Piero Sraffa - Free

108 Piero SraffaCritique of the Marginalist Approach 109ww 10r 1βw 2r 2The implication of this is that a decrease of the wage rate, interpretedby traditional neoclassical macroeconomic theory as the reaction ofa competitive labour market to the presence of unemployment, mayequally well produce either of the following outcomes: (i) an adjustmentin the correct direction, with a decrease in the amount of capitalper worker (negative real Wicksell effect) which would allow for the useof a greater amount of labour with the available quantity of capital,or (ii) an adjustment in the wrong direction, with a decrease in theamount of capital per worker (positive real Wicksell effect), so thatunemployment increases and the economy moves further away fromthe equilibrium situation.This critique gave rise to much debate, 15 while the crucial questionof its relevance has received relatively scant attention. Contrary to theapparent belief of many, it does not only apply to the aggregate productionfunction: a tool which nevertheless continues to be used in all thevarious versions of the dominant macroeconomic theory, from ‘real cycle’theories to ‘old’ and ‘new’ growth theory models, up to the overlapping15For a survey, cf. Harcourt (1972).rs 1s 2αgenerations models. It also applies to all those cases in which, whileacknowledging the fact that capital is in reality a collection of heterogeneousmeans of production, the attempt is still made to determine therate of profits as the price of a factor of production, i.e. capital, howeverit be defined (aggregate of value, ‘waiting’, average period of production).In particular, Sraffa’s critique undermines the very foundations of theidea – crucial to marginalist macroeconomic theory – that a competitivelabour market in a closed economy moves automatically towardsfull employment equilibrium, since the decrease in real wages caused byunemployment prompts an increase in the quantity of labour employedper unit of capital. 16Figure 6.3 Reswitching and real Wicksell effects.βAs we know, Sraffa’s book only purports to ‘serve as the basis’ for acritique of the marginalist tradition. And as already noted, at the sametime as Sraffa, and following similar lines of enquiry, Garegnani (1960)put forward his direct critique of some of the main theoretical contributionsin the marginalist tradition. The publication of Sraffa’s book waspromptly followed by lively debate.It emerged from an initial skirmish, recalled above in § 6.2 (Harrod1961; Sraffa 1962), that the possibility of measuring capital once therate of profits is given offers no escape from Sraffa’s strictures, sincethey refer to the necessity, for the traditional marginalist theories ofdistribution, to measure capital independently of income distribution(a point which Garegnani 1960 stresses as well). Another clash camewith Samuelson’s (1962) attempt to depict the aggregate productionfunction as a ‘parable’ not betraying the essential characteristics of aproductive system. Then it was the turn of Levhari (1965), who setout to show that the problems raised by Sraffa (such as the possibilityof the reswitching of techniques) referred only to the single industryand not to the economic system as a whole. These propositions wereimmediately refuted. 17 Debate then turned to the issue of the relevance16Cf. Roncaglia and Tonveronachi (1985).17Samuelson’s theses were refuted by Garegnani (1970a) and Spaventa (1968);Levhari’s by Pasinetti (1966), followed by various other authors, among whichwas Garegnani (1966). Samuelson (1966), and Levhari (with Samuelson, 1966)themselves recognise the erroneous nature of their thesis. Notwithstanding, inthe following years some argument dragged on, though without adding to theresults of the previous debate: cf. for instance Gallaway and Shukla (1974) andGaregnani (1976); Burmeister (1977, 1979) and Pasinetti (1979a, 1979b).6.4 Extensions of the critiques