Neo-Marxism and Post-Keynesian Economics: From Kalecki to Sraffa and Joan Robinson [1 ed.] 1032254807, 9781032254807

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Neo-Marxism and PostKeynesian Economics

Piero Sraffa and Joan Robinson, both iconic Cambridge economists, were highly inf luenced by the economic theory of Karl Marx, and integrated important elements of Marx’s economic system into their theories. This book argues, based on published and unpublished documents, that the work of Sraffa and Robinson can in fact be considered as essentially post-Keynesian neo-Marxist. The first part of the book reviews the intellectual development of several key thinkers along this neo-Marxist current in economic thought: Kalecki, Steindl, Baran, and Sweezy. Parts 1 and 2 separately examine Robinson’s and Sraffa’s works and question how they fit into this specific neo-Marxist current, either building on it (in Robinson’s case) or following another direction (in Sraffa’s case). Part 3 observes Robinson’s theory of economic growth and its relationship to the views of Marx and Kalecki. Overall, Cuyvers demonstrates how their thought processes share characteristics with neo-Marxist key views, such as stating or implying the labour theory of value as either redundant or wrong, emphasising the role of class struggle in the distribution of income and rejecting Marx’s falling rate of profits. Following on from ideas brief ly introduced in Cuyvers’s Economic Ideas of Marx’s Capital (2017), this book will particularly appeal to readers interested in the history of economic thought, works of Sraffa, Robinson, and Marx, post-Keynesian economics, and neo-Marxism. Ludo Cuyvers is Emeritus Professor at the University of Antwerp, Belgium and Extraordinary Professor at North-West University, South Africa.

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Neo-Marxism and PostKeynesian Economics From Kalecki to Sraffa and Joan Robinson Ludo Cuyvers

First published 2022 by Routledge 4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 605 Third Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2022 Ludo Cuyvers The right of Ludo Cuyvers to be identified as author of this work has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record has been requested for this book ISBN: 978-1-032-25480-7 (hbk) ISBN: 978-1-032-25482-1 (pbk) ISBN: 978-1-003-28341-6 (ebk) DOI: 10.4324/9781003283416 Typeset in Bembo by codeMantra

To my grandchildren Flor, Emiel, Hannelore, Quinten, Sien, Staf, Louis, Pauline, Hendrik and Juliette.

Contents

List of figures Preface

xi xiii

PART 1

Post-Keynesian neo-Marxism: the trajectory 1 The core of Marx’s economics and the monopolisation of capitalism: an introduction to some major issues

1 6

2 The Oxbridge connection: Sraffa, Kalecki, Steindl 2.1 Piero Sraffa’s notes and publications 11 2.2 The Kalecki–Steindl nexus: some biographical data that are relevant to our story 14 2.3 Capitalist long-run economic development: the views of Kalecki and Steindl in a nutshell 16

11

3 The other side of the Atlantic 3.1 Influence of Kalecki’s neo-Marxism on Baran and Sweezy: evidence from the Baran−Sweezy correspondence 26 3.2 Baran and Sweezy’s Monopoly Capital 31

25

4 Piero Sraffa and Joan Robinson: two directions of post-Keynesian neo-Marxism 4.1 Sraffa’s way: picking up the thread where it was left by Ricardo and Marx 41 4.2 The Robinson direction: building on Keynes, Marx, and Kalecki 44 5 What remains of post-Keynesian neo-Marxist economics? An unfinished integration

41

51

viii Contents PART 2

Piero Sraffa’s neo-Marxist theory of value and distribution 6 The work and life of Piero Sraffa 6.1  Sraffa’s life and work: a short overview 59 6.2  Sraffa as a Marxist 62 6.3  Sraffa’s circular flow model and some relevant results 67 6.3.1  Sraffa’s price equations 67 6.3.2  The standard system 68 6.3.3  Joint production 69 6.3.4  Switching and re-switching of production techniques 70 6.3.5  Basic and non-basic commodities 71 6.4  L ong road towards Production of Commodities by Means of Commodities 73 7 Let one hundred schools of thought blossom …: some major differences compared with Marx 7.1  Embodied labour as the substance of value 90 7.2 Sraffa’s wage rate and Marx’s social necessary consumption 94 7.3 T he rate of profits as derived from the system of physical input– output flows 99 7.4  The role of “luxuries” and “non-basics” 103 7.5 Taking a “snapshot” or investigating the economy in normal reproduction? 106 7.6  Joint production 109 7.7 Marx’s falling rate of profits and the organic composition of capital 113 Appendix 1: Sraffa’s “non-basics” and Marx’s average rate of profits 125 Appendix 2: T he inequalities approach of the labour theory of value with normal reproduction 127 8 How were Sraffa’s theoretical insights received by the Marxists? A timeline 8.1  The first reactions 130 8.2  T he early 1970s: intensifying discussions among Marxists 131 8.3  T he late 1970s: cold war, guerilla warfare, and attempts at “peaceful coexistence” between Marxists and Sraffians 135 8.4  T he 1980s and after: digesting and revising the labour theory of value 139 9 What to conclude?

57 59

89

130

152

Contents  ix PART 3

Joan Robinson: Modelling capitalist economic growth with Marxist and neo-Marxist ingredients

157

10 Joan Robinson’s life: a short overview

160

11 Robinson’s theory of economic growth and accumulation in a nutshell 11.1  Profits realisation mechanism 171 11.2  Capitalists’ “animal spirits” and their interaction with the realisation mechanism 173 11.3  Factors constraining the maximum attainable rate of growth 175 11.4  Technical progress, equilibrium 177 11.5  L ogical time versus historical time – history versus equilibrium 179 11.6  Monopolisation, underconsumption, stagnation 181

171

12 Joan Robinson’s and Marx’s model and concepts compared 185 12.1  Robinson’s “basic model” and Marx 186 12.2  Robinson’s production model and the Marx–Sraffa model 187 12.2.1  Labour as the sole unproduced factor of production 189 12.2.2  Homogeneous labour 190 12.2.3  Constant production coefficients 191 12.2.4  Closed economy 192 12.2.5  Reproduction schemes 192 12.3  Robinson’s normal prices and Marx’s prices of production 194 12.4  Robinson’s views on the labour theory of value 196 12.5  Real and nominal wage rates: “inflation barrier” 198 12.6  Robinson’s definitions of “surplus” 199 13 What is Joan Robinson’s indebtedness to Sraffa? 13.1 Sraffa’s 1926 Economic Journal article and his 1928–1929 lectures 206 13.2  Measurement of capital 207 13.3  An Essay on Marxian Economics 210 13.4  Sraffa’s introduction to Ricardo’s Principles 210 13.5  Sraffa’s Production of Commodities by Means of Commodities 212 14 Robinson’s model of economic growth compared with Marx and the post-Keynesian neo-Marxists of the 1940s and 1950s 14.1  Rate of accumulation and Robinson’s “animal spirits” 220

206

220

x

Contents

14.2 14.3 14.4 14.5 14.6 14.7

Rate of accumulation as a function of the expected rate of profits 223 Secular behaviour of the rate of profits 224 Technical progress 227 Conditions of steady economic growth 228 Monopoly capitalism, underconsumption, and stagnation 230 Underconsumption and stagnation: counteracting factors 234

15 What has remained of Robinson’s post-Keynesian neo-Marxism?

Index

238

243

Figures

11.1

Interaction between profits realisation, profits expectations, and the capitalist urge to accumulate

174

Preface

The year 2023 marks forty years since the death of Piero Sraffa and Joan Robinson. Both iconic Cambridge economists were deeply inf luenced by the economic theory of Karl Marx, and both integrated important elements of Marx’s economic model into their work. In this volume, I will analyse Piero Sraffa’s theory of value and distribution, and Joan Robinson’s theory of economic growth, and I will argue that these theories belong to post-Keynesian neo-Marxist economic thought of the 1930s, 1940s, and 1950s. In the first decades of the twentieth century, only a few professional economists studied Marx’s Capital, and many scholars and observers with Marxist sympathies had doubts about the correctness and relevance of Marx’s economic theory. Some Marxists such as Rudolf Hilferding, Rosa Luxemburg, and Lenin had tried to analyse the impact of economic concentration but came to opposite conclusions, in particular as to the future of capitalism. The stock market crash of October 1929 and the Great Depression that followed clearly showed the instability of the capitalist system. To many, it was obvious that Jean-Baptiste Say’s loi des débouchés was a myth, and that Marx’s “critique of political economy” had probably been on the right track. However, Marxists and non-Marxists alike lacked the tools for a thorough and comprehensive, let alone a convincing, theoretical analysis of the ongoing deep economic crisis, and of the policies needed to overcome the massive unemployment. There was no theory as to how this crisis related to the working of the capitalist system and the dominance of “big business”. The role of effective demand at the macro-economic level in directing economic activity was not understood. Despite all signs that the economic depression that followed “Black Tuesday” (29 October 1929) was not just another example of a short-run disequilibrium that would soon be forgotten, mainstream economists repeated, as John Maynard Keynes had complained in his Tract on Monetary Reform many years before, “that when the storm is long past the ocean is f lat again”. On the other side, the mantra of orthodox Marxists was that the crisis was a result of the operation Marx’s “law” of the falling rate of profits, and that capitalists could only restore profitability by reducing wages and increasing exploitation of labour.

xiv Preface

In 1931, both in Cambridge, UK, and in Warsaw, Poland, theories based on the macro-economic role of effective demand were worked out by building on Marx’s reproduction schemes. In Cambridge, the famous Keynes and his “circus” of young collaborators (among whom were Piero Sraffa and Joan Robinson) were doing this unknowingly, whereas in Warsaw, an unknown Marxist-oriented Michał Kalecki was building on these schemes. Thus were laid the foundations of post-Keynesian neo-Marxist thinking. Michał Kalecki was inspired by the views expressed by Rosa Luxemburg in her discussion with Tugan-Baranovski on the role of “external markets”. It led him to his theory of the Marxist “profits realisation mechanism”. In the 1940s and 1950s, this approach was further developed by Josef Steindl, and it was also adopted in the work of Paul Baran and Paul Sweezy, in particular, in the bestseller Monopoly Capital that they co-authored. The theories of these authors share a number of characteristics that distinguish them from the original Marxist model: (1) a neglect, even an avoidance, of the labour theory value, (2) a focus on “big business” and oligopolistic competition, (3) a view of the nominal wage rate as determined by the balance of forces between capital and labour, and not by a given subsistence wage level, (4) a rejection of Marx’s idea of a tendentially falling rate of profits, and (5) a theory of economic stagnation. When I use the term “post-Keynesian neo-Marxist” (or occasionally “neo-Marxist” for short) economic theory, I refer to this current in economic thought. The intellectual development of this group of economists is reviewed in Part 1. Based on published and unpublished evidence, their relationship and interaction as peers are sketched. Using the correspondence between Paul Baran and Paul Sweezy, for instance, we can follow how they both became submerged in Kalecki’s as well as Steindl’s thinking, while they considered these views insufficiently anchored into Marxist political economy. Unfortunately, many personal interactions, including those with Joan Robinson and Piero Sraffa, have remained undocumented. This first part also shows how Robinson and Sraffa fit into this specific post-Keynesian neo-Marxist current. They both built on the Classical (and Marxian) surplus concept and showed, in Robinson’s case, how it can be integrated into a theory of economic growth, based on insights of Keynes and Kalecki and, in Sraffa’s case, into a theory of value. After an overview of Sraffa’s life and his lifelong political affinity with the Italian Communist Party, Part 2 investigates his relationship with Marxism. Piero Sraffa developed his model, largely independently, as is evidenced by his unpublished notes, but in line with some earlier work by von Bortkiewicz on Ricardo and Marx, which was mostly unknown to the wider Englishspeaking public of economists. I then compare his model and its assumptions to that of Marx and discuss how it relates to post-Keynesian neo-Marxist economic theory. Part 3 is devoted to Joan Robinson’s theory of economic growth and its relationship with the views of Marx and Kalecki. It starts with a brief biography,

Preface

xv

followed by an overview of her theory. Next, I investigate how her theory of economic growth built on Marx’s and Kalecki’s theoretical contributions and how it is also related to the work of Steindl, Paul Baran, and Paul Sweezy. I also look at Joan Robinson’s debts to Sraffa. Apart from the analysis of the published work of these authors, I will also refer to their personal interactions, using both published evidence and archival material. The aim of Parts 2 and 3 is to show how Joan Robinson’s theory of economic growth and the theory of value and distribution of Piero Sraffa both have similar post-Keynesian neo-Marxist characteristics, but that the full integration of the two theories has remained unfinished. In the economics profession, however, this aspect of their work is neglected. As things stand today, Joan Robinson’s contributions are regarded as just post Keynesian (without hyphen between “post” and “Keynesian” to indicate that the original post-Keynesian current became amalgamated with that of institutional and radical economics into what is known today as “heterodox economics”), while Sraffa’s work is characterised as neo-Ricardian. The three parts of this book have been written in such a way that they can be read independently of each other. In the past 50 years, I have studied the work of these economists, but never came to writing up the results of my research. There was always a reason to delay, for instance a new publication that had appeared, particularly after the opening of the Sraffa archive at the Wren Library, Cambridge, UK. In fact, it was only when Geoff Harcourt wrote the preface to my book The Economic Ideas of Marx’s Capital (2017) that I finally made up my mind to bring all the material together. I owe him my deep gratitude. The manuscript of this book was already with the publishers when I was informed that Geoff had passed away on 7 December 2021. Along with his many friends, students, and colleagues, I have lost a mentor. A mentor who was full of humour, but who was also always available for comments on drafts of papers, and who would generously offer advice and point to sources and documents that should be read or consulted. I was very fortunate in being able to discuss my views on her work with Joan Robinson in person during visits to Cambridge in 1977 and 1980. However, by the time I contacted Piero Sraffa, hoping for a meeting and possibly access to some of his notes, he was already suffering from memory loss. Anyway, knowing what we know today from the unpublished papers and documents in the Sraffa archive about his extreme reticence to discuss his research, it would have probably been futile to have such meetings. A number of my peers read drafts of the chapters and made most useful comments. I am much indebted to Riccardo Bellofiore, Scott Carter, John Bellamy Foster, Heinz Kurz, Maria Cristina Marcuzzo, Glenn Rayp, and Marc Vandoorne. None of them, however, can be held responsible for the views expressed in the pages that follow. I am grateful to Lord Eatwell for his permission to quote from the Sraffa Papers, to Stanford University Archives for support in accessing the Paul

xvi

Preface

Alexander Baran Archive and quoting from the papers, and to the Universitätsbibliothek der Wirtschaftsuniversität Wien for allowing access to the SteindlSweezy correspondence, however scanty this was. Part 2 of this volume is a revised and enlarged version of a chapter that was published earlier in a Festschrift with Lexxion. I am grateful for being granted permission to use it. Finally, I also wish to thank New Left Review for permission to use copyright material of Karl Marx, Capital, Volume 1, translated by Ben Fowkes, Harmondsworth, Penguin, 1976; Karl Marx, Capital, Volume 2, translated by David Fernbach, London, 1978; and Karl Marx, Capital, Volume 3, translated by David Fernbach, London, 1981.

Part 1

Post-Keynesian neoMarxism: the trajectory When Paul Sweezy, the famous éminence grise of the Marxist economists, delivered his Marshall Lecture at Cambridge University in 1971, he reviewed the “alternative approaches” to the “late capitalist reality” and organised them under three headings: the heterodox bourgeois, the traditional Marxist, and the neo-Marxist (Sweezy, 1971: 30). When he then elaborated on the neo-Marxist approach, he stated that he was “not particularly wedded to the label” and explained: I use it not to designate a group which is in some sense less genuinely Marxist than others – though clearly some may be – but rather a group which is less convinced of the adequacy of Marxist theory as it has been inherited from the past. (Sweezy, 1971: 39). Indeed, in the 1950s and 1960s, it seemed as if a distinct, fresh current in economic thought was forming. This new current originated in the application of John Maynard Keynes’s insights on macro-economic mechanisms to the theories of Karl Marx about the working of the capitalist economic system and the appropriate way to analyse that system. The main proponents of this new approach were convinced that capitalism had changed dramatically since Marx’s time. During much of the nineteenth century, capitalism had been based on cut-throat competition between capitalist enterprises. This had changed in the twentieth century; many markets were now dominated by just a few large capitalist players. Together with the theoretical challenges that the realities of modern capitalism posed, Marxist economic theory was also challenged by the theoretical and methodological problems related to how Marx had “transformed” his values of Volume I of Capital into the prices of production of Volume III. The changes in capitalism had evidently not gone unnoticed by Marxists. In Das Finanzkapital (1910), Rudolf Hilferding had elaborated on how the rise of corporate capitalism is an inevitable consequence of the competitive

DOI: 10.4324/9781003283416-1

2 Post-Keynesian neo-Marxism: the trajectory

advantages of large-scale production, which, in turn, pushes the banks into becoming major shareholders of the joint stock companies. He argued that the “development of capitalist industry produces concentration of banking, and this concentrated banking system is itself an important force in attaining the highest stage of capitalist concentration in cartels and trusts” (Hilferding, 1981: 223). This concentration, in his opinion, changed the nature of economic crises with “the disruption of credit (…) not (…) as complete as in crises of the early period of capitalism” (Hilferding, 1981: 290). He further argued that cartels do not eliminate crises: they divert the main burden of a crisis to the non-cartelised industries. And with the increasing cartelisation, the role of the capitalist state in safeguarding the domestic markets from foreign competition, as well as in promoting the penetration of foreign markets, becomes crucial. This, then, leads to the export of capital and the struggle for foreign markets and economic territory, in other words, to imperialism. The changes in the nature of capitalism were also analysed by Rosa Luxemburg in her Die Akkumulation des Kapitals (1913). She looked into great detail on the conditions for the expanded reproduction of the capitalist economic system, which she saw as closely linked to the expansion of “effective demand” (Luxemburg, 1913: 131). Her conclusion was that with the accumulation of capital, the demand for consumer goods by the workers will lag the increased output of these goods, that goes with the growth of the means of production that are put in operation. This tendency towards “underconsumption” can be neutralised as long as “external markets” exist. She, therefore, like Hilferding, pointed to the role played by the exports of capital to the non-capitalist part of the world and by the struggles for territory between imperialist powers, but, interestingly, also to the role of armaments spending as a kind of domestic or internal “external market” (Luxemburg, 1913: 458ff.). Neither Hilferdings’s nor Luxemburg’s analysis investigated the nature itself of the competitive process between large companies, i.e., the “microfoundations of macroeconomics”. Since much of the dynamics in Marx’s model of capitalism was based on competition, it was natural to conclude that the model needed revision as a result of the emergence of oligopolistic firms. In 1926, in a seminal paper published in the Economic Journal, the otherwise unknown Piero Sraffa wrote that in Marshallian economic theory, the idea of a downward sloping average cost curve due to a “greater internal division of labour, which is rendered possible by an increase in the dimensions of an individual firm, was entirely abandoned, as it was seen to be incompatible with competitive conditions” (Sraffa, 1926: 537–538). The author argued that “external economies but internal to the industry”, i.e., the economies that were supposed to lead to the downward sloping part of the cost curve of the companies under consideration, “constitute precisely the class which is most seldom to be met with” (Sraffa, 1926: 540) and concluded with the necessity

Post-Keynesian neo-Marxism: the trajectory

3

“to abandon the path of free competition and turn in the opposite direction, namely, towards monopoly” (Sraffa, 1926: 542). He suggested that the actual conditions in industries generally do not fit exactly one or other of the categories, but will be found scattered along the intermediate zone, and that the nature of an industry will approximate more closely to the monopolist or the competitive system according to its particular circumstances, such as whether the number of autonomous undertakings in it is larger or smaller, or whether or not they are bound together by partial agreements, etc. (Sraffa, 1926: 542) At Cambridge, Sraffa’s paper resulted in new and intense research on “imperfect competition”. Joan Robinson started in 1930 what was to become her The Economics of Imperfect Competition. The book came out in 1933, and in the same year, in the United States, Edward Chamberlin’s The Theory of Monopolistic Competition was published.1 In the foreword to her book, Robinson stated: Mr. Sraffa’s article must be regarded as the fount from which my work f lows, for the chief aim of this book is to attempt to carry out his pregnant suggestion that the whole theory of value should be treated in terms of monopoly analysis. (Robinson, 1933: xiii) The theoretical as well as the more empirical and descriptive work on oligopolies and monopolistic competition, further strengthened the belief among Marxist-oriented economists that capitalism had entered a new phase and that Marx’s theory had to be revised. With the publication of Keynes’s The General Theory of Employment, Interest and Money in 1936 and the spread of its ideas, some of these economists, mainly under the inf luence of Michał Kalecki’s views, analysed the economics of “monopoly capitalism” and formulated theories that I will henceforth refer to as “post-Keynesian neo-Marxist”. Apart from Kalecki, mention should be made of Josef Steindl, Paul M. Sweezy, and Paul A. Baran. It is true that today “post-Keynesian neo-Marxism” cannot be considered as a separate school of thought but is part of the post-Keynesian heterodox school. However, as I also showed elsewhere (Cuyvers, 2017), the ideas and hypotheses put forward by its main representatives, particularly in the 1950s and 1960s, were very important in shaping post-Keynesianism. These authors aimed at explaining the stagnation of the mature capitalist economies and the role of imperialism, by integrating Keynesian and Marxian insights (Cogoy, 1987). Since then, neo-Marxist insights have been evolving and authors working along these lines, first and foremost, now consider themselves

4

Post-Keynesian neo-Marxism: the trajectory

post Keynesians – the drop of the hyphen between “post” and “Keynesian” marks the difference with the original post Keynesians. One should not forget that we are living in the post-Soviet bloc era and that ideological stances have changed. At present, the vast majority of the post Keynesians who are sympathetic to Marx’s work (many of them are much less sympathetic) will probably agree with Geoff Harcourt who always stressed the line of descent going from Marx to Sraffa and argued that “the Marxian stream is the most appropriate one, both for interpreting Sraffa’s own views and inclinations” (Harcourt, 2018: 89). What was largely, although not entirely, left untouched by the secondgeneration Marxists such as Hilferding or Luxemburg,2 was Marx’s theory of value and of exploitation. Of course, some well-known critics of Marx’s economic theories had pointed to the “the transformation problem”, i.e., how the values of Volume I of Marx’s Capital are transformed into the prices of production of Volume III. This problem that was considered as a serious theoretical inconsistency, received its importance, because of the 1896 essay by von Böhm-Bawerk, Zum Abschluss des Marxschen Systems (von BöhmBawerk, 1896), after he had already stated in his Kapital und Kapitalzins, well before Volume III of Capital was published, that Marx’s transformation problem was insolvable and that Marx knew it could not be solved (von Böhm-Bawerk, 1890: 389–390). In the early years of the twentieth century, a number of economists explored a mathematical treatment of Ricardo’s (and hence Marx’s) theory of value. We find this, for instance, in 1904, in the work of Dmitriev (1974), and in 1906–1907, in that of von Bortkiewicz (1949). Both “neo-Ricardians” “translated” Ricardo’s theory of value into a system of simultaneous equations, from which they mathematically derived several of Ricardo’s propositions. von Bortkiewicz in particular subjected Marx’s “labour values solution” of the problem of the transformation of values into prices of production, to a thorough investigation. 3 After one of his 1907 papers was published in English translation in 1949 by Paul Sweezy (von Bortkiewicz, 1907), together with Hilferding’s reply to Böhm-Bawerk, Bortkiewicz’s work became the starting point for the vast literature on the transformation problem. His approach was, however, already known to Piero Sraffa who continued in the early 1940s his earlier attempts at formulating a system of equations on which to build his model (Gehrke and Kurz, 2006) and to correct Marx’s theory of value.4

Bibliography E. von Böhm-Bawerk (1890). Capital and Interest – A Critical History of Economical Theory, London-New York: Macmillan. E. von Böhm-Bawerk (1896). “Karl Marx and the Close of His System”, in: P.M. Sweezy (Ed.), Karl Marx and the Close of His System by Eugen von Böhm-Bawerk & Böhm-Bawerk’s Criticism of Marx by Rudolf Hilferding, together with an Appendix consisting of an Article by Ladislaus von Bortkiewicz on the Transformation of Values into Prices of Production in the Marxian System, New York: August M. Kelley, 1949.

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L. von Bortkiewicz (1907). “On the Correction of Marx’s Fundamental Theoretical Construction in the Third Volume of Capital”, in: P.M. Sweezy (Ed.), Karl Marx and the Close of His System by Eugen von Böhm-Bawerk & Böhm-Bawerk’s Criticism of Marx by Rudolf Hilferding, together with an Appendix consisting of an Article by Ladislaus von Bortkiewicz on the Transformation of Values into Prices of Production in the Marxian System, New York: August M. Kelley, 1949. E.H. Chamberlin (1933). Theory of Monopolistic Competition, Cambridge, MA: Harvard University Press. M. Cogoy (1987). “Neo-Marxist Theory, Marx, and the Accumulation of Capital”, International Journal of Political Economy, 17(2), Summer 1987, 11–37. L. Cuyvers (2017). The Economic Ideas of Marx’s Capital – Steps Towards Post-Keynesian Economics, London-New York: Routledge. V.K. Dmitriev (1974). Economic Essays on Value, Competition and Utility, Cambridge: Cambridge University Press. C. Gehrke & H.D. Kurz (2006). “Sraffa on von Bortkiewicz: Reconstructing the Classical Theory of Value and Distribution”, History of Political Economy, 38(1), 91–149. G.C. Harcourt (2018). “The Role of Sraffa Prices in Post-Keynesian Pricing Theory”, in: M. Corsi, J. Kregel & C. D’ippoliti (Eds.). Classical Economics Today – Essays in Honor of Alessandro Roncaglia, London: Anthem Press. R. Hilferding (1904). “Böhm-Bawerk’s Criticism of Marx”, in: P.M. Sweezy (Ed.), Karl Marx and the Close of his System, By Eugen von Böhm-Bawerk, and Böhm-Bawerk’s Criticism of Marx, By Rudolf Hilferding, New York: Augustus M. Kelley, 1949. R. Hilferding (1981). Finance Capital. A Study of the Latest Phase of Capitalist Development, London, Boston – Henley: Routledge and Kegan Paul. R. Luxemburg (1913). The Accumulation of Capital, London: Routledge and Kegan Paul, 1951. R. Luxemburg (2013). “Practical Economics: Volume 3 of Marx’s Capital”, in: P. Hudis (Ed.), The Complete Works of Rosa Luxemburg. Volume I, Economic Writings 1, London-New York: Verso. J. Robinson (1933). The Economics of Imperfect Competition, London: Macmillan. M. Smith (2017). “Some Notes on the Reception of Ricardo’s Principles in the Non-English-Speaking World”, Contributions to Political Economy, 36, 43–60. P. Sraffa (1926). “The Laws of Returns under Competitive Conditions”, Economic Journal, 36(144), December, 535–550. P.M. Sweezy (1971). “On the Theory of Monopoly Capitalism”, in: P.M. Sweezy (Ed.), Modern Capitalism and other Essays, New York-London: Monthly Review Press, 1972.

1

The core of Marx’s economics and the monopolisation of capitalism: an introduction to some major issues

In his economic theory, Marx attempted to demonstrate, with the labour theory of value of the Classical economists as his point of departure, that profits in the capitalist system are the result of exploitation of the working class. He also argued that the accumulation of these profits results in the economic expansion of the entire economic system, but he also proved what the limits of this expansion are. From this, a theory was derived that explains the accumulation process and also indicates how the exploitation of the working class changes over the economic cycle. Marx also stated that labour in the production process is systematically replaced by machines, which, he argued, leads to a tendential fall in the rate of profits. This fall in the rate of profits, in combination with the increase in the production of consumer goods that outstrips the rise in wages and in demand, will result in long-term economic stagnation. In short, the core of the reasoning that Marx set up is the following: 1 2 3 4

Workers produce using the means of production owned by capitalists. All value is produced by labour and hence by the workers. However, workers produce more value – surplus value – than they receive as compensation for their labour. This compensation, their wages, are related to a given social norm. What workers produce above their wages is surplus, which will go to capitalists as profits, after deduction of what is needed for (for example) the state apparatus.

In addition, Marx made an impressive attempt to make his model dynamic. He proceeded as follows: 1 2 3

Capitalists, both individually and collectively, have an insatiable hunger for profits and accumulation. Each capitalist tries to appease his hunger for profits by maximising the surplus value extracted from workers. The squeezing of wages is the most important instrument for maximising the surplus value.

DOI: 10.4324/9781003283416-2

Introduction 7

4 5

6

Wages will be squeezed by replacing labour with capital/means of production (the mechanisation of production). The use of less labour will constrain the production of surplus value in the long run. The squeezing of wages in capitalism generates a tendency to underconsume and overproduce, which, in contemporary economics jargon, is known as a lack of effective demand.5 As a result, the realisation of the surplus value that is produced will also be constrained. As a result of the proportionate decline in surplus value and profits, and the increase in capital, there will be a tendency for the rate of profits to fall.

Marx’s assumption that capitalists are showing an unlimited hunger for profits and for accumulation, i.e., that they invest as much as possible and consume as little as possible, had already been questioned by Veblen in his ref lections on the “leisure class” and of “conspicuous consumption” (Veblen, 1899). Moreover, by stressing that capitalists are ploughing back into their businesses a maximum amount of surplus value, Marx mostly assumed that investment is not (or hardly) affected by expectations for the rate of return. If this expected rate of return is low, will they still invest? How do the investment decisions of capitalists, operating in a competitive economic system, differ from those in monopoly capitalism? To what extent do we have to amend Marx’s model and his main conclusions if the monopolisation of capitalism is considered? Such issues have been analysed and debated among Marxists. In the rest of this chapter, I merely list them, without going into much detail. They will be discussed later in the following chapters.6 In Volume I of Capital, Marx had made an analysis of the capitalist system in terms of his labour theory of value. However, in Volume III, he had to work out a procedure of transforming the labour values of Volume I into the prices of production that would result in a uniform rate of profits across the production sectors. As was hinted at by von Böhm-Bawerk (1890: 389–390) before the publication of Volume III of Marx’s Capital, and as it soon became clear after, Marx’s “transformation” of values into prices of production was rejected by scholars such as von Böhm-Bawerk (1896) and von Bortkiewicz (1907). For many researchers – evidently not for “true Marxists” – this was sufficient to avoid referring to labour values or to Marx’s “law of value”. Moreover, with oligopolistic firms becoming dominant, it was hard to reconcile to a theory of capitalism, especially the “mark-up pricing” behaviour of such companies with equilibrium prices that were the outcome of a competitive process of equalisation of the rate of profits, as implied by Marx’s “prices of production”. Many scholars who wanted to apply Marx’s methods to analyse “monopoly capitalism”, therefore, either rejected the labour theory of value, or simply neglected it. It should not be forgotten that labour values are “underlying” Marx’s prices of production, and are therefore

8 Post-Keynesian neo-Marxism: the trajectory

not observable and not falsifiable, making them an easy target for positivist mockery. The critics of Marx appeared immune to the accusation of being “vulgar economists”. Marx’s theory of exploitation also came under attack. With the apparent invalidation of his labour theory of value, the concept of the exploitation of workers on the factory f loor by extracting surplus labour was also refuted. How would one interpret Marx’s “value of labour power” if the labour theory of value is redundant or even invalid? In addition, wages in Marx’s day might have corresponded to a bare subsistence level, but since then, labour unions have been successfully negotiating wages that often increased in line with labour productivity (see e.g., Wilkinson, 1988). At the macro-level, the share of wages in national income was therefore to an important extent inf luenced by the balance of forces between capital and labour. In addition, as John Maynard Keynes had argued, in contrast to Marx’s views that linked the movement of real wages to that of the unemployed in the “reserve army of labour”, that the real wage rate moved countercyclically over the business cycle. He stated: “The fact that wages tend to be sticky in terms of money, the money-wage being more stable than the real wage, tends to limit the readiness of the wage-unit to fall in terms of money” (Keynes, 1936: 232). He also found that the facts do not support the recently prevailing assumptions as to the relative movements of real wages and output, and are inconsistent with the idea of there being any marked tendency to increasing unit-profit with increasing output. Indeed, (…) the result remains a bit of a miracle. (Keynes, 1936: 409) Kalecki, in turn, argued that the wage share remained roughly constant over business cycles, based on his assumed oligopolistic mark-up pricing: “A rise in the degree of monopoly or in raw material prices in relation to unit wage costs causes a fall of the relative share of wages in the value added” (Kalecki, 1952: 29), with the degree of monopoly and the relative prices of raw materials negatively correlated with increasing and decreasing demand. With the spread of Keynes’s theory of effective demand within the ranks of left-wing economists, it became accepted that the factors determining national income were consumer and investment spending. If total wages are given, this implies that profits are determined by capitalists’ spending. “Workers spend what they get, but capitalists get what they spend”, quipped Michał Kalecki, referring to Marx’s mechanisms for “surplus value realisation”, that were analysed in Volume II of Capital, but had been unduly overlooked by Marxists (with Rosa Luxemburg as an exception). Moreover, profits cannot be increased at the macro-level by squeezing wages: reducing wages as a way of overcoming an economic crisis will reduce effective demand further and deepen the crisis (unless accompanied by a larger increase in capitalist spending). Kalecki had inherited much from Rosa Luxemburg,

Introduction 9

who had emphasised the importance of sufficient “effective demand” for the realisation of the surplus value in her Die Akkumulation des Kapitals: There may (…) be a desire to accumulate in both departments, yet the desire to accumulate plus the technical prerequisites of accumulation is not enough in a capitalist economy of commodity production. A further condition is required to ensure that accumulation can in fact proceed and production expand: the effective demand for commodities must also increase. (Luxemburg, 1913: 131 – My italics) Because this “effective demand” is lacking, there is a problem of the sale of the ever-increasing production, i.e., a contradiction between the growing production capacity and the limited consumption possibilities (a contradiction that was also emphasised by Marx). Finally, Marx’s tendentially falling rate of profits came under attack. In Volume III of Capital, Marx had argued at length that during the process of capitalist development, each individual capitalist’s attempt to reduce labour costs and increase labour productivity would lead to the introduction of labour-saving and capital-using technical innovations. This will allow the capitalist to reap “surplus profits”. However, all capitalist producers are doing the same. As a result, in the economy as a whole, constant capital will be substituted for labour, thus increasing the “organic composition of capital”, which, in turn, will lead to a fall in the general rate of profits. Marx listed several factors counteracting this falling rate of profits, thus transforming it into a tendency. Strikingly, in her Accumulation of Capital, Rosa Luxemburg hardly paid attention to the tendency of the general rate of profits to fall in the long run. In a numerical example, using a Marxian scheme of reproduction and illustrating the effect of the accumulation of capital on the sectoral outputs, she let the composition of capital and the rate of surplus value increase in such a way that the general rate of profits remains constant (Luxemburg, 1913: 337). Further research into the question where and when exactly the ingredients of post-war neo-Marxist economic thinking originated is needed. What we can say is that some of these ingredients are found in the work of Rosa Luxemburg and, as I argued elsewhere, in, for instance, the 1930–1935 economic articles of the Marxist dissenter Henri De Man. Until 1933, De Man was professor at the University of Frankfurt and author of Zur Psychologie des Sozialismus (1926), a book that had caused sensation, but also indignation, among socialists in Europe (Cuyvers, 2015).

Notes 1 In fact, Chamberlin’s book was a completely rewritten version of the doctoral thesis that he submitted at Harvard University in 1925 (Chamberlin, 1933: xi), and his research was unrelated to Sraffa’s 1926 article. 2 See Hilferding (1904) and Luxemburg’s unpublished work, such as Luxemburg (2013).

10 Post-Keynesian neo-Marxism: the trajectory 3 On Dmitriev’s and von Bortkiewicz’s contributions from a historical perspective, see Smith (2017). 4 Sraffa’s notes on von Bortkiewicz were mainly written between January and April 1943. See Sraffa Papers D1.91: 9r–33r that can be consulted at https:// mss-cat.trin.cam.ac.uk/manuscripts/uv/view.php?n=Sraffa.D1.91#?c=0&m= 0&s=0&cv=11&xywh=-218%2C0%2C5351%2C2767 5 John Bellamy Foster rightly pointed out to me in private correspondence the term “underconsumption” is not useful in relation to Marxist analysis unless the Schumpeterian definition is adopted as encompassing effective demand-type theories. Sweezy famously advanced in his The Theory of Capitalist Development (1942) an underconsumptionist analysis but abandoned the term altogether in the 1950s. See the Editors’ remark in Penzner, Magdoff, and Sweezy (2013). 6 For an excellent overview and a deeper discussion of the main issues, I refer to Baran and Sweezy (2012), which is a missing chapter of the authors’ Monopoly Capital (1966).

Bibliography P.A. Baran & P.M. Sweezy (2012). “Some Theoretical Implications”, Monthly Review, 64(3), July–August. E. von Böhm-Bawerk (1890). Capital and Interest – A Critical History of Economical Theory, London – New York: Macmillan. E. von Böhm-Bawerk (1896). “Karl Marx and the Close of His System”, in: P.M. Sweezy (Ed.), Karl Marx and the Close of His System by Eugen von Böhm-Bawerk & Böhm-Bawerk’s Criticism of Marx by Rudolf Hilferding, together with an Appendix consisting of an Article by Ladislaus von Bortkiewicz on the Transformation of Values into Prices of Production in the Marxian System, New York: August M. Kelley, 1949. L. von Bortkiewicz (1904). “On the Correction of Marx’s Fundamental Theoretical Construction in the Third Volume of Capital”, in: P.M. Sweezy (Ed.), Karl Marx and the Close of His System by Eugen von Böhm-Bawerk & Böhm-Bawerk’s Criticism of Marx by Rudolf Hilferding, together with an Appendix consisting of an Article by Ladislaus von Bortkiewicz on the Transformation of Values into Prices of Production in the Marxian System, New York: August M. Kelley, 1949. L. Cuyvers (2015). “Was Henri de Man an Early Post-Keynesian Neo-Marxist?”, Review of Radical Political Economics, 47(1), 90–105. M. Kalecki (1952). The Theory of Economic Dynamics – An Essay on Cyclical and Long Run Changes in Capitalist Economy, London: Allen and Unwin, 1965 (revised second print). J.M. Keynes (1936). The General Theory of Employment, Interest and Money, in: A. Robinson and D. Moggridge (Eds.), The Collected Writings of John Maynard Keynes, Vol. VII, Cambridge: Cambridge University Press for The Royal Economic Society, 1973. R. Luxemburg (1913). The Accumulation of Capital, London: Routledge and Kegan Paul, 1951. J. Penzner, H. Magdoff & P.M. Sweezy (2013). “Capitalism and the Fallacy of Crude Underconsumptionism”, Monthly Review, 64(8), January. T. Veblen (1899). The Theory of the Leisure Class: An Economic Study of Institutions, London: Routledge, 1991. F. Wilkinson (1988). “Where Do We Go from Here? Real Wages, Effective Demand and Economic Development”, Cambridge Journal of Economics, 12(1), March, 179–191.

2

The Oxbridge connection: Sraffa, Kalecki, Steindl

2.1 Piero Sraffa’s notes and publications In 1921, Piero Sraffa (1898–1983), a bright young Italian economics professor and close friend of Antonio Gramsci, founder of the Italian Communist Party, travelled to England, where he met John Maynard Keynes. Back in Italy, he developed his devastating critique of Alfred Marshall’s theory of value and attracted the attention of his peers in Cambridge. He was invited to publish the essentials of this critique in the Economic Journal (Sraffa, 1926) and to become a lecturer at Cambridge University. His article caused a sensation. However, his 1926 paper, with its focus on the implications of the laws of diminishing and increasing returns for Marshallian economic analysis, gave the impulse that led to the analysis of imperfect competition by Joan Robinson (1933) and others. Sraffa himself did not follow this route in his future work. He preferred “keeping to the path of free competition” (Sraffa, 1926: 541) and concentrated on the situation that supported the Classical theory of value. He wrote: “And so, as a simple way of approaching the problem of competitive value, the old and now obsolete theory which makes it dependent on the cost of production alone appears to hold its ground as the best available” (Sraffa, 1926: 541). From 1927 to 1931, from 1942 to 1945, and from 1955 to 1958 he worked on his model, mostly in isolation and without informing his colleagues of his progress. The work finally resulted in the publication of Production of Commodities by Means of Commodities (Sraffa, 1960) – a slender book of barely 99 pages that was hardly accessible for the general reader. His model consists of a system of equations of the input–output type along the lines of Dmitriev (1974) and von Bortkiewicz (1907). He gave his book a subtitle “Prelude to a Critique of Economic Theory”, because it contained a frontal attack of the neoclassical theory of value. And the book did result in the so-called “Capital Controversy” of the 1960s and 1970s (see Harcourt, 1972). Sraffa’s model describes a cost-pricing system, where the price pi of the commodity i produced in the sphere of production i, consists of the cost of the means of production used, plus the wages paid, and the profits on the capital advanced (which, assuming no fixed capital, equals the cost of the DOI: 10.4324/9781003283416-3

12

Post-Keynesian neo-Marxism: the trajectory

used-up means of production).1 The same holds for all n commodities produced. Thus, also assuming that all labour is of uniform quality and receives the same hourly wage rate: pi =

˜a n

1

ji p j

+ w li + r

˜a n

1

ji p j

( j = 1,,n )

with pj being the unit price of commodity j, aji, the means of production j required to produce one unit of commodity i, w, the wage rate, li, the labour time required to produce one unit of commodity i, and r being the uniform rate of profits. In matrix notation and after rearranging, this system of equations is: p = (1 + r )A p + w l with p being the column vector of unit prices, A, the square matrix of the means of production input coefficients, and l being the column vector of labour input coefficients. By choosing w as numéraire in which the prices are expressed, this becomes: p/w = (1 + r ) p/w A + l such that2 p/w = l + (1 + r ) A l + (1 + r )2 A 2 l + (1 + r )3 A 3 l + (1 + r )4 A 4 l + (1 + r )5 A 5 l In other words, each price pi/w is reduced to a sum of “dated quantities of labour” (Sraffa, 1960: 34–35). Only when r = 0 will prices be simple sums of (undated) quantities of labour, i.e., coincide with labour values. It will also be seen that if the rate of profits r changes, the sums of “dated quantities of labour” will also change. Sraffa then constructed a “composite commodity”, which he called a “standard system”, and which consists of the row vector q* of quantities, such that 3 q * = (1 + R ) q* A As will be shown in Part 2, this “standard system” of q’s allows Sraffa to derive the relationship r = R(1 – w ) implying that in such a “standard system”, there exists a linear relationship between w and r, such that when w = 0, r = R, and when r = 0, w = 1. In plain language: when the rate of profits is zero, the “surplus” of the economy which produces q* completely going to wages, and when profits increase, wages fall pari passu.

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The reader would have noticed that Sraffa’s definition of wages as (in part consisting of ) “surplus-wages”, i.e., wages sharing in the surplus of the economy, differs from wages corresponding to a basket of consumer goods that are necessary for the reproduction of the labour power, the way Marx defined the “value of labour power”. Sraffa thus deviates on purpose from the Classical and Marxist concept and is adopting a neo-Marxist wage concept that is determined by the balance of forces between labour and capital.4 What from a Marxist point of view also emerged from Sraffa’s equations, was that competitive prices can be determined without having recourse to the labour theory of value – that, in fact, such a theory was redundant. On the other hand, by reconsidering the circular f low model of the Classical economists and of Marx, Sraffa put the “economic surplus” as a “residual factor”, i.e., output that remains after the production costs are deducted, back at the central position it had in the Classical economists’ “political economy”. Because Sraffa had edited The Works and Correspondence of David Ricardo and because the value measurement rod q*(I – A) p he designed in Sraffa (1960) was clearly his answer to David Ricardo’s quest for an “invariable measure of value”, his work was quickly labelled as “neo-Ricardian”. However, based on his unpublished notes and preparatory documents, I will show in Part 2 that his approach clearly had neo-Marxist characteristics. These notes and documents are part of Sraffa’s archive, that is kept at the Wren Library, Cambridge University, and became available in 1994 for scholarly investigation, although access was initially restricted to some “privileged” researchers. Since September 2016, the Sraffa Papers can be consulted online.5 Again, his unpublished papers created a furore among the interested scholars. When Piero Sraffa came to Cambridge in 1926, he was already adopted by Keynes into his circle of patronage. Sraffa was very discrete about his political beliefs and lived in a somewhat schizophrenic situation. His political sympathies were known, but he did not discuss them. Maurice Dobb, a card-holding member of the British Communist Party, whom Sraffa had met in London during his first visit in 1921–1922 while they both were at the Labour Research Department (Shenk, 2013: 60), was among the very few who knew Sraffa’s close affiliation to the Italian Communist Party (Marcuzzo, 2005: 440). Although belonging to Keynes’s circle, Sraffa was very critical of his patron’s work.6 Naldi (2012: 1408) rightly states: “…Sraffa saw himself belonging to a movement and a network of relations to which other people, close as they might be to him, like Keynes, did not belong or might be considered in opposition”. Sraffa was critical of Keynes’s “new economics” and followed the Classical tradition and Marx: he focused on how the economic surplus originates in the sphere of production and how it is distributed. This clearly put him on a different track from that followed by Michał Kalecki. For many years, he also played an important role in commenting on ongoing research by others (for more details see Part 2), and some way or the other, his personality blended seamlessly into the Cambridge social network. How differently was Kalecki received ten years later!

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Post-Keynesian neo-Marxism: the trajectory

2.2 The Kalecki–Steindl nexus: some biographical data that are relevant to our story Michał Kalecki (1899–1970), a “near-university graduate” (Toporowski, 2013: 17) and a self-educated economist and statistician, had been working as an economic journalist during the late 1920s and early 1930s. Since 1929, he had been employed at the Institute for the Study of Business Cycles and Prices in Warsaw as a consultant on cartels, but he became increasingly interested in the study of the business cycle. As an economic journalist, he also wrote for socialist periodicals. During his years as a student at the Gdansk Engineering College, Kalecki became familiar with the main theses of Marx’s economic theory7 and with the Marxian schemes of reproduction (Kalecki, 1990: 1). But all in all, not much is known about Kalecki’s economic reading before his first publications (Kalecki, 1990: 425).8 Lipin˙ski (1977: 69), for instance, says that: “… before he wrote his first theoretical study, he had read one or two economic works: Tugan-Baranovsky’s well-known history of crises and Hobson’s and Lenin’s studies of monopoly capitalism”. In fact, in Kalecki’s Polish publications of the first half of the 1930s, Marx is quoted only once, in a 1932 paper (Kalecki, 1996: 167).9 And at the time of writing his Essay on the Business Cycle Theory (1933), he appears to have known Luxemburg’s theses only through the debates they generated among Polish left-wing intellectuals.10 In 1932, Kalecki got involved in an argument with the orthodox Marxist Eugen Varga, on the ongoing economic crisis, and the episode throws some light on his position as a Marxist and as a socialist. Whereas Varga defended the then orthodox Communist Party position that capitalist profits could only be restored by reducing wages, Kalecki argued that additional profits could only be made by enhanced capitalist investment (Kalecki, 1990: 432; Toporowski, 2013: 51). Kalecki’s arguments were published in the socialist journal for which he wrote regularly. Osiatyn˙ski stated (Kalecki, 1990: 440): The following general features of the Essay (of 1933 – L.C.) testify to its Marxian background: (i) a macro-economic analytical approach; (ii) the use of Marxian reproduction equations; (iii) the concept of the class nature of the capitalist society, with two major social classes distinguished on the basis of their respective ownership of the means of production; (iv) the idea of fundamental contradictions and instability in the capitalist system. There are also many specific similarities between Kalecki and Marx (…).11 At the end of 1935, Kalecki received a Rockefeller Foundation fellowship that brought him first to Sweden, where he met with Gunnar Myrdal, Bertil Ohlin, and Erik Lindahl. When he received news of the publication of Keynes’s General Theory, he left for England in mid-April 1936. He first

Sraffa, Kalecki, Steindl

15

stayed in London, where he studied Keynes’s theory, attended seminars at the London School of Economics (LSE), and met Abba Lerner, R. G. D. Allen, John Hicks, and Nicholas Kaldor (Kalecki, 1990: 501). He arrived in Cambridge in October 1936, after he had met with Joan Robinson, a meeting on which I will report later. Many in Keynes’s circle had a high regard for Kalecki and did all they could to provide him with a job. Finally, a precursor of the later Department of Applied Economics at Cambridge University, the Cambridge Research Scheme, was set up at the end of 1938, with Kalecki as one of its few full-time employees.12 In the following year, however, this project broke down. There were also doubts by some about the quality of his statistical work. At the end of 1939, Kalecki moved to Oxford where he worked for the Oxford Institute of Statistics. While in London in 1936, Kalecki had made friends with a German refugee, Erwin Rothbarth (1913–1944), who had just graduated from LSE. Rothbarth became fascinated with Kalecki’s approach to the business cycle and attempted to formulate a dynamic theory, which, besides the business cycle, would also include the underlying trend (Kalecki, 1990: 505). When Rothbarth had moved to Cambridge in 1938 to become assistant in statistical research and Kalecki was again in London, they remained in close contact.13 Unfortunately, Rothbarth was killed at the front in Holland in 1944 (Cuyvers, 1983–1984). Toporowski states that Kalecki later developed and used some of the ideas that had emerged from discussions with Rothbarth on studies of the dynamics of the capitalist economy (Kalecki, 1990: 505).14 There can also be little doubt that via Kalecki, Rothbarth’s ideas inf luenced the work of Josef Steindl. Interestingly, Rothbarth was also involved in many discussions with Joan Robinson while she was writing An Essay on Marxian Economics in 1941 (Robinson, 1942: xxiv). In 1941, Josef Steindl (1912–1993) joined Kalecki at the Oxford University Institute of Statistics. Steindl had lost his position at the Austrian Institute for Economic Research in Vienna in 1938, after the German Anschlusz, and he had emigrated to England. In Vienna, the econometrician Gerhard Tintner, an associate of the Institute, had already introduced him to the work of Keynes, and it appears that during his Viennese period, Steindl was already very familiar with the work of Keynes’s immediate circle (Rothschild, 2012). In England, he worked, first, as a lecturer at Balliol College, Oxford (1938–1941), a position that was secured for him by von Mises, Haberler, Hayek, and others of his Alma Mater. In 1941, he became a researcher at the Oxford University Institute of Statistics (1941–1950) (Shapiro, 2000). Here he worked closely with Kalecki, until the latter moved to Montreal in March 1945 to join the International Labour Organisation (Toporowski, 2018: 149). In December 1946, Kalecki moved to New York to become a senior staff member of the United Nations Secretariat (Toporowksi, 2018: 166), where he stayed until December 1954, when he resigned under political pressure in a period of increasing Cold War tensions that also saw the McCarthyist witchhunt in the United States.

16 Post-Keynesian neo-Marxism: the trajectory

Steindl’s magnum opus, Maturity and Stagnation in American Capitalism (1952), was written while at the Institute in Oxford. It was the result of a research project on the Great Depression that had been undertaken at Kalecki’s suggestion. In his Introduction (dated “Summer 1949”), Steindl made it clear that he picked up a theme that he stated was insufficiently dealt with in Sweezy’s Theory of Capitalist Development (Steindl, 1952: vi), at that time and for many years afterwards, a standard text of Marxist economics, and that his “explanation of economic maturity really amounts only to a new form of underconsumption theory” (Steindl, 1952: ix), thus justifying his last chapter on Marx’s theory of accumulation. Like Kalecki, Steindl used a model with a two-way relationship between profits and investment: investment is essential to the “realisation” of profits; realised or expected profits determine investment plans. This creates a growth process that is only disturbed when shocks or “realisation” problems arise (see also Kalecki, 1990: 562–563).

2.3 Capitalist long-run economic development: the views of Kalecki and Steindl in a nutshell Kalecki’s starting point was a consumption function of the capitalists. Consumption by the capitalists consists of a part that is stable, and independent of profits (A), and a part that is a function of past profits: Ct = q Pt − ˆ + A, where Ct is capitalist consumption in period t and Pt−λ is capitalist profits in period t−λ. Because Pt = It + Ct (profits are spent on investment and capitalist consumption), it follows that Pt = It + q Pt−λ + A and that, if It = It−λ = It−2λ = …, Pt =

It + A . 1− q

In this formula, 1−q plays the same role as Keynes’s multiplier in his “income” equation. The consumption and investment from capitalists determine profits. Profits are proportional to investment and A: “capitalists earn what they spend”. Investment decisions Dt−τ in year t−τ can be written as a linear function of savings St−τ (a proxy for corporate savings), of the change in profits, the growth of the capital stock, and a constant factor d that is subject to long-term changes (Kalecki, 1952: 98): P ˘ Dt− = a St− + b + d  − c   t t In this equation,15 there is a positive impact of changes in profits and a negative impact of changes in the capital stock. The reader will notice the

Sraffa, Kalecki, Steindl

17

difference with Marx’s view that capitalists are accumulating as much of the surplus value (profits) as possible. Kalecki (1952: 98) explained the negative K impact of as follows: t Just as an increase in profits within the period considered renders additional investment projects attractive, so an accumulation of capital equipment tends to restrict the boundaries of investment plans. This effect is most easily seen in the case where new enterprises enter the field and thereby render investment plans of the established firms less attractive. (Kalecki, 1952: 98) Investment decisions Dt−τ will result in the investment outlay It in year t.16 Therefore, since Pt is a function of It, investment in year t is a function of investment in previous periods. It follows that investment is self-propelling: investment in year t will result in an increase in profits in year t, which will, in turn, result in higher investment in the next period (Kalecki, 1952: 120). Kalecki then investigated how, on the basis of this investment function, an “automatic business cycle” is generated. Kalecki’s model in the long run, which builds on his pioneering work on business cycle theory, can now be derived. It is easy to prove that, provided short-term profits and national income are considered as linear functions of investments, long-term profits and national income are linear functions of the long-term values of respectively investments and capital stock. It can also be deduced that the secular rate of profits and the secular utilisation rate of capital (represented by the output–capital ratio if the production capacity per unit of capital is constant) are linear functions of the so-called accumulation rate (the ratio of investments/capital stock) (Kalecki, 1962: 150ff.). On representing the trend value of profits, savings, investments, and capital stock by, respectively, P′, S′, I′, and K′, and their actual value in year t by Pt, St, It, and Kt, Kalecki derives equations for the secular rate of profits and the secular degree of capacity utilisation, as follows: P  gI  / K  q = + K 1− m 1− m Y  hI /K  r = + K 1− n 1− n with m > 0, q > 0, n > 0, and r > 0. In a stationary state I′/K′ = 0, which implies that P′/K′ = q/(1 − m) and Y′/K′ = r/(1 − n).17 In his 1962 article, Kalecki argued against Harrod’s growth model where the instability of the long-term growth path results in cyclical f luctuations around the trend. Kalecki showed that the equilibrium rate of accumulation is unstable, and that a slight deviation between the actual growth rate and the equilibrium growth rate will drive the capitalist system towards the

18

Post-Keynesian neo-Marxism: the trajectory

stationary state (Kalecki, 1952: 155; 1962: 146; 1968: 464). For example, a decrease in the rate of accumulation below the equilibrium level, e.g., due to an increase in the share of rentiers’ savings as a result of changes in the composition of the capitalist class will result in a further decrease of the rate of accumulation down to the depreciation level (Kalecki, 1967: 454; 1968: 464). Kalecki wrote: …many authors assume that a uniform trend is an automatic tendency inherent in the capitalist economy. However, the process of uniform growth which emerges from our discussion is based on ‘development factors,’ such as innovations, in the absence of which the capitalist economy would remain static. (Kalecki, 1952: 155) “Development factors” and the intensity of these factors are responsible for long-run growth. Kalecki considered three such factors: technological innovations, population growth, and rentiers’ consumption. An increase in their intensity will lead to a disturbance in the cyclical f luctuations, which would make the boom more pronounced than the slump and will result in a new long-run position with a higher level of investment (Kalecki, 1952: 151). As for the intensity of technology innovations, Kalecki stated that under monopoly capitalism, it will decline, which will, in turn, reduce the rate of accumulation. Due to a fall in the rate of accumulation, the rate of profits and the degree of utilisation of capital will also tend to fall. Of course, an increase in the so-called degree of monopoly can result in a shift from wages to profits, but this would not stop the downward pressure on the rate of profits given the declining intensity of innovations. The underutilisation of capital equipment, however, would increase (Kalecki, 1952: 156). Kalecki gave the following reasons for the decline in the intensity of innovations: The slowing down in the growth of capitalist economies in the later stages of their development is probably accounted for, at least partly, by the decline in the intensity of innovations. Three broad reasons may be given for such a tendency. The most obvious is the diminishing importance of opening up of new sources of raw materials, etc. Another is the hampering of application of new inventions which results from the increasingly monopolistic character of capitalism. Finally, ‘assembly industries’, such as those manufacturing automobiles, wireless, and other durable mass consumption goods, are gaining in importance and in such industries technological progress is largely concentrated on a ‘scientific organization’ of the assembly process which does not involve heavy investment. (Kalecki, 1952: 156)

Sraffa, Kalecki, Steindl

19

A second “development factor” that will tend to slow down economic growth under monopoly capitalism are increased savings by rentiers, in combination with the increasing importance of the rentiers. Such savings outside the firms will be at the expense of what can be invested (Kalecki, 1952: 159). However, rentiers’ savings represent only a small proportion of gross savings (Kalecki, 1968b: 268). A third “development factor” is population growth: it will slow down long-term growth because of the downward pressure it exerts on nominal wages (Kalecki, 1952: 160). Also, as Marx and Rosa Luxemburg did before him, Kalecki rejects the idea that population growth can stimulate investment and economic growth (Kalecki, 1952: 160). Kalecki’s argument means that the factor that supports economic growth in capitalism are innovations and not the “external markets” that Rosa Luxemburg had emphasised (Kalecki, 1967: 456). But since the pace of innovations declines under monopoly capitalism, stagnation can only be avoided by finding export opportunities and/or a massive creation of effective demand using government budget deficits, and these can be seen as another type of “external market”: “It is the export surplus and the budget deficit which enable capitalists to make profits over and above their own purchases of goods and services” (Kalecki, 1952: 52). Rivalry between imperialist powers will lead to massive armaments spending and war (Kalecki, 1952: 52). Armaments spending in monopoly capitalism is to be considered as government spending that, by its nature, is not competing with private investment and, therefore, acceptable to the “captains of industry”. Kalecki concluded: The ‘external markets’ in the broad sense of Rosa Luxemburg in the form of armament orders and ancillary expenditure – insofar as they are financed by loans and taxation of capitalists – play today a leading role in the functioning of modern capitalism. (Kalecki, 1967: 458) So it comes as no surprise that the impact of such armaments spending had Kalecki’s unwavering attention during the 1950s and 1960s.18 Finally, also Kalecki’s analysis of the “political business cycle” should be mentioned. In a brilliant paper that he published in 1943 in the Political Quarterly that has often been quoted and referred to since then, he analysed the opposition of the “captains of industry” to full employment and to government spending to combat unemployment.19 Kalecki predicted: This state of affairs is perhaps symptomatic of the future economic regime of capitalist democracies. In the slump, either under the pressure of the masses, or even without it, public investment financed by borrowing will be undertaken to prevent large-scale unemployment. But if attempts are made to apply this method in order to maintain the high level of

20

Post-Keynesian neo-Marxism: the trajectory

employment reached in the subsequent boom, strong opposition by business leaders is likely to be encountered. (…) lasting full employment is not at all to their liking. The workers would ‘get out of hand’ and the ‘captains of industry’ would be anxious to ‘teach them a lesson’. Moreover, the price increase in the upswing is to the disadvantage of small and big rentiers and makes them ‘boom-tired’. In this situation a powerful alliance is likely to be formed between big business and rentier interests, and they would probably find more than one economist to declare that the situation was manifestly unsound. The pressure of all these forces, and in particular of big business – as a rule inf luential in government departments – would most probably induce the government to return to the orthodox policy of cutting down the budget deficit. A slump would follow in which government spending policy would again come into its own. (Kalecki, 1943: 354–355). During the time that Kalecki was in New York writing his Theory of Economic Dynamics, Steindl was working in Oxford on Maturity and Stagnation in American Capitalism. They had been working together in 1941–1945, but, unfortunately, how exactly they interacted and discussed theoretical issues has remained undocumented. There are, however, obvious similarities between their work. For instance, from the outset, Steindl had stated in Maturity and Stagnation that he considered innovation as an endogenous process and accumulation of capital as self-perpetuating: The growth of capital is (…) viewed as something inherent in the nature of capitalism (…) the concrete hypothesis which explains this: the mere fact that business concerns accumulate savings is sufficient to induce them (after a certain time) to invest. The internal accumulation, by itself, generates investment, and if there has been growth in the past sufficient to enable entrepreneurs to accumulate funds internally, then this will in itself produce a further growth. The growth of capital is in this sense self-perpetuating. (Steindl, 1952: 192–193) Steindl first formulated an investment function in which, apart from the expected profits, the deviation of the actual utilisation rate from the planned or desired utilisation rate is also used as a variable (Steindl, 1952: 127ff.) as well as the actual as compared with a socio-psychologically determined neutral “gearing ratio” (Steindl, 1952: 210ff.). From Steindl’s investment function, a Kaleckian difference equation was derived with investments determined by the level and changes in the level of investments in an earlier period (Kalecki, 1952: 119, 121–122; Steindl, 1952: 200, 216–217). However, what for Kalecki is a business cycle model that works with annual figures is for Steindl a model that aims at explaining the trend and works with moving averages of annual observations. The fact

Sraffa, Kalecki, Steindl

21

that his long-term investment function is essentially a difference equation allowed him to call the long-term growth rate he thus obtained self-sustaining (Steindl, 1952: 112, 193).20 Steindl argued that in the “monopolistic” phase of capitalism, oligopolistic businesses would become more and more risk averse. This risk-aversion would show in an increase in the planned or desired rate of capacity utilisation compared with a competitive regime, in an increasing fear of overcapacity, and in reduced spending on research and development. The result is a falling rate of accumulation, increasing gross margins, and a tendency to stagnate (Steindl, 1952: 131, 132, 137, 245; 1967: 198). Osiatyn˙ski (Kalecki, 1991: 537) rightly remarks: Steindl’s theory differs from Kalecki’s in that the former embodies two important assumptions which are not present in the latter, i.e. that (i) firms wish to establish a planned degree of capacity utilization over a period long enough to embrace both boom and slump, and (ii) if the actual utilization is below the desired level, this deters investment. In Steindl’s view, as in Kalecki’s, government military spending, including R&D for military purposes, had been used in the United States and in Europe to shore up industrial capacity utilisation and had stimulated post-war investment activity, particularly in the 1950s and 1960s (Steindl, 1964; 1967: 199–201; 1979: 9–10). In summary, the models of capitalist development in its monopolistic phase worked out by both Kalecki and Steindl, are based on the premise that investment determines profits. In Marxist jargon: they focus on the surplus value realisation process. Both Kalecki and Steindl avoided referring to Marx’s theory of value and exploitation, which they considered redundant or wrong. 21 Profits are the result of capitalist spending. That’s it! They also stressed that capitalism in its monopolistic phase is working differently from capitalism in Marx’s time. In monopoly capitalism, so they argued, investment tends to stagnate. The reasons given are that the pace of technological innovation and/or the introduction of the innovations will be slower than under competitive conditions, and that entrepreneurs have been becoming very risk averse. With capitalist investment stagnating, capitalist profits will necessarily stagnate as well. However, because under monopolistic conditions, profit margins tend to be higher than under competitive capitalism (the “degree of monopoly”), total income will fall, which will result in underutilisation of production capacity as compared with the competitive phase of capitalism. Since the profits share in income (and therefore the ratio of profits to wages) is dictated by capitalist spending and the “degree of monopoly”, there is no role for a Marxian tendentially falling rate of profits due to the introduction of capital-using technology. Moreover, in monopoly capitalism, organised labour will struggle for higher wages and in this way have an impact on the share of wages and thus on the distribution of income.

22

Post-Keynesian neo-Marxism: the trajectory

Notes 1 In this simple presentation, it is also assumed that there are no joint products. −1 2 This is derived as follows: the solution of the system is p / w = I – (1+ r ) A l (with I a square “identity” matrix with 1’s at the diagonal and 0’s elsewhere) and from the property of the input coefficients aji that summed over i (the spheres of production in which commodity j is used), −1

3 4

5 6

7 8

9 10

2

n 1

a ji < 1  , it can be shown that

[ I – (1+ r )A ] = l + (1 + r )A + (1 + r ) A + (1 + r ) A + (1 + r )4 A 4 + (1 + r )5 A 5 …. The mathematical properties of this system of equations do not concern us here. The reader is referred to Part 2. In fact, Sraffa argued that the actual wages consist of a subsistence part and a surplus part, but that he refrained “in this book from tampering with the traditional wage concept and (…) follow the usual practice of treating the whole of the wage as variable” (Sraffa, 1960: 10). They can be consulted at https://archives.trin.cam.ac.uk/index.php/papersof-piero-sraffa-1898-1983-economist See, e.g., the letter of Sraffa to Tatiana Schucht of 9 September 1931, quoted in Naldi (2012: 1408). See also Paul Baran’s letter to Paul Sweezy of August 30, 1962 in which Baran stated about Sraffa: “… every time I talked to him, he maintained that Keynesianism is the illusion of the epoch rather than Marxism.” (Baran and Foster, 2017: 330 – Baran’s emphasis). For the relationship between Kalecki and Marx, see Kriesler and Halevi (2020). Kalecki’s initiation into Marxist economic theory owes very much to Edward Lipin˙ski (1988–1986), who was also his mentor in the study of the business cycle; see Toporowski (2013: 33ff.). On Lipin˙ski, see Kalecki, Kowalik and Secomski (1969) Osiatynski mentions: “In fact the quotation is after P. J. Dunning, Trades’ Unions and Strikes, London, 1860: 35” (Kalecki, 1996: 519). Osiatynski states: 2

3

˜ 3

Kalecki’s other source of inspiration (for his 1933 Essay – L.C.) was probably the animated contemporary debates about the theory of capital accumulation put forward by Rosa Luxemburg (…). It appears that Kalecki only studied Luxemburg’s The Accumulation of Capital thoroughly after the publication of the Essay. (Kalecki, 1990: 439–440) 11 An important characteristic of Kalecki’s work is that, for most of the time, he wanted to stay out of the discussions among Marxists, as also Lipin˙ski (1977: 70) testifies: “Michal Kalecki made use of Marx’s work, but took good care not to place himself among the Marxist epigones.” 12 On this episode, see Toporowski (2013: Ch. 11, 122–124). 13 No evidence remains of this, however. In 1980, I inquired with Tadeusz Kowalik about some Rothbarth correspondence and notes among those of Kalecki. Professor Kowalik replied that Mrs. Ada Kalecki, Kalecki’s widow, had told him that there were no such papers in the archive (letter by Tadeusz Kowalik of 28 February 1980, private correspondence with the author). Neither had I discovered such papers among those with Mrs. Rintoul, Rothbarth’s widow. By the way, Toporowski (2018: 80) only mentions a letter by Kalecki to Kaldor ( July 1942), asking him to give Rothbarth a copy of his finalised manuscript on profits for the Economic Journal. 14 Kalecki (1952: 126n) mentions Rothbarth’s 1939 lecture to the Economic Society of the LSE as the source of his “incomplete re-investment” factor for the turning point of the business cycle.

Sraffa, Kalecki, Steindl

23

15 This is the simplest expression of the relationship. Kalecki also considers the effect of investment in inventories and of the rate of change of output. 16 For the sake of brevity, I do not follow the distinction that Kalecki makes between investment in fixed capital F and all investment outlays I. 17 In contrast to what the Cambridge equation r = g/sc suggests, Kalecki’s model shows that “simple reproduction” results in a positive rate of profits. 18 See his articles “The Impact of Armaments on the Business Cycle after the Second World War” (1955), “The Economic Situation in the USA, 1956–1961” (1962) and “Economic Aspects of West German Rearmament” (1962), published in Kalecki (1991). 19 Keynes found Kalecki’s paper an “exceedingly good article and very acute” (Kalecki, 1990: 573). 20 In an unfinished and posthumously published paper, Steindl (2005) has endeavoured to reconcile the Kaleckian business cycle model and Keynes’s long-term views on the role of investment in shaping the cycle and the trend in economic activity. 21 In a letter dated March 4, 1952 to Paul Baran, Paul Sweezy writes: “K(alecki) is contemptuous of value theory, of course, and argues that his system is entirely at variance with the Ricardo-Marx system” (Baran and Foster, 2017: 76).

Bibliography N. Baran & J.B. Foster (Eds.) (2017). The Age of Monopoly Capital – Selected Correspondence between Paul A. Baran and Paul M. Sweezy, 1949–1964, New York: Monthly Review Press. L. Cuyvers (1983–1984). “Erwin Rothbarth’s Life and Work”, Journal of Post Keynesian Economics, 6(2), Winter, 305–312. V.K. Dmitriev (1974). Economic Essays on Value, Competition and Utility, Cambridge: Cambridge University Press. G.C. Harcourt (1972). Some Cambridge Controversies in the Theory of Capital, Cambridge: Cambridge University Press. M. Kalecki (1943). “Political Aspects of Full Employment”, in: J. Osiatyn˙ski (Ed.), Collected Works of Michał Kalecki, Volume I: Capitalism – Business Cycles and Full Employment, Oxford: Clarendon Press: 347–356. M. Kalecki (1952). The Theory of Economic Dynamics – An Essay on Cyclical and Long Run Changes in Capitalist Economy, London: Allen and Unwin, 1965 (revised second print). M. Kalecki (1962). “Observations on the Theory of Growth”, Economic Journal, 72(285), March, 134–153. M. Kalecki (1967). “The Problem of Effective Demand with Tugan-Baranovsky and Rosa Luxemburg”, in: J. Osiatyn˙ski (Ed.), Collected Works of Michał Kalecki, Volume II: Capitalism – Economic Dynamics, Oxford: Clarendon Press, 1991: 451–458. M. Kalecki (1968a). “The Marxian Equations of Reproduction and Modern Economics”, in: J. Osiatyn˙ski (Ed.), Collected Works of Michał Kalecki, Volume II: Capitalism – Economic Dynamics, Oxford: Clarendon Press, 1991: 459–466. M. Kalecki (1968b). “Trend and Business Cycles Reconsidered”, Economic Journal, 78(310), June, 263–276. M. Kalecki (1990). Collected Works of Michał Kalecki, Volume I: Capitalism – Business Cycles and Full Employment ( J. Osiatyn˙ski, Ed.), Oxford: Clarendon Press. M. Kalecki (1991). Collected Works of Michał Kalecki, Volume II: Capitalism – Economic Dynamics ( J. Osiatyn˙ski, Ed.), Oxford: Clarendon Press.

24 Post-Keynesian neo-Marxism: the trajectory M. Kalecki (1996). Collected Works of Michał Kalecki, Volume 6: Studies in Applied Economics, 1927–1941 ( J. Osiatyn˙ski, Ed.), Oxford: Clarendon Press. M. Kalecki, T. Kowalik & K. Secomski (1969). “The Economics of Edward Lipin˙ski”, in: J. Osiatyn˙ski (Ed.), Collected Works of Michał Kalecki, Volume 7: Studies in Applied Economics, 1940–1967: Miscellanea, Oxford: Clarendon Press, 1997: 335–373. P. Kriesler & J. Halevi (2020). “Kalecki and Marx Reconnected”, Review of Political Economy, 32(4), 604–614. E. Lipin˙ski (1977). “Michal Kalecki”, Oxford Bulletin of Economics and Statistics, 39(1), February, 69–77. M.C. Marcuzzo (2005). “Piero Sraffa at the University of Cambridge”, European Journal of the History of Economic Thought, 12(3), September, 425–452. N. Naldi (2012). “Two Notes on Piero Sraffa and Antonio Gramsci”, Cambridge Journal of Economics, 36(6), Special Issue: New Perspectives on the Work of Piero Sraffa, November, 1401–1415. J. Robinson (1933). The Economics of Imperfect Competition, London: Macmillan. J. Robinson (1942). An Essay on Marxian Economics, London: Macmillan, 1967 (2nd ed.). K.W. Rothschild (2012). “Roots – Ref lections on Josef Steindl’s First Article in an Economic Journal”, PSL Quarterly Review, 65(261), 117–133. N. Shapiro (2000). “Josef Steindl (1912–1993)”, in: P. Arestis & M.C. Sawyer (Eds.), A Biographical Dictionary of Dissenting Economists, Cheltenham – Northampton: Edward Elgar, 629–635. T. Shenk (2013). Maurice Dobb: Political Economist, Houndmills, Basingstoke: Palgrave Macmillan. P. Sraffa (1926). “The Laws of Returns under Competitive Conditions”, Economic Journal, 36(144), December, 535–550. P. Sraffa (1960). Production of Commodities by Means of Commodities – Prelude to a Critique of Economic Theory, Cambridge: Cambridge University Press. J. Steindl (1952). Maturity and Stagnation in American Capitalism, Oxford: Basil Blackwell. J. Steindl (1964). “On Maturity in Capitalist Economies”, in: Problems of Economic Dynamics and Planning: Essays in Honour of Michal Kalecki, Warszawa: PWN-Polish Scientific Publishers. J. Steindl (1967). “Capitalism, Science and Technology”, in: C.H. Feinstein (Ed.), Socialism, Capitalism and Economic Growth – Essays presented to Maurice Dobb, Cambridge: Cambridge University Press, 198–205. J. Steindl (1979). “Stagnation Theory and Stagnation Policy”, Cambridge Journal of Economics, 3(1), March, 1–14. J. Steindl (2005). “Trend and Cycle”, in: T. Mott & N. Shapiro (Eds.), Rethinking Capitalist Development – Essays on the Economics of Josef Steindl, London-New York: Routledge, 140–148. J. Toporowski (2013). Michał Kalecki: An Intellectual Biography. 1, Rendezvous in Cambridge 1899–1939, Houndmills, Basingstoke: Palgrave Macmillan. J. Toporowski (2018). Michał Kalecki: An Intellectual Biography. 2, By Intellect Alone, 1939–1970, Houndmills, Basingstoke: Palgrave Macmillan.

3

The other side of the Atlantic

By 1946, the year Kalecki took up his job at the United Nations, a generation of left-wing economists that had been working for the U.S. Government during the New Deal, and/or had been involved in the war against fascism and Japan, had become increasingly involved with Marxism. One of the factors that contributed to this evolution was the publication of The Theory of Capitalist Development by Paul M. Sweezy (1910–2004) in 1942. Sweezy’s conversion to Marxism had been the result of the rapidly changing political climate in the United States during the second half of the 1930s. Sweezy’s first exposure to Marxist ideas came in 1932–1933 when he was a visiting graduate student at the London School of Economics (LSE). During school breaks, he also studied in Vienna. At the LSE, he attended lectures by Harold Laski, the inf luential socialist political scientist and economist. He was deeply affected by how the economic situation in the United Kingdom evolved and he became acquainted with some of the left-wing Keynesians in Cambridge, among whom was Joan Robinson (Foster, 2004).1, 2 Sweezy was greatly inf luenced by Keynes’s General Theory, particularly in relation to Roosevelt’s New Deal. On his return to the United States in 1933, he took up an academic position at Harvard University, where he collaborated closely with Joseph Schumpeter. In 1935, he met Nicholas Kaldor who had obtained a Rockefeller Scholarship and visited Harvard (Targetti, 2000: 344). Although Sweezy would later say that he returned to the United States as a “convinced but very ignorant Marxist”, Howard and King (1992: 110) came to the conclusion that “Nothing Sweezy published in the 1930s (…) marked him out as anything other than a very competent and original Keynesian”. From 1936 onwards, he lectured at Harvard on the “Economics of Socialism”.3 This course consisted of two parts: a first part dealt with the economic structure and working of socialist societies, the second part was devoted to socialist economic theories. During this period, Sweezy became “a selfeducated Marxist” (Savran, Tonak, and Sweezy, 1987: 2). Starting from his lecture notes, he finally produced his classic The Theory of Capitalist Development (1942).4 DOI: 10.4324/9781003283416-4

26

Post-Keynesian neo-Marxism: the trajectory

During the Second World War, Sweezy was first assigned to the Office of Strategic Services (OSS) and in the fall of 1943, he was sent to London to join the Research and Analysis programme of the OSS there. The London branch of the OSS relocated to Paris in the winter of 1944–1945 and then to Wiesbaden in the spring. Later, Sweezy was sent to Berlin, where he had frequent contacts with members of the Strategic Bombing Survey team. One of the members of that team was Paul A. Baran (1909–1964), who was to become his friend and co-author (Baran and Foster, 2017: 22). Sweezy had met Baran for the first time in October 1939, when Baran was a graduate student at Harvard University (Baran and Foster, 2017: 16, 18).5 Baran, born in Ukraine, studied in Moscow and Berlin and had been living in exile after he f led Nazi-Germany in 1933. During the Second World War, he worked first in the Office of Price Administration in Washington and was later sent to Germany to join the Economic Effects Division of the U.S. Strategic Services, working under John Kenneth Galbraith6. There he had, again, frequent contacts with Sweezy. After the war, in 1947, he accepted a position as an economist with the Federal Reserve Bank of New York, and in 1949, he became associate professor at Stanford University. He was promoted to a full professorship in 1951 (Reder, Tarshis, and Smith, 2010). During the 1950s and early 1960s, Paul Baran at Stanford University, “occupied a lonely and uncomfortable position as the only avowedly Marxist professor of economics in the United States” (Howard and King, 1992: 114). So, it comes as no surprise that Baran is among those whom Sweezy thanked in the preface to his Theory of Capitalist Development for “valuable criticisms and suggestions” (Sweezy, 1942: viii). Sweezy’s Theory of Capitalist Development was for many years a classic of Marxist economics (Foster, 2000: 643–644). From a historical perspective, one of its major contributions was that it discussed the views of Rosa Luxemburg, and that Sweezy developed an “underconsumption” theory of longterm stagnation, in combination with an explanation of cyclical crisis as the result of overaccumulation (Howard and King, 1992: 111).7

3.1 Inf luence of Kalecki’s neo-Marxism on Baran and Sweezy: evidence from the Baran−Sweezy correspondence Paul Baran published The Political Economy of Growth in 1957. The book was clearly inf luenced by Kalecki’s ideas on the capitalist profits realisation mechanism. But initially, it was Sweezy who was in contact with Kalecki. Toporowski (2016: 47) has hinted at Kalecki’s inf luence on Sweezy as follows: Sweezy finally got to know the work of Kalecki when the latter arrived in New York at the end of 1946 to take up work at the United Nations. The two men met regularly through the nine years while Kalecki was

The other side of the Atlantic

27

in New York. The inf luence of their discussions on Baran and Sweezy is obvious. Baran’s book, published in 1957, cites Kalecki and Steindl, in an analysis that recognizes the role of investment in the realization of profit. In his introduction, Baran mentioned Kalecki, along with Charles Bettelheim, Maurice Dobb, Leo Huberman, Oskar Lange, and Joan Robinson, as “friends” who had discussed key ideas in the book with their author, and read all or parts of the manuscript.8 Paul Sweezy’s immersion in Kaleckian economics took place while reading the manuscript of The Theory of Economic Dynamics that Kalecki had handed him in January 1951. Sweezy wrote to Paul Baran, on 20 January 1951: Had dinner with K [Michał Kalecki] in NY Friday night. He’s relatively cheerful. Gave me the ms. of his book, which I agreed to read in the next week or so. I hope I can understand it. I must say that my ability to concentrate on and understand theoretical economics has sadly declined in the last few years. But maybe K will be an exception.9 Nine days later, he reported on his reading: I’ve been reading Kalecki’s ms. It is brilliant alright but has an air of paradox -- of not being related to any previous theoretical tradition -which will certainly make it unpopular with both sides. I wish he would make the effort to square his theory with the classical-Marxist tradition: I think, though I’m not sure, that it could be done.10 Clearly, at that moment, Sweezy was not yet considering Kalecki’s theory as relevant for a neo-Marxist theory of monopoly capitalism. From Baran’s correspondence, we also learn that Baran met with Kalecki regularly during the autumn of 1951, when Baran was in New York waiting for a passport to travel to Europe (in the end, the passport was refused). In a letter to his friend Oskar Lange, dated 11 January 1952,11 he wrote: While in N.Y. I have seen Kalecki quite frequently. (…) These days it is a major relief to talk to him and to Paul (Sweezy – L.C.) – there is hardly anyone left to talk to….12 From the correspondence between Baran and Sweezy, we learn that they were both reading Kalecki’s manuscript of The Theory of Economic Dynamics (Baran and Foster, 2017: 72–73). Sweezy wrote on 4 March 1952 to Baran again, mentioning his disappointment that Kalecki did not link his analysis to Marxist theory (to which he had already alluded more than a year earlier, in his letter of 29 January 1951 to Baran). But, reading between the lines, we can say that at this stage, Sweezy had come to realise the importance of Kalecki’s insights for developing a neo-Marxist theory of monopoly capitalism:

28 Post-Keynesian neo-Marxism: the trajectory

My fundamental criticism of Kalecki’s ms (as far as I have gone in it (7 chapters)) is not that it leaves the state out but that it fails to make any analytical connections with classical-Marxian theory. K is contemptuous of value theory, of course, and argues that his system is entirely at variance with the Ricardo-Marx system. This seems to me a superficial view. R-M theory is in a sense a special case, but it is a special case which provides the absolutely essential link between the class structure of capitalism and analytical economic theory. Once this link has been firmly established, it is safe to go on, much along Kalecki’s lines, to analyze the actual modus operandi of the system. K’s theory, by the way, provides all the openings that are needed for integrating economic and political factors, it seems to me. I tried to present this line of reasoning to K when I was last in NY, but I did it badly and he wasn’t really listening. He’s a lovely guy, but I find it almost impossible to carry on a real twoway discussion with him. Schumpeter sensed the essential point – which again shows how much above the level of the vulgar economists he was – when he wrote in his obituary on Böhm-Bawerk that “the picture which the theorist paints of the economic process depends in large part on his conception of the value phenomenon” and again that “nearly all of our insight into, and all of our attitude towards, the nature and meaning of capitalism hangs on our view of the meaning and function of interest and profit.” Daher müssen wir stick resolutely to the theory of value and surplus value. This Kalecki doesn’t see at all, in fact brushes it aside as an irrelevancy. (Baran and Foster, 2017: 74). Unfortunately, Baran and Sweezy’s reading of Kalecki’s manuscript came too late to have any impact on the content of The Theory of Economic Dynamics.13 This might be one of the reasons that “he wasn’t really listening. He’s a lovely guy, but I find it almost impossible to carry on a real two-way discussion with him”. Another reason, which evidently does not exclude the first one, might be due to Sweezy’s belief in the Marxist theory of value, whereas Kalecki was “allergic” toward “the law of value” (Cuyvers, 2017: 64). Probably, the work load that Kalecki had to carry at that time could also have been responsible for his apparent lack of openness.14 The McCarthy period made international travelling, for people living in the United States and with left-wing political convictions, very difficult. For instance, Baran was invited to attend the Economic Conference in Moscow in April 1952 but had to decline the invitation, because he could not get a passport. For a long time, it was also uncertain whether he would be able to travel to the United Kingdom in 1952 and 1953. He was finally able to spend some eight weeks in October–November 1953 in Oxford, on an invitation by the Oxford Institute of Statistics, the institute where Kalecki (until 1945) and Steindl (until 1950) had worked.15 His lectures were on “The Political Economy of Growth”, the topic of his forthcoming book (Baran, 1957). He had

The other side of the Atlantic

29

been working on the manuscript for a long time, and it was finalised in late 1955. Initially, the idea was that Blackwell was going to publish the book. It was however rejected on ideological grounds by reviewers (Baran and Foster, 2017: 29). It was finally published in 1957 by Monthly Review Press. During his stay in Oxford, Baran also visited Cambridge, as he had earlier announced to Maurice Dobb.16 I have no evidence of him meeting with Joan Robinson while in Oxford, although such meetings are likely. But there is definitely written evidence of him meeting Sraffa.17 That Baran and Sweezy were eager to link up with their peers at Cambridge, UK, is easy to understand: Kalecki had close contacts with them, and Joan Robinson, in particular, considered her interpretation of Keynes’ work as highly inf luenced by Marx and Kalecki. I cannot but have the feeling that this eagerness to link up was not reciprocated by Robinson. The discussion between Baran and Sweezy on Kalecki and Steindl during the gestation period of The Political Economy of Growth is worth reviewing. In a letter of 17 October 1954, Baran wrote to Sweezy (Baran and Foster, 2017: 115–116) about his planned book: Otherwise I am struggling with my ms, and have finished now the first half. Since the subsequent chapters are pretty well outlined, I ought to finish the whole thing pretty soon now. I have been studying Steindl and Kalecki again, also your exposition of the underconsumption theory, and am still not happy about the whole business. I shall write to you on this matter separately, and will also dispatch to you the chapters involved for such condemnation as they may deserve. Based on the Baran–Sweezy correspondence, it can be deduced that they both considered Steindl’s stagnation thesis of the greatest importance. Because there is hardly written evidence of the intellectual interaction between Baran–Sweezy and Kalecki–Steindl, we have to rely on what is known of their personal contacts during the period 1956–1964. In August 1957, Baran travelled to Moscow and reported back from there that The Political Economy of Growth was well received by many he had met and that he expected a Russian translation.18 On his way back, he had a stop in Warsaw where he met with Kalecki over dinner on 8 September. Sweezy was planning to visit Warsaw and Baran reported to Sweezy that the people he had informed about this visit were very pleased.19 In November–December 1957, Paul Sweezy, in his turn, travelled to Leningrad and Moscow, after which he went to Warsaw – meeting with Kalecki – Belgrade, Rome, Paris, and London. Kalecki again made quite an impression, as is evidenced by a letter by Sweezy: “Kalecki is wonderful, as usual. What a man!”20 While in London, he spent a weekend in mid-December in Cambridge where he met Joan Robinson, Piero Sraffa, and Maurice Dobb.21 In early January 1955, Baran and Sweezy started working on their joint book Monopoly Capital (Baran and Foster, 2017: 35) in which the gist of

30 Post-Keynesian neo-Marxism: the trajectory

Kalecki’s and Steindl’s theory of stagnation was incorporated. Baran met Steindl in Vienna in October 1959, on his return from another trip to Moscow and Warsaw. Writing to Sweezy, he described Steindl as “an exceptionally attractive person, (…) bright, thoughtful and oriented towards relevant problems”. Baran discussed the planned book and reported: “He enthusiastically approves of our general approach, and more specific lines of thought and has made a number of suggestions that looked to me most useful”.22 In the spring of 1962, Baran again travelled to Europe and met with Oskar Lange and Kalecki while in Warsaw. While in Austria, he met with Steindl and Kurt W. Rothschild,23 and he wrote to Sweezy on 12 April 1962 that they approved of what the forthcoming book said about surplus theory and how under monopolist capitalism, all kinds of marketing costs increase production costs (Baran and Foster, 2017: 303): P.S. By the way, Steindl cum Rothschild – both very bright – approve 100% of the surplus theory and in particular of “interpenetration effect.” In August 1963, Sweezy travelled to Europe and once more met in Vienna with Steindl and Rothschild. In a letter to Baran written from Dubrovnik on 19 August 1963, he said about Steindl and Kalecki (Baran and Foster, 2017: 426): Steindl (…) is a difficult person to involve in a conversation, let alone a discussion. Personally, however, I found him quite charming. More than ever, I am for dedicating opus to him and Michał Kalecki as the 2 most important neglected economists of our time. How close Baran and Sweezy were with some of their colleagues in Cambridge, United Kingdom is evidenced by how the Festschrift for Maurice Dobb came into being. It was Baran who in a letter to Eric Hobsbawn, on 25 December 1963, suggested to offer such a book to Dobb, even suggesting Sraffa as editor.24 Unfortunately, Baran died of a heart attack on 26 March 1964. When the Festschrift for Dobb appeared in 1967, it contained Sweezy’s article “Obstacles to Economic Development”. In a footnote, Sweezy explained that the article was a revised version of a paper that he and Baran had planned to write for a symposium in Paris at the invitation of François Perroux, but because of Baran’s untimely death, Sweezy delivered it alone. He wrote: The present essay is a revised version of my response to Perroux’s invitation. I believe that it also expresses Paul Baran’s views and that if he were alive he would have been more than willing to have his name associated as co-author of a contribution in honour of Maurice Dobb for whom he entertained warm feelings of friendship and admiration (Sweezy, 1967: 191)

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It would be interesting to further investigate Sweezy’s contacts with Kalecki, Steindl, or Joan Robinson after the publication of Monopoly Capital. This involves further archival research, which is beyond the scope of the present investigation.25

3.2 Baran and Sweezy’s Monopoly Capital Monopoly Capital is a monumental and multifaceted work, and it is extremely difficult to summarise the arguments and the chains of reasoning Baran and Sweezy used in their work. Bronfenbrenner (1966: 500) wrote: “Because of its stress on monopoly and oligopoly, Monopoly Capitalism (sic) is to Capital what Monopolistic Competition and especially Imperfect Competition were to Marshall’s Principles”. The literature offers several excellent summaries.26 But the present contribution has to concentrate on the arguments that are relevant for the intellectual trajectory that we try to follow (see Cuyvers, 1971; 1972; 1977: 93ff.). One can only wonder whether it is a coincidence that at a time when Piero Sraffa was in the process of rehabilitating the concept of “surplus” as it was used by the Classical economists and by Marx, Paul Baran was trying to turn this concept into an operational tool of analysis within a neo-Marxist theory of monopoly capitalism. Baran described his effort as: “an attempt (…) to submit for renewed consideration an old and simple concept that appears to be quite helpful in thinking about economic and social development” (Baran, 1953: 290). For this purpose, he introduced in his first publication on the subject, a distinction between the “actual” and the “potential” economic surplus (Baran, 1953: 292–293). These concepts were then further elaborated in The Political Economy of Growth (Baran, 1957: 22–23). Baran (1953) made an attempt to adapt the Marxist surplus value concept to the analysis of capitalism in its monopolistic phase. “Actual economic surplus” was defined as “the difference between society’s actual current output and its actual current consumption”, whereas “potential economic surplus” was defined as “the difference between the output that could be produced in a given natural and technological environment with the help of actually employed productive resources and what might be regarded as essential consumption” (Baran, 1953: 292–293; 1957: 132–133). In Monopoly Capital (Baran and Sweezy, 1966), the concept of the potential economic surplus was used, but without considering that part of output wasted under capitalism compared with “a more rationally ordered society” (Baran, 1953: 293–294; 1957: 134). The notion of an economic surplus as used in Baran and Sweezy (1966) derives from two neo-Marxist theoretical considerations. The first is that Marx’s surplus value is the value of what is produced minus the value of labour power. For Marx, the value of labour power can be assumed as “given” from a longer-term perspective and it corresponds to the consumption by the labour force that is socially necessary for its reproduction.

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In a modern capitalist economy and viewed from the neo-Marxist perspective, however, the average wage rate can be reduced in the class struggle between capital and labour, as well as by oligopolistic pricing of goods and services that are consumed by the working class. It is, therefore, not “given” and it cannot be identified with Marx’s value of labour power. The result is that under monopoly capitalism, “essential consumption” rather than average wages determine the economic surplus. The second argument made by Baran and Sweezy is that under conditions of monopoly capitalism, Marx’s “law” of the tendentially falling rate of profits is replaced by a tendency of the economic surplus to increase. From the theoretical and empirical work on the cost discipline of oligopolistic firms, they concluded that this cost discipline is no less severe than that of firms in a competitive environment, and that, as a result, production costs under monopoly capitalism are on a clear downward trend (Baran and Sweezy, 1966: 71). Combined with monopoly prices, this results in higher profits: The whole motivation of cost reduction is to increase profits, and the monopolistic structure of markets enables the corporations to appropriate the lion’s share of the fruits of increasing productivity directly in the form of higher profits. This means that under monopoly capitalism, declining costs imply continuously widening profit margins. (Baran and Sweezy, 1966: 71) Following Kalecki’s reasoning, these widening profit margins create an increasing surplus that needs to be absorbed by increased spending by the capitalist class and/or by spending on unproductive activities. Baran and Sweezy next investigate the possibilities of surplus absorption, including by spending on publicity and on sales effort, and also on armaments and other military spending. In Monopoly Capital, Baran and Sweezy made it clear that their analysis owed a lot to the views of Kalecki and Steindl: … anyone familiar with the work of Kalecki and Steindl will readily recognise that the authors of the present work owe a great deal to them. If we have not quoted them more often or made more direct use of their theoretical formulations, the reason is that for our purposes we have found a different approach and form of presentation more convenient and usable (Baran and Sweezy, 1966: 56).27 Yet, Lebowitz (2004: 55) has argued: “… all these elements were already present in Sweezy’s own work!” The “different approach and form of presentation” that Baran and Sweezy mentioned, was the direct outcome of Baran’s analysis in The Political Economy of Growth (Baran, 1957) about the generation and absorption of the economic

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surplus. In their view, this also allowed them to link their analysis with Marx’s, something Kalecki or Steindl had hardly done. Bleany (1976: 226) states: … it is striking that Baran and Sweezy, who are well acquainted with the literature, can find only two modern writers whom they feel to have made a real contribution to their line of argument – Joseph Steindl and Michał Kalecki – and both of these are significant for questioning the inherently dynamic nature of capitalism rather than for specifically underconsumptionist qualities. Despite this, there are few references in Baran and Sweezy (1966) to the work of Kalecki and Steindl. The acknowledgement I quoted earlier is one such reference. Another reference is to Kalecki’s remark on population as a “development factor”. Kalecki had argued that “(w)hat is important (…) is not an increase in population but an increase in purchasing power” (Kalecki, 1952: 161). This is criticised as “going too far” (Baran and Sweezy, 1966: 90). Steindl’s Maturity and Stagnation in American Capitalism, in turn, is hailed as a “powerful treatise (…) aimed at solving a problem (of the length and depth of the Great Depression – L.C.) which every serious analyst should have considered a standing challenge to his sense of scientific responsibility” (Baran and Sweezy, 1966: 239–240). However, apart from some estimate of the rate of growth of private business capital by Steindl and that in Maturity and Stagnation… he is reproached for not having pointed to symptoms of stagnation before the First World War (Baran and Sweezy, 1966: 228). Steindl is also mentioned (together with “others”) for introducing endogenous investment in his model (Baran and Sweezy, 1966: 88) and for showing that technological progress “tends to determine the form which investment takes at any given time rather than its amount” (Baran and Sweezy, 1966: 97 – italics are by Baran and Sweezy).28 Of course, the inf luence of Kalecki and Steindl on the analysis in Monopoly Capital is much more profound than these few references suggest. Lebowitz (2004: 56) drew attention to the fact that the argument for a rising potential economic surplus goes back to Kalecki’s thesis in The Theory of Economic Dynamics (the manuscript of which Baran and Sweezy had read) that an increase in the degree of monopoly would make the share of profits in national income larger, but that, because the volume of profits is determined by capitalist investment spending, this could lead to a decrease in national income and “retarded growth” (Kalecki, 1952: 61). Lebowitz (2004: 57) also indicated that the “immediate inf luence” on Baran and Sweezy’s concept of potential economic surplus came from Steindl, who in discussing Sweezy’s “underconsumption thesis” as put forward in The Theory of Capitalist Development, remarked (Steindl, 1952: 245): To take account of the realities of the situation the under-consumption theory needs a different re-interpretation. If we think of it, the tendency for the capitalists’ share in the product to increase does, after all, exist

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potentially. It is a consequence of the growth of oligopoly. The expression of this tendency can only be an increase in the gross profit margins. That means that the actual share of net incomes of capitalists need not increase at all. The increased gross profit margins may be compensated by a reduced degree of utilization, so that there is not a shift of actual income from wages to profits, but shift of potential income of workers to wastage in excess capacity. Steindl (1952: 245) continued with an interpretation in Marxian terms: We should have to say that as a consequence of the rise of oligopoly, the rate of surplus value produced tends to increase: the rate of exploitation rises. But as Marx explained, producing surplus value does not necessarily mean realising it, and the realisation depends on the existence of a sufficient market. We should now say that surplus value can be realised only to the extent to which there is a corresponding amount of investment and capitalists’ consumption. If this amount does not increase, then the rise in the rate of surplus value produced will not lead to any increase in surplus value realised, but only to excess capacity. (Steindl’s italics – L.C.) Thus, the difference between the produced and the realised surplus value is “wastage in excess capacity” (Steindl, 1952: 245). Baran (1953, 1957) and Baran and Sweezy (1966) go beyond this, and “generalise” the Steindlian “surplus value wastage”. As was also argued in the bestselling books by John Kenneth Galbraith and Vance Packard, such waste should include the costs of selling and publicity as well as consumption based on artificially created wants. However, it would be wrong to suggest that the potential economic surplus concept came to Baran in a eureka moment while reading Maturity and Stagnation in American Capitalism. The Baran–Sweezy correspondence shows that while Baran was drafting his paper “Economic Progress and Economic Surplus” (Baran, 1953),29 they discussed the issue of including wasted potential output in the potential economic surplus concept. Baran had started working on that paper some time before 1951 (see his letter of 15 July 1951 to Sweezy: Baran and Foster, 2017: 64). From the correspondence, it can also be deduced that at that time they already discussed the issue of unproductive labour and of output wasted in capitalism as compared with “a more rationally ordered society” (Baran, 1953: 293–294; 1957: 134), which is evidently a reference to a socialist society. In a letter to Baran, dated 21 July 1951, Paul Sweezy wrote: The only point I would suggest adding to the “Surplus” study is the way the surplus gets disguised and so to speak dissipated under advanced capitalism. If a proper distinction is made between productive and unproductive workers, the former producing surplus and the latter living off it,

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it will be seen, I am certain, that the surplus of the American economy is vastly greater than statistics of profit plus rent plus interest would indicate. And the potential surplus available to a planned economy is even greater because the unproductive workers could mostly be transferred to productive lines. (Baran and Foster, 2017: 65). This was followed by a letter of 18 August 1951 to Baran. Sweezy was returning Baran’s draft paper, and wrote: My own suspicion is that the potential output of this country, for example, is enormously greater than even the present war-induced expansion would lead one to believe. It could be reached only by cutting out unproductive labor (as well as unproductive consumers) and putting them all into productive pursuits. But when you try to analyze this problem closely you get into all sorts of conceptual and other difficulties. (Incidentally, one reason I expect the USSR to overtake the capitalist countries much sooner than is commonly supposed possible is precisely the fact that they do with very little unproductive labor.) (Baran and Foster, 2017: 65–66) It is not clear whether in 1952 Sweezy, or Baran, had moved away (and if they had, how far away) from the orthodox Marxist labour theory of value. It is interesting to see that Marx’s theory of value is ignored in Baran (1957) and in Baran and Sweezy (1966), and that his theory of surplus value is remodelled and reformulated by Baran’s concepts of actual and potential economic surplus in The Political Economy of Growth. In Baran (1953), Joan Robinson and Paul Sweezy are thanked for their comments and suggestions. It is unclear how and when Joan Robinson got involved, but the dates indicate that already at that stage, Baran was reinterpreting the surplus concept of the Classical economists and Marx.30 It will be remembered from the last section, that on his return from Moscow and Warsaw in October 1959, Baran met Steindl in Vienna. He discussed the planned book Monopoly Capital with him and reported to Sweezy of Steindl’s “enthusiastical approval” of their approach.31 On his next meeting with Steindl in April 1962, he reported to Sweezy that both Steindl and his old friend and colleague at the Österreichisches Institut für Wirtschaftsforschung, Kurt W. Rothschild, “approve 100% of the surplus theory and in particular of ‘interpenetration effect’”.32 Interestingly, in their definition of the potential economic surplus, Baran and Sweezy went beyond the inclusion of the costs of publicity and of the costs related to the production to satisfy “created needs”. Having stressed that sales effort is likely to absorb surplus that would otherwise not be produced (Baran and Sweezy, 1966: 142), other ways of surplus absorption are investigated. Under monopoly capitalism, in contrast to competitive capitalism,

36 Post-Keynesian neo-Marxism: the trajectory

effective demand is not sufficient, which leads to an underutilisation of production capacity. In this situation, government spending can increase effective demand.33 The structure of the monopoly capitalist economy is such that a continually mounting volume of surplus simply could not be absorbed through private channels; if no other outlets were available, it would not be produced at all. What government absorbs is in addition to, not subtracted from, private surplus. (Baran and Sweezy, 1966: 147) Based on U.S. statistics, Baran and Sweezy indicated that whereas the contribution to surplus absorption of non-defence government purchases of goods and services has been negligible, that of transfer payments (especially social security) has been substantial. However, the largest part of the surplus has been absorbed by massive and increasing government defence purchases (Baran and Sweezy, 1966: 152–153). According to Baran and Sweezy, there is a simple explanation: all other government spending, except for that on highways, in some way or the other is in opposition to “the private interests of the oligarchy” (Baran and Sweezy, 1966: 173). In the case of the United States, military spending not only benefits the ruling class, but has become the ultimate raison d’être of the “military-industrial complex”, not in the least for safeguarding and protecting the dominant position of U.S. big-business in the world economy. Without this government spending that allows the surplus absorption, the economy would have plunged into stagnation. It is clear that Baran and Sweezy rejuvenated the Kalecki–Steindl stagnation thesis. Together with Herbert Marcuse’s One-Dimensional Man, Monopoly Capital (dedicated to Che Guevara) soon became a worldwide “must-read” for radical students and intellectuals involved in the student revolts and the anti-war demonstrations in the West, following the Vietnam War, as well as for sympathisers of the worldwide anti-imperialist struggle.34 However, in the economics profession, their arguments were not highly regarded. Even sympathisers such as Ronald Meek said that the theory of Monopoly Capital “is virtually incapable of being disproved, since so many real-world situations can be plausibly claimed to be consistent with it” (Meek, 1967: 115).

Notes 1 Biographies of Paul Sweezy are found in, e.g., Hillard (1985: 401–403), Baran and Foster (2017: 18–35, also including Paul Baran’s biography), Foster (2004), Lebowitz (2004), and in Bellofiore (2019: 72–95). 2 Joan Robinson was member of the “Circus”, the small group of Keynes’s collaborators that discussed his Treatise on Money and contributed to the transition to his General Theory between 1931 and 1935. The likelihood of Robinson’s inf luence on Sweezy is more likely during his time in London in 1943–1944. 3 Foster (2004: 10) and Lebowitz (2004: 43) have dated this to 1938, but Sweezy was an assistant professor for the course in the 1936–1938 period.

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4 The writing of the book “started more or less as an effort of self-clarification” (Savran, Tonak, and Sweezy, 1987: 2). Howard and King (1992: 111) have called The Theory of Capitalist Development: “even today one of the best introductions to Marx’s own economic thought, and also contains the most comprehensive survey in the English language of Marxian crisis theories up to the 1930s”. 5 Baran had received a doctorate in Berlin and supplemented this with an MA in economics at Harvard University. 6 Baran was a colourful and unconventional figure of which Galbraith testifies in his autobiography Galbraith (1981: 219–224). 7 In the same year, Joan Robinson published her Essay on Marxian Economics in which she also argued that Marx was thinking about further developing an underconsumption theory. See Robinson (1942: 68–69). As mentioned in Chapter 1, Sweezy abandoned the term “underconsumption” altogether in the 1950s. See the editors’ remark in Penzner, Magdoff, and Sweezy (2013). I am grateful to John Bellamy Foster for bringing this to my notice. 8 In the preface of Baran and Sweezy (1966), there are no acknowledgements. 9 This letter is in the Baran and Sweezy correspondence, February 1949 through May 1951, that can be consulted at: https://monthlyreviewarchives.org/index. php/baran-sweezy/article/view/1949-02_1951–05/7229 and at https://stacks. stanford.edu/file/druid:km151hd0812/SC1234_1949-02_to_1951–05.pdf 10 This letter can be consulted at https://stacks.stanford.edu/file/druid: km151hd0812/SC1234_1949-02_to_1951–05.pdf. The exchange of manuscripts is reciprocal. On 25 May 1952, Sweezy wrote to Baran that he will give a manuscript he wrote to Kalecki for comments. The letter can be consulted at: https:// monthlyreviewarchives.org/index.php/baran-sweezy/article/view/195201_1952–06/7227 and at https://stacks.stanford.edu/file/druid:km151hd0812/ SC1234_1952-01_to_1952–06.pdf 11 The letter can be consulted at: https://stacks.stanford.edu/file/druid: vm474kf4548/PAB-General_Correspondence.pdf 12 Baran is evidently referring to the McCarthyist witch-hunt. 13 In the foreword dated February 1952, they are not mentioned. Two collaborators are thanked but not for any contribution to the theoretical content. 14 The manuscript of Kalecki’s Theory of Economic Dynamics was not ready by October 1951, when it was due. The main part of the book, but without preface and statistical appendix was delivered to the publisher in February 1952. At the end of March, Kalecki had to renegotiate the royalties. The book was finally published in February 1954 (Toporowski, 2018: 185–186). 15 Baran’s correspondence with Frank Burchardt of the Oxford Institute of Statistics makes it very clear that he hoped to find an academic position outside the United States. See Paul Alexander Baran Papers (SC1234). Dept. of Special Collections and University Archives, Stanford University Libraries, Stanford, Calif.: Additional Papers Accession ARCH_2017_292/Box 1, Folder 11 Oxford trip 1953e. I am grateful to Stanford University Archives for providing this file. 16 See the correspondence between Baran and Dobb that can be accessed at https:// stacks.stanford.edu/file/druid:vm474kf4548/PAB-Dobb.pdf 17 See Sraffa’s 1953–54 pocket diary that shows a meeting on 16 and 29 October 1953: https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view.php?n=Sraffa. E26#?c=0&m=0&s=0&cv=33&xywh=-458%2C-1%2C4426%2C2480 18 Letter of 29 August 1957 by Paul Baran to Paul Sweezy, see Baran-Sweezy Archives at: https://monthlyreviewarchives.org/index.php/baran-sweezy/article/ view/1957–08_1957-12/7215 and at https://stacks.stanford.edu/file/druid: km151hd0812/SC1234_1957–08_to_1957-12.pdf 19 Letter of 8 September 1957 by Paul Baran to Paul Sweezy, see Baran-Sweezy Archives at: https://monthlyreviewarchives.org/index.php/baran-sweezy/

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20

21

22

23 24

25

26 27 28

29 30

article/view/1957–08_1957-12/7215 and at https://stacks.stanford.edu/file/druid: km151hd0812/SC1234_1957–08_to_1957-12.pdf Letter by Paul Sweezy to Paul Baran of 16 November 1957, that can be consulted in the Baran-Sweezy Archives at: https://monthlyreviewarchives.org/index. php/baran-sweezy/article/view/1957–08_1957-12/7215 and at https://stacks. stanford.edu/file/druid:km151hd0812/SC1234_1957–08_to_1957-12.pdf Letter by Paul Sweezy to Paul Baran of 16 December 1957, that can be consulted in the Baran-Sweezy Archives at: https://monthlyreviewarchives.org/index. php/baran-sweezy/article/view/1957–08_1957-12/7215 and at https://stacks. stanford.edu/file/druid:km151hd0812/SC1234_1957–08_to_1957-12.pdf. The sentence continues: “Nicky [Kaldor], fortunately, I think, was away”, which probably refers to the disagreements about some of the main theses of Baran’s Political Economy of Growth and the largely unsympathetic review of the book by Kaldor in the American Economic Review (Kaldor, 1958). Letter by Paul Baran to Paul Sweezy of 6 October 1959, in the Baran-Sweezy Archives at: https://monthlyreviewarchives.org/index.php/baran-sweezy/article/ view/1959-04_1959-12/7210 and at: https://stacks.stanford.edu/file/druid: km151hd0812/SC1234_1959-04_to_1959-12.pdf Kurt W. Rothschild was Steindl’s colleague at the Österreichisches Institut für Wirtschaftsforschung. See https://stacks.stanford.edu/file/druid:vm474kf4548/Dobb_FestschriftMarglin-Response.pdf. On the Festschrift Shenk (2013: 182) writes: “Sraffa, whose perpetual writer’s block made submitting an article impossible, helped with the editing”. Joan Robinson’s correspondence comprises two letters by Paul Sweezy, respectively on her “Conference Sketch Book” and on Charles Bettelheim’s “Revolution Culturelle”. See: GBR/0272/JVR - The Papers of Professor Joan Violet Robinson, Cambridge University: King’s College Archive Centre, that can be consulted at: https://discovery.nationalarchives.gov.uk/details/r/c4286d0a96bb-4ef5–9650-be1b81078b5c. There is no trace of correspondence among Paul Baran, Joan Robinson, and Josef Steindl. The correspondence between Sweezy and Steindl, as available in the Steindl archive, Universitätsbibliothek der Wirtschaftsuniversität Wien, is digitised by the WU University Library. URL: https://viewer. wu.ac.at/viewer/josefsteindl/. The correspondence consists of eight letters, seven of which are by Sweezy. This correspondence relates to the reprint of Maturity and Stagnation... and to Sweezy’s requests for articles for Monthly Review. Unfortunately, the letters cannot be consulted online. I am grateful to Universitätsbibliothek der Wirtschaftsuniversität Wien for making this correspondence available. See e.g., Bleaney (1976: 225ff.), Lebowitz (2004: 57ff.), Howard and King (1992: 117ff.). On this inf luence, see also, e.g., Osiatyn˙ski in Kalecki (1991: 563–566) and Foster (2014: 110ff.). They criticise Steindl for having formulated this “as a general proposition applicable to all stages of capitalism” (Baran and Sweezy, 1966: 97n). Interestingly, Steindl revised his earlier view and argued in Steindl (1964: 430–431) that innovations generate higher profit expectations that in turn give rise to additional investment. Baran intended to send the paper to the American Economic Review, but he finally had it published in Science & Society in 1953. In his Introduction to Baran (1957), Sutcliff reproaches Baran to have no theory of exploitation (Baran and Sweezy, 1957: 90). Baran (1957: 132n) clarified the difference of his “actual economic surplus” with Marx’s surplus concept and Baran and Sweezy (1966: 11n) indicated why they use “surplus” instead of “surplus value”. In fact, Baran’s untimely death in March 1964 prevented the inclusion in Monopoly Capital of a chapter linking the surplus concepts to Marx’s

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32

33

34

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theory of value. In an interview, John Bellamy Foster stated: “They were simply extending the value analysis to take on new questions related to the monopoly stage” (Feldman and Foster, 2015). Letter by Paul Baran to Paul Sweezy of 6 October 1959, in the Baran Sweezy Archives at: https://monthlyreviewarchives.org/index.php/baran-sweezy/ article/view/1959-04_1959-12/7210 and at https://stacks.stanford.edu/file/druid: km151hd0812/SC1234_1959-04_to_1959-12.pdf What Baran and Sweezy called the “interpenetration effect” refers to the condition “in which the sales and production efforts interpenetrate to such an extent as to become virtually indistinguishable”, which “entails a profound change in what constitutes socially necessary costs of production as well as in the nature of the social product itself ” (Baran and Sweezy, 1966: 131). As the reader will notice, this argument differs from that of the Keynesians and Kalecki, who only regard a government budget deficit as exercising an expansionary effect on the economy. Baran and Sweezy, however, argued that “government can create additional demand even with a balanced budget” (Baran and Sweezy, 1966: 144). Howard and King (1992: 123) seem to have a different opinion, stating that Monopoly Capital had little inf luence in Western Europe. This is probably true as far as academic inf luence is concerned. As to its inf luence among left-wing intellectuals, based on personal experience, I am of a different opinion.

Bibliography P.A. Baran (1953). “Economic Progress and Economic Surplus”, Science & Society, 17(4), Fall, 289–317. P.A. Baran (1957). The Political Economy of Growth, Harmondsworth: Penguin Books, 1973. P.A. Baran & P.M. Sweezy (1966). Monopoly Capital, New York: Monthly Review Press. N. Baran & J.B. Foster (Eds.) (2017). The Age of Monopoly Capital – Selected Correspondence between Paul A. Baran and Paul M. Sweezy, 1949–1964, New York: Monthly Review Press. R. Bellofiore (2019). “Between Schumpeter and Keynes: The Heterodoxy of Paul Marlor Sweezy and the Orthodoxy of Paul Mattick”, Continental Thought & Theory, 1(4), 72–111. M.F. Bleany (1976). Underconsumption Theories: A History and Critical Analysis, New York: International Publishers. M. Bronfenbrenner (1966). “Monopoly Capitalism: A Revised Revisionism”, Journal of Political Economy, 74(5), October, 500–505. L. Cuyvers (1971). “Beschouwingen bij een theorie van het ekonomisch surplus”, Vlaams Marxistisch Tijdschrift, 6(2), June, 74–92. L. Cuyvers (1972). “ De verspilling van het potentieel economisch surplus: een kwantitatieve analyse”, Tijdschrift voor Sociale Wetenschappen, 17(1), 51–78. L. Cuyvers (1977). Marxistische en Neo-Marxistische kenmerken en invloeden in de groeitheorie van Joan Robinson, Antwerp: Antwerp University, Ph.D. thesis. (DOI: 10.13140/RG.2.2.20055.50081). L. Cuyvers (2017). The Economic Ideas of Marx’s Capital – Steps Towards Post-Keynesian Economics, London – New York: Routledge. B. Feldman & J.B. Foster (2015). “Baran and Sweezy’s Monopoly Capital, Then and Now – An Interview with John Bellamy Foster”, Monthly Review, 67(6), November.

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J.B. Foster (2000). “Paul Marlor SWEEZY (born 1910)”, in: P. Arestis & M.C. Sawyer (Eds.), A Biographical Dictionary of Dissenting Economists, Cheltenham – Northampton: Edward Elgar, 642–651. J.B. Foster (2004). “The Commitment of an Intellectual: Paul M. Sweezy (1910– 2004)”, Monthly Review, 56(5), October, 5–39. J.B. Foster (2014). “Polish Marxian Political Economy and US Monopoly Capital Theory: The Inf luence of Luxemburg, Kalecki and Lange on Baran and Sweezy and Monthly Review”, in: R. Bellofiore, E. Karwowski & J. Toporowski (Eds.), The Legacy of Rosa Luxemburg, Oskar Lange and Michał Kalecki, Volume 1 of Essays in Honour of Tadeusz Kowalik, Houndmills, Basingstoke: Macmillan, 104–121. J.K. Galbraith (1981). A Life in Our Times – Memoirs, Boston: Houghton Miff lin. M. Hillard (1985). “Harry Magdoff and Paul Sweezy: Biographical Notes”, in: S. Resnick & R. Wolff (Eds.), Rethinking Marxism – Struggles in Marxist Theory – Essays for Harry Magdoff & Paul Sweezy, Brooklyn: Automedia, 397–404. M.C. Howard & J.E. King (1992). A History of Marxian Economics, 1929–1990, 2, London: Macmillan. N. Kaldor (1958). “The Political Economy of Growth by Paul A. Baran”, American Economic Review, 48(1), March, 164–170. M. Kalecki (1952). The Theory of Economic Dynamics – An Essay on Cyclical and Long Run Changes in Capitalist Economy, London: Allen and Unwin, 1965 (revised second print). M. Kalecki (1991). Collected Works of Michał Kalecki, Volume II: Capitalism – Economic Dynamics ( J. Osiatyn˙ski, Ed.), Oxford: Clarendon Press. M.A. Lebowitz (2004). “Paul M. Sweezy”, Monthly Review, 56(5), October, 40–68. R.L. Meek (1967). “Monopoly Capital. An Essay on the American Economic and Social Order. by P. A. Baran and P. M. Sweezy”, Economic Journal, 77(305), March, 114–116. J. Penzner, H. Magdoff & P.M. Sweezy (2013). “Capitalism and the Fallacy of Crude Underconsumptionism”, Monthly Review, 64(8), January. M. Reder, L. Tarshis & T. Smith (2010). Memorial Resolution: Paul A Baran, https:// stacks.stanford.edu/f ile/druid:mh305vq8502/SC0193_MemorialResolution_ BaranP.pdf S. Savran, E.A. Tonak & P.M. Sweezy (1987). “Interview with Paul M. Sweezy”, Monthly Review, 38(11), April, 1–28. T. Shenk (2013). Maurice Dobb: Political Economist, Houndmills, Basingstoke: Palgrave Macmillan. J. Steindl (1952). Maturity and Stagnation in American Capitalism, Oxford: Basil Blackwell. J. Steindl (1964). “On Maturity in Capitalist Economies”, in: Problems of Economic Dynamics and Planning: Essays in Honour of Michał Kalecki, Warszawa: PWN-Polish Scientific Publishers. P.M. Sweezy (1942). The Theory of Capitalist Development, London: Dennis Dobson, 1946. P.M. Sweezy (1967). “Obstacles to Economic Development”, in: C.H. Feinstein (Ed.), Socialism, Capitalism and Economic Growth – Essays presented to Maurice Dobb. Cambridge: Cambridge University Press, 191–197. F. Targetti (2000). “Nicholas Kaldor (1908–1986)”, in: P. Arestis & M.C. Sawyer (Eds.), A Biographical Dictionary of Dissenting Economists, Cheltenham-Northampton: Edward Elgar, 343–352. J. Toporowski (2018). Michał Kalecki: An Intellectual Biography. 2, By Intellect Alone, 1939–1970, Houndmills, Basingstoke: Palgrave Macmillan.

4

Piero Sraffa and Joan Robinson: two directions of post-Keynesian neo-Marxism

In Parts 2 and 3 of this volume, I intend to show that Piero Sraffa’s work, as well as a good deal of Joan Robinson’s, should be considered as belonging to the post-Keynesian neo-Marxist current in economic thought of which I indicated the line of descent in the previous chapters. Whereas Joan Robinson’s theory of economic growth is from Kaleckian descent, Sraffa’s neo-Marxism, although containing many neo-Marxist characteristics, seems to be on a different track. Sraffa’s writings do not refer to Kalecki, while Kalecki’s studies refer to Sraffa (1926) only occasionally. Yet, they became personally close when Kalecki was in Cambridge, not in the least because they shared a political vision.

4.1 Sraffa’s way: picking up the thread where it was left by Ricardo and Marx Sraffa’s 1926 Economic Journal contained a devastating attack on Marshall’s theory of value and set in motion theoretical thinking about monopolistic competition. In 1930, he was assigned the task of editing and publishing the collected writings of David Ricardo, of which the eleventh and last volume was published in 1966. Until 1960, only a few close friends, such as Maurice Dobb, had an idea along which lines Sraffa was working. With the publication of his Production of Commodities by Means of Commodities in 1960 (Sraffa, 1960), it appeared that he had wrought another devastating attack on mainstream neoclassical economy theory, re-inventing and adopting the circular f low and surplus approach of the Classical economists and reformulating their theory of value. Sraffa’s notes of 1927–1931 show how he struggled to translate the essentials of this circular f low theory in mathematical equations. In line with von Bortkiewicz (1907), but independently from the pioneering work by von Neumann (1945–1946),1 Sraffa’s price equations became a system of homogeneous linear equations of the input–output type, with the unknown prices on both the left-hand and the right-hand side of the equations, and with the system of equations either closed by the given wage rate or the given rate of profits.

DOI: 10.4324/9781003283416-5

42 Post-Keynesian neo-Marxism: the trajectory

In his reformulation of the Classical approach, he departed radically from it by replacing its considering of the cost of labour as a bundle of necessities, by the concept of surplus-wages, thus (mostly implicitly) introducing the class struggle over the division of income and the balance of forces between capital and labour as determining forces of the wage rate. The use of this concept of surplus-wages is a post-Keynesian neo-Marxist characteristic, which should not be considered in isolation of the other neo-Marxist characteristics in his writings. Because of its critique of the neoclassical theory, leading to the “capital controversy”, Production of Commodities by Means of Commodities inspired many followers in the academic world, not the least inf luenced by post-Keynesian authorities like Joan Robinson, Luigi Pasinetti, Pierangelo Garegnani, Geoffrey Harcourt, and many others. “Sraffian” neo-Marxism is different from “Kaleckian” neo-Marxism. Sraffa laid the foundations for a neo-Marxist theory of value as clearly linked to the circular f low approach of value and distribution of the Classical economists and of Marx. It builds on David Ricardo. The approach adopted in Sraffa (1960) implicitly showed that Marx’s labour values of Volume I of Capital were redundant in a surplus-based theory of value. When Sraffa’s archive became available for scholarly research, his unpublished notes revealed many other neo-Marxist traits. More on this in Part 2. Both Sraffa and Kalecki started with a two-class model of society, populated with capitalists and workers. However, whereas the former investigated how the price system is intimately connected to how the economic surplus in a capitalist society is distributed, the latter focused on how the economic surplus in a capitalist society emerges as realised by the “effective demand” of the capitalist class and the government. While in Cambridge, Kalecki belonged to the group of left-wing economists, together with Maurice Dobb, Piero Sraffa, Joan Robinson, and Nicholas Kaldor. Although Sraffa’s 1926 article (Sraffa, 1926) seems to have inf luenced Kalecki’s work on investment, risk, and market imperfection (Sardoni, 1984),2 there is no evidence of any inf luence of Kalecki on Sraffa’s work. The reason for this apparent lack in theoretical communication between otherwise politically and ideologically close intellectuals is simple: while Sraffa submerged himself in the works and correspondence of David Ricardo and attempted to make head or tail of the theories of value of William Petty, the Classical economists and Karl Marx – a subject far from the daily concerns of most other economists during the Great Depression – Kalecki’s theoretical developments had no bearing whatsoever with value theory (in fact, Kalecki resisted the “law of value” and considered that capitalism had changed profoundly since Marx’s time). Moreover, as will be elaborated later in this book, Sraffa was highly reluctant to give his peers any insight into his theoretical work and mostly limited himself, when asked, to criticise the work of the others. Sraffa’s archive contains one letter by Kalecki, dated 15 March 1945, and on stationery belonging to the University of Oxford Institute of Statistics,

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announcing his appointment at the International Labour Office and his upcoming move to Montreal, together with the draft text for a telegram on 20 April 1970, to Ada Kalecki, with condolences on the death of her husband.3 Also any correspondence between Sraffa and Paul Baran and/or Paul Sweezy is lacking.4 In spite of this lack, the correspondence between Baran and Sweezy shows how they came to accept Sraffa’s “surplus-wages” while discussing and drafting Monopoly Capital.5 If Sraffa’s neo-Marxism is not Kaleckian, can it be regarded as postKeynesian? How can Sraffa’s model with prices depending on income distribution and technology be reconciled with the full-cost pricing depending on the degree of monopoly of post-Keynesians? Joan Robinson in person made the following plea for integrating Sraffa and Kalecki: “With the light that Sraffa has thrown on the theory of value and Kalecki on the process of realisation of the surplus, we can develop a complete system (…) of intelligible Marxism…” (Robinson, 1979b: 253 – her italics). Jan Kregel, in turn, suggested to attempt an integration of monetary theory of the General Theory with Sraffa’s theory of prices and production (Kregel, 1991: 81). An interesting approach is that adopted by nobody less than Luigi Pasinetti, an all-round “first generation” post-Keynesian economist, who has attempted to reconcile the labour theory of value and Sraffa’s model when using vertically integrated industries (Pasinetti, 1988). Roncaglia (1995) has reported that the compatibility of the Keynesian and Sraffian approaches have been lively debated and their “conceptual compatibility” investigated, at successive meetings of the Trieste International Summer School in Advanced Economic Studies. He argued that in Sraffa’s model, outputs are assumed to be corresponding to a “normal” degree of utilisation of existing productive capacity (Roncaglia, 1995: 114). Yet, this integration requires that Sraffa’s analysis of relative prices and their relationship with income distribution should not contradict basic elements of the Keynesian paradigm such as the instability of capitalist economies, the possibility of persistent unemployment, and the relevance of ‘short period’ events in determining the path of development followed by the economy as a whole. (Roncaglia, 1995: 120). However, others have objected to the “deductionist” approach of the Classical economists, Marx and Sraffa, as opposed to the “critical realism” of post-Keynesianism (Pratten, 1996). The debate continues and seems to concentrate on whether prices derived from Sraffa’s model are “centres of gravitation” or not. According to Lavoie (2013), this is the “one issue” (Lavoie, 2013: 35) that makes compatibility of Sraffa’s model with the post-Keynesian views difficult. Interpreting Sraffa prices as full-cost prices in line with Kalecki, with a mark-up designed to achieve a given rate of return – the normal rate of profits – reconciles both approaches.

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4.2 The Robinson direction: building on Keynes, Marx, and Kalecki During Kalecki’s stay in Cambridge, he had become particularly close to Joan Robinson. It is known that Robinson was much inf luenced by him. How far did this inf luence go? Evidently, Joan Robinson made important contributions to post-Keynesian economic theory, and she considered herself as a “post-Keynesian”.6 In Part 3, I investigate her theory of economic growth, which germinated during a period in which she was discussing relevant questions for this theory with Kalecki and when she discovered Marx’s Capital. Robinson (1977: 8) described how she got in touch with Kalecki as follows: In the summer of 1934 the main lines of the General Theory of Employment, Interest and Money had become clear, but the book was not published until 1936. I had been writing some essays drawing a number of riders from the main theory, holding them back to be published when the General Theory was out. One of these appeared in the Economic Journal in June 1936. Soon afterwards I received a letter, evidently from a foreigner visiting England, who said that he was interested in my article as it was close to some work of his own. I thought this very strange. Who could claim to be doing work that was close to this—the first fruits of the Keynesian revolution? When Michal Kalecki turned up, I was still more astonished. He cared little for party manners or small talk and plunged directly into the subject. He was perfectly familiar with our brand new ideas and he had invented for himself some of Keynes’ fanciful concepts, such as the device of burying bank notes in bottles and setting off a boom in mining them. As we talked, I felt like a character in a Pirandello play, I could not tell whether it was I who was speaking or he. But he could challenge a weak point in Keynes’ formulation and quickly subdued my feeble attempt to defend it. After having met with Kalecki, Robinson wrote to him, saying: “I think you are one of the ten people in Europe who will understand what I am trying to do” (Kalecki, 1990: 502) and she sent him her “long-period article” 7 to which Kalecki reacted in a letter dated 3 October 1936: As concerns your article one can imagine I think, cases when the system does not tend to long-run equilibrium, at any case not in that way as you represent it. Let us examine the simple case (excluded in my previous letter) where the proportion of capitalist savings to capitalist income is constant. In this case [it] is quite possible that investment (and thus capitalist income), equipment, and total output will increase every year in the same proportion whilst prices and the rate of interest remain on at a stable level. If the population grows in the same or greater proportion nothing

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will stop this development. If the growth of population is slower (or the population is constant) the development will come after a certain time to the end, however not because of the fall of marginal efficiency of capital due to the accumulation of equipment, but because of the shortage of labour. There will be an increase of nominal wages and prices [which] will force the banks to raise the rate of interest. I will not here analyse the further process but it seems to me that it will likely lead to long-run equilibrium with full employment. (Kalecki, 1990: 503) The economic growth process that Kalecki described here is basically also the version that Robinson will elaborate on in her Accumulation of Capital (Robinson, 1956) and Essays on the Theory of Economic Growth (Robinson, 1962). Unfortunately, no written evidence exists of the “mutual and long-sustained interaction between these two great friends” (Harcourt, 1996: 332). Robinson became quickly convinced that Kalecki’s contribution could claim priority to that of Keynes and she considered it richer and more general.8 Kalecki’s Essays in the Theory of Economic Fluctuations was the immediate and tangible result of the confrontation between his theory and that of Keynes. In its foreword, dated June 1938, he thanked Joan Robinson for comments, and Piero Sraffa and Richard Kahn for “valuable remarks” (Kalecki, 1990: 234). Some researchers believe that from Joan Robinson’s first meeting with Kalecki, she “saw that Kalecki might be doing what apparently nor Kahn, nor Keynes, nor Sraffa were keen to do, and what she felt unable to do, i.e. to build the theory of effective demand on more ‘realistic’ grounds that those of the Marshall-Pigou apparatus” (Maria Cristina Marcuzzo’s contribution to the conference on ‘Kalecki’s Relevance Today’, Perugia, 22–24 April 1986, mimeo, quoted in Kalecki, 1991: 483). I discussed earlier (Cuyvers, 1979) that her theory of economic growth should be considered as post-Keynesian neo-Marxist and, despite its highly academic characteristics, largely belonging to the strand exemplified by Kalecki himself 9, as well as by Josef Steindl, Baran, and Sweezy10. In this volume, I intend to go deeper into this. How was Robinson’s relationship with Baran and Sweezy? After Baran’s Political Economy of Growth had finally come from the press in March 1957, Joan Robinson’s critical review of the book shocked Baran as well as Sweezy. In her review in The Nation, 1 June 1957, she wrote: “The book has many faults. The economic analysis is slapdash. (…) The historical analysis is wildly hypothetical rather than Marxian.” In a letter of 14 May 1957 to Paul Sweezy, Baran called Robinson’s review “a mean and unwarranted outburst of hostility” and a “stab in the back” that needed a reply. This reply was delivered by Paul Sweezy in the same columns, followed by a rejoinder by Robinson.11 Robinson had particularly taken offence to what she called “the moth-eaten

46 Post-Keynesian neo-Marxism: the trajectory

argument that a Keynesian policy is impossible in the developed capitalist countries, because budget deficits cause inf lation”. In his reply in the issue of The Nation of 29 June, Paul Sweezy restated Baran’s argument and invited Robinson to a “serious discussion of these questions”. On other issues raised by Robinson, Sweezy found some “unworthy of so exacting a theorist”. Unfortunately, in her rejoinder, Robinson did not take up the discussion about inf lation and long-run deficit spending in financing unproductive outlays, limiting herself to remarking: “On ‘inf lation,’ please excuse me. I have written enough about that already”.12 Whereas Robinson acknowledged that Baran’s “main case (…) cannot be lightly dismissed”, Nicholas Kaldor’s review in the American Economic Review attacked that case head-on. Firstly, Kaldor (1958) raised the point of how to reconcile the stylised fact that the share of wages in national income is remaining fairly constant, with Baran’s thesis that the economic surplus in monopoly capitalism is rising. Secondly, Kaldor stated his disagreement with Baran’s argument that in monopoly capitalism, a powerful stagnation tendency is working due to the speed of technological change that tends to slow down. Strangely, Baran looked at Kaldor’s review very differently as to Robinson’s. In a letter to Sweezy dated 28 January 1958, he called it “a long and thorough review in the AER”, to which he added: The review itself is the first reaction of a highly qualified pro, and I must admit that he – being undoubtedly very bright – has put his finger on the one spot in the book about which I have felt all the time quite uneasy.13 In a letter of 3 February 1958 to Baran, Sweezy states, however, about Kaldor’s review: It is actually a very weak performance so far as real substance is concerned, but the trouble is that he is able to make out a fairly plausible case (at least it will be so to the readers of the AER) because you were struggling in PEoG (Political Economy of Growth – L.C.) for the right way to formulate basically absolutely correct ideas but never wholly succeeded in finding it.14 Despite these published exchanges of criticism, Baran and Sweezy were eager to remain in close personal contact with their peers in Cambridge, UK. For instance, while in London in December 1957, on his way back from Leningrad and Moscow, Belgrade, Rome, and Paris, Sweezy also spent a weekend in Cambridge where he met Joan Robinson, Piero Sraffa, and Maurice Dobb.15 It is hard to avoid the impression that Robinson neglected Paul Baran’s contribution, although also descending from Kalecki’s views. How

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can one interpret that she only wrote a few sentences in the Monthly Review issue commemorating Paul Baran’s untimely death? Paul Baran and I had many professional disputes concerned with points of economic analysis, but on the broad sweep we generally pretty much agreed. (Robinson, 1965: 127) Also, there are but a few references to the work of Baran and Sweezy in her publications.16

Notes 1 Goodwin (1986: 125) characterised von Neuman (1945–1946) as “one of the great, seminal works” of the twentieth century. 2 Steindl (1945: 18n) refers to Sraffa (1926), Robinson (1933), and Chamberlin (1933). 3 See cat.trin.cam.ac.uk/manuscripts/Sraffa_C152/manuscript.php?fullpage= 1&startingpage=1 4 Baran’s archive at Stanford University contains a letter by Sraffa, dated 5 January 1963, apparently responding to a letter from Paul Baran (which is not in Sraffa’s archive at the Wren Library). Sraffa’s letter is mostly a letter of recommendation for Pierangelo Garegnani. He is also thanking Baran for sending offprints “which I always read with interest & sympathy”. The letter can be consulted at https://stacks.stanford.edu/file/druid:vm474kf4548/PAB-miscCorresp.pdf, pages 31–32. 5 See Paul Sweezy’s letter to Baran of 2 and of 7 March 1964, and of Paul Baran to Sweezy of 3 March 1964, as published in Baran and Foster (2017: 458, 461, 467). 6 This she stated repeatedly during our meetings in February 1977. 7 Letter of Robinson to Kalecki, dated 16 September 1936, as quoted in Kalecki (1990: 502). 8 On this priority, see Kalecki (1990: 464–466). 9 Based on the evidence provided by Tadeusz Kowalik, that Kalecki, at the end of his life, should not be considered a “left-wing Keynesian”, but a Marxist (Toporowski, 2018: 245, 260 n1). 10 Feiwel (1989: 115) wrote on this assessment: … Cuyvers (1979) confirms that Marxists have often been irritated by Joan Robinson’s provocative criticism of Marx’s theory of value and have generally considered her work as esoteric and highly academic. His neo-Marxist, sympathetic, critical, and learned perspective on Joan’s work is enlightening. 11 Robinson’s review was published in The Nation, 1 June 1957, Paul Sweezy’s reaction in The Nation, 29 June 1957, and Robinson’s rejoinder in the issue of 6 July 1957 (see Paul Alexander Baran Papers (SC1234). Dept. of Special Collections and University Archives, Stanford University Libraries, Stanford, Calif.: Additional Papers Accession ARCH_2017_292/Box 1, Folder 24 Paul Sweezy and Joan Robinson on PEoG). I am grateful to the Stanford University Archives for having provided access to this file. 12 Robinson (1962b: 90–91) reiterated her argument. Kalecki published a short review of The Political Economy of Growth only in 1965 (Kalecki, 1997: 332–333).

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15

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Post-Keynesian neo-Marxism: the trajectory This review was originally designed for a special issue of Monthly Review commemorating Paul Baran but was received late and published in the following issue of Monthly Review (Kalecki, 1997: 534). Kalecki’s review does not contain any criticism. On this episode, see also Foster (2014: 114–115). See https://monthlyreviewarchives.org/index.php/baran-sweezy/issue/view/ 1958-01_1958-03vol1no15; also accessible at https://stacks.stanford.edu/file/ druid:km151hd0812/SC1234_1958-01_to_1958-03.pdf Letter of 3 February 1958 by Paul Sweezy to Paul Baran, see BaranSweezy Archives, at: https://stacks.stanford.edu/file/druid:km151hd0812/ SC1234_1958-01_to_1958-03.pdf On the Kaldor critique, see also Foster (2014: 116). Letter by Paul Sweezy to Paul Baran of 16 December 1957, that can be consulted in the Baran-Sweezy Archives at: https://monthlyreviewarchives.org/ index.php/baran-sweezy/article/view/1957–08_1957-12/7215 and at https:// stacks.stanford.edu/file/druid:km151hd0812/SC1234_1957–08_to_1957-12.pdf The sentence continues: “Nicky [Kaldor], fortunately, I think, was away”, which probably refers to the disagreements about some of the main theses of Baran’s Political Economy of Growth and the largely unsympathetic review of the book by Kaldor in the American Economic Review. She repeats her criticism of her review of Baran’s Political Economy of Growth in Economic Philosophy (Robinson, 1962b: 90) and she only takes over from Monopoly Capital a quotation of U.S. News and World Report in Economics: An Awkward Corner (Robinson, 1966: 82) and in Freedom and Necessity (Robinson, 1970: 86). One would expect some reference to Baran and/or Baran & Sweezy in Aspects of Development and Underdevelopment (Robinson, 1979), but there is none.

Bibliography N. Baran & J.B. Foster (Eds.) (2017). The Age of Monopoly Capital – Selected Correspondence between Paul A. Baran and Paul M. Sweezy, 1949–1964, New York: Monthly Review Press. L. von Bortkiewicz (1907). “On the Correction of Marx’s Fundamental Theoretical Construction in the Third Volume of Capital”, in: P.M. Sweezy (Ed.), Karl Marx and the Close of his System by Eugen von Böhm-Bawerk & Böhm-Bawerk’s Criticism of Marx by Rudolf Hilferding, together with an Appendix consisting of an Article by Ladislaus von Bortkiewicz on the Transformation of Values into Prices of Production in the Marxian System, New York: August M. Kelley, 1949, 199–221. E.H. Chamberlin (1933). Theory of Monopolistic Competition, Cambridge, MA: Harvard University Press. L. Cuyvers (1979). “Joan Robinson’s Theory of Economic Growth”, Science & Society, 43(3), Fall, 326–348. G.R. Feiwel (1989). “Joan Robinson Inside and Outside the Stream”, in: G.R. Feiwel (Ed.), Joan Robinson and Modern Economic Theory, Houndmills, Basingstoke, Hampshire and London: Macmillan. J.B. Foster (2014). “Polish Marxian Political Economy and US Monopoly Capital Theory: The Inf luence of Luxemburg, Kalecki and Lange on Baran and Sweezy and Monthly Review”, in: R. Bellofiore, E. Karwowski & J. Toporowski (Eds.), The Legacy of Rosa Luxemburg, Oskar Lange and Michał Kalecki, Volume 1 of Essays in Honour of Tadeusz Kowalik, Houndmills, Basingstoke: Macmillan, 104–121.

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R.M. Goodwin (1986). “Swinging along the Autostrada”, in: W. Semmler (Ed.), Competition, Instability, and Nonlinear Cycles, Berlin – Heidelberg: Springer, 125–131. G.C. Harcourt (1996). “Some Ref lections on Joan Robinson’s Changes of Mind and their Relationship to Post-Keynesianism and the Economics Profession”, in: M.C. Marcuzzo, L.L. Pasinetti & A. Roncaglia (Eds.), The Economics of Joan Robinson, London – New York: Routledge, 331–344. N. Kaldor (1958). “The Political Economy of Growth by Paul A. Baran”, American Economic Review, 48(1), March, 164–170. M. Kalecki (1990). Collected Works of Michał Kalecki, Volume I: Capitalism – Business Cycles and Full Employment ( J. Osiatyn˙ski, Ed.), Oxford: Clarendon Press. M. Kalecki (1991). Collected Works of Michał Kalecki, Volume II: Capitalism – Economic Dynamics ( J. Osiatyn˙ski, Ed.), Oxford: Clarendon Press. M. Kalecki (1997). Collected Works of Michał Kalecki, Volume 7: Studies in Applied Economics 1940–1967- Miscellanea ( J. Osiatyn˙ski, Ed.), Oxford: Clarendon Press. J.A. Kregel (1991). “The Organising Principle in Post-Keynesian Economics”, in: W. Adriaansen & J. van der Linden (Eds.), Post-Keynesian Thought in Perspective, Groningen: Wolters-Noordhof, 79–81. M. Lavoie (2013). “Sraffians, other Post-Keynesians, and the Controversy over Centres of Gravitation”, in: E.S. Levrero, A. Palumbo & A. Stirati (Eds.), Sraffa and the Reconstruction of Economic Theory, 3, Houndmills, Basingstoke: Palgrave Macmillan, 34–54. J. von Neumann (1945–1946). “A Model of General Economic Equilibrium”, Review of Economic Studies, 13(1), 1–9. L.L. Pasinetti (1988). “Growing Subsystems, Vertically Hyper-integrated Sectors and the Labour Theory of Value”, Cambridge Journal of Economics, 12(1), 1988, 125–134. S. Pratten (1996). “The “Closure” Assumption as a First Step: Neo-Ricardian Economics and Post-Keynesianism”, Review of Social Economy, 54(4), Winter, 423–443. J. Robinson (1933). The Economics of Imperfect Competition, London: Macmillan. J. Robinson (1956). The Accumulation of Capital, London: Macmillan. J. Robinson (1962a). Essays on the Theory of Economic Growth, London: Macmillan. J. Robinson (1962b). Economic Philosophy, Harmondsworth: Penguin Books (1974 reprint). J. Robinson (1965). “Statements by Friends and Associates”, Monthly Review, 16(11), March, 127. J. Robinson (1966). Economics: An Awkward Corner, London: George Allen & Unwin. J. Robinson (1970). Freedom and Necessity – An Introduction to the Study of Society, London: Allen and Unwin. J. Robinson (1977). “Michal Kalecki on the Economics of Capitalism”, Oxford Bulletin of Economics & Statistics, 39(1), February, 7–17. J. Robinson (1979a). Aspects of Development and Underdevelopment, Cambridge: Cambridge University Press. J. Robinson (1979b). “Who is a Marxist?”, in: J. Robinson, Collected Economic Papers, 5, Oxford: Basil Blackwell, 248–253. A. Roncaglia (1995). “On the Compatibility between Keynes’s and Sraffa’s Viewpoints on Output Levels”, in: G.C. Harcourt, A. Roncaglia & R. Rowley (Eds.), Income and Employment in Theory and Practice – Essays in Memory of Athanasios Asimakopulos, New York: St. Martin’s Press, 111–125. C. Sardoni (1984). “Some Ties of Kalecki to the 1926 “Sraffian Manifesto””, Journal of Post-Keynesian Economics, 6(3), Spring, 458–465.

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P. Sraffa (1926). “The Laws of Returns under Competitive Conditions”, Economic Journal, 36(144), December, 535–550. P. Sraffa (1960). Production of Commodities by Means of Commodities – Prelude to a Critique of Economic Theory, Cambridge: Cambridge University Press. J. Steindl (1945). Small and Big Business – Economic Problems of the Size of Firms, Institute of Statistics Monograph No. 1, Oxford: Basil Blackwell. J. Toporowski (2018). Michał Kalecki: An Intellectual Biography. 2, By Intellect Alone, 1939–1970, Houndmills, Basingstoke: Palgrave Macmillan.

5

What remains of postKeynesian neo-Marxist economics? An unfinished integration

As indicated in Chapter 4 and as I will show in more detail in Part 2, Sraffa’s starting point and several of his assumptions in Sraffa (1960) are evidence of his neo-Marxist approach. What has remained of this neo-Marxism? Almost immediately after the publication of his Production of Commodities by Means of Commodities, it was defended by Maurice Dobb and Ronald Meek, two important Marxist economists (Dobb, 1961; Meek, 1961). Both acknowledged that they had been deeply inf luenced by Sraffa.1 Subsequent reactions of many Marxists were, however, hostile. An important implication of Sraffa’s model, although not mentioned in his book itself, was that the labour theory of value was redundant and that it led to logical inconsistencies. Steedman (1977) stated that it should be abandoned altogether. Dobb’s and Meek’s reputation among the Marxists proved not to be sufficient to warrant the adoption of Sraffa’s model as a basis for further theoretical elaboration. Quite a few orthodox Marxists attacked Sraffa’s model vigorously. It should come as no surprise that for almost half a century, the road from Sraffa back to Marx, i.e., the development of “Sraffa’s track”, was blocked. At the same time, Sraffa’s model, astonishingly quickly, became the cornerstone of a separate heterodox school of economic thought, under the umbrella of the post-Keynesians (see, e.g., Roncaglia, 1978; 1991; Kurz and Salvadori, 1995). The academic success of the “Sraffians” undermined the attractiveness of Marxist economic theory for a younger generation of scholars. With the opening of Sraffa’s archive in the Wren Library in 1993 (and even more so since its opening in 2016 for online consultation) some Sraffa-inspired researchers elaborated on his “value theory of labour”. While this macroapproach abandons labour values at the micro-level, it starts from the equality of the value of the net product of the economy with the total expenditure of living labour during a “year”.2 I refer the reader to Part 2, Chapters 7 (7.1) and 8 (8.4). It needs to be stressed that Sraffian neo-Marxism is still in its infancy, but it benefits from the academic reputation that the “Sraffians” have gained among heterodox economists. What remains of the neo-Marxism of Kalecki et al.? A first assessment could be based on the number of citations of the main authors involved. Google DOI: 10.4324/9781003283416-6

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Scholar shows that the works of Joan Robinson have been cited 38,704 times in other publications (some 3,500, however, spurious), Kalecki 16,689, and Piero Sraffa 14,987.3 Remarkably, Google Scholar has no recorded citations of Steindl, Baran, and Sweezy. However, a “monopoly capital Baran Sweezy” entry leads to 7,980 results and a search using Google for “Paul Baran economist” leads immediately to 1,870,000 results, as compared with 948,000 for Paul Sweezy, and 32,300 for Josef Steindl.4 But these numbers seriously overstate the impact of these authors as neo-Marxist economists, since many of the citations are related to other aspects of their theories. It is safe to say that today, many post-Keynesians tend to ignore the neo-Marxist “past” of these founding fathers because it is mostly irrelevant to their scholarly work. Viewed from an academic angle, the main publication that was “founded in the traditions of Marx, Keynes, Kalecki, Joan Robinson, and Kaldor” is the Cambridge Journal of Economics, founded in 1977. Other journals are: The International Journal of Political Economy founded in 1971, the Review of Political Economy, founded in 1994, and the European Journal of Political Economy, founded in 1955. These are peer-reviewed academic journals that publish specialised articles, mostly on subjects that are remote or have little to do with the issues that the early neo-Marxists were dealing with. It is not accidental that a lot of research on Kalecki et al. is published in scholarly books, which, in contrast to submissions to peer-reviewed academic journals, are going through a much less thoroughly reviewing process. The theoretical contributions of Kalecki were presented in a coherent way, e.g., by Sawyer (1985), Sadowski and Szeworski (2004), and Toporowski (2013; 2018), after the interested scholar had also become familiar with the seven-volume edition of the Collected Works of Michał Kalecki by Osiatyn˙ski (see Kalecki, 1990; 1991; 1996), containing a detailed apparatus of explanatory notes by its editor, who also elaborated on Kalecki’s Marxism. Josef Steindl’s published work, which was evidently less voluminous that that of Kalecki, fared worse. His Economic Papers 1941–1988 was published in 1990 (Steindl, 1990), and ran to 386 pages. The work was brilliantly reviewed by King (1995). A book on Steindl’s work was edited by Tracy Mott and Nina Shapiro (2005), and a special issue of July 2006 of Metroeconomica, edited by Christian Gehrke and Heinz D. Kurz, presented papers connected to Steindl’s work. Sadly, these publications do not deal with the relation between Steindl and Marx or neo-Marxist authors.5 For a comparison of the Kalecki–Steindl growth model with that of the Cambridge School, we can refer to Lavoie (1995). Despite the relentless efforts of authorities such as Joan Robinson, it must be admitted that Kalecki’s impact on the post-Keynesian theory, not to mention present-day economic theory, has been disappointingly small. During his life, in contrast to, e.g., Keynes, Kalecki was unable to create a circle of followers. A major reason is that in the crucial years of the late 1930s until the mid-1950s, he moved from Cambridge to Oxford, then to Montreal, New York, and Warsaw, at a time when the international communication of

An unfinished integration

53

new scholarly work between scientists was completely different from what it is today. Also, Kalecki’s background worked against him. Steindl (1981: 596) has written: Keynes was in a position to command attention, to make people listen (…). Kalecki was not similarily placed and fortunate. Moreover, in the social context of his writing, Kalecki was too blunt in his reformist socialist zeal for the tastes of a profession as conservative and, alas, as conformist as economics generally is. Kalecki’s inf luence on Marxist economic thinking today is mostly felt in the neo-Marxist tradition, of which the banner is carried by the editors and authors of Monthly Review: An Independent Socialist Magazine, which is published in the United States and in some other countries. The first issue of Monthly Review appeared in May 1949. The journal is published in 11 issues per year. In addition to the U.S. magazine, there are six sister editions of Monthly Review, published in Turkey, Spain, and South Korea and as separate English, Hindi, and Bengali editions in India. Foster (2004) states: Although often ignored, the writings by the associates of Monthly Review and, specifically, the books by Paul Baran, Paul Sweezy, Harry Braverman, and Harry Magdoff formed a school that in coherency, originality, and boldness no other American Marxism has come close to matching. For an assessment of the Baran–Sweezy–Magdoff views, I refer to, e.g., Halevi (1985).6 A number of theses put forward by Baran and Sweezy in their Monopoly Capital have been subjected to empirical testing, for instance, the increased wasting of the economic surplus (e.g. Cuyvers, 1972; Stanfield, 1973, and more recently: Lambert and Kwon, 2015; Lambert, 2020), the increasing sales effort under monopoly capitalism (e.g. Holleman et al., 2009), or the role of armaments spending (e.g. Riddell, 1986). Although Monopoly Capital was a best-selling book, it was not taken very seriously in the economics profession, dominated by neoclassical economics that strived to become a science much like theoretical physics. The solid scientific reputation of Piero Sraffa and Joan Robinson did not help, and neo-Marxism had extreme difficulties in creating a foothold in the academic world. Progress has been made in reconciling Joan Robinson’s and Sraffa’s model, although this work is still in its infancy. A first attempt was made by Bhaduri and Robinson (1980), although their analysis was not cast into the mathematics of linear systems of Sraffa’s model. An important next step was set by Pasinetti (1981), who showed how a Sraffa-type model of an economy can be adapted in such a way that the different sectors grow at different rates, that demand structures change over time, and that productivity growth rates differ in different sectors.

54 Post-Keynesian neo-Marxism: the trajectory

The “dynamisation” of the Sraffa model is a fertile new field of research (Cuyvers, 2017: 277–278), in which, e.g., Richard Goodwin took interesting steps with a model that shows sectoral change and that leads to oscillatory movement of the system with “bounded instability” (Goodwin, 1986a; 1986b). A lot of new research remains to be done. The problem is that this research will be highly specialised and hardly accessible, if at all, for the average reader, interested in the topic.

Notes 1 See Dobb (1973: 262ff.) and Meek’s Introduction to the Second Edition of his Studies in the Labour Theory of Value (Meek, 1956: xvii, xxix, xxxixff.; 1977: 124). 2 The source of this “New Interpretation” is found in a note made by Sraffa in February 1955 in the margin of an earlier note of December 1946, that is in the Sraffa Papers D3.12.44:3 and can be consulted at https://mss-cat. trin.cam.ac.uk/manuscripts/uv/view.php?n=Sraffa.D3.12.44#?c=0&m= 0&s=0&cv=3&xywh=-1743%2C-168%2C5799%2C3249 3 Accessed on 21 March 2021. 4 Evidently, these results cannot be compared with those from Google Scholar, that only relate to citations in scholarly journals. The Google results for Joan Robinson, Sraffa, and Kalecki are respectively 4,710,000, 673,000, and 696,000 (accessed on 21 March 2021). 5 This relationship is reviewed in Baran and Foster (2017). See also Kalecki (1991: 562ff.). 6 Of the “Monthly Review school”, Paul Sweezy said in 1987: “In the URPE, for instance, the Union for Radical Political Economics, I would say the Monthly Review tendency is a minority, a definite minority” (Savran, Tonak, and Sweezy, 1987: 9).

Bibliography N. Baran & J.B. Foster (Eds.) (2017). The Age of Monopoly Capital – Selected Correspondence between Paul A. Baran and Paul M. Sweezy, 1949–1964, New York: Monthly Review Press. A. Bhaduri & J. Robinson (1980). “Accumulation and Exploitation: An Analysis in the Tradition of Marx, Sraffa and Kalecki”, Cambridge Journal of Economics, 4(2), June, 103–115. L. Cuyvers (1972). “De verspilling van het potentieel economisch surplus: een kwantitatieve analyse”, Tijdschrift voor Sociale Wetenschappen, 17(1), 51–78. L. Cuyvers (2017). The Economic Ideas of Marx’s Capital – Steps Towards Post-Keynesian Economics, London – New York: Routledge. M. Dobb (1961). “An Epoch-Making Book”, Labour Monthly, 40, October, 487–491. M. Dobb (1973). Theories of Value and Distribution since Adam Smith, Cambridge: Cambridge University Press. J.B. Foster (2004). “The Commitment of an Intellectual: Paul M. Sweezy (1910– 2004)”, Monthly Review, 56(5), October, 5–39. R.M. Goodwin (1986a). “Swinging along the Autostrada”, in: W. Semmler (Ed.), Competition, Instability, and Nonlinear Cycles, Berlin – Heidelberg: Springer, 125–131.

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R.M. Goodwin (1986b). “Swinging along the Turnpike with von Neumann and Sraffa”, Cambridge Journal of Economics, 10(3), September, 203–210. J. Halevi (1985). “The Contemporary Significance of Baran and Sweezy’s Notion of Monopolistic Capitalism”, in: M. Jaruslic (Ed.), Money and Macro Policy, Leiden: Kluwer-Nijhoff Publishers, 109–131. H. Holleman, I.L. Stole, J.B. Foster & R.W. McChesney (2009). “The Sales Effort and Monopoly Capital”, Monthly Review, 60(11), April. M. Kalecki (1990). Collected Works of Michał Kalecki, Volume I: Capitalism – Business Cycles and Full Employment ( J. Osiatyn˙ski, Ed.), Oxford: Clarendon Press. M. Kalecki (1991). Collected Works of Michał Kalecki, Volume II: Capitalism – Economic Dynamics ( J. Osiatyn˙ski, Ed.), Oxford: Clarendon Press. M. Kalecki (1996). Collected Works of Michał Kalecki, Volume 6: Studies in Applied Economics, 1927–1941 ( J. Osiatyn˙ski, Ed.), Oxford: Clarendon Press. J.E. King (1995). “Outside the Mainstream”, Cambridge Journal of Economics, 19(3), June, 463–475. H.D. Kurz & N. Salvadori (1995). Theory of Production – A Long-Period Analysis, Cambridge: Cambridge University Press. T.E. Lambert (2020). “Monopoly Capital and Innovation: An Exploratory Assessment of R&D Effectiveness”, International Review of Applied Economics, 34(1), 36–49. T. Lambert & E. Kwon (2015). “Monopoly Capital and Capitalist Inefficiency”, International Review of Applied Economics, 29(4), February, 533–552. M. Lavoie (1995). “The Kaleckian Model of Growth and Distribution and Its Neo-Ricardian and Neo-Marxian Critiques”, Cambridge Journal of Economics, 19(6), December, 789–818. R.L. Meek (1956). Studies in the Labour Theory of Value, London: Lawrence and Wishart, 1973. R.L. Meek (1961). “Mr. Sraffa’s Rehabilitation of Classical Economics”, Scottish Journal of Political Economy, 24(1), June, 36–52, republished in R.L. Meek (1967), Economics and Ideology and Other Essays, London: Chapman and Hall, 161–178. R.L. Meek (1977). “A Plain Person’s Guide to the Transformation Problem”, in: R.L. Meek (Ed.), Smith, Marx, and After – Ten Essays in the Development of Economic Thought, London: Chapman and Hall, 95–119. T. Mott & N. Shapiro (Eds.) (2005). Rethinking Capitalist Development – Essays on the Economics of Josef Steindl, London – New York: Routledge. T. Riddell (1986). “Marxism and Military Spending”, Journal of Post Keynesian Economics, 8(4), Summer, 574–580. A. Roncaglia (1978). Sraffa and the Theory of Prices, Chichester – New York – Brisbane – Toronto: John Wiley & Sons. A. Roncaglia (1991). “The Sraffian Schools”, Review of Political Economy, 3(2), 187–219. Z.L. Sadowski & A. Szeworski (Eds.) (2004). Kalecki’s Economics Today, London – New York: Routledge. S. Savran, E.A. Tonak & P.M. Sweezy (1987). “Interview with Paul M. Sweezy”, Monthly Review, 38(11), April, 1–28. M.C. Sawyer (1985). The Economics of Michał Kalecki, Houndmills, Basingstoke – London: Macmillan. P. Sraffa (1960). Production of Commodities by Means of Commodities – Prelude to a Critique of Economic Theory, Cambridge: Cambridge University Press.

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R. Stanfield (1973). The Economic Surplus and Neo-Marxism, Lexington: D.C. Heath & Co. I. Steedman (1977). Marx After Sraffa, London: New Left Books. J. Steindl (1981). “A Personal Portrait of Michal Kalecki”, Journal of Post Keynesian Economics, 3(4), Summer, 590–596. J. Steindl (1990). Economic Papers 1941–88, Houndmills, Basingstoke: Palgrave Macmillan. J. Toporowski (2013). Michał Kalecki: An Intellectual Biography. 1, Rendezvous in Cambridge 1899–1939, Houndmills, Basingstoke: Palgrave Macmillan. J. Toporowski (2018). Michał Kalecki: An Intellectual Biography. 2, By Intellect Alone, 1939–1970, Houndmills, Basingstoke: Palgrave Macmillan.

Part 2

Piero Sraffa’s neo-Marxist theory of value and distribution1 Many Marxists seem to have insurmountable problems with what is often called the “neo-Ricardian” or “Sraffian” approach to the labour theory of value. This approach is considered neo-Ricardian, because it builds on the work of Piero Sraffa, specifically on his 99-page-long book Production of Commodities by Means of Commodities (Sraffa, 1960). Sraffa had previously collected and published the complete writings of David Ricardo. In his 1960 book, he set out, among other things, to find the solution to Ricardo’s problem of an “invariable measure of value”, and he aimed to restore the “Classical” theory of value (a theory that reached its apogee in the work of Ricardo, and even more so in that of Karl Marx) as opposed to the marginalist and utilitarian neoclassical theory. He did the first by designing, starting from an input– output type production model, his so-called “standard system”, a basket of goods and services composed in such a way that the output of each of the spheres of production shows the same percentage rate of physical surplus. He did the second by setting up his argument for an economy – actually taking a snapshot of that economy – stating that in the absence of even an infinitesimally small increase in any “production factor”, there is no marginal product. As a result, the neoclassical theory equating prices to the marginal utility of consumers, the wage rate to the marginal product of labour, and the rate of profits to the marginal product of capital, can be discarded. Piero Sraffa who passed away in Cambridge, United Kingdom, on 3 September 1983, enjoyed worldwide renown during the final 20 years of his life, after the publication of his Production of Commodities by Means of Commodities. In 1971, Nobel laureate Paul Samuelson made a remarkable statement that economic science had entered the age of Wassily Leontief and Piero Sraffa (Samuelson, 1971: 400). Sraffa’s impact on the economics profession after 1960 has indeed been large, although in fact his inf luence was felt well before. A first chapter brief ly reviews Sraffa’s life and work and investigates evidence on Sraffa’s relationship with Marxism. It deals also with the arguments put forward in Production of Commodities by Means of Commodities and analyses the main characteristics of Sraffa’s model. In the fourth section of that chapter, a timeline is sketched of how Sraffa’s economic ideas evolved. Next, in Chapter 7, I unravel some of the major differences between Sraffa’s model DOI: 10.4324/9781003283416-7

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and the Marxian version of the labour theory of value as developed over many decades by scholars such as von Bortkiewicz, Francis Seton, Michio Morishima, and many others. The following chapter discusses the main reactions of Marxists versus “neo-Ricardians”. Chapter 9 gives a summary and conclusion. Since the partial opening of Sraffa’s archive in the Wren Library, manuscripts have become available for in-depth research on the evolution of the ideas of the inf luential economist that Sraffa was and still is, and a number of papers have been published, using this new information. The aim of Part 2 is not to offer new evidence, based on these unpublished Sraffa documents,2 but rather to take stock of the literature, including recent publications based on the archives, about Sraffa’s relationship with Marx and with Marxism. It will be shown that there is much reason to consider Sraffa’s economics as neo-Marxist, which has also laid the foundation for a neo-Marxist theory of value and distribution.

Bibliography L. Cuyvers (2021). “Sraffa and Marx: Strange Bedfellows?”, in: S. Van Puyvelde & C. Buts (Eds.), Critical Contributions to Economics and Beyond, Berlin: Lexxion Publisher, 603–650. P.A. Samuelson (1971). “Understanding the Marxian Notion of Exploitation: A Summary of the So-called Transformation Problem between Marxian Values and Competitive Prices”, Journal of Economic Literature, 9(2), June, 399–431. P. Sraffa (1960). Production of Commodities by Means of Commodities – Prelude to a Critique of Economic Theory, Cambridge: Cambridge University Press.

6

The work and life of Piero Sraffa3

6.1 Sraffa’s life and work: a short overview Sraffa was born in Turin on 5 August 1898, as the only son of Angelo Sraffa, a famous university professor and lawyer, and Irma Tivoli. He studied in Turin and served in the Italian army at the Austrian front. On 29 November 1920, he received his doctoral degree under the supervision of Luigi Einaudi on a dissertation about inf lation in Italy during and after the war.4 Sraffa first met John Maynard Keynes during a visit to Cambridge in 1921– 1922. Keynes urged him to write an article on the Italian banking system for the Manchester Guardian Reconstruction Supplements and for the Economic Journal. Its contents angered Mussolini and got Sraffa, and his parents, into trouble with the Italian fascist regime. Around the same time, Sraffa was a contributor to L’Ordine Nuovo, the periodical of the left-wing political group of Antonio Gramsci, a group that was instrumental in the establishment of the Italian Communist Party (PCI). Because of increasing threats from Mussolini in person, Keynes invited the young Sraffa back to England. Unfortunately, this visit was aborted when Sraffa, on arriving in Dover, was denied entry. In November 1923, he took on a lectureship in political economy at the University of Perugia. He was also responsible for the Italian translation of Keynes’s A Tract on Monetary Reform, published in 1924. In March 1926, Sraffa became professor at the University of Cagliari (Sardinia). With Keynes’ and Francis Edgeworth’s support, he published a paper in the Economic Journal in which he criticised the Marshallian marginalist price theory. The article caused much sensation at the time. In January 1927, again with the support of Keynes, he was offered a lectureship at the University of Cambridge, “a rare honour for an outsider” (Schefold, 1996: 1315). He emigrated to England, but throughout life retained his Italian nationality.5 Sraffa’s lectures in Cambridge critically reviewed economic orthodoxy but left him unsatisfied. He felt unable to offer his students any alternative theoretical insights. Already in 1927, he had made plans to write a book on the history of economic thought, based on his lecture notes and other material. However, he resigned his lectureship after just two years (Marcuzzo, 2005).6 DOI: 10.4324/9781003283416-8

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Again, through Keynes, he was appointed as Assistant Director of Research in Economics and Politics and as librarian of the Marshall Library. During the 1930s, Sraffa visited Italy regularly. As a renowned foreign university professor, he succeeded several times in visiting Gramsci in prison and acting as a liaison between Gramsci, the leadership in exile of the PCI and the Komintern, the Communist International (Naldi, 2012). In 1930, Sraffa took on the task of collecting and editing David Ricardo’s writings for the Royal Economic Society. The first volume would only appear in 1951. He finally published The Works and Correspondence of David Ricardo in 11 volumes, the last volume coming from the press in 1973.7 During the 1930s, Sraffa was also a member of “The Circus”, a group of young collaborators, who discussed Keynes’ Treatise on Money and were instrumental in Keynes’ breakthrough towards his General Theory of Employment, Interest and Money. In 1932, Sraffa published a scathing criticism of the theory of money and capital in Hayek’s Prices and Production (1931). He was elected to a fellowship of Trinity College, Cambridge, in 1939. When Italy declared war on Great Britain in June 1940, Sraffa was interned sometime during the summer of that year on the Isle of Man, together with other “enemy aliens” from Cambridge, including Hans Singer and Erwin Rothbarth. Once more, it was Keynes who came to his rescue and that of others. During the war years, he continued preparing the publication of Ricardo’s Works and Correspondence and was under quite a bit of pressure from the Royal Economic Society to complete the work. His preparations for publication were interrupted when, in July 1943, Sraffa, by chance, recovered a series of manuscripts and letters in Ireland, including unfinished manuscripts. During the war, and again when his work on Ricardo’s writings was nearing its end, he reconsidered writing the book he had envisaged in the 1920s. Probably due to the time and effort spent on the methodological problems he encountered while reformulating the surplus approach of the Classical economists and of Marx, the project became less and less grandiose, but also more focused. In 1960, at the age of 62, Sraffa finally published his Production of Commodities by Means of Commodities. He had worked on it from 1927 to 1931, 1942 to 1946, and 1955 to 1958. For many, the ideas contained in this slender book8 were hardly accessible, and this explains why it took time before its often implicit critique of the neoclassical theory of production and distribution caused the equivalent of an earthquake in the world of economic theory.9 In March 1961, after a nomination by Gunnar Myrdal, the Swedish King Gustav-Adolph awarded Sraffa, the Söderström Gold Medal of the Royal Swedish Academy of Sciences, at that time as prestigious as the current Nobel prize in economics (Ahijado, 1985: 81; Potier, 1991: 61; Arthmar and McLure, 2019).10 In 1963, Sraffa officially retired.11 Feeling increasingly lonely as old friends died, he spent the last years of his life in a rather reclusive way. He still visited

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the Marshall Library on a regular basis, but he increasingly suffered from loss of memory. In 1981, Piero Sraffa suffered thrombosis. He died on 3 September 1983. In 1925 and 1926, Sraffa had published a severe critique of Alfred Marshall’s analysis of the laws of diminishing and increasing returns (Sraffa, 1925; 1926). He showed Marshall had derived these two laws from David Ricardo’s theory of rent and of the division of labour, respectively, but had combined the two in an inconsistent way. He saw three solutions for solving the inconsistency: (1) assume that with perfect competition, Marshall’s “representative enterprise” is on average operating under conditions of constant returns; (2) develop a theory of general equilibrium taking the interrelations between sectors into account; or (3) abandon the assumption of perfect competition. Joan Robinson (1933) and Edward Chamberlin (1933) would follow the third way; Sraffa chose the second. While editing the writings of David Ricardo, Sraffa became aware of the evolution in Ricardo’s views on value. In his introduction (Sraffa, 1951: xxx– xxxiii), he showed that in the Essay on the Influence of the Low Price of Corn on the Profits of Stock (1815), Ricardo had implied that in a pure “corn economy”, the rate of profits is a ratio of physical quantities and that, assuming that in a diversified economy, the same holds for the agricultural sector, the rate of profits in the non-agricultural sectors will have to adjust to that in agriculture. In contrast, in his Principles of Political Economy and Taxation (first edition 1817; third edition 1821), Ricardo determined the rate of profits as a ratio of outputs and inputs measured in labour values. He was well aware that (labour) values diverge from “natural prices” since with constant labour use, an increase in the wage rate will affect relative prices and total output measured in prices. Hence the need for an “invariable measure” of value, i.e., a measure that is such that the value of total output is unaltered when its distribution between capital-owners and workers changes. Sraffa provided a general equilibrium analysis that takes sectoral interdependencies into account and also solved Ricardo’s problem of the “invariable measure of value”. To circumvent the marginalist theory of price determination, which he wanted to show cannot be sustained, he modelled an economy with given conditions – in fact a snapshot of an economy – where no small changes (not even infinitesimally small) of a “factor of production” have to be considered, and, as a result, no marginal product comes into the picture. He then built an input–output type system of price equations, in which – because of his “stationary economy” assumption – relative prices are independent of the levels of production but are fully determined by the material conditions of production, i.e., the physical input coefficients that are the parameters in the price equations. Today, there is a huge literature on Sraffa and the model of Production of Commodities by Means of Commodities. The many aspects of the Sraffa model have undergone further development from an historical, economical, and mathematical perspective. Several studies that have contributed to this

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development are mentioned in this part, but a full review of the literature on the subject is way beyond its scope. For an almost exhaustive theoretical treatment of the “Sraffian” model and an in-depth analysis of the many aspects involved, the reader is referred to Pasinetti (1977), Kurz and Salvadori (1995), and Abraham-Frois and Berrebi (1997).

6.2 Sraffa as a Marxist It is not justified to simply dismiss Production of Commodities by Means of Commodities as “neo-Ricardian” and to treat its model as outside the broad strand of Marxist economic theory. Sraffa’s political development during and after the First World War points in that direction. But, more importantly, he obviously considered that his scientific work was building on foundations laid by Marx, though he was correcting him where he deemed that necessary. Sraffa was always very discrete about his political ideas, but he could boast an impressive left-wing political pedigree.12 Although inf luenced by the Italian “neo-idealist” intellectual movement as an adolescent, he was also exposed to the socialist ideas of some of his teachers and became increasingly attracted to socialism (Potier, 1991: 3–4). This also generated a vivid interest in economic questions. As a result of Italy’s ordeal during the First World War and of the Russian October revolution, Sraffa’s political opinions radicalised. In 1924, he wrote to Antonio Gramsci, the founder of the Partito Comunista Italiano: My political opinions are unchanged – or worse still, I have become fixed in them; just as up till 1917, I was fixed in the pacifist socialism of 1914–15 – which I was shaken out of by the discovery, made after Caporetto and the Russian Revolution of November, that guns were precisely in the hands of the worker-soldiers. (Letter quoted by Ferrata, 1978: 68)13 Sraffa had met Gramsci in 1919 shortly before the latter founded L’Ordine Nuovo, the weekly review of the radical left wing of the Italian socialist party. Sraffa joined the editorial board of the review and carried its press card. He would continue contributing articles after it became the daily newspaper of the Communist Party. Although a committed “fellow traveller”, Sraffa would never become a member of the PCI (Potier, 1991: 19).14 During his stay in England between April 1921 and June 1922, Sraffa followed courses at the London School of Economics and was involved in activities of the London-based Labour Research Department. This involvement, together with that in L’Ordine Nuovo, led Naldi (2005: 380) to believe “that Sraffa was tightly linked to the world of England’s communists and labour movement”. Naldi (2005: 380–381) even suggested, be it with reservation, that in April 1922, Sraffa may have travelled to Ireland, which was in political turmoil (on April 14, the IRA occupied the Four Courts in Dublin in protest

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against the Anglo-Irish Treaty). He quotes a witness to the fact that Sraffa brought an Irish book on guerrilla warfare instructions back to Italy for his friends at L’Ordine Nuovo. At the end of May 1922, Gramsci left for Moscow as a PCI delegate to the Communist International and on his return six months later, settled in Vienna. After Sraffa’s first trips to England in 1921–1922 (where Sraffa, having recently defended his doctoral thesis on financial and monetary problems in Italy, met John Maynard Keynes for the first time) he stayed in close and regular contact with Gramsci by mail (Naldi, 2000: 84). In the course of 1924, however, they disagreed completely, on the issue of the role of the PCI in the revolutionary struggle against Italian fascism. Although Gramsci considered this political disagreement very serious and criticised Sraffa’s opinion in the columns of L’Ordine Nuovo, he continued to think of him as a Marxist (Gramsci, 1924: 218; see also Potier, 1991: 23; Naldi, 2000: 85–86). Moreover, Sraffa proposed the creation of an IWW-type labour union15 and wanted to break with the reformist Confederazione Generale del Lavoro, a proposal that met Gramsci’s approval (Gramsci, 1924: 218; see also Ahijado, 1985: 22). After being elected to the Italian parliament, Gramsci returned to Italy in May 1924 and the two friends met again. There is no precise information about what they discussed, but it can be assumed that the economic and political situation in fascist Italy (Potier, 1991: 24) and issues such as the management of the economy in the Soviet Union (Naldi, 2000: 89) were on the table. Naldi (2000: 90) suggested that due to Gramsci’s limited knowledge of economics, they most likely talked about Sraffa’s publications on Alfred Marshall’s theory of value. What Sraffa’s exact position about Marx and Marxism was before he left fascist Italy and emigrated to England, is not clear. There are good reasons to believe, although no written evidence exists, that Sraffa, Gramsci, and their comrades, discussed Marx’s economic theory (Potier, 1991: 14; Porta, 2012: 1379)16 and that it was Gramsci who put Sraffa on the way of studying and improving Classical economic theory, Ricardo’s in particular (Kaldor, 1984: 149; Bharadwaj, 1984: 300; Naldi, 2000: 91–92).17 It is also alleged that Gramsci’s Marxist “organicist” thinking deeply inf luenced Sraffa both in his 1926 criticism of Alfred Marshall and in his Production of Commodities. In both instances, Sraffa was challenging the atomistic view of neoclassical theory by stressing interdependence (Davis, 1993). In addition, it has been suggested that Sraffa’s writings “may perhaps be interpreted as the search and eventually the proposal for a framework of economic theory” that aims a “profound critical revision of orthodox Marxism”, similar to Gramsci’s ideas laid down in his Quaderni del carcere (Ginzburg, 2014: 38). When Gramsci ended up in Mussolini’s prison, Sraffa, who had by then emigrated to England, visited him regularly and acted as a liaison between Gramsci, the leadership of the PCI in exile, and the Communist International.18 In 1930, he visited Gramsci’s wife in Moscow to ascertain her living conditions and that of her children (Ahijado, 1985: 25). He also played a vital

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role in safeguarding Gramsci’s Prison Notebooks after his death in 1937, and in their publication in an English edition. Frank Rosengarten writes about Gramsci’s prison years (Rosengarten, 2019): Among the people, in addition to Tania (Gramsci’s sister-in-law – L.C.), who helped him either by writing to him or by visiting him when possible, were his mother Giuseppina, who died in 1933, his brother Carlo, his sisters Teresina and Grazietta, and his good friend, the economist Piero Sraffa, who throughout Gramsci’s prison ordeal provided a crucial and indispensable service to Gramsci. Sraffa used his personal funds and numerous professional contacts that were necessary in order to obtain the books and periodicals Gramsci needed in prison. Gramsci had a prodigious memory, but it is safe to say that without Sraffa’s assistance, and without the intermediary role often played by Tania, the Prison Notebooks as we have them would not have come to fruition. Sraffa’s political ideas during the 1930s and after, are not documented.19 We know that somewhere during the second half of the 1930s, Maurice Dobb’s “Study Group of the League Against Imperialism” counted Sraffa among its members (Shenk, 2013: 80), but Sraffa remained very discrete about his convictions (in hindsight, this is far from surprising, considering how discrete he remained about his unpublished economic ideas).20 Among scholars, there is some controversy about the extent Sraffa the economist can be considered a Marxist. There can be no doubt that he held Marx as an economist in high esteem and that he regarded him as an (admittedly late, but no less important) Classical economist. Porta (2012: 1360) has argued that a “Marxian research programme” formed the basis of Sraffa’s search for a new foundation of economics during the 1920s. In a November 1927 note with a plan for his book on the history of economic thought, he wrote about the part devoted to the period from Malthus to John Stuart Mill, as the period of “vulgar economy” (Marx’s terminology is noted): “Period dominated by Mill: Marx stands here towering as the last of the Classical amongst the vulgar, just as Smith stood isolated among the classicals, being the first of the vulgar” (Sraffa Papers D3.12.4:10, also quoted in Pasinetti, 2013: 170, Document 4).21 In 1927 and 1928, while preparing for his lectures in Cambridge, he had explored aggregate inter-sectoral exchange relations using linear equations, allegedly along the lines of Marx’s schemes of simple and expanded reproduction.22 When, in 1940, Sraffa was interned as “enemy alien” on the Isle of Man, he reread Volume I of Capital. In August 1942, he took up his equations system again, using Marx’s concepts of constant and variable capital (Carter, 2013: 231, 235).23 In November 1943, elaborating on a note written in the first half of 1931, he made the assumption that the capital–output ratio remains constant when the income distribution changes (see Sraffa Papers D3.12.7:157.3, also quoted by Kurz and Salvadori, 2010: 207–208).24 From February 1944 onwards, he worked on his formula of the organic composition of capital, another crucial concept in Marx’s economics. However, he

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found Marx’s definition unsuited for his purpose and reformulated the concept as the ratio between the total supplies of means of production to the other spheres of production, and the wages in the sector (Carter, 2013: 249).25 Soon afterwards, he showed that his definition logically leads to the concept of the maximum rate of profits, which, he claimed, was also found in Marx’s Capital (Sraffa, 1960: 94). But he also soon realised that his “hypothesis” of a capital–output ratio that is invariant to changes in income distribution was untenable. His search for an “invariable measure” led him in January 1944 to his “standard system” (Kurz and Salvadori, 2010: 210).26 Until the late 1920s, Sraffa was critical about Marx’s labour theory of value, as is convincingly shown by Kurz and Salvadori (2010), as well as Bellofiore (2010; 2012; 2014). He changed his mind, however, in particular while struggling during the war years with the way of finding an “invariable measure of value”. About this time period, Bellofiore wrote: …the hero of Sraffa was Marx even more than Ricardo. More than that, the documents at the Wren show that, for some years at least, Sraffa was convinced that his forthcoming book was re-instating the substantial soundness of Marx’s economics. This in a sense was true even of his labour theory of value, his price theory, his law of the tendential fall in the profit rate. (…) Later on Sraffa – reluctantly – had to change his mind on the continuity between his results and Marx’s. How far this change of mind goes is still to be assessed, in my view. (…) What is sure is that even after publishing his book in 1960 he maintained a positive judgment on Marx’s transformation procedure. He even used his conclusions to propose a redefinition of the notion of exploitation based on labor commanded rather than labor contained, but still in relation to Marx. (Bellofiore, 2010: 9) Porta (1986) has credited Sraffa for having provided a rigorous answer, taking the form of the standard product, to Marx’s long search for a replacement of the physiocrats’ “produit net” and their determination of the surplus rate as a ratio of physical quantities of the same commodity (see also Sraffa, 1960: 93). As will be discussed later, in Sraffa’s standard system, the rate of profits can be expressed both in labour values and in prices of production. Whether conceived as a ratio of aggregates in labour values or in prices of production, or of homogeneous quantities of output as in the physiocratic model or in a Ricardian “corn economy”, the standard system performs the same function and supplies “a missing argument” to the “Marxian reading of Ricardo” (Porta, 1986: 451). In this way, Sraffa revived Marx’s interpretation of the Classical economists as forerunners of the “surplus approach”. All this was done writing about Ricardo while hardly mentioning Marx. Porta (1986: 451 – Porta’s emphasis) concluded: “Sraffa succeeded in this way in making the notion of Marxian economics more precise and contributed powerfully to dignify it”. However, according to Petri (2014: 44), by turning Sraffa’s model into a powerful tool to destroy the labour theory of value, Sraffa’s followers transformed Sraffa into Marx’s rival.

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After the publication of Production of Commodities by Means of Commodities, other economists started investigating the relationship between Sraffa’s model and Marx’s theory of value. But we can mention that Sraffa stayed out of the (all too often) heated discussions of his theory, and that he systematically refused to participate in international symposia on his work (Potier, 1991: 65). No doubt, this reluctance must be attributed to his natural reticence, his perfectionism, and an aversion to making statements when he was not 100% certain of his point. But there might well be more. 27 Based on his interviews, Dostaler (1982: 102–103) reported on Sraffa’s opinions as follows: … Sraffa then told us that, for him, his “values” and Marx’s “prices of production” referred to exactly the same reality. We also asked him about his more general relationship with Marx. (…) Sraffa therefore told us that he could not have written Production of Commodities by Means of Commodities if Marx had not written Capital. It is clear, he told us, that Marx’s work had inf luenced him a lot, and that he felt more sympathy with him than with those he calls the “disguisers” of capitalist reality. Obviously aware of the criticisms which come to him from certain Marxist circles, Sraffa explained to us that he did not have to rewrite the three volumes of Capital. More so, Sraffa considers that his model describes certain aspects of the same reality as that described by Marx, a reality characterized by class antagonism between workers and capitalists, by the exploitation of the former by the latter. (My translation)28 It is interesting to mention at this point some unpublished documents by Sraffa. One dates from January 1944 and contains Sraffa’s remarkable statement, relating to his linear relationship r = R (1 – w), that Marx “knew all this” (Sraffa Papers D3.12.36, also quoted in Kurz and Salvadori, 2010: 209).29 The other document is a letter to Maurice Dobb on 9 October 1960 in which Sraffa comments on a review of Production of Commodities by Means of Commodities in an Italian periodical: if we want to follow in Marx’s footsteps and pass from values to prices of production and from rate of surplus value to rate of profits, the Standard System is a necessary adjunct: for that passage implies going through certain averages and if these are calculated without weights (or with the weights of the real system), a result which is only approximately numerically correct is obtained. If an exact result is wanted the proportions of the St. Syst. of eq’s q’s must be applied as weights. – This is not stated explicitly in the book, but is implied. (Sraffa Papers D3.12.111: 118r, also quoted in Kurz and Salvadori, 2010: 209)30

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Although no “smoking gun” can be found in Sraffa’s unpublished notes, Bellofiore (2014: 225) is convinced that the labour theory of value “maintains a significant, though implicit, theoretical, explanatory, even quantitative, role for Sraffa”, a conviction based on notes made by Sraffa beginning from 13 November 1940, i.e., soon after he started rereading Volume I of Capital. Sraffa’s notes, entitled “Use of the notion of surplus value” (Sraffa Papers D3.12.46: 57r–61r),31 start with a quotation from Volume I, but in contrast to Marx, he is not considering the production process during which surplus value is “extracted” from the “living labour” of the workers, but puts himself at the end of the production period when the commodities are materialising to be exchanged at the market. In this way, Sraffa was able to bring back the “new value added” in the production period to the “living labour” extracted from the workers during the production period (Bellofiore, 2014: 219). Interestingly, Sraffa’s unpublished notes seem to contain evidence that, based on Marx, Sraffa regarded exploitation of labour as at the origin of a “pool of profits” that is distributed to the capitalist producers in proportion to their capital advanced (Carter, 2014). Before reviewing Sraffa’s model, as outlined in his Production of Commodities by Means of Commodities, in the next section, it is interesting to quote the opinion of two “privileged witnesses” on Sraffa and his relationship with Marx. In 1977, Joan Robinson stated: “Piero has always stuck close to pure unadulterated Marx and regards my amendments with suspicion” (Robinson, 1977: 56), and in 1987, Paul Sweezy declared in an interview that Sraffa himself did not see what he was doing as an alternative to Marxism, or in any way a negation of Marxism. (…) He always was a loyal Marxist, in the sense of himself adhering to the labor theory of value. But he didn’t write about that. Now that was Sraffa’s peculiarity. (Savran, Tonak and Sweezy, 1987: 13)

6.3 Sraffa’s circular f low model and some relevant results 6.3.1 Sraffa’s price equations In Production of Commodities by Means of Commodities, Sraffa considered the following system of price equations32: (1 + r )A p + w l = p

(1)

with: A being the n × n matrix of physical input coefficients aij ≥ 0,33 p being the n × 1 vector of “natural prices” or what Marx called “prices of production” pj > 0 l being the n × 1 vector of labour input coefficients lj > 0,34

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w being a scalar representing the uniform wage rate, r being the uniform rate of profits. Choosing, e.g., the wage rate w as numéraire, the system of equations can be solved: p / w = [ I − (1 + r )A ] l −1

(2)

The algebra of non-negative matrices teaches us that (2) can also be written as: p / w = l + (1 + r )Al + (1 + r )2 A 2 l + (1 + r )3 A 3 l + (1 + r )4 A 4 l + (1 + r )5 A 5 l  The price pj/w of commodity j shows how much labour this price “commands” but is also a sum of dated quantities of labour, i.e., the labour “embodied” in it (Sraffa, 1960: 34–35). 6.3.2 The standard system Next, Sraffa’s standard system can be built: (1 + R)q* A = q*

(3)

with q*, the 1 × n vector of output quantities, chosen so that (3) holds, and R, the standard ratio, a scalar closely associated with the matrix of intersectoral f lows A.35 The standard system is a sub-system of the full physical input–output system of the economy, with the outputs proportioned in such a way that in each sector, the same ratio R is found between its output and its inputs delivered to the other sectors and itself. The vector q* > 0, showing the output proportions of the standard system, can be solved in (3) by adding the equation q* l = 1

(4)

If we now pre-multiply (1) by q* and post-multiply (3) by p, we find: (1 + r )q* Ap + w q* l = q* p q* p = (1 + R )q* A p, which, because of (4), becomes: (1 + r )q* A p + w = (1 + R)q* A p When we use the “net product of the standard system” R q* A p as the unit of measuring p and w: r q* A p + w = Rq* A p = 1

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It then follows that r q* A p = 1 – w and since q* A p = 1/R, this expression resolves itself into (Sraffa, 1960: 31): r / R = 1 − w , or r = R(1 − w ) (5) It will be noticed that in this approach, wages are considered as part of the surplus or net product of the standard system. These “surplus-wages” are not related to “necessary workers’ consumption” as with the Classical economists and Marx but are f lexible. From (5), it can be deduced that, because wages are measured in the standard net product, and given the standard ratio R, there exists a strict linear negative relationship between the wage rate and the rate of profits. This relationship is independent of prices and is therefore the result of using the “invariable measure of value” that Ricardo was looking for. Assume R=20%. When w=0, r=R=20%, i.e., the maximum rate of profits. Conversely, for w=1, i.e., when the complete standard net product is going to wages, r=0%. For w=0.5, r=10%. In other words: a wage rate increase will lead to a fall in the rate of profits, but the value of the standard commodity is unaffected. In the standard system, a wage rate increase will lead to an increase in the wage bill that is exactly equal to the reduction in profits. It will be remembered that Sraffa modelled an economy where the use of labour and capital are given. This means that Sraffa’s assumption allows us to dissociate changes in “factor incomes” and “marginal products”. Therefore, a change in wages cannot be attributed to a change of the marginal product of labour, as neoclassical theory dictates. It only comes about because the income distribution changes. Likewise, with the change in wages, there is an opposite change in profits, and this despite the fact that the use of capital remained constant. This is the first major blow Sraffa dealt to neoclassical theory. 6.3.3  Joint production In a third step, Sraffa considered the case of industries producing joint products. This is evidently a more general situation than that of single-product industries. Moreover, by allowing joint products, the t “years” old fixed capital stock of a specific means of production in sector j can be introduced in the model, as both an input and as a t+1 “years” old output. Mathematically, allowing joint products in the model implies that A will become a n × m matrix, with the number of products m now larger than the number n of sectors (m > n). There are more prices to be solved for than equations (processes). Sraffa therefore stated in that case, there is room for alternative processes. In a sector where two commodities are produced jointly, a second alternative process can be used as well, or in case the joint products are used as means of production to produce a third commodity, an alternative process becomes available in that third sector (Sraffa, 1960: 44). This will make the number of

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processes equal to the number of commodities. As in the single-commodity situation, relative prices can be determined, as well as a maximum rate of profits R, the standard ratio, and the linear relationship (5) between r and w will hold. However, without going into the details and intricacies, a new situation arises. In the single-product situation, an increase in r together with the corresponding fall in w, might lead to a fall in the price of the product considered (all measured in terms of the “standard commodity”), but since r and w are moving in opposite directions, the rate of fall of the price will be lower than the rate of fall of w (Sraffa, 1960: 38–39). This is not so in the joint-products situation, since there is the possibility that the price of a product is falling at a higher rate than the wage rate and that this excessive fall is balanced by a rise (or a moderate fall) in the price of the jointly produced commodity (Sraffa, 1960: 61). The joint production case will be of interest in the following chapter, when the “neo-Ricardian” (or “Sraffian”) critique of the labour theory of value is discussed. 6.3.4 Switching and re-switching of production techniques In the final chapter of Production of Commodities by Means of Commodities, Sraffa investigated how switching between techniques of production can occur. The idea is that, given the rate of profits, different techniques (different matrices A) will result in a different price for a commodity. For every rate of profits, the technique that corresponds to the lowest price will be “chosen”. A graphical representation would show how the price of a commodity changes as a function of the rate of profits if production technique 1 is applied and how it changes if technique 2 is used. Let us assume that at rates of profits below r 1 (0 < r 1), production technique 2 leads to a lower price and will be adopted, and that at rates of profits r 1 < r < r 2 , production technique 1 will result in a lower price than when using technique 2, so that technique 1 is adopted. Where the two price curves intersect, r1 = r2 and the two methods are equally profitable. At that point, a switch from technique 2 to technique 1 is made. And it is possible that at still higher rates of profits, the price curves intersect again, and that producers will switch back from technique 1 to technique 2 (Sraffa, 1960: 81–82). Neoclassical theory states that when wages increase, producers will switch to more capital-using production techniques. However, Sraffa’s re-switching of techniques implies that at higher wage rates (and lower rates of profits), there might be a switch back from a more capital-using technique to a more labour-using technique, a result that contradicts neoclassical theory. The re-switching possibility was already mentioned by Joan Robinson as the “Ruth Cohen Curiosum” but she considered it as a “perverse relationship” and “not of great importance” (Robinson, 1956: 109–110). Robinson, using a Sraffa-type model (see Part 3, § 3.2, and Cuyvers, 1979: 329), argued that the factor of production “capital” that enters the neoclassical production function, consists of specific physical

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capital equipment that is aggregated using the prices of various items. But the rate of profits is needed to calculate these prices. Therefore, the neoclassical statement that the rate of profits is equal to the marginal product of capital is based on a circular reasoning. Not surprisingly, Sraffa’s theoretical proof of re-switching considerably stirred up emotions in the economics profession. In 1965, David Levhari, a doctoral student of Paul Samuelson, published a paper, based on his 1964 PhD thesis, and tried to show that Sraffa’s conclusions only hold for a single industry, not for the economic system as a whole (Levhari, 1965). The article and the reactions it generated, prompted the Quarterly Journal of Economics to organise the “Paradoxes in Capital Theory” symposium. Luigi Pasinetti proved Levhari wrong and presented a numerical example of a Sraffa-type economy, showing how and when re-switching of techniques would occur (Pasinetti, 1966). Other contributions at the symposium, for instance, by Michio Morishima and Pierangelo Garegnani, proved the theoretical existence of re-switching in linear production models of the input–output type, settling the matter once and for all. “Re-switching of techniques” has been haunting the theoretical economics profession for decades. Mostly ignored by the neoclassicals, “Sraffians” used it to emphasise the inconsistency of neoclassical theory. Although revealing, it is not the place here to review its history. 36 More recently, Mainwaring and Steedman demonstrated that the probability of re-switching is low and concluded: “… close followers of Sraffa may continue to stress that re-switching is a distinct theoretical possibility, while pragmatic defenders of orthodoxy may rest content with the cumulating evidence that its probability is small” (Mainwaring and Steedman, 2000: 346; see also Potestio, 2010). All this seems to be just a technical issue of limited practical relevance. However, Amartya Sen, Nobel prize winner and former student of Maurice Dobb, reminded us that “Sraffa’s findings have to be seen as a response to a particular descriptive account—with normative relevance—of the capitalist system of production, and that is where the potential social relevance of these technical results lies” (Sen, 2003: 1247). 6.3.5 Basic and non-basic commodities What “luxuries” were in David Ricardo’s analysis of the impact of taxes on prices, is what “non-basics” are in Sraffa’s. In contrast to “basic” commodities that enter as inputs directly or indirectly into all spheres of production, “non-basics” are only used as inputs in the production of itself or that of other “non-basics” (Sraffa, 1960: 8). Non-basics have no part in the determination of the system. Their role is purely passive. If an invention were to reduce by half the quantity of each means of production which are required to produce a unit of a ‘luxury’

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commodity of this type, the commodity itself would be halved in price, but there would be no further consequences; the price-relations of the other products and the rate of profits would remain unaffected. (Sraffa, 1960: 7–8). In the system of price equations (1b)–(1c): (1 + r )A11p1 + w l1 = p1 (1 + r )A12 p1 + (1 + r )A 22 p 2 + w l 2 = p 2

(1b) (1c)

the commodities in (1b) are “basics” and those in (1c) are “non-basics”. An important finding of Sraffa was that only “basic” commodities have a role in determining the rate of profits, and that “non-basic” commodities have no impact. I refer to Appendix 1 in Chapter 7, where it is shown that “nonbasics” are not in the standard system. We will return to Sraffa’s “basics” and “non-basics” in the next chapter, where it will be shown that these concepts cannot be derived from Marx’s theory of value when translated in the language of the algebra of nonnegative matrices, and that they have important implications for the determination of the rate of profits in such models. Moreover, it is one thing to say that Sraffa belongs to what I called previously “the broad strand of Marxist economic theory”, it is another to say the same about the “Sraffians”. At the beginning of the 1970s, the school of Sraffa’s followers were mostly economists who attacked the neoclassical theory of production and distribution, based on Sraffa’s “prelude”. In 1969, in tempore non suspecto, Geoff Harcourt labelled them as “neo-Keynesians” (Harcourt, 1969: 370 n2, 382 n15, 384), or even, approvingly (Harcourt, 1970: 44 n1) as “neo-Marxists” (Nell, 1970: 43), but 20 years later, Roncaglia (1991) distinguished three currents in the “Sraffian school”: a Ricardian, a Smithian, and a Marxian current, with a common goal of reconstruction of the Classical approach of political economy and the critique of the marginalist “mainstream economics”. Harcourt (2018: 89) reacted, by indicating that “the Marxian stream is the most appropriate one, both for interpreting Sraffa’s own views and inclinations and for providing relevant theoretical developments to aid our understanding of the structure of, and processes at work in, the modern capitalist world”. Many post-Keynesian economists are claiming Sraffa’s model, with prices allowing reproduction of a given capitalist economic system, as belonging to their school of thought.37 This position is not accepted by every post-Keynesian (see, e.g., Pratten, 1996). Against that opposition, Lavoie (2013: 35) has argued that the reluctance of several Post-Keynesians to take Sraffian economics on board is tied to a caricature of the dominant Sraffian strand, and that except for one issue, there is no true incompatibility between Sraffian economics and the rest of the Post-Keynesian school.

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The “one issue” Lavoie refers to is the view expressed by Garegnani and his followers that “Sraffa prices” incorporate a uniform normal rate of profits and are “long-period centres of gravitation” for actual prices (Lavoie, 2013: 39). It is precisely this supposed property of “Sraffa prices” that links them to the “natural prices” of Adam Smith and David Ricardo, and to Marx’s prices of production (although the convergence mechanisms assumed need to be reconsidered).38

6.4 Long road towards Production of Commodities by Means of Commodities Production of Commodities… deals with problems in Ricardo’s theory that he himself was unable to solve. This is hardly surprising, knowing the extent of Sraffa’s research while editing the Works and Correspondence. He had an in-depth knowledge of the various manuscripts and papers left by Ricardo, including his manuscript on “Absolute Value and Exchange Value”, that remained unfinished because of his untimely death. As will be shown in the next chapter, Sraffa’s solution of Ricardo’s problem is also the solution of the so-called “transformation problem” in Volume III of Marx’s Capital, of which he was fully aware. Sraffa was always reluctant to lift the veil on the issue of Marx’s inf luence on his work. There are only a few references to Marx in his publications. In his 1926 Economic Journal article, he complained about the indifference among professional economists vis-à-vis the theory of value, … an indifference which is justified by the fact that this theory, more than any other part of economic theory, has lost much of its direct bearing upon practical politics, and particularly in regard to doctrines of social changes, which had formerly been conferred upon it by Ricardo and afterwards by Marx, and in opposition to them by the bourgeois economists. (Sraffa, 1926: 535)39 We must wait until 1960 and the publication of Production of Commodities… to find some further (important) references to Marx. In Appendix D, “References to the Literature”, Sraffa mentioned two concepts used in his analysis for which he was indebted to Marx: (1) the maximum rate of profits, corresponding to w = 040 and (2) the treatment of fixed capital as a joint product (Sraffa, 1960: 94–95). It is not surprising that Sraffa did not refer to the literature on input–output models in relation to the labour theory of value that emerged in the 1950s (e.g., Cameron, 1952).41 But it is remarkable that he did not refer to the existing economic literature on Marx’s transformation problem and the attempts at a mathematical solution, starting with von Bortkiewicz and Dmitriev. Sraffa was well aware of von Bortkiewicz’s 1906 and 1907 articles in the Archiv

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fur  Sozialwissenschaft und Sozialpolitik on “Wertrechnung und Preisrechnung im Marxschen System” (Bortkiewicz, 1906; 1907) on which he made notes in 1943 (Gehrke and Kurz, 2006: 91–92).42 It is my conviction that although Sraffa did not refer to these contributions, he made a statement that the title and subtitle of his book Production of Commodities by Means of Commodities – Prelude to a Critique of Economic Theory implied that his analysis (1) is rooted in the Classical tradition of looking at the production process as a circular f low process and (2) that its results address first and foremost the neoclassical orthodoxy. By choosing “Prelude to a Critique of Economic Theory” as the subtitle of his book, he seems to have linked his work to Marx’s magnum opus, subtitled “A Critique of Political Economy”. However, the economic theory he referred to is not Marx’s, nor that of the Classical economists (“political economy”), but neoclassical “economic theory”. Harcourt (1993: 303) reported that Sraffa had personally informed him that the subtitle was aimed specifically at “neoclassical theory… despite others’ attempts to argue that he also had some aspects of Marx’s theoretical structure, the labor theory no less, firmly in his sights”. It would also have been strategically silly to present his book as being in the Marxist tradition: it would have been dismissed as ideologically biased and disregarded.43 The scholar interested in the relationship among Sraffa, Marx, and Marxism had to wait until 1993 when Sraffa’s archive in the Wren Library at Trinity College in Cambridge was opened. Between 1983 and 1993, the archive was under the custody of Professor Pierangelo Garegnani, Sraffa’s literary executor.44 It is important to clarify why and how Sraffa’s model was developed. Based on the documents in Sraffa’s archive that became accessible in 1993,45 Luigi Pasinetti stated in this respect (Pasinetti, 2001: 144–145; 2013: 160): For Sraffa, it is absolutely necessary to return to the point where sensible economic theory stood, i.e., to the point where its development was interrupted and distorted. It is necessary to return to the political economy of the Physiocrats, Smith, Ricardo and Marx. One must resume economic theory at the point where it was left. And one must proceed in two directions: (i) cleanse it of all difficulties and incongruities that the classical economists (and Marx) had not been able to overcome; and (ii) go on to develop the relevant and true economic theory as it should have evolved, from ‘Petty, Cantillon, the Physiocrats, Smith, Ricardo, Marx’ (My italics) In 1927 and 1928, Sraffa read the newly published French edition of Marx’s Theorien über den Mehrwert, at a time when his knowledge of the Classical economists was still developing (De Vivo, 2001: 159),46 although it was growing rapidly (Gehrke and Kurz, 2006: 102). It is interesting that initially, and up to the second half of the 1920s, he was critical of the labour theory of value of the Classical economists (Kurz and Salvadori, 2010: 192–193). He called labour “metaphysical” and adhered to William Petty’s use of the basket

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of physical subsistence of workers as measure of value (De Vivo, 2001: 159). This changed (probably in 1927) when he came to regard Marx as his hero and began to envisage “the ultimate result” of his own work as “a restatement of Marx, by substituting to his Hegelian metaphysics and terminology our own modern metaphysics and terminology” (Sraffa Papers D3.12.4: 15r, and quoted by De Vivo, 2001: 159).47 However, in 1927, Sraffa still distinguished between two notions of human labour, the first taking human labour as the “cause” of value, which creates all outputs and values, the second considering human labour as one of the factors of production. At that time, Sraffa criticised the view that the value of the individual commodity can be traced back to the quantity of labour alone, but he seemed to be in favour of the “macrosocial perspective” (Bellofiore, 2008: 75) that at the macro-level, the output produced is due to the expenditure of human labour. But in 1943, as is evidenced by his notes on von Bortkiewicz, he defended Marx’s procedure of transforming labour values in prices of production (see, e.g., Sraffa Papers D1.91: 12r).48 What is more, in his defence of Marx, he insisted that labour values must be taken as the starting point (Bellofiore, 2008: 77). Today, we know (see, e.g., Pasinetti, 2007: 182–183), based on Sraffa’s unpublished notes, that in an attempt to develop a Classical theory of value and production, he was building a system of equations somewhere between 1927 and 1931. It is alleged by some that he took Marx’s schemes of reproduction in Volume II of Capital as his starting point (Gilibert, 2003). De Vivo (2003) and Gilibert (2003) have indicated that Sraffa began reading Volume II of Capital, as well as Marx’s Theorien über den Mehrwert (both in French translation), in 1927, but that he probably knew Volume I before.49 He wrote down his first system of equations for an economic system without a surplus from November 1927 onwards (De Vivo, 2003; Gilibert, 2003). There is disagreement among scholars as to when Sraffa changed his opinion on Marx’s labour theory of value, and about the interpretation of Sraffa’s equations as being based on Marx’s schemes of reproduction. Kurz and Salvadori (2010: 196) stated that until 1929, Sraffa seems to have been opposed to using the concept of labour as a “quantity” in his equations,50 and Kurz (2012: 1540–1541, 1551) argued against the origin of these equations in Marx’s reproduction schemes, since in these systems of equations, Sraffa was using physical quantities, following Petty’s “real cost” theory of production.51 It is also argued, in line with Garegnani (2005), that until the Autumn of 1927, Sraffa had adhered to the Marshallian interpretation of Classical political economy, but that he rediscovered the “real cost” theory of value, used it to write down his first equations, and only afterwards came to Marx (also Ginzburg, 2016). The debate on “the origin” of Sraffa’s equations continues (De Vivo, 2019; Gehrke, Kurz and Salvadori, 2019; Kurz, 2021). In a recent paper, Naldi (2020) has come up with a more nuanced picture, showing that (1) Sraffa saw his 1927–1928 equations as relevant to a restatement of Marx’s contributions; (2) that he abandoned the physical real cost approach and considered rather the labour cost approach of the Classicals and Marx, once he considered a

76 Piero Sraffa’s neo-Marxist theory

community with a surplus; and (3) found out that neither approaches could be used to determine the objective cost of production in case natural resources that have no substitutes have been used.52 A brief inspection of the equations reveals that it was impossible to find relative values based on the equilibrium conditions of the reproduction schemes, in particular, if a surplus is considered.53 Sraffa sought the help of Frank P. Ramsey in 1928, who is thought to have advised him to distinguish between unit values and quantities (Kurz and Salvadori, 2001b: 262–263, De Vivo, 2003: 10; Gilibert, 2003: 33). Sraffa showed Keynes his equations at the end of the 1920s. He felt often unprepared for the intricacies the work involved. He also felt increasingly depressed with his university lectures, being unable to offer his students a synthetic view. Keynes seems to have come to his rescue by offering him the opportunity of preparing and editing the publication of the complete writings of David Ricardo for the Royal Economic Society (Pasinetti, 2001: 145–146). The work absorbed Sraffa during the 1930s. While interned as an enemy alien on the Isle of Man in 1940, he reread Volume I of Capital. He gave up the subsistence wage approach of Classical economists and Marx, and started to deal with wages as a share of the surplus, largely, although far from exclusively, as the result of his work on Ricardo’s writings in the 1930s (Gehrke and Kurz, 2006: 104, 107).54 Hence, when he resumed work on his equations in the summer of 1942, he adopted this approach, although he still assumed that wages are paid out of the capital advanced, an assumption he would drop toward the end of 1943 (Gehrke and Kurz, 2006: 107; Kurz and Salvadori, 2010: 206).55 In terms of the model of Production of Commodities by Means of Commodities, as brief ly sketched in the previous section, abandoning the Classical (and Marxian) assumption and assuming instead that wages are paid post factum, takes the workers’ necessary consumption out of matrix A, and opens the way to Sraffa’s distinction between “basics” and “non-basics”.56 Another crucial step in the development of Sraffa’s model at that time was the introduction of the concept of “surplus-wages” and the abandoning of the subsistence wages concept such that the workers’ consumer goods are no longer basics. Kurz (2007: 146) stated that Sraffa “in late 1943, after some careful deliberation, (...) decided instead to treat wages henceforth as entirely paid out of the net product” (see also Carter, 2011: 1126–1128; Gehrke, 2016: 237, 246 n8).57 His assumption that wages are paid out of the surplus, finally brought him to equation (5) and to r=R for w=0, i.e., the concept of the maximum rate of profits, for which he credited Marx (Sraffa, 1960: 94), based on a remark in Volume III of Capital related to the secular tendency of the rate of profit to fall.58 Gehrke and Kurz (2006: 111) remarked: As a ref lection of his deeper knowledge and understanding of Marx’s contribution, in the 1940s we see Sraffa use such notions as simple reproduction, constant and variable capital, rate of surplus value, and organic

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composition of capital. However, Marx’s concepts are typically not simply adopted, but are adapted to Sraffa’s own non-labor-value-based approach. In January 1944 came the development of the concept of standard product, followed by the analysis of “basics” and “non-basics”. In both cases, he was helped by Abram S. Besicovitch and Alister Watson in the 1940s and 1950s (Gehrke and Kurz, 2006: 99).59 From mid-1954, after having finished Volume X of The Works and Correspondence of David Ricardo, Sraffa submerged himself again in his planned book. He was continuously polishing the manuscript and had to be persuaded by his old friend Raffaele Mattioli60 to finish it and publish (Potier, 1991: 63). Bortis (2013: 56, 65) wrote: He was certainly decisively shaped by his extensive preoccupation with Ricardo from 1931 onwards, the year he started to work on the edition of Ricardo’s Works and Correspondence, and by his in-depth knowledge of Marx. (…) For the first time, the great classical problems of value and distribution, are solved in a logically perfect way within the social and circular process of production, implying unequal conditions of production between the various industries. (Bortis’ italics)

Notes 1 This chapter draws partly on Cuyvers (2021). I am much indebted to Scott Carter for looking up and providing for all quotations from Sraffa’s unpublished papers, the hyperlink to the relevant documents in Sraffa’s digitised archive. 2 Since September 2016, the Sraffa Papers at the Wren Library, Trinity College, Cambridge, can be consulted online at https://archives.trin.cam.ac.uk/index. php/papers-of-piero-sraffa-1898-1983-economist 3 This chapter draws partly on Cuyvers (2021) and § 6.1 on Cuyvers (1983). 4 On Sraffa’s thesis, and the many similarities between its arguments and these in Keynes’s 1923 A Tract on Monetary Reform, see Panico (1988: 8–14). 5 On Sraffa’s emigration and life in Cambridge, see Naldi (2005) and Marcuzzo (2005). 6 For more information, the reader is referred to the blog post by Scott Carter on the digital Sraffa website https://sraffaarchive.org/academic-blog/f/ sraffas-postponement-of-lecturing-duties-in-1927-to-1928 7 Porta (1986: 447) writes: “The Marxian reading of Ricardo achieves its highest point with Sraffa’s masterpiece – his “Introduction” to Ricardo’s Principles – in light of which his subsequent Production of commodities must be read.” In fact, the last volume, published in 1973, consists of the General Index, on which Maurice Dobb and, in August and September 1966, Arnold Heertje helped Sraffa; see Schefold (1998) and Gehrke (2005). Ten volumes were published between 1951 and 1955. On Dobb’s collaboration with Sraffa on Ricardo’s Works and Correspondence, see Pollitt (1988). 8 On being asked by Geoff Harcourt why he wrote his book in such a sparse prose, Sraffa answered: “I don’t like writing, so I wrote the book in as few words as

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10 11 12 13 14

15

Piero Sraffa’s neo-Marxist theory possible” (Harcourt, 1982: 272). Skidelsky (1992: 291) quotes Sraffa’s letter to Keynes of 23 November 1924: “I confess that always, when I read something that I have written I feel such a deep disgust that I cannot resist the temptation to destroy it, unless I have a definite engagement to deliver it.” Sraffa’s aversion to writing also explains why the introductions to Ricardo’s Works and Correspondence were so long overdue and that eventually Maurice Dobb had to come to his rescue. In letter dated 3 September 1960 and archived as Sraffa Papers D3.12.111:267– 268v, John Hicks wrote to Sraffa: “Economic theory (teachable economic theory, at least) was getting just a bit boring lately; for the second time in your life you have livened it up again. Thank you.” See: https://mss-cat.trin.cam.ac.uk/ manuscripts/uv/view.php?n=Sraffa.D3.12.111#?c=0&m=0&s=0&cv=321&xywh=-1194%2C-1%2C4237%2C2360. I am indebted to Scott Carter for bringing this to my notice. Previous recipients of the Söderström Gold Medal included Gustav Cassel in 1922, Eli Heckscher in 1933, John Maynard Keynes in 1939 and Gunnar Myrdal in 1947. On Sraffa’s academic career at the University of Cambridge, see Marcuzzo (2005). This section draws in part on Cuyvers (1983) but benefited from detailed information in Potier (1991). Large parts of this letter were published anonymously by Gramsci in L’Ordine Nuovo of 1–15 April 1924. In a handwritten document, written while in Moscow in March 1923, Gramsci stated about Sraffa: “…his communist opinions are known only by a small circle of acquaintances” (document quoted by Naldi, 2000: 83). De Vivo (2017) states, based on information from Giorgio Napolitano, the former Italian President, that Sraffa never broke with the PCI. In his letter to Gramsci that caused the disagreement, Sraffa asked how it is that our party has never thought of creating unions of the same type as the American IWW, which was precisely suited to the situation of lawlessness and violent repression on the part of the State and the private capitalist organizations. (Gramsci, 1924: 218)

16 Porta (2012: 1379) has stated: As a student, Sraffa even read Ricardo’s Principles, only to discover that much of what Ricardo had to say bore a close resemblance to what he had been reading in Marx’s work. As Ricardo was eminently respectable and acceptable to the teachers, Sraffa and his fellow students took to discussing Marxist issues under the guise of a study of Ricardo. 17 In his Prison Notebooks, Gramsci remarked: “One could say in a sense, I think, that the philosophy of Praxis (Marxism – L.C.) equals Hegel plus David Ricardo” (Hoare and Nowell Smith, 1999: 740). 18 Reports on Sraffa’s visits of Gramsci are kept in the Archivio Centrale dello Stato (ACS) and at the Archivio Storico Diplomatico (ASD) in Rome. For details on its contents, see Lattanzi and Naldi (2018). Lo Papiro (2013: 104) suggested that Sraffa, more than a “hidden communist”, was a cover agent for the Komintern. This has been vehemently denied by Naldi (2014) and De Vivo (2017). See also Naldi (2012). 19 In the files at the Archivio Centrale dello Stato (ACS) and at the Archivio Storico Diplomatico (ASD) in Rome Sraffa is called “a communist” ( July 1922), “ex-socialist” (December 1928), “a militant communist” (March 1931), and “suspected of

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being a clandestine delegate of the Italian Communist Party” (October 1951). See Lattanzi and Naldi (2018). 20 Marcuzzo (2005: 440) writes: Sraffa’s great reserve in his adhesion to Marxism is matched by the paucity of documentation confirming or disproving connections, contact or even everyday relations with communist militants or sympathizers in Cambridge, with the exception of M. Dobb. This is an aspect of Sraffa’s life that has so far eluded reconstruction, apart of course from the evidence offered by the Lettere a Tania (…). Reading this correspondence in the light of his exchanges with the Cambridge economists, we can see how much of a ‘double life’ Sraffa led in this respect, and also that he could hardly have done otherwise. 21 The note can be consulted at https://mss-cat.trin.cam.ac.uk/manuscr ipt s/uv/v iew.php?n=Sra f f a.D3.12.4#?c=0&m=0&s=0&cv=22& x ywh=-1288%2C0%2C4776%2C2659. 22 This is challenged by scholars such as Garegnani, Kurz, Salvadori, and Gehrke. I return to the debate on Sraffa’s equations in § 6.4. 23 Before the Sraffa archive was opened, it was assumed in the circle of Sraffa intimi that his equations had started from Marx. In February 1977, John Eatwell told me that, having consulted the old notes and papers, he had discovered that the equations were derived from “C + V + S”. 24 … it may be said that the value of total capital in terms of total goods produced cannot vary, since the goods are composed exactly in the same proportions as the capitals which have produced them. (…) … capital must be evaluated in terms of consumption goods. The unit of measure is a parcel of cons. goods, combined in the same proportions as they are produced… (Sraffa Papers D3.12.7:157.3, that can be consulted at https://mss-cat.trin. cam.ac.uk/manuscripts/uv/view.php?n=Sraffa.D3.12.7#?c=0&m=0&s= 0&cv=149&xywh=-1283%2C0%2C4806%2C2676). The 1943 elaboration is archived as Sraffa Papers D3/12/35:28 and can also be consulted at https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view.php?n=Sraffa. D3.12.35#?c=0&m=0&s=0&cv=69&xywh=-1873%2C0%2C6769%2C3769. 25 In fact, what Sraffa denoted as “organic composition of capital” is Marx’s value composition of capital. Changes in the organic composition of capital are solely due to changes in the means of production used per worker, with prices and wages kept constant (Cuyvers, 2017: 136, 146–147). See supra. 26 When the distribution of the net product of the economy between capitalists and workers changes, the structure of prices changes. With changing prices, the value of the invested capital changes, further affecting the rate of profits, before it settles to a new level. By using the assumption of a constant capital–output ratio Sraffa was trying to “segregate” the first and second-round impact of a change in income distribution on the rate of profits. The January 1944 document is archived as Sraffa Papers D3.12.36 and can be consulted at https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view. php?n=Sraffa.D3.12.36#?c=0&m=0&s=0&cv=1&xywh=-1846%2C0%2C66 11%2C3681. 27 Recently, de Vivo (2018: 134) likened some of Sraffa’s character traits with those of Turgot, one of his other heroes: … they were both very shy, not only when they were young boys; both had a very strong relationship with their mothers; both were regarded as misogynous, and were accused by their enemies of haughtiness and detachment— indeed, of estrangement from mankind itself. One aspect of their similarities,

80 Piero Sraffa’s neo-Marxist theory which is more relevant to us here, was perfectionism (…). Another aspect which I believe also linked the two men was that of conferring upon books they owned the task of giving hints about their own ideas. De Vivo (2018: 135) also adds: I would suggest that Sraffa also wanted to send a message by similarities between Production of Commodities and Turgot’s Réflexions sur la formation et la distribution des richesses—some formal, some substantial—which I believe he purposely introduced. These similarities are as striking to me as is the fact that (to the best of my knowledge) they seem to have gone completely unnoticed. De Vivo should also have mentioned that both Sraffa and Turgot can be considered as fellow travellers, the former of the Marxists, the latter of the physiocrats as Meek (1962: 311) noticed about Turgot. 28 It is interesting to refer here to Roncaglia (1978: 127): … it is necessary to remember that Sraffa wrote after Marx and could thus presume the reader to be familiar with the Marxian analysis of capitalist society. It was thus unnecessary to outline it ex novo as a background for his own analysis. The main aim that Sraffa set for himself was the destruction of the very foundations of the theory that was destined and presented as a conception of reality in opposition to that of Marx. 29 This note can be consulted at https://mss-cat.trin.cam.ac.uk/manuscripts/ uv/view.php?n=Sraffa.D3.12.36#?c=0&m=0&s=0&cv=135&xywh=-1332% 2C0%2C4305%2C2397. 30 This note can be consulted at https://mss-cat.trin.cam.ac.uk/manuscripts/ uv/view.php?n=Sraffa.D3.12.111#?c=0&m=0&s=0&cv=138&x ywh=-23 80%2C0%2C7532%2C4194. 31 This can be consulted at https://mss-cat.trin.cam.ac.uk/manuscripts/uv/ view.php?n=Sraffa.D3.12.46#?c=0&m=0&s=0&cv=74&xywh=-1491%2C1%2C5343%2C2976. 32 It is assumed that wages are not advanced, but paid post factum. 33 It is assumed at this point that matrix A is irreducible. The physical input coefficients are constants and hence parameters in the system of equations. It is customary in the economic literature on linear models of production to assume constant returns. As he made clear from the outset, Sraffa was not making this assumption because he considered no changes in output (Sraffa, 1960: v). For the sake of completeness, we refer to Pasinetti (1988a, 1993) for a Sraffa model with changing labour input coefficients. 34 Sraffa (1960: 11) assumed that labour is uniform in quality, or that differences in quality have been previously reduced to equivalent differences in quantity. 35 Mathematically, 1/(1+R) is the maximum real eigenvalue associated with A. Any other eigenvalue will not lead to a positive vector q. Carter (2017: 200, 225 n10) refers to Sraffa’s Majorca draft of March 1955 where the quantity ratio ρ, although identical, is distinguished from the value ratio R. See also Eatwell (1975: 547–548). For the Majorca draft (Sraffa Papers D3.12.52), see https:// mss-cat.trin.cam.ac.uk/manuscripts/uv/view.php?n=Sraffa.D3.12.52#?c= 0&m=0&s=0&cv=0&xywh=-720%2C-138%2C4947%2C2755. 36 For an early review, the reader is referred to Harcourt (1972). For a more recent review, I refer to Lazzarini (2011). 37 In Part 3, it will be indicated that Sraffa’s model and that of Joan Robinson’s “normal prices” in her Accumulation of Capital are basically identical. See also Cuyvers (1979: 329). 38 See on this, e.g., Arena and Blankenburg (2013).

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39 Dostaler (1982: 93) has noted the “surprising use” by Sraffa of Marx’s expression “bourgeois economists” in the columns of the Economic Journal. Dostaler also draws attention to a mention of Marx by Sraffa in Volume 4 of the Works and Correspondence of David Ricardo, regarding the use by Ricardo in an unpublished note on Robert Torrens, of the concept of fixed and circulating capital, which is the same as Marx’s constant and variable capital, but which Marx, wrongly, traced back to George Ramsay, not to Ricardo. 40 It should be noted here that Marx also considered a maximum rate of profits when constant capital is zero. This rate of profits is then equal to the rate of surplus value. See Marx (1894: 176). 41 It is noteworthy that Sraffa was familiar with the work by Wassily Leontief and John von Neumann (Screpanti, 1993: 6). Kurz and Salvadori stated: From Sraffa’s unpublished papers it can be seen that he was not able to understand the mathematics of von Neumann, but also that he understood perfectly well that they started essentially from the same theoretical point of view, that is, the one of the classical economists. This is also why Sraffa was able to discern in von Neumann several aspects which he, Sraffa, had already, at least in part, elaborated himself. When Sraffa came across the von Neumann model his own analysis was already quite advanced. (Kurz and Salvadori, 2001a: 179) See also Joan Robinson’s letter to Peter Newman of 29 May 1962: “Your detective work on the inf luence of von Neumann in Cambridge seems a bit illogical. The reason why Sraffa could explain him to Champernowne was that Sraffa had already made the discovery”. (Sraffa Papers D3.12.111: 304; https:// mss-cat.trin.cam.ac.uk/manuscripts/uv/view.php?n=Sraffa.D3.12.111#?c= 0&m=0&s=0&cv=367&xywh=-1573%2C0%2C5801%2C3230). 42 For the notes see Sraffa Papers D1/91: 9r-33r that can be consulted at https:// mss-cat.trin.cam.ac.uk/manuscripts/uv/view.php?n=Sraffa.D1.91#?c=0&m= 0&s=0&cv=11&xywh=-27%2C0%2C4969%2C2767. 43 In a draft version of the Preface of Production of Commodities, dated 16 September 1956 and archived as Sraffa Papers D3.12.46: 32b recto, Sraffa wrote that his system is intended (…) to facilitate, on the one hand, the interpretation understanding of certain some theories of the Classical economist + of Marx, which seem (…) to have become (…) misunderstood by (…) modern economists (…) and on the other hand to supply (…) a platform (base, foundation) for discussion re-examination of the marginal theory…. See: https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view.php?n=Sraffa.D3.12. 46#?c=0&m=0&s=0&cv=41&xywh=-1139%2C0%2C5061%2C2818. 44 Some frustrated scholars (see e.g., Porta, 2013: 5–6) complained that Garegnani considered himself (allegedly based on an agreement with Sraffa) to be the interpreter of Sraffa’s writings and had obtained after Sraffa’s death that the archive would remain closed for an indefinite period of time. Potier (1991: 66) mentions that Garegnani originally planned the publication of Sraffa’s collected works, writings, and correspondence. 45 On the Sraffa Archives, see Pasinetti (2001). For the account of the archiving procedures and a full description of the Sraffa Archives with hyperlinks to the various digitised files, see Carter (2019). 46 De Vivo (2001: 159) states that at that time, Marx’s Theorien über den Mehrwert were for Sraffa, “in addition to Cannan’s works, the principal authority on the Classical economists.”

82 Piero Sraffa’s neo-Marxist theory 47 The document from November 1927 is available at https://mss-cat.trin.cam.ac.uk/ manuscripts/uv/view.php?n=Sraffa.D3.12.4#?c=0&m=0&s=0&cv=28&xywh=-1288%2C0%2C4776%2C2659. See also Ginzburg (2014: 13–14), who indicates that Sraffa, when referring to metaphysics in his November 1927 notes, was using this concept in a non-pejorative sense, as being “not only unavoidable but also necessary to render a rigorous theory ‘living’, assimilable and understandable in a particular cultural tradition”. Schefold (1996: 1317) stated: “His preference to base economic theory on objective, measurable data showed in his appreciation of Ricardian economics and, incidentally, in his Ricardian, anti-Hegelian interpretation of Marx”. 48 This can be consulted at https://mss-cat.trin.cam.ac.uk/manuscripts/uv/ view.php?n=Sraf fa.D1.91#?c=0&m=0&s=0&cv=14&x y wh=-27%2C0% 2C4969%2C2767. 49 In the Sraffa Archives, the file D3.12.11 of 1927 contains references and quotations from the three volumes of Capital, as well as Theories of Surplus Value, and the file D3.12.10 of 1928 also references of Marx’s Value, Price and Profit and Contribution to the Critique of Political Economy. 50 Kurz and Salvadori (2010: 196) alleged that this was the case “well into 1929”. However, referring to the same unpublished document, they mention later “Sraffa’s vacillation as late as 1929 as to the possibility of taking labour as a given constant” (Kurz and Salvadori, 2010: 212 n18). 51 See also Ginzburg (2014: 21) and de Vivo (2016: 63–64). In case of a two-sector system without surplus, this procedure would imply that if the ratio of the output of sector 1 to its inputs in both sectors is used to calculate the unit prices ratio p2/ p1, that C 2 = V1 is obtained (after rearranging terms, with C 2 being the constant capital in sector 2 and V1 the variable capital in sector 1), which is Marx’s equilibrium condition based on a reproduction scheme. In a system of equations with a surplus, this evidently becomes impossible, and quantities need to be aggregated using values. 52 Porta (2012: 1370 n26) has stated against the views that Sraffa’s equations are evidence of a “break”: … there was no break or turning point whatsoever: there was instead a continuity of thought consisting in a gradual restriction of the scope of the inquiry, ultimately bound to be reduced to a prelude to a critique of economic theory. The appearance of the ‘equations’ is the first sign of this process of scope restriction. 53 Consider a two-sector reproduction scheme. With C1 and C 2 being the constant capital used up in sector 1 and 2, V1 and V2 being the variable capital, and S1 and S 2 being the surplus value, the equilibrium condition of simple reproduction is C1 + C 2 = C1 + V1 + S1, or C 2 = V1 + S1. Sraffa seems to make the assumption in his “first equations” that with w1 and w2 being the unit values of the output of sector 1 and 2, the ratio is w 1/w 2 = C 2 / (V1 + S1), unless he was using physical quantities. See Garegnani (2005: 468). 54 As Sraffa (1951: li) mentioned, Ricardo used the expression “real value of wages”, in explaining the peculiar sense in which he is to be understood when he speaks of the rise or fall of wages: namely as referring to the proportion of the total product going to labour, and not to the absolute quantity of commodities received by the labourers. (Italics by Sraffa) Using Marxian notation, Ricardo’s “real value of wages” is V/(V+S), whereas Marx’s rate of exploitation equals S/V. The “real value of profits”, as the complement of Ricardo’s “real value of wages”, being S/(V+S), is evidently closely

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related to Marx’s rate of exploitation. Marx considered Ricardo’s concept of relative wages as “one of Ricardo’s greatest contributions” and concluded that “it is only another way of expressing the real theory of surplus value.” (Marx, 1861–1863: 53–54, 226–227) 55 Gilibert (2003: 38) has mentioned the date when that assumption was dropped as on 5 May 1943, when Sraffa found, with wages advanced, the relationship r = R(1 − w(1+r)) and then realised that by assuming wages paid post factum this becomes even simpler: r = R(1 − w). 56 In fact, Sraffa acknowledged that part of the wages is related to subsistence (thus entering A) but refrained “from tampering with the traditional wage concept” and “follow the usual practice of treating the whole of the wage as variable” (Sraffa, 1960: 10). 57 For an in-depth review of the archival evidence of Sraffa’s choice of the wage share over the wage bundle, I refer to Carter (2020). 58 Two workers working for 12 hours a day could not supply the same surplusvalue as 24 workers each working 2 hours, even if they were able to live on air and hence scarcely needed to work at all for themselves. In this connection, therefore, the compensation for the reduced number of workers provided by a rise in the level of exploitation of labour has certain limits that cannot be overstepped… (Marx, 1894: 356). 59 On Ramsey’s and Watson’s contribution, see Kurz and Salvadori (2001b); on Besicovitch: Kurz and Salvadori (2008). 60 Mattioli and Sraffa were friends since their time as students. According to a legend, repeatedly denied, Mattioli had kept Gramsci’s prison notebooks, that were saved by Sraffa, in a vault at the Banca Commerciale.

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Let one hundred schools of thought blossom …: some major differences compared with Marx

Except for Marxist economists, few modern economists have something to say about what is “behind” value. Marxists, however, consider value from both a quantitative and a qualitative perspective (Sweezy, 1942: 32–33). The qualitative perspective stresses that what two “commodities” that are exchanged have in common, is that they are both produced by human labour. In the mind, it is argued, both the process of production and the exchange of the produce will take the form of a relationship between things – physical means of production, combined with labour, or: textiles exchanged against wheat… – but in reality, a social relationship is involved. What is produced and exchanged has been done under capitalist social conditions. The social relationship involved in the production process and the exchange of commodities appears in a “fetishised” form. Marx called this “commodity fetishism”, a concept that he elaborated at length in Volume I of Capital. He wrote in this connection: … the commodity form, and the value-relation of the products of labour within which it appears, have absolutely no connection with the physical nature of the commodity and the material [dinglich] relations arising out of this. It is nothing but the definite social relation between men themselves which assumes here, for them, the fantastic form of a relation between things. In order, therefore, to find an analogy we must take f light into the misty realm of religion. There the products of the human brain appear as autonomous figures endowed with a life of their own, which enter into relations both with each other and with the human race. So it is in the world of commodities with the products of men’s hands. I call this the fetishism which attaches itself to the products of labour as soon as they are produced as commodities and is therefore inseparable from the production of commodities. (Marx, 1867: 165). And also: The degree to which some economists are misled by the fetishism attached to the world of commodities, or by the objective appearance of the social characteristics of labour, is shown, among other things, by the DOI: 10.4324/9781003283416-9

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dull and tedious dispute over the part played by nature in the formation of exchange-value. Since exchange-value is a definite social manner of expressing the labour bestowed on a thing, it can have no more natural content than has for example, the rate of exchange. (Marx, 1867: 176) Regarding the process of production, he elaborated: … from the standpoint of both capitalist and worker, the means of production as an existing form of capital, as eminently the capital of labour, confront the other component in which capital has been invested and hence appear potentially to have a specific mode of existence as capital even outside the production process. (…) This is why we find in the capitalist process of production this indissoluble fusion of use-values in which capital subsists in the form of the means of production and objects defined as capital, when what we are really faced with is a definite social relationship of production. In consequence the product embedded in this mode of production is equated with the commodity by those who have to deal with it. It is this that forms the foundation for the fetishism of the political economists. (Marx, 1867: 983) For reasons that I will discuss later, Sraffa left the fundamental issue of commodity fetishism, the substance of value and the labour theory of value, unmentioned in Production of Commodities by Means of Commodities (Sraffa, 1960). However, reformulating the Marxist “circular f low” model using the algebra of non-negative matrices (see on this: Cuyvers, 2017), will allow us to investigate the differences compared with Sraffa’s model. In this chapter we will deal first with value from a Marxian and a Sraffian perspective, after which Sraffa’s treatment of the wage rate, the rate of profits, “basics” and “non-basics”, changes in technology, and joint production will be discussed in relation to Marx’s economics. Sraffa’s unpublished papers and notes also refer to some other aspects of Marx’s economic model, such as the secular behaviour of the rate of profits and of the organic composition of capital. These topics were not covered in Production of Commodities by Means of Commodities but will be discussed as well.

7.1 Embodied labour as the substance of value For Marxists, human labour is not just a standard to measure value, it is the substance of value. They claim to look below the surface, beyond appearances, when investigating value from the quantitative perspective. A commodity has absorbed part of society’s total expenditure of labour power. The substance of value is abstract labour, hidden behind the exchange value, the “phenomenal form”. The labour value of a commodity is the amount of abstract labour

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that is directly and indirectly (via the means of production used) required to produce one unit of that commodity. As is well known since, e.g., Cameron (1952), labour values are the solution of the system of equations: Λ = AΛ + l

(6)

with A and l as defined before and Λ, the column vector of labour values. The solution of (6) is: Λ = (I − A )−1 l

(7)

or: Λ = l + Al + A 2 l + A 3l + A 4 l + A 5l +  It is thus found that the unit labour value λi is a sum of the labour time that is directly and indirectly (via the used up means of production) spent on the production of commodity i. Marx (1867: 129–130) indicated: Socially necessary labour-time is the labour-time required to produce any use-value under the conditions of production normal for a given society and with the average degree of skill and intensity of labour prevalent in that society. (…) The value of a commodity would therefore remain constant, if the labour-time required for its production also remained constant. But the latter changes with every variation in the productivity of labour. This is determined by a wide range of circumstances; it is determined amongst other things by the workers’ average degree of skill, the level of development of science and its technological application, the social organization of the process of production, the extent and effectiveness of the means of production, and the conditions found in the natural environment and “… value at any given time is measured by the labour socially necessary to produce them, i.e. by the labour necessary under the social conditions existing at the time” (Marx, 1867: 318). This socially necessary labour time decreases continuously. The production of commodities must be fully developed before the scientific conviction emerges, from experience itself, that all the different kinds of private labour (which are carried on independently of each other; and yet, as spontaneously developed branches of the social division of labour, are in a situation of all-round dependence on each other) are continually being reduced to the quantitative proportions in which society requires them. The reason for this reduction is that in the midst of the accidental and ever-f luctuating exchange relations between the

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products, the labour-time socially necessary to produce them asserts itself as a regulative law of nature. In the same way, the law of gravity asserts itself when a person’s house collapses on top of him. (Marx, 1867: 168) Moreover, the socially necessary labour time for a given commodity is an average that changes with changes in the method of production: the old-established conditions of production (…) are thrown into the melting-pot (…). What was yesterday undoubtedly labour-time socially necessary to the production of a yard of linen ceases to be so today, a fact which the owner of the money is only too eager to prove from the prices quoted by our friend’s competitors. (Marx, 1867: 202) In other words, when applied to (6) and (7), the elements of A and l are assumed given at each moment in time by the methods of production applied by capitalist producers. As indicated already, Sraffa’s equations (2) have led to a solution p = wl + (1 + r )Awl + (1 + r )2 A 2wl + (1 + r )3 A 3wl + (1 + r )4 A 4 wl + (1 + r )5 A 5wl The price pj of commodity j is the sum of dated quantities of labour (Sraffa, 1960: 34–35). It differs from the solution of (7) in that an indirect labour expenditure of n “years” back in the past is “capitalised” by multiplying it with a factor (1 + r)n. When the wage rate moves from 0 to 1 (and r from R to 0) the “value” of each “labour term” will change in a complicated way. At r = 0, prices are proportional to labour values Λ and since at r = R, w = 0, “the wage vanishes and with it vanishes the value of each labour term” (Sraffa, 1960: 36). The situation that r = 0 corresponds to Sraffa’s “Value Theory of Labour”. He wrote in February 1955 in the margin of a note of December 1946: In the dust raised by the controversies on the Labour Theory of Value, a valuable (…) aspect has been overlooked, or what might be called the Value Theory of Labour. (…) For whatever disputes there may be about the determination of value by the quantity of labour, there can be no doubt (nobody doubts so far as I know) that the value of a commodity (its price for r = 0) determines (i.e. measures) the quantity of labour which directly or indirectly has entered into its production.1 (Sraffa Papers D3.12.44:3) And in another note of mid-1955, archived as D3.12.46:24–28: Discussions on the relation between labour & value are apt to concentrate on the inf luence of the former upon the latter. There is some interest

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however in looking into the other end of the telescope, namely starting from the value to discover the quantity of labour.2 (Sraffa Papers D3.12.46:24) What is important here is that behind Sraffa’s “dated quantities of labour” in his Production of Commodities by Means of Commodities, Marx’s “substance of value” is lurking. Sraffa’s approach identifies homogeneous (what Marx called, “abstract”) labour as the substance of his prices of production. This is in sharp contrast to, for instance, Joan Robinson’s opinion that value is “a metaphysical notion” (Robinson, 1942: xi), that it has “no operational content” and is “just a word” (Robinson, 1962: 47),3 or to Joseph Schumpeter who accused Marx of being “under the same delusion as Aristotle, viz., that value, though a factor in the determination of relative prices, is yet something that is different from, and exists independently of, relative prices or exchange relations” (Schumpeter, 1943: 23n2). Starting from values as embodied labour, Marx had to establish the relationship with so-called prices of production. These are prices based on an average rate of profits applied to the capital advanced. Establishing this relationship between labour values and prices of production is known as the “transformation problem”. Marx considered this “transformation” of labour values into prices of production as a process of pooling and redistribution of surplus value. In a sector with “average composition of capital”, the “quantity” of surplus value produced and that received as profits would be equal. As Dobb (1961) and Meek (1961) remarked soon after Production of Commodities by Means of Commodities was published, Sraffa’s standard system performs the same function as the “sector with average composition of capital” in Marx’s procedure.4 The “transformation problem” refers to the fact that the transformation of values into prices of production can be done under the assumption that total surplus value (pooled and redistributed) is equal to total profits, but then the total value of output will differ from output “valued” at prices of production; or we can assume that output aggregated in values or in prices are the same, but then total profits will differ from total surplus value. Of course, pooling and redistributing of surplus value should not change the aggregates involved, but it does. It is at this point that Sraffa enters the picture. It is easy to show that in the standard system, and assuming that Marx’s value of labour power is equal to w, the value and price aggregates are equal: Multiplying (6) by q*, the output proportions in Sraffa’s standard system, and (3) by Λ and p respectively, gives q* Λ = q* AΛ Λ + q* l = (1 + R )q* AΛ q* p = (1 + R )q* Ap Because of (4), q* l = Rq* AΛ = 1

(8)

94 Piero Sraffa’s neo-Marxist theory

From (1), it follows that q* p = (1 + r )q* Ap + w and therefore that q* (I − A )p = r q* Ap + w = Rq* Ap = 1 (being the standard product, taken as numéraire). From (4) and (8), we find equality Rq* AΛ = Rq* Ap The standard net product is the same, whether valued in prices or in labour values. Since R q* A Λ consists of surplus value S and the wages, we write Rq* AΛ = S + w = Rq* Ap = r q* Ap + w This shows that in Sraffa’s standard system, total profits are also equal to total surplus value: S = r q* Ap = r q* AΛ Λ With total profits equal to surplus value and the standard net product in prices equal to that in labour values, it evidently follows that q* p = q* Λ , i.e., total output of the standard system when aggregated in values and in prices of production are equal. Thus, in the standard system, the transformation of values in prices of production leaves all aggregates unchanged. Quod erat demonstrandum. Moreover, in Sraffa’s standard system, the rate of profits and the average rate of profits in Marx’s model are identical: r = S / q* AΛ Λ In the standard system and assuming w is equal to the value of labour power, Marx’s rate of exploitation is also equal to the ratio of profits to the wage bill.5

7.2 Sraffa’s wage rate and Marx’s social necessary consumption Both in the Classical economists’ “physical cost of production” approach, and in Marx, workers receive per unit of labour time worked, a given “basket”

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of consumer goods and services, that will allow the “reproduction” of the labour force. Marx writes in a famous passage of Volume I of Capital: The value of labour-power is determined, as in the case of every other commodity, by the labour-time necessary for the production, and consequently also the reproduction, of this specific article. In so far as it has value, it represents no more than a definite quantity of the average social labour objectified in it. Labour-power exists only as a capacity of the living individual. Its production consequently presupposes his existence. Given the existence of the individual, the production of labour-power consists in his reproduction of himself or his maintenance. For his maintenance he requires a certain quantity of the means of subsistence. Therefore, the labour-time necessary for the production of labour-power is the same as that necessary for the production of those means of subsistence; in other words, the value of labour-power is the value of the means of subsistence necessary for the maintenance of its owner. (…) If the owner of labour-power works today, tomorrow he must again be able to repeat the same process in the same conditions as regards health and strength. His means of subsistence must therefore be sufficient to maintain him in his normal state as a working individual. His natural needs, such as food, clothing, fuel and housing vary according to the climatic and other physical peculiarities of his country. On the other hand, the number and extent of his so-called necessary requirements, as also the manner in which they are satisfied, are themselves products of history, and depend therefore to a great extent on the level of civilization attained by a country; in particular they depend on the conditions in which, and consequently on the habits and expectations with which, the class of free workers has been formed. In contrast, therefore, with the case of other commodities, the determination of the value of labour-power contains a historical and moral element. Nevertheless, in a given country at a given period, the average amount of the means of subsistence necessary for the worker is a known datum. (Marx, 1867: 274–275) To “translate” this into the mathematics of Marx’s model, we need to introduce a vector c of “necessary consumption” per unit of labour time, and the matrix A of input–output coefficients has to be converted into a matrix B = A + l c, with l being the column vector of labour inputs per unit of output. The elements of c are thus partly based on subsistence consumption levels, but also contain an important “institutional” component (Marx’s “historical and moral element”) and cannot be equated with the necessary consumption of slaves, which Sraffa compares with “fodder given to horses, the amount of fuel given to a machine, the amount of manure given to land” (Sraffa Papers D3.12.9:89). As a result, B will combine both coefficients based on technological data and coefficients ref lecting the “physical cost” (William Petty) of the reproduction of the labour power.

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With the elements of B thus given, the surplus in Marx’s model is determined. Cartelier (2014: 176) stated in this respect: The surplus is observed only logically after matrix B is known. (…) Real wages are all included in that matrix not because wage-earners could not work without them (a physical necessity), but only because real wages are what they are. Whatever the process of determination of B may be – market, negotiation, class struggle, etc. – real wages are as (socially) objective as prices. And he formulated the proposition against the Sraffa approach of “surpluswages”: “Given the social conditions of an objective observation of the surplus in an economy with entrepreneurs and wage-earners, assuming that wage-earners may get a fraction of the surplus is selfcontradictory”. Today, the average wage rate, at least in developed industrial countries, is largely unrelated to the “subsistence level”. Wage-earners are on average spending their wages on a basket of goods and services based on a slowly evolving and historically determined consumption pattern. Under such circumstances, the elements of the vector c are very similar to what in many industrial countries is the basket of consumer goods and services used for calculating the index of consumer prices (Cuyvers, 2017: 58–59). Similar to Sraffa’s real wage rate, it is fixed and governed by conditions other than those determining total output and the shares of non-labour incomes in the net product (Garegnani, 1984: 295–296), but it consists of the “average necessary consumption” of workers. I would agree with Stephen Marglin’s conclusion that “subsistence consumption” should be considered as a nominal basket of goods that workers struggle about but do not necessarily consume. That is, workers and capitalists may be assumed to bargain over a real wage that ref lects a conventional consumption bundle in a given historical situation. The real wage emerges as a consequence of this struggle. Commodity prices must allow workers to purchase the “conventional” consumption bundle, the product of history and class struggle, with their nominal wages whether or not any particular worker wants to consume the conventional bundle. (Marglin, 1984: 268) That the necessary workers’ consumption is a vector (of consumer goods), not a scalar (the share of wages in the surplus, as in Sraffa’s model) also seems to be behind Bellofiore’s remark: In a monetary production economy, firms as a whole are in fact setting the amount of the real consumption goods which are left available to workers. From the point of view of the pure market dynamics, the

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‘freedom to choose’ is something pertaining to individual consumers, not to the working class as a whole. (Bellofiore, 2008: 86). In fact, as shown by equation (7), l c plays no role in the determination of labour values. The elements of the matrix A, however, are of crucial importance in the reproduction of the economic system. It remains to be seen whether the issue of ante factum payment of wages is important. Until 1942, Sraffa considered wages as “advanced” by the capitalists and therefore as part of the capital advanced. But he abandoned this assumption, because post factum wage payment allowed for a simpler relationship between R and r (Gilibert, 2003: 37–38), and because it resulted in a linear relationship between w and r. Indeed, if wages are advanced, and the rate of profits also applies to the variable capital V, the relationship between r and w (both measured in units of Sraffa’s standard system) becomes non-linear (Benetti, De Brunhoff and Cartelier, 1976: 34): a fall in wages will not lead to a proportional increase in r. From a Marxist point of view, the need for an “invariable measure of value” is a purely Ricardian problem and the loss of linearity in the w–r relationship is only to be regretted for “aesthetic” reasons. From the early discussions of Sraffa’s model among Marxists, it has rightly been stressed that Sraffa’s surplus-wage concept misses the important point that surplus value, and hence profits, are the outcome of the exploitation of labour under capitalist production (see, e.g., De Brunhoff, 1974; Laibman, 1974). However, today the issue is more complex. Apart from the exploitation of labour power, the class struggle of labour organisations in present-day capitalism, has also been affecting the wage-setting processes outside the realm of the production process. This consideration underlies Dobb’s remark that Collective bargaining, as soon as it developed, introduced a new element into the situation; and as a result, the price of labour-power need no longer correspond with its value but could rise at the expense of surplus- value. For theoretical purposes one will now have to adopt as datum the degree and market-inf luence of labour-organisation, since this determines how much of what in the ‘pure’ case was surplus-value is now included in the wage. (Dobb, 1973: 262–263) Bhaduri and Robinson (1980: 106) also took the defence of Sraffa’s wages concept: The rate, or better the ratio, of exploitation (i.e., the share of wages in the surplus – L.C.) is not determined by the technical specification of the system. It is an independent element in the situation which may be explained by the fortunes of the class war.

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It is evidently correct that at times organised labour will succeed in getting a wage increase at the expense of profits, thus capturing “surplus-wages” for the working class. Against Dobb’s argument and as mentioned before, however, I do not see any reason for abandoning Marx’s concept of necessary consumption as a basket of consumer goods and services that is given at each moment in time, let alone adopting “surplus-wages” as more than a temporary phenomenon that, if sufficiently long-lasting, will lead to changes in the necessary consumption basket.6 Finally, it needs to be stressed, in anticipation of what follows in § 7.3., that by abandoning the “consumption basket” concept, and thus by equating society’s net product with its surplus, Sraffa also abandoned what the physiocrats, Ricardo, and Marx considered a crucial insight: that the rate of profits is not determined in the sphere of circulation and is logically prior to the prices of production. As a result, Sraffa’s procedure sees wages and profits as determined by the struggle over the distribution of income, with R ≥ r ≥ 0, moving between “the boundaries (or extremes) of the distribution parameter independent of the value system” (Carter, 2017a: 200). It does not take much imagination to consider Sraffa’s “surplus-wages” as a post-Keynesian neo-Marxist concept, that is intended to ref lect the situation in a developed capitalist economy where wages are determined not by Marx’s “value of labour power”, but solely by the class struggle. Sraffa’s wage concept is clearly in agreement with the post-Keynesian neo-Marxist critique of Marx’s value of labour power as based on a bundle of necessary wage-goods. Baran (1957: 55) pointed out that the subsistence wage level is continuously increasing and that, therefore, the hypothesis that wages are hovering around this level can neither be confirmed nor falsified, and Baran and Sweezy (1966: 145) criticised the concept of a conventional subsistence minimum that makes real wages “for all practical purposes” irreducible.7 Also in Joan Robinson’s model, the evolution of nominal wages is determined by class struggle, until the “inf lation barrier” is reached, which generates powerful price inf lation and forces the capitalist system to respect the generally accepted workers’ standard of living (Robinson, 1956: 48). Sraffa’s concept is thus also in line with the views of other “founding fathers” of post-Keynesian neo-Marxist economic theory (see Part 3, § 12.5, and Cuyvers, 1979: 332–333). As mentioned in Part 1, Sraffa’s surplus-wages are also accepted by Baran and Sweezy.8 I am not suggesting that Marxist economists should discard Sraffa’s “surplus-wages”. The time period considered should determine which model is the most relevant. In the short period, particularly in times of an economic upswing, wages can be split into a large part that ref lects the historical elements of Marx’s value of labour power, and another part that, as a result of trade union strength, can be considered as “surplus-wages”. As a result and provided these “surplus-wages” are paid out over a sufficiently long period (the average length of this time period differs depending on social-cultural factors and social-psychology), workers’ consumption

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patterns will change. That way Sraffa’s model with “surplus-wages” can help introducing wage dynamics in the Marxian model and R, Sraffa’s maximum rate of profits, as a scalar associated with matrix A, indicates exactly what it is: the maximum rate of profits. The surplus-wages of the recent past will become permanent and, having led to a new workers’ consumption pattern c’, the rate of profits will drop to a lower level, unless, in accordance with Marx’s “absolute general law of capitalist accumulation” (Marx, 1867: 798), the increase in wages is compensated by the introduction of labour-saving production methods. From the perspective of modelling the long period, “normal reproduction”, as a condition of longer-term economic and social viability of the capitalist mode of production, must be assumed and the average workers’ consumption basket will be relevant, not the surplus-wages that have led to that basket.

7.3 The rate of profits as derived from the system of physical input–output f lows In Production of Commodities by Means of Commodities, it is stated that prices and the rate of profits are determined simultaneously (Sraffa, 1960: 6). The rate of profits cannot be dissociated from the prices. However, this conclusion is based on the assumption that wages are paid at the end of the production period. If we adhere to the Classical and Marxist assumption that wages are “advanced” and are spent on the workers’ necessary consumption, the price system and the standard system are as follows: p = (1 + r )Bp

(1’)

q = (1 + r )Bq

(3’)

with B = (A + l c). Interestingly, in his notes during the period from 1927 to 1931, Sraffa was implicitly considering this system of physical input requirements, “augmented” with the necessary consumption of the workers. He wrote: There appears to be no objective difference between the labour of a wage earner and that of a slave; of a slave and of a horse, of a horse and of a machine, of a machine and of an element of nature (? this does not eat). He added, however: It is a purely mystical conception that attributes to human labour a special gift of determining value. Does the capitalist entrepreneur, who is the real “subject” of valuation and exchange make a great difference whether he employs men or animals? Does the slave owner? (Sraffa Papers D3.12.9:89)9

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He elaborated further on this issue in another note as follows: The food and other necessaries for efficiency of slaves are determined in the same way as the amount of fodder given to horses, the amount of fuel given to a machine, the amount of manure given to land: they are not determined outside economies (…), but for the present purpose they are regarded as given constants. (Sraffa Papers D3.12.7:62)10 In (1’) and (3’), r is a structural characteristic of the matrix of inter-sectoral inputs of means of production and the workers’ necessary consumption. Mathematically, assuming that B is strictly positive, µ=1/(1+r) is an eigenvalue associated with B, such that (µI – B) = 0. It is the analogue of what Sraffa called in his March 1955 Majorca draft the quantity ratio ρ, associated with matrix A, which is identical to R, the maximum rate of profits (Carter, 2017a: 200, 225 n10).11 There are as many µ’s as there are sectors (equations). The r’s that are derived from these eigenvalues indicate the ratio between the physical surplus produced and the total physical output. The system of equations (3’) depicts an economy that behaves like the pure “corn” economy, that Sraffa (1951: xxxi–xxxii) suggested was underlying Ricardo’s theory in An Essay on the Influence of a Low Price of Corn on the Profits of Stock.12 In such an economy, inputs and outputs are physically the same and the rate of profits is equal to the ratio between the physical surplus and the physical inputs advanced, and there is no need for an “invariable measure” of value. Similar to a pure “corn” economy, the output proportions of (3’), although consisting of heterogeneous products, show in each sector a proportion r between the surplus produced and the total supplies to all the sectors, that is the same and equal to the rate of profits. However, of all the µ’s, only that associated with the lowest r will lead to a positive vector p and q. All other (higher) r’s give rise to some negative prices and outputs, which is evidently nonsensical. The point is that in systems (1’) and (3’), r is not determined simultaneously with p but is prior to p. It is striking that by considering the rate of profits as not determined simultaneously with prices of production, the argument seems to be close to that of Ricardo’s view, that was criticised by Marx in Theories of Surplus Value. Marx’s position is that the average or general rate of profits “is formed through the total surplus value produced being calculated on the total capital of society (of the class of capitalists)” (Marx, 1861–1863b: 68 – [XIII-670]). Marx continues his argument against Ricardo by referring to the transformation of values in prices of production that he discusses in Volume III of Capital: It is evident, that the emergence, realisation, creation of the general rate of profit necessitates the transformation of values into cost prices that are different from these values. Ricardo on the contrary assumes the identity of values

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and cost prices, because he confuses the rate of profit with the rate of surplus value. Hence he has not the faintest notion of the GENERAL CHANGE which takes place in the PRICES of commodities, in the course of the establishment of a GENERAL RATE OF PROFIT, before there can be any talk of a GENERAL RATE OF PROFIT. He accepts this RATE OF PROFITS as something pre-existent which, therefore, even plays a part in his determination of value. (See CH. I, “On Value”.) The GENERAL RATE OF PROFIT having been presupposed, he only concerns himself with the exceptional modifications in prices which are necessary for the maintenance, for the continued existence of this GENERAL RATE OF PROFIT. He does not realise at all that in order to create the GENERAL RATE OF PROFITS VALUES must first be transformed into COST PRICES and that therefore, when he presupposes a GENERAL RATE OF PROFITS, he is no longer dealing directly with the VALUES OF COMMODITIES. (Marx, 1861–1863b: 69 – [XIII-671] – Marx’s emphasis) That r is determined prior to prices of production is clearly also Marx’s view. Marx’s surplus value is unpaid labour, i.e., the difference between labour time spent and the labour time that is necessary for the reproduction of the labourer. As Porta (1986: 448) remarked, Marx felt “an inherent need to escape the logical necessity of determining the rate of profit and prices simultaneously”. He therefore praised the physiocratic system as the first political economic system that “transferred the inquiry into the origin of surplus value from the sphere of circulation into the sphere of direct production, and thereby laid the foundation for the analysis of capitalist production” (Marx, 1861–1863a: 354). But Marx considered his analysis of the economic surplus in terms of surplus labour, which allowed the determination of the rate of profits as prior to the transformation of embodied labour into prices of production, as superior to that of the physiocrats: So what they (the physiocrats – L.C.) say is not: the labourer works more than the labour-time required for the reproduction of his labour capacity; the value which he creates is therefore greater than the value of his labour capacity; or the labour which he gives in return is greater than the quantity of labour which he receives in the form of wages. But what they say is: the amount of use values which he consumes during the period of production is smaller than the amount of use values which he creates, and so a surplus of use values is left over. (Marx, 1861–1863a: 359) Marx evidently felt the need to measure output in embodied labour, because he had to aggregate the society’s surplus product by using a measure that is invariable to changes in the rate of profits. To the value system (6) belongs a

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dual output system of use-values: q = q A + N, with N being the vector of net outputs,13 from which, following the duality theorem, it can be derived that q l = N Λ, i.e., that total labour expenditure equals the labour embodied in the net output. Although the surplus product, as a vector of use-values, emanates from the dual system of use-value production, Marx’s average rate of profits is “total surplus value produced being calculated on the total capital of society”. Marx’s dual view on value and use-value creation in a circular f low system was evidently not based on the mathematical characteristics of the system. Therefore, he did not regard r as a dominant parameter associated with that dual use-value system of physical circular f lows and immediately related to the overall “rate of physical surplus”. That the rate of profits is a dominant parameter of the productive system can, however, also be demonstrated by further investigating the economic meaning of the mathematics involving the eigenvalues of matrix A, which is assumed as indecomposable. The column sums of A show the proportion of the output of each product that is supplied as inputs, i.e., each industry’s “rate of physical surplus”. Denoting the maximum eigenvalue of A by µ*, the largest column sum of A by Γ and the smallest by ρ, it can then be asserted that, Γ > µ* > ρ. From this, it follows that r = (1−µ*)/µ*, the uniform rate of profits, must lie between the largest and the smallest “industry rate of physical surplus” (Newman, 1977: 352). As just mentioned, only the smallest r will lead to positive prices. Since for any other r, it will hold that p/w ≤ [I – (1+r) A]−1 l, these solutions contain negative prices, all other r’s are irrelevant for the viability and reproduction of the economic system of input–output relations (1) and (3). The same argument holds if we start from matrix B. With wages paid post factum and considered as a share in the surplus, one can decide how to “close” the system. The “surplus-wage” can be assumed as given and the system can be solved for the rate of profits, or, alternatively, one can take the rate of profits as given and solve for the unknown wage share. At that point, Sraffa (1960: 39) suggested that the rate of profits is determined by the “money rate of interest”. To be sure, this is an interesting avenue to follow, since it will link the price vector p to Keynesian and post-Keynesian monetary theories that view the rate of interest as a purely monetary phenomenon, unrelated to the “real economy”.14 In fact, as Panico (1988a: 298–299) has shown, Sraffa adhered to a “conventionalist” theory of the interest rate, that is also found in Keynes’s General Theory.15 The price to be paid for this U-turn is that the rate of profits, which should be a structural scalar that derives from the input–output relations between the various spheres of production, becomes exogenous. Interestingly, Panico (1988a: 186–187) introduced the rate of interest as a separate variable in the Sraffa model (including risk premia that have to be deducted from the yield of the assets) and showed that this, although at first sight, making the distributive variables r and w endogenous again, will give monetary policy an exogenous inf luence on distribution and prices.

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7.4 The role of “luxuries” and “non-basics” If it is assumed that wages are based on a “basket” of workers’ consumer goods, required for the reproduction of labour power (similar to the “subsistence real wage rate”), non-wage consumer goods are “luxuries” that are not entering under the social-technological conditions of production in matrix B. In Sraffa’s analysis (in which he followed Ricardo’s arguments), “luxuries” play no role in the determination of the prices of other goods and services, and they have no impact on the rate of profits in a situation of equilibrium. Garegnani (1984: 319)16 pointed out: … the proportion of labour to means of production on which the rate of profit depends is that of the integrated wage-goods sector, and not that of the economy as a whole as Marx thought. This in turn implies that he was mistaken in believing that changes in the relative outputs of commodities could affect the rate of profit, through variations in the proportion of labour to the means of production in the community. It also implies that Marx was equally wrong when he thought that, through the same variations, changes in the technical conditions of production of “luxuries”, or of their specific means of production, could affect the rate of profit. In fact, that “luxuries” play no role in the determination of r can be derived from considering (3’) as the system of outputs q that is expanding at the rate r  = g, with g being the maximum rate of growth of the system. “Luxuries” will absorb inputs that would otherwise be used to produce q, and as a result, the rate of growth will be lower than g. To have maximum growth g, the outputs of “luxuries” in the vector of growth maximising outputs necessarily have to be zero. On analysing the role of “luxuries” in the reproduction process, Marx (1867: 983) wrote: “This sort of productive labour produces use-values and objectifies itself in products that are destined only for unproductive consumption. In their reality, as articles, they have no use-value for the process of reproduction” (Marx’s italics). Since the capitalists’ consumption of “luxuries” can be considered as a trif le from a macro-perspective, this result did not bother Marxists too much. It was also remarked that some sectors being excluded in Sraffa’s standard system can only be understood as due to the assumption of a uniform rate of profits (Benetti and Cartelier, 1977: 162). Mandel (1975: 289– 290) even claimed, whether or not as a conscious misinterpretation, that Sraffa fell into the “error” of von Bortkiewicz “to discard Marx’s thesis that the sum of the production prices is equal to the sum of values” to find that “luxuries” are not inf luencing the rate of profits. Once it is realised that, e.g., armaments and ammunition belong to this category, Sraffa’s result becomes much less of a trif le. There is a long Marxist tradition that considers armaments spending as an “external market” that makes an important

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contribution to effective demand under monopoly capitalism. This argument was made by Marxists from Rosa Luxemburg (1913: 466) to Baran and Sweezy (1966), and by neo-Marxists and post-Keynesian economists such as Michał Kalecki (1967: 155), Josef Steindl (1967: 199), and Joan Robinson (1956: 93, 273). Occasionally, Sraffa’s concepts of basics and non-basics were attacked. Farjoun (1974: 32) stated that further disaggregating sectors up to individual product levels will make all products “non-basics” (forgetting that his “f lat rolled iron sheets of specific quality of thickness” will enter into the production of another product, that will enter into another one…, and through these indirect linkages is a “basic”). In contrast to this opinion, Newman (1977: 353) suggested that by aggregating spheres of production, a lot of “non-basics” would disappear, which, of course, misses Sraffa’s point, and the case of arms production shows that “the rather heavy emphasis placed on such commodities by Sraffa” is justified. I already quoted Garegnani’s provocative conclusion. It rests on the tacit assumption that the “own rate of reproduction” of the “non-basics” subsystem (or Newman’s “industry rate of physical surplus”), i.e., the ratio of physical surplus and output, is larger than that of the “basics” subsystem. Following Newman’s argument (Newman, 1977: 352–353), Abraham-Frois and Berrebi (1997: 67–71, 166–167) showed that when the dominant eigenvalue of matrix A is, in terms of (1c), that of A 22, the rate of profits must be lower than the maximum rate of profits; if the rate of profits is equal to the maximum rate as determined by the “non-basics”, the prices of the basics will be zero. This is the case when “non-basic” goods enter their own production in an “abnormally high” proportion. It will rule out the possibility for a uniform rate of profits, determined by the production conditions of the “non-basics”.17 However, if in Sraffa’s model, the rates of profits of the two subsystems are allowed to be different, i.e. that of the “basics” higher than that of the “non-basics”, it seems justified that “non-basics” inf luence the average rate of profits of the economy (a lower rate of profits in some “non-basics” sectors, such as, e.g., those producing arms and ammunition, more than balanced by high government demand and/or subsidies). Alternatively, if the dominant eigenvalue of matrix A is that of A11, such that the “basics” determine the average rate of profits of the economic system, sectoral rates of profits might well differ due to differences in the degree of monopoly between sectors (Cuyvers, 2017: 61–62). What does Marx himself have to say on “luxuries”? An inspection of his writings reveals a conviction that changes in the conditions of production of “luxuries” have an impact on the average rate of profits. While investigating the relationship between the rate of profits and economies in the use of constant capital, Marx (1894: 177) stated in Volume III of Capital: It must be noted how this rise in the rate of profit brought about by a reduction in the value of the constant capital, and thus in its expense, is

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completely independent of whether the branch of industry in which it takes place produces luxury products, means of subsistence that enter the consumption of the workers, or means of production. (My italics) But Marx’s comments in Theories of Surplus Value on Ricardo’s treatment of luxuries (Ricardo, 1821: 393–394) are more about how surplus value is realised through the inter-sectoral transactions of capitalists related to the surplus product (Marx, 1861–1863b: 197, 200). He also went into detail with regard to Malthus’ theory (Marx, 1861–1863b: 235–238) and stated clearly that capitalists in sectors producing luxuries and, in sectors producing the means of production needed for that production, “have no real SURPLUS PRODUCE, nothing in which surplus labour time is embodied” (Marx, 1861–1863b: 240). Going back now to a comparison of Marx and Sraffa on the impact of “non-basics” on the rate of profits, we come to the conclusion that, according to Marx: (1) the “non-basics” spheres of production share in the equalisation of the sectoral rates of profits; (2) economies in the use of constant capital in these spheres, given the surplus value, will increase the rate of profits; and (3) these sectors are not producing a surplus product and are therefore not contributing to the surplus value. Of course, these three statements are mutually contradictory.18 In Appendix 1, it is shown that Marx’s point that luxuries “have no real SURPLUS PRODUCE, nothing in which surplus labour time is embodied” (Marx, 1861–1863b: 240), can be confirmed. At the same time, it is shown that q2 = 0 (the vector of proportionate output quantities of “non-basics”), from which it follows that the sector of “luxuries” production has no inf luence on the average rate of profits. They (as “non-basics”) are neither included in the numerator (total value of the surplus product, i.e., the total surplus value), nor in the denominator (the total value of the means of production used up) of Marx’s average rate of profits formula. Evidently, the story is entirely different if we consider recurring capitalist “underconsumption” and “underinvestment” in a situation with a plethora of capital (Mandel, 1978: 56–57), which leads to surplus value realisation problems that are eased by government spending, such as on armaments (Cuyvers, 1980). It is clear that Marx considered the realisation of the surplus value produced in these “non-basics” sectors. It is also clear that he had no “steady state” economy in mind, but a dynamic capitalist system, where surplus value is realised through inter-sectoral transactions. It should also be remembered that Marx’s mechanism for the realisation of the surplus is essentially the same as Kalecki’s “capitalists get what they spend” mechanism, implying that the capitalists’ spending on luxuries contributes pari passu to profits realisation at the macro-economic level (Bhaduri and Robinson, 1980: 109).19 Therefore, Roncaglia’s warning is well founded: the distinction between “basics” and “non-basics” can be used in the context of a dynamic problem (…) only with the greatest caution. The vigorous use of Sraffa’s distinction between basic

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and non-basic products is thus, in fact, only possible within the limited confines of the theoretical problem proposed by Sraffa, the determination of prices of production and of the inf luence of the distributive variables on these prices. (Roncaglia, 1978: 61 – my italics)

7.5 Taking a “snapshot” or investigating the economy in normal reproduction? In Production of Commodities by Means of Commodities, Sraffa considered a “snapshot” of the economy (see on this Kurz and Salvadori, 2018), taken at the end of the production period, but before the products are sold. This allowed him to avoid a discussion on an assumption of constant returns to scale (Sinha, 2012). Because of the “snapshot” of the economy, no changes in the use of labour and means of production take place, and Sraffa could voice his criticism of the neoclassical theory in the loudest possible way. Yet, the set of equations (3) can also be interpreted as depicting an economy that is expanding at the maximum rate of growth R, with q* as the outputs of that economy, moving along that “balanced equilibrium growth path” (dixit Morishima). In this interpretation, it must necessarily be assumed that the elements of A in (3) – or B in (3’) for that matter – are given and remain constant. Considering a situation without technical change, Sraffa remarked already in 1926: In normal cases the cost of production of commodities produced competitively  – as we are not entitled to take into consideration the causes which may make it rise or fall – must be regarded as constant in respect of small variations in the quantity produced. (Sraffa, 1926: 540–541). As to the elements of A, constant returns to scale are now implied, which, from a long-term perspective, is a heroic assumption.20 When the economy is expanding, economies in the use of means of production will take place, possibly as the result of an increased division of labour and the specialisation involved, and with technological innovation and technical change, the relative importance of means of production and of labour will change. Hence, the elements of A will vary exogenously. With matrix B, we also have to consider the elements of the vector c, the “necessary consumption” goods. These coefficients should also remain constant. Then total necessary consumption is expanding at the rate of growth R because the labour expenditure q* l is increasing at the same rate. And that requires the assumption that labour is available and “can be expanded in unlimited quantities” (von Neumann, 1945–1946: 2). Based on Sraffa’s unpublished papers, Gilibert (2003: 36) showed that Sraffa also interpreted r as the rate of growth but abandoned this interpretation

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because he would have to introduce the assumption of constant returns, in contradiction to his statement in his famous 1926 paper about the element of time, “whereby the shorter the period of time allowed for the adjustments, the greater is the likelihood of decreasing returns, while the longer that period is, the greater is the probability of increasing returns” (Sraffa, 1926: 538). More importantly, however, changes in the elements of A or B will lead to a change in R. In fact, the old and the new system cannot be compared. As Harcourt (1982: 259) rightly reminded us, the standard commodity is uniquely defined for only one position of the economic system concerned. As soon as we consider another position, i.e., a later or different snap-shot, in which either the level and/or composition of output and activity have changed and/or technical advances have been embodied in the processes of production, we have another standard system and commodity implied, and so no way of making a comparison, between one position and the other, of the magnitudes and distributions of the surpluses involved. Endogenously changing coefficients of the A-matrix and the l-vector can be introduced in the model. Craven (1973; 1983) showed that in linear production models of the input–output type, there exists at each time a subset of Harrod-neutral innovations in the set of innovation possibilities. As a result, the input coefficients of A can be considered constant, while the coefficients of the l-vector are decreasing. In each sphere of production, the direct and indirect inputs thus remain unchanged. Craven (1983) proved mathematically that a series of such Harrod-neutral technological changes will cause outputs per unit of labour to increase by at least (asymptotically) at the same rate as that for every other series of innovations. Whether the maximum rate of growth of the economic system will remain the same or not will then depend on whether all elements of the l c–matrix remain constant. Evidently, a quite heroic assumption. Moreover, even under that assumption, neutral innovations will need “the steady reconstruction of the entire operating capital stock in every successive period of production” (Lowe, 1976: 244), such that the “traverse” from one equilibrium state of the economy to another, is “path-dependent”. Joan Robinson introduced her concept of a “Golden Age”, “a mythical state of affairs not likely to obtain in any actual economy” (Robinson, 1956: 99), as an attempt to distinguish the “various types of disharmony that are liable to arise in an uncontrolled economy” (Robinson, 1962: 99). Her approach was close to Marx’s (see Part 3, § 14.5; also, Cuyvers, 1979: 342–343;2017: 23–24), whose schemes of expanded reproduction of Volume II of Capital perform a similar function of illustrating a steady process of capitalist accumulation and growth and allow analysing its conditions. As Rosa Luxemburg stressed, Marx’s schemes are considering an average situation of a capitalist economy, producing means of production and consumer goods, over the

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business cycle: “a socially necessary average level in which all these movements must centre…” (Luxemburg, 1913: 104). A balanced scheme of reproduction thus shows average inter-sectoral f lows of goods and services (Marx, 1885: 159). When investigating these conditions for expanded reproduction, Marx assumed “a normal course of reproduction” (Marx, 1885: 571, 186– 187) over a long period of time during which the average rate of profits and the value composition of capital remained constant. Stated differently, Marx attempted to analyse the equilibrium conditions of the economy in a state of normal expansion with, on average, Harrod-neutral technical change during the period considered (Harrod, 1956: 23). In very clear words, Marx wrote: For all the great changes that constantly occur in the actual rates of profit in particular spheres of production (…), a genuine change in the general rate of profit, one not simply brought about by exceptional economic events, is the final outcome of a whole series of protracted oscillations, which require a good deal of time before they are consolidated and balanced out to produce a change in the general rate. In all periods shorter than this, therefore, and even then leaving aside f luctuations in market prices, a change in prices of production is always to be explained prima facie by an actual change in commodity values, i.e. by a change in the total sum of labour-time needed to produce the commodities. We are not referring here, of course, to a mere change in the monetary expression of these values. (Marx, 1894: 266 – my italics)21 When discussing the systems of equations (6), I stated that the elements of A and l are technological data at each moment in time. Now it appears that if we want to use the matrices A or B to analyse the conditions required for continuous economic growth, its elements have to be interpreted as based on the “average socially necessary requirements” of the production system during a time period of “normal reproduction”. On modelling this using the data of A, c, and l, it has to be assumed that during this period, the coefficients are given and unchanged. The conclusion is that by assuming normal reproduction, Marx is not taking a snapshot of the economy at a moment of time but taking a “snapshot of a cycle of production of the system” (Kurz and Salvadori, 2018: 115, 119; Roncaglia, 1978: 119) during a period of time expanded reproduction is proceeding normally. In other words, Marx is not presenting a theory about the “path of economic growth” (Lowe), and even less analysing the “traverse” (“the path that connects two dynamic equilibria defined by different rates of change from one state of the economy to another”) (Lowe, 1976: 103). In Volume II of Capital, Marx laid bare the conditions for expanded reproduction. In Volume III, he investigated various factors that will upset his “law of reproduction”, such as the credit system (Marx, 1894: 611ff.), speculation (Marx, 1894: 614–615), money hoarding and its impact on prices and the rate of interest (Marx, 1894: 663), the periodic devaluation of existing capital (Marx, 1894: 358), sudden f luctuations of the prices of raw materials and agricultural

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products (Marx, 1894: 204, 213), etc. Cuyvers (2020) has argued that during the 1870s, Marx wanted to thoroughly investigate the economic evolution in countries such as the United Kingdom, the United States, and Russia, to further elaborate his theory on the long-term developments of capitalism. Marx’s assumption of “normal reproduction” has also implications for the interpretation of the Sraffa prices, not as prices of production at the average rate of profits, but as administered prices, with firms taking into account costs at the normal rate of capacity utilisation on which some target rate of return is then applied. There is no reason to assume that the average rate of profits is that target rate and therefore sectoral rates of profits do not need to be equalised (see e.g., Nisticò, 2008). However, I showed elsewhere (Cuyvers, 2017: 61–62) that there exists an average rate of profits for the economy as a whole, which is a characteristic of the structure of input–output relations (matrix B), which means that if some sectors get a higher-than-average rate of profits, other sectors will experience a lower rate.

7.6 Joint production In Volume I of Capital, Marx considered fixed capital as both entering as input used during the production period and as output having become one production period older and to be used during the next production period. He wrote (referring to Malthus)22: Now we have seen how that portion of the constant capital which consists of the instruments of labour transfers to the product only a fraction of its value, while the remainder of that value continues in its old form of existence. Since this remainder plays no part in the formation of value, we may at present leave it on one side. To introduce it into the calculation would make no difference. For instance, taking our former example, c = £410: assume that this sum consists of £312 value of raw material, £44 value of auxiliary material and £54 value of the machinery worn away in the process; and assume that the total value of the machinery employed is £1,054. Out of this latter sum, then, we reckon as advanced for the purpose of turning out the product the sum of £54 alone, which the machinery loses by wear and tear while performing its function, and therefore parts with to the product. Now if we also reckoned the remaining £1,000, which continues to exist in its old form in the machinery, as transferred to the product, we would also have to reckon it as part of the value advanced, and thus make it appear on both sides of our calculation. We should, in this way, get £1,500 on one side and £1,590 on the other. The difference between these two sums, or the surplus-value, would still be £90. When we refer, therefore, to constant capital advanced for the production of value, we always mean the value of the means of production actually consumed in the course of production, unless the context demonstrates the reverse. (Marx, 1867: 320–321 – my italics)

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If a given stock of fixed capital, e.g., a specific weaving machine, can be split up into as many parts as the number of production periods that it can be operated (thus allowing that the inputs used of the “one year older” machine to differ from that of the younger one, ref lecting changing efficiency in use), it will enter as input in the equations of (1), but it will also appear as a one production period older output. Sraffa (1960: 43) showed that this, like other “joint products”, will open the way for considering alternative production techniques. It is doubtful that Marx was ever inclined to follow this approach, despite being close to discovering the “golden rule” that John von Neumann developed some 60 years later (Morishima, 1973: 164). Yet, Sraffa did (Sraffa, 1960: 63ff.). He first showed that with unchanging efficiency over the lifetime of the machine, the standard approach of calculating the annual charge for depreciation and interest and that based on using equations for the separate processes corresponding to the successive ages of the machine – the “joint production” approach – will lead to the same result (Sraffa, 1960: 65–66). However, in the realistic case that the efficiency of the machine changes during its life, the annuity approach cannot be applied, whereas the “joint production” approach will give the ‘correct’ answer in every case, no matter how complex, over the life of a durable instrument of production, may be the pattern of falling productivity or increasing maintenance and repairs. It will, besides, make due allowance for any variation in the prices of the different materials and services required. (Sraffa, 1960: 66) While investigating how joint products would change the conclusions about prices, the rate of profits and the standard system, obtained on the basis of the analysis of single-product industries, Sraffa observed that with joint production, some prices and also some labour values might be negative, implying that the corresponding outputs are produced by a negative quantity of labour (Sraffa, 1960: 59). This weird result was taken up in Steedman’s Marx after Sraffa (Steedman, 1975; 1977). But Steedman went well beyond Sraffa. Using simple numerical examples, he illustrated that positive prices could go with negative labour values, as well as positive profits with negative surplus value, or negative profits with positive surplus value (Steedman, 1977: 154–155). Based on Sraffa’s analysis, he had already come to the conclusion that labour values are redundant for the determination of prices of production and of the rate of profits. Now he concluded that with joint production there appears to be no good reason for not abandoning all reference to such magnitudes (labour values – L.C.), it being clearly understood that such an abandonment in no way leads to the rejection of a materialist account of capitalist economies and their working. (Steedman, 1977: 162)

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Marxists’ reaction to Steedman will be dealt with in the next chapter. But his results were soon challenged by post-Keynesians and Sraffians as well. Harcourt published a polite, but critical review of Marx after Sraffa (Harcourt, 1979).23 Schefold (1978: 28) proved that goods that are jointly produced but can also be produced separately, cannot have negative values, and that the negative labour values of the goods that can only be produced jointly, can only occur, if some processes are not indispensable. 24 In his turn, Kurz (1979: 64ff.) showed that Steedman’s negative labour values are due to the assumption that all abstract labour has equal productivity, that, in fact, they are employment multipliers à la Keynes and Kahn, and that when an appropriate productivity index is attached to labour inputs using alternative techniques to jointly produce products, positive labour values are found. Within a much broader context, which cannot possibly be done justice to here, Duménil and Lévy (1987), from the Marxist side of the researchers’ spectrum, distinguished between “individual value” and “market value”. They further indicated that in a single production situation, but with more processes than products, individual values and market values will be the same, whether as an average of individual values or as computed on the basis of the average technology (Duménil and Lévy, 1987: 24–25). In contrast, the application of the concepts of individual and market values leads to an indeterminacy in a situation of joint production. But they showed that a unique solution for individual and market values exists, if the technology is “non-reductive” and if the economy is in a situation of reproduction.25 To obtain non-negative values, non-reductivity is a necessary, but not a sufficient, condition. The other condition is that the technology is non-heterogeneous.26 With joint production of commodities and of older capital equipment considered as output, the number of products can be substantially smaller than the number of production processes that are operated, which makes it impossible to apply the simultaneous equations approach. Because the number of unknowns (prices or output proportions) is no longer equal to the number of equations, the von Neumann programming approach (von Neumann, 1945–1946) should be used to solve for prices/labour values and output proportions and to avoid negative prices or labour values, as applied in Morishima (1973: 175–188). Morishima found, however, that the Λ vector thus obtained did not give the labour values of the individual commodities (Morishima, 1973: 185) or might be indefinite (Morishima, 1973: 190). Morishima and Catephores (1978) reformulated this approach as follows: With p+ and q+ being the prices and output intensities solutions to the programming problem, the vector Y of net outputs is defined: Y = q+ lc + gq+ B

(9)

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The labour value of net outputs, Y Λ, can then be solved in the linear programming problem: Max YΛ Λ subject to XΛ ≤ AΛ + l Λ ≥ 0( ≠ 0)

(10)

The dual problem of (10) is: Min ql subject to qX ≥ qA + Y q ≥ 0( ≠ 0)

(11)

With q° and Λ° as solutions of (10) and (11), q°l = YΛ Λ° by virtue of the duality theorem, i.e., the direct labour time spent on producing q° equals the “true” labour value of the net output of the economy producing q°. However, q+ l ≠ q° l. What is more, labour expenditure will not be minimised when producing the “actual” outputs q+ (Morishima and Catephores, 1978: 44) and (q+ l − Y Λ°) stands for the amount of labour which will be wasted in the capitalist economy, because decisions to employ labour are made, in that economy, in an anarchical way from the individualistic point of view of profitseeking and could be dispensed with by introducing conscious planning in order to use labour in an efficient way (Morishima and Catephores, 1978: 45). Against this conclusion, Cuyvers (1986) replied that with production prices p+ and other things being equal, q° will not necessarily allow a “normal reproduction” of the capitalist economy considered. As mentioned before, Marx was conducting his analysis of expanded reproduction based on an economy in a state of normal expansion over a period of time with the average rate of profits and the value composition of capital remaining constant. This implies, on average, Harrod-neutral technical change during the period considered, and that in turn leads to constant income shares. Therefore, Cuyvers (1986) reformulated the linear problem (11) by adding the additional constraint: q+ ( X − A )p+ / w + ≤ (1 + σ )q+ l

(12)

with w+ = c p+ and σ the normal profits–wages ratio. It can then be shown that, with the condition that the economy is in a state of normal reproduction and with a “normal” profits–wages ratio, q+ is the optimal solution

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+

of (11) and (12). The Λ solution of the dual problem, which is a vector of non-negative labour values, will minimise labour expenditure in producing the “actual” outputs q+: q+ l = YΛ+ The reader is referred to Appendix 2 for further details. The normal profits or wages share are ratios that can be assumed to play a normative role in the class struggle over the income generated during the production process. From a formal perspective, Cuyvers (2017: 55–56) suggested that workers are paying attention, at the same time, that equal work receives equal pay and that the profits of their bosses stay at their normal level in proportion to the wages paid. The uniform wage rate will enter the process of price determination and rate of profits equalisation across sectors. However, by reacting “with their feet” to deviations between the sectoral profits–wages ratios, also a tendency towards equalisation of these ratios will be at work, tending to prices that are proportional to labour values.27 I will return to this interpretation in the next chapter.

7.7 Marx’s falling rate of profits and the organic composition of capital As stressed earlier, Sraffa’s model in Production of Commodities by Means of Commodities is assuming an economy with given input coefficients and is dealing with the theory of value only, focusing on price determination and the measurement of value with changes in the distribution of income between labour and capital. However, once the Sraffa archive was opened, scholars investigating the process of development of the book, discovered that among the notes and unpublished manuscripts were some dealing with what Marx called the “laws of motion” of the capitalist economy. Sraffa’s 1942–1943 notes on von Bortkiewicz’s criticism of Marx are of particular interest (Sraffa Papers D1.91).28 Marx’s theory of the tendentially falling rate of profits is well known. As he explains in Volume III of Capital, the determining factor is the composition of capital, i.e., the ratio of constant capital and variable capital. With S, the surplus value, and C and V the constant and variable capital in labour values, the rate of profits can be transformed as follows: S S V = C +V CV + 1 In this formula, S/V represents the rate of surplus value or the ratio of unpaid labour time over necessary labour time, whereas C/V is the value composition of capital. Marx argued that C/V will show a tendency to rise, since more and more constant capital per worker is required (Marx, 1894: 318, 326, r=

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330). This tendency cannot be neutralised by increasing the rate of exploitation of labour S/V: [I]f the constant capital set in motion by a worker increases ten-fold, the surplus labour-time would have to increase ten-fold as well, and very soon the total labour-time, or even the full twenty-four hours of the day, would not be sufficient, even if it were entirely appropriated by capital. (Marx, 1894: 523) Marx’s C and V are not valued in prices of production and thus a circular reasoning (with prices of production changing with changes in the rate of profits) is avoided. However, although C and V are expressed in labour values, Marx’s value composition of capital is not an invariant measure of the degree of mechanisation of the production processes, since labour values will drop with increasing productivity of labour. It is for that reason that Marx introduced his concepts of the “technical composition of capital” and the “organic composition of capital” as being invariant. In Volume I of Capital, he wrote: The composition of capital is to be understood in a twofold sense. As value, it is determined by the proportion in which it is divided into constant capital, or the value of the means of production, and variable capital, or the value of labour-power, the sum total of wages. As material, as it functions in the process of production, all capital is divided into means of production and living labour-power. This latter composition is determined by the relation between the mass of the means of production employed on the one hand, and the mass of labour necessary for their employment on the other. I call the former the value-composition, the latter the technical composition of capital. There is a close correlation between the two. To express this, I call the value-composition of capital, in so far as it is determined by its technical composition and mirrors the changes in the latter, the organic composition of capital. (Marx, 1867: 762 – my italics) Thus, from an analytical perspective, it is necessary to separate changes in the value composition of capital that are due to the “value effect” of increased mechanisation, from the value invariant “mechanisation effect”. With C = q A Λ and V = q l c Λ, changes of C/V in time can be written as: ∂  q   A(t)Λ Λ(t)  ∂  q   A(t)  Λ q  A ∂  Λ(t)  +  =       ∂t   q l(t)c  Λ Λ(t)  ∂t   q l(t)  c   Λ q l ∂t   c   Λ( t)  In this expression, the changes of C/V can be viewed as consisting of two parts. The first part aggregates the changes in the ratio’s A ij/ lj on the basis of the given price (here, labour values) ratio’s Λ/c Λ. These changes ref lect changes in the technical composition of capital and represent the value

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invariant mechanisation effect. The second part aggregates the changes in the respective labour values for a given degree of mechanisation in the production process (Cuyvers, 2017: 146–147). Whereas Ricardo was in need of an “invariant measure of value”, Marx’s theory of the rate of profits requires an “invariant measure of technical change”. Neither Ricardo, nor Marx possessed the mathematical skills for solving the respective “invariance” requirements in their theories. In an ingenious attempt to integrate capitalists’ introduction of more mechanised methods of production in his model and to arrive at a coherent theory of the “laws of motion” of capitalism, Marx pointed to the effect of increasing mechanisation on the average rate of profits. By increasing the technical composition of capital, which, in turn, will increase the value composition of capital C/V, the introduction of more mechanised methods of production will lead to a fall in the average rate of profits. However, the labour-saving effect of the new methods of production will give rise to a “counteracting” factor, transforming this “law” of the falling rate of profits into a “tendency”.29 What does Sraffa tell us about the organic composition of capital and the falling rate of profits? His unpublished notes on von Bortkiewicz not only show a defence of Marx’s transformation of labour values in prices of production, but also a rejection of Bortkiewicz’s criticisms of Marx’s law of the tendential fall of the rate of profits. Sraffa’s notes were mainly written between January and April 1943, with some additions in December 1945 and June 1955. Kurz and Salvadori (2010: 207) have translated Marx’s rate of profits formula into Sraffa’s “language”: S S 1− w R(1 − w) r= = L = 1 = C +V C + V 1 + Rw +w L L R

(13)

with L being the amount of labour performed, R being Sraffa’s maximum rate of profits, and w being the share of wages. C and V are, as before, the constant and variable capital aggregated in labour values, in which case L equals the labour embodied in Sraffa’s surplus (or in the Classics economists’ terminology, the net product). In the above formula (13), C/L stands for Marx’s organic composition of capital, the ratio of “dead” over “living” labour.30 R (it will be remembered that Sraffa credited Marx for the concept) plays a crucial role in this “translation”. If w = 0, r = R, and if w = 1, r = 0. What happens with r in the long run clearly depends on w and R. If the share of wages remains constant (in Kurz and Salvadori’s interpretation of Marx, w stands for the “proportional wage”), but when the maximum rate of profits falls (rises), the actual rate of profits will fall (rise). At w > 0 and, consequently r > 0, the valuation of the means of production is in prices (“dated quantities of labour”) that incorporate the rate of profits r. Hence, Sraffa’s “Hypothesis” of 1941–1943 of a “distribution invariant” capital–output ratio.

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A major criticism by Sraffa of von Bortkiewicz is that the latter wrongly assumes, as did Adam Smith and David Ricardo, that the value of each product can be reduced, in a finite number of steps, to the labour expenditures made in producing it (Sraffa Papers D1.91:13).31 Marx indicated that this is due to their neglect of constant capital. As a result, the denominator in the rate of profits formula consists only of variable capital, such that the rate of profits will become infinitely large when wages become smaller and smaller. Not so with Marx, whom Sraffa credited for having invented R, the maximum rate of profits, when wages tend to be zero and workers are likely to be “living on air”. Moreover, Bortkiewicz’s neglect of the constant capital component of the capital stock, makes Marx’s concept of the “organic composition of capital” disappear, a concept that is crucial for understanding his law of the tendential fall of the rate of profits. As a result, Sraffa wrote, both Ricardo and Bortkiewicz were “not seeing the cause” contemplated by Marx for his “law”. From (13), one can derive that r will fall in the long run, as the wages share remains unchanged, when in the course of economic development, the maximum rate of profit R falls (Gehrke and Kurz, 2006: 122). Based on Sraffa’s notebook on von Bortkiewicz, Gehrke and Kurz (2006: 122) show that Sraffa had read Marx’s law of the rising organic composition of capital in relation to a situation without technological progress, but with technical change. Capital accumulation will lead to higher wages and a fall in the rate of profits. Sraffa stated in his notes on Bortkiewicz: He quotes an important passage in Kap. III p. 247 on how “new” methods of production are introduced, and their effect on lowering profit-rate: but B. overlooks that “new” here means “known, but not yet used; introduced only after accumulation,” from which Mʼs conclusion follows: he (B.) refutes him on p. 457–8 by an argument which clearly implies that by “new method” he B. understands a “new invention”—and on the basis of this “proves” that rate of profit (r) need not fall! (from the Sraffa Papers, D1.91: 2232; emphasis added by Gehrke and Kurz, 2006: 132) The relationship between Marx’s falling rate of profits, the organic composition of capital, accumulation without technological progress, and Sraffa’s R is clearly summarised in an additional working note of 29 August 1946 (Sraffa Papers, D3.12.44: 11, quoted in Gehrke and Kurz, 2006: 135),33 in which – as equation (13) shows – Sraffa argued against Bortkiewicz and against Joan Robinson in her 1942 Essay on Marxian Economics that the fall in the rate of profits during the accumulation process cannot possibly be offset by a fall in wages. Confronted with the problem that Marx’s value composition of capital is not invariant with respect to changes in the labour embodied in the constant and variable capital, Sraffa looked for a solution. As he wanted to have the organic composition of capital expressed in prices of production, his problem of finding an invariant expression for it was evidently unsolvable. For some time, Sraffa hypothesised that the surplus rate (the physical ratio of the surplus over the means

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of production) equals the maximum rate of profits. This would imply that the value of social capital relative to social product remains constant in the face of changes in distribution. To his dismay, he discovered that this assumption was a “disastro del modello” because it implied the physical homogeneity of inputs and output (Sraffa Papers D3.12.20: 3r, quoted in Gilibert, 2003: 37–39; Bellofiore, 2012: 1391–1392).34 In his effort to find a solution, Sraffa would adapt Marx’s organic composition of capital to his needs and reformulate it, which he did in February 1944. In Sraffa’s formula of the “corrected” organic composition of capital of a sector, the numerator is not the constant capital as found by aggregating (using prices or labour values) the means of production used in that sector, but the total inter-sectoral physical supplies of the output of that sector (Carter, 2013: 229). This “correction” would lead to a final breakthrough in that it allowed the construction of the standard commodity, and at the end of October 1944, with the help of his friend, the mathematician Abram S. Besicovitch, the proof of its uniqueness (Kurz and Salvadori, 2008: 264–266). What is obvious from this development of Sraffa’s thought between 1940 and 1944, from Marx to his standard system via his “corrected” organic composition of capital, is that he used Marx’s concepts, reformulated them, and/or translated them in his new “language”, and finally adapted the reformulated concepts in his “own non-labor-value-based approach” (Gehrke and Kurz, 2006: 111). In contrast to the situation of capital accumulation and technical change, Sraffa considered technological progress as on average Harrod-neutral, thus leaving the capital–labour ratio, the wage and profits shares, and the rate of profits unchanged (Perri, 2014: 94, 116–117).

Notes 1 D3.12.44:3 at https://mss-cat.trin.cam.ac.uk/manuscripts/Sraffa_D3_12_44/ manuscript.php?fullpage=1&startingpage=1 2 D3.12.46:24 at https://mss-cat.trin.cam.ac.uk/manuscripts/Sraffa_D3_12_46/ manuscript.php?fullpage=1&startingpage=1 3 Harcourt and Kerr (2009: 55) have commented that by 1979, Sraffa’s work had somehow enabled Robinson to accept Marx’s arguments. 4 This was also mentioned by Sraffa in his letter of 4 February 1961 to Stephen Bodington: There are, besides, many possible applications which I have not mentioned in the book in problems discussed by Marx. Take, e.g., the determination of a general rate of profits from the rate of surplus value: Marx takes an average of rates of profits obtained in the production of the different commodities on the basis of “values”, and gets, as he acknowledges, an approximately correct result. An exact result could however be obtained by taking, instead of a simple average, a weighted average: and it can be shown that the appropriate weights can be derived directly from the proportions in which the comm. enter the “St. com.”. Similarly, in the application of M’s notion of comm produced by “a cap. of av. org. comp.”: for an exact result the average must be found in the same way. In other words, that comm. is the St. Com. (Sraffa Papers D3.12.111:132v, that can be consulted at https://mss-cat. trin.cam.ac.uk/manuscripts/uv/view.php?n=Sraffa.D3.12.111#?c=0&m= 0&s=0&cv=158&xywh=-3747%2C0%2C9780%2C5058)

118 Piero Sraffa’s neo-Marxist theory 5 Alternatively, the proof that Sraffa’s standard system performs the function of Marx’s “average sector”, can start from q* p = q* Λ as given. All steps in the proof are the same but now, it will follow that w = c p (the wage rate in the price equations) is equal to c Λ, the value of labour power. 6 Moreover, with long-lasting changes in the composition of the labour force (e.g., new segments of temporary workers) or in the balance of power in the class struggle, surplus-wages might well disappear altogether, if not becoming negative, which in the long run will lead to a reduction of the necessary consumption. 7 Baran and Sweezy were both personally close to Sraffa. The way wages are dealt with in Baran and Sweezy (1966) is clearly due to Sraffa’s “surplus-wages”, as is evidenced by the correspondence between Baran and Sweezy, while drafting Monopoly Capital. See Sweezy’s letter to Baran of 2 and of 7 March 1964, and that of Baran to Sweezy of 3 March 1964; see Baran and Foster (2017: 457, 461, 467). 8 See letter by Paul Sweezy to Paul Baran of 2 March 1964 and of Paul Baran to Paul Sweezy of 3 March 1964 (Baran and Foster, 2017: 452–453, 458–459) 9 This short note can be consulted at https://mss-cat.trin.cam.ac.uk/manuscripts/ uv/view.php?n=Sraffa.D3.12.9#?c=0&m=0&s=0&cv=120&xywh=-488% 2C0%2C2791%2C1443. I am grateful to Scott Carter for bringing this and other notes to my notice. 10 For this note, see https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view.php?n= Sraffa.D3.12.7#?c=0&m=0&s=0&cv=65&x ywh=-1461%2C0%2C5184% 2C2682. See also Sraffa Papers D3.12.7:105 (undated, but in the file “After 1927”) and D3.12.7:161.1 (of 22 August 1931). 11 See also Eatwell (1975: 547–548). For the Majorca draft (D3.12.52), see https://mss-cat.trin.cam.ac.uk/manuscripts/Sraffa_D3_12_52/manuscript. php?fullpage=1&startingpage=1 12 In Capital and Theories of Surplus Value, Marx hardly mentioned Ricardo’s Essay. 13 Petri (2014: 35) has stated that the neo-Ricardian view that the labour theory of value is irrelevant, stems from the notion of the “production method” that has become “the major analytical tool in understanding the value form.” This, I think, is wrong. The “production method” as introduced as parameters in the matrix A of Sraffa’s price equations, is not only the same as in the Marxian value equations, but also to that of the dual use-value system of equations. The duality theorem is crucial for proving that the labour embodied in the total gross product of a commodity producing economy is equal to the labour expenditure in that economy. See, e.g., Morishima (1973: 14ff., also Bródy, 1970: 17ff., Cuyvers, 1978: 71–72). 14 The introduction of the money rate of interest as determining the rate of profits appeared in the manuscript of Production of Commodities… in March 1957 and in the letter to Garegnani of 13 March 1962, Sraffa wrote about this: “I did not want to commit myself much, and in general I only wanted to signal something…” (quoted in Panico, 2001: 301–302; Deleplace, 2014: 142). Pasinetti (1988: 137), also, has truly downplayed Sraffa’s short statement “as purely incidental” and Bhaduri and Robinson (1980: 103) called it “the inexplicable suggestion”. As is shown in Cuyvers (2017: 239), in a parallel with post-Keynesian monetary theory, Marx viewed the average rate of interest (the price of money capital) as a pure monetary phenomenon. 15 Keynes (1936: 203) stated: It might be more accurate, perhaps, to say that the rate of interest is a highly conventional, rather than a highly psychological, phenomenon. For its actual value is largely governed by the prevailing view as to what its value is expected to be. This passage was highlighted in Sraffa’s copy of the General Theory.

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16 Although published in 1984, Garegnani’s manuscript dates from 1976. 17 Sraffa (1960: 90–91) elaborated on the situation that the “own rate of reproduction” of the “non-basic” products (“beans”) is unusually high, such that only 10% is left, whereas the rate of profits based on the “basics” is 15%. He concluded that “if the rate of profits were at or above 10% it would be impossible for these conditions (a uniform price for all units of a commodity and a uniform rate of profits – L.C.) to be fulfilled.” Kurz and Salvadori (1995: 83–84) disagreed and considering this case of Sraffa’s “beans” as “non-basic” product, they came up with the following solution: If beans are not consumed, then either their price is ignored or the free disposal assumption implies a zero price anyway. If beans are consumed, then an assumption on consumption which asserts that at high prices beans are not consumed is enough to obtain a long-period solution. 18 Unless no surplus value is produced in the “non-basics” (or “luxuries” producing) sectors, but the capital in these sectors, as all other sectors, shares in the surplus value produced in the “basics” sectors. 19 Bhaduri and Robinson (1980: 104n) stated on Sraffa and the model of Production of Commodities by Means of Commodities: “… he has never gone into the question of the realisation of physical surplus profits, leaving his logical scheme open-ended with one degree of freedom in the system.” 20 Bhaduri and Robinson (1980: 105) have stated that there is no need to assume constant returns to scale in Sraffa’s one-technology model: One total stock of basics is appropriate to one f low of work being performed with one technique. A differently employed labour force would require a correspondingly different stock. If there were differences in returns to scale between the two cases, the items in the two stocks would not be in the same proportions and they would represent two different techniques. Thus, once the existence of stocks in a stationary state is explicitly recognised, the question of changing the scale of output does not arise. As we shall see, the one-technique model can be adapted to deal with steady growth, but growth with changing proportions of inputs requires an historical analysis of the manner in which a new stock is built up to support the changed technique of production. 21 Also: In any given country, the average rate of interest is constant over long periods, because the general rate of profit changes only in the long run - despite constant change in the particular rates of profit, a change in one sphere being offset by an opposite change in another.

(Marx, 1894: 488) 22 This is one of the two passages in Marx’s writings that Sraffa (1960: 95) referred to. The same passage is referred to by Morishima (1973: 164) when linking his way of dealing with fixed capital to von Neumann’s “golden rule”. 23 Harcourt (1979: 535) wrote, e.g.: … Steedman considers that the objective existence of a physical surplus which can be valued in terms of the prices of production is all that we need. (Sraffa does not, for it was not his purpose to criticize Marx, at least not on these points.) 24 Process i is not indispensable if a net outputs vector s ≥ 0 (≠ 0) and non-negative activity levels q exist such that q (X - A) = s and qi = 0.

120 Piero Sraffa’s neo-Marxist theory 25 Based on their definitions and with q being the row vector of levels of activity, a technology is reductive if ∃ q > 0 such that q (X - A) ≤ 0, i.e., if a set of levels of activity can be found for which all components of the net product are negative or zero. An economy is in a situation of reproduction if all components of the net product are strictly positive: q (X – A) >> 0. 26 Duménil and Lévy (1987: 37) define a technology as heterogeneous if there exist two positive linear combinations by q and q’, such that the net product of the first combination is smaller or equal to that of the second, q (X – A) ≤ q’ (X – A), while the first combination is incorporating more labor, q l ≥ q’ l with at least one strict inequality among the n+1. 27 Interestingly, this is also suggested in Sraffa’s note of 12 November 1940 in the document “Use of the notion of surplus value”, archived as Sraffa Papers D3.12.46, that can be consulted at https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view.php?n= Sraffa.D3.12.46#?c=0&m=0&s=0&cv=74&xywh=-1696%2C0%2C5753% 2C2975. 28 For the notes, see Sraffa Papers D1.91 9r-33r that can be consulted at https:// mss-cat.trin.cam.ac.uk/manuscripts/uv/view.php?n=Sraffa.D1.91#?c=0& m=0&s=0&cv=11&xywh=-218%2C0%2C5351%2C2767. 29 Apart from reductions in the value of the constant capital, Marx (1894: 339ff.) listed also other factors that counteract the “law” of the falling rate of profits. Moreover, based on Marx’s manuscripts that Friedrich Engels used in editing Volume III of Capital, there is evidence that Marx’s views were much more nuanced than a reading of Volume III suggests and, as indicated by Cuyvers (2020: 24), that Marx was never really satisfied about how to analyse the simultaneous impact of the increase in labour productivity on the rate of surplus value and on the value composition of capital. 30 In his pioneering Sraffian analysis of technical progress, Schefold (1976: 266) defined the “organic composition of capital” as the ratio of the capital stock measured in prices of production and the wage bill (with necessary consumption also aggregated in prices of production), K/W and finds that K/W = 1/(R – r) along the von Neumann expansion path with q B = (1+R) q A. 31 This can be consulted at https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view. php?n=Sraffa.D1.91#?c=0&m=0&s=0&cv=17&xywh=-218%2C0%2C535 1%2C2767. 32 This can be consulted at https://mss-cat.trin.cam.ac.uk/manuscripts/uv/ v iew.php?n=Sraf fa.D1.91#?c=0&m=0&s=0&cv=24& x y wh=-517%2C156%2C5945%2C3075. 33 This can be consulted at https://mss-cat.trin.cam.ac.uk/manuscripts/uv/ view.php?n=Sraf fa.D3.12.44#?c=0&m=0&s=0&cv=12& x y wh=-1677% 2C0%2C5633%2C2914. 34 This can be consulted at https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view. php?n=Sraffa.D3.12.20#?c=0&m=0&s=0&cv=5&xywh=-1385%2C0%2C43 84%2C2267. 35 This is not Sraffa’s price system, since we are considering all wages to be advanced. 1/(1+R) is the maximum eigenvalue of matrix B, which is equal to 1/ (1+r). 36 It will be found that the post-multiplication of (10a) with q1 leads to q1p1 = (1+R) q1B11p1 and pre-multiplication of (9a) with p1 leads to q1p1 = (1+R) q1B11p1 + (1+R) q2 B21p2 , which can only be reconciled if q2 = 0. The same result is obtained by multiplying q2p2. For a full treatment of non-basics, we refer to the Kurz and Salvadori (1995). In the two-sector model in Kurz and Salvadori (1995), silk is used as an example of a non-basic. In Cuyvers (2017: 75–78, and in Cuyvers, 1980), non-basics are illustrated by taking Pekinese dogs as “luxury” of the bourgeoisie during the Belle Epoque.

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122 Piero Sraffa’s neo-Marxist theory L. Cuyvers (1980). “Luxegoederen, Sraffa’s “non-basics” en de algemene winstvoet”, Tijdschrift voor Politieke Ekonomie, 4(1), September, 33–56. L. Cuyvers (1986). “A Note on the Inequality Approach of the Labour Theory of Value”, Recherches Économiques de Louvain, 52(1), March, 85–94. L. Cuyvers (2017). The Economic Ideas of Marx’s Capital – Steps Towards Post-Keynesian Economics, London – New York: Routledge. L. Cuyvers (2020). “Why Did Marx’s Capital Remain Unfinished? On Some Old and New Arguments”, Science & Society, 84(1), January, 13–41. S. de Brunhoff (1974). “Controversies in the Theory of Surplus Value: A Reply to John Eatwell”, Science & Society, 38(4), 478–482. G. Deleplace (2014). “The Essentiality of Money in the Sraffa Papers”, in: R. Bellofiore & S. Carter (Eds.), Towards a New Understanding of Sraffa: Insights from Archival Research, Houndmills, Basingstoke: Palgrave Macmillan, 139–166. M. Dobb (1961). “An Epoch-Making Book”, Labour Monthly, 40, October, 487–491. M. Dobb (1973). Theories of Value and Distribution since Adam Smith, Cambridge: Cambridge University Press. G. Duménil & D. Lévy (1987). “Value and Natural Prices Trapped in Joint Production Pitfalls”, Journal of Economics – Zeitschrift für Nationalökonomie, 47(1), March, 15–46. J. Eatwell (1975). “Mr. Sraffa’s Standard Commodity and the Rate of Exploitation”, Quarterly Journal of Economics, 89(4), November, 543–555. E. Farjoun (1984). “The Production of Commodities by Means of What?”, in: E. Mandel & A. Freeman (Eds.), Ricardo, Marx, Sraffa – The Langston Memorial Volume, London: Verso, 11–42. P. Garegnani (1984). “Value and Distribution in the Classical Economists and Marx”, Oxford Economic Papers, New Series, 36(2), June, 291–325. C. Gehrke & H.D. Kurz (2006). “Sraffa on von Bortkiewicz: Reconstructing the Classical Theory of Value and Distribution”, History of Political Economy, 38(1), 91–149. G. Gilibert (2003). “The Equations Unveiled: Sraffa’s Price Equations in the Making”, Contributions to Political Economy, 22(1), November, 27–40. G.C. Harcourt (1979). “Marx after Sraffa. By Ian Steedman”, Journal of Economic Literature, 17(2), June, 534–536. G.C. Harcourt (1982). “The Sraffian Contribution: An Evaluation”, in: I. Bradley & M. Howard (Eds.), Classical and Marxian Political Economy – Essays in Honour of Ronald L. Meek, London – Basingstoke: Macmillan, 225–275. G.C. Harcourt & P. Kerr (2009). Joan Robinson, Basingstoke: Palgrave Macmillan R.F. Harrod (1956). Towards a Dynamic Economics, London: Macmillan. M. Kalecki (1967). “The Problem of Effective Demand with Tugan-Baranovski and Rosa Luxemburg”, in: M. Kalecki (Ed.), Selected Essays on the Dynamics of the Capitalist Economy, 1933–1970, Cambridge: Cambridge University Press, 1971, 146–155. J.M. Keynes (1936). The General Theory of Employment, Interest and Money, in: A. Robinson and D. Moggridge (Eds.), The Collected Writings of John Maynard Keynes, VII, London-Basingstoke: Macmillan, 1973. H.D. Kurz (1979). “Sraffa after Marx”, Australian Economic Papers, 18(32), June, 52–70. H.D. Kurz & N. Salvadori (1995). Theory of Production – A Long-Period Analysis, Cambridge: Cambridge University Press. H.D. Kurz & N. Salvadori (2008). “On the Collaboration between Sraffa and Besicovitch: The ‘Proof of Gradient’”, in: G. Chiodi & L. Ditta (Eds.), Sraffa or an Alternative Economics, Basingstoke and New York: Palgrave Macmillan, 260–274.

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H.D. Kurz & N. Salvadori (2010). “Sraffa and the Labour Theory of Value: A Few Observations”, in: J. Vint, J.S. Metcalfe, H. Kurz, N. Salvadori & S. Samuelson (Eds.), Economic Theory and Economic Thought: Essays in Honour of Ian Steedman, London: Routledge, 189–215. H.D. Kurz & N. Salvadori (2018). “On the “Photograph” Interpretation of Piero Sraffa’s Production Equations: A View from the Sraffa Archive”, in: M. Corsi, J. Kregel & C. D’Ippoliti (Eds.), Classical Economics Today – Essays in Honor of Alessandro Roncaglia, London: Anthem Press, 113–128. D. Laibman (1974). “Controversies in the Theory of Surplus Value: A Comment”, Science & Society, 38(4), 482–487. A. Lowe (assisted by S. Pulrang) (1976). The Path to Economic Growth, Cambridge: Cambridge University Press. R. Luxemburg (1913). The Accumulation of Capital, London: Routledge and Kegan Paul, 1951. E. Mandel (1975). Late Capitalism, London: NLB. E. Mandel (1978). “Introduction”, in: K. Marx (Ed.), Capital – A Critique of Political Economy, Volume 2. Harmondsworth: Penguin Books, in association with New Left Review, 11–79. S.A. Marglin (1984). Growth, Distribution, and Prices, Cambridge, MA – London: Harvard University Press. K. Marx (1861–1863a). Theories of Surplus Value, in: Marx Engels Collected Works, Vol. 30, Marx 1861–63, Economic Manuscript of 1861–63, London: Lawrence & Wishart, 2010. K. Marx (1861–1863b). Theories of Surplus Value, in: Marx Engels Collected Works, Vol. 32, Marx 1861–63, Economic Manuscript of 1861–63, London: Lawrence & Wishart, 2010. K. Marx (1867). Capital – A Critique of Political Economy, Volume 1. Harmondsworth: Penguin Books, in association with New Left Review, 1976. K. Marx (1885). Capital – A Critique of Political Economy, Volume 2. Harmondsworth: Penguin Books, in association with New Left Review, 1978. K. Marx (1894). Capital – A Critique of Political Economy, Volume 3. Harmondsworth: Penguin Books, in association with New Left Review, 1981. R.L. Meek (1961). “Mr. Sraffa’s Rehabilitation of Classical Economics”, Scottish Journal of Political Economy, 24(1), June, 36–52, republished in R.L. Meek (1967), Economics and Ideology and Other Essays, London: Chapman and Hall, 161–178. M. Morishima (1973). Marx’s Economics, Cambridge: Cambridge University Press. M. Morishima & G. Catephores (1978). Value, Exploitation and Growth, London: McGraw-Hill Book Company. P. Newman (1977). “Production of Commodities by Means of Commodities – A Review”, in: J. Schwartz (Ed.), The Subtle Anatomy of Capitalism, Santa Monica: Goodyear Publ. Cy., 346–362. S. Nisticò (2008). “Sraffa 1926 and Sraffa 1960: An Attempt to Bridge the Gap”, in: G. Chiodi & L. Ditta (Eds.), Sraffa or an Alternative Economics, Basingstoke – New York: Palgrave Macmillan, 114–126. C. Panico (1988). Interest and Profit in the Theories of Value and Distribution, London: Macmillan. C. Panico (2001). “Monetary Analysis in Sraffa’s Writings”, in: T. Cozzi & R. Marchionatti (Eds.), Piero Sraffa’s Political Economy: A Centenary Estimate, London – New York: Routledge, 285–310.

124 Piero Sraffa’s neo-Marxist theory L.L. Pasinetti (1988). “Sraffa on Income Distribution”, Cambridge Journal of Economics, 12(1), March, 135–138. S. Perri (2014). “The Standard System and the Tendency of the (Maximum) Rate of Profit to Fall – Marx and Sraffa: There and Back”, in: R. Bellofiore & S. Carter (Eds.), Towards a New Understanding of Sraffa: Insights from Archival Research, Houndmills, Basingstoke: Palgrave Macmillan, 94–120. D. Petri (2014). “On the Neoricardian Criticism of Irrelevance”, in: R. Bellofiore & S. Carter (Eds.), Towards a New Understanding of Sraffa: Insights from Archival Research, Houndmills, Basingstoke: Palgrave Macmillan, 25–46. P.L. Porta (1986). “Understanding the Significance of Piero Sraffa’s Standard Commodity: A Note on the Marxian Notion of Surplus”, History of Political Economy, 18(3), 443–454. D. Ricardo (1821). On the Principles of Political Economy and Taxation, in: P. Sraffa, with the Collaboration of M. H. Dobb (Eds.), The Works and Correspondence of David Ricardo, 1, Cambridge: Cambridge University Press, 1951. J. Robinson (1942). An Essay on Marxian Economics, London: Macmillan, 1967 (2nd ed.). J. Robinson (1956). The Accumulation of Capital, London: MacMillan. J. Robinson (1962). Essays in the Theory of Economic Growth, London: MacMillan. A. Roncaglia (1978). Sraffa and the Theory of Prices, Chichester – New York – Brisbane – Toronto: John Wiley & Sons. B. Schefold (1976). “Different Forms of Technical Progress”, in: B. Schefold, Normal Prices, Technical Change, and Accumulation, London: Macmillan, 1997, 257–275. B. Schefold (1978). “Multiple Product Techniques with Properties of Single Product Systems”, in: B. Schefold, Normal Prices, Technical Change, and Accumulation, London: Macmillan, 1997, 21–45. J.A. Schumpeter (1943). Capitalism, Socialism and Democracy, London: George Allen & Unwin. A. Sinha (2012). “Listen to Sraffa’s Silences: A New Interpretation of Sraffa’s “Production of Commodities””, Cambridge Journal of Economics, 36(6), November, 1323–1339. P. Sraffa (1926). “The Laws of Returns under Competitive Conditions”, Economic Journal, 36(144), December, 535–550. P. Sraffa (1951). “Introduction”, in: P. Sraffa, with the Collaboration of M. H. Dobb (Eds.), The Works and Correspondence of David Ricardo, 1, Cambridge: Cambridge University Press. P. Sraffa (1960). Production of Commodities by Means of Commodities – Prelude to a Critique of Economic Theory, Cambridge: Cambridge University Press. I. Steedman (1975). “Positive Profits with Negative Surplus Value”, Economic Journal, 85(337), March, 114–123. I. Steedman (1977). Marx After Sraffa, London: New Left Books. J. Steindl (1967). “Capitalism, Science and Technology”, in: C.H. Feinstein (Ed.), Socialism, Capitalism and Economic Growth – Essays Presented to Maurice Dobb, Cambridge: Cambridge University Press, 198–205. P.M. Sweezy (1942). The Theory of Capitalist Development, London: Dennis Dobson, 1946. J. von Neumann (1945–1946). “A Model of General Economic Equilibrium”, Review of Economic Studies, 13(1), 1–9.

Appendix 1

Sraffa’s “non-basics” and Marx’s average rate of profits

We show that non-basics are absent in a Sraffa-like standard system. q1 = (1 + R ) ( q1B11 + q 2 B 21 ) q 2 = (1 + R )q 2 B 22

(9a) (9b)

It will be remembered that the first equations relate to “basics” and the second to “non-basics”. Following the Classical and Marxist assumption that wages are advanced, wage-goods are delivered to the sectors producing q1 and q2. These wage-goods are therefore included in B11 and B21, such that (9a) and (9b) also form a Sraffa-like standard system. We now define the price system with r=R 35: p1 = (1 + R )B11p1 p 2 = (1 + R )( B 21p1 + B 22 p 2 )

(10a) (10b)

Post-multiplying (9a) and (9b) with p1 and p2 and pre-multiplying (10a) and (10b) with q1 and q2 will give expressions that are contradictory36 and from which the contradiction can only be removed by putting q2 = 0. Using the same notation as before, we next consider the following system of equations from which labour values can be derived: Λ 1 = A11Λ 1 + l1 Λ 2 = A 21Λ 1 + A 22 Λ 2 + l 2

(6a) (6b)

By introducing Marx’s value of labour power as the value of the necessary consumption per unit of labour time c1Λ1, (6a) and (6b) can be rewritten as: Λ 1 = A11Λ 1 + l1c1Λ 1 + S1 = B11Λ 1 + S1 Λ 2 = A 21Λ 1 + A 22 Λ 2 + l 2c1Λ 1 + S2 = B 21Λ 1 + B 22 Λ 2 + S2

(6c) (6d)

with S1 and S2 being the respective surplus value per unit of output. Pre-multiplication of (6c) and (6d) with (9a) and (9b), post-multiplication of (9a) and (9b) with (6c) and (6d), and adding up and taking into account that q2

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= 0 will lead to q1 S1 + q2 S2 = q1 S1 = q1(I−B11) Λ1 and to q2(I−B22) Λ2 = R B22 Λ2 = 0. This proves Marx’s point that “luxuries” “have no real SURPLUS PRODUCE, nothing in which surplus labour time is embodied” (Marx, 1861– 1863: 243). But from q2 = 0 it also follows that “luxuries” (as “non-basics”) are neither included in the numerator (the total value of the surplus product, i.e., the total surplus value), nor in the denominator (the total value of the means of production used up) of Marx’s average rate of profit formula.

Appendix 2

The inequalities approach of the labour theory of value with normal reproduction

In this appendix, the solution to the inequalities approach of the labour theory of value is presented, following Cuyvers (1986). Consider the programming problem (Morishima and Catephores, 1978: 48–49): Min r subject to Xp ≤ (1+r )Bp p ≥ 0( ≠ 0)

(14)

with p a m × 1 column vector of normalised prices of production; r the uniform rate of profit; X m × n matrix of output coefficients, and B = A + l c the m × n matrix, which is the sum of A and l c, with c the 1 × n column vector of necessary consumption per unit of abstract labour. The dual problem allows to solve for the process intensities as the 1 × n row vector q along the von Neumann balanced growth path: Max g subject to qX ≥ (1+g )qB

(15)

q ≥ 0( ≠ 0) Let p+ and q+ be solutions to the problem (14) and (15) and define the vector Y of net outputs, such that: Y = q+ lc + gq+ B

(16)

Based on Morishima and Catephores (1978), the following linear programming problem can be solved: Min q l subject to qX ≥ qA + Y q ≥ 0 ( ≠ 0)

(17)

and the dual problem: Max Y Λ subject to XΛ ≤ AΛ + l Λ ≥ 0( ≠ 0)

(18)

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With q° and Λ° as solutions of (17) and (18), then q°l = YA° by virtue of the duality theorem, i.e., the direct labour time spent on producing q° equals the “true” labour value of the net output of the economy producing q°. However, q+ and q° are different. We subject the economy of (17) and (18) to be in a state of “normal reproduction” with, on average, Harrod-neutral technical change during the period considered. As is well known from the modern growth theory, balanced growth and Harrod-neutral technical progress imply constant income shares and, therefore, when the economy is in “normal reproduction”, a normal profits–wages ratio will apply, such that: Yp+ / w + = q+ ( X − A )p+ / w + = (1 + σ )q+ l

(19)

with w+ = c p+ and σ being the normal profits–wages ratio. Therefore, to the programming problem (17), the condition is added: q+ ( X − A )p+ / w + ≤ (1 + σ )q+ l

(20)

We call q* the solution of (17) and (20). As a result, the labour values problem (18) changes into: MaxYΛ subject to ( X − A )Λ − Μλm+1 ≤ l Λ ≥ 0(≠ 0) and λm+1 ≥ 0

(18’)

with M the nx1 column vector [(X – A) p+/w+ - (1+σ) q+ l c] By denoting Λ* as the solution of problem (18’), it can be shown that q+ is the solution of the dual (17’) Min ql (17’) subject to qX ≥ qA + Y and -q[(X − A )p+ / w + − (1 + σ )q+ lc ] ≥ 0 Theorem: q+ minimises q l in (16’) By (15) and (16): q+ (X – A) ≥ Y, and by (19): q+ (X – A) p+/w+ = (1+σ) + q l, which is compatible with (17’), such that q+ is a feasible solution. Next, assume Q is an arbitrary non-negative, non-zero feasible solution of (17’), then (1 + σ )Q l ≥ Q[(X − A)p+ / w + ≥ Yp+ / w + = (1 + σ )Q l, which shows that Q l ≥ q+ l, so that q+ is an optimal solution of (17’). It follows from this theorem and the duality theorem that Λ*Y = q+ l. It can therefore be concluded that in an economy in normal reproduction

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and with the normal profits–wages ratio, the capitalists’ choice of production techniques will lead to the minimisation of labour-time expenditure and to non-negative labour values, such that the labour value of the net output is equal to the total labour time expenditure.

8

How were Sraffa’s theoretical insights received by the Marxists? A timeline1

In this chapter, the most poignant reactions by Marxists to Sraffa’s contribution to the discussions in the economics profession and to theoretical issues in Marx’s economic theory are reviewed chronologically. We first deal with the positive reactions by Sraffa’s close friends among the British Marxist economists, after which some of the (mostly) orthodox Marxists’ discussions on Sraffa’s model during the 1970s are reviewed. Finally, the theoretical revisions of the Marxist theory of value, attempting to cope with the Sraffian challenges to that theory are brief ly reviewed. I will suggest an alternative version of the simultaneous equations approach of the labour theory of value in which labour values and prices of production are both prices to which the production processes and reproduction tend, depending on the reasons behind the intra- and intersectoral mobility of labour and capital.

8.1 The first reactions Soon after Production of Commodities by Means of Commodities (Sraffa, 1960) appeared, Maurice Dobb and Ronald Meek, both renowned Marxist economists, wrote positive reviews of the book (Dobb, 1961; Meek, 1961). Dobb, writing his note on the editors’ request for Labour Monthly, was relieved to hear that Sraffa was delighted with the piece (Shenk, 2013: 180–181). Dobb and Meek were both friends and colleagues of Sraffa, and it is not surprising that they tried to “set the tone” at that early stage and claim Sraffa’s contribution for the Marxist tradition.2 Meek (1961) is probably the first review of Production of Commodities…, where Sraffa’s arguments were summarised and explained in a clear way for the layman and the uninitiated. More importantly, Meek made some remarks that linked Sraffa’s analysis to Marx. Regarding the “law of value”, which according to Marx still ultimately and indirectly determined prices, Meek indicated that Sraffa had followed Marx’s “line of approach”, against Ricardo’s lukewarm position that prices were “mainly” determined by relative values (Meek, 1961: 168, n21). The major point he made, however, was

DOI: 10.4324/9781003283416-10

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that Sraffa’s standard system has the same role as Marx’s “sector with average organic composition of capital” in the transformation of values into prices of production: … Sraffa is postulating precisely the same relation between the average rate of profits and the conditions of production in his “standard” industry as Marx was postulating between the average rate of profits and the conditions of production in his industry of “average organic composition of capital”. What both economists were trying to show, in effect, is that (when wages are given) the average rate of profits, and therefore the deviations of price ratios from embodied labour ratios, are governed by the ratio of direct to indirect labour in the industry whose conditions of production represent a sort of “average” of those prevailing over the economy as a whole. (…) Sraffa’s “standard” industry, seen from this point of view, is essentially an attempt to define “average conditions of production” in such a way as to achieve the identical result which Marx was seeking. (Meek, 1961: 177–178 – Meek’s italics)3 Since the opening of the Sraffa archives in Cambridge in 1993, we know that Dobb’s and Meek’s interpretation of the standard system as the formally correct “industry of average organic composition of capital”, was also Sraffa’s position, as laid down in his note “Risposta a Napoleoni” on 31 December 1960 (Sraffa Papers D3.12.111: 247–249; see, on this: Bellofiore, 2008: 82–83).4

8.2 The early 1970s: intensifying discussions among Marxists In the early 1970s, other Marxists started to react. In his monumental 1962 Traité d’économie marxiste, Ernest Mandel, mentioning Sraffa just once, was still referring to the “Introduction” to the Works and Correspondence of David Ricardo and stated approvingly that Sraffa “convincingly” showed, “contrary to a generally accepted view” that Ricardo did not change his mind on his conception of value (Mandel, 1968: 703). Thirteen years later, the impact of Sraffa’s Production of Commodities … was such that Mandel, in the introduction to the English translation of his Der Spätkapitalismus, felt the need to take a hostile position against the “new” economics inspired by Sraffa: While any rehabilitation of the labour theory of value, even in a preMarxist version, can only be welcomed, we ourselves remain convinced that no real synthesis is possible between Neo-Ricardianism and Marxism. Contemporary Marxists have a duty to defend all those decisive advances accomplished by Marx over Ricardo, which Neo-Ricardian theorists are now seeking to rescind. (Mandel, 1975: 12 – my italics)5

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It is interesting to give, at this stage, Martin Bronfenbrenner’s opinion on Sraffa’s relationship with Marx and Ricardo: Sraffa was a Marxist, a refugee from Mussolini’s Fascist regime… Since Marx professed himself an admirer of Ricardo—as nearly a disciple as Marx could ever admit being of any predecessor—it may have seemed natural to attribute the same system first to Ricardo, and thence to classical economics in general—not, of course, to Smith, Malthus, Say, or the ‘hired prize-fighters’ of ‘vulgar economy’. (Quoted in Hollander, 2000: 193) Many Marxists furiously rejected considering Marx as a Classical economist (Benetti, De Brunhoff and Cartelier, 1976). Increasingly irritated by the academic success of the “Sraffians” and their claims of superiority to Sraffa’s equations (from a Marxist perspective, they are a ref lection of the fetishistic character of capitalist exchange relations), a reaction started. It is evidently beyond the scope of this paper to fully review the Marxist literature on Sraffa (for the time period until 1990, see Howard and King, 1992). We restrict ourselves to some highlights. In 1974, in an inf luential paper, Bob Rowthorn blamed Sraffa and the economists who came under Sraffa’s inf luence (among them Maurice Dobb, Sraffa’s senior colleague at the University of Cambridge and like Rowthorn, a member of the Communist Party) of being advocates of the primacy of the exchange relations over the relations of production. He argued that these “Neo-Ricardians” are not looking below the surface of “appearances”, which is what Marx’s labour theory of value does (Rowthorn, 1974). They neglected, as Ricardo did, the social character of the labour process, and how and by whom the production process has been organised. Consequently, they had no eye for the class struggle over wages and labour conditions (see also: Dostaler, 1982: 110). Soon afterwards, Ronald Meek (in a paper originally published in 1975) saw no insurmountable conf lict: For Marx himself, the heart of the matter undoubtedly lay in the fact (already mentioned) that the workforce in a capitalist economy, as a result of the class monopoly possessed by its employers, is compelled ‘to do more work than the narrow round of its own life-wants prescribes’. It is true, I think, that if one drops this one drops Marxism; and it is also true that there is nothing in Sraffa’s models of a surplus economy, as they stand, which clearly implies that such a state of affairs exists. But I cannot see that we run any great ideological danger if we take Sraffa’s models as constituting the general technical basis (as it were) of our analysis, and where necessary simply specify any additional datum that may be required. (Meek, 1977: 132 – Meek’s italics)

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Maurice Dobb, in turn, pointed out that “it is perfectly possible” to explain prices in terms of conditions of production and that it is “natural” to assume “value” and “surplus value” as part of the data (Dobb, 1975: 468). Therefore, he dryly replied: “Most of those ‘leftist’ critics who have coined the term ‘neo-Ricardian’ pejoratively in order to counterpose it to ‘true Marxism’ seem, accordingly, to have misunderstood and misinterpreted the focal point of discourse” (Dobb, 1975: 469). Amartya Sen agreed that Sraffa’s approach to value and prices was essentially a matter of focus (Sen, 1978: 177), and to the Marxist critique that Sraffa did not consider the capitalist labour process, Garegnani, one of the “neo-Ricardian” figureheads par excellence, replied: … if Sraffa did not deal with the social determination of the technical conditions of production and therefore the ‘labour process’, it was exactly for the same reason for which he did not treat the forces governing accumulation (…): it simply was not the aim of Production of Commodities by Means of Commodities to deal with those subjects. The implicit reference for them was either to works where they had already been adequately treated, within the surplus approach, and in Marx himself, or to work to be done in the future. There seems to be in particular no difficulty in treating the ‘labour process’ in terms strictly similar to Marx’s within ‘neo-Ricardian’ analysis, and thus make transparent and confirm the interest which moves the capitalists, individually and as a class, to exercise their ‘authority and control’ in order to increase labour intensity or to lengthen the working day …. (Garegnani, 2012: 87) The French Marxist economist Jean Cartelier also had his doubts on the physicalism attributed to Sraffa (…) as distinct from his own opinions and, more generally, on the physicalism of any theory of price. Indeed, the objectivity of the starting point of PCMC is not physical but social: assumed here is not only a certain state of the material world but also a certain type of social organisation (Cartelier, 2014: 171) and after a detailed and careful analysis of the social conditions needed for a positive surplus in Sraffa’s model, his conclusion was: “What has heretofore been conceived as physical reality – the technique – is in fact an effect of some specific assumptions concerning social relations” (Cartelier, 2014: 184). Against the Marxist opponents, John Eatwell stressed that Sraffa’s theoretical framework, although ignored, offered “constructive possibilities (…) particularly for the development of the Marxian theory” (Eatwell, 1974: 281). After showing that the standard commodity possessed all the characteristics

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of the “average commodity” in Marx’s postulate of the identity between surplus value and profits, he concluded that the Marxist polemics against Sraffa’s work were “fundamentally misconceived”: They appear to derive from a failure to appreciate both the role which a theory of value must play in the analysis of surplus value, and the fundamental importance of the establishment of a systematic relation between surplus value and the rate of profit. (Eatwell, 1974: 303) He did not convince Suzanne de Brunhoff, who replied to Eatwell that Sraffa’s wage concept is unrelated to Marx’s concepts of “variable capital” and “labour power as a commodity”, and that Sraffa’s wage rate belongs to the sphere of income distribution, not the sphere of production (de Brunhoff, 1974: 479): “… the peculiar quality of labor which produces value appears neither in Ricardo’s analysis, nor in Sraffa’s” (de Brunhoff, 1974: 480). David Laibman, while developing “a synthetic alternative position” (Laibman, 1974: 482) agreed with Eatwell, and argued in favour of “the incorporation of Sraffa’s contributions within the framework of Marxist political economy” (Laibman, 1974: 482): The real “role of a theory of value in the origin of surplus” is not to untangle valuation intricacies due to the heterogeneity of commodity aggregates, but rather to expose the nature of capitalist power, and its ability to explain why the worker-capitalist relation takes the form of an impersonal market relation. (Laibman, 1974: 487) It cannot be denied that Production of Commodities… makes no mention whatsoever of profits as the result of the capitalist exploitation of human labour, nor of human labour as the substance of value. In fact, an accusation levelled at Sraffa is that his “Absolute Value” is in reality an “Absolute Price”, i.e. logically unrelated to quantities of labour (Benetti, De Brunhoff and Cartelier, 1976: 33).6 This is an important point: if one accepts Marx’s axiom that value has a substance, which is human labour, then, based on his theory of exploitation, the rate of surplus value will provide a linear relationship between wages and profits, and there is no need for another “invariable measure of value” such as the standard product. However, one can wonder why it is always required to repeat the “qualitative” aspect of the labour theory of value if one wants to investigate the “quantitative” aspect of it and try to convince non-Marxists of the soundness of one’s analysis? If Sraffa’s purpose was to provide a “prelude to a critique of economic theory”, what would be the point of alienating his audience? Might this consideration not have, additionally, been underlying Sraffa’s silence (Bellofiore, 2014: 205) in the debates? Some have also suggested that Sraffa “wished to hide the Marxian element of his thought during a period when East/West relations were not particularly happy” (Smith, 2014: 15).7

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As the unpublished papers reveal, Sraffa was well aware that the labour process, the work intensity, the length of the working day, etc. are highly relevant.8 However, by taking a “snapshot” at the end of the production process, he avoided unnecessary ballast that would distract from his argument. This is also the point made by Bellofiore (2012: 1395) when he remarked about Sraffa’s procedure of looking at the end of the production period: Living labour—an intrinsically variable f luid—is now crystallised into the direct labour that has been expended in the period and that is now definitely dead in the commodity. (…) Inside the capitalist labour processes the extraction of the living labour ‘making up’ the productive configuration is going on after the buying and selling of labour power: capital as a whole is able to get value and surplus value if, and only if, it is capable of imposing workers to work in immediate production as a ‘contested terrain’. All this happens before the production process comes to an end, and therefore before commodities are materialised and thereafter exchanged on the market. It thus seems, again, that the “orthodox” Marxists’ accusations made against Sraffa’s analysis are, in fact, based on a misunderstanding about scientific methodology and focus.

8.3 The late 1970s: cold war, guerilla warfare, and attempts at “peaceful coexistence” between Marxists and Sraffians From 1975 onwards, another devastating attack on the Marxist labour theory of value followed. Steedman (1975; 1977) argued that in a Sraffa system with joint products (including fixed capital), positive profits might correspond to negative surplus value, and positive prices of production might go together with negative labour values. He concluded: Since (…) Marx’s additive value magnitudes are completely irrelevant to the determination of the profit rate (and prices of production), there appears to be no good reason for not abandoning all references to such magnitudes, it being clearly understood that such an abandonment in no way leads to the rejection of a materialist account of capitalist economies and their working. The physical data concerning production conditions and real wages can explain anything explicable in terms of value magnitudes, which are merely their derivatives, and can indeed explain far more. Marxists should therefore concentrate on developing the materialist account of why production conditions and real wages are what they are, leaving the discussion of ‘value magnitudes’ to those concerned only with the development of a new Gnosticism. (Steedman, 1977: 162)

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Steedman’s conclusion sent a shockwave through the Marxist ranks. Indeed, if he was right, the so-called “Fundamental Marxian Theorem” (Seton, 1957: 151 n2; Okisio, 1963: 293; Morishima, 1973: 52–53) was false, and positive surplus value is neither a necessary nor a sufficient condition for the existence of positive profits. Some of Steedman’s results were anticipated by Morishima (1973, 182ff.). This, together with the introduction of the idea of scrapping unprofitable capital goods and technology, led Morishima to develop his inequality approach to the labour theory of value, as mentioned in the previous chapter. A first glimpse of it was given in Marx’s Economics (Morishima, 1973, 184ff.), and the approach was outlined at greater length in Morishima’s Walras Lecture at the 1973 Meeting of the Econometric Society in New York (Morishima, 1974) and reworked in Morishima and Catephores (1978). Around the time Steedman’s Marx after Sraffa was published, another book, The Subtle Anatomy of Capitalism (Schwartz, 1977) appeared, a milestone in the attempts at rapprochement between Marxists and post-Keynesian neoMarxists, including some Sraffians. For our purpose, Part II of the book, “The Hidden Meaning of Things: Profit, Rent, Interest, and Wages”, is of interest. I will focus on the chapters by Nuti and Shaikh. Nuti devoted his chapter to the transformation problem and reiterated Morishima’s result that, based on input–output models, the rate of profits is an average, “where however the weights are given by the relative outputs produced not in the actual economic system considered but in a golden rule economy” (Nuti, 1977: 97). He agreed that in such models, as in Sraffa’s, the labour theory of value is redundant in explaining relative prices, but not when explaining prices as such: The point is that Marx’s purpose is not the determination of relative prices; on the contrary, his problem is how to look beyond the impact of a positive profit rate on relative prices, in order to find the origin of profit and present the true nature of profit as unpaid labour. The fact that the transformation process also yields a set of relative prices is only a by-product of the analysis. The Marxian insight is that capitalist exploitation is not in the transformation process, in the sphere of competitive exchange of commodities, but in the sphere of production, or rather in the production of labour power as a commodity and its use in the production of commodities. (Nuti, 1977: 98) Nuti was clearly extending the warm hand of friendship to Rowthorn and his companions, but he did not deal with Ian Steedman’s criticism. Shaikh’s analysis, in a sense, continued along these lines. Building on Morishima (1973: 77 n3), he argued that the “transformation procedure” followed by Marx in Volume III of Capital is just the first step in an iterative transformation from values to prices of production (Shaikh, 1977: 109). He then argued that in a Marxist analysis “the categories of exchange, such as

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money and price, as well as their movements, must necessarily be based on the categories of production” (Shaikh, 1977: 111). It is in production and only in production that value is created; in the process of circulation, the commodities are merely exchanged. Shaikh distinguished between labour values, values expressed in monetary units, and prices of production. His analysis started from outputs in labour values as exchange value, which leads to unequal sectoral rates of profits. As a result, the equalisation of the profit rates will give rise to an increase in the “money prices” in the sectors with lower-thanaverage profit rates, and the opposite result will be obtained in sectors with higher-than-average profit rates (Shaikh, 1977: 128). If the “money prices” thus obtained are then applied to the inputs, the rate of profits will adjust again. This “extended procedure” of progressively feeding back the adjusted money cost prices of the inputs into the sectoral equations, finally, leads to the “correct” prices of production (Shaikh, 1977: 131–133). At these prices, “the money rate of profit will deviate from the Value rate of profit. Like the deviations of prices of production from direct prices, however, the money and Value profit rate deviation is systematic and determinate” (Shaikh, 1977: 134). Shaikh’s “extended procedure” is ingenious. Its importance from a Marxist point of view is that it makes a clear distinction between the sphere of production and the sphere of circulation, with values being determined in the first round and prices of production being money prices that are merely transformed in the circulation process. Independently from Shaikh, a similar “extended procedure” starting from labour values was suggested and illustrated in Cuyvers (1980: 40–41), but without introducing money prices. As I have already mentioned, Sraffa remained silent during all these discussions. That makes it very difficult to assess his views, as an economist, on Marx’s theory of value. Until the opening of the Sraffa archives, we had to rely on the opinion and assessments of “privileged witnesses”. Geoff Harcourt, for instance, wrote: It does seem to me (…) that Sraffa’s analysis of price formation is complementary to Marx’s analysis, that it can be fitted into Marx’s general system with very little trouble, that, in fact, it fits neatly between the Marxist emphasis on the dominance of the sphere of production (and that the social relationships emanating there are of crucial importance), and the wage, profit and price relationships of the sphere of distribution and exchange. (Harcourt, 1982: 270) Then, in 1984, an “orthodox Marxist” attempt was made to counter the neo-Ricardian attacks: the Langston Memorial Volume, a book edited by Ernest Mandel and Alan Freeman (1984). The editors seemed to follow Lenin’s famous words: “Before we can unite, and in order that we may unite, we must first of all draw firm and definite lines of demarcation” (Lenin, 1902: 11). However, it was clear that there was neither an intention to “unite”, nor to

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cooperate against the dominance of “vulgar economics”. The volume was the result of a research project, privately funded by the widow of the American Marxist Robert Langston. Five years later, Ernest Mandel, probably out of shame towards contributors and loyalty to Langston, published the volume after severe editing. Reviewers considered it a “very uneven collection of papers”, lacking “sophistication and rigour”, and of “very low quality” (Stutje, 2007: 282). The furious outbursts by many Marxists, among which the authors of the chapters in the Langston Memorial Volume (although not all) to, e.g., Steedman’s results and his provocative statements were no doubt prompted by a widespread sense of sacrilege and by the need felt to settle a political account with the revisionists and Euro-communists in Italy and elsewhere. Although it is evidently not needed to review the various chapters, it is interesting to mention some of the arguments advanced. In his chapter, Farjoun (1984) focused on Steedman’s results, stating that a uniform rate of profits, as used by the “neo-Ricardians” does not exist and that the concept is not a Marxist one. He further indicated that Steedman’s “joint production problem” is entirely due to considering production techniques that are less efficient and therefore are not alternative techniques. Because labour will be transferred to the more efficient technique, the less efficient technique will not be used. Should this transfer be unfeasible, for instance, because of the unavailability of land, then the labour value of the output can be determined as the socially necessary labour time, averaged using the relative weight of the processes involved (Farjoun, 1984: 22). Attacking Sraffa’s concept of a “basic commodity”, Farjoun (1984: 32) wrote: … there is nothing inherent about the capitalist mode of production which guarantees the existence of a single basic commodity in the Sraffian sense. Indeed, the whole point about labour is that it is the only commodity which necessarily enters the production of every other commodity (except, of course, itself ). Given a full breakdown of all commodities, there will be millions of them (for Steedman each is differentiated according to age). Probably none, or only very few accidental ones, will be ‘basic’ in the Sraffian sense. Are f lat rolled iron sheets of specific quality of thickness ‘basic’? Since the existence of basic products is not in reality a necessary feature of universal commodity production, it is unreasonable to construct a theory which collapses without them. One can easily imagine a capitalist economy without a single basic commodity: Sraffa’s account will tell us nothing about it. Anwar Shaikh’s contribution to the Langston Memorial Volume started by pointing out that “prices are distinct from values because price is always money price, the monetary expression of value within the sphere of circulation” (Shaikh, 1984: 44). He showed next that the “value rate of profit r” and the “transformed rate r” have both been increasing with increases in the rate

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of surplus value, from which it follows “that they must move together: when the value rate of profit rises (or falls) its ref lection in the sphere of circulation, the transformed rate of profit, also rises (or falls)” (Shaikh, 1984: 59). After having restated Morishima’s argument that both rates are equal along the “balanced equilibrium growth path” (which Shaikh called “Maximum Expanded Reproduction”), he admitted that they are normally different because they are averaged differently. The value rate is transformed in the sphere of circulation: In the relatively autonomous mirror of circulation the transformed rate of profit appears as a displaced image of the value rate of profit, essentially the same in determination but somewhat different in exact magnitude. The autonomy of the sphere of circulation expresses itself in this displacement of magnitude. (Shaikh, 1984: 62) Then came Salama (1984) who made the point that Marx’s numerical examples of the transformation of values into prices of production of Volume III of Capital consider only five sectors: in contrast to Sraffa’s simultaneous equations model, not the whole economy is considered, and the sectors are not interrelated (Salama, 1984: 165). He further dealt with the uniform rate of profits, again starting from the Marxist axiom that value equals objectified abstract labour time. In turn, Albarracin (1984), after many pages repeating the mathematics of Sraffa’s model, investigated the consequences of the alleged assumption of the neo-Ricardians of constant returns to scale, apparently undisturbed by Sraffa’s words of caution in Production of Commodities by Means of Commodities that no such assumption is made. The other contributions to the Langston Memorial Volume should not retain us. It will be clear from the above discussion that Mandel’s 1984 counterattack, although it made some important points, was unable to convince a single “neo-Ricardian”. Nor was it able to convince the Marxist economists that were open to the “neo-Ricardian” arguments. With such “friends”, there is no need for enemies. In Lenin’s words “firm and definite lines of demarcation” were drawn, but the way it was done could not possibly lead to “unity”, and both sides basically stuck to their guns. More importantly, the mostly sectarian attacks by the “true Marxists” (Dobb, 1975: 469) irritated the “neo-Ricardians” to such an extent that the Marxists’ arguments were considered as merely “metaphysical” and “hagiographic”, and that it was better not to devote precious time to them and to neglect them altogether.

8.4 The 1980s and after: digesting and revising the labour theory of value In the decade that followed, “a reciprocal ignorance of what was going on in the other theoretical territory won the day” (Bellofiore, 2012: 1387).9 We

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will not review the abundant Marxist and neo-Marxists literature on the transformation problem and on the labour theory of value. But there are two developments that bear a relationship, either directly or indirectly, to Sraffa’s Production of Commodities by Means of Commodities: the “New Interpretation” of the labour theory of value and the “Temporal single system interpretation”.10 The “New Interpretation” of Marx’s theory of value was proposed independently in the late 1970s by Gérard Duménil (1980; 1983), Duncan Foley (1982), and Alain Lipietz (1982). Duménil and Foley preferred to call it the “Single-system labour theory of value” (SS-LTV). It indicates, as Anwar Shaik had suggested before, that Marx’s prices of production, in contrast to values, are not expressed in labour time, but are money prices. The “New Interpretation” abandons labour values and “abolishes” the transformation problem (dixit Duménil). Duménil and Foley (2006: 9–10) wrote: A key aspect of the SS-LTV interpretation is that value is present in the theory of exploitation, as a social substance extracted in one place in the economy (firm, industry), and realized in another. But there is no logical anteriority in the value system, compared to the price system. This interpretation is a single-system approach to the LTV. (…) This property has important analytical consequences. There is only one economy, one system, not two. There is no ‘underlying’, hidden economy, which operates in ‘values’ where the distributional realities that structure the functioning of capitalism could be determined. According to the “New Interpretation”, the vector p consists of money prices of production, whereas labour values Λ consist of embodied labour. Marx’s labour theory of value as interpreted using an input–output system of equations in line with von Bortkiewicz, Cameron, Winternitz, Seton, Morishima, Bródy, and others thus leads to a “dual system”, that is inconsistent. Labour values as prices of embodied labour comprise a concept that became fatally undermined because of joint production situations, which completely ignores the monetary aspect of Marx’s labour theory of value (Foley, 2000: 18). Although the “New Interpretation”, abandons Marx’s values, the total money value added to the economy (the net national product) and the total labour expenditure to produce it allows to define the “Monetary Expression of Labour Time” (MELT) as the ratio of the two. The MELT, thus defined, “translates” money prices in labour time, and therefore “dispenses with the need for a separate accounting system based on embodied labor coefficients” (Foley, 2000: 20). Sraffa’s “labour theory of value”, which he called the “value theory of labour” (see above), also equates total value added in the economy (or net income) to the total current labour expended in the production of the gross product, which shows the close relationship between this “macrointerpretation” of the labour theory of value and the “New Interpretation” (Carter, 2011: 1131–1132; Perri, 2010). In the notation of the previous pages,

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total labour expenditure is q (I−A) p = q l = L. Hence, the value of labour power is nothing but the hourly money wage rate, divided by the MELT, and surplus value is the monetary equivalent of unpaid labour time. Since we know that q (I–A) Λ = q l = L, the Marxist result that the labour embodied in the net product of the economy is identical to the total labour expenditure during the period considered, still holds. What makes the “New Interpretation” of Marx’s theory of value of particular interest from the perspective of this study of Sraffa’s theoretical contributions is that the way the MELT is determined is basically the same as Sraffa’s normalisation procedure: R q* A p = 1 = q* l, the labour theory of value “in disguise” (Bellofiore, 2012: 1397). Sraffa elaborated on it already in his 1940 note “Use of the notion of surplus value” (Bellofiore, 2008: 84ff.; 2012: 1393; 2014: 222). The determination of the MELT boils down to “looking into the other end of the telescope”, as Sraffa put it in D3.12.46:24,11 from value/price to labour expenditure. Moreover, immediately after the publication of Production of Commodities by Means of Commodities, while discussing John Eaton’s review, Sraffa made use of the “rate of exploitation” concept, considered, as Marx did, as a division of the social working day, but he realised that when wages are not subsistence based, they cannot be interpreted in terms of “labour embodied” but are to be interpreted in terms of “labour commanded” (Bellofiore, 2014: 222). In line with the neo-Marxist view of wages as fully determined by the class struggle and unrelated to the workers’ necessary consumption, Carter (2014) showed how with changes in the rate of exploitation of labour, Sraffa’s analysis allows “a full-blown Marxian interpretation” (Carter, 2014: 8) of his concept of “surplus industries” and “deficit industries”. At w = 1, the full net product is going to labour and the rate of exploitation is zero. Exploitation rises when the wage share falls: … as the wage share falls from unity, workers in labour-intensive industries will have a magnitude of unpaid labour extracted per hour worked greater than the distribution of unpaid labour owners of such industries receive according to the uniform rate of profit on the value of their (labour-intensive) ‘capital’ advanced, and Sraffa says that such industries are surplus industries in that there is a surplus in the unpaid labour extracted versus that distributed within this industry. Similarly, ‘capital’ intensive industries are deficit industries in that the unpaid labour extracted from workers there is less than that distributed to the owners of the (means of production-intensive) ‘capital’ advanced. (Carter, 2014: 8) Carter showed that at each rate of exploitation, which corresponds to a given share of wages in the net product, there will be a “pool of profits” that is extracted as unpaid labour and is subsequently distributed to the capitalist owners of the means of production. Based on a detailed investigation of Sraffa’s

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unpublished papers for the period between 194212 and 1956, he then argued that this “full-blown Marxian interpretation” of exploitation is also Sraffa’s. Carter (2017) further explored various aspects of Sraffa’s “Value Theory of Labour”, elaborating on the distinction between what he termed “unit labour-bestowed values” and “unit labour-commanded values” and indicating that the labour theory of value “breaks down” (with the former unit values becoming smaller than the latter) at proportional wages lower than 100% (1 > w ≥ 0). It is then shown that Marx’s theory of exploitation enters the story at rates of profit r > 0, when labour remuneration is falling short of its own productivity and unpaid labour is extracted (Carter, 2017: 214–215). An evident reaction by many Marxists in the past has been to broaden the scope of the analysis, instead of focusing on the formal relationship between prices and values, and treat Marx’s theories as a whole, the components of which cannot be properly understood if treated in isolation. In this respect, it is of interest to mention a current in present-day Marxist thought on the theory of value, referring to a long tradition in Marxism of rereading and reinterpreting Marx’s writings, that has endeavoured to develop a monetary theory of value. This is done against the critique of the Sraffians of the labour theory of value. For instance, Elson (1979: 121) argued “for a quite different reading of Marx’s theory of value, in relation to which it is the Sraffa-based critique which is redundant, rather than value”. Among these Marxists, the discussion has been about where value, as abstract labour, is generated. If value is produced by living labour in the production process, the issue is where the socialisation takes place and living labour becomes abstract labour. If this happens in the circulation process, there are no actual labour values before the eventual validation on the market (Elson, 1979: 135). Bellofiore (2018b: 529–530) writes: The contradiction between the two definitions of socialisation – a posteriori socialisation in commodity circulation, and immediate socialisation within immediate production – can be abolished and transcended if we transform the monetary theory of value into a macro-monetary theory of capitalist production. (…) The initial financing of capitalist production as a valorisation process may be seen as an act of anticipated monetary socialisation (once again, a Vergesellschaftung) of the labour power of its living bearers. Labour power is in fact potential labour in action; just like living labour is abstract labour in becoming, to be validated on the market against real money. This ex ante socialisation is what allows capitalists to think and manipulate “things” and “labour” in the production process as value-in-process and money-in-motion. Therefore, …the value of advanced money capital is nothing but the monetary expression of necessary labour, while, on the other hand, the expected price

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of the new value added in the period is the monetary expression of living labour. As a consequence, potential exploitation is known in advance, after production and before the market. (Bellofiore, 2018b: 530) Bellofiore also refers to the “value theory of labour” as “macro-monetary theory of capitalist production of (surplus) value” (Bellofiore, 2018a: 359), thus linking his reinterpretation of Marx with Sraffa’s concept and with the “New Interpretation”. Like in the “New Interpretation”, he focuses on  the macro-equality between the money value added, on the one hand, and the direct labour multiplied by the monetary expression of labour time, on the other hand. How exactly in this theory, credit-money, instead of gold, receives value is unclear, unless it is by forces outside of the model, which implies that also the “monetary expression of labour time” is undetermined and depends on a money stock (even if considered as based on an endogenous money supply), which essentially is outside the model that determines labour values (Cuyvers, 2017: 68n, 234–235). Irreconcilable with Sraffa’s approach is the “Temporal single system interpretation” (TSSI) of the labour theory of value. It can be considered as an attempt to establish a “new Marxist orthodoxy” (dixit David Laibman) or the “restoration” of Marxist political economy after “the highly successful post-Sraffian onslaught on Marxist orthodoxy of the 1970s”, the outcome of which “was effectively the near-elimination of Marxist economists from substantial inf luence in academia, following significant advances made in the wake of the radicalisation of the sixties” (Freeman, Kliman and Wells, 2004: xiv). The TSSI advocates reject the “Bortkiewiczian” reading of Marx and claim that “simultaneist interpretations”, such as Sraffa’s, are incompatible with Marx’s theory of profit. The word “temporal” in TSSI refers to the claim that Marx conceived both values and prices as magnitudes determined in historical time. With “single system” is meant that in the price equations, the value that used-up means of production transfer, depends upon their price (not their value) at the time they enter the production process. Freeman, Carchedi, and others that launched the TSSI see Marx’s economics as essentially a non-equilibrium economics (Freeman and Carchedi, 1996): production techniques and the quality of the goods produced change continuously, and the price of an input at time 0 is different from the price of that same commodity at time 1. In a nutshell, based on McGlone and Kliman (1995) and Kliman and McGlone (1999) and defining εt as the scalar “monetary expression of value” (for simplicity assumed constant within the production period), the following relations are put forward (in the notation used before):

ε t Λ t +1 = Apt + ε t l pt +1 / ε t +1 = pt A / ε t + l + gt

(20) (21)

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with subscript t indicating time period t and with gt a gain (or loss) of some amount of value in exchange, that by assumption cancels at the macro level, i.e., qt gt = 0. Therefore:

ε t qt Λ t +1 = qt Apt + ε t qt l, the total value of output, St = ε t qt l − wqt lpt , the monetary surplus value, and rt = St / qt ( A + wl)pt , the rate of profits

(22)

qpt +1 = (1 + rt )q(A + wl)pt We are not dealing with a simultaneous equations system, but with a set of equalities and definitions, and that prices are in monetary terms, with prices pt as the outcome of the previous production period. Total profits of period t are equal to the monetary surplus value (the difference between the monetary expression of total labour expenditure during the production period t and the wage bill) and define the rate of profits of period t. On applying this rate of profits to the money capital at the start of the production period, money prices pt+1 are determined, which, in turn, are considered as given in the production period t+1. The rate of profits is not determined as a structural scalar associated with the input–output relations, as in the simultaneous equations à la Sraffa, but is defined as the monetary expression of total surplus labour time as a percentage of the money capital at the beginning of the production period. Kliman and McGlone (1999: 55) claim that TSSI destroys just about all the results of the Sraffa model by showing that: (a) all of Marx’s aggregate value–price equalities hold; (b) values cannot be negative; (c) profit cannot be positive unless surplus value is positive; (d) value production is no longer irrelevant to price and profit determination; (e) the profit rate is invariant to the distribution of profit; (f ) productivity in luxury industries affects the general rate of profit; and (g) labour-saving technical change can cause the profit rate to fall. TSSI has sparked much debate among Marxist economists, discussion of which is beyond the scope of this chapter. Suffice it to mention that a detailed analysis of these claims by Veneziani (2004; 2005) and Laibman (2004) has proved them unfounded and false. Laibman (2004) rejected the TSSI advocates’ different valuation of inputs and outputs (in contrast to the modelling of Marx’s prices of production in simultaneous equations) and criticised Kliman and McGlone’s numerical illustrations of pooling and redistribution of surplus value in their theory of price determination, concluding that further adjustment in subsequent steps will not lead to convergence of the value rate of profits. Veneziani (2004; 2005) indicated that in the TSSI equations and definitions, εt, the “monetary expression of labour”, remains undefined and showed that claims (a)–(f ) are not proved, but tautological: they follow from the definitions, thanks to arbitrary assumptions. Claims (a) and (c) are obtained by assuming that qt gt = 0; claim (b) trivially follows from (20) by assuming pt ≥ 0; claims (d)–(f ) follow from (22) because the price rate of profits

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is defined as the average value rate of profits. It is safe to say that as a critique of Sraffa’s model, the TSSI has failed. In contrast to the labour theory of value without labour values of the “New Interpretation” and the abandonment of the simultaneous equations systems approach of the TSSI, I myself have suggested that labour values and prices of production are both prices to which the production processes and reproduction tend, depending on the reasons behind intra- and intersectoral labour mobility (Cuyvers, 2017: 55–56). I assumed a dynamic price formation system that is affected by the class struggle between workers and capitalists. With the workers moving between the various sectors, equal pay for equal work will be achieved, and a uniform wage rate w is established. With the given w and the interrelated production structure of the economy as captured by the input–output matrix A, capital mobility will lead to a uniform rate of profits r and to the vector of prices p, but also to unequal relative shares of profits and wages across the sectors. In sectors with a higher-than-normal profits share, “class conscious” workers will consider these profits as unfair and exploitative.13 They will react by moving to sectors where the “rate of exploitation” is smaller, which, if unhampered, will ultimately lead to the equalisation of the profits–wages shares between the sectors. Marx put it as follows: If capitals that set in motion unequal quantities of living labour produce unequal amounts of surplus-value, this assumes that the level of exploitation of labour, or the rate of surplus value, is the same, at least to a certain extent, or that the distinctions that exist here are balanced out by real or imaginary (conventional) grounds of compensation. This assumes competition among the workers, and an equalization that takes place by their constant migration between one sphere of production and another. We assume a general rate of surplus-value of this kind, as a tendency, like all economic laws, and as a theoretical simplification (…). In reality, this is only an approximation; but the approximation is all the more exact, the more the capitalist mode of production is developed. (Marx, 1894: 275) If the tendency of equalisation of the rate of exploitation is unhampered, prices will be established that are proportional to the labour values of the vector of embodied labour Λ. Such prices are evidently leading to unequal profit rates between the sectors, to which the capitalists react by moving capital to the more profitable production activities. Viewed from this angle, it can be said that: … labour values do not only logically precede prices of production but they acquire the same status as prices of production. (…) Labour values and prices of production are the two sides of the same coin, i.e. two different sets of normal, long-term prices for the same real world but neither

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ever fully realised as they are the result of two conf licting tendencies. Both are normal, long-term prices which allow the physical reproduction of the production system (including the expanded reproduction following a path of balanced economic expansion) based on the normal physical input-output relationship between the sectors of the economy. (Cuyvers, 2017: 56) Another interesting counterargument against the neo-Ricardian view that the Marxist labour theory of value is irrelevant was advanced by Petri (2014: 37ff.), where the transformation of values in prices of production is done by connecting the value equations system to the production price equations system using an equation linking total output in prices to total output in labour values. He also argued that the assumption of given production methods, as ref lected in the given matrix A and vector l, neglects the crucial relationship between the expenditure of labour (the length of the working day) and the production methods: When the relationship between profit and labour comes into play, it is necessary to abandon these limited and faulty assumptions and to consider the structure of the methods formed and its relationship with the expenditure of labour. The result we arrive at is a structure of production methods as a function of daily work time, one that is a relatively complex material determination of the daily working time and exists in that form as a result of a given length of the working day. Variations of the working day involves some kind of change of the structure. (Petri, 2014: 37–38) In other words, changes in the length of the working day will lead to changes in the elements of matrix A and vector l. As a result, profits, the rate of profits, and the prices of production depend ultimately on the length of the working day, or stated differently, on the actual expenditure of living human labour, and are an increasing function of the daily working time (Petri, 2014: 39). The Sraffa model is unable to see this relationship, and the neo-Ricardian conclusion that the labour theory of value is irrelevant is said to derive from “blindness” of considering that profit depends only on the technique used in various industries.

Notes 1 This chapter draws partly on Cuyvers (2021). 2 In Cambridge, Sraffa was advisor to Meek’s 1949 doctoral thesis “The Development of the Concept of Surplus in Economic Thought from Mun to Mill”. Maurice Dobb and Sraffa were close friends since the first half of the 1920s. Interestingly, they travelled together to Moscow in 1930 and 1952. As mentioned before, Dobb worked occasionally with Sraffa on Ricardo’s Works and Correspondence.

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3 Roncaglia (1978: 79) has warned, however, that Sraffa’s standard commodity is not an “average” of the actual system and cannot be considered the “average sector” needed in Marx’s equations. 4 This document from the Sraffa Archive can be consulted at https://msscat.t r in.ca m.ac.uk/manuscr ipt s/uv/v iew.php?n=Sraf fa.D3.12.111#?c= 0&m=0&s=0&cv=291&xywh=-2101%2C-1%2C6862%2C3555. See also Sraffa’s letter to Maurice Dobb of 9 October 1960 on Eaton’s review: Sraffa Papers D3.12.111: 118r; https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view.php?n= Sraf fa.D3.12.111#?c=0&m=0&s=0&cv=138&x y wh=-2668%2C0%2C81 09%2C4194. 5 This introduction is not found in the original 1972 book. Mandel’s “duty as a Marxist” resulted in Mandel and Freeman (1984). We will come back to this publication below. 6 This is a strange assertion, since Sraffa’s procedure reduced prices of production to “dated quantities of labour”. 7 One should not forget that during the 1950s and early 1960s, Paul Baran at Stanford University, “occupied a lonely and uncomfortable position as the only avowedly Marxist professor of economics in the United States” (Howard and King, 1992: 114). Interestingly, Ginzburg (2014: 1–2) has suggested as reasons for Sraffa’s silence: first, his “perfectionism” – that is, his fear of incorrectness or imprecision; second, his fear of being misunderstood; and lastly a keen sense of political opportuneness, given the hostility of the environment even in a democratic regime. This sense of political opportuneness concerned not the ideas themselves but the way they are presented, or the choice to remain silent. One may conjecture that these characteristics were merged in the concern that a false step could jeopardize the “cause”. It is reported by several witnesses that for Sraffa, as also for Gramsci, criticisms or reservations levelled from the “inside”, at the Bolshevik policy, never led to separation from the Communist movement or to abandoning the idea (as Valiani stated in an obituary of Sraffa) that “the future will be forged in the USSR”. 8 See, e.g., his November 1940 note “Use of the Notion of Surplus Value” (D3.12.46: 56–58) that can be consulted at https://mss-cat.trin.cam.ac.uk/manuscripts/ uv/view.php?n=Sraffa.D3.12.46#?c=0&m=0&s=0&cv=0&x ywh=-910% 2C-138%2C5327%2C2755 9 Bellofiore (2008: 68) complained: “… most Marxists nowadays live in a deep ignorance about Sraffa”. The inverse is equally true: most “Sraffians” have no idea what the discussions among Marxist economists are about, which unfortunately is often due to the polemical tone and the “dynamicist rhetoric” (Laibman, 2004: 6) of TSSI authors. 10 I am not referring to the empirical studies, mostly using input–output data, aiming at the calculation of labour values and of a validation of the labour theory of value. 11 In this note, “The Value Theory of Labour”, dating from 6 to 7 June 1955, Sraffa elaborates on the situation that prices are proportional to labour values, i.e., when r = 0. See: https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view.php?n= Sraffa.D3.12.46#?c=0&m=0&s=0&cv=29&xywh=-1566%2C-1%2C5491% 2C2949. 12 Sraffa’s “pool of profits”, which is based on the exploitation of labour and redistributed across the industries such that prices of production are obtained, resembles Marx’s procedure of transforming labour values in prices of production. Sraffa’s concept appears for the first time in a note of 12 November 1942, which is based on his notes on Capital, Volume I, of 1940 (Sraffa Papers D3.12.17: 1r–3r). The note can be

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consulted at https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view.php?n=Sraffa. D3.12.17#?c=0&m=0&s=0&cv=5&xywh=-1720%2C-156%2C5766%2C3096. 13 The reader who abhors any reasoning based on class struggle and class consciousness can rest assured that the same tendency will be somehow at work if it is assumed that the workers are reacting to profits that they consider as based on unfairness and exploitation. See, on this, e.g., de Man (1926: 70–71), whose economic papers published in the early 1930s, interestingly, also show postKeynesian neo-Marxist characteristics as I showed in Cuyvers (2015).

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L. Cuyvers (2021). “Sraffa and Marx: Strange Bedfellows?”, in: S. van Puyvelde & C. Buts (Eds.), Critical Contributions to Economics and Beyond, Berlin: Lexxion Publisher, 603–650. S. de Brunhoff (1974). “Controversies in the Theory of Surplus Value: A Reply to John Eatwell”, Science & Society, 38(4), 478–482. M. Dobb (1961). “An Epoch-Making Book”, Labour Monthly, 40, October, 487–491. M. Dobb (1975). “A Note on the Ricardo-Marx-Sraffa Discussion”, Science & Society, 39(4), 468–470. G. Dostaler (1982). “Marx et Sraffa”, L’Actualité Economique, 58(1–2), janvier–juin, 95–114. G. Duménil (1980). De la valeur aux prix de production. Paris: Economica. G. Duménil (1983). “Beyond the Transformation Riddle: A Labor Theory of Value”, Science & Society, 47(2), 427–450. G. Duménil & D.K. Foley (2006). The Marxian Transformation Problem, https:// www.researchgate.net/publication/255650016_The_Marxian_Transformation_ Problem J. Eatwell (1974). “Controversies in the Theory of Surplus Value, Old and New”, Science & Society, 38(3), 281–303. D. Elson (1979). “The Value Theory of Labour”, in: D. Elson (Ed.), The Representation of Labour in Capitalism, London: CSE Books, 115–180. E. Farjoun (1984). “The Production of Commodities by Means of What?”, in: E. Mandel & A. Freeman (Eds.), Ricardo, Marx, Sraffa – The Langston Memorial Volume, London: Verso, 11–42. D.K. Foley (1982). “The Value of Money, the Value of Labor Power, and the Marxian Transformation Problem”, Review of Radical Political Economics, 14(2), 37–47. D.K. Foley (2000). “Recent Developments in the Labor Theory of Value”, Review of Radical Political Economics, 32(1), 1–39. A. Freeman & G. Carchedi (1996). Marx and Non-Equilibrium Economics, Aldershot – Brookfield: Edward Elgar. A. Freeman, A. Kliman & J. Wells (2004). “Introduction”, in: A. Freeman, A. Kliman & J. Wells (Eds.), The New Value Controversy and the Foundations of Economics, Cheltenham – Northampton: Edward Elgar, ix–xx. P. Garegnani (2012). “‘Neo-Ricardian Theory’ versus Marxian Theory”, in: N. Salvadori, C. Gehrke, I. Steedman & R. Sturn (Eds.), Classical Political Economy and Modern Theory: Essays in Honour of Heinz Kurz, London: Routledge, 85–88. A. Ginzburg (2014). “Two Translators: Gramsci and Sraffa”, Centro Sraffa Working Papers, 1, April, Modena: Università degli Studi di Modena e Reggio Emilia. G.C. Harcourt (1982). “The Sraffian Contribution: An Evaluation”, in: I. Bradley & M. Howard (Eds.), Classical and Marxian Political Economy – Essays in Honour of Ronald L. Meek, London – Basingstoke: Macmillan, 255–275. S. Hollander (2000). “Sraffa and the Interpretation of Ricardo: The Marxian Dimension”, History of Political Economy, 32(2), 187–232. M.C. Howard & J.E. King (1992). A History of Marxian Economics, 1929–1990, 2, London: Macmillan. A.J. Kliman & T. McGlone (1999). “A Temporal Single-System Interpretation of Marx’s Value Theory”, Review of Political Economy, 11(1), 33–59. D. Laibman (1974). “Controversies in the Theory of Surplus Value: A Comment”, Science & Society, 38(4), 482–487.

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D. Laibman (2004). “Rhetoric and Substance in Value Theory: An Appraisal of the New Orthodox Marxism”, in: A. Freeman, A. Kliman & J. Wells (Eds.), The New Value Controversy and the Foundations of Economics, Cheltenham – Northampton: Edward Elgar, 1–17. V. Lenin (1902). What Is to Be Done? Moscow: Progress Publishers, 1969. A. Lipietz (1982). “The ‘So-called Transformation Problem’ Revisited”, Journal of Economic Theory, 26, 59–88. H. de Man (1926). Au delà de Marxisme, Paris: Editions du Seuil, 1974. E. Mandel (1968). Marxist Economic Theory, 2, New York – London: Monthly Review Press. E. Mandel (1975). Late Capitalism, London: NLB. T. McGlone & A. Kliman (1995). “One System or Two? The Transformation of Values into Prices of Production versus the Transformation Problem”, in: A. Freeman & G. Carchedi (Eds.), Marx and Non-equilibrium Economics, Aldershot – Brookfield: Edward Elgar, 29–48. R.L. Meek (1961). “Mr. Sraffa’s Rehabilitation of Classical Economics”, Scottish Journal of Political Economy, 24(1), June, 36–52, republished in R.L. Meek (1967), Economics and Ideology and Other Essays, London: Chapman and Hall, 161–178. R.L. Meek (1977). “From Values to Prices: Was Marx’s Journey Really Necessary?”, in: R.L. Meek, Smith, Marx, and After – Ten Essays in the Development of Economic Thought, London: Chapman and Hall, 120–133. M. Morishima (1973). Marx’s Economics, Cambridge: Cambridge University Press. M. Morishima (1974). “Marx in the Light of Modern Economic Theory”, Econometrica, 42(4), July, 622–632. M. Morishima & G. Catephores (1978). Value, Exploitation and Growth, London: McGraw-Hill Book Company. D.M. Nuti (1977). “The Transformation of Labour Values into Production Prices and the Marxian Theory of Exploitation”, in: J. Schwartz (Ed.), The Subtle Anatomy of Capitalism, Santa Monica: Goodyear Publ. Cy., 88–105. N. Okisio (1963). “A Mathematical Note on Marxian Theorems”, Weltwirtschaftliches Archiv, 91, 287–299. S. Perri (2010). “From «the Loaf of Bread» to «Commodity-Fetishism»: A ‘New Interpretation’ of the Marx-Sraffa Connection”, History of Economic Ideas, 18(1), 33–59. D. Petri (2014). “On the Neoricardian Criticism of Irrelevance”, in: R. Bellofiore & S. Carter (Eds.), Towards a New Understanding of Sraffa: Insights from Archival Research, Houndmills, Basingstoke: Palgrave Macmillan, 25–46. A. Roncaglia (1978). Sraffa and the Theory of Prices, Chichester – New York – Brisbane – Toronto: John Wiley & Sons. R. Rowthorn (1974). “Neo-Classicism, Neo-Ricardianism and Marxism”, New Left Review, 86, 63–87. P. Salama (1984). “Value and Price of Production: A Differential Approach”, in: E.  Mandel & A. Freeman (Eds.), Ricardo, Marx, Sraffa – The Langston Memorial Volume, London: Verso, 165–176. J. Schwartz (Ed.) (1977). The Subtle Anatomy of Capitalism, Santa Monica: Goodyear Publ. Cy. A. Sen (1978). “On the Labour Theory of Value: Some Methodological Issues”, Cambridge Journal of Economics, 2(2), June 1978, 175–190.

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F. Seton (1957). “The “Transformation Problem””, Review of Economic Studies, 24(3), June, 149–160. A. Shaikh (1977). “Marx’s Theory of Value and the Transformation Problem”, in: J. Schwartz (Ed.), The Subtle Anatomy of Capitalism, Santa Monica: Goodyear, 106–137. A. Shaikh (1984). “The Transformation from Marx to Sraffa”, in: E. Mandel & A. Freeman (Eds.), Ricardo, Marx, Sraffa – The Langston Memorial Volume, London: Verso, 43–84. T. Shenk (2013). Maurice Dobb: Political Economist, Houndmills, Basingstoke: Palgrave Macmillan. J. Smith (2014). “Surprise in the Archive: Reactions to Sraffa’s Papers”, in R. Bellofiore & S. Carter (Eds.), Towards a New Understanding of Sraffa: Insights from Archival Research, Houndmills, Basingstoke: Palgrave Macmillan, 9‒21. P. Sraffa (1960). Production of Commodities by Means of Commodities – Prelude to a Critique of Economic Theory, Cambridge: Cambridge University Press. I. Steedman (1975). “Positive Profits with Negative Surplus Value”, Economic Journal, 85(337), March, 114–123. I. Steedman (1977). Marx After Sraffa, London: New Left Books. J.W. Stutje (2007). Ernest Mandel – Rebel tussen droom en daad, 1923–1995, AntwerpenGent: Houtekiet/Amsab-ISG. R. Veneziani (2004). “The Temporal Single-System Interpretation of Marx’s Economics: A Critical Evaluation”, Metroeconomica, 55(1), 96–114. R. Veneziani (2005). “Dynamics, Disequilibrium, and Marxian Economics: A Formal Analysis of the Temporal Single-System”, Review of Radical Political Economics, 37(4), Fall, 517–529.

9

What to conclude?

After a careful analysis, Dostaler concluded about Sraffa’s model (Sraffa, 1960), as compared with Marx’s: It is certainly superior to the one found in the third book of Capital. It cannot, however, replace the theory of the commodity sketched out at the beginning of Capital. Are the approaches of one and the other reconcilable? In their entirety, certainly not. Certainly not regarding matrix formalisation either. There are, in particular, residues which will always escape mathematical translation. It is a question of trying to integrate part of the contribution of Sraffa, like that of Marx, in an effort of global understanding of social reality. It is certainly not a finished task. (Dostaler, 1982: 113 – my translation) However, the relationship between Sraffa and Marx seems “quite narrow, even without taking into account Sraffa’s political options…” (Dostaler, 1982: 103 – my translation). Our investigation largely corroborates this conclusion. Despite Sraffa’s political, historical, and doctrinal links with Marx and Marxism, his model, some of its assumptions, and its analytical results are often difficult to reconcile with Marx’s economic ideas. This should not be considered as deplorable per se. Sraffa has forced Marxism into a discussion that led to a rethinking of “established truths”. Unfortunately, the “Sraffian” cry for abandoning some fundamentals of Marxist political economy has also led “orthodox Marxists” into futile attempts of counterattacks that backfired. As I showed elsewhere (Cuyvers, 2017), however, many of Marx’s results can be derived from Sraffa’s model, by staying close to the simultaneous equations approach. In contrast, other scholars, in a response to the analytical challenges that Sraffa initiated, abandoned Marx’s values of Volume I of Capital. Sraffa’s stubbornness and intellectual independence (that he shared with other great thinkers) made him turn Marx’s concepts (or concepts he or the Sraffians attributed to Marx) around and around and adapt them to his own theoretical needs. In this way, he paved the way for a thorough rethinking of Marx’s economics. DOI: 10.4324/9781003283416-11

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What is remarkable is that Sraffa’s book laid the foundation of a separate school of thought in economic theory. The attitude of an inf luential group of “Sraffians” against Marx’s theory of value has caused anger, such that paraphrasing Marx’s famous words (reported by Engels) against the “phrase-mongering French Marxists”,1 a clearly frustrated Porta (2013: 4) suggested that if Sraffa would live today, he would say he is not a Sraffian. It will be remembered that against the views of prominent Sraffian scholars, Geoff Harcourt always stressed the line of descent going from Marx to Sraffa and argued (against Roncaglia) that “the Marxian stream is the most appropriate one, both for interpreting Sraffa’s own views and inclinations” (Harcourt, 2018: 89). Also, Bellofiore (2012) dryly remarked that, e.g., Heinz Kurz, until recently, always attempted to neglect, or at best to minimise, Marx’s inf luence on Sraffa, and mused that for Kurz, “Sraffa’s admiration towards Marx is argued misdirected, as something that should rather be devoted to Ricardo” (Bellofiore, 2012: 1392).2 It seems that here Rowthorn’s label of “neo-Ricardianism” (Rowthorn, 1974) is appropriate, after all. But can Sraffa be put in the same box? It is not because Sraffa edited the complete works and correspondence of David Ricardo – a monumental work unparalleled in history – and that the largest part of his Production of Commodities by Means of Commodities is about the issue of how to construct an invariable measure of value, a problem that absorbed Ricardo until the end of his life, that he should be labelled a “neoRicardian”. In light of a number of essential characteristics of his model, it seems more justified to call Sraffa’s theory “neo-Marxist”.3 Viewed from this perspective, Sraffa is standing on Marx’s shoulders, developing further, and amending where deemed necessary. However, whereas most “post-Keynesian neo-Marxists” are rejecting (or ignoring) the labour theory of value and are focusing on Marx’s “laws of motion of capitalism”, the model in Production of Commodities by Means of Commodities is doing the opposite by focusing on value and not on the dynamics of capital accumulation and economic growth. Consequently, Sraffa reinstated the Classical economists’ theory of economic surplus, but despite solving the transformation problem of Marxist economics, he did not consider labour values (Marx’s invariable measure of value) as of relevance, except in the unlikely situation that “surplus-wages” are fully consuming the surplus and that the rate of profits is zero. He suggested as a “provisional proposal” (Panico, 2001: 301) that the rate of profits is determined by the “money rate of interest”, thus making it prior to the determination of the prices of production, like with Marx, but such that there is no point in looking at the rate of profits as a parameter that derives from the given structural input–output relationships between the interdependent spheres of production in the economy, or somehow related to the rate of exploitation as defined by Marx. Moreover, although in his unpublished notes and manuscripts, Sraffa discussed Marx’s theory of the tendential fall of the rate of profits, and defended it against von Bortkiewicz, he found it only relevant in the absence of technological progress and only relating to R, the maximum rate of profits.

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What has Sraffa to offer to Marxist economics? Sraffa’s proof that prices of production consist of “dated quantities of labour” seems to accept labour as the substance of value and his standard system provides the correct transformation of values in prices of production, based on the simultaneous equations approach. But there remain fundamental differences between Marx’s theory of value (as translated into the mathematics of a system of equations) and Sraffa’s model. His treatment of wages is not following Marx’s necessary consumption approach but the Kaleckian–Robinsonian approach and agrees with the “New Interpretation” of the labour theory of value. In Sraffa’s equations, the rate of profits is determined simultaneously with the prices of production. In Marx’s theory, however, it is prior to the prices of production. But Sraffa suggested, for unclear reasons, to “close” his model by assuming that the rate of profits is determined by the money rate of interest, which opens the way for integration with the post-Keynesian monetary theory. In such a system, prices are related to the economic policies of the monetary authorities, which allows linking the monetary system with the value system without having to assume that the labour value of gold in a gold-producing sector determines the value of money (as some Marxists still hold) or the “monetary expression of labour-time”. Another reason for resentment and disgruntlement from the orthodox Marxist side was Sraffa’s treatment of “luxuries” and “non-basics”. Sraffa had shown that these goods and services are not among those of the standard commodity, implying that “non-basics” such as the output of the armaments industry, are not affecting the rate of profits. This has created a lot of confusion. If we accept that the rate of profits is determined prior to the prices of production and that profits are surplus value, which is the result of unpaid labour, the statement that “non-basics” have no impact on the rate of profits can only be explained if we also accept that in the production of “non-basics”, no surplus value is created, a situation about which Marx was hinting in his Theories of Surplus Value. It is evidently a completely different issue whether in a situation of structural underinvestment, spending on “non-basics” such as, e.g., arms and ammunition, will increase the rate of profits of the economy – a situation that Kalecki, Steindl, Baran, and Sweezy, but also Joan Robinson, have investigated and is a tenet of the post-Keynesian neo-Marxist economic theory of the stagnation tendencies in monopoly capitalism. For Marxists, Sraffa’s introduction of joint production in his model has led to mind-boggling results – negative surplus value with positive profits, or negative labour values with positive prices – and to an angry outcry from orthodox Marxists. Some Marxists investigated the assumptions that gave rise to the unexpected anomalies and revised their “standard model” accordingly. Others abandoned labour values as embodied labour and formulated the “New Interpretation” of the labour theory of value, that seems to follow Sraffa’s “value theory of labour” of equating the value of the net product of the economy and the total expenditure of living labour during the “year” that is considered.

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In contrast, I am still prepared to stick to the constantly besieged labour theory of value. I have shown that in a situation of normal reproduction of the capitalist economy, labour values are positive and labour expenditure minimising, even in case of joint production. I also argued that since normal reproduction implies a normal wage (or profits) share in value added, the workers’ attempts to keep this share at its normal level will create a tendency for “reproduction prices” towards labour values. Such prices are evidently contradicting the capitalist logic of the equalisation of the rate of profits, that, in turn, makes the price system tend to prices of production. Thus, my interpretation of the labour theory of value considers prices and values as two sides of the same coin. Until the mid-1970s, important Marxism-oriented economists, such as Maurice Dobb, Ronald Meek, and John Eatwell had given hints about Sraffa’s relevance for Marxist economic theory. Unfortunately, following Steedman’s publications on profits and surplus value, the tone in the discussions between “true” and “Sraffian” Marxists soon became increasingly acrid and shrill. In the previous chapters, it was shown that Sraffa’s model and the Marxist theory of value, as developed in the simultaneous equations approach, share crucial similarities, but also differ in some important aspects. The hostile reactions by many of their respective followers to each other’s arguments, and the often-aggressive tone of these arguments and counterarguments have led to a long trench warfare between Sraffians and orthodox Marxists, that has mostly weakened the Marxist side. If the lines of communication between Sraffians and Marxists had remained open, much could have been avoided. It is pointless to expect that all Sraffians will be open to Marxist arguments, nor that some Marxists will refrain from excommunicating Sraffa. However, it is high time, not so much to start a period of tolerance and “peaceful coexistence”, but to embrace the pluralism that warrants progress in science.

Notes 1 “Now what is known as ‘Marxism’ in France is, indeed, an altogether peculiar product – so much so that Marx once said to Lafargue: “Ce qu’il y a de certain c’est que moi, je ne suis pas Marxiste” (Engels’s letter to Edouard Bernstein of 2–3 November 1882, Engels, 1882: 356). 2 See also Porta (2012: 1365 n20). In private correspondence with me, Heinz Kurz stated: I was not concerned with an abstract admiration but with the question of when precisely did Sraffa refer to Marx’s work and make use of it and when not. This is a question of historical research and not of ideological leanings or general esteem.

(e-mail of 18 September 2020). 3 Reacting during private conversations in February 1977 to my arguments (see Cuyvers, 1979) that her theory of economic growth belongs to a post-Keynesian neo-Marxist strand in economics (pioneered by Kalecki, following hints in Marx

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Piero Sraffa’s neo-Marxist theory and Rosa Luxemburg, to which also the work of Josef Steindl and Baran and Sweezy belongs), Joan Robinson replied that she did not like such labels. Later, in Robinson (1979: 253), she stated: “With the light that Sraffa has thrown on the theory of value and Kalecki on the process of realisation of the surplus, we can develop a complete system, not of neo Marxism but of intelligible Marxism…”. In this respect, it would be particularly interesting to follow the suggestion in Porta (2013: 73) “that a proper understanding of Sraffa’s Marxian Classicism requires a connection with the Italian tradition of Marxism, in which the labour theory of value was criticised and dispensed with at an early stage”. See also Porta (2012: 1360 n5).

Bibliography R. Bellofiore (2012). “The ‘Tiresome Objector’ and Old Moor: A Renewal of the Debate on Marx after Sraffa based on the Unpublished Material at the Wren Library”, Cambridge Journal of Economics, 36(6), November, 1385–1399. L. Cuyvers (1979). “Joan Robinson’s Theory of Economic Growth”, Science & Society, 43(3), Fall, 326–348. L. Cuyvers (2017). The Economic Ideas of Marx’s Capital – Steps Towards Post-Keynesian Economics, London – New York: Routledge. G. Dostaler (1982). “Marx et Sraffa”, L’Actualité Economique, 58(1–2), janvier–juin, 95–114. F. Engels (1882). “Letter to Edouard Bernstein”, in: Marx Engels Collected Works, Vol. 46, Letters 1880–83, London: Lawrence & Wishart, 2010. G.C. Harcourt (2018). “The Role of Sraffa Prices in Post-Keynesian Pricing Theory”, in: M. Corsi, J. Kregel & C. D’ippoliti (Eds.), Classical Economics Today – Essays in Honor of Alessandro Roncaglia, London: Anthem Press, 89–95. C. Panico (2001). “Monetary Analysis in Sraffa’s Writings”, in: T. Cozzi & R. Marchionatti (Eds.), Piero Sraffa’s Political Economy: A Centenary Estimate, London – New York: Routledge, 285–310. P.L. Porta (2012). “Piero Sraffa’s Early Views on Classical Political Economy”, Cambridge Journal of Economics, 36(6), November, 1357–1383. P.L. Porta (2013). “What Remains of Sraffa’s Economics”, DEMS Working Paper Series No. 242, May, Milan: Dipartimento di Economia, Metodi Quantitativi e Strategie di Impresa, Università degli Studi di Milano – Bicocca. P.L. Porta (2014). “Comment: On the Neoricardian Criticism of Irrelevance by Dario Preti and Sraffa and the Standard Commodity by Scott Carter”, in: R. Bellofiore & S. Carter (Eds.), Towards a New Understanding of Sraffa: Insights from Archival Research, Houndmills, Basingstoke: Palgrave Macmillan, 69–74. J. Robinson (1979). “Who Is a Marxist?”, in: J. Robinson (Ed), Collected Economic Papers of Joan Robinson, 5, Oxford: Basil Blackwell, 248–253.

Part 3

Joan Robinson: Modelling capitalist economic growth with Marxist and neo-Marxist ingredients For almost half a century, Joan Robinson was a leading economist, who made important contributions in various areas of economic theory, particularly to what has become post-Keynesian economics. As a prolific writer, in sharp contrast to her colleague and friend at Cambridge University, Piero Sraffa (Gilibert, 1996: 126), her Collected Economic Papers run to five volumes.1 Also, in contrast to Piero Sraffa who always showed great reluctance, if not refusal, to communicate on the development of his unpublished ideas, Robinson’s eagerness to discuss her theoretical insights, including those “in progress”, was proverbial. Her major theoretical contributions were in the field of monetary economics, capital theory, employment theory, and economic growth theory. But she did not hesitate to abandon views that she held before, whenever she felt that they could no longer be defended. The way she looked at her The Economics of Imperfect Competition, soon after its publication in 1933, is a case in point. Similarly, in the late 1970s, she wrote about “the unimportance of re-switching”, despite having been among the first to mention this theoretical anomaly as part of her critique of the neoclassical capital theory. Her neoclassical opponents often reacted with ridicule. Nobel prize winner Robert Solow used to quip at conferences: “As Mrs. Robinson is not in the room, I assume that everybody knows what we mean by the quantity of capital”. Originally incited by John Strachey in 1936, but much under the inf luence of Michał Kalecki, she started reading Marx (Marcuzzo, 2020: 505– 506). Although she strongly criticised Marx’s theory of value, she considered much of his views on capitalist development highly relevant and she stated on various occasions that if economists had taken Marx seriously, some crucial steps in the development of Keynesian and post-Keynesian economics would have been set much earlier. However, most of her colleagues disagreed with her ideological and political ideas, and, e.g., considered her views on communism in China as highly partisan. In a review of a book for which Robinson had written a foreword, Mark Blaug described her as being “one DOI: 10.4324/9781003283416-12

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of the great eccentrics of modern economics, who in defiance of all the laws of social psychology, seems to become more radical, the older she gets” (Blaug, 1974: 650). In October 1977, I defended my doctoral thesis on Joan Robinson’s theory of economic growth (Cuyvers, 1977). I had discussed the content of the first draft of my thesis with her during afternoon sessions in the office that she shared at the Faculty of Economics & Politics (presently the Austin Robinson Building), in Sidgwick Avenue, Cambridge, or in the spacious living room at Grange Road. She did not like the way I labelled her work on economic growth theory as neo-Marxist. In the years that followed, Geoff Harcourt used to tease me when introducing me to his colleagues, by joking: “Ludo has shown that Joan is a Marxist!” In fact, what I had tried to show was that her theory of economic growth belongs to what I called then and now “post-Keynesian neo-Marxism”, “a current in contemporary economic thought aiming at a reformulation and reinterpretation of Marx’s main theses in the light of Keynesian and post-Keynesian contributions to the understanding of the working of capitalism” (Cuyvers, 1979: 327). As explained in Part 1, it is a current to which authors such as Michał Kalecki and Josef Steindl belong, but also Baran and Sweezy, and other minor authorities and precursors (see, e.g., Cuyvers, 2015).2 In Robinson (1979: 253 – Robinson’s italics), she seemed to reply to my labelling by writing: “With the light that Sraffa has thrown on the theory of value and Kalecki on the process of realisation of the surplus, we can develop a complete system, not of neo Marxism but of intelligible Marxism…”. In the following pages, I intend to show that Joan Robinson’s theory of economic growth contains important ingredients that are either close to Marx (if not borrowed and “translated”) or the other post-Keynesian neo-Marxists of the time she wrote The Accumulation of Capital (Robinson, 1956)3 and Essays in the Theory of Economic Growth (Robinson, 1962). Evidently, since the 1970s, important contributions to the Marxist theory of accumulation and of economic crises have been published, and attempts have been made to integrate Marxist and post-Keynesian views (see, e.g., Schwartz, 1977, or Halevi, Laibman and Nell, 1999). It was at the instigation of Joan Robinson herself, that Nell (1980) brought together papers by leading post-Keynesians and Marxists, a collection that Mongiovi (2003: 318) has called “the culmination of a project to integrate Keynesian, Kaleckian, Sraffian and Marxian insights into a unified Post Keynesian account of postwar capitalism”. Among the most recent developments, mention should be made of Shaikh (2016), who is one of the few to attempt an integration of Robinson’s theory of accumulation and growth with modern Marxist economic theory. Another notable exception is Marglin (1984; 2021). Since 1980, many scholarly publications were devoted to Robinson’s work that need to be considered today. I intend to do that and move beyond Cuyvers (1979). In addition, I will attempt not only to shed light on the typical Marxist and/or neo-Marxist elements in her theories, but also provide

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insight into the richness of her personality and on her intellectual relationship with Piero Sraffa, her friend and colleague in Cambridge.

Bibliography N. Aslanbeigui & G. Oakes (2009). The Provocative Joan Robinson – The Making of a Cambridge Economist, Durham – London: Duke University Press. F. Baragar (2003). “Joan Robinson on Marx”, Review of Political Economy, 15(4), October 2003, 467–482. M. Blaug (1974). “Kregel, J.A.: The Reconstruction of Political Economy. An Introduction to Post-Keynesian Economics”, Kyklos, 27(3), 649–651. L. Cuyvers (1977). Marxistische en Neo-Marxistische kenmerken en invloeden in de groeitheorie van Joan Robinson, Antwerp: Antwerp University, Ph.D. thesis. (DOI: 10.13140/RG.2.2.20055.50081) L. Cuyvers (1979). “Joan Robinson’s Theory of Economic Growth”, Science & Society, 43(3), Fall, 326–348, also in P. Kerr & G.C. Harcourt (Eds.) (2002). Joan Robinson: Critical Assessments of Leading Economists, Volume 2, London: Routledge, 268–287. L. Cuyvers (2015). “Was Henri de Man an Early Post-Keynesian Neo-Marxist?”, Review of Radical Political Economics, 47(1), 90–105. G. Gilibert (1996). “Joan Robinson, Piero Sraffa and The Standard Commodity Mystery”, in: M.C. Marcuzzo, L.L. Pasinetti & A. Roncaglia (Eds.), The Economics of Joan Robinson, London – New York: Routledge, 126–137. J. Halevi, D. Laibman & E.J. Nell (Eds.) (1992). Beyond the Steady State – A Revival of Growth Theory, New York: St. Martin’s Press. G.C. Harcourt & P. Kerr (2009). Joan Robinson, Basingstoke: Palgrave Macmillan. M.C. Marcuzzo (2020). “Kalecki and Cambridge”, Review of Political Economy, 32(4), 500–510. M.C. Marcuzzo & A. Rosselli (2008). “The Cambridge Keynesians: Kahn, J. Robinson and Kaldor – A Perspective from The Archives”, in: R. Leeson (Ed.), The Keynesian Tradition, Houndmills, Basingstoke: Palgrave Macmillan, 196–220. S.A. Marglin (1984). Growth, Distribution, and Prices, Cambridge, MA – London: Harvard University Press. S.A. Marglin (2021). Raising Keynes - A Twenty-First-Century General Theory, Cambridge, MA: Harvard University Press. G. Mongiovi (2003). “Sraffian Economics”, in: J.E. King (Ed.), The Elgar Companion to Post Keynesian Economics, Cheltenham – Northampton: Edward Elgar, 318–322. E.J. Nell (Ed.) (1980). Growth, Profits and Property, Cambridge: Cambridge University Press. J. Robinson (1956). The Accumulation of Capital, London: Macmillan. J. Robinson (1962). Essays in the Theory of Economic Growth, London: Macmillan. J. Robinson (1979). “Who is a Marxist?”, in: J. Robinson, Collected Economic Papers, 5, Oxford: Basil Blackwell, 248–253. J. Schwartz (Ed.) (1977). The Subtle Anatomy of Capitalism, Santa Monica: Goodyear Publ. Cy. A. Shaikh (2016). Capitalism - Competition, Conflict, Crises, New York: Oxford University Press.

10 Joan Robinson’s life: a short overview

Joan Robinson was born Joan Violet Maurice at Camberley, Surrey, on 31 October 1903, the third daughter of Major General Sir Frederick Maurice and his wife, Helen Margaret Marsh. Major General Maurice had to leave the army in 1918, after his “whistle blow” about the strength of the British forces during a battle, which also led to a debate in Parliament (Harcourt and Kerr, 2009: 2). After her studies at St. Paul’s Girls’ School, where Joan took history, she went to Girton College, Cambridge, in October 1921, to read economics (Robinson, 1978: ix). Although she obtained a 2.i4 in both parts of the Tripos in 1924 and 1925, respectively, she could not be awarded a degree “because this right did not come to women in Cambridge until 1948” (Harcourt and Kerr, 2009: 2). In 1926, she married Austin Robinson, Fellow of Corpus Christi, six years older, and her tutor (Cairncross, 1993: 19). Shortly before they married, Joan had brought an opening as tutor to the Maharajah of Gwalior to Austin’s attention. Austin got the appointment (Cairncross, 1993: 20) and the Robinsons sailed to India in October 1926. In 1927, during his stay in India, Austin became involved in a study of the financial relations between the Princely States and the Government of India, a study in which Joan occasionally participated. Late in 1928, his appointment was brought to an end by a political decision for which the reasons are not known, and the Robinsons left India (for details on this episode, see Cairncross, 1993: 29–36; Harcourt and Kerr, 2009: 4 give a somewhat different account) and they settled in Cambridge.5 In Cambridge, Joan attended Sraffa’s lectures on the “Advanced Theory of Value” in October–December 1928 (Marcuzzo, 2005a: 430).6 Although she described Sraffa at that time as “brilliant” but “erratic” (see the October 1928 letters to E.A.G. Robinson, quoted in Marcuzzo, 2005a: 446 n4), she was much inf luenced by both the lectures and Sraffa’s 1926 paper in the Economic Journal. Marcuzzo (2005a: 430) writes: Sraffa’s inf luence on Kahn and Robinson was in fact such that they embraced the hypothesis of imperfect competition as the starting point

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for their own researches (respectively in The Economics of the Short Period and The Economics of Imperfect Competition) although their approaches and results proved far from Sraffa’s intentions and framework. The fact that Joan Robinson became an academic at Cambridge was by itself quite an achievement that should not be belittled. The university had “a long and inglorious history of discrimination against women unique among British universities” (Aslanbeigui and Oakes, 2009: 25). As a result, her university education was not of the same quality as that of male students. There is more. As Aslanbeigui and Oakes (2009: 31) write: Excluded from the privileged social spheres of men’s colleges, Maurice ( Joan Robinson – L.C.) did not have the valuable informal contacts and close personal relations with leading economists that were such an important element of a Cambridge education. She was not allowed in the rooms of male students or fellows, nor could she dine in the halls of men’s colleges or expect invitations to breakfast or weekends or tea from male faculty. This meant that she was barred from sites at which journeymen economists received much of their education. In 1930, she was allowed to supervise a few economics students (which she did from her f lat), but not to lecture. Her supervision, however, “neither diminished the limitations under which she worked as a woman, nor altered her institutional marginality” (Aslanbeigui and Oakes, 2009: 35). This changed when, early 1930, Austin introduced her to a concept of the marginal revenue curve in a paper written by one of his students. This MR-concept in combination with the supply curve in a market with imperfect competition, at which Sraffa had hinted in his 1926 Economic Journal paper, got her into research on imperfect competition. Robinson’s The Economics of Imperfect Competition was published in 1933. An appointment as an assistant lecturer at the university followed in 1934, the same year she bore her first child. By the time Keynes’s Treatise on Money came from the press in October 1930, he was already moving away from the ideas formulated in the book. On Sraffa’s impulse, a small group of junior researchers at the university, that called itself “the Circus”, started with a thorough discussion of the Treatise and of Keynes’s revisions. The outcome of each of the discussions was communicated to Keynes by Richard Kahn. It is common knowledge that these intellectual interactions between Keynes and “the Circus” were instrumental to the genesis of his General Theory of Employment, Interest and Money, but also in the development of the theoretical insights of the members of “the Circus” (Skidelski, 1992: 448 ff.). The members of “the Circus” were Austin and Joan Robinson, Richard Kahn, James Meade, and Piero Sraffa, and they met until March 1931.7

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Austin Robinson reported many years later that Keynes picked up the ‘Circus’s’ ideas, sometimes only after extensive discussion, incorporated them into his own thinking and went ahead. There may have been (as some members believe) a short period when the ‘Circus’ was slightly further on towards the General Theory than was Keynes. But it was a very short time. Moreover, Keynes himself appears to have been moving forward on his own lines…. (Robinson, 1977: 342)8 Joan published two articles based on ideas she picked up during the discussions and combined with her own evolving insights.9 One of these, her February 1933 Economica paper, “A Parable on Saving and Investment”, was an answer to the damaging critique by Hayek of Keynes’s Treatise. It was based on the discussions of “the Circus” and explained Keynes’s counterargument using a parable (Aslanbeigui and Oakes, 2009: 170). It earned her the introduction into Keynes’s circle, an introduction that was of crucial importance for an academic career in a culture based on mutual support and patronage, such as Cambridge in the 1930s. But she still had to wait another two years and a half before she could consider herself the patron’s “client” (Aslanbeigui and Oakes, 2009: 181). Joan believed in the Keynesian revolution “even before Keynes understood the implications of A Treatise on Money (1930) in these dramatic terms” (Aslanbeigui and Oakes, 2009: 9). Keynes, however, did not recognise her as part of the small group that discussed his insights, until June 1935, when he asked her for help and sent her the proofs of The General Theory, which placed her “at the centre of Cambridge economics” (Aslanbeigui and Oakes, 2009: 9). In 1936, Michał Kalecki came to England. Keynes’s General Theory had just been published and Kalecki had discovered that the basic ideas put forward in Keynes’s opus magnum corresponded to the insights he had developed independently. Having read a recent article by Joan Robinson, he wrote to her. They met and Robinson was immensely impressed by Kalecki’s understanding of Keynesian economics (Toporowski, 2013: 86ff.). The result was a lifelong friendship, which at times, at least from Robinson’s side, tended to be of a somewhat maternalistic nature.10 She considered Kalecki an ally.11 Toporowski (2013: 87) commented on Robinson’s first meeting with Kalecki: His exchange with Joan Robinson was to be the beginning of a lifelong friendship in which they were to exchange insights into each other’s work. Their disagreements precluded the possibility of an intellectual partnership. But their sympathies and that apparent common core of ideas with Keynes made Joan Robinson and Michał Kalecki return time

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and again to each other, Kalecki in particular for support in his trials to come and Robinson for confirmation that she had indeed witnessed at first hand a scientific revolution. Harcourt concluded similarly: …though there was mutual and long-sustained interaction between these two great friends, causation did, most of the time, run more from Kalecki to Joan Robinson than the other way around. Increasingly, I believe, her own mode of thought and analysis were moulded by her absorption of Kalecki’s approach, to the propagation of which she lent her very considerable powers of exposition. I think this is as true of the main propositions of The Accumulation of Capital (1956) and the papers that ran up to and follow it, as it is of her superb account of Kalecki on capitalism in the 1977 Oxford Bulletin Memorial Issue for Kalecki. (Harcourt, 1996: 332) Having been witness and discussant of Keynes’s breakthroughs that led to his General Theory, she set herself the task in 1937 of popularising the “New Economics”. In a book review, Marcuzzo (2010: 459) writes: By that time, she had become an apostle and a proselytizer of the Keynesian revolution, eager to teach and propagate it. She was accused of being fiercely opinionated, one-sided, and badmannered and, as a result, her path to acceptance in the Faculty of Economics of Cambridge was littered with obstacles. Despite an impressive record of publications, she was made Full Professor only in 1965. The strains of her professional and private life led to a series of manicdepressive crises during the 1930s, the latest of which was in September 1938 (Marcuzzo, 2005b: 38). Rosselli and Besomi (2005: 318) say on that episode: Robinson had given birth to two daughters in 1934 and 1937 and published three books and a number of articles in less than six years. According to Keynes, ‘The strain of combining babies with so much intellectual work is at the bottom of it’ (letter 2209 from JMK to RFK, 4 October 1938). However, the whole crisis (the latest breakdown – L.C.) had in fact occurred immediately before the Munich Pact which saw the triumph of Chamberlain’s appeasement policy and defeat for those who saw agreements with Hitler as not only indecorous but also quite useless. In one of the two letters that she sent to Sraffa on the same day (letter 1065, 27 September 1938), a greatly agitated Robinson insistently urges Sraffa—then in Italy—to come back to England immediately and points out that she had felt closely involved in the events through two members of her family. Her father ‘has in all innocence bless his incredible simple heart been used to

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play a crucial part in Chamberlain scheme’, while her sister with a group of Conservative members of parliament had taken the alternative, hard line in favour of presenting Hitler with an ultimatum after his invasion of Czechoslovakia. Emotional turmoil, complex relations with Sraffa and Kahn and family conf lict may well have combined with political conf lict and the spectre of war to form a devastating mixture. No clear evidence emerges in the correspondence with Sraffa or indeed with anyone else. However, what had contributed a lot to her psychic crisis and also to a clash with her husband over Chamberlain’s appeasement policy, was her relationship with Richard Kahn, who had become her lover and who, like her, disagreed with the UK’s foreign policy towards fascism (Aslanbeigui and Oakes, 2009: 67ff.). During the Battle of England ( July–October 1940), she took refuge with her two daughters in Cornwall, from where she corresponded on an almost daily basis with her friends and colleagues in Cambridge, particularly with Kahn. From there, she followed the internment and the release of Sraffa (Rosselli and Besomi, 2005: 320). In a letter to Kahn (1 August 1940), she remarked: “I wonder if the authorities also have forgotten that there are antifascist Italians”. These letters are quoted in a chapter by Annalisa Rosselli with Daniele Besomi to which the authors of the chapter add: “It still took over a month before Robinson was able triumphantly to proclaim Keynes’s success in having Sraffa released” (Rosselli and Besomi, 2005: 320 – my italics). Deeply impressed by Kalecki who, starting from Marx,12 had discovered the “new economics” independently from Keynes and his circle in Cambridge, she assigned herself the task of “translating” Marx’s Capital into the language of 20th-century economists. In December 1940, she wrote to Richard Kahn: My next project is to make a dictionary to [sic] Marx so that he can be read by economists. Value = man hours. Surplus value = product−real wages etc. I had some conversation with Dobb but he is really useless – always running with the hare and hunting with the hounds (Papers of R.F. Kahn at King’s College Archives, University of Cambridge, RFK\13\90\4\376–7; also quoted in Harcourt and Kerr, 2009: 35). Three months later, she wrote to Kahn: “I am now spending my spare time reading Capital. I think it will be fun to lecture on”. In May 1941, as another letter to Kahn witnesses, she had finished the first chapter of her Essay on Marxian Economics and she wrote that on her usual Monday night duty fire watching, she was spending “the time putting in footnotes to the first chapter of my book on Marx” (Papers of R.F. Kahn, RFK\13\90\4\422, also quoted in Harcourt and Kerr, 2009: 35). As Prue Kerr’s research of the extant of Dobb–Robinson correspondence shows, Maurice Dobb, the Marxist economics authority par excellence in Cambridge and in the

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UK at large, disagreed completely with her approach of Marx. Kerr (2007: 77) concluded on Dobb’s reluctance: “Perhaps Dobb felt some exasperation with Robinson’s reductionist and deductive approach to Marx”. Apart from Kalecki and Kahn, Robinson also enjoyed other lifelong friendships with academic peers to which she was very much attached, such as Piero Sraffa and Nicholas Kaldor. The friendship between Robinson, Sraffa, Kahn, and Kaldor was strengthened by common personal interests and activities. Potier (1991: 60) mentions, for instance, that in the summer of 1948, Sraffa had decided to show post-war Italy to his Cambridge friends, Richard Kahn and Joan Robinson. During their stay in the Italian Dolomites, they “enjoyed hiking in the mountains, and when they were not scaling the heights, they were immersing themselves in Roy Harrod’s book Towards a Dynamic Economics, which came out shortly after.”13 In the summer of 1951, Sraffa went to the Austrian Alps with Kahn, Joan Robinson, and Nicholas Kaldor. In Cambridge in the 1950s and 1960s, Sraffa was regularly joined by Joan Robinson, Kahn, and Kaldor for walks or bicycle rides, as Sraffa’s pocket diaries show (see Sraffa Papers E39). In terms of politics, Joan Robinson was to the left. King (2005: 305–306) writes: Although probably already a member of the Labour Party (his wife was secretary of the local branch), Kaldor was not politically active. Joan Robinson, by contrast, had long-standing connections with the Party, and in particular with the Fabian Society. In the early 1930s she was an active member of the New Fabian Research Bureau’s expert committee on the supply of capital, along with Colin Clark and Gerald Shove. During the war years, she was active in both the Reconstruction Committee of the Labour Party and the ‘technical committee’ that advised William Beveridge on employment policy (King, 2005: 307). She wrote several pamphlets on economic planning, competition policy, monopolies and price controls, public control of private enterprise, or wage control and employment policies (King, 2005: 308–312) that shaped discussions in the Labour Party. After the war, she withdrew from these activities, and concentrated on her theoretical work. During the following decades, she belonged to the socialist tendency in the Labour Party, together with Austin Robinson, Hugh Dalton, and James Meade, who made proposals for post-war economic policy reforms, based on their critique of capitalism (Harcourt and Kerr, 2009: 60). She was involved in the publication of the English translation of Rosa Luxemburg’s The Accumulation of Capital in 1951, and wrote a 16-page introduction (Robinson, 1951) in which she tried to “translate” Luxemburg’s arguments, that were obviously stated in Marxist terminology, the same way she had done in her Essay on Marxian Economics for Marx’s Capital. But her introduction became much more than that. Remarkably, five years later, she chose the title of Luxemburg’s book for her own magnum opus (Lachmann, 1958: 87; Pasinetti, 2005: 248).14

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In the 1950s, Joan Robinson turned out to be a passionate world traveller. In April 1952, she made a first trip to Moscow, then still Stalinist. Together with Dobb and Sraffa, she participated in the International Economic Conference, for which Dobb had organised the British delegation (Shenk, 2013: 144).15 She published a small 28-page booklet (Robinson, 1952) with various, mostly sympathetic notes and brief observations. Crucial for the development of her political and ideological views were the trips to Mao’s China. She visited China in 1953, 1957, 1963, 1964, 1967, 1972, 1975, and 1978; North Korea in 1964; and Cuba in 1979. She considered the Chinese experiment as a successful development strategy and wrote articles in which she supported the road taken by the Communist government (for an in-depth analysis, I refer to Tahir (1990)). In her later years, she visited India every year, on which occasion she lectured. The Papers of Joan Robinson that are kept at King’s College, Cambridge contain field notebooks and travel journals with the notes of many of these travels.16 Joan Robinson was part of the British delegation17 that visited Poland in June 1956 on an invitation by Oskar Lange. During this trip, a visit of Poznan had to be cancelled because of a general strike. The discussions that followed had a great impact on her. Toporowski (2013b: 54) wrote on this: “The two members of the British Communist Party, Maurice Dobb and Ronald Meek, and Joan Robinson were deeply affected by what they had witnessed, and it changed their political outlook”.18 As a woman academic in an academic environment dominated by men, she had to stand tall. She built herself a reputation as an unwavering debater who had the courage to go against the grain and propagate and defend new and unorthodox ideas. Despite many pathbreaking publications, her academic career advanced much slower than one would expect.19 She was appointed as assistant lecturer in economics in 1931, a lecturer in 1937, and a reader in 1949, and she became a fellow – of both Girton and Newnham College  – only in 1965. Robinson became a full professor in 1965 and an honorary fellow of King’s College in 1979. When in May 1983 Victoria Chick gave a lecture at the University of Antwerp, we talked about Cambridge and Joan Robinson. She told me that Joan had been seriously ill in February, but that she had no further information. Later, I learned that Robinson had suffered a massive stroke (Harcourt and Kerr, 2009: 14). Concerned, I contacted Geoff Harcourt, who wrote back immediately: Joan has been in a coma since 3 Feb. I see her once a week, but I doubt that she knows who is there. She probably hears & understands a few things but is fed intravenously and moved every 2 hours. It is incredibly sad. (letter by G.C. Harcourt, 31 May 1983, in my private correspondence). She died on 5 August 1983.

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Notes 1 Aslanbeigui and Oakes (2009: 1) write: “Joan Robinson was one of the most original and prolific economists of the 20th century and unquestionably the most important woman in the history of economic thought”. Harcourt and Kerr (2009: 10) mention that Cristina Marcuzzo recorded 444 published items in Joan Robinson’s bibliography. Marcuzzo and Rosselli (2008: 204) mention: “more than 440 items” and that she “left very little unpublished”. 2 Some authors are going much further. A paper by Baragar (2003) concludes: Robinson was fortunate to have had personal contact with such giants as Keynes, Kalecki and Sraffa. It is not surprising then that elements of their work shaped her own thinking. But Marx’s inf luence dominates, and it is into a Marxian vessel that Robinson poured what for her were the constructive elements of Marshall, Keynes, Kalecki and Sraffa. (Baragar, 2003: 481)

3 4 5 6

7

8

On the close relationship between Kalecki–Steidl and Baran and Sweezy’s work, and its roots in Rosa Luxemburg, see Foster (2014). Aslanbeigui and Oakes (2009: 2) call Robinson’s Accumulation of Capital: “a daunting work of uncompromising formalism and an important stimulus of the ‘capital controversy’”. Upper Second-Class Honours. Joan Robinson already left India in the summer of 1928. There is no direct evidence on Robinson’s attendance, only indirect evidence, as Marcuzzo (2005b) argues. Interestingly, Kalecki would follow Sraffa’s seminar in October 1937 and publish in 1938 a paper he produced on that occasion (Marcuzzo, 2005a: 433). In 1935–1936, however, she wrote most of the notes for Keynes (Moggridge, 1973: 637). Kalecki and Sraffa were close, and Sraffa was instrumental in Kalecki getting academic posts in Cambridge and Oxford. See Kalecki’s letter to Sraffa of 15 March 1945 (Sraffa Papers C152:1r-v at https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view. php?n=Sraffa.C152#?c=0&m=0&s=0&cv=1&xywh=-1668%2C0%2C5003% 2C2587) While the contributions of Kahn, Meade, Sraffa, and Austin Robinson are documented, it is not clear in what way Joan Robinson contributed to the discussions on the revision of Keynes’s Treatise on Money, as Aslanbeigui and Oakes (2009: 180–181) indicate. In another paper, Austin Robinson has explained why he inserted between brackets “as some members believe”: I did not think there was any real difference of opinion as to where the ‘Circus’ had got to. But it was, if you remember the channels of communication, very much more difficult to know at any moment just how far Keynes had got. Richard Kahn, as angel-messenger, could not always tell whether Keynes had or had not accepted some suggestion or criticism. (Robinson, 1977: 35–36).

9 See her February 1933 Economica paper “A Parable on Saving and Investment” and her 1933 article “The Theory of Money and the Analysis of Output”, in the first issue of the Review of Economic Studies. 10 The Keynes Papers contain an interchange of letters between Keynes and Joan Robinson on a paper by Kalecki that Keynes refused for publication. Robinson played the role of intermediary between Keynes and Kalecki, and convinced

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11 12 13 14

15

16 17

18

Keynes to read the newest version of the paper, based on her understanding of it. In the end, Keynes quipped to Kaldor: “I do not doubt that in the end she will write quite a good article for him”! (letter of Keynes to Nicholas Kaldor, 18 March 1941, in Moggridge, 1983: 836). After their first meeting, Robinson wrote to Kalecki: “I think you are one of the ten people in Europe who will understand what I am trying to do” (quoted in Toporowski, 2013: 86). Robinson (1978: xvi) wrote on Kalecki: “He did not have, like Keynes, a long struggle to escape from Marshall, but approached his problems directly from Marx”. Harrod had lent a proof to Kahn “which we read when we were not walking or climbing” (Kahn, 1984: 4). Paul Baran stated that Robinson “visualizes herself as the Rosa Luxemburg of our days”; letter of Paul Baran to Paul Sweezy of 17 May 1957, which can be consulted in the Baran-Sweezy Archives at: https://monthlyreviewarchives.org/ index.php/baran-sweezy/article/view/1957-04_1957-05/7217 Joan Robinson was a member of the “Initiating Committee”. Due to worsening international relations between the Soviet Union and the USA, participation by American scholars was made impossible. For details on the difficulties in organising the Conference, see the correspondence between Paul Baran and Oskar Lange kept in Paul Baran’s Archive at Stanford University: https://stacks. stanford.edu/file/druid:vm474kf4548/PAB-Lange.pdf See https://archivesearch.lib.cam.ac.uk/repositories/7/archival_objects/289218 The delegation consisted of R.F. Kahn, Maurice Dobb, Joan Robinson, W.B. Reddaway, Kenneth Berrill, R.L. Cohen, and R. Davies, from Cambridge; Peter Wiles, J.R. Sargent, and E.F. Jackson from Oxford; R.G.D. Allen and Brian Hopkin from London; R.L. Meek from Glasgow; W. Martin from Manchester, and Brinley Thomas from Cardiff. About this visit, Ronald Meek has left the following anecdote: While we were in Cracow, Mrs Joan Robinson, who was one of the members of our delegation, gave a lecture to the local economists, the majority of whom were Party members. I was interested in the subject of the lecture and obtained a special dispensation from Mrs Robinson to enable me to attend. That night, at dinner, I was sitting next to Mrs Robinson and opposite to Oscar Lange. ‘How many orthodox Marxist economists would you say were at my lecture this afternoon?’, Mrs Robinson asked Lange. Lange thought for a moment, and then smiled, and said: ‘Well, there was Mr Meek…’. (Meek, 1964: 186–187)

19 By becoming openly a fanatic Keynesian during the 1932–1936 period and trying to get a lectureship in monetary theory at a time when most of Keynes’s ideas in his General Theory were considered by his peers (such as Dennis Robertson) in Cambridge as ill-founded and wrong, her candidacy was a treat for the “Marshallian guild” and was bound to create open theoretical controversy (Aslanbeigui and Oakes, 2009: 196ff.). Later, the balance of forces in the Faculty Board were often against her – an academic who was seen as having learned her economics by reading Keynes’s proofs of the General Theory, and who combined her orthodox Keynesianism with what were seen as ideological positions and with an analysis of capitalism using a model similar to Marx’s.

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Bibliography N. Aslanbeigui & G. Oakes (2009). The Provocative Joan Robinson – The Making of a Cambridge Economist, Durham – London: Duke University Press. A. Cairncross (1993). Austin Robinson – The Life of an Economic Adviser, Houndmills, Basingstoke – London: Palgrave Macmillan. G.C. Harcourt (1996). “Some Ref lections on Joan Robinson’s Changes of Mind and their Relationship to Postkeynesianism and the Economics Profession”, in: M.C. Marcuzzo, L.L. Pasinetti & A. Roncaglia (Eds.), The Economics of Joan Robinson, London – New York: Routledge, 331–344. G. C. Harcourt & P. Kerr (2009). Joan Robinson, Basingstoke: Palgrave Macmillan. R.F. Kahn (1984). The Making of Keynes’ General Theory: Raffaele Mattioli Lectures, Cambridge: Cambridge University Press. P. Kerr (2007). “Joan Robinson and Maurice Dobb on Marx”, Contributions to Political Economy, 26, 71–92. J.E. King (2005). “Planning for Abundance: Nicholas Kaldor and Joan Robinson on the Socialist Reconstruction of Britain, 1942–45”, in: I. Barens, V. Caspari & B. Schefold (Eds.), Political Events and Economic Ideas, Cheltenham: Edward Elgar, 306–324. L.M. Lachmann (1958). “Mrs. Robinson and the Accumulation of Capital”, South African Journal of Economics, 26(2), June, 87–100. M.C. Marcuzzo (2005a). “Piero Sraffa at the University of Cambridge”, European Journal of the History of Economic Thought, 12(3), September, 425–452. M.C. Marcuzzo (2005b). “Robinson and Sraffa”, in: B. Gibson (Ed.), Joan Robinson’s Economics – A Centennial Celebration, Cheltenham – Northampton: Edward Elgar, 29–42. M.C. Marcuzzo (2010). Book review, The Provocative Joan Robinson: The Making of a Cambridge Economist. By Nahid Aslanbeigui and Guy Oakes. Science and Cultural Theory series. Durham – London: Duke University Press, 2009. Journal of Economic Literature 48, June 2010, 456–471. R.L. Meek (1964). “The Rise and Fall of the Concept of the Economic Machine”, in: R.L. Meek (Ed.), Smith, Marx, and After – Ten Essays in the Development of Economic Thought, London: Chapman and Hall, 1977, 176–188. D. Moggridge (Ed.) (1973). The Collected Writings of John Maynard Keynes, Vol.13, The General Theory and After - Part I - Preparation, Cambridge: Cambridge University Press. D. Moggridge (Ed.) (1983). The Collected Writings of John Maynard Keynes, Vol. 12, Economic Articles and Correspondence – Investment and Editorial, Cambridge: Cambridge University Press. J.P. Potier (1991). Piero Sraffa—Unorthodox Economist (1898–1983), A Biographical Essay, London: Routledge. A. Robinson (1977). “Keynes and his Cambridge Colleagues”, in: D. Patinkin and J.C. Leith (Eds.), Keynes, Cambridge and The General Theory - The Process of Criticism and Discussion Connected with the Development of The General Theory, London and Basingstoke: Macmillan, 25–38. J. Robinson (1951). “Introduction”, in: R. Luxemburg (Ed.), The Accumulation of Capital, London: Routledge and Kegan Paul, 13–28. J. Robinson (1978). “Reminiscences”, in: Contributions to Modern Economics, New York – San Francisco: Academic Press, ix–xxii.

170 Modelling capitalist economic growth A. Rosselli & D. Besomi (2005). “The Unlocked for Proselytizer – J. Robinson and the Correspondence with Sraffa, Harrod and Kaldor”, in M.C. Marcuzzo & A. Rosselli (Eds.), Economists in Cambridge – A Study through their Correspondence, 1907–1946, London – New York: Routledge, 308–325. R. Skidelski (1992). John Maynard Keynes – The Economist as Saviour, 1920–1937, London: Papermac. J. Toporowski (2013). Michał Kalecki: An Intellectual Biography. Vol. 1, Rendezvous in Cambridge 1899–1939, Houndmills – Basingstoke: Palgrave Macmillan.

11 Robinson’s theory of economic growth and accumulation in a nutshell

In Part 2 devoted to Sraffa, we saw how the linear production model à la Marx, Leontief, von Neumann, and Sraffa – using the technologically determined input coefficients and the vector of necessary consumer goods – not only allows the calculation of labour values and prices of production, but also the general rate of profits and the maximum attainable rate of growth of the economic system. Both the rate of profits and the attainable rate of growth are thus structurally linked to the system of intersectoral input f lows. Elsewhere (Cuyvers, 2017), I have stressed that the relationship between the rate of accumulation and the rate of profits is the translation in terms of the linear model of what in Marxist economics is called the surplus value realisation mechanism: when the capitalist class accumulates the entire surplus product, it also realises the surplus value via the purchases of additional constant and variable capital. When part of the surplus product consists of goods that are consumed by capitalists, the rate of economic growth will fall below the maximum attainable rate; nevertheless, surplus value is realised by this consumption. This realisation mechanism was often neglected by Marxist economists, until Michał Kalecki made it the cornerstone of his theory of profits and closed a theoretical gap between Marx’s schemes of reproduction and Keynes’s theory of effective demand.

11.1 Profits realisation mechanism When Kalecki came to England in 1936, Joan Robinson was impressed by his insights into the relationships that she thought were only known within the small circle around Keynes. She wrote: Kalecki had one great advantage over Keynes – he had never learned orthodox economics (…). The only economics he had studied was in Marx. Keynes could never make head or tail of Marx (…). But starting from Marx would have saved him a lot of trouble. Kahn, at the “Circus” where we discussed the Treatise in 1931, explained the problem of saving and investment by imagining a cordon round the capital-goods industries

DOI: 10.4324/9781003283416-14

172 Modelling capitalist economic growth

and then studying the trade between them and the consumption-goods industries; he was struggling to rediscover Marx’s scheme. Kalecki began at that point. (Robinson, 1966b: 338. See also Robinson, 1966a: x). To analyse the requirements for a positive long-term growth rate, Robinson used a model with two social classes. Already in one of her first papers on the subject of “the long period”, she dealt with the impact of changes in the income distribution on savings and the savings ratio, by referring to the different saving propensity of capitalists and workers (Robinson, 1936: 82). In The Accumulation of Capital (Robinson, 1956), she introduced a further distinction within the capitalist class, between entrepreneurs and rentiers, and she stressed that conf licts of interest will develop, whether or not both roles are unified in a single capitalist, since under certain conditions, larger rentier consumption will constrain the maximum attainable rate of accumulation (Robinson, 1956: 255–256). Also, with a separate class of rentiers, the decision to save and the decision to invest are separated, introducing a source of instability (Robinson, 1952: 47). Robinson took from Kalecki the idea that “capitalists get what they spend”, i.e., his profits realisation mechanism. Inspired by Kalecki’s use of Marx’s schemes of reproduction, she explained the relationship between profits and capitalist spending by aggregating the various spheres of production into a consumer goods sector and an investment goods sector (Robinson, 1962: 89, 126–127). The value of output produced in each of these sectors consists of the wages paid, together with the “quasi-rents”, which in turn are made up of profits, depreciation allowances, and interest payments (Robinson, 1956: 13). She then showed that the quasi-rents in the consumer goods sector correspond to a physical surplus of consumer goods that can be used for hiring additional workers in the investment goods sector (i.e., for future higher investment goods output) and/or for consumption by capitalists. Let Xi, Li, and Qi be the value of output, the wage sum, and the quasi-rents of sector i (i =1,2), then the following intersectoral relations hold in case of zero capitalist consumption (Robinson, 1956: passim): Sector 1 (capital goods): X 1 = L1 + Q1 = Q1 + Q2 Sector 2 (consumer goods):X 2 = L 2 + Q2 = L1 + L 2 The first equality1 says that the totality of quasi-rents is spent on capital goods since it is assumed that there is no capitalist consumption. The second equality says that the total wages are spent on consumer goods because workers do not “save”. From these equalities, it follows that: Q 2 = L1

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With capitalist consumption and c as the capitalist propensity to consume (0 ≤ c < 1), this equality becomes: Q2 = L1 + c (Q1 + Q2 ), and after rearrangement: Q2 =

L1 + c Q1 (Robinson, 1956: passim). (1 − c)

Robinson’s model also results in a vector of positive prices. When expressed in labour time (i.e., with the uniform wage rate as numéraire), these prices are normal prices. Such prices will not be found in reality, since they will exist only in a situation of steady economic growth without innovations (or with neutral technical progress only) (Robinson, 1956: 103, 114).2 This formula indicates a simple ex post linear relationship between the quasi-rents of sector 2 and the consumption of workers and capitalists of sector 1. The equality, Robinson argued, can be interpreted in physical terms, with the surplus of consumer goods of sector 2 (above what the workers of sector 2 consume) being what allows the consumption of the workers in sector 1 (and that of sector 1 capitalists, if positive). At this stage of her argument, Robinson thus avoided aggregation, in which prices or labour values would have to be used.

11.2 Capitalists’ “animal spirits” and their interaction with the realisation mechanism Robinson’s theory of economic growth and accumulation starts from an analysis of capitalists’ inherent urge to accumulate. She states that the strength of this urge (which she calls “animal spirits”, following Keynes) determines how much the capitalists will be willing to accumulate, given their expectations about the rate of profits. The higher the expected longrun rate of profits, the more the capitalists will want to accumulate. Further increases in the expected rate of profits are, however, accompanied by more uncertainty. As a result, the rate of accumulation (and, for a given capital–output ratio, the rate of economic growth) will increase with the expected rate of profits, but less than proportionately. The mathematical relationship between the expected rate of profits and the desired rate of accumulation is shown in the Robinsonian investment curve. It should not be confused with the relationship between the rate of profits and the rate of accumulation/rate of growth with given capitalist savings rates. I will call this the Robinsonian realisation curve, the functional form of which is r = g/ sc (Robinson, 1956: 272; 1962: 61), with r being the rate of profits, g being the rate of accumulation, and sc being the capitalists’ propensity to save out of profits.

174 Modelling capitalist economic growth

In Figure 11.1, the straight line depicts the realisation curve, while the convex-shaped curve is the Robinsonian investment curve, given the capitalists’ urge to accumulate. Robinson summarised her theory as follows: In my model the rate of accumulation and the propensity to save out of profits are the independent elements that determine the rate of profit of capital; while the rate of profit, together with technical conditions, determine the real wage. (Robinson, 1963: 409, 410) Whatever the ratio of net investment to the value of the stock of capital may be, the level of prices must be such as to make the distribution of income such that net saving per unit of value of capital is equal to it. Thus, given the propensity to save from each type of income (the thriftiness conditions) the rate of profit is determined by the rate of accumulation of capital. (Robinson, 1962: 11–12) At a given moment in time, the rate of growth of the capital stock (the rate of accumulation) is g’. The capitalists’ savings rate sc, via this rate of accumulation, generates the realised rate of profits r’. Figure 11.1 indicates, however, that when the capitalists expect r’, they are eager to accumulate more, i.e., g+. Once this higher rate of accumulation is reached, a higher rate of profits

r

Robinsonian investment curve Realisation curve

r*

r’

g’

g+

g*

g

Figure 11.1 Interaction between profits realisation, profits expectations, and the capitalist urge to accumulate.

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is also realised. Equilibrium is reached at the rate of accumulation g* and the rate of profits r* when the desired rate of accumulation becomes equal to the actual rate. Moreover, for given capitalists’ “animal spirits”, g* is the maximum rate of accumulation that is attainable in the long run.

11.3 Factors constraining the maximum attainable rate of growth Robinson’s point is that there are many reasons why g* cannot be considered as a stable equilibrium position. For one, if in the absence of technical change, the rate of population growth and the rate of accumulation happen to be identical, the rate of unemployment will remain constant during the accumulation process (Robinson, 1956: 79). However, if the rate of population growth is higher, unemployment will increase; if it is lower, an everincreasing shortage of labour will develop (Robinson, 1956: 80–81). The rate of growth of output is by definition equal to the sum of the rate of growth of labour productivity and of the (employed) labour force. In the absence of technical change, the capital–output ratio and the labour productivity will be constant. The rate of growth of output will then also equal the rate of accumulation, and the rate of growth of the work force. If the rate of accumulation is higher than the rate of growth of population, labour scarcity will develop and the rate of population growth will constrain the rate of accumulation (Robinson, 1956: 84, 174–175). Thus, often the maximum rate of accumulation g* cannot be reached due to labour scarcity. The reserves of labour that are available in the long run determine whether the additional capital goods and other means of production can be manned or not. Intense capitalist “animal spirits” – the normal situation in the competitive phase of capitalism – will cause capitalists to do their utmost to reach the desired rate of accumulation. Assume that the maximum attainable rate of accumulation is g’. This rate will allow the realisation of the rate of profits r’. However, if this r’ is also expected in the future, capitalists will aim at a proportionate increase in their invested capital at g+. Therefore, labour intensity will be increased and/or new technology will be introduced until g* can be reached. Apart from labour scarcity, the organised labour movement can also constrain the maximum attainable rate of growth. Robinson refers to the wage rate that plays this role as the “inf lation barrier”. It is the “minimum acceptable real wage” (Robinson, 1962: 58), “a limit to the level to which real-wage rates can fall without setting up a pressure to raise money-wage rates” (Robinson, 1956: 48), or else: “the level of real wages, that the workers are willing to accept and able to enforce” (Robinson, 1956: 83–84). Once the inf lation barrier is reached, the actual rate of accumulation cannot move further in the direction of the desired rate of accumulation. Every attempt to increase the actual rate of accumulation will only result in inf lation. In contrast to less developed economies, where a “technical surplus available above subsistence

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wages for the workers employed” (Robinson, 1956: 83) exists and is realised through the spending of the capitalist class, the relevant surplus in a developed capitalist system is not limited by subsistence wages, but by the inf lation barrier (Robinson, 1956: 83). Two other factors can constrain the rate of accumulation before the “inf lation barrier” starts operating or before permanent labour scarcity is making itself felt: limited financial resources and capacity limits. Both should, however, be considered as short-period problems (Robinson, 1956: 52). What is then the impact of technical change and technological progress? Robinson analyses this by using her “ex ante” production function for a given rate of profits r. We will not go into the technicalities involved. Suffice it to indicate that Robinson’s “ex ante” production function pictures a given spectrum of techniques. For a given rate of profits, it depicts the various known efficient production methods as a combination of the corresponding labour productivity and the degree of mechanisation. The degree of mechanisation of a production process is measured by the “real-capital ratio” C/L, with C, capital K in wage units w: C = K/w, and L the labour expenditure. However, it is stressed (Robinson, 1956: 156): In reality techniques are not fully blue-printed before they are about to be used. The spectrum of techniques is a real phenomenon, but a very amorphous one. The possibility of using less or more mechanised techniques than those actually being operated is known only in a vague and general way. Assume that the real wage cost w/p < wαβ and that α, the least mechanised production technique is applied. When the real wage cost increases to w αβ, then the techniques α and β are equally efficient and both will be used. A further increase of w/p > wαβ will then lead to the full adoption of technique β. It will be clear that a higher wage rate will induce the adoption of a more mechanised production technique. However, in some situations, an abnormal relationship between wages and degree of mechanisation is possible, leading to “re-switching of techniques”. This is the case when an increase of w/p from wαβ to w βγ does not establish indifference between β and γ, but between α and β, such that a further small increase of w/p will lead to the adoption of α with a lower degree of mechanisation (Robinson, 1956: 418). Labour scarcity that constrains the possible rate of accumulation will lead to rising real wages and a fall in the rate of profits. Making abstraction of “re-switching of techniques”, the existence of a spectrum of techniques will only postpone the constraints on the possible rate of accumulation. Without technical progress, the rate of accumulation will tend to move asymptotically towards the rate of population growth. Except for a “Golden Age”, when the income shares of labour and capital remain constant, there is no rule that dictates income distribution. The degree of mechanisation and the capital–output ratio will normally increase

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during the accumulation process within a given spectrum of techniques, but since also the rate of accumulation and the rate of profits drops, there is no reason to think that the share of profits and of investment will fall (Robinson, 1959: 438, 440).

11.4 Technical progress, equilibrium Robinson stressed that the capitalist rules of the game are particularly conducive to technical progress (Robinson, 1956: 65, 96). What will be the impact? Although technical progress is often induced by labour scarcity, there is no reason to think that it is necessarily capital-using, i.e., that the increase in labour productivity will be larger in the consumer goods sector than in the investment goods sector (Robinson, 1956: 169; 1962: 51, 111). If the increase in labour productivity in both sectors is the same, technical progress is neutral, and the income shares of labour and capital remain constant. It follows that technical progress can prevent a fall in the rate of profits that would otherwise have resulted from the labour shortage created by the current rate of accumulation. Each technical progress, however, shifts the spectrum of techniques and the production function only once, so that a desired accumulation rate higher than population growth will again create labour shortage and push back the rate of profits. For the rate of profits to remain constant, technical progress must therefore be sufficiently at a fast and steady pace; moreover, with a constant rate of profits, the income proportions of labour and capital will only remain constant, if technical progress is neutral. An acceleration of the pace of technical progress leads to a faster obsolescence of the investment goods that need to be replaced, and thus to an increase in the rate of accumulation (which, in turn, triggers technical progress) (Robinson, 1956: 91, 138). Robinson argued that in the long run, there is a tendency to compensate for the bias of the innovations, so that technical progress will be neutral on average (Robinson, 1956: 170–171; 1962: 101). In this context, she pointed to acceleration in the rotation of capital and the development of transport and distribution. Moreover, a capital-saving bias gives rise to labour shortages, which leads to the introduction of capital-using innovations, while capital-using innovations, via the increased cost of capital, lead to capital savings (Robinson, 1956: 170). She concludes: “After a period of heavy bias in the capital-using direction, opportunities are thrown up for capital-saving innovations. Thus near-enough neutrality over the long run seems to be what we might in general expect to see” (Robinson, 1962: 101). Robinson listed various other reasons for instability during the process of accumulation, among which are mutually inconsistent expectations that are not confirmed by subsequent events (Robinson, 1959: 442). Still other reasons are that (1) the initial conditions under which balanced growth starts do not ensure sustained accumulation; (2) a shortage of labour or of natural

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production factors may develop; or (3) the growth rate may be too low resulting in poverty (Robinson, 1962: 6). Technical progress, or the acceleration of the rhythm of technical progress, also causes distortions as the distribution of labour across sectors and the expected profitability of investments will change (Robinson, 1956: 92, 98). Mention should also be made that consumer demand will change with increasing wealth, as will the competitive environment (Robinson, 1956: 268, 359). Since equilibrium and accumulation are only reconcilable in logical time (see § 11.5), Robinson preferred to use the concept of tranquillity. Rather than assuming correct foresight, this implies that expectations are constantly being confirmed and renewed by the calm and regular development of the economy (Robinson, 1956: 59, 66). Only in a state of perfect tranquillity does a well-defined and universally applicable rate of profits exists, because people think they know the future costs and quasi-rents (Robinson, 1956: 103). Also, this expected profit rate is equal to the current profit rate and the age structure of the capital stock adjusted to the growth and accumulation rate (Robinson, 1956: 104; 1962: 50–51). Major inventions destroy the relationship between expected returns on investment and the current rate of profits and stimulate accumulation. It is possible that after such a shock, the economy will regain tranquillity (Robinson, 1956: 163), but frequent changes, as well as a bias in technical progress, make this state impossible (Robinson, 1956: 175). For tranquillity to survive with technical progress, it must be neutral and proceeding at a steady pace, so that the “real-capital ratio” remains constant. However, for a harmonious development to be possible in the future, the rate of profits must also remain constant, and the wage rate must increase at the same rate as labour productivity. When technical progress is neutral, and proceeding steadily, without any change in the time pattern of production, the competitive mechanism working freely, population growing (if at all) at a steady rate and accumulation going on fast enough to supply productive capacity for all available labour, the rate of profit tends to be constant and the level of real wages to rise with output per man. There are then no internal contradictions in the system. Provided that political events cause no disturbances, and provided that the entrepreneurs have faith in the future and desire to accumulate at the same proportional rate as they have been doing in the past, there is no impediment to prevent them from continuing to do so. As long as they do, the system develops smoothly without perturbations. Total annual output and the stock of capital (valued in terms of commodities) then grow together at a constant proportionate rate compounded of the rate of increase of the labour force and the rate of increase of output per man. We may describe these conditions as a golden age (thus indicating that it represents a mythical state of affairs not likely to obtain in any actual economy). (Robinson, 1956: 99)

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The reader will recall that Robinson employs a two-classes model of capitalism. Thus, although from the point of view of capitalists, the “Golden Age” can be termed a state of permanent equilibrium; for the workers, it is only an optimum in the complete absence of consumption from profits (Robinson, 1962: 53). When introducing a rentier class into the model, it immediately becomes apparent that such a “Golden Age” cannot be regarded as a general equilibrium. Moreover, due to changes in the ratio of profits and rentier’s savings (Robinson, 1956: 258–259, 276, 277–278), e.g., because of a larger “pay-out ratio” or a higher rentier’s savings rate, the rate of accumulation will no longer be a steady one.

11.5 Logical time versus historical time – history versus equilibrium Robinson argued repeatedly that one should not try to solve the theoretical problem of getting into equilibrium, since the economic environment changes due to all kind of short-period inconsistencies and because of unpredictable long-period changes in technology, the availability of natural resources, and the structure of institutions. In Robinson (1953–1954: 85), it is stated: The neo-classical economist thinks of a position of equilibrium as a position towards which an economy is tending to move as time goes by. But it is impossible for a system to get into a position of equilibrium, for the very nature of equilibrium is that the system is already in it, and has been in it for a certain length of past time. While analysing the process of economic growth, she stressed that the neoclassical concept of balanced growth is not suited, with accumulation taking place through historical time (see on this: Harris, 2005). In contrast, an economy that accumulates and, in the absence of technical progress, adopts more mechanised production techniques while the rates of profits and of accumulation fall with the growing capital stock, is moving in logical time (Robinson, 1962: 24). In reality, there is a continuous series of disturbances and shocks that prevent an equilibrium position from being reached (Robinson, 1962: 6, 76). When according to theory, an economy has moved away from an equilibrium position, or the so-called equilibrium growth path, the physical composition, as well as the age structure of the capital goods stock changes (Robinson, 1962: 50). This is a movement in historical time, so that, according to Robinson, even assuming that companies can sufficiently foresee the coming evolution, “wrong” decisions are made that can easily prevent the return to the equilibrium growth path (Robinson, 1962: 25). Moreover, in the real world, perfect foresight does not exist, so expectations and uncertainty also play an important role (Robinson, 1962: 17).

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Robinson’s views on time, equilibrium, uncertainty, and expectations finally brought her to even dissociate herself from the post-Keynesian allies at the height of the “capital controversy”. In her 1975 article, “The Unimportance of Reswitching”, she wrote (Robinson, 1975: 38–39) that what is compared when considering “re-switching” are two economies – “islands”: On each island a particular rate of profit obtains, and each has the stock of machines appropriate to its own rate of profit. There is no way of moving across a switch point from one island to another, and no one takes any interest in blueprints for techniques that they are not using themselves. (…) Two different economies are separated either in space or in time. No two economies separated in space have exactly the same technology, for many accidents of geography and history enter into the choice of technique, as well as the design of “machines.” The same economy at different dates has a different state of technical knowledge. Not only is every island at a different point, but every point is on a different production function. Looking at a capitalist economy as it evolves over long periods of historical time allows us to model it by considering periods of normality or, alternatively, by considering sufficiently long periods of time. This is what Marx’s schemes of reproduction and his focus on a situation of “normal reproduction” are about. Bhaduri (1985) has shown that in sharp contrast to the neoclassical growth models, Marx’s analysis of the conditions of profit realisation in the economic system and historical proportionality inherited from the past is essentially an analysis of capitalistic accumulation as a historical process. Marx’s two-sector model has been reformulated as a multisectoral model of the input–output type. By generalising his reproduction schemes, scholars have shown their close resemblance to von Neumann’s model (von Neumann, 1945), from which output levels along an equilibrium growth path can be derived, and equilibrium prices that have been shown to be equivalent to the “normal prices” of the Classical economists, to Marx’s “prices of production”, or to Sraffa’s prices as modelled in his Production of Commodities by Means of Commodities (Sraffa, 1960). Such an interpretation, however, has been vehemently rejected by Robinson (and most post-Keynesians of today). She stated that no stable position exists about which to learn how prices are expected to change and at which level they will be in equilibrium. In fact, the Classical economists and Marx did not consider “natural prices” or “prices of production” as equilibrium prices, but rather as centres of gravitation of actual prices. But Garegnani’s defence of Sraffa’s prices as such centres of gravitation (Garegnani, 1989) has also been rejected by Robinson.3 Gram (2003: 504) remarked: Robinson never embraced the view that prices of production corresponding to a uniform rate of profit with different capital/labor ratios in different industries constitute centers of gravity to which market prices

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are continually attracted. On this score, she would not count as a classical revivalist. Indeed, she was as critical of the tendency towards long-period positions as she was of the equilibrium paths of neo-neoclassical theory.

11.6 Monopolisation, underconsumption, stagnation After having shown that, in contrast to what neoclassical theory indicates, steady economic growth and accumulation is unlikely in a competitive capitalist economy, Robinson then analysed the impact of monopolies. Her starting point was the opinion that in the long run, capitalism tends to become monopolised (e.g., Robinson, 1956: 92, 176, 217, 338; also: Robinson, 1962: 76, 77; 1966a: 57). With the increasing capital stock and of the required minimum investments needed for entering a market, she expected that normally the competitive pressure on companies will weaken. Monopolisation, she argued, is the direct result of the competitive struggle that leaves fewer and fewer rivals in the arena, and of price agreements during the economic slump (Robinson, 1956: 92, 217; 1962: 77; 1966a: 57–59). Robinson made the point that monopolisation results in an increase in profit margins (Robinson, 1962: 42, 77; 1966a: 17; also: Robinson, 1956: 77– 78) as an increase in cost will tend to translate in a price increase, while the opposite would be less likely to happen. Unless effective demand increases, higher monopolistic profit margins will result in lower profits in the more competitive sectors (Robinson, 1962: 42). She then argued that monopolisation, since it is accompanied by increasing minimum investments and product differentiation, affects the accumulation rate in various ways, due to fear of overcapacity (Robinson, 1962: 41, 76). The less intense urge to accumulate, combined with the upward trend in profit margins, will reduce output, real wages, and employment, and result in the underutilisation of the existing equipment (Robinson, 1962: 42). The reduced competitive pressure will also depress the pace of innovations and technical progress (Robinson, 1956: 90, 93, 100, 162). This will reduce the growth rate, as well as the general rate of profits, causing stagnation (Robinson, 1956: 91, 162). This way, the monopolisation tendency may, though not necessarily, lead to a weakening of the “animal spirits” of the capitalists, a cautious investment policy (Robinson, 1962: 41) and a lower rate of technical progress and innovation (Robinson, 1956: 90–91, 407).4 In addition, since under monopolistic and oligopolistic conditions, falling cost prices are not followed by falling sales prices, profit margins and selling costs keep increasing (Robinson, 1956: 92–93; 1962: 78). Conversely, with monopolisation, all kind of publicity and sales techniques are introduced, and price reductions are avoided as higher profit margins are needed to increase selling costs (Robinson, 1956: 92–93). In this way, a significant portion of the investable surplus is wasted in capitalist economies (Robinson, 1970: 77), although via uniformisation of consumers’ tastes, advertising can lead to returns of scale (Robinson, 1956: 339).

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Capitalism, in its monopolistic phase, is therefore confronted with a tendency towards “underconsumption” and stagnation, as the real wage bill is depressed by the tendency to increase profit margins (Robinson, 1956: 77, 92–93, 131), while price rigidity has as a consequence that with a decreasing nominal wage rate, the real wage rate also decreases (Robinson, 1956: 79, 154, 195, 197) and, with continuing technical progress, lags behind the increase in output per person (Robinson 1956: 93; 1962: 61). In the absence of sufficient entrepreneurial spirit and technical progress, the rate of accumulation will become too low to allow production capacity to expand to the same extent as labour productivity (Robinson, 1956: 91, 94–95, 131, 162, 179, 260; 1962: 78). However, according to Robinson, various trends and real developments counteract this tendency to underconsume and stagnate. A first “solution” for declining private investment and the increasing threat of unemployment is government spending on armaments (Robinson, 1956: 93, 273). It is important that such expenditure does not compete with private expenditure or create a saturation point of consumer needs (Robinson, 1970: 86). They, therefore, have played an important role in maintaining economic stability and growth in the Western capitalist economies after the Second World War (Robinson, 1970: 84, 86; 1966a: 50). A second counteracting factor is the development of foreign trade. When the relative overproduction is sold abroad, the gap between the evolution of labour productivity and the real wage rate can be maintained. By increasing the volume of exports from year to year through price competition with the artisanate in the stationary non-capitalist economies, or through the creation of needs with the local rich or in the population as a whole, accumulation will continue and the threat of stagnation can be averted wholly or in part (Robinson, 1956: 369).

Notes 1 Following Kalecki, and in contrast with Marx, Robinson assumes that each sector is vertically integrated and produces directly and indirectly its own means of production. Hence, the intersectoral supplies are on both sides of the equalities and cancel out. 2 Robinson (1956: 59; 1962: 51) prefers to use the term “tranquillity” instead of “equilibrium” for a situation without disturbances, internal contradictions, and external shocks. See further in § 11.4. The Accumulation of Capital (Robinson, 1956) is a very difficult book, and her Essays on the Theory of Economic Growth (Robinson, 1962) was needed to clarify important points. Harcourt and Kerr (2009: 83) wrote: “Though she and Kahn clearly thought of Golden Age analysis as a preliminary to the real business of exploring dynamic processes in historical time, the way she presented the analysis in The Accumulation of Capital, with ‘reality’ often breaking through, tended to blur the analytical boundaries between the two. It is not until we get to the Essays and the developments built on them that we see that analysis of the medium term with short-period situations growing out of those that preceded them becomes centre stage”. Harcourt and

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Kerr (2009: 82–83) also refer to an unpublished preface to a later edition of The Accumulation of Capital where she explained very clearly the four main issues and questions with which she was concerned. 3 Harcourt (1986: 105) stated: In Sraffa’s system, certainly as used by the Sraffians, though not in anything Sraffa himself wrote, the prices of production are centres of gravitation. Presumably, therefore, they have some explanatory power for the patterns of actual market prices – but this is not so in Joan Robinson’s interpretation. 4 Robinson came back on some of this in later work. See, e.g., Robinson (1966a: 59).

Bibliography A. Bhaduri (1985). “Capitalistic Accumulation in Logical and Historical Time”, Economic and Political Weekly, 20(45/47), Special Number, November, 1903–1905, 1907. L. Cuyvers (2017). The Economic Ideas of Marx’s Capital – Steps Towards Post-Keynesian Economics, London – New York: Routledge. P. Garegnani (1989). “Some Notes on Capital, Expectations and the Analysis of Changes”, in: G.R. Feiwel (Ed.), Joan Robinson and Modern Economic Theory, Houndmills, Basingstoke, Hampshire – London: Macmillan, 344–367. H. Gram (2003). “Joan Robinson: Classical Revivalist or Neoclassical Critic?”, Review of Political Economy, 15(4), October, 493–508. G.C. Harcourt (1986). “On the Inf luence of Piero Sraffa on the Contributions of Joan Robinson to Economic Theory”, Economic Journal, 96, Supplement: Conference Papers (1986), 96–108. G.C. Harcourt & P. Kerr (2009). Joan Robinson, Basingstoke: Palgrave Macmillan. D.J. Harris (2005). “Robinson on “History versus Equilibrium””, in: B. Gibson (Ed.), Joan Robinson’s Economics – A Centennial Celebration, Cheltenham – Northampton: Edward Elgar. J. Robinson (1936). “The Long-Period Theory of Employment”, in: J. Robinson, Essays in the Theory of Employment, Oxford: Basil Blackwell, 1947. J. Robinson (1952). “The Model of an Expanding Economy”, Economic Journal, March, 62(245), 42–53. J. Robinson (1953–1954). “The Production Function and the Theory of Capital”, Review of Economic Studies, 21(2), 81–106. J. Robinson (1956). The Accumulation of Capital, London: Macmillan. J. Robinson (1959). “Accumulation and the Production Function”, Economic Journal, 69(275), September. J. Robinson (1962). Essays in the Theory of Economic Growth, London: Macmillan. J. Robinson (1963). “Findlay’s Robinsonian Model of Accumulation: A Comment”, Economica (New Series), 30(120), November. J. Robinson (1966a). Economics – An Awkard Corner, London: Macmillan. J. Robinson (1966b). “Kalecki and Keynes”, in: Problems of Economic Dynamics and Planning. Essays in Honour of Michał Kalecki, Warszawa: Pwn-Polish Scientific Publishers, 335–341. J. Robinson (1970). Freedom and Necessity, London: Macmillan.

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J. Robinson (1975). “The Unimportance of Reswitching”, Quarterly Journal of Economics, 89 (1), 32–39. P. Sraffa (1960). Production of Commodities by Means of Commodities – Prelude to a Critique of Economic Theory, Cambridge: Cambridge University Press. J. von Neumann (1945). “A Model of General Economic Equilibrium”, Review of Economic Studies, 1945–46, 13(1), 1–9.

12 Joan Robinson’s and Marx’s model and concepts compared

Joan Robinson did not want to be considered as a Marxist. On the title page of her 1953 booklet On Re-Reading Marx, she made the provocative statement “Marxism is the opium of the Marxists”, a statement which must have been shocking for the Marxists, both orthodox and less orthodox. The booklet also contains her “An Open letter from a Keynesian to a Marxist” in which she described herself as a “left-wing Keynesian”. It is worthwhile quoting the passage in full: You are very polite, and try not to let me see it, but, as I am a bourgeois economist, your only possible interest in listening to me is to hear which particular kind of nonsense I am going to talk. Still worse – I am a leftwing Keynesian. I was drawing pinkish rather than blueish conclusions from the General Theory long before it was published. (I was in the privileged position of being one of a group of friends who worked with Keynes while it was being written.) Thus I was the very first drop that ever got into the jar labelled ‘Left-wing Keynesian’. Moreover, I am quite a large proportion of the contents of the jar today, because so much of the rest has seeped out of it meanwhile. Now you know the worst. (…) I was a student at a time when vulgar economics was in a particularly vulgar state. There was Great Britain with never less than a million workers unemployed, and there was I with my supervisor teaching me that it is logically impossible to have unemployment because of Say’s Law. Now comes Keynes and proves that Say’s Law is nonsense (so did Marx, of course, but my supervisor never drew my attention to Marx’s views on the subject). Moreover (and that is where I am a left-wing Keynesian instead of the other kind), I see at a glance that Keynes is showing that unemployment is going to be a very tough nut to crack, because it is not just an accident – it has a function. In short, Keynes put into my head the very idea of the reserve army of labour that my supervisor had been so careful to keep out of it. (Robinson, 1953: 19–20) Against the Marxist whom she addressed, she also pointed out: “What I mean is that I have Marx in my bones and you have him in your mouth” (Robinson, 1953: 20). DOI: 10.4324/9781003283416-15

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In their pathbreaking biography of Joan Robinson, Harcourt and Kerr (2009) have examined the evidence from her correspondence with Sraffa, Kahn, and Dobb, on how she interpreted the economic ideas of Marx. This correspondence dates from the time when she was writing An Essay on Marxian Economics (1942). There is no point in doing over scholarly work that is well done.1 What needs to be investigated, however, is how a number of elements of Marx’s model of capitalist development and its assumptions penetrated in her work of the 1950s on the theory of economic growth. Her model of capitalist accumulation, which she primarily developed in Robinson (1956a, 1962a), is building on Michał Kalecki’s theory and on Marx (particularly on how she interpreted Marx in her Essay of 1942). In this chapter, we will investigate how her views relate to those of Marx and Kalecki.2 It is evidently beyond its scope to review Kalecki’s theory and explore the relationship of these views with Marx. But the important point is that Kalecki considered his theory of effective demand, based on the schemes of reproduction of Volume II of Capital, as an elaboration of Marx’s underdeveloped theories of the realisation of surplus value through the spending of capitalists. The problem had already been investigated by Rosa Luxemburg, whom Kalecki held in high esteem, although he did not share her theory that capitalist expanded reproduction is impossible.3 First, we will investigate Robinson’s “basic model” for similarities with Marxian–Kaleckian ideas. Next, we review her model of production and distribution. We then come to the Robinsonian relationship between the rate of profits and the rate of accumulation and to the crucial issue of how to introduce technological progress in the model. Finally, we review how, according to Robinson, economic growth proceeds in a capitalist economy and what the impact is of monopoly capitalism.

12.1 Robinson’s “basic model” and Marx Robinson’s “basic model” considers what she called the “rules of the game”, and her model of production and distribution. On the foundation of this “basic model”, she built her theory of economic growth. This way of considering from the outset, the economic and social constraints of economic growth, is evidently similar to (though as we will see, far from identical with) Marx’s view of the interrelationship of the “forces of production” and the “relations of production”. While discussing the “rules of the game” of a given economy, be it a slave economy, a feudal system, a capitalist system, or a socialist system, she stated: Work without property can produce nothing, and property without work is soon consumed. The rules of the game are largely concerned with the manner in which work and property are combined in production and with the rights that they give to share in the proceeds. (Robinson, 1956a: 4)

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Bhaduri (1969: 533) has rightly pointed out that these “rules of the game” are, in fact, identical to Marx’s relations of production. The Classical economists used a model with interacting social–economic classes to analyse how the output and the surplus were produced and distributed between them. Marx followed this approach but insisted on the role of the class struggle in income distribution, and in production, thus putting limits to what is feasible in an economic system. He insisted that he was using a model with two classes to assume the “allgemeine und ausschlieszliche Herrschaft der kapitalistische Produktion” (“universal and exclusive domination of capitalist production”) (Marx, 1885: 422). Such a division of society into two classes is also used by Robinson with workers and entrepreneurs respectively, to which she later added rentiers (Robinson, 1956a: 68, 250; 1962a: 88, 120).4 Interestingly, Marx saw the function of entrepreneur as part of the function of the capitalist, and also distinguished between the capital-owner and the manager (Marx, 1867: 448–449). He predicted a conf lict over the propensity to consume and to invest between the two: At the historical dawn of the capitalist mode of production – and every capitalist upstart has to go through this historical stage individually – avarice, and the drive for self-enrichment, are the passions which are entirely predominant. But the progress of capitalist production not only creates a world of delights; it lays open, in the form of speculation and the credit system, a thousand sources of sudden enrichment. When a certain stage of development has been reached, a conventional degree of prodigality, which is also an exhibition of wealth, and consequently a source of credit, becomes a business necessity to the ‘unfortunate’ capitalist. (Marx, 1867: 741) In Robinson’s model, the distinction between entrepreneurs and rentiers is a methodological one from the outset, and it would play an important role at a later phase of her research.5 It is clear that although Robinson’s terminology is not that of Marx or Marxists, the setting of her basic model is the same. The same conclusion holds regarding the factors that determine the “rules of the game”. In her view, these rules change, although not deterministically, under pressure of class conf licts (Robinson, 1956a: 16) and as part of the necessary adjustment of society to developing forces of production (Robinson, 1966a: 14; 1970: 45, 86). We are far from the determinism of Marx’s preface to his Contribution to the Critique of Political Economy (1859), but not far from the present-day versions of Marxian historical materialism.

12.2 Robinson’s production model and the Marx–Sraffa model Although not formally presented in Robinson (1956a), her production model is of the input–output type. It should be noted that, as it was developed in The

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Accumulation of Capital (Robinson, 1956a), it anti-dates Sraffa’s linear model (Sraffa, 1960). Such linear models are based on assumptions, such as (1) labour is the sole unproduced factor of production; (2) labour is homogeneous, i.e., of uniform quality (or reducible to the same quality); (3) in each process of production, a homogeneous output is produced and no “joint production” exists; (4) the input coefficients are constant; no technical innovations take place, and no economies of scale are considered; and (5) a closed economic system (Georgescu-Roegen, 1950: 215–216). It was John von Neumann, who introduced such linear models of the input–output type to the English-speaking profession (von Neumann, 1945). In his paper, originally in German and dated 1932, prices, quantities produced, the rate of economic expansion, the rate of profits, etc. were determined simultaneously. It sparked a lot of interest in both Cambridge and Oxford, also thanks to the explanatory note on von Neumann’s model by Champernowne (1945). Since then, some papers drew attention to the link between the linear model and Marx’s theory of value (see e.g., Cameron, 1952; Seton, 1957). When Sraffa’s Production of Commodities by Means of Commodities was published in 1960 (Sraffa, 1960), a similar linear model was used. Of course, neither the Classical economists, nor Marx, had a linear production model in mind when studying value theory. Meek (1961: 162) writes: … (the Classical economists) did not, by and large, use these postulated interrelationships (between elements of input and elements of output over the economy as a whole) an integral part of the methods which they employed to make prices and factor incomes determinate…. Yet, it can easily be shown that Marx (and Ricardo) reduced concrete labour to abstract labour, often assumed proportionalities between some inputs and outputs and between spheres of production, neglected international trade in his reproduction schemes and analysed the impact of technical progress and an expanding scale of production. Therefore, both the Classical economists and Marx reasoned within a common system that, today, can best be translated into a linear production model (Pasinetti, 1977; Kurz and Salvadori, 1995: 380ff.; Cuyvers, 2017). Why did Robinson not present her model in terms of such a formal Marx– Leontief model? Some obvious reasons can be listed. Firstly, she was not trained in mathematics at all and was dismissive of the use of mathematics in economic analysis (Harcourt and Kerr, 2009: 199). A well-known anecdote tells that she declined an invitation from Ragnar Frisch in 1958 to become vice-president of the Econometric Society and pointed out that she could not very well oversee a journal that she could not read! A favourite of her comments was “I never learned math, so I had to think.” In both The Accumulation of Capital and Essays in the Theory of Economic Growth, the analysis is conducted in plain and logical language, without mathematics and using diagrams only where absolutely required. This has been considered

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unfortunate by the mathematically trained economists who do not want to spend time reading heavy sentences presenting difficult-to-follow arguments. In his review of The Accumulation of Capital, Lawrence Klein complained: The author may be accused of being insular in her intellectual outlook and horizon. Had she gone beyond her select range of references into the powerful fields of linear programming, input-output analysis, mathematical general equilibrium systems, and theory of balanced growth she would have found it possible to cut through much more directly and much more generally to all her results. It is a pity that she is not more familiar with many of the results that have already been established in the literature of mathematical economics. (Klein, 1958: 623) Secondly, Sraffa’s model, which was developed with the help of mathematicians Besicovitch and Watson, was not discussed with Robinson and was only revealed to her after he published his Production of Commodities by Means of Commodities in 1960. And although she knew about John von Neumann’s model6, it is obvious that she was unable to understand the mathematics,7 also being convinced that its results could be derived without it. In the Sraffa Papers, there is a letter by Robinson to Peter Newman, dated 29 May 1962, about Newman’s review of Sraffa’s model in the Schweizerische Zeitschrift für Volkswirtschaft und Statistik, in which she writes: Your detective work on the inf luence of von Neumann in Cambridge seems a bit illogical. The reason why Sraffa could explain him to Champernowne was that Sraffa had already made the discovery. Not that I want to be ungrateful to von Neumann. His model is beautiful and it is very useful for dealing with those people who cannot see a simple point unless it is put in a complicated way. (My italics)8 12.2.1 Labour as the sole unproduced factor of production Although kept in the dark by Sraffa about his work with the linear model, Robinson herself adopted such a model in her 1956 magnum opus. However, she made it clear that the usual assumption of labour as the only unproduced factor, can probably not be maintained in the long run: Looking at the matter in a philosophical light, the reason why there is no meaning to be attached to the marginal product of “capital” is that, from a long-run point of view, labour and natural resources are the factors of production in the economy as a whole, while capital goods and the time pattern of production are the means by which the factors are deployed. (…) From a short-period point of view it is more convenient

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to treat labour as the only factor of production, and to regard the stock of concrete capital goods as one element of the technical conditions that determine the productivity of a given quantity of labour. (Robinson, 1956a: 310–311). And in “Notes on Marx and Marshall” she stated: Marx’s refusal to treat capital as a factor of production seems well founded. Whether it is right to regard natural resources in the same way is more dubious, though to do so may have been a helpful stage in the development of thought. (Robinson, 1951a: 19) She added that Marx’s refusal to treat scarce natural resources as a factor of production follows from his neglect of geographical inf luences and she considered Rosa Luxemburg’s points of view in this matter as an improvement (Robinson, 1951a: 19). I have argued elsewhere (Cuyvers, 1977: 198) that Robinson’s opinion on this issue ref lects Keynes’s inf luence. She had to wait until 1960 when Sraffa’s Production of Commodities by Means of Commodities was published to come to terms with his argument that scarce land will lead to alternative production processes based on the differences in soil fertility (Sraffa, 1960: 76), and that rent-earning land is a “non-basic” and has no impact on the prices of the “basics”, the wage rate, or the rate of profits. The assumption of no technical progress and returns to scale made in the Marx–Sraffa models and also made by Robinson as far as the short-run analysis of production is concerned, allows for the determination of a system of relative prices and of output levels. Marx’s assumption in this respect is similar: labour is the only productive factor in a dual system of value and use-value creation, which “capital” (or scarce land) cannot possibly be (Cuyvers, 1978: 72–73). 12.2.2 Homogeneous labour The labour expenditure that enters the input–output system of equations of a Marx–Sraffa model is homogeneous labour. I refer the reader to the vast literature on such a model, as well as to Part 2. Strikingly, the labour homogeneity assumption is also made by Robinson from the outset. All workers are alike, so that we can reckon work simply in terms of man-hours of standard labour time. (Robinson, 1956a: 64; see also 68, 115, 352; Robinson, 1962a: 7, 87)9 She also stated in Robinson (1962a: 7n) that the assumption is not essential, on the condition that the supply of labour of different skills is reacting to the relative wage rates such that for each skill and profession, the return on investment of education and training is equal.

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Marx has dealt similarly with this problem. He wrote: The various proportions in which different kinds of labour are reduced to simple labour as their unit of measurement are established by a social process that goes on behind the backs of the producers; these proportions therefore appear to the producers to have been handed down by tradition. (Marx, 1867: 135) It was, however, not made clear how exactly the “social process that goes on behind the backs of the producers” is doing that.10 There is a vast Marxist literature on the “skilled labour reduction problem”. It is evidently beyond the scope of this section to review this. Suffice it to mention Bródy (1970: 87), Morishima (1973: 191–192), and Rowthorn (1980). Most likely, however, Robinson’s rationale for her assumption of homogeneous labour should not be traced back to Ricardo or Marx, but to Keynes, who made the same assumption in The General Theory, and justified it as follows: This assumption of homogeneity in the supply of labour is not upset by the obvious fact of great differences in the specialised skill of individual workers and in their suitability for different occupations. For, if the remuneration of the workers is proportional to their efficiency, the differences are dealt with by our having regarded individuals as contributing to the supply of labour in proportion to their remuneration; whilst if, as output increases, a given firm has to bring in labour which is less and less efficient for its special purposes per wage-unit paid to it, this is merely one factor among others leading to a diminishing return from the capital equipment in terms of output as more labour is employed on it. We subsume, so to speak, the non-homogeneity of equally remunerated labour units in the equipment, which we regard as less and less adapted to employ the available labour units as output increases, instead of regarding the available labour units as less and less adapted to use a homogeneous capital equipment. (Keynes, 1936: 41–42)11 12.2.3 Constant production coefficients In a first step, Robinson in her model considered one technique in use for each good that is produced – an assumption that results in fixed production coefficients. This will of course not change if she allowed technical choice at a later stage: A given technique of production requires equipment (factory buildings, machinery, etc.) of specific quantities and designs, and a specific

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time-pattern in the cycle of production in the sense that each process, on a particular batch of goods, requires a definite time, and different processes are applied, in parallel or in sequence, in a definite manner, so that, at any moment, the stock of capital goods, including equipment, work-in-progress, technically necessary stocks of material, etc., required to produce a given flow of output, is rigidly determined by the technique in operation. Since commodities are produced in rigid proportions, the stock of equipment of all kinds must be in appropriate proportions. (Robinson, 1956a: 65 – my italics) The assumption of given proportionalities between inputs and outputs must evidently be abandoned when technical progress and/or economies of scale are introduced in the model (Robinson, 1956a: 69, 336–337, 352; 1962a: 15–16). A linear model with constant coefficients of production is therefore only useful at the start of the analysis, to explain the price system and to simulate capitalist development with unchanged technology. It cannot possibly be used in a dynamic analysis. 12.2.4 Closed economy Linear production models that are designed to analyse prices and output proportions, or the choice between techniques of production, such as these encountered in the literature on the Classical economists’ or Marx’s approach of the circular f low of the economic system, are about closed economies. Although a very simplifying assumption, it is most common to assume a closed economic system. Robinson was doing likewise at an early stage of her analysis (Robinson, 1956a: 69; 1962a: 1, 88). However, as soon as she abandoned this assumption, she considered the world to consist of a capitalist and a non-capitalist sector, which brings her to conclusions that, although phrased in more cautious and sober wordings, correspond to the conclusions reached by Rosa Luxemburg and Paul Baran (Robinson, 1956a: 368–371). I will return to this. 12.2.5 Reproduction schemes It is well known that Marx–Sraffa type linear models are easily transformed into easier-to-handle bi-sectoral or tri-sectoral reproduction schemes such as those that Marx introduced in Volume II of Capital. It is generally accepted that the use Joan Robinson made of bi-sectoral schemes in The Accumulation of Capital owes to Marx. Bronfenbrenner (1957: 540) wrote in this respect: Mrs. Robinson (…) handles the problem (of the conditions for and the consequences of capital accumulation) within the Marxian tradition. This means more than a constant eye to that hackneyed expression, “the laws of motion of capitalism”. It means also a characteristic two-way

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disaggregation: capital goods versus consumption goods on the product side of the social accounts, capitalist class versus working class on the income side of the social accounts, the two closely interrelated (capitalists buy capital goods, workers buy consumption goods), and “class angles” never aggregated out, as in Keynes, Harrod, Domar, et al. (See also Klein, 1958: 622)12 Following Kalecki, she changed the Marxian sector definition in such a way that the directly and indirectly required means of production in each of the two sectors are vertically integrated. This allows to define the value of output in the two sectors as: Sector 1 (capital goods): X 1 = L1 + Q1 = Q1   + Q2 Sector 2 (consumer goods): X 2 = L 2 + Q2 = L1 + L 2 As a result, the cost of raw materials, machines, and equipment, etc. at both sides of each identity can be deleted, i.e., do not belong to the intersectoral reproduction f lows (Robinson, 1956a: 43–44). Kalecki’s sector definition brought Robinson to her “potential technical surplus”, which consists only of consumer goods, but still needs to be realised by capitalists’ investment spending: For profit to be obtainable there must be a surplus of output per worker over the consumption per worker’s family necessary to keep the labour force in being. But the existence of a potential technical surplus is not a sufficient condition for profits to be realised. It is also necessary that entrepreneurs should be carrying out investment. (…) If they have no profit, the entrepreneurs cannot accumulate, and if they do not accumulate, they have no profit. (Robinson, 1956a: 76) It is interesting to stress at this point that Robinson’s “potential technical surplus” concept performs the same function as Marx’s “surplus product”, although it is not identical with it, due to the diverging sector definition. It is also remarkable that her “potential technical surplus” appeared at a time that at the other side of the Atlantic Ocean, Paul Baran launched similar concepts in his The Political Economy of Growth (Baran, 1957) that are considered as major building blocks for a neo-Marxist analysis of development and underdevelopment. These conceptual relationships are even more striking as both Robinson and Baran, along the tracks beaten by Rosa Luxemburg and Kalecki, have given the Marxist realisation mechanism a central place in their theory. I will return to this in Chapter 14 (see § 14.6). Where did Robinson get her production approach? This is a matter of conjecture. In Sraffa’s lecture notes of 1929–1931, there are a couple of slips of paper about suggestions that Richard Kahn made. However, these relate

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to demand curves and elasticity, and are completely unrelated to Sraffa’s later model (which at that time was not existing). A better candidate as inf luence on Robinson using an input–output type model is Kaldor and David Champernowne. Kaldor, who knew von Neumann personally (Kaldor, 1989; Kurz and Salvadori, 1993; 1995: 405–406) had made the publication of the translation of the von Neumann’s paper in the first 1945 issue of the Review of Economic Studies possible and had discussed its contents with Champernowne, who, in turn, wrote the accompanying “commentary note” to the article, acknowledging indebtedness to Sraffa “for instruction in subjects discussed in this article” (Champernowne, 1945: 10n).13 Kaldor was sufficiently familiar with the original paper to mention in his July 1937 Econometrica paper (Kaldor, 1937) that in a linear production model, the rate of interest (or the rate of profits) will be equal to the maximum rate of growth, having von Neumann’s model in mind (Chakravarty, 1989: 72, 78n4). It is far from unlikely that Robinson at that time learned about the relationship between such model and the Classical economist’s approach to value and growth. However, unless evidence surfaces, this is speculation. In addition, the mountaineering trips with Sraffa, Kahn, and Kaldor to Italy and Austria in the summer of 1948 and 1951 must have been an excellent opportunity for Robinson to hear more of such models. In Robinson (1978: xvi–xvii), she wrote: I had innumerable discussions with Piero Sraffa but they always consisted in his heading me off from errors; he would never say anything positive. Thus it was not till I found the ‘corn economy’ in his Introduction to Ricardo’s Principles that I saw a gleam of light on the question of the rate of profit on capital. This led to a new upheaval in ideas, comparable in excitement, though not in immediate practical importance, to the Keynesian revolution itself. Marcuzzo (2005: 37ff.) tried to solve the puzzle about what exactly Robinson derived from Ricardo’s “corn rate of profit” and suggested that it led her to the issue of measuring the stock of capital independently from changes in the rate of profits. Although Robinson’s capital stock concept is important for her theory of economic growth, Marcuzzo’s suggestion evidently would imply that Sraffa’s Introduction cannot be considered as having contributed to Robinson’s model as found in The Accumulation of Capital. One solution of a puzzle leads to another unsolved puzzle.

12.3 Robinson’s normal prices and Marx’s prices of production Although Robinson did not formally derive prices from the linear production model she used, it will be clear that her “normal prices” are prices that will obtain under certain conditions in an economy corresponding to her “basic model”. Therefore, it will come as no surprise that these prices are

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closely linked to those in Sraffa’s model, i.e., that they are the sum of dated quantities of labour. Robinson (1956a: 28) wrote: Over the long run the important price level is the price level in terms of labour time, for this (…) expresses the distribution of the total product of the economy between work and property. In effect, by taking the wage rate as numéraire, she got to “dated quantities of labour” à la Sraffa and called these normal prices (Robinson, 1962a: 7, 44). She stated: At any moment when work is being done to-day’s labour is being added to the product of past labour which in its own day was added to the product of still earlier labour. Under the capitalist rules of the game this shows itself in the element of interest in the cost of to-day’s capital goods, but the reality that underlies it does not depend upon any particular man-made rules. It is deeply rooted in the technical nature of production. (Robinson, 1956a: 121) The physical cost of an outfit of equipment for the consumption good sector consists in a certain amount of labour-time and basic-plant time; when a given rate of profit is ruling uniformly throughout an economy, there is a determinate pattern of normal prices (governed by costs of production including profit at the ruling rate on the capital involved) which can be expressed in terms of labour time. By the real cost of a piece of consumption-sector equipment we mean its price when new in terms of labour-time, at the ruling rate of profit. (Robinson, 1962a: 89) Robinson’s normal prices are in line with the natural prices of the Classical economists and Marx’s prices of production, and, remarkably, are also anticipating, in 1956, Sraffa’s prices of Production of Commodities by Means of Commodities. She stressed that they are structurally determined long-term prices, irrespective of f luctuations of supply and demand.14 However, they should not be considered as positions to which actual prices are converging (Robinson, 1956a: 356–357; 1962a: 22–23). In contrast to her normal prices, her concept of subjective normal prices (Robinson, 1956a: 185) is of Keynesian descent, “a rather vague but very important conception” (Robinson, 1956a: 185). In Robinson (1969: 17), she explained further: Combined with the theory of imperfect competition, the Keynesian theory of value starts from the formation of prices as it actually occurs. Prices of manufactures are set by a gross margin added to prime cost.

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(…) How are the gross margins formed? From the point of view of the individual producer, they are set by the rule that, at the expected rate of output, receipts should cover the total cost of producing and selling the goods, including whatever seems a reasonable level of profits.

12.4 Robinson’s views on the labour theory of value Already in her 1942 Essay on Marxian Economics, Robinson rejected Marx’s labour theory of value. She stated that nothing of substance that Marx expressed in value terms is not much better expressed without recourse to it and that nothing of substance in Marx’s economics depends on it (Robinson, 1942: 20, 22). In Economic Philosophy (1962), she concluded the chapter devoted to the Classical and Marxian theory of value by indicating that value has “no operational content” and is “just a word” (Robinson, 1962b: 47). Still in 1965, five years after Sraffa published his Production of Commodities by Means of Commodities, she wrote in the preface to the second edition of her Essay on Marxian Economics: The concept of value seems to me to be a remarkable example of how a metaphysical notion can inspire original thought, though in itself it is quite devoid of operational meaning. (Robinson, 1942: xi) Other Marxist-inspired economists of Robinson’s time adopted a similar attitude with respect to labour values and avoided building their theoretical arguments on it. Kalecki’s use of vertically integrated sectors in his reproduction schemes allowed him to show how profits are “realised” by capitalists’ spending, without having any recourse to value or to how surplus value is “produced”. A privileged witness remembered Kalecki being “allergic” to any discussion on the “law of value”.15 The use of vertically integrated sectors has also been of crucial importance in later applications by post-Keynesians like Joan Robinson and Luigi Pasinetti. Josef Steindl, who considered Kalecki to be his “inspiration and Guru” (Steindl, 1984: 7), devoted a chapter in Maturity and Stagnation in American Capitalism (Steindl, 1952) to Marx and the accumulation of capital. The subject of his book, so he admitted much later, was the result of a suggestion by Kalecki. It was a very Marxian problem, but my methods of dealing with it were Kaleckian. (Steindl, 1984: 8) Steindl’s chapter on Marx elaborates on Marx’s theory of wages and how it relates to accumulation and growth. It also links Marx’s underconsumption

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thesis, rather than that of a tendentially declining rate of profits, to the longrun stagnation of capitalism. The latter thesis was revived by Paul Sweezy in his Theory of Capitalist Development (Sweezy, 1942), to which Steindl refers. Steindl’s views on Marx have had a profound inf luence on the theoretical work of later post-Keynesian neo-Marxist authors, among whom Paul A. Baran and Paul M. Sweezy figure prominently (Foster, 2014; Baran and Foster, 2017: 41; Kalecki, 1991: 562–566). Yet, Steindl’s chapter on Marx, while also dealing with exploitation, ignored the labour theory of value. He only mentioned that according to Marx, the value of labour power is found by applying Marx’s rule that “commodities” have a “value” (Steindl’s quotation marks) in terms of the “necessaries of life” (Steindl, 1952: 229). It can be assumed that Steindl probably shared Kalecki’s “allergy” towards labour values. This became clear when Steindl wrote in 1984 about the revival of Marxist economics in the late 1960s and 1970s: I find it regrettable that most of the renaissance of Marx – as far as economics is concerned – concentrated on the theory of value and the conundrums connected with it. This complex of questions is ultimately derived from Ricardo in so far as it relates to a competitive economy with equalization of profit rates and essentially without money. But there is a different side of Marx, a dynamic approach to economics (such as in the chapter on accumulation in Capital, Vol. I) which results from his aim to explain the development of capitalism, an approach to history with the tools of economic analysis. (Steindl, 1984: 12) In addition, the attitude of authors such as Paul Baran and Paul Sweezy towards the labour theory of value is not entirely clear. In 1942, Sweezy explained at length and defended Marx’s value theory in his Theory of Capitalist Development (Sweezy, 1942: 33–34, Chapter III). Yet in 1957, Paul Baran argued in The Political Economy of Growth that the labour spent on the production of goods and services that meet no rational need, but are the result of publicity, is not value-creating labour but rather unproductive labour (Baran, 1957: 144). This means that such goods and services have no labour value. This idea is also found in Baran and Sweezy’s Monopoly Capital (Baran and Sweezy, 1966). In both cases, no further use whatsoever is made of Marx’s value concept, which left the impression that they abandoned the labour theory of value (Mandel, 1967). The authors’ analysis starts from “economic surplus”, not from exploitation on the factory f loor.16 Among the many present-day post-Keynesian economists, few take the labour theory of value seriously. Notable exceptions are Geoffrey Harcourt and Luigi Pasinetti. No doubt, Sraffa’s inf luence on them has been profound. They rely on Sraffa’s proof that the prices of production are “a sum of dated quantities of labour” and that there is a Sraffian solution to the transformation

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problem, although the transformation is a very complicated one. This made Joan Robinson finally come to terms, at least to some extent, with Marx’s theory of value. In 1979, she wrote: With the light that Sraffa has thrown on the theory of value and Kalecki on the process of realisation of the surplus, we can develop a complete system, not of neo Marxism but of intelligible Marxism, and, what is more important, adapt it to the analysis of contemporary problems of capitalism, socialism and so-called “development” (Robinson, 1979: 253 – Joan Robinson’s italics) This statement prompted Harcourt and Kerr to comment that Sraffa’s work had somehow enabled her to accept Marx’s arguments (Harcourt and Kerr, 2009: 55).

12.5 Real and nominal wage rates: “inf lation barrier” As is well known, Keynesian theory states that nominal wages, not real wages, are affected by the economic conditions over the business cycle. This idea is also found in Kalecki (1944: 27–28, 47–48; 1971: 28) and is accepted by his followers (Steindl, 1952: 236–237).17 That growing unemployment, together with diminishing trade union power, will depress nominal wages, rather than real wages, is also accepted by Robinson, and by Baran and Sweezy (1966: 85) in their neo-Marxist bestseller. In Robinson’s theory, nominal wages are determined by the bargaining position of the workers, while the evolution of the real wage rate depends on the nominal prices (Robinson, 1956a: 79–80). However, labour organisations have put a f loor under the real wage rate, and price increases that would bring real wages below this limit – the “inf lation barrier” – generate inf lation as the result of neutralising nominal wage demands. If the “inf lation barrier” increases, so will nominal and real wages do pari passu. Marx hardly devoted attention to the inf luence of labour organisations on real wages.18 He stated that the value of labour power is based on the necessities of life that are required to maintain and reproduce this labour power and is therefore “given” for a particular moment in time and for each place. He indicated: …wages (…) are governed by a natural law; their minimum limit is given by the physical minimum of means of subsistence that the worker must receive in order to maintain and reproduce his labour-power; i.e. a definite amount of commodities. The value of these commodities is determined by the labour-time required for their reproduction (…). The actual value of his labour-power diverges from this physical minimum; it differs according to climate and the level of social development; it depends not only on physical needs but also on historically developed social

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needs, which become second nature. In each country, however, this governing average wage is a given quantity at a given time. (Marx, 1894: 998–999) As I showed in the part on Sraffa, it is this given value of labour power in Marx’s model that the post-Keynesian neo-Marxists found inappropriate for developed capitalist economies and that they revised. By introducing her “inf lation barrier”, Robinson revised the Classical and Marxist model along similar lines. As early as her Essay on Marxian Economics, she announced: Marx’s argument requires modification if it is to be brought into line with the rise in real wages which has actually occurred in modern times. (Robinson, 1942: 32–33) This “bringing into line” involved the introduction of her “inf lation barrier”, i.e., the real wage rate that is accepted as a minimum, as a lower limit by organised labour and that is normally increasing over time. Trade unions only have a direct impact on nominal wages (Robinson, 1963: 409) and if the inf lation barrier is reached, a powerful inf lation forces capitalists to leave the general accepted standard of living of the working class unaffected (Robinson, 1956a: 48). Yet, the level of the “inf lation barrier” only constrains the rate of accumulation when the organised labour movement is strong (mainly in boom periods) (Robinson, 1956a: 49). Thus, unlike the Marxist value of labour power, the “inf lation barrier” is not relevant in the operation of the economic system under “average” circumstances and does not correspond to the “normal cost of reproduction” of labour power. Neither can Robinson’s “inf lation barrier” be identified with an average bundle of subsistence consumer goods for workers. Since its level is determined solely by the strength of labour unions (Robinson, 1956a: 48–49, 91) and therefore can be reduced, Robinson’s concept is a refinement of Sraffa’s surplus-wages concept. In contrast to Sraffa, who did not rule out a fixed minimum wage, Robinson viewed all wages as determined by the balance of forces between labour and capital. Like Sraffa’s surplus-wages concept, the “inflation barrier” contains the necessary ingredients to be considered as the “modification” that would bring Marx’s theory of wages into line with the functioning of present-day capitalism and is a neo-Marxist substitute for Marx’s concept of the value of labour power. This characteristic being “an essential part of the analysis” (Robinson, 1963: 410) receives even more importance as a neo-Marxist concept in Robinson’s model of economic growth (Robinson, 1963: 410).

12.6 Robinson’s definitions of “surplus” A logical consequence of the existence of an “inf lation barrier” is the need for a distinction between a “technical surplus available above subsistence wages for the workers employed” and “the surplus above the level of real

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wages that the workers are willing to accept and able to enforce” (Robinson, 1956a: 83). Admittedly, the “inf lation barrier” in Robinson’s theory of economic growth must be seen as the analogue of the value of labour power in that of Marx. For an analysis of the growth potentialities of a country  – especially for developing countries and poor stagnant capitalist economies (Robinson, 1956b: 97), consumer goods surplus above the subsistence minimum is particularly relevant. In this respect, the notion of “potential technical surplus” contributes to understanding and directing the growth potentialities present, although it is irrelevant for a mature capitalist system. Remarkably, these surplus concepts are strikingly similar to the neo-Marxist concepts of Paul Baran in his The Political Economy of Growth (Baran, 1957: 22–23). As I mentioned before, it is unclear who inf luenced who in this respect.19 It will also be remembered that Robinson’s surplus concept was developed using a Marxian scheme of reproduction, in which she followed Kalecki’s sector definition, such that the physical surplus in the vertically integrated consumer goods sector allows the growth of the capital goods stock.

Notes 1 This is not implying that Robinson’s critique of Capital is correct. Kerr has stated elsewhere that Robinson “errs on two major accounts, revealing her lack of understanding, and so leaving little of significance in Marx’s analysis to be developed” (Kerr, 1999: 297). 2 Interestingly, as mentioned previously, Kalecki’s pioneering work was heavily inf luenced by Rosa Luxemburg. Pasinetti (2005: 248) stressed the linkage between Robinson and Luxemburg: “She [Robinson – L.C.] was proud to repeat the title of the major work of another female economist, Rosa Luxemburg, though not sharing, and in fact harshly criticizing, her approach and conclusions”. 3 The Marx–Luxemburg–Kalecki relationship is well documented. See, e.g., Lopez and Assous (2010: 194ff.). For a full account of Marx’s and Luxemburg’s inf luence on Kalecki, and how Kalecki’s views on profits differed from the “official Marxist” view, see: Toporowski (2013: 46–47, 61–66), or Bellofiore, Karwowski, and Toporowski (2014). 4 Rentiers “represent capitalists in their aspect as owner of wealth, as opposed to their aspect as entrepreneurs” (Robinson, 1956: 257). 5 Robinson applied Kalecki’s principle that “capitalists get what they spend”: increasing capitalist consumption, at the expense of investment, will not reduce profits at the macro-level. As will be seen later in Chapter 14, the rate of accumulation in Robinson’s model will drop when rentiers’ consumption pushes workers’ consumption below the “inf lation barrier”. 6 On the relationship between the Sraffa model and the von Neumann model, see Kurz and Salvadori (2001). 7 Kurz and Salvadori (2001: 179) have stated that Sraffa was “not able to read the mathematics of John von Neumann”, which is even more true for Joan Robinson. 8 The letter can be consulted at https://mss-cat.trin.cam.ac.uk/manuscripts/ uv/view.php?n=Sraffa.D3.12.111#?c=0&m=0&s=0&cv=367&xywh=-149% 2C-496%2C2952%2C4208 9 In Robinson (1936: 77n), labour is assumed to be standardised based on stereotyped duration, intensity, and efficiency.

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10 Marx’s view on the “reduction problem” of labour is similar to (and probably derived from) Ricardo’s, who stated: In speaking (...), however, of labour, as being the foundation of all value, and the relative quantity of labour as almost exclusively determining the relative value of commodities, I must not be supposed to be inattentive to the different qualities of labour, and the difficulty of comparing an hour’s or a day’s labour, in one employment, with the same duration of labour in another. The estimation in which different qualities of labour are held, comes soon to be adjusted in the market with sufficient precision for all practical purposes, and depends much on the comparative skill of the labourer, and intensity of the labour performed. The scale, when once formed, is liable to little variation. If a day’s labour of a working jeweller be more valuable than a day’s labour of a common labourer, it has long ago been adjusted, and placed in its proper position in the scale of value (Ricardo, 1821: 20–21 – my italics). 11 Obviously, in Keynes’s (and Robinson’s) argument, the wages that homogenise labour are the actual wage rates. It can be assumed for simplicity that each wage rate allows the consumption of a specific bundle of consumer goods at prevailing prices. In Marx’s case, however, not prevailing prices apply, but the corresponding labour values do. Since these are not observed, it is hard to imagine “a social process that goes on behind the backs of the producers” and that reduces concrete labour to abstract labour. It seems more justified to reduce concrete labour to abstract labour using a pattern of historically determined and socially accepted relative wage differences, as suggested by, e.g., Morris and Lewin (1973: 469–470). 12 Kregel (1971: 98), however, considers Robinson’s use of bisectoral schemes of reproduction as a Keynesian inf luence. It is certainly true that the distinction between capital goods and consumer goods was introduced in Keynes’s Treatise on Money, but Robinson has repeatedly stressed that Keynes and his circle, without knowing, only rediscovered Marx’s schemes, whereas Kalecki started from these schemes (Robinson, 1953: 8–9; 1966a: 338). 13 Kaldor (1989: viii–ix) relates about the original 1937 paper by von Neumann, that he received from its author: Unfortunately the paper was quite beyond me except for the beginning where he stated that it was concerned with the circular aspects of the production process – commodities being produced out of commodities, with the aid of technical variables (…). I could also follow the meaning of the final section of the paper where he claims to have proved that the (competitive) rate of interest will be equal both to the maximum rate of growth of the system (…) 14 See also Robinson’s introduction to Rosa Luxemburg’s Accumulation of Capital (Robinson, 1951b: 14). 15 In their intellectual biography of Kalecki, Julio López G. and Michaël Assous write: Kalecki did never (to our knowledge) refer to the “Law of value”, and he did not use it to explain the existence of a surplus accruing to capitalists. We may assume – though he never said it explicitly – that he agreed with Marx and classical economics that profits are indeed a surplus. Moreover, he did not start from values to arrive at production prices, but conceived prices as determined by firms which mark-up unit prime costs. In a later footnote, the same authors mention that according to Kazimierz Laski, a close collaborator of Kalecki in the 1950s and 1960s and author of a chapter on the labour theory of value in the Festschrift for Josef Steindl, he was “allergic” to any discussion on the so-called “law of value”. J. Lopez and M. Assous (2010: 196, 242 n.15), respectively.

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16 It has become clear later that neither Baran nor Sweezy abandoned Marx’s theory of exploitation, but that two chapters for Monopoly Capital, drafted by Baran, in which their theoretical position was clarified, did not make it to the final version, because of the untimely death of Baran. The unpublished chapter “Some Theoretical Implications” deals with Marx’s value of labour power and what, following Sraffa, are “surplus-wages”. See Foster (2012). For the chapter “Some Theoretical Implications”, see Baran and Sweezy (2012). 17 When price changes exactly compensate a fall in nominal wages, real wages remain constant. Due to price stickiness, however, a fall in nominal wages during the downswing of the business cycle will lead to percentage change of real wages that is smaller than that of nominal wages. 18 However, some passages in Capital deal with this. See, e.g., Marx (1867: 793; 1885: 414). 19 Baran’s concepts of actual and potential economic surplus were previously outlined in Baran (1953), where Joan Robinson and Paul Sweezy are thanked for their comments and suggestions. Baran had started with that study some time before 1951 (see his letter of 15 July 1951 to Paul Sweezy: Baran and Foster, 2017: 64). His book appeared in 1957, but the manuscript was ready in the autumn of 1955. Its contents were presented in a course of lectures at Oxford during the Michaelmas Term in 1953. In his Preface, Baran thanked Charles Bettelheim, Maurice Dobb, Leo Huberman, Michał Kalecki, Oskar Lange, and Joan Robinson for discussions and reading of manuscripts. When asked by me in February 1977 about the relationship between her and Baran’s surplus concept, she denied being inf luenced by Baran. On the relationship with Paul Baran, it is interesting to note that Robinson wrote an unexpectedly critical review of The Political Economy of Growth that was published in The Nation, 1 June 1957, to which Paul Sweezy reacted in a letter to The Nation, 29 June 1957, with a rejoinder by Robinson in the issue of 6 July 1957 (see Paul Alexander Baran Papers (SC1234). Dept. of Special Collections and University Archives, Stanford University Libraries, Stanford, CA: Additional Papers Accession ARCH_2017_292/Box 1, Folder 24 Paul Sweezy and Joan Robinson on PEoG). Robinson’s review upset Baran. He wrote to Paul Sweezy on 17 May 1957: It makes me really sick! It is such a mean and unwarranted outburst of hostility! And I cannot understand, why she had to do it. I have never had any conf licts with her, in fact refer to her in most laudatory terms. see Baran-Sweezy Archives at https://stacks.stanford.edu/file/druid:km151 hd0812/SC1234_1957-04_to_1957-05.pdf and https://monthlyreviewarchives. org/index.php/baran-sweezy/article/view/1957-04_1957-05/7217 See also Part 1, Chapter 3, § 3.2 and Chapter 4, § 4.2.

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J.M. Keynes (1936). The General Theory of Employment, Interest and Money, in: A. Robinson and D. Moggridge (Eds.), The Collected Writings of John Maynard Keynes, Vol. VII, Cambridge: Cambridge University Press for The Royal Economic Society, 1973. L.R. Klein (1958). “The Accumulation of Capital. By Joan Robinson”, Econometrica, 26(4), October, 622–624. J.A. Kregel (1971). Rate of Profit, Distribution and Growth: Two Views, London – Basingstoke: Macmillan. H.D. Kurz & N. Salvadori (1993). “Von Neumann’s Growth Model and the ‘Classical’ Tradition”, European Journal of the History of Economic Thought, 1(1), Autumn,129–160. H.D. Kurz & N. Salvadori (1995). Theory of Production – A Long-Period Analysis, Cambridge: Cambridge University Press. H.D. Kurz & N. Salvadori (2001). “Sraffa and von Neumann”, Review of Political Economy, 13(2), 161–180. J. Lopez & M. Assous (2010). Michal Kalecki, Houndmills, Basingstoke: Palgrave Macmillan. E. Mandel (1967). “The Labor Theory of Value and Monopoly Capitalism”, International Socialist Review, 28(4), July–August, 29–42. M.C. Marcuzzo (2005). “Robinson and Sraffa”, in: B. Gibson (Ed.), Joan Robinson’s Economics – A Centennial Celebration, Cheltenham – Northampton: Edward Elgar, 29–42. K. Marx (1867). Capital – A Critique of Political Economy, Volume 1. Harmondsworth: Penguin Books, in association with New Left Review, 1976. K. Marx (1885). Capital – A Critique of Political Economy, Volume 2. Harmondsworth: Penguin Books, in association with New Left Review, 1978. R.L. Meek (1961). “Mr. Sraffa’s Rehabilitation of Classical Economics”, in: R.L. Meek, Economics and Ideology and Other Essays, London: Chapman and Hall, 1967, 161–178. M. Morishima (1973). Marx’s Economics, Cambridge: Cambridge University Press. J. Morris & H. Lewin (1973). “The Skilled Labour Reduction Problem”, Science & Society, 37(4), Winter 1973–1974. L.L. Pasinetti (1977). Lectures on the Theory of Production, New York: Columbia University Press. L.L. Pasinetti (2005). “Beyond the Accumulation of Capital”, in: B. Gibson (Ed.), Joan Robinson’s Economics - A Centennial Celebration, Cheltenham – Northampton: Edward Elgar, 247–265. D. Ricardo (1821). On the Principles of Political Economy and Taxation, in: P. Sraffa (Ed.) (with the Collaboration of M.H. Dobb), The Works and Correspondence of David Ricardo, Vol. 1, Cambridge: Cambridge University Press, 1951 J. Robinson (1936). “The Long-Period Theory of Employment”, in: Essays in the Theory of Employment, Oxford: Basil Blackwell, 1947 (2nd ed.), 75–100. J. Robinson (1942). An Essay on Marxian Economics, London: Macmillan, 1967 (2nd ed.). J. Robinson (1951a). “Notes on Marx and Marshall”, in: J. Robinson, Collected Economic Papers, 2, Oxford: Basil Blackwell, 1960, 18–26. J. Robinson (1951b). “Introduction”, in: R. Luxemburg, The Accumulation of Capital, London: Routledge and Kegan Paul, 13–28. J. Robinson (1953). “An Open Letter from a Keynesian to a Marxist”, in: On Re-Reading Marx, Cambridge: Student’s Bookshops Ltd.

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J. Robinson (1956a). The Accumulation of Capital, London: Macmillan. J. Robinson (1956b). “Notes on the Theory of Economic Development”, in: J. Robinson, Collected Economic Papers, 2, Oxford: Basil Blackwell, 1960, 88–106. J. Robinson (1962a). Essays in the Theory of Economic Growth, London: Macmillan. J. Robinson (1962b). Economic Philosophy, Harmondsworth, Middlesex: Penguin, 1974. J. Robinson (1963). “Findlay’s Robinsonian Model of Accumulation: A Comment”, Economica (New Series), 30(120), November, 408–411. J. Robinson (1966a). Economics – An Awkard Corner, London: Macmillan. J. Robinson (1966b). “Kalecki and Keynes”, in: Problems of Economic Dynamics and Planning. Essays in Honour of Michał Kalecki, Warszawa: Pwn-Polish Scientific Publishers, 335–341. J. Robinson (1970). Freedom and Necessity, London: Macmillan. J. Robinson (1978). “Reminiscences”, in: Contributions to Modern Economics, New York – San Francisco: Academic Press, ix–xxii. J. Robinson (1979). “Who is a Marxist?”, in: J. Robinson, Collected Economic Papers, 5, Oxford: Basil Blackwell, 248–253. B. Rowthorn (1980). “Skilled Labour in the Marxist System”, in: B. Rowthorn (Ed.), Capitalism, Conflict and Inflation – Essays in Political Economy, London: Lawrence and Wishart, 231–249. F. Seton (1957). “The “Transformation Problem””, Review of Economic Studies, 24(3), June, 149–160. P. Sraffa (1960). Production of Commodities by Means of Commodities – Prelude to a Critique of Economic Theory, Cambridge: Cambridge University Press. J. Steindl (1952). Maturity and Stagnation in American Capitalism, Oxford: Basil Blackwell. J. Steindl (1984). “Ref lections on the Present State of Economics”, Banca Nazionale del Lavoro Quarterly Review, 37(148), March, 3–14. P.M. Sweezy (1942). The Theory of Capitalist Development, London: Dennis Dobson, 1946. J. Toporowski (2013). Michał Kalecki: An Intellectual Biography. Vol. 1, Rendezvous in Cambridge 1899–1939, Houndmills, Basingstoke: Palgrave Macmillan. J. von Neumann (1945). “A Model of General Economic Equilibrium”, Review of Economic Studies, 1945–1946, 13(1), 1–9.

13 What is Joan Robinson’s indebtedness to Sraffa?

In this chapter, I attempt to shed light on Robinson’s indebtedness to Sraffa, who was a lifelong friend and colleague at Cambridge. Various channels of inf luence have been suggested, such as (1) Sraffa’s 1926 Economic Journal article and his 1928–1929 lectures; (2) his views on the measurement of capital; (3) his introduction to Ricardo’s Principles (Sraffa, 1951); and (4) his model as published in Production of Commodities by Means of Commodities (Sraffa, 1960). We also have to consider Robinson’s An Essay on Marxian Economics (Robinson, 1942).

13.1 Sraffa’s 1926 Economic Journal article and his 1928–1929 lectures As mentioned in the previous chapter, it is generally believed that it was Sraffa who put Joan Robinson on the track of her theoretical work about imperfect competition. This belief is supported by Robinson in her foreword of The Economics of Imperfect Competition (1933): Of more recent work, my chief debt is to Mr. Piero Sraffa’s article in the Economic Journal of December 1926 (…). Mr. Sraffa’s article must be regarded as the fount from which my work f lows, for the chief aim of this book is to attempt to carry out his pregnant suggestion that the whole theory of value should be treated in terms of monopoly analysis. (Robinson, 1933: xiii) With Richard Kahn, Joan Robinson, also attended Sraffa’s lectures on “Advanced Theory of Value” during the Michaelmas and Lent Terms of the 1928–1929 academic year. The lectures during the Michaelmas Term were on theories of production and distribution; during the Lent Term, they dealt with the theory of demand and forms of competition (Marcuzzo, 2001). In an early biography of Sraffa, Potier (1991: 39–40) wrote on Sraffa’s lectures of 1928–1929: In his course on theories of value, Sraffa developed a critique of Marshall’s Principles of Economics, and developed the ideas he had introduced in the 1926 Economic Journal article. His attacks on Marshallian orthodoxy DOI: 10.4324/9781003283416-16

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often shocked the majority of his students, and very few of them derived much benefit from the lectures: those who did included Richard Ferdinand Kahn and Joan Robinson. However, Robinson only acknowledged her indebtedness to Sraffa’s 1926 article, not to his 1928–1929 lectures; it will be remembered that she considered Sraffa at that time as “brilliant” but “erratic” (see the October 1928 letters to E.A.G. Robinson, quoted in Marcuzzo, 2005a: 446 n4). Potier’s assessment of the impact on Robinson’s work on imperfect competition stands in contrast to that of Marcuzzo (2005b: 31): “It is clear that Sraffa’s lectures had no impact on Robinson, nor on any other pupils (…). Her first two books (…) were a response to Sraffa’s 1926 article alone…”. As we are mainly interested in Robinson as a post-Keynesian neo-Marxist, there is no reason to go into more detail about this early inf luence on her work. Moreover, although Sraffa had many discussions with Joan Robinson on questions relating to her ongoing research of imperfect competition, most of the criticisms he made were negative (Harcourt, 1986: 100).

13.2 Measurement of capital In 1937, Robinson published her Essays in the Theory of Employment, which received a very generous review by Roy Harrod. Harrod did however register his disagreement with her definition of “neutral investments” and brought up the issue of measuring capital, which would later, in the 1950s, become the spearpoint of Robinson’s scathing critique of the neoclassical theory of production and distribution. Harrod wrote: Mrs. Robinson divides inventions into labour-saving, neutral and capital-saving. The definition of neutral invention is that it leaves the ratio of the marginal productivity of capital to that of labour unchanged when the relative amounts of the factors of production are unchanged. Unfortunately, this definition is ambiguous without the provision of a precise measure of the volume of capital. Since the problem is a long-period one, the capital may be conceived to be physically re-constituted; how is the amount of the new capital to be measured to ensure that it is the same as the old? Should a unit of capital be conceived as waiting in respect of a unit of commodities per unit period or waiting in respect of a unit of labour? If an improvement in technique occurs, the rate of re-investment required to keep a given volume of capital intact will differ according to which measure is used. Reference to money values will not avoid the ambiguity, since we may suppose stable prices, prices falling as factor productivity rises, etc. (Harrod, 1937: 328–329 – my italics) Harrod formulated two objections to Robinson’s attempt at initiating a “long-period theory of employment”: (1) how to measure capital and (2) how

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to conduct a genuine dynamic analysis, without using a static theoretical framework (Aslanbeigui and Oakes, 2009: 21–22). In the months that followed, Robinson struggled with the problem of measuring capital and discussed it also with Sraffa and Kalecki. Kalecki, who had just visited her in Cambridge, wrote in a letter of 5 November 1936 about how to categorise a new invention and noticed the complication of the measurement of capital (letter published in Kalecki, 1990: 504). Sraffa had already mentioned the theoretical problem of measuring the quantity of capital (in contrast to labour and land) in his letter of 27 October 1936 to Joan Robinson (published in Bradford and Harcourt (1997: 131)): If one measures labour and land by heads or acres the result has a definite meaning, subject to a margin of error: the margin is wide, but it is a question of degree. On the other hand if you measure capital in tons the result is purely and simply nonsense. How many tons is, e.g., a railway tunnel? If you are not convinced, try it on someone who has not been entirely debauched by economics. Tell your gardener that a farmer has 200 acres or employs 10 men – will he not have a pretty accurate idea of the quantities of land & labour? Now tell him that he employs 500 tons of capital, & he will think you are dotty – (not more so, however, than Sidgwick or Marshall). However, at that time, Robinson was still assuming that capital can be properly measured, as is evidenced by her 1937 and 1938 articles “The Long Period Theory of Employment” and “The Classification of Inventions” respectively. In Robinson (1938), she stated: For our present purpose capital must be conceived in physical terms, that is, as a stock of capital goods, and it is most conveniently measured in terms of cost units. Two stocks of capital goods are said to be equal if they would cost the same sum to produce at a given date, in a given state of knowledge. (Robinson, 1938: 139n) If we consider her published work, we have to wait until 1953 to see, in what direction her ideas on the measurement of capital evolved. By the time she wrote her famous 1953 article in the Review of Economic Studies, she clearly had made up her mind: We call the stock of goods in existence at any moment physical capital. The value of these goods in terms of a unit of output we call capital simpliciter. Capital valued in terms of wage units we call real capital; though it must be observed that there is a slightly misleading f lavour about this term, since the cost of capital goods, in terms of wage units, includes interest over the time required to construct them and to use them in

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production. Thus the same stock of physical goods represents a larger amount of real capital when the rate of interest is higher (and has been higher in the past) than when it is (and has been) lower. (Robinson, 1953–1954: 86). By measuring in wage units, capital becomes a sum of units of labour that it represents, and by taking into account the interest that applies during the time of construction, her definition of real capital comes very close to Sraffa’s dated quantities of labour (see Harcourt, 1972: 24). What she wrote in The Accumulation of Capital is much more precise in this respect: This is in some ways the most significant way of measuring capital, for the essence of the productive process is the expenditure of labour time, and labour time expended at one date can be carried forward to a later date by using it to produce physical objects (…) At any moment, when work is being done to-day’s labour is being added to the product of past labour, which in its own day was added to the product of still earlier labour. Under the capitalist rules of the game this shows itself in the element of interest in the cost of to-day’s capital goods (…). (Robinson, 1956: 121) Only in a “Golden Age” are “real capital” and capital measured using the “discounted cash f low” method of investors identical. Once the expected rate of profits starts to deviate from the normal rate, they will differ. How had Robinson’s views evolved since 1938? In Robinson (1956), she mentioned Wicksell’s theory of capital and the so-called Wicksell effect. Although disagreeing with some of Wicksell’s statements, she mentioned the impact of the rate of interest on the value of capital, through the valuation of labour inputs during its production period (Robinson, 1956: 397–398). However, Wicksell cannot possibly be her source of inspiration, since she added in a footnote: “For my part, I only became aware that Wicksell had made the point after I had stumbled upon it myself ” (Robinson, 1956: 391n). Most likely, she developed her views on the measurement of capital in the late 1940s and early 1950s, probably after some hints by and discussions with Kahn, Kaldor, and Sraffa. Robinson acknowledged her indebtedness to Sraffa in a letter of 18 June 1960, specifically referring to “both our conversations in old days and by your Preface” (Sraffa Papers D3.12.111: 339–340, also quoted in Marcuzzo, 2005b: 40).1 Harcourt (2005: 19) confirms this when he reports on the relationship between Robinson and Sraffa during the first half of the 1950s while Robinson was developing her theory of economic growth and distribution: Sraffa was again on the fringes, going on walks, climbing mountains and joining in discussions but usually only revealing what he had going on when it actually entered the public domain – the Ricardo volumes 1951–55

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(which eventually saw the light mainly because of the selfless efforts of Maurice Dobb) and then Production of Commodities in 1960. There were, of course, prior hints, for example, his October 1936 letter to Robinson about the meaning and measurement of capital in neoclassical theory and his request that she ask her gardener about it (…). But the full force of his probings and questions really only hit home in the post-war period. From my observations I would say that Robinson had more respect for Sraffa’s critical mind and was more scared of his criticisms than she was of anyone else’s.

13.3 An Essay on Marxian Economics A similar enigma is the genesis of the views expressed by Robinson in An Essay on Marxian Economics and what the contribution of her close friends in Cambridge could have been. Why did Robinson in her foreword of An Essay not mention her debt to Dobb or Sraffa, the two most prominent Marx scholars in Cambridge at that time?2 As was documented by Prue Kerr on the basis of the Robinson–Dobb correspondence (Kerr, 2007), we know that she consulted Dobb regularly, but that they disagreed deeply. In the preface to the second edition, she mentioned (Robinson, 1942: vi): “Piero Sraffa teased me, saying that I treated Marx as a little-known forerunner of Kalecki”, but it is not clear when Sraffa made this remark. In her 1965 preface to the second edition of her Essay, she also stated that in Production of Commodities by Means of Commodities, Sraffa had solved Marx’s transformation problem, but that the insight that prices are proportional to labour values when the rate of profits is zero (Sraffa’s “Value Theory of Labour”) originated in a remark made by Keynes when he read her book (Robinson, 1942: x). Kerr (2007: 79–80) refers to some notes by Sraffa, likely from 1942, in which he discussed Marx’s falling rate of profits (Sraffa Papers D3/12/16) and which Kerr interprets as a reaction to Robinson’s Essay or to her discussion with Sraffa of the rate of profits and her dismissal of the labour theory of value. Robinson complained much later that Sraffa had refused to discuss her book (in a letter to Kahn, 111\52; RFK\13\90\4\370). My hunch is that neither Dobb, nor Sraffa wanted to be mentioned or thanked for having discussed her book and intended to clearly dissociate themselves from it. Kerr (2007: 77) writes: “Perhaps Dobb felt some exasperation with Robinson’s reductionist and deductive approach to Marx”. Inspection of the Sraffa archive shows that he did critically read Robinson’s Essay.3

13.4 Sraffa’s introduction to Ricardo’s Principles On the role played by Sraffa’s introduction to Ricardo’s Principles in the intellectual development that resulted in Robinson’s The Accumulation of Capital (Robinson, 1956), she wrote (Robinson, 1978: xvi–xvii): Harrod’s Towards a Dynamic Economics, 1949 (expanding ideas conceived in 1938), opened up a discussion of long-run growth in Keynesian

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terms, but he also lacked a rate of profit. I had innumerable discussions with Piero Sraffa but they always consisted in his heading me off from errors; he would never say anything positive. Thus it was not till I found the ‘corn economy’ in his Introduction to Ricardo’s Principles that I saw a gleam of light on the question of the rate of profit on capital. This led to a new upheaval in ideas, comparable in excitement, though not in immediate practical importance, to the Keynesian revolution itself.4 Harcourt (2005: 22) has mentioned the same point: She (Robinson – L.C.) felt she had in Sraffa’s introduction to volume one of the Ricardo volumes, the clue to an alternative and more satisfying theory of the rate of profits – the classical concept of the surplus already familiar to her from reading Marx but tightened up and made more precise without any metaphysical overtones of the labor theory of value (in her view!) in Sraffa’s exposition. (See also Harcourt, 1986: 100). But, as will be discussed later, the rate of profits she found explained in Sraffa’s introduction, was neither the Ricardian or Marxian average rate of profits, nor that of Sraffa’s model in Production of Commodities by Means of Commodities; it was the expected rate of profits she found vindicated. In fact, my interpretation is, that by linking Ricardo’s “corn” rate of profits to the expected rate of profits, which motivates production and accumulation, she could “anchor” expectations to the “real world”. Interestingly, Marcuzzo (2005b: 36–37n) mentions: “Sraffa appears to have sent a copy of the first proofs of his Introduction to the Principles, marked 15 November 1950, to Sergio Steve and Nicholas Kaldor, but not to Joan Robinson. In the Draft of the General Preface written in early December, the names of Joan Robinson and Richard Kahn appear as deleted in the acknowledgements. However, in the page-proofs, marked 7 March 1951, Sraffa first re-inserted the names and then deleted them a second time”. According to his Diary entry of 20 March 1951, he had reached the decision after having consulted her: “Phoned Joan. (Says better not mention in Preface.)” (Sraffa Papers: E 23).5 What is undisputable is that, although Robinson was brought to her critique of the neoclassical capital theory via Sraffa, she came to the “re-switching of techniques” possibility – her Ruth Cohen curiosum (Robinson, 1956: 109–110) – independently. She fairly and squarely stated, however, that its full importance was only clearly stated by Sraffa in 1960: “My treatment of this subject was clumsy and contained some errors. Piero Sraffa arrived at the same argument, in a more rigorous manner, starting from a different question – the classical theory of value” (Robinson, 1975: 35). That she considered that her views, although inf luenced by Sraffa’s introduction of Ricardo’s Principles, had evolved independently from Sraffa’s,

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is also evidenced by her letter to Richard Kahn of 25 February 1975 (in the R.F. Kahn Papers: 13/90/10/191–2), in which she wrote: “It is true that I anticipated Piero’s publication but only because I had more or less worked it out for myself from his Introduction to Ricardo’s Principles – the corn economy” (quoted in Marcuzzo, 2005b: 38). It is also evident that Sraffa, despite their friendship, was not willing to discuss his results and the progress made while writing his Production of Commodities by Means of Commodities with Robinson.6 We can only speculate about his motives. There might have been some ill feelings about Robinson’s publications of the early 1930s, when she built on still unpublished ideas of Keynes or discussions within “the Circus”. Harcourt (2005: 17) has called these publications “progress reports”, but Sraffa might have considered that Joan Robinson had been “speaking before her turn”.7 If this is the case, he may have feared that she could do the same with his work – in fact, there was a general reluctance on Sraffa’s side to discuss his ideas with his colleagues and peers at Cambridge.8 Such an interpretation would also explain why he did not discuss Marx with Robinson while she was writing her Essay on Marxian Economics. Marcuzzo (2005a: 430) points out: Sraffa’s relations with Kahn and Robinson lasted for the rest of their respective lives (Sraffa and Robinson died a few days from one another in 1983, while Kahn died in 1989), taking on a richly nuanced range of overtones and undertones deriving from the shared experience of personal and professional events and circumstances. One direction they did not take, however, was that of intellectual exchange at the level of economic theory, as in the two-way relations that Robinson and, above all, Kahn had with Keynes. The two ‘special’ pupils remained extraneous to Sraffa’s scientific project (…); once the project took shape definitively with publication of the Production of Commodities by Means of Commodities, only Robinson eventually came to appreciate it, although she was never able to convince Sraffa that she understood it.

13.5 Sraffa’s Production of Commodities by Means of Commodities After Sraffa published his Production of Commodities…, Robinson eagerly attempted to absorb and digest its conclusions, of which she, like almost everybody else, had received no hint during its long gestation period. She regularly consulted with Sraffa to make sure that she was on the right track. It is interesting to follow this process based on the documents in Sraffa’s archive at the Wren Library, Cambridge. Sraffa’s Production of Commodities… ran from the press in April 1960. As soon as possible on Saturday 14 May 1960, Robinson, in anticipation of a meeting on “Sunday”, sent a note to Sraffa with points that she was “puzzled

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9

about” (Sraffa Papers D3.12.111: 322–324). This note was followed by another note the next day (15 May 1960) with questions about the status of the assumption that there is at least one basic commodity, and another one on 18 May 1960, with a small letter the next day in which she is asking for “a coaching on these points”. Clearly, Robinson was carefully studying Sraffa’s Production of Commodities… It was all new for her, but she soon absorbed it and she made important steps to integrate it with her emerging post-Keynesian views on wages, profits, and prices. She was also quick in writing a review entitled “Prelude to a Critique of Economic Theory” that she submitted in August to Oxford Economic Papers. She wrote to Sraffa about it and added a copy of the typescript (Sraffa Papers D3.12.111: 343ff.).10 Interestingly, Sraffa made some marginal comments on it. In her review, Robinson commented on Sraffa’s treatment of wages (Sraffa Papers D3.12.111: 347).11 Gehrke (2016) states in this respect, referring to the various manuscript versions of Production of Commodities… (Gehrke, 2016: 239–240): …Sraffa viewed Robinson’s objection to the concept of subsistencecum-surplus wages as misplaced, because to him it was always clear that the subsistence requirements must be specified, not in terms of hypothetical consumption goods baskets which could only just satisfy the workers’ physical needs, but in terms of notional parts of the commodities actually produced and consumed in the economic system under consideration. It is interesting to discuss further Sraffa’s reaction to other statements in Robinson’s paper. Some pages further down in Robinson’s typescript, Sraffa dropped a probably disapproving wave line in the margin, when Robinson writes: In the corn-wage economy, the production of corn this year requires that there should be a stock of corn already in existence, to provide seed and the subsistence of the workers until the next harvest. Sraffa has removed the assumption of a technically determined physical real wage. (Sraffa Papers D3.12.111: 353)12 But she commented further: It leads to the very striking proposition that there is a technically determined maximum notionally possible rate of profit, which would obtain at zero wages. It is only notionally possible, for even when the postulate of a precise physically necessary wage has been abandoned, there is still a vague but tough lower limit to possible real wages and so an upper limit to the possible rate of profit. (Papers D3.12.111: 354)13

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This, most likely, refers to her “inf lation barrier” (see also further below). Another remark by Robinson was about the uniform rate of profits in a model with fixed capital: Can the equalisation of the rate of profit throughout the economy mean anything except the equalisation of expected profits on new investment in various lines? If the rate of profit has changed during the lifetime of machines in existence this year, there is no equality between expected and realised profits in any one line – why should there be equality between realised profits in different lines? Sraffa underlined “realised” (I italicised Sraffa’s underlining in the quotation – L.C.) and with an arrow referred back to the underlined “expected”, implying that not realised profits are at issue in his model, but the expected profits (Sraffa Papers D3.12.111: 348).14 If this interpretation is correct, Robinson, with Sraffa’s approval, linked the Sraffa model to what later would become the dominant post-Keynesian view on profits and prices. In August 1964, Robinson also wrote an article for the New Left Review on Production of Commodities... Due to time constraints, she did not discuss her text with Sraffa before publication, but sent him the typescript “A Reconstruction of the Theory of Value” anyway. In the paper, she elaborated on Sraffa’s model, explaining the main arguments, and asking herself what might determine the rate of profits. She argued that the rate of profits is determined by the rate of accumulation of the economy, in accordance with the Cambridge equation r = g/sc. In Sraffa’s model, the wage rate would then also be determined. Robinson warned, however, that the rate of profits is not the prime mover of the system. The investment plans of the capitalists and the managers will determine the required savings out of profits S c, and it is, therefore, the share of profits, i.e., the rate of exploitation, which governs the rate of profits, not the other way round (Sraffa Papers D3.12.111: 371).15 In modern capitalist economies, the rate of exploitation “tends to be more or less constant through time”. Any attempt to increase either the rate of accumulation or the proportion of profits consumed, without reducing the other, would bring about a violent inf lation as the Trade Unions push up money-wage rates in an attempt to maintain their share. At the same time, it is next to impossible for the Trade Unions to increase the share of wages. When a certain rate of profit has come to be regarded as “normal” it is embodied in appropriate profit margins (the “full cost” determination of prices). The Trade Unions cannot operate directly on real-wage rates; they can inf luence only money wages. When money-wage rates are raised the customary margins are added to the raised costs, and prices are raised more or less in proportion to wage rates, so that the attempt to raise real wages is frustrated.

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This combines Keynes’s theory of money wage determination with Sraffa and with her “inf lation barrier” (Sraffa Papers D3.12.111: 372).16 After having drawn the attention of the reader to the large differences in the profits share across countries, she concluded: All this seems to justify Marx’s conception that the rate of exploitation is a more fundamental relationship than the rate of profit on capital. But these large speculations are not in Sraffa’s line. The function of pure logic is to liberate us from nonsense, not to tell us what we ought to believe. (Sraffa Papers D3.12.111: 374–375).17 A revealing episode in the Robinson–Sraffa relationship occurred in 1967. Some friction seems to have crept in, apparently, caused by a suggestion by Sraffa that Robinson had published results that he considered his (in private correspondence with me, Heinz Kurz called this “bread crumbs” that were picked up by Robinson).18 In a letter to Sraffa of 10 February 1967, Robinson wrote: It is not my fault that you had not published your book when I was working on mine. However, I picked up the clue from the corn economy in your preface to Ricardo, so it is no coincidence that I came upon many of your ideas, though not so neatly expressed. It was only after my book that putty came into fashion. Before that it was just K. I took capital in terms of labour commanded as “real capital”. At the wage rate at which α is eligible it normally has less real capital than β+. [Therefore I don’t see why you accuse me of associating more mechanisation with more “capital”]. Only at a switch point does it necessarily have more. I did not think of the case that Naqvi has unearthed where α has less capital in terms of labour embodied because I did not pay much attention to the end points (zero wage & zero profit). I am putting into my note. In this case there is no double switch, but it is even worse for the putty merchants. (Sraffa Papers D3.12.111: 376–377)19 Harcourt and Kerr (2009: 6) have stated that after the publication of Production of Commodities by Means of Commodities, Robinson recognised Sraffa’s ‘model’ as an abstraction from social and historical forms, but seemed not to then identify its categories with the very basic requirements of a system of production and exchange underlying the productive systems she recommended for replacing orthodox theories. Her own abstractions were institutional or social, and her mode of thinking was to pursue all the logical possibilities of a situation at that level of abstraction in a deductive chain, thereby reaching implications which a less inquisitive mind would fail to find, meanwhile finding contradictions and logical limits. Sraffa’s system was spare yet far-reaching.

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I am far from sure about this, and I will try to show below that the basic model of production outlined in The Accumulation of Capital, although it is not worked out formally, is close to that of Sraffa. Bradford and Harcourt (1997: 124–125) wrote: Joan Robinson also was sceptical of the value of Sraffa’s concept of a Standard commodity. (…) Joan Robinson in a number of places tried to get at the essence of the Sraffa result while dodging the use of the Standard commodity as the measuring rod. (…) She, however, preferred to take a short cut which ‘Sraffa himself would scruple to do’ (…). She measured everything in terms of labour time by postulating a given money-wage per man (sic) hour of ordinary labour. Corresponding to each value of the rate of profits there is a level of prices in money terms and a pattern of prices such that both wages and profits (reckoned at the given rate on the value of capital required for production) are covered by sales receipts. This allowed her, with further simplifications, to establish that r = g/sc, the Cambridge equation. Robinson was at pains to bring her theoretical approach to income distribution and economic growth in line with Sraffa’s model (Bhaduri and Robinson, 1980). It has been convincingly argued that she never fully succeeded in integrating Sraffa in her post-Keynesian neo-Marxist views (Marcuzzo, 2005b) and finally had to state: The rate of exploitation (with the corresponding level of the rate of profits) may, in principle, be anything between zero (which permits only enough gross profit to keep stocks intact) and the maximum that permits the labour force just to exist and reproduce itself. There does not seem to be much point in making further systematic generalisations. We have here a broad frame within which detailed studies of actual history can be carried out. This is where Sraffa leaves us and hands us over to Keynes. (Robinson, 1985: 160; also, Robinson, 1982: 182)

Notes 1 This can be consulted at: https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view. php?n=Sraffa.D3.12.111#?c=0&m=0&s=0&cv=431&xywh=-1592%2C-1%2C 5837%2C3251 2 She only stated in her foreword of being indebted to Erwin Rothbarth “for many helpful discussions and criticisms” (Robinson, 1942: xxiv). According to R.C.O. Matthews (1989: 912), she was introduced to Marx by Rothbarth and Kalecki. 3 His library contains the 1942 edition, in which he marked passages in the margin, but without comments. Sraffa’s copy also contains a slip of paper with some remarks with reference to pages that, however, do not correspond to pages in Robinson’s book, in which he states agreement with passages on “Marx on demand”, but indicating complete disagreement with “Value + Price” and indicating “Falling profit: Up to this point, excellent”. Sraffa’s Black Notebook that contains his notes and observations about articles and books ranging from von

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Bortkiewicz and physicist Erwin Schrödinger (!) to Hayek, also contains a comment on the views on pricing in socialism (the passage on p. 30 of her book, omitted in the second edition) expressed by Robinson in her 1942 Essay. 4 See also Robinson (1982: 179): Piero Sraffa had a Programme of spring cleaning of his own. He tells us in the preface to Production of Commodities by Means of Commodities that he tried to discuss it with Keynes in 1928 but it was not published until 1960. Meanwhile he kept his ideas very much to himself though some leaked out in his Introduction to Ricardo’s Principles. 5 This can be consulted at https://mss-cat.trin.cam.ac.uk/manuscripts/uv/ view.php?n=Sraffa.E23#?c=0&m=0&s=0&cv=53&xywh=-471%2C-1%2C 4452%2C2480 6 This was far from exceptional. As already explained in Part 2, Sraffa was very suspicious that others would walk away with his work and spoke to very few about the state of his research. 7 The reader will remember that much input in her 1933 Economica paper was based on ideas generated in “the Circus”, in which her role and intellectual contribution must have been rather small. There is no evidence, however, which supports the idea that this created animosity in the group. 8 Marcuzzo and Rosselli (2008) mention correspondence between Gerald Shove and Joan Robinson on The Economics of Imperfect Competition where Shove suggests that she was “stealing” some of his ideas, which shows how sensitive Robinson’s “inquisitiveness” must have been for Sraffa. Marcuzzo and Rosselli (2008: 208–209) conclude that Shove was right in seeing many overlaps between their fields of research, both having an interest in classifying the possible sources of increasing costs and factor productivity, but the similarities end here. They may have reached the same results, but along completely different routes. 9 This can be consulted at https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view. php?n=Sraffa.D3.12.111#?c=0&m=0&s=0&cv=404&xywh=-1834%2C-1% 2C6356%2C3288 10 This can be consulted at: https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view. php?n=Sraffa.D3.12.111#?c=0&m=0&s=0&cv=436&xywh=-1592%2C-1% 2C5837%2C3251 11 This can be consulted at: https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view. php?n=Sraffa.D3.12.111#?c=0&m=0&s=0&cv=436&xywh=-1592%2C-1% 2C5837%2C3251 12 This can be consulted at: https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view. php?n=Sraffa.D3.12.111#?c=0&m=0&s=0&cv=436&xywh=-1592%2C-1% 2C5837%2C3251 13 This can be consulted at: https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view. php?n=Sraffa.D3.12.111#?c=0&m=0&s=0&cv=436&xywh=-1592%2C-1% 2C5837%2C3251 14 This can be consulted at: https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view. php?n=Sraffa.D3.12.111#?c=0&m=0&s=0&cv=439&xywh=-1592%2C-1% 2C5837%2C3251 15 This can be consulted at: https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view. php?n=Sraffa.D3.12.111#?c=0&m=0&s=0&cv=464&xywh=-1807%2C0% 2C6250%2C3232 16 This can be consulted at: https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view. php?n=Sraffa.D3.12.111#?c=0&m=0&s=0&cv=464&xywh=-1807%2C0% 2C6250%2C3232

218 Modelling capitalist economic growth 17 This can be consulted at: https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view. php?n=Sraffa.D3.12.111#?c=0&m=0&s=0&cv=468&xywh=-1807%2C0% 2C6250%2C3232 18 Private correspondence with the author. 19 This can be consulted at: https://mss-cat.trin.cam.ac.uk/manuscripts/uv/view. php?n=Sraffa.D3.12.111#?c=0&m=0&s=0&cv=468&xywh=-1807%2C0% 2C6250%2C3232

Bibliography N. Aslanbeigui & G. Oakes (2009). The Provocative Joan Robinson – The Making of a Cambridge Economist, Durham – London: Duke University Press. A. Bhaduri & J. Robinson (1980). “Accumulation and Exploitation: An Analysis in the Tradition of Marx, Sraffa and Kalecki”, Cambridge Journal of Economics, 4(2), June, 103–115. W. Bradford & G.C. Harcourt (1997). “Units and Definitions”, in G.C. Harcourt & D.A. Riach (Eds.), A Second Edition of the General Theory, 1, London: Routledge: 107–131. C. Gehrke (2016). “Subsistence-cum-Surplus Wages versus Gross Wages: A Note”, in: G. Freni, H.D. Kurz, A.M. Lavezzi & R. Signorino (Eds.), Economic Theory and Its History: Essays in Honour of Neri Salvadori, Oxon – New York: Routledge. G.C. Harcourt (1972). Some Cambridge Controversies in the Theory of Capital, Cambridge: Cambridge University Press. G.C. Harcourt (1986). “On the Inf luence of Piero Sraffa on the Contributions of Joan Robinson to Economic Theory”, Economic Journal, 96, Supplement: Conference Papers (1986), 96–108. G.C. Harcourt (2005). “Joan Robinson and her Circle”, in: B. Gibson (Ed.), Joan Robinson’s Economics – A Centennial Celebration, Cheltenham – Northampton: Edward Elgar, 15–28. R.F. Harrod (1937). “Essays in the Theory of Employment. by Joan Robinson”, Economic Journal, 47(186), June, 326–330. M. Kalecki (1990). Collected Works of Michał Kalecki, Volume I: Capitalism – Business Cycles and Full Employment ( J. Osiatynski, Ed.), Oxford: Clarendon Press. P. Kerr (2007). “Joan Robinson and Maurice Dobb on Marx”, Contributions to Political Economy, 26, 71–92. M.C. Marcuzzo (2001). “Sraffa and Cambridge Economics, 1928–1931”, in: T. Cozzi & R. Marchionatti (Eds.), Piero Sraffa’s Political Economy – A Centenary Estimate, London – New York: Routledge, 81–99. M.C. Marcuzzo (2005a). “Piero Sraffa at the University of Cambridge”, European Journal of the History of Economic Thought, 12(3), September, 425–452. M.C. Marcuzzo (2005b). “Robinson and Sraffa”, in: B. Gibson (Ed.), Joan Robinson’s Economics - A Centennial Celebration, Cheltenham – Northampton: Edward Elgar, 29–42. M.C. Marcuzzo & A. Rosselli (2008). “The Cambridge Keynesians: Kahn, J. Robinson and Kaldor – A Perspective from the Archives”, in: R. Leeson (Ed.), The Keynesian Tradition, Houndmills, Basingstoke: Palgrave Macmillan, 196–220. R.C.O. Matthews (1989). “Joan Robinson and Cambridge – A Theorist and Her Milieu: An Interview”, in: G.R. Feiwel (Ed.), Joan Robinson and Modern Economic Theory, Houndmills, Basingstoke, Hampshire – London: Macmillan, 911–915.

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J.P. Potier (1991). Piero Sraffa—Unorthodox Economist (1898–1983), A Biographical Essay, London: Routledge. J. Robinson (1933). The Economics of Imperfect Competition, London: Macmillan. J. Robinson (1938). “The Classification of Inventions”, Review of Economic Studies, 5(2), February, 139–142. J. Robinson (1942). An Essay on Marxian Economics, London: Macmillan, 1967 (2nd ed.). J. Robinson (1953–1954). “The Production Function and the Theory of Capital”, Review of Economic Studies, 21(2), 81–106. J. Robinson (1956). The Accumulation of Capital, London: Macmillan. J. Robinson (1975). “The Unimportance of Reswitching”, Quarterly Journal of Economics, 89(1), 32–39. J. Robinson (1978). “Reminiscences”, in: J. Robinson, Contributions to Modern Economics, New York – San Francisco: Academic Press, ix–xxii. J. Robinson (1982). “Spring Cleaning”, Wirtschaft und Gesellschaft, 8(2), 175–182. J. Robinson (1985). “The Theory of Normal Prices and Reconstruction of Economic Theory”, in: G.R. Feiwel (Ed.), Issues in Contemporary Macroeconomics and Distribution, London – Basingstoke: Macmillan, 157–165. P. Sraffa (1951). “Introduction”, in: P. Sraffa, with the Collaboration of M. H. Dobb (Eds.), The Works and Correspondence of David Ricardo, 1, Cambridge: Cambridge University Press, xiii–lxii. P. Sraffa (1960). Production of Commodities by Means of Commodities – Prelude to a Critique of Economic Theory, Cambridge: Cambridge University Press.

14 Robinson’s model of economic growth compared with Marx and the postKeynesian neo-Marxists of the 1940s and 1950s In this chapter, I will discuss the issues that are most relevant for a comparison of Robinson’s theory of economic growth with the views of Marx and of the early neo-Marxists. For the sake of brevity, not all issues will be reviewed, however. Issues such as, e.g., the role of the rate of interest, population growth, the measurement of capital, etc. would lead us too far away from what is essential for our purpose.

14.1 Rate of accumulation and Robinson’s “animal spirits” That the rate of accumulation generates the rate of profits, as is shown in the Robinsonian realisation curve of Figure 11.1, is the logical outcome of Robinson’s extension to the long run of the Keynes–Kalecki multiplier mechanism. It is the application of Kalecki’s “capitalists get what they spend” principle that leads to the realisation of the profits. Marx was aware that profits (or surplus value) had to be “realised”. He wrote in Volume III of Capital: It is the extraction of this surplus-value that forms the immediate process of production, and this faces no other barriers than those just mentioned. As soon as the amount of surplus labour it has proved possible to extort has been objectified in commodities, the surplus-value has been produced. But this production of surplus-value is only the first act in the capitalist production process, and its completion only brings to an end the immediate production process itself. (…) Now comes the second act in the process. The total mass of commodities, the total product, must be sold, both that portion which replaces constant and variable capital and that which represents surplus-value. If this does not happen, or happens only partly, or only at prices that are less than the price of production, then although the worker is certainly exploited, his exploitation is not realized as such for the capitalist and may even not involve any realization of the surplus-value extracted, or only a partial

DOI: 10.4324/9781003283416-17

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realization; indeed, it may even mean a partial or complete loss of his capital. The conditions for immediate exploitation and for the realization of that exploitation are not identical. Not only are they separate in time and space, they are also separate in theory. The former is restricted only by the society’s productive forces, the latter by the proportionality between the different branches of production and by the society’s power of consumption. (Marx, 1894: 352) However, although it can be shown that in Marx’s schemes of expanded reproduction, a similar realisation mechanism is at work as that of Kalecki and Robinson, Marx devoted no further attention to it.1 The realisation mechanism came to Kalecki via Rosa Luxemburg’s writings. Steindl (1952: 237) called it “the best established truth of Keynesian economics: namely that a given amount of profits can only materialise (…) if there is a corresponding amount of net investment and capitalists’ consumption”. However, Rosa Luxemburg stressed limits of the realisation mechanism because of insufficient consumption capacity that restricts effective demand. Hence, Luxemburg’s argument of the importance of “external markets” for counteracting the inherent underconsumption tendency in capitalism. Kalecki agreed with this argument, although he considered it overstated. He chose to put the stress on the massive budget deficits that are created under monopoly capitalism to support effective demand (Kalecki, 1971: 146, 152). It is clear that what is considered the determinant of capitalist accumulation is crucial for the theorist’s views on how surplus/profits are realised and on how economic expansion of the capitalist system takes place. In Marx’s theory of capitalist accumulation, the capitalists’ urge to accumulate plays a pivotal role in driving the accumulation of capital. In Volume I of Capital, Marx agreed with the way Classical economists regarded the capitalists’ historical mission: Accumulate, accumulate! That is Moses and the prophets! (…) Therefore save, save, i.e. reconvert the greatest possible portion of surplus-value or surplus product into capital! Accumulation for the sake of accumulation, production for the sake of production: this was the formula in which classical economics expressed the historical mission of the bourgeoisie in the period of its domination. Not for one instant did it deceive itself over the nature of wealth’s birth-pangs. (…) But what use is it to lament a historical necessity? If, in the eyes of classical economics, the proletarian is merely a machine for the production of surplus-value, the capitalist too is merely a machine for the transformation of this surplus-value into surplus capital. Classical economics takes the historical function of the capitalist in grim earnest. (Marx, 1867: 742)

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He further emphasised the importance of the capitalist urge to accumulate, as follows: Only as a personification of capital is the capitalist respectable. As such, he shares with the miser an absolute drive towards self-enrichment. But what appears in the miser as the mania of an individual is in the capitalist the effect of a social mechanism in which he is merely a cog. Moreover, the development of capitalist production makes it necessary constantly to increase the amount of capital laid out in a given industrial undertaking, and competition subordinates every individual capitalist to the immanent laws of capitalist production, as external and coercive laws. It compels him to keep extending his capital, so as to preserve it, and he can only extend it by means of progressive accumulation. (Marx, 1867: 739) Against Luxemburg and Kalecki, but with Marx, Robinson assumed from the outset that in her model, accumulation is driven continuously by capitalists’ “animal spirits”. Although thus stated, it seems that the urge to accumulate is derived from human nature (see also Robinson, 1962b: 101); such an interpretation would do injustice to her views as, e.g., expressed in Freedom & Necessity (Robinson, 1970: 25–29), where the existence or lack of an urge to accumulate is linked to societal conditions. This is spelled out explicitly in Robinson (1962a: 37): It is not only a matter of the innate characteristics of human nature but also of the kind of behaviour that is approved by society. Capitalism develops the spirit of emulation: without a competitive urge to grow, modern managerial capitalism could not f lourish. (…) To attempt to account for what makes the propensity to accumulate high or low we must look into historical, political and psychological characteristics of an economy (…). Elsewhere, she stressed that the urge to accumulate satisfies the ambitions and the hunger for power in capitalism. The exaltation of making money for its own sake to respectability, indeed to dominance, in society was the new feature of the capitalist system which distinguished it from all former civilisations. A temperamental inclination to avarice or generosity is no doubt distributed statistically in much the same way in all human populations. There is no reason to suppose that the natural passions were changed in the nineteenth century. Rather a society developed in which ambition and love of power could be satisfied by accumulating wealth, and this met with technical and historical conditions which enabled it to grow and f lourish and stretch its tentacles over the world. (Robinson, 1970: 67).

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We are far from Keynes’s “spontaneous urge to action rather than inaction” (Keynes, 1936: 161), so it seems. Robinson’s “animal spirits” are more in agreement with “the way to success and social preferment (…) through accumulation”, as Sweezy (1942: 81) summarised the Marxian urge to accumulate. By referring to Keynes’s concept of “animal spirits” but redefining it in a way that is much closer to Marx, Robinson silently linked the two, thus stressing how one extends the other.

14.2 Rate of accumulation as a function of the expected rate of profits The position of the Robinsonian investment curve as depicted in Figure 11.1 is the result of the vigour of capitalist “animal spirits”, but the general form and the slope of the curve express a functional relationship between the rate of accumulation and the expected rate of profits. How does this relate to Marx’s view? In Volume I of Capital, Marx essentially took the rate of accumulation as given. He pointed out that with a constant composition of capital: “To put it mathematically, the rate of accumulation is the independent, not the dependent variable; the rate of wages is the dependent, not the independent variable” (Marx, 1867: 770). He also stressed that the creation of a relative labour surplus, the so-called industrial reserve army, as the result of technical change (which changes the composition of capital), is the “absolute general law of capitalist accumulation” (Marx, 1867: 798). We thus see that for Marx, the rate of accumulation was the fundamental independent variable and the driving force of the capitalist system (as regards technical changes, see § 11.4). The rate of accumulation is the result of the tendency towards maximum accumulation by individual capitalists. This tendency is understood as “a social mechanism in which he (the capitalist – L.C.) is merely a cog”.2 It is in Volume III of Capital that Marx introduced the idea that the rate of accumulation is a function of the expected rate of profits. His idea was that as a result of the secular decline of the rate of profits, the motor of capitalist accumulation will sputter: As the capitalist mode of production develops, so the rate of profit falls, while the mass of profit rises together with the increasing mass of capital applied. Once the rate is given, the absolute amount by which capital grows depends on its existing magnitude. But if this magnitude is given, the proportion in which it grows, i.e. its rate of growth, depends on the profit rate. (Marx, 1894: 356 – my italics) … in view of the fact that the rate at which the total capital is valorised, i.e. the rate of profit, is the spur to capitalist production (in the same way as the valorisation of capital is its sole purpose), a fall in this rate slows down the formation of new, independent capitals and thus appears as a threat to the development of the capitalist production process; it

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promotes overproduction, speculation and crises, and leads to the existence of excess capital alongside a surplus population. (Marx, 1894: 349–350) However, this is an analysis about the long-run future of capitalism. Most of the time, Marx simply assumed that the total surplus value is invested as much as possible, i.e., independently of the expected rate of profits. It was logical for Robinson (1942: 50) to argue against Marx’s crisis theory: To work out a theory on these lines it is necessary to deal with the problem of the inducement to invest. If capitalists were always prepared to invest their surplus in capital goods, without regard to the prospect of profit, the output of capital goods would fill the gap between consumption and maximum potential output. (…) Thus to clinch the argument it is necessary to show that investment depends upon the rate of profit and that the rate of profit depends, in the last resort, upon consuming power. It is necessary, in short, to supply a theory of the rate of profit based on the principle of effective demand. This Marx fails to do, for he had meanwhile worked out his theory of the falling tendency of profit, based on the principle of the rising organic composition of capital. Interestingly, it was Josef Steindl who, in the late 1940s and in the footsteps of Kalecki, worked out this relationship in his long-period endogenous theory of investment (Steindl, 1952: 192ff.). He emphasised that Marx made “the implicit assumption of a somehow given long-term rate of accumulation” but left the question open “how this trend rate of accumulation is determined” (Steindl, 1952: 231–232). After Steindl had stated the relationship between internal accumulated savings by the capitalist companies and their investment, he indicated that a time-lag is involved, but that essentially, a sufficiently high increase in profits is expected. But in Robinson’s theory, as summarised in Figure 11.1, this dependence of accumulation on the expectations for the rate of profits is introduced in a more transparent way. This should not be seen as a suggestion that she got this insight from Steindl, since she pointed the relationship out as early as 1942 in An Essay on Marxian Economics.

14.3 Secular behaviour of the rate of profits Much has been written about Marx’s theory of the tendency of the average rate of profits to fall. He saw this mainly as the result of the introduction of capital-using methods of production. Some important Marx scholars have questioned whether his “law” of the tendentially falling rate of profits really ref lects Marx’s views. Maurice Dobb, for instance, wrote: It seems probable that Marx, in common with other economists of the early and mid-nineteenth century, assumed that this was an actual trend

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for which an explanation was called for; and treated it as such rather than as a dogmatic forecast for the future. Whether or not he assigned to it in his mind a significant place as a contributory factor in the causation of periodic crises seems to be an open question. (Dobb, 1973: 157–158) With the scholarly work on the MEGA2 (Marx–Engels–Gesamtausgabe) project in which all manuscripts by Marx and Engels will be published, it has become increasingly clear that Friedrich Engels occasionally twisted Marx’s arguments and that, as a result, Marx’s “law” of the tendential fall of the rate of profits is more Engels’s “law” than Marx’s. It has also been shown that Marx’s treatment of the “law” in Volume III of Capital differs from the approach in the Grundrisse, his notebooks of 1857–1858. The list of counteracting factors that is discussed in Capital is more extensive, and in the Grundrisse, the factors mentioned are considered as slowing the fall of the rate of profits, while in Capital, they are viewed as counteracting this (Reuten and Thomas, 2011; Thomas and Reuten, 2013: 315). In Marx’s manuscripts of December 1861–January 1862 (Notebook XVI), the “law” of the falling rate of profits is transformed into a tendency (Thomas and Reuten, 2013: 318–319). Only in Volume III of Capital will there be a separate chapter on the various factors that counteract the “law” (Rosdolsky, 1977: 380). Already in her Essay on Marxian Economics, Joan Robinson rejected Marx’s tendential fall of the rate of profits due to increasing mechanisation of production: If knowledge develops as capital accumulates, there need be no tendency to diminishing returns, and with constant returns there can be no tendency for the rate of profit to fall (always assuming that the problem of effective demand is ruled out). The most that we can say is that periods of falling profits may occur when capital per man increases very rapidly relatively to the rate of advance in technical knowledge. (Robinson, 1942: 38) She repeated these views in Robinson (1952a), but approvingly mentions Marx’s views on underconsumption (although “rather vaguely sketched by Marx”, Robinson, 1952a: 50) and on the unplanned capitalist commodity production. However, Robinson refused to conclude that capitalism would inevitably collapse (Robinson, 1952a: 52). Robinson has listed reasons why in the long-run the rate of profits would remain constant, rather than fall. First of all, a persistent capitalusing bias would be inconsistent with the capitalist “rules of the game”. The rate of accumulation would become highly unstable as a diminishing importance of the capital-using innovations in technical progress would

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cause a deep crisis: “... while capital-using innovations are favourable to the interests of the entrepreneurs (by making capital scarce relative to labour) an excessive indulgence in them creates conditions in which the capitalist rules of the game become unplayable” (Robinson, 1956a: 172). She states that the capitalists are deliberately holding back an increase in the real-capital ratio. A decrease in investment opportunities therefore means that the capitalist rules of the game resist an increase in the capital–labour ratio if it leads to a decrease in the rate of profits: “… the capitalist rules of the game create a resistance to a rise in the ratio of capital to labour when it entails a fall in the rate of profit” (Robinson, 1956a: 151). Interestingly, this view is also voiced by, e.g., Steindl (1952: 242). In fact, her argument is based on her observation that in the long run, the wage–profits ratio in income is constant. According to Robinson, there is nothing mysterious about this tendency: it ref lects the balance of power between labour and capital. Constant relative income shares combined with a constant capital–labour ratio (or “real-capital ratio”) evidently mean that the rate of profits is also constant. Robinson accepted Kalecki’s arguments for a constant wage–profits ratio as a “stylised fact” (Bronfenbrenner, 1957: 539). She called it “an empirical law of distribution (…) better established than most economic generalisations” (Robinson, 1942: 80). Her opinion was shared by other post-Keynesian neo-Marxist authors of the 1950s and 1960s, for instance, Steindl (1952: 69–70, 236) and Baran (1957: 56–58). In Robinson and Eatwell (1973: 188–189), the link was made with Marx’s constant rate of exploitation in Volume III of Capital, explaining that in a situation of economic growth, such a constant rate of exploitation will lead to an increasing real wage rate and to a “embourgeoisement” of the working class, as witnessed in modern capitalism. Robinson’s rejection of Marx’s tendentially falling rate of profits is also in line with that of Baran and Sweezy (1966: 72). However, whereas Robinson’s rejection is based on the assumed long-run tendency of technical progress to be neutral on average (see sub § 14.4) and on the impossibility of reconciling such a falling profit rate with the capitalist rules of the game, that of Baran and Sweezy is based on it being replaced in monopoly conditions by “the law of the rising economic surplus”. They wrote: By substituting the law of the rising surplus for the law of falling profit, we are therefore not rejecting or revising a time-honored theorem of political economy: we are simply taking account of the undoubted fact that the structure of the capitalist economy has undergone a fundamental change since that theorem was formulated. What is most essential about the structural change from competitive to monopoly capitalism finds its theoretical expression in this substitution. (Baran and Sweezy, 1966: 72 – my italics)

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14.4 Technical progress Robinson believed that the main cause of technical progress is labour shortage that makes the desired accumulation rate unattainable: “The chief driving force behind technical progress is the scarcity of labour in relation to capital which is produced by a rate of accumulation in excess of the rate of growth of population” (Robinson, 1956b: 105). She considered the incorporation of this source of technical progress “the most interesting and important Marxian idea” in her model (Robinson, 1963: 410). It is well-known that Marx referred to this relationship at various places in Capital. For instance, in Volume III: A momentary excess of surplus capital over the working population it commands has a double effect. On the one hand it will gradually increase the working population by raising wages, hence attenuating the destructive inf luences that decimate the offspring of the workers and making marriage easier, while on the other hand, by using methods that create relative surplus-value (introduction and improvement of machinery), it produces far more quickly an artificial and relative over-population, which in turn is the forcing house for a really rapid increase in the number of people – since, under capitalist production, misery produces population. (Marx, 1894: 325 – my italics) Apart from labour scarcity, Robinson considered that the capitalist rules of the game stimulating competition also promote technical progress (Robinson, 1962a: 52) – another point of view that she shares with Marx (see, e.g., Marx, 1894: 373ff.). Moreover, again, like Marx (1894: 175, 198–199), she viewed “autonomous innovations” that come out of “the mere accumulation of knowledge” (Robinson, 1962a: 17, also 52) as the least important source of technical progress.3 Because in Marx’s view, the main driving force behind technical progress is the need to replace labour that tends to become scarce, he argued at length that technical progress is capital-using. His view goes as follows: (1) mechanisation of production makes it possible to reduce the labour required per unit of product; (2) the introduction of innovations that increase output per person also increases the amount of raw and auxiliary materials per person (in the absence of raw and auxiliary material-saving innovations) to the same extent (Marx, 1894: 346); (3) since in competition, it comes down to the fact that the increase in fixed capital should reduce unit prices, the share of depreciation in prices must fall, which is only possible if the increased fixed costs are spread over a larger output (Marx, 1894: 374). This evolution increases the so-called organic composition of capital, but it is likely that the value composition will rise less, and possibly even fall, as a result of the price decreases of the components of constant capital, accompanied by the rising productivity of labour in their production (Marx, 1894: 343). However, by

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and large, Marx’s point is that in the long run, technical progress takes the form of increased mechanisation of production, which will increase the use of constant capital proportionally more than that of variable capital, and is therefore, capital-using. In contrast to Marx, Joan Robinson argued that there is a tendency to compensate biases in the introduced innovations (Robinson, 1956a: 170–171; 1962a: 101). She admitted a capital-using bias in technology that is, however, compensated by the development of transportation. The following quotation perfectly summarises her view: There is no reason to expect technical progress to be exactly neutral in any one economy, but equally there is no reason to expect a systematic bias one way or the other. Capital-using innovations raise the cost of machines in terms of commodities and give entrepreneurs an extra motive to find ways to cheapen them. Capital-saving innovations tend to produce scarcity of labour in the consumption sector and give entrepreneurs an extra motive to increase productivity. Each type of bias tends to get itself compensated by the other. It is true that there may have been a systematic bias in the capital-using direction for technological reasons, since (at least until very recent times) it has proved easier to devise robots to carry out the operations of production of consumer goods than it is to devise robots to make robots. But, against this, there is an important tendency towards a bias in the other direction due to improvements which consist of speeding up the process of production. The development of transport, and the reorganization of marketing which accompanies it, have played a role in technical progress which is of the utmost historical importance and is by no means yet at an end. This kind of economy of capital is therefore a strong counterweight to any bias there may be in technology in a capital-using direction. (Robinson, 1956a: 170–171) At the same time, it should be stressed that Robinson’s “belief ” that in the long-term, technical progress on average will be neutral derives from her views about the secular behaviour of the rate of profits. Also, the assumption of neutral technical progress is essential in the analysis of the conditions of steady economic growth, which is dealt with in the next section.

14.5 Conditions of steady economic growth We do not know whether Marx intended to investigate the conditions for a steady expansion of the capitalist economy using his schemes of expanded reproduction. His manuscripts show he did not get that far (Cuyvers, 2020: 27–29). Moreover, due to a lack of mathematical tools, such as matrix algebra and calculus, he had to work with numerical examples, which, in the end, did not give a satisfactory solution because they were based on a very peculiar

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investment function for the capitalists of Departments I and II (Morishima, 1973: 118–119). However, there is a solution to Marx’s schemes in which there is uniform expansion, but without leading to a Robinsonian “Golden Age”. As mentioned before, Robinson developed the concept of a “Golden Age” to identify the various causes that stand in the way of steady growth: To set out the characteristics of a golden age by no means implies a prediction that it is likely to be realised in any actual period of history. The concept is useful, rather, as a means of distinguishing various types of disharmony that are liable to arise in an uncontrolled economy. (Robinson, 1962a: 98–99) Capitalism is normally incapable of steady expansion as virtually none of the conditions for a “Golden Age” are found in reality (Robinson, 1956a: 92). Therefore, it is “a mythical state of affairs not likely to obtain in any actual economy” (Robinson, 1956a: 99). Robinson’s “Golden Age” performs a similar function as Marx’s expanded reproduction, derived from his schemes of reproduction, as expounded in Volume II of Capital (Marx, 1885: 581ff.). There is, however, an important difference: as Rosa Luxemburg explained, the data in Marx’s schemes are meant to illustrate a hypothetical process of steady accumulation, and are averages that make abstraction of price and profit f luctuations, the stage of the business cycle, etc. (Luxemburg, 1951: 36, 104). They also make abstraction of the difference between produced and realised surplus value, and, therefore, are not showing how the economy is moving (Luxemburg, 1951: 342). Marx’s schemes illustrate a hypothetical state of harmony in the capitalist accumulation process and are thus thought constructs intended to clarify the longer term, but not to prove the possibility of steady capitalist growth. Marx is concerned with describing a situation of “normal reproduction” (Marx, 1885: 571). Such “normal reproduction” implies that the average rate of profits can be considered as constant: …the general rate of profit changes only in the long run – despite constant change in the particular rates of profit, a change in one sphere being offset by an opposite change in another. And the relative constancy of the profit rate is precisely ref lected in this more or less constant character of the average or common rate of interest. (Marx, 1894: 488) For all the great changes that constantly occur in the actual rates of profit in particular spheres of production (as we shall later show), a genuine change in the general rate of profit, one not simply brought about by exceptional economic events, is the final outcome of a whole series of protracted oscillations, which require a good deal of time before they are consolidated and balanced out to produce a change in the general rate. (Marx, 1894: 266).

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Although the reproduction schemes can be used to build a model that under conditions of “normal reproduction” will yield a constant realised and expected rate of profits as well as a steady growth rate (and there is evidence that Marx made attempts to build such a model), this outcome cannot be compared with Robinson’s “Golden Age”, where the growth rate is higher than the average growth rate of a “real world” expanding economy in which expectations are uncertain and activity goes through cyclical f luctuations. Robinson wrote: The very fact that accumulation takes place unsteadily reduces the growth ratio below what it would be in golden age conditions, for uncertainty weakens the urge to invest and consequently slows down technical progress. The trend which emerges ex post from the operation of the trade cycle is not the same thing as the growth ratio of a golden age, but is an imperfect ref lection of it. (Robinson, 1956a: 213) But it is clear that her analysis of the conditions of steady economic expansion started from Marx. In On Re-Reading Marx, she stressed: “When you turn to the General Theory in the long period you have to start with Marx’s schema for expanded reproduction” (Robinson, 1953: 9). Interestingly, a year earlier, she published The Generalisation of the General Theory in which she tried to apply Keynes’s insights in the long run. In that text, she referred to Rosa Luxemburg and characterised her concept of a “Golden Age” (a concept that was apparently not yet fully developed at that time),4 as “nothing more than a piece of simple arithmetic” (Robinson, 1952b: 30), needed to classify disturbances and causes of instability. In fact, as was just shown, the same holds for Marx’s schemes of reproduction in Volume II of Capital – their analysis allows him to list and explore the factors that upset the “law of reproduction” in Volume III (Cuyvers, 2020: 28).

14.6 Monopoly capitalism, underconsumption, and stagnation Marx emphasised the tendency towards concentration and centralisation of capital. He emphasised that an increasing concentration of means of production with capitalists allows the accumulation of capital and production on an ever-increasing scale, while the centralisation of capital as the result of competition brings larger amounts of capital in the hands of fewer capitalists: With the accumulation of capital, therefore, the number of capitalists grows to a greater or lesser extent. Two features characterize this kind of concentration, which grows directly out of accumulation, or rather is identical with it. Firstly: the increasing concentration of the social means of production in the hands of individual capitalists is, other things

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remaining equal, limited by the degree of increase of social wealth. Secondly: the part of the social capital domiciled in each particular sphere of production is divided among many capitalists who confront each other as mutually independent and competitive commodity-producers. Therefore not only are accumulation and the concentration accompanying it scattered over many points, but the increase of each functioning capital is thwarted by the formation of new capitals and the subdivision of old. Accumulation, therefore, presents itself on the one hand as increasing concentration of the means of production, and of the command over labour; and on the other hand as repulsion of many individual capitals from one another. This fragmentation of the total social capital into many individual capitals, or the repulsion of its fractions from each other, is counteracted by their attraction. The attraction of capitals no longer means the simple concentration of the means of production and the command over labour, which is identical with accumulation. It is concentration of capitals already formed, destruction of their individual independence, expropriation of capitalist by capitalist, transformation of many small into few large capitals. This process differs from the first one in this respect, that it only presupposes a change in the distribution of already available and already functioning capital. Its field of action is therefore not limited by the absolute growth of social wealth, or in other words by the absolute limits of accumulation. Capital grows to a huge mass in a single hand in one place, because it has been lost by many in another place. This is centralization proper, as distinct from accumulation and concentration. (Marx, 1867: 776–777) However, Marx did not work out a theory of the monopolisation of capitalism. The capitalism that he analysed was capitalism where competition reigned. It has been suggested that he did not deal with the monopolisation of capitalism due to lack of data (Sweezy, 1942: 262; Baran and Sweezy, 1966: 19), but in my opinion, it is rather because a theory of competition or a theory of the changes in competitive conditions are not the subject of Capital. Nevertheless, Marx stated that during capitalist development, the minimum amount of capital required for a business keeps increasing, which creates a barrier to entry. The text I just quoted continues as follows: The laws of this centralization of capitals, or of the attraction of capital by capital, cannot be developed here. A few brief factual indications must suffice. The battle of competition is fought by the cheapening of commodities. The cheapness of commodities depends, all other circumstances remaining the same, on the productivity of labour, and this depends in tum on the scale of production. Therefore, the larger capitals beat the smaller. It will further be remembered that, with the development of the capitalist mode of production, there is an increase in the minimum

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amount of individual capital necessary to carry on a business under its normal conditions. The smaller capitals, therefore, crowd into spheres of production which large-scale industry has taken control of only sporadically or incompletely. Here competition rages in direct proportion to the number, and in inverse proportion to the magnitude of the rival capitals. It always ends in the ruin of many small capitalists, whose capitals partly pass into the hands of their conquerors, and partly vanish completely. (Marx, 1867: 777) It is in the work of authors, including Hilferding and Rosa Luxemburg, and later Kalecki, Steindl, Baran, and Sweezy, that an analysis of monopoly capitalism was introduced in Marxism. For them, capitalism has changed so much since Marx’s time that his analysis needs revision. The same applies to Joan Robinson’s theory of economic growth. Therefore, we have to look for similarities between neo-Marxist views and those of Robinson. First of all, there is the role of organised labour and trade unions: their bargaining power will determine the distribution of income, together with other factors affecting the balance of power between labour and capital. Kalecki introduced the “degree of monopoly” as a major factor explaining the distribution of income in capitalism. He attributed an increase in the degree of monopoly to “the process of concentration in industry leading to the formation of giant corporations”, but also to “the development of sales promotion through advertising, selling agents, etc.”, and tacit agreements among firms to protect profits associated with the increase in the capital intensity of production (Kalecki, 1952: 17). Robinson has made important contributions to this neo-Marxist analysis of monopoly capitalism. Her starting point is similar to that of Steindl5: (1) important economies of scale result in higher minimum investments and the creation of barriers to entry (Robinson, 1956a: 176; 1962a: 76); and (2) resulting better negotiation positions on the products, capital, and labour market (Robinson, 1956a: 6, 338). But it remains a fundamental truth that the monopolisation tendency is a logical outcome of competition: When competition is unrestrained and carried on with vigour, the size of firms grows and the number in any one industry falls. The logical end of competition is monopoly. (Robinson, 1966: 57, also Robinson, 1956a: 92, 217; 1962a: 77) This monopolisation goes hand in hand with an increase in profit margins, which, following Kalecki, is only possible if expenditure out of profits increases, or alternatively, if total income drops (Kalecki, 1952: 61, also 156, 160). Steindl, in particular, has stressed this point and has shown how monopolisation and overcapacity go together (Steindl, 1952: 245). Monopolists, Robinson (1962a: 41) argued, are afraid of creating overcapacity and tend to be cautious investors, which will lead to a low state of

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“animal spirits”. This argument has already been made in Sweezy (1942: 221), has been further elaborated in Steindl (1952: 131–132),6 and has also been found in Baran and Sweezy (1966: 58–61). As to the question whether the speed of technical progress and the rate of diffusion of innovations will drop under conditions of monopolisation, she has stated this affirmatively, adding that, as a result, the rate of accumulation will drop (Robinson, 1956a: 90–91, 162, 407) – an opinion that was also defended by Sweezy (1942: 277), Kalecki (1952: 159), and Steindl (1952: 123). At the end of the 1950s, when participating in the famous “Has Capitalism Changed?” debate, Sweezy defended a more nuanced point of view: due to “institutionalised research”, the rate of technological innovation in post-war capitalism did not slow down, a thesis that also found its way into Baran and Sweezy (1966: 77–79). Sweezy’s point of view was endorsed by Joan Robinson in her contribution to that debate (Robinson, 1961: 168). Moreover, in both Robinson (1966: 59) and Robinson (1970: 83), it is stated that oligopolistic competition has made present-day capitalism particularly progressive because of the constant f low of new product varieties and production methods that are developed. Also highly relevant is Robinson’s view on capitalist “underconsumption”. In Volume III of Capital, Marx indicated: The conditions for immediate exploitation and for the realisation of that exploitation are not identical. Not only are they separate in time and space, they are also separate in theory. The former is restricted only by the society’s productive forces, the latter by the proportionality between the different branches of production and by the society’s power of consumption. And this is determined neither by the absolute power of production nor by the absolute power of consumption but rather by the power of consumption within a given framework of antagonistic conditions of distribution, which reduce the consumption of the vast majority of society to a minimum level, only capable of varying within more or less narrow limits. (Marx, 1894: 352 – my italics) The Marxist underconsumption thesis was developed in greater detail by Rosa Luxemburg. As Dobb (1952: 268) has noted, underconsumption in Luxemburg’s work is a result of the rising rate of surplus value combined with a constant savings ratio. Sweezy (1942: 174–175, 180), too, has sought the ultimate cause of the underconsumption trend in the conf lict between the production of use values and the exchange-value realisation necessary for capitalism, as a result of which the increase in the production capacity in the consumer goods sector collides with a smaller increase in the demand for consumer goods. Both in this approach and in the work of Marx, underconsumption is the result of the limited consumption power of the population on one side, the high urge to accumulate, so that the sphere of action of capitalism must systematically expand, on the other.

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Kalecki, on the other hand – and under his inf luence, Steindl – has emphasised that the realisation of profits is a consequence of capitalist spending, so that an increasing profits share for given investments is obtained through a decrease in national income (Kalecki, 1952: 61, 156). For Kalecki, both the underconsumption and stagnation tendencies in capitalism stem from a diminishing intensity of the so-called “developmental factors” as capitalism becomes more monopolised (Kalecki, 1952: 159). Robinson, like Marx, distinguished between the production and consumption capacity of an economy (Robinson, 1956a: 16). She saw the underconsumption and stagnation tendencies in monopoly capitalism as the result of the reduced urge to accumulate (Robinson, 1956a: 94–95; 1962a: 61). In addition, rising monopolistic profit margins are accompanied by growing sales costs. The incomes derived from these sales costs, however, mainly benefit the middle class, which can increase the growth of the average thrift of the economy (Robinson, 1962a: 77–78). In the view of Marx–Luxemburg–Sweezy and Kalecki–Steindl–Robinson, underconsumption seems to be the result of respectively a high or a weak urge to accumulate. In the latter case, the accumulation rate is too low to allow production capacity to increase in line with labour productivity (Robinson, 1956a: 94–95). Marx–Luxemburg–Sweezy underconsumption is especially relevant to an expansive capitalism, the Kalecki–Steindl–Robinson variant to monopoly capitalism. The Robinsonian view on underconsumption as developed in The Accumulation of Capital thus follows the direction taken by Kalecki. Although Steindl actually made the connection between the lacking capitalist urge to accumulate in Kalecki’s theory and the declining intensity of the “developmental factors”, before she did, it is still Robinson who provided the more elaborate theoretical development.

14.7 Underconsumption and stagnation: counteracting factors (a) In the post-Keynesian neo-Marxist theories of capitalism, armaments spending is mentioned as a counteracting factor against economic stagnation. Rosa Luxemburg had devoted attention to armaments spending as government demand financed by taxes (Luxemburg, 1951: 458), and also mentioned its importance, for the future expansion of capitalism and for control of the business cycle (Luxemburg, 1951: 464, 466). While writing 30 years after Luxemburg, Paul Sweezy stated that, in the absence of sufficiently high government demand, armaments spending will create previously non-existing output that, in turn, will increase the scope for profitable investment opportunities (Sweezy, 1942: 310). In a similar way, Kalecki has stressed that armament spending, at least if not financed by taxes on wages, but by government loans or budget deficits, is an important “external market” for stagnant capitalism (Kalecki, 1952: 52; 1971: 153). It cannot come as a surprise that Joan Robinson, in line with these views and with Kalecki (1971: 140–141), Baran (1957: 119), and Baran and Sweezy (1966: 205, 207), has stated that

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government spending tends to concentrate on armament spending, since the resulting output is not in competition with that of the rest of the private sector (Robinson, 1970: 86).7 (b) In Robinson’s opinion, increasing rentier consumption also plays a role in counteracting capitalist stagnation, provided it grows more rapidly than national income, e.g., as a result of advertising. While such rising rentier consumption would be preferable to armaments expenditure, it absorbs unemployment less than, e.g., investment in industrial production capacity (Robinson, 1956a: 273) and is in fact hardly less irrational than digging and filling holes. In Robinson (1962a: 77–78), it was argued that higher monopolistic profit margins are largely absorbed by higher sales costs and that the middle classes, in particular, benefit from the related income, as a result of larger savings. It would appear that during the 1960s, her views were increasingly close to those put forward by Baran and Sweezy (1966), as is evidenced by Robinson (1970: 84) where she stated that the increased middle-class consumption (including that of the executives and the “workers aristocracy”) is insufficient to absorb the investible sources generated by the capitalist system. (c) Another counteracting factor is foreign trade and capital exports. Marx already listed these (Marx, 1894: 353, 359, 364–365) and they figure prominently in Rosa Luxemburg’s thesis on the “external markets”, i.e., the markets in the non-capitalist part of the globe: … the internal market is the capitalist market, production itself buying its own products and supplying its own elements of production. The external market is the non-capitalist social environment which absorbs the products of capitalism and supplies producer goods and labour power for capitalist production. (Luxemburg, 1951: 366) Robinson has adopted this view with the capitalist sector being the “internal market” and the periphery the “external market” of capitalism (Robinson, 1956a: 358–359). The “external market” will shrink as time goes by, but in contrast to Luxemburg, she was not prepared to advance a theory of the resulting collapse of capitalism. In fact, in her later work, she said that colonialism and imperialism lead to a embourgeoisement of the workers (Robinson, 1970: 65–66).

Notes 1 The last chapter “Accumulation and Reproduction on an Expanded Scale” of Volume II of Capital breaks off unexpectedly. As Engels indicated in his preface to Volume II, it is from Marx’s Manuscript VIII, dating from the late 1870s (Marx, 1885: 86). 2 Only as a personification of capital is the capitalist respectable. As such, he shares with the miser an absolute drive towards self-enrichment. But what

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3 However, Marx, in contrast to Robinson, did not consider autonomous innovations as exogenous, i.e., like manna falling from heaven, but as the result of the increasing socialisation of labour, which leads to the development and splittingoff of intellectual productive labour: This development in productivity can always be reduced in the last analysis to the social character of the labour that is set to work, to the division of labour in society, and to the development of intellectual labour, in particular of the natural sciences. (Marx, 1894: 175) 4 In that paper, a “Golden Age” can have increasing unemployment. 5 Her views are going back to Robinson (1933: 307, 324), which, as is sufficiently known, was inspired by Sraffa (1926). 6 Going back to Steindl (1945: 30). 7 Between 1955 and 1962, Kalecki has analysed the impact of armaments spending in three papers in Polish, which can now be consulted in Kalecki (1991: 351ff.)

Bibliography P.A. Baran (1957). The Political Economy of Growth, Harmondsworth: Penguin Books, 1973. P.A. Baran & P.M. Sweezy (1966). Monopoly Capital, New York: Monthly Review Press. M. Bronfenbrenner (1957). “Academic Methods for Marxian Problems”, Journal of Political Economy, 65(6), 535–542. L. Cuyvers (2020). “Why Did Marx’s Capital Remain Unfinished? On Some Old and New Arguments”, Science & Society, 84(1), January, 13–41. M. Dobb (1952). “The Accumulation of Capital”, in: M. Dobb, (Ed), On Economic Theory and Socialism, London: Routledge & Kegan Paul, 1955, 266–272. M. Dobb (1973). Theories of Value and Distribution since Adam Smith, Cambridge: Cambridge University Press. M. Kalecki (1952). The Theory of Economic Dynamics – An Essay on Cyclical and Long Run Changes in Capitalist Economy, London: Allen and Unwin, 1965 (revised second print). M. Kalecki (1971). Selected Essays on the Dynamics of the Capitalist Economy, 1933–1970, Cambridge: Cambridge University Press. M. Kalecki (1991). Collected Works of Michał Kalecki, Volume II: Capitalism – Economic Dynamics ( J. Osiatynski, Ed.), Oxford: Clarendon Press. J.M. Keynes (1936). The General Theory of Employment, Interest and Money, in: A. Robinson and D. Moggridge (Eds.), The Collected Writings of John Maynard Keynes, Vol. VII, Cambridge: Cambridge University Press for The Royal Economic Society, 1973. R. Luxemburg (1951). The Accumulation of Capital, London: Routledge and Kegan Paul. K. Marx (1867). Capital – A Critique of Political Economy, 1. Harmondsworth: Penguin Books, in association with New Left Review, 1976.

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K. Marx (1885). Capital – A Critique of Political Economy, 2. Harmondsworth: Penguin Books, in association with New Left Review, 1978. K. Marx (1894). Capital – A Critique of Political Economy, 3. Harmondsworth: Penguin Books, in association with New Left Review, 1981. M. Morishima (1973). Marx’s Economics, Cambridge: Cambridge University Press. G. Reuten & P. Thomas (2011). “From the ‘Fall of the Rate of Profit’ in the Grundrisse to the Cyclical Development of the Profit Rate in Capital”, Science & Society, 75(1), 74–90. J. Robinson (1933). The Economics of Imperfect Competition, London: Macmillan. J. Robinson (1942). An Essay on Marxian Economics, London: Macmillan, 1967 (2nd ed.). J. Robinson (1952a). “The Model of an Expanding Economy”, Economic Journal, March, 62(245), 42–53. J. Robinson (1952b). “The Generalisation of the General Theory”, in: J. Robinson (Ed), The Generalisation of the General Theory and Other Essays, London – Basingstoke: Macmillan Press, 1979 (2nd ed.), 1–76. J. Robinson (1953). On Re-Reading Marx, Cambridge: Student’s Bookshops Ltd. J. Robinson (1956a). The Accumulation of Capital, London: Macmillan. J. Robinson (1956b). “Notes on the Theory of Economic Development”, in: J. Robinson (Ed), Collected Economic Papers, 2, Oxford: Basil Blackwell, 88–106. J. Robinson (1961). “Has Capitalism Changed?”, Monthly Review, 13(6), October. J. Robinson (1962a). Essays in the Theory of Economic Growth, London: Macmillan. J. Robinson (1962b). Economic Philosophy, Harmondsworth, Middlesex: Penguin, 1974. J. Robinson (1963). “Findlay’s Robinsonian Model of Accumulation: A Comment”, Economica (New Series), 30(120), November, 408–411. J. Robinson (1966). Economics – An Awkard Corner, London: Macmillan. J. Robinson (1970). Freedom and Necessity, London: Macmillan. J. Robinson & J. Eatwell (1973). An Introduction to Modern Economics, London: McGraw-Hill Book Company. R. Rosdolsky (1977). The Making of Marx’s “Capital”, London: Pluto Press. P. Sraffa (1926). “The Laws of Returns under Competitive Conditions”, Economic Journal, 36(144), December, 535–550. J. Steindl (1945). “Capitalist Enterprise and Risk”, Oxford Economic Papers, 7(1), March, 21–46. J. Steindl (1952). Maturity and Stagnation in American Capitalism, Oxford: Basil Blackwell. P.M. Sweezy (1942). The Theory of Capitalist Development, London: Dennis Dobson, 1946. P.D. Thomas & G. Reuten (2013). “Crisis and the Rate of Profit in Marx’s Laboratory”, in: R. Bellofiore, G. Starosta & P.D. Thomas (Eds.), In Marx’s Laboratory – Critical Interpretations of the Grundrisse, Leiden – Boston: Brill, 311–328.

15 What has remained of Robinson’s post-Keynesian neo-Marxism?

During all her years of scholarly work and lecturing, Joan Robinson has defended her interpretation of Keynes’s work and ideas, which she learned “from the horse’s mouth” and absorbed during the years that The General Theory was prepared and after. Based on that interpretation, she developed her post-Keynesian theory of long-run economic growth and distribution. This theory was to a large extent also based on the theoretical work of Michał Kalecki, whom she considered as having developed Keynes’s major views and insights independently, starting from Marx. In the previous pages, I argued that Robinson’s theory is essentially post-Keynesian neo-Marxist. It follows the lines of thought on profits as a surplus and their realisation, initiated by Kalecki. In this, its neo-Marxism differs from that of Sraffa who, starting from the Classical and Marxian surplus concept, formulated a neo-Marxist theory of value. Robinson was an original mind and a prolific writer, but her published work indicates signs of inf luences, based on hints she received, which she further developed. There is, for instance, reason to believe that her frontal attack of the neoclassical theory of production and distribution, starting with her 1953 article (Robinson, 1953–1954), was inf luenced by discussions with her close friends and colleagues such as Kahn, Kaldor, and Sraffa. It is most likely that she owes a similar debt for her “basic” model in The Accumulation of Capital, which in its essentials, is very close to the models of von Neumann (1945) and of Sraffa (1960). Although during the 1950s she had hardly or no information on the development of Sraffa’s model, in Robinson (1956), she arrived at some similar results, although not as fully worked out. One such outcome was that, under certain conditions, and as a result of a different valuation of the capital stock, an economy with a higher wage rate can have a lower capital intensity. Robinson treated it as a “curiosum”, but Sraffa showed its more general relevance, thus lighting the fuse that ignited the “re-switching” debate with the neoclassical economists in the 1960s and early 1970s. Moreover, together with Kaldor, she demonstrated the fallacy of treating economic growth as a process taking place in “logical time” and moving towards an “equilibrium”, thus launching a second attack on the heart of neoclassical economic theory. DOI: 10.4324/9781003283416-18

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Already in 1989, an attempt was made to take stock of Joan Robinson’s contributions to economic theory by George Feiwel in a book with chapters by some (post-Keynesian) friends and (neoclassical) foes (Feiwel, 1989). This was followed in 1996 by The Economics of Joan Robinson (Marcuzzo, Pasinetti, and Roncaglia, 1996). Also mention should be made that in October 2003, a conference was organised at the University of Vermont, celebrating Joan Robinson’s 100th birthday, which resulted in a remarkable book edited by Bill Gibson (2005). These publications showed that the topics that were central to Robinson’s work were still actual, and they gave a progress report on the discussions she had initiated. How should we assess the status of her work as of today? Based on Google Scholar,1 The Accumulation of Capital (Robinson, 1956) is cited 2179 times, Essays in the Theory of Economic Growth (Robinson, 1962a) 1252 times, and Economic Philosophy (Robinson, 1962b) 1797 times, which are considerable figures. To compare: Nicholas Kaldor’s Essays on Economic Stability and Growth is cited only 362 times, but his Scourge of Monetarism 1,110 times. They cannot compare, however, with Sraffa’s Production of Commodities by Means of Commodities with 5,649 citations. I argued that Joan Robinson’s post-Keynesianism has a very distinct Marxist f lavour. That Marxist f lavour is not the result of adding some Marxist condiments to her theoretical work, the way we would add some pepper and salt to a dish. It is the result of the nature of the ingredients that are essential for the recipe and are used from the start. Her neo-Marxism has inspired some scholars, but over the years, as post-Keynesian economic theory developed, the inf luence has diluted and the references to her work are often made to show affinity, rather than descent. Moreover, many developments in post-Keynesian economic theory that took place since Robinson’s death in 1983, have no relation with Robinson’s Marx, or with the Marx of the present-day Marxists. Feeling some frustration about this slow but unstoppable process of selective amnesia of many post-Keynesians, I wrote in the Introduction of my book The Economic Ideas of Marx’s Capital – Steps Towards Post-Keynesian Economics (Cuyvers, 2017): Looking back over the years, it would seem that post-Keynesian economists have diverged into a number of sub-currents according to their particular source of inspiration: Kaleckian, Robinsonian, Kaldorian, Sraffian, …, to which other powerful heterodox insights have also been added. In this book, we wish to present the Marxian views of Das Kapital and the early post-Keynesian insights right up to the views of presentday post-Keynesian economists, many of whom have strayed from, or have forgotten, the earlier contributions. (Cuyvers, 2017: 1) When the archives of Piero Sraffa, Joan Robinson, Lord Kahn, Lord Kaldor, and Maurice Dobb became available for research, the scholarly literature on

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the early history of Keynesianism and on the evolution of the ideas of these authors and their interaction received a boost. These archives are held by the King’s College Archive Centre of Cambridge University, except for Sraffa’s archive, which is at the Wren Library, Trinity College, Cambridge. Joan Robinson’s archive was thoroughly analysed by Maria Cristina Marcuzzo who has published her findings in a series of books and articles (e.g., Marcuzzo and Rosselli, 2005c; 2008). Joan Robinson by G.C. Harcourt and Prue Kerr (2009) and The Provocative Joan Robinson: The Making of a Cambridge Economist by Nahid Aslanbeigui and Guy Oakes (2009) deserve particular mention. There can be no doubt that the seeds sown by Robinson have grown into a rich harvest. In An Essay on Marxian Economics (Robinson, 1942), she had pointed out that in Marx’s model, the investment function is based on the assumption that surplus value is accumulated as much as possible. This assumption implied that surplus value is fully realised by capitalist investment expenditure. However, Robinson, like Kalecki, assumed that investment is a function of expected profits, and this gave the profits realisation mechanism a central role in her model. Following Robinson, Kaldor, Pasinetti, and others, the “Cambridge equation” stating r = g/sc has been thoroughly analysed (see e.g., Garegnani, 1992), although it was comparatively neglected in the Marxist literature (see, however, Shaikh, 2016: passim; Marglin, 2021). Robinson’s “inf lation barrier” has been further investigated in post-Keynesian-oriented articles such as by Harris (1967), Burkitt (1979), McDonald and Lye (2006), or Arestis and Sawyer (2008), but, unfortunately, it has not reached the Marxist literature. The same holds for other Robinsonian concepts and views. One can ask why, although Robinson often addressed the Marxists, they have hardly discussed her views on the accumulation of capital and on the process of economic growth. No doubt, her critique of the labour theory of value offended orthodox Marxists, and as a result, they wrongly consider her other theories as altogether unacceptable and/or better to be ignored. However, one would expect other Marx-oriented authors to have given it a try. The reason, I think is, that her views on, e.g., the economic surplus or on technical progress and the secular behaviour of the rate of profits, are similar to those of other, more popular neo-Marxist authors and/or were developed too long ago, and, as a result, it is considered that they can be neglected. Moreover, she has created a lot of difficulties for the reader who does show an interest, by working out her neo-Marxist views in highly abstract and tersely formulated academic papers and books. Since mathematical economics has come to dominate the profession, also today’s academic economist is often insufficiently trained to absorb Robinson’s theoretical reasoning or has no patience to read her work. As a result, the insights of, e.g., Robinson’s The Accumulation of Capital are only very slowly (and often in a distorted form), if at all, reaching the few Marxist and neo-Marxist academics that show an interest. Notable exceptions are Edward J. Nell (Nell, 1980; Halevi, Laibman

Robinson’s post-Keynesian neo-Marxism

241

2

and Nell, 1992), Bob Rowthorn (1981), David Laibman (1992; 1997), Anwar Shaikh (2016), and Marglin (2021). Finally, one should not underestimate how much the world has changed since the 1960s and 1970s. With the financial instability that has been experienced since then, the attention of Marxist and neo-Marxist authors has often shifted to new monetary phenomena (Lapavitsas, 2011; Magdoff and Sweezy, 1987), and in general towards monetary theory and policy (see, e.g., Nell, 1998; Bellofiore, 2009, 2011), or to ecology (e.g., Foster, 2002).

Notes 1 Accessed on 29 March 2021. 2 The borderline between neo-Marxism and post-Keynesian economics is hazy in Edward J. Nell’s case. The same could be said about Joseph Halevi and Bob Rowthorn.

Bibliography P. Arestis & M. Sawyer (2008). “Price and Wage Determination and the Inf lation Barrier: Moving beyond the Phillips Curve”, in: C. Gnos & L.-P. Rochon (Eds.), Monetary Policy and Financial Stability: A Post-Keynesian Agenda, Cheltenham: Edward Elgar, 30–44. N. Aslanbeigui & G. Oakes (2009). The Provocative Joan Robinson – The Making of a Cambridge Economist, Durham – London: Duke University Press. R. Bellofiore (2009). “A Ghost turning into a Vampire - The Concept of Capital and Living Labour”, in: R. Bellofiore & R. Fineschi (Eds.), Re-reading Marx: New Perspectives after the Critical Edition, Basingstoke: Palgrave Macmillan, 178–194. R. Bellofiore (2011). “Crisis Theory and the Great Recession: A Personal Journey, from Marx to Minsky”, in: P. Zarembka & R. Desai (Eds.), Revitalizing Marxist Theory for Today’s Capitalism, Bingley: Emerald Books, 81–120. B. Burkitt (1979). “Wage Restraint and the Inf lation Barrier”, Review of Radical Political Economics, 11(1), 49–51. L. Cuyvers (2017). The Economic Ideas of Marx’s Capital - Steps Towards Post-Keynesian Economics, London – New York: Routledge. G.R. Feiwel (Ed.) (1989). Joan Robinson and Modern Economic Theory, Houndmills, Basingstoke, Hampshire – London: Macmillan. J.B. Foster (2002). Ecology Against Capitalism, New York: Monthly Review Press. P. Garegnani (1992). “Some Notes for an Analysis of Accumulation”, in: J. Halevi, D. Laibman & E.J. Nell (Eds.), Beyond the Steady State – A Revival of Growth Theory, New York: St. Martin’s Press, 47–71. B. Gibson (Ed.) (2005). Joan Robinson’s Economics – A Centennial Celebration, Cheltenham – Northampton: Edward Elgar. J. Halevi, D. Laibman & E.J. Nell (Eds.) (1992). Beyond the Steady State – A Revival of Growth Theory, New York: St. Martin’s Press. G.C. Harcourt & P. Kerr (2009). Joan Robinson, Basingstoke: Palgrave Macmillan. D.J. Harris (1967). “Inf lation, Income Distribution and Capital Accumulation in a Two-Sector Model of Growth”, Economic Journal, 77(308), December, 814–833.

242 Modelling capitalist economic growth D. Laibman (1992). Value, Technical Change, and Crisis: Explorations in Marxist Economic Theory, At-monk: M.E. Sharpe. D. Laibman (1997). Capitalist Macrodynamics – A Systematic Introduction, Basingstoke: Macmillan. C. Lapavitsas (2011). “Theorizing Financialization”, Work, Employment and Society, 25(4), December, 611–626. H. Magdoff & P.M. Sweezy (1987). Stagnation and the Financial Explosion, New York: Monthly Review Press. M.C. Marcuzzo, L.L. Pasinetti & A. Roncaglia (Eds.) (1996). The Economics of Joan Robinson, London – New York: Routledge. M.C. Marcuzzo & A. Rosselli (Eds.) (2005c). Economists in Cambridge – A Study Through their Correspondence, 1907–1946, London: Routledge. M.C. Marcuzzo & A. Rosselli (2008). “The Cambridge Keynesians: Kahn, J. Robinson and Kaldor – A Perspective from the Archives”, in: R. Leeson (Ed.), The Keynesian Tradition, Houndmills, Basingstoke: Palgrave Macmillan, 196–220. S.A. Marglin (2021). Raising Keynes – A Twenty-First-Century General Theory, Cambridge, MA: Harvard University Press. I. McDonald & J. Lye (2006). “Union Power and Australia’s Inf lation Barrier, 1965:4 to 2004:3”, Australian Journal of Labour Economics, 9(3), 287–304. E.J. Nell (Ed.) (1980). Growth, Profits and Property, Cambridge: Cambridge University Press. E.J. Nell (1998). The General Theory of Transformational Growth: Keynes After Sraffa, Cambridge: Cambridge University Press. J. Robinson (1942). An Essay on Marxian Economics, London: Macmillan, 1967 (2nd ed.). J. Robinson (1953–1954). “The Production Function and the Theory of Capital”, Review of Economic Studies, 21(2), 81–106. J. Robinson (1956). The Accumulation of Capital, London: Macmillan. J. Robinson (1962). Essays in the Theory of Economic Growth, London: Macmillan. J. Robinson (1962b). Economic Philosophy, Harmondsworth, Middlesex: Penguin, 1974. B. Rowthorn (1981). “Demand, Real Wages and Economic Growth”, Thames Papers in Political Economy, Autumn, 1–39. A. Shaikh (2016). Capitalism - Competition, Conflict, Crises, New York: Oxford University Press. P. Sraffa (1960). Production of Commodities by Means of Commodities – Prelude to a Critique of Economic Theory, Cambridge: Cambridge University Press. J. von Neumann (1945). “A Model of General Economic Equilibrium”, Review of Economic Studies, 1945–1946, 13(1), 1–9.

Index

accumulation, maximal rate of 172, 175 accumulation of capital 2, 9, 20, 196, 221, 230, 240 advertising 32, 34, 35, 181, 197, 232, 235 “animal spirits” 173, 175, 181, 222, 223, 233 banking 2, 59 Baran, Paul A. 3, 30–31, 37n6, 37n7, 52, 104, 147, 158, xv; on armament spending 154, 235; correspondence 22n6, 23, 26–29, 34–35, 37n15, 38, 46, 47n4, 168n15, xiv; and Kalecki, M. 26–30, 33, 34, 47n12, 167n2; and the labour theory of value 197, 202n16; Monopoly Capital 10n6, 29, 31–32, 38n30, 43, 45, 53, 197, xiv; The Political Economy of Growth 26, 28, 29, 31, 32, 35–36, 193, 197, 200; on real wages and nominal wages 198; and Robinson, J. 35, 38, 45–47, 47n11, 48n16, 168n14, 193, 202n19, 226, 235; and Sraffa, P. 22n6, 30, 43, 47n4, 118n7; and Steindl, J. 30, 33, 34, 35, 38n28, 167n2; on subsistence wages 43, 98 Basics and non-basics 71–72, 76, 77, 90, 103–105, 119n18, 119n20, 120n36, 125–126, 154, 190 Bellofiore, Riccardo 65, 67, 75, 96–97, 134–135, 142–143, 153 Böhm-Bawerk, Eugen von 4, 7, 28 Bortkiewicz, Ladislaus von 4, 7, 11, 41, 73–74, 103, 113, 115–116, 153, xiv Bródy, Andras 140, 191 de Brunhoff, Suzanne 97, 132, 134 business cycle 8, 14, 15–17, 20, 22n14, 23n20, 108, 198, 202n17, 234; political 19

Cambridge School 52 Cambridge University 1, 11, 15, 157, 240 capacity utilisation 17, 21, 109 capital depreciation see Depreciation capital exports 2, 235 capitalist consumption: neglected 172; positive 16, 173, 200n5 capital share see Profits share Carter, Scott 77n6, 140–142 classes, social 14, 172, 179, 187, 235 classical economists see Classical school classical school 43, 64, 81n41, 132, 187, 188, 194, 221; circular flow 42, 74; surplus concept 13, 31, 35, 41, 60, 65, 153, 201n15, 211, 238, xiv; theory of value 6, 11, 42, 57, 74, 75, 180, 195, 196; wages 13, 42, 69, 75–76, 94, 99, 125 class struggle 32, 42, 96–98, 113, 132, 141, 145, 148n13, 187 commerce see Trade competition 1, 2–3, 7, 11, 21, 22, 32, 61, 178, 181, 206, 222, 227, 231–232; monopolistic 3, 11, 41, 160–161, 195, 207, 233, xiv; oligopolistic (see Competition, monopolistic) competition among the workers 145 concentration 2, 230–232 consumption: necessary 95, 98–100, 106, 118n6, 120n30, 127, 141, 171; unnecessary 46, 103; unproductive (see Consumption, unnecessary) crisis (economic) 2, 8, 14, 26, 226, xiii demand, effective 19, 42, 103, 181, 186, 224; Keynes’s theory 8, 45, 171; lack of 7, 35–36; macro-economic role xiii, xiv; Rosa Luxemburg 8–9, 221

244 Index depreciation 18, 110, 172, 227 Dobb, Maurice 42, 71, 130, 133, 233; and Baran, P.A. 27, 29–30, 202n19; on collective bargaining 97, 98; on the falling rate of profits 224–225; and Robinson, J. 164–165, 166, 210; and Sraffa, P. 13, 41, 51, 64, 66, 77n7, 78n8, 79n20, 130, 132, 146n2, 166, 210; and the standard system 131, 155; and Sweezy, P.M. 46 Duménil, Gérard 111, 120n26, 140 Eatwell, John 134–135, 155, 226 economies of scale 188, 192, 232 Engels, Friedrich 120n29, 153, 155n1, 225, 235n1 equilibrium, economic 44–45, 61, 103, 175, 177–180, 182n2, 238 equilibrium growth 17, 106, 139 expectations 7, 38n28, 95, 173, 177, 178, 179, 180, 211, 224, 230 exploitation 38n30, 140, 148, 197; Marx’s theory of 4, 6, 8, 21, 83n58, 113, 134, 136, 142, 202n16, 215, 220–221, 233; Sraffa on 65, 66, 67, 134, 141, 142, 147n12 exploitation of labour 6, 98, 143, xiii exploitation, rate of 34, 82–83n54, 94, 98, 113, 141, 153, 217; constant 214, 226; tendency of equalisation 145 external markets 19, 103, 234, 235; Rosa Luxemburg (see Luxemburg, Rosa: importance of external markets) Foley, Duncan 140 forces of production, development of the 186, 187 Garegnani, Pierangelo 42, 47n4, 71, 75, 79n22, 104, 118n14, 119n16, 133, 180, Sraffa prices as long–period centres of gravitation 73; Sraffa archive 74, 81n44 Gramsci, Antonio 59, 63–64, 147n7; Prison Notebooks 63–64, 78n17, 83n60; and Sraffa, P. 11, 60, 62, 63–64, 78n14, 78n15, 78n18 growth, economic 18–19, 44–45, 108, 153, 171–175, 179, 181, 182, 186, 200, 210, 228–229, 238 growth, maximum rate of 103, 106, 107, 171, 175, 194, 201n13 Harcourt, Geoffrey C. 42, 111, 158, 166, 197, xv; capital controversy 11; on Robinson, J. 163, 183n3, 186, 198, 209,

211, 212, 215–216, 240; on Sraffa 4, 72, 74, 77n8, 107, 137, 153, 183n3, 211, 215–216 Harrod-neutral technological change 107, 108, 112, 117, 128 Harrod, Roy 17, 165, 168n13, 207, 210 Hilferding, Rudolf 1–2, 4, 232, xiii historical materialism 187 imperialism 2, 3, 235 income distribution 21, 43, 69, 79n26, 98, 113, 172, 187, 226, 232 Inflation barrier see Robinson, Joan: inflation barrier interest, rate of 44–45, 102, 108, 118n14, 118n15, 119n21, 153, 154, 194, 209 joint production 69–70, 73, 109–111, 135, 140, 154, 155; absence of, assumption 22n1, 188 Kaldor, Nicholas 15, 22n13, 25, 42, 52, 211, 239, 240; and Baran, P.A. 38n21, 46, 48n15; and Robinson, J. 165, 168n10, 194, 209, 238; and von Neumann, J. 194, 201n13 Kalecki, Michał 3, 13, 14–15, 28, 37n14, 42, 52–53, 154, 163, 167n6, 171, 201n15; armament spending 19, 21, 234, 236n7; and Baran, P.A. (see Baran, Paul A. and Kalecki, M.); “capitalists get what they spend” 8, 105, 172, 200n5, 220; development factors 18–19; and Luxemburg, R. 8, 19, 186, 221, xiv; no inherent urge to accumulate 234; political business cycle 19–20; price formation 43; and Robinson, J. 41, 44–45, 47n7, 157, 162–164, 167n2, 167n10, 168n11, 168n12, 208, 216n2; scheme of reproduction 172, 186, 197, 201n12, xiv; and Steindl, J. 15, 16, 29, 196–197, 224, 234; and Sweezy, P.M. 26–31, 37n10; theory of the business cycle 16–17, 20, 23n20; wage share 8, 198, 226 Keynes, John Maynard 8, 13, 16, 23n19, 52–53, 78n10; “animal spirits” 223; General Theory 3, 14, 25, 44, 60, 102, 118n15, 161–162; and Robinson, J. 162, 210, 212; and Sraffa, P. 11, 13, 22n6, 59–60, 76, 77n8, 217n4; and ‘the Circus’ 36n2, 60, 161–162, 212, xiv; Tract on Monetary Reform 59, 77n4, xiii; Treatise on Money 60, 161, 162

Index  245 Kregel, Jan 43, 201 Kurz, Heinz D. 52, 65, 75, 76, 79n21, 82n50, 111, 115–116, 119n17, 120n36, 153, 155n2, 200n7, 215 labour, abstract 90, 111, 142, 188, 201n11 labour, homogeneous (assumption) 93, 188, 190–191, 201n11 labour intensity 91, 133, 135, 175, 201n10 labour mobility 130, 145 labour power: reproduction of 103; value of 8, 13, 31–32, 93, 95, 98, 114, 125, 141, 197, 198, 199, 202n16 labour productivity 8, 9, 91, 114, 120n29, 175, 177, 178, 182, 227, 231, 234 labour scarcity 175, 176, 177, 227 labour share see Wage share labour theory of value 58, 65, 67, 70, 92, 132, 135, 197; classical 6, 74; inequalities approach 127–129, 136; input-output approach of (see Labour theory of value; simultaneous equations approach); avoidance 153, xiv; metaphysical 74, 93, 139, 196; “new interpretation” (see New intepretation); simultaneous equations approach 73, 130; temporal singlesystem interpretation 143–144 labour values: not influenced by income distribution 134, 153; redundant 8, 51, 118n13, 136, 146, 156n3, 196–197; same status as prices of production 155; sum of direct and indirect labour time 91 Laibman, David 134, 143, 144, 158, 241 law of value 7, 28, 42, 130, 196, 201n15 Lenin, Wladimir I. 14, 137, 139, xiii Leontief, Wassily 57, 81n41, 171 Lévy, Dominique 111 Luxemburg, Rosa 3–4, 9, 26, 186, 229, 233, 234, xiii; importance of external markets 2, 19, 103–104, 221, 235, xiv; importance of profits realisation 8, 107–108, 193, 221 managers 187, 214 Mandel, Ernest 103, 131, 137–138, 139, 147n5 “mark-up” pricing 7, 8, 43, 201n15 Marshall, Alfred 11, 31, 41, 61, 63, 168n12, 206, 208 Marx, Karl: exploitation (see Exploitation, Marx’s theory of); inherent urge to accumulate 221–222, 223, 233;

normal reproduction 99, 108–109, 112, 180, 230; rate of profits 7, 73, 76, 81n40, 94, 98, 100–101, 103, 104–105, 108–109, 113–115, 131, 223–224, 229; reproduction schemes (see Reproduction scheme); tendentially falling rate of profits (see Rate of profits: tendentially falling); theories of surplus value 82n49, 100, 105, 118n12, 154; value of labour power (see Labour power, value of) mechanisation, degree of 115, 176 Meek, Ronald L. 36, 51, 54n1, 80n27, 93, 130–131, 132, 146n2, 155, 166, 168n18, 188 MELT (“monetary expression of labour time”) 140–141, 143, 144, 154 monetary theory 43, 142, 241 money supply, endogeneous 143 monopoly, degree of 8, 18, 21, 33, 43, 104, 232 Morishima, Michio 58, 71, 106, 111–112, 127, 136, 139, 141, 191; Fundamenteel Marxian Theorem 136 necessary labour time 91–92, 113, 138 neoclassical economics 41, 42, 53, 57, 63, 69, 70–71, 74, 179, 180, 210, 238 Neo-Marxism, post-Keynesian 3, 9, 26–27, 32, 41–42, 51–53, 98, 141, 148n13, 153, 155n3, 158, 197, 199, 217, 226, 234, 238, 240–241, xiii–xiv Neo-Ricardian 4, 13, 57, 70, 118n13, 131, 132–133, 139, 146, 153 net product 65, 68–69, 94, 98, 115; value equal to total direct labour spent 51, 141, 154 “new interpretation” 140–143, 154 organic composition of capital 9, 64, 79n25, 114–117, 120n30, 131, 224, 227 Pasinetti, Luigi L. 42, 43, 53, 71, 74, 118n14, 196, 197, 200n2, 240 physiocrats 65, 74, 80n27, 98, 101 post-Keynesian economics 3, 42–43, 44, 51, 52, 72, 102, 111, 118n14, 154, 157– 158, 180, 196, 197, 213, 214, 239, xv post-Keynesian neo-Marxism see NeoMarxism, post-Keynesian potential economic surplus 31, 34, 35, 202n19 prices of production: as money prices 137, 140; proper 7, 114, 127, 153–154,

246 Index 180, 195; sum of dated quantities of labour 92, 147n6, 197; transformed labour values 7, 93, 94, 101, 115, 136–137, 139, 145–146 production function 70, 176, 177, 180 production model, linear 71, 107, 188, 192, 194 profit margin 32, 34, 181–182, 214, 232, 234, 235 profits, realised 214 profits share 21, 117, 145, 215, 234 profits-wages ratio see Surplus value, rate of publicity see Advertising rate of profits: average 93, 104, 105, 108, 112, 125–126, 131, 229; equalisation tendency 7, 105, 113, 137, 155, 214; general (see Rate of profits, average); lowest goes together with positive prices 102; in the standard system 57, 65, 69, 94, 99, 131; tendentially falling 6, 21, 32, 65, 113, 115–116, 197, 224–226 rentiers 18, 19, 20, 172, 179, 187, 200n5, 235 reproduction, expanded 2, 64, 107–108, 112, 146, 186, 228, 229, 230 reproduction scheme 9, 14, 64, 75, 108, 171, 172, 180, 186, 192, 196, 200, 201n12, 221, 228–229, 230, xiv reproduction, simple 23n17, 64, 76, 82n53 re-switching of techniques 70–71, 158, 176, 180, 211, 238 Ricardo, David 63, 65, 71, 74, 76, 82n54, 98, 103, 105, 132, 153; Essay on the Influence of the Low Price of Corn on the Profits of Stock 61, 100, 118n12; invariable measure of value 13, 58, 61, 69, 73, 115, 188; Principles of Political Economy and Taxation 61, 77n7, 78n16, 194, 201n10, 206, 217n4; theory of value 4, 61, 100, 116, 130, 131, 153, 201n10; The Works and Correspondence of 13, 41, 58, 60, 77, 78n8, 81, 131, 146n2, 209–212 Robinson, Joan 25, 29, 35, 38n25, 42, 52, 53, 67, 70, 93, 98, 158, 160–166, 167n1, 168n15, 185; The Accumulation of Capital 45, 80n37, 158, 167n3, 172, 182n2, 187–188, 192, 194, 210, 234, 239, 240; An Essay on Marxian Economics 15, 37n7, 116, 196, 199, 210, 216n2, 216n3, 240; and Baran, P.A. (see Baran, Paul A. and Robinson, J.);

Golden Age 107, 178, 179, 229–230; inflation barrier 175–176, 198–199; inherent urge to accumulate 173, 222–223, 234; investment function 173–174, 223, 240; and Kalecki, M. (see Kalecki, Michał and Robinson, J.; Keynes, John Maynard and Robinson, J.); monopolistic competition 3, 11, 61, 181, 206–207; realisation function 173–174, 220; reproduction scheme 192, 201n12; and Sraffa, P. 163, 165, 189, 194, 195, 206–216, xiv, xv; stagnation, economic 154, 181–182, 225–226, 234–235; surplus 172, 175–176, 193, 199–200; technological innovations 177, 178, 181, 207, 227–228, 236n3; and “the Circus” 36n2, 161, 212, xiv Rothbarth, Erwin 15, 22n13, 60, 216n2 Rothschild, Kurt W. 30, 35, 38n23 Samuelson, Paul A. 57, 71 Say’s law 132, 185, xiii Schumpeter, Joseph 10n5, 25, 28, 93 Shaikh, Anwar 136–139, 158 Smith, Adam 64, 73, 74, 116, 132 Sraffa Papers 13, 42, 51, 77n2, 81n45, 113, 189, 240 Sraffa, Piero 11, 13, 42, 46, 57, 59–62, 63–66, 72, 74–76, 116–117, 130, 132, 146n2, 152–154, 164–166, 210, xiv; and Baran, P.A. (see Baran, Paul A. and Sraffa, P.); exploitation (see Exploitation, Sraffa on); Economic Journal 1926 2–3, 11, 41, 59, 81n39, 161, 206–207; and Gramsci, A. (see Gramsci, Antonio and Sraffa, P.); introduction to Ricardo’s Principles 61, 77n7, 77n8, 194, 206, 210–212; and Keynes, J.M. (see Keynes, John Maynard and Sraffa, P.); lack of communication 41, 42, 137, 157, 189, 212, 217n6; luxuries and nonbasics 71–72, 77, 104–105, 125–126, 154; notes with equations (with and without surplus) 41, 74, 75–76, 82n53; Production of Commodities by Means of Commodities 11, 41, 57, 59, 62, 66, 67, 73, 90, 106, 113, 130, 139, 153, 180, 188, 212–213, 239; and Robinson, J. (see Robinson, Joan and Sraffa, P.); standard system 12, 65, 68–69, 93–94, 99, 117, 118n5, 131, 154; surpluswages 13, 22n4, 43, 76, 96, 97, 98–99, 118n7, 134, 199, 202n16

Index  247 stagnation 3, 19, 26, 33, 36, 46, 154, 181–182, 197, 234–235 standard ratio 68, 69, 70 standard system see Sraffa, Piero: standard system Steedman, Ian 51, 71, 110–111, 119n23, 135–136, 138, 155 Steindl, Josef 3, 15–16, 20–21, 23n20, 29–30, 34, 38n28, 52, 154, 196–197, 221; and Baran, P.A. (see Baran, Paul A. and Steindl, J.); and Kalecki, M. (see Kalecki, Michał and Steindl, J.) subsistence wage 76, 176, xiv surplus, economic 13, 31–33, 34, 35–36, 38n30, 42, 46, 53, 98, 100, 102, 172–173, 175, 193, 199–200, 202n19 surplus product 101–102, 105, 126, 171, 193 surplus value 6–8, 31, 38n30, 66–67, 76, 93, 94, 97, 101–102, 105, 110, 119n18, 126, 133, 141, 144, 154, 171; produced vs. realised 34, 196, 220, 229; rate of (see Exploitation, rate of) Sweezy, Paul M. 1, 3, 4, 25–26, 30, 36n1, 53, 67, 197, 202n19, 233, 234; correspondence with Baran, P.A. 27–28, 34, 35, 37n9, xiv; and Kalecki, M. (see Kalecki, Michał and Sweezy, P.M.); Monopoly Capital (see Baran, Paul A. Monopoly Capital); and Steindl, J. 29, 30, xiv; The Theory of Capitalist Development 10n5, 16, 25, 26, 27, 33, 37n4, 197 technical change: capital-saving 177, 207, 228; capital-using 9, 21, 177, 225–226, 227, 228; labour-saving 9, 99, 115, 144

technical composition of capital 114; mathematical formula 114 technical progress see Technological innovation technological innovation 18, 33, 116, 176, 177–178, 181–182, 188, 192, 225, 227, 228, 230, 233 technological progress, Harrod-neutral 107, 108, 112, 117, 128, 173, 177 temporal single-system approach 143–145 “The Circus” 36n2, 60, 161–162, 167n8, 171, 212, 217n7, xiv trade, foreign 182, 188, 235 trade unions 98, 198, 199, 214, 232 transformation problem 4, 65, 73, 93, 136, 153, 210 transport 177, 228 uncertainty 173, 179, 180, 230 underconsumption 2, 10n5, 33, 37n7, 105, 182, 221, 225, 233–234 unproductive labour 34, 35, 197 urge to accumulate 173, 181, 221–223, 233, 234 value composition of capital 108, 112, 114, 116, 227; effect on the rate of profits 113, 115, 120n29 Veblen, Thorstein 7 wage rate as numéraire 12, 68, 173, 195 wage, real 8, 96, 98, 135, 174, 175, 176, 181–182, 198–199, 202n17, 226 wages, share 8, 21, 46, 76, 102, 113, 115, 141, 145, 155, 176–177, 214 waste 31, 34, 181