Piero Sraffa - Free

52 Piero Sraffathe other hand, the analysis is proposed as a solution to a purely formaltheoretical problem (determination of the prices that produce a uniformrate of profits in the various industries), then the relation between thetheory and the world that it is supposed to describe ceases to have anyimportance. This dilemma is open to different answers in different contexts;thus, it may be useful to pursue the issue somewhat further.Sraffa gives no direct indication concerning the problem of the typeof technology in use. However, given his continual reference to the classicaleconomists, it seems reasonable to refer in this context to sociallynecessary techniques of production, interpreting this term in the samesense that Marx uses when introducing the notion of the labour time‘socially necessary’ for the production of a given commodity, implyingreference to the dominant technique in the historical period under consideration.19 This need not necessarily correspond to the average of all thetechniques actually adopted by the various producers of the commodityunder analysis. The two concepts coincide if the industry is composedof a large number of small firms, for then each of these is ‘dominated’by all the others. 20 The distinction becomes important if the industrycontains some firms of large size which perform the role of price leaders.The relevant technology for the determination of prices would then bethe techniques to which these firms refer to when taking price decisionswith the aim of maximising profits under the constraint of no entranceof new competitors into the industry. Should there be several large producers,each at the same time using different techniques, then the choiceof the ‘socially necessary’ technique depends, among other things, onthe structure of the industry considered. It is thus necessary to considerthe structure of the industry as one of the givens of the problem.It is, therefore, not sufficient to refer to the engineers to obtain empiricalestimates of the technical coefficients to be used in the construction19‘The labour time socially necessary is that required to produce an article underthe normal conditions of production, and with the average degree of skill andintensity prevalent at the time’. (Marx 1867: 39). See also the passage cited inthe following note.20Marx is evidently referring to this situation when he says: ‘On the one hand,market-value is to be viewed as the average value of commodities produced ina single sphere, and, on the other, as the individual value of the commoditiesproduced under the average conditions of their respective sphere and formingthe bulk of the products of that sphere. It is only in extraordinary combinationsthat commodities produced under the worst, or the most favourable, conditionsregulate the market-value’. (Marx 1894: 175). Soon after (on p. 176), Marx makesit clear that ‘what has been said here of market value applies to the price of productionas soon as it takes the place of market value’.Production of Commodities by Means of Commodities 53of a Sraffian system of price determination; nor is it sufficient to use asectoral input-output table showing the average techniques. Study ofspecifically economic factors, such as the structure of each industry, isalso required. Moreover, study of what might be called socio-politicalfactors is also necessary, in order to take into account the influencethat these factors have on the technical coefficients of production, inparticular on the coefficients expressing the labour necessary to productionin the various industries. Such factors include the length of theaverage working day, the speed of work and absenteeism. More generally,the technology in use is also influenced by factors that originateoutside the capitalistic or market sectors of the economy: for example,public services like education, the administration of justice, health andsanitary requirements and services, influence technical coefficients inproduction processes.The extreme difficulty in taking all these factors into consideration,thus the difficulty in determining, with any exactness, a concrete conceptof a ‘reference technology’, should not in itself be considered as anobjection to Sraffa’s analysis. At any given instant the various factorscited above can be considered as given and thus, in principle at least,the technology can be identified. The actual process of description isextremely complex and can be no more than approximated. However,a certain amount of approximation is common in any application of atheoretical scheme to the study of real life situations.The ‘dominated’ techniques still in use correspond to investmentscarried out in the past, which would not be chosen today. These techniques,translated into a corresponding number of equations to beadded to the system of equations illustrated earlier in § 3.2, can serve,as Sraffa (1960: 78) points out, to determine the relative prices of thecorresponding fixed capital equipment still in use. It can be shown thatthe set of prices corresponding to the dominant techniques are notinfluenced by the dominated techniques.In this manner the problem of the transition period of technologicalchange can be dealt with. An example of such a situation might be thecase of mechanical loom weaving as the dominant technique, althoughartisan weaving is still carried on. On the other hand, in a situationin which an innovation has just been introduced on a limited scale,such that it has yet to constitute a dominant technique, the innovatingfirms enjoy an extra profit, determined in a way much like that ofa quasi-rent. More precisely, this extra profit is equal to the differencebetween the discounted price of the means of production incorporatingthe new innovation and their price of production. The discounted