Re: [OPE-L] Ajit's Paper on Sraffa and Late Wittgenstein

From: Ian Wright (wrighti@ACM.ORG)
Date: Wed Jun 07 2006 - 12:53:30 EDT

Hi Paul

> However -- and this is important -- the firm revenue is transferred to
> capitalist accounts. A part of this revenue is simultaneously returned
> to firm accounts to serve as working capital. The net transfer is the
> profit income.
> --------------
> That goes very much against what actually happens in capitalist
> accounting practice. The gross revenue actually stays in the firms accounts
> and portion of it then goes to the rentiers as dividends or interest.

Think of the mathematics in flow terms. Then the only flow of money
from firm accounts to capitalist accounts is the net profit income.
The gross revenue minus the profit income, that is the working
capital, then remains in firm accounts.

Also, consider how it would be possible, in a linear production model
of simple reproduction, for capitalists to reallocate their
money-capital to different sectors of production, if revenue cannot be
withdrawn from sectors and transferred to capitalist accounts.

> I would disagree, both coexist. There is a stock of commodity
> capital and a simultaneous stock of money used to facilitate
> the exchange of the commodity capital. If you introduce the
> notion of money capital you have to account for it separately
> as a distinct stock.

In the circular flow model there is both working-capital and
commodity-capital. However, there is not an identifiable "point in
time" when a firm both owns the working-capital and the
commodity-capital that was bought with it. That would not make any

In reality production is of course not smooth. Hence, within a
production period, a firm will have a partial stock of working-capital
and a partial stock of commodity-capital and unfinished goods etc.
This level of detail is abstracted from in linear production theory.

> $/$ is simply a dimensionless scalar. Profit is always  profit
> per unit time and expresses the exponential growth rate of capital
> with respect to time. I don't see that this commits one to
> an Austrian view.

To be precise, in Sraffa's theory, profit is not explicitly profit per
unit time. That's because the length of time of the period of
production is undefined.

All Sraffa's variables could be qualified wrt time, but it is a
redundant procedure. For instance, the net product also has dimensions
of quantities of commodity types per "year". The per "year" is

> I said that the error was in the treatment of r as a price.
> Sraffa does not do this.

I know Sraffa does not do this. But if the physical distribution of
the surplus is specified then the presence of a commodity called
money-capital with unit price r follows as a logical necessity.

I agree that explicitly considering the length of time of the
production period does not necessarily commit one to an Austrian view.
But do you agree that considering money-capital to have a price does
not necessarily commit one to a "bourgeois" view?

Although the austere concept of money-capital employed in the circular
flow does not perfectly match Marx's natural language discussions of
it, nonetheless this quote may help:

"It is not until capital is money-capital that it becomes a commodity,
whose capacity for self-expansion has a definite price quoted every
time in every prevailing rate of interest."
Marx, Capital Vol. 3.

Marx continues and discusses the money-market and how money-capital is
a fetish form of self-expanding value M-M'.

I am not well-versed in the different approaches to capital theory.
But I get the impression that scepticism regarding the idea that
profit is the price of money-capital derives from the Cambridge
capital controversies, which was the first application of Sraffa's
theory to attack the logical possibility of a theory of value. Marx's
theory came next.

Sraffa does not explicitly treat r as a price, although unwittingly
does. Marx does treat r as a price.

Best wishes,

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