Re: [OPE-L] basics vs. non-basics

From: Ian Wright (iwright@GMAIL.COM)
Date: Wed Sep 28 2005 - 18:30:49 EDT


> He does not 'reject the option', but sets it aside for simplicity of
> argument having first accepted
> that on grounds of realism one should include the real wage necessary for
> subsistence
> in the technical coefficient matrix.
Does he return to it?

On grounds of realism, then, one can ask: on what criteria do we classify
commodities as belonging to those "necessary for subsistence" and those that
are a "part of the surplus"? What principles are used to draw the line?

I regard the attempt by Steedman and others to interpret Sraffa as a
> positive alternative theory
> of prices as being mistaken, because to do so relies upon the key
> assumption of
> an equal rate of profit which we know to be false in reality. Whilst it
> was valid
> to make that assumption in an internal critique of equilibrium theory, it
> is not
> valid as an assumption about the real world.

You might also add: (i) the concept of distinct commodity-types, (ii) lack
of dynamics, and (iii) the distinction between basic and non-basic

However, that does not mean that the ideas of the basic sector and the
> standard system are without merit.

I am questioning the merit of the basic/non-basic distinction. I am not sure
of the answer. I offered to go through a numerical example that might help
here, which shows that if we stick to the idea that the basic sector
determines the average rate of profit then prices in general are not

These are complex issues: I might be mistaken. But it would be useful to go
into a little more depth on the problem of "self-reproducing non-basics".

It is an open question whether the actual mean rate of profit will be
> determined
> in the basic sector. I suspect that it will, but one would have to back
> this up by
> a) empirical studies using i/o tables
> b) simulation studies that allowed for dispersions of the profit rate
> between industries in a realistic way

If my understanding of the literature is well-founded then there are logical
reasons, prior to empirics, that suggest that the profit rate cannot be
determined by the basic sector alone.

Beyond this I think the idea of the basic sector has obvious applications to
> the theory of the socialist planned economy, and to the theory of productive
> and unproductive labour. On the former, I suspect that the economic model
> that Sraffa presents may in fact represent the impact on Cambridge
> economists of the 30s on seeing the first GOSPLAN planning tables. I gather
> from some references by Keynes that these were going the rounds.
> The structure of Sraffa's model is that of a planned economy, and the
> notions of the basic sector and its rate of profit are obviously related to
> similar results by von Neumann and Koopman. See also the work of Samuelson
> and
> Weizacker, where they explicitly use a similar model to theorise socialist
> allocation.
> I think it interesting that the sectors of the US economy whose price
> structure corresponded most
> closely to that predicted in the Sraffian model were the regulated
> utilities.
I would put aside whether your theory of the distinction between productive
and unproductive labour is threatened by the problem of "self-reproducing
non-basics". The tail should not wag the dog.

If I recall, you have made the link between Sraffa's formalism and growth of
bacterial colonies, or other more general notions of productive networks,
such as reaction networks in chemistry. My point is that Sraffa views the
economy as a "one way avenue" from factors of production to "surplus". That
surplus is not a precondition for the next round of production, whereas the
stock of capital and labour is. This is like trying to model an
autocatalytic network by ignoring the feedback of output to input from one
period to the next. This feature of Sraffa's approach generates, I think,
the indeterminacy of prices, under the usual assumptions.


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