issue. I would pose it another 
way: would Marx recognize the essential elements of his own system in Sraffa's 
model?  I think yes, and have explained why in earlier posts and in published 
work. Fred thinks not, mainly because Marx determines the profit rate prior to 
the determination of prices. At some level, Fred & I will have to agree to 
disagree, since there's no way to establish what Marx would think if he were 
confronted with Sraffa's model.

But I want to be clear that I NOT claiming, nor have I ever claimed that 
Sraffa's model is the same as Marx's. My claim is (i) that Sraffa's model 
solves the same problem Marx was grappling with -- the determination of the 
long-period normal rate of profit -- in terms of the same fundamental data 
that enter into Marx's explanation (technical conditions of production and the 
real wages of labor); and (ii) that Sraffa's approach is able to avoid the 
problematic labor-value analysis that Marx needed because matrix algebra was 
not part of his, that is, Marx's toolbox. Would Marx have ditched the value 
analysis if he had Sraffa's equations in front of him? Who knows? That depends 
partly on his ego, his temperament and how wedded he was to the ideological 
implications of his value analysis.  My point, though, is that HE COULD HAVE 
DITCHED IT, and without abandoning much of what is central to his account of 

When Fred says that "If Marx had known matrix algebra, he would have rejected 
it, because it assumes that the rate of profit is determined simultaneously 
with prices of production, rather than prior to prices of production," he's 
just reasserting that he believes the differences between the tools utilized 
by Marx and by Sraffa signals some fundamental difference in their 
understanding of how the profit rate is determined. So, again, would Marx have 
recognized his own project in Sraffa's equations? Maybe. Maybe not. But if 
not, then Fred would have another, and I think harder, question to answer: On 
what grounds could Marx's analysis be defended as an account of how market 
economies actually function?  My reading provides a defense: Marx was on the 
right track but didn't have to tools to provide a robust solution. If we 
accept Fred's interpretation that Marx would have viewed Sraffa's model as a 
distortion or (to borrow some Post Keynesian terminology) bastardization of 
his own theory, how can we avoid the conclusion that Marx's theory of 
distribution is just an wrong-headed historical curiosity, interesting mainly 
for its ideological content?

>Has the numeraire in Sraffas theory ever been assumed to be a scarce,
>privately owned mineral that yields rent, like actual gold?  References
>would be appreciated.

To my knowledge, no.  But again, to be clear, the Sraffian literature would 
not regard gold as scarce, but as a commodity that is producible at increasing 
cost.  The scarce entity would be mine-able land that contains gold ore. But 
anyway, we've established earlier in this discussion that the Sraffian 
framework doesn't  take much interest in the question of selection of 
numeraire, so one wouldn't expect the literature to follow the line described 
in Fred's question: it'd just be a cumbersome exercise that wouldn't reveal 
anything very interesting.

All the best,


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