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104 Piero Sraffaproduction’ (identified with capital and labour) are determined by theforces of supply and demand; that is, indirectly, by the confrontationbetween resource endowments and consumers’ final preferences. Byimplication, aggregate production functions such as the Cobb-Douglasfall under Sraffa’s critiques. 10The analytical point that Sraffa focuses his attention upon concernsthe consequences of the fact that ‘capital’ is a set of produced means ofproduction, the relative prices of which change in a non-univocal waywhen income distribution changes, so that it is impossible to state a prioriwhether a reduction of the real wage would bring about a decrease,rather than increase, in the capital–labour ratio.Even more basically, with regard to the problem of the choiceamong alternative techniques of production, when the rate of profitschanges, Sraffa (1960: 103–6) points out the possibility of a reswitchingof techniques. In other words, a given technique that proves themost advantageous for a given rate of profits may be superseded byanother technique when the rate of profits is raised, but may onceagain turn out to be preferable when the rate of profits rises stillhigher.The implication here is that however capital, and hence the capital–labour ratio, of the two techniques is measured, the traditional marginalisttheories of employment and distribution are contradicted. In fact,the marginalist theories consider the distributive values, wage and rateof profit, as prices of the corresponding factors of production determinedby the law of demand and supply, so that the capital–labour ratio shoulddiminish as the rate of profits rises (and the wage consequently falls).With the reswitching of technique, if this happens when one techniquegives way to another with a rising rate of profits, the contrary necessarilyobtains when the second technology is once again replaced by thefirst, as the rate of profits rises yet higher.10The Cobb-Douglas production function is still widely utilised because of theapparent good fit of real world data with it. However, as Shaikh (1974, 1980)showed, this is a necessary algebraic consequence whenever profit and wageshares are sufficiently constant; even a data set spelling out the word HUMBUGmay turn out to be well fitted by a Cobb-Douglas production function. Moreover,as Sylos Labini (1995) stressed, the coefficients of the Cobb-Douglas should addup to one, since they represent the wage and profit shares in national income;but if this requirement is not imposed as a constraint on the form of the function,as is usually done, then it turns out to be systematically violated. For asystematic treatment of these issues, cf. Felipe and McCombie (2005) and, ongrowth accounting, Felipe and McCombie (2006).Critique of the Marginalist Approach 105The problem illustrated here is analogous to the one, discussed in theprevious section, regarding the attempt to measure capital by the averageperiod of production. In fact, the problem lies in the basic structureof the marginalist approach, where the rate of profits is considered asthe price of the ‘factor of production’ capital, however it be measured.In our case, the issue concerns the possibility of using a ‘well behaved’demand curve for capital, characterised by an inverse relationshipbetween the rate of profits and the capital intensity of production.With reswitching, it is clear that however capital is measured, the techniquescannot be arranged in an order of ascending capital intensityas the rate of profits decreases. Hence, the rate of profits cannot beinterpreted as the equilibrium price of the factor of production capital,with equilibrium for both price and quantity determined by the usualsupply–demand mechanism.Subsequent to the publication of Sraffa’s book, the critique has beenpresented in a variety of ways. Brief illustration can be made with a fewsimple graphs depicting wage–profit curves, representing what havecome to be known as ‘Wicksell effects’. Such effects are labelled as ‘price’or ‘real’, according to whether a single technique is considered, or thechoice between two (or more) alternative techniques. 11 That is, a priceWicksell effect is due to the change in relative prices brought aboutby a change in income distribution, while the commodity compositionof the capital stock remains unchanged; while the real Wickselleffect is due to a change in technology, and so in the composition ofthe capital stock. Wicksell effects are also classified as positive or negative,according to whether the value of capital per worker (the capitalintensity of the technique) is positively or negatively related to the rateof profits. 12Let us begin by illustrating positive price (Figure 6.1) and negativeprice (Figure 6.2) Wicksell effects. The rate of profits r is representedon the horizontal axis, and the wage rate w on the vertical axis; thewage–profit curve represents the w–r relation derived from a set ofsimultaneous Sraffa-type price equations (like those illustrated earlier,in § 3.2), representing a given technology. For any given level of the rate11The real Wicksell effect is also occasionally referred to in the literature as theRicardo effect.12Occasionally in the literature the terminology is reversed, so that positiveeffects are those which conform to neoclassical theory (inverse relationshipbetween the price and the quantity employed of the ‘factor of production’capital, i.e. between the value of capital per worker and the rate of profits) andnegative effects are those which contradict neoclassical theory.