[OPE-L] Fwd: [OPE-L] workers' consumption and capitalists' consumption

From: Ian Wright (wrighti@ACM.ORG)
Date: Fri Jun 16 2006 - 12:49:55 EDT

Hi Ajit

Thank you for your criticisms, and taking the time to provide feeback.
I understand if you feel we've come to a conclusion for now. I hope
you won't mind if I make some closing remarks on your summing up.

> (3) This conceptual error turns out to be a logical
> error since your scheme requires outputs to be treated
> as its own inputs--this reading of mine is correct
> because in your paper you turn whatever is the surplus
> produced in the current period into its own input in
> the same period.

Let's apply your reasoning to how Sraffa treats means of production.
In the example, 2 tons of corns is used-up as raw material and
replaced within the production period. Hence, Sraffa has 2 tons on the
LHS and 2 tons on the RHS. The 2 tons on the LHS is used-up in the
period. The 2 tons on the RHS is new corn output, which replaces the
used-up corn.

Here Sraffa is turning inputs into outputs "in the same period".
Hence, according to your interpretation, Sraffa has made a "logical

However, neither Sraffa or I are making a logical error, and this is a
mundane issue.  The element that seems strange to you is that this is
a closed, rather than an open, linear production model. In a closed
model, the capitalists consumption is used-up and replaced in the
production period, just like the means of production.

> (4) To this you responded that actually you are not
> treating outputs to be its own inputs but rather the
> capitalist consumption is a historical datum, i.e. its
> the surplus of the last cycle of production.

You introduced time-scripts, I did not. The only time I have mentioned
is the length of the production period. I do not need to distinguish
between production at time t-1 and time t because this is a state of
self-replacing equilibrium, and both moments are identical.

In any production period the following happens:
2 tons of raw materials are used-up
4 tons are consumed by capitalists
4000 hours of direct labour is applied
10 tons of output is produced, of which
   - 2 tons replaces the raw materials
   - 4 tons replaces the corn consumed by capitalists
   - 4 tons is consumed by workers to reproduce their labour-power
This is a standard interpretation of a "method of production".

There is no merit to this particular objection of yours. I therefore
need to explain why you think it  important. My guess is that the
metaphor of an undistributed surplus is so ingrained that you think it
impossible that either workers consumption or capitalists consumption
can be both consumed (as an input) and replaced (as an output) in the
period of production. More on metaphors below.

> (5) then I pointed out that if this is how you
> interpret your scheme, then you get into another
> problem, i.e. your principle of accounting breaks down
> if the current period surplus happens to be different
> from the surplus of the past period. So your scheme
> freezes rate of wages for all conceivable past and
> futute.

We have been discussing self-replacing equilibrium with a distributed
surplus. No time subscripts, no historical data, just a period of
production that is self-replacing. Implicit in your criticism is an
unstated assumption that Sraffa's accounting does not break down in a
non-equilibrium state. As I mentioned, this is begging the question,
particularly if Sraffa's accounting is erroneous in the special case
of equilibrium.

> (6) Note that this condition is not a condition of
> simple reproduction schema in Marx. Marx's schema
> takes current period and assumes that all the surplus
> of the current period will be consumed by the
> capitalist. Thus it is open to accommodating any wage
> rate that prevails today. Your system is not.

I don't have much to say on this point. I'd need to consult Vol. 2.
Maybe the circular flow model does not perfectly match Marx's Vol. 2
reproduction schema.

> (7) Also note that your labor-value accounting is
> radically different from Marx's. In Marx v = c+v+s,
> where (v+s)= L, direct labor-time. In your scheme:
> v = c+L+s = c+v+2s, that's why in my first messege I
> pointed out that your scheme involves double counting
> of profits or surplus value.

Your mention of double-counting was based on the idea that firms do
not need money-capital because they have commodity-capital. This was
followed up by some exchanges between Paul and myself on the circuit
of capital in the circular flow, particularly the relationships
between money-capital, working-capital and commodity-capital. My view
is that a model of an economy in which firms can pursue production
with only commodity-capital, and do not require the supply of
money-capital from capitalists, is not a model of a capitalist
economy. I also suggested, that due to the mapping between a Sraffian
system and a circular flow, that the concept of money-capital is
implicit in Sraffa's theoretical framework.

I'm not sure where you get "v=c+v+2s" from. My guess is that you think
that placing capitalist consumption on both the LHS and RHS of a
method of production implies double counting. I hope my comments above
address that concern. For example, if you were correct, then Sraffa is
double counting means of production, i.e. "v = 2c + v + s". But of
course he is not.

> (8) You say that my example of wages being 0.0005 ton
> of corn per hr. of labor in the current period implies
> recourse to non-equilibrium situation. Now, just a
> second of reflection should have told you that in a
> one commodity corn economy, talk of non-equilibrium is
> pure non-sense. What could be non-equilibrium in a one
> commodity corn economy? Why can't the capitalists eat
> the surplus 6 tons of corn? All you need to do is to
> think through the issue.

I do not understand why you think a 1-commodity economy must be in
equilibrium. But that is not important. Choose any real wage rate on
condition that it holds in a fully specified self-replacing state,
which is the only situation I have been making any truth claims about.

> (10) I do not think that your work has been in vein
> though. I think if you think through the issues you
> could come up with a good mathematical paper that will
> show correctness of Sraffa's statement that once
> surplus emerges in a subsistence system, the system
> becomes self-contradictory. You can show that there is
> no way one can convert surplus into cost and equate
> the sum of column inputs with the corresponding row
> outputs. This could also give you some clue to
> interpreting Sraffa's note on 'surplus' and
> 'objectivity', which you have not read completely but
> are relying quite a bit on.

Why does Sraffa think the transition from subsistence to surplus
equations become "self-contradictory"?

I'd suggest that the contradiction arises because Sraffa's
metaphorical image of the surplus is that of an undistributed surplus.
Hence, there is break in continuity, a novel distributional event: now
there are additional outputs, not yet re-assimilated as inputs. Sraffa
therefore has an inkling of dialectics: that change is inherently
contradictory. But he does not resolve that contradiction. Instead he
immediately imposes a nominal price equilibrium in order to study
prices of production. In other words, he partially distributes the
surplus, but only in nominal terms. Now his inputs prices equal output

But he does not fully distribute the surplus, that is distribute it in
real terms. The contradiction, avoided in his nominal accounts,
persists in his real accounts. Hence his labour-cost accounting
equation does not balance: input labour-costs do not equal output
labour-costs, a feature particularly clear in our discussion of the
corn economy.  In consequence, the conservation of real-cost in price
is severed because the circular flow is interrupted due to the
presence of an undistributed surplus. The metaphors of the circular
flow and undistributed surplus clash.

In a state of equilibrium, in which the surplus is fully distributed,
there is no change. Hence production of a surplus is not always
"self-contradictory". Applying Sraffa's metaphor of an undistributed
surplus to this case only leads to confusion and muddle, such as the
loss of conservation principles, in particular the principle of

Best wishes,

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