[OPE-L:7530] RE: Fred's remarks on Marx, Sraffa & Rents

From: Fred B. Moseley (fmoseley@mtholyoke.edu)
Date: Thu Aug 22 2002 - 14:48:34 EDT

On Tue, 20 Aug 2002, mongiovg wrote:

> >
> >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.

Marx's theory explains absolute rent on the basis of its fundamental
theory of value.  Sraffa's theory does not explain absolute rent at all,
and, at best, can only incorporate an external, ad hoc explanation of
absolute rent into its system of equations.  Isn't this an example of the
superior explanatory power of Marx's theory of value and price over
Sraffa's theory?

> 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.

Thanks for these references.  I will read them soon.

> >
> >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 
> capitalism.
> 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?

I think Marx's theory can be defended precisely because it provides a
superior explanation of how capitalism actually works.  A brief summary of
the superior explanatory power of Marx's theory, all based on the labor
theory of value, includes:

1.  Marx's theory provides a superior theory of MONEY.  Marx's theory
explains the necessity of money in a commodity-producing economy on the
basis of its fundamental labor theory of value.  Sraffa's theory does not
explain money at all, and can even be formulated without money at all, in
terms of a non-money numeraire.  Indeed Sraffa's preferred numeraire is
his standard commodity, which is certainly not real money.  I looked up
"money" in Sraffa's index and was not surprised to find that it is missing

2.  Marx's theory explains the CONFLICT OVER THE WORKING DAY, 
and Sraffa's theory does not.

3.  Marx's theory explains the CONFLICT OVER THE INTENSITY OF LABOR, 
and Sraffa's theory does not.

4.  Marx's theory explains INHERENT TECHNOLOGICAL CHANGE, 
and Sraffa's theory does not.

5.  Marx's theory explains CYCLES, and Sraffa's theory does not.  
What good is a theory of distribution and the rate of profit 
if it cannot explain cycles?  

6.  As discussed above, Marx's theory explains absolute rent, 
and Sraffa's theory does not.

(For further discussion of the impressive explanatory power of Marx's
labor theory of value, please see my paper, "Marx's Economic Theory: True
or False? A Marxian Response to Blaug's Appraisal," in Moseley (ed.),
*Heterodox Economic Theories: True of False?*)

And, on the other side, what phenomena can Sraffa's theory explain that
Marx's theory cannot explain?  NOTHING, I submit.

The only possible advantage that Sraffa's theory has over Marx's theory is
that Marx allegedly made a logical mistake in his determination of prices
of production in Part 2 of Volume 3 (I suppose that this is what Gary is
referring to when he says Marx was "wrong-headed").  But I have argued in
several papers that, if Marx's logical method is correctly understood,
then Marx did not make this alleged logical mistake (others have made
similar arguments).  If Marx did not commit this logical mistake, then
Sraffa's theory is left with no advantage whatsoever over Marx's theory,
and with the devastating disadvantage of much less explanatory power.  

All the important phenomena listed above are "central" to Marx's
theory.  If one abandons Marx's labor theory of value for Sraffa's matrix
algebra, then one loses the explanations of all these important phenomena.  

> >
> >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.

This is another example of the superior explanatory power of Marx's
theory:  Marx's theory is able to explain the exchange-value of gold as
the real world money commodity, including rent, and Sraffa's theory


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