Piero Sraffa - Free

64 Piero SraffaA line of argument similar to that proposed by Torrens to demonstratethe different effects of monopoly on necessaries and on luxury goodscan be pursued with reference to the theory of decreasing returns toland and the tendency towards a stationary state. Let us briefly recallRicardo’s (1817: 120) analysis. In the absence of technical progress,expansion of production in agriculture (following an increase inpopulation) requires that ever less fertile lands be taken under cultivation,or it necessitates a more intensive and less profitable cultivation of theland already in production. Since the wage in terms of agricultural outputmust remain unchanged at the level of subsistence, the rise in costsof production due to the expansion of cultivation implies a reduction inthe rate of profits. The process comes to a halt when the rate of profitsfalls to zero (or, more precisely, below the minimum level necessary toinduce capitalists to continue to invest). At this point the accumulationof capital comes to a halt, the increase in output stops and the size ofthe population becomes stationary. From this point on, assuming stillthat there is no technical progress, 7 the economic system continues toreproduce itself through time at the same level. This is the position thatthe classical economists named the ‘stationary state’. 8We can distinguish two cases. In the first, the commodity producedunder decreasing returns is a luxury. The general effect described byRicardo cannot result in this case because the change in the method ofproduction of a luxury only affects its own price relative to other commodities.The rate of profits and the wage in terms of necessaries remainunchanged. The alternative case involves a necessary commodity whosephysical cost of production increases, while the wage remains unchangedat the subsistence level, namely in terms of the necessary commodity(or in terms of a basket of necessaries of which the commodity is aconstituent element); in this case the rate of profits must decrease. 9 Onlyin the latter case does the system tend towards a stationary state.The distinction between necessaries and luxuries was also adopted byDmitriev (1904, especially the first essay) and by Bortkiewicz (1906–7,1907). These writers develop mathematical formulations of Ricardo’sBasic and Non-Basic Products 65model to demonstrate rigorously that both wage goods and the goodsdirectly or indirectly necessary to their production must be consideredas ‘necessaries’.Bortkiewicz’s analysis also suggests the correction of an error madeby Marx in his presentation of the problem. Marx defines the averagerate of profits as the ratio of the system’s total surplus value to the totalvalue of capital advanced. He is thus led to conclude that the conditionsof production of all commodities, including luxuries, are relevant to thedetermination of the rate of profits. However, as shown by Bortkiewicz,if the wage rate is given in physical terms, only the conditions of productionof wage goods, together with those commodities directly orindirectly required in their production, play a part in the determinationof the rate of profits. 10 The reasons behind Marx’s error on this pointare difficult to explain, for Marx himself, in various other passages inhis writings, accepts the traditional distinction between necessary andluxury commodities, pointing out that a change in the conditions ofproduction has an effect on the rate of surplus value only if such achange takes place in a sector producing a necessary, while an increasein the productivity of a sector producing a luxury commodity onlydiminishes the value of the luxury commodity produced. 11However, even in relation to the more complete formulations byDmitriev and Bortkiewicz the treatment that Sraffa proposes for theproblem is substantially different, in that he abandons the assumptionthat the wage is given in terms of physical commodities. Probably inconnection with this, Sraffa also abandons the classical terminology,which suggests a distinction based on the use of particular commoditiesfor final consumption (‘necessary’ and ‘luxury goods’, althoughthe latter term does occasionally appear in Production of Commodities byMeans of Commodities). Instead he proposes a terminology more directlylinked to technology (‘basic’ and ‘non-basic’ products). In the next twosections, 3 and 4, we will look into Sraffa’s treatment of the problem,concluding with a comparison between the implications of Sraffa’sapproach and treatment as opposed to the Ricardian tradition.7Ricardo (1817: 120) emphasises that ‘the natural tendency of profits […] to fall[…] is happily checked at repeated intervals by the improvements in machinery,connected with the production of necessaries, as well as by discoveries in thescience of agriculture which enable us to relinquish a portion of labour beforerequired, and therefore to lower the price of the prime necessary of the labourer’.8Cf. Ricardo (1817: 109). J. S. Mill, in Book IV of his Principles of Political Economy(Mill 1848), discusses the subject at length.9This distinction is recognised by Ricardo (1817: 118).4.3 The distinction between basic and non-basic productsAccording to Sraffa’s (1960: 8) definition, ‘The criterion [for distinguishingbasics from non-basics] is whether a commodity enters10On this point see Meldolesi (1971) and Vianello (1970: 131–9).11Cf., for example, Marx (1905–10, vol. 1: 215–7).