Economics Dictionary of ArgumentsHome
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| Production theory: Production theory in economics examines the processes and principles behind transforming inputs (like labor, capital, and resources) into outputs (goods or services). It explores factors influencing production efficiency, optimal resource allocation, technology's impact on output, and the relationships between inputs and outputs within various production frameworks, guiding decision-making for firms and industries._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Piero Sraffa on Production Theory - Dictionary of Arguments
Kurz I 14 Production theory/Sraffa/Kurz: (…) we reflect upon the development of input–output analysis from Leontief’s 1928 essay(1) to his 1936(2) and later contributions and compare them with Piero Sraffa’s early work on the theory of production. >Input-Output Analysis/Leontief. Sraffa: Since the opening of Sraffa’s papers at Trinity College Library in Cambridge, UK, we have been able to study in detail Sraffa’s independent, but parallel attempt at elaborating an economic approach that proceeds exclusively in terms of magnitudes that can be observed and measured. Also, Sraffa saw his analysis as rooted in the contributions of the classical economists from William Petty to David Ricardo and he too equated his scheme with the Tableau Economique. However, while in the years 1927–1928 Leontief and Sraffa may be said to have been independently pursuing similar lines of thought, they soon afterwards, apparently again without knowing of each other’s work, parted company, with Leontief turning to the practical application of a stripped-down version of the new instrument, and Sraffa relentlessly seeking to solve the intricate problems the approach posed in the course of its elaboration. Objectivism/VsSubjectivism/Sraffa/Leontief/Kurz: Interestingly, both Leontief and Sraffa were disenchanted with the marginalist doctrine as it had been handed down by Alfred Marshall. They despised the subjectivist character of the explanation of value and distribution given and explicitly sought to elaborate an objectivist alternative to it. Both authors saw their own work as firmly rooted in the contributions of the physiocrats and the English classical political economists. >Alfred Marshall, >Physiocrats. Kurz I 21 Production theory/Sraffa/Kurz: Sraffa quite naturally first analysed an economy that produces just enough, neither more, nor less, to recover the necessary means of production used up in the process of production and the necessary means of subsistence in the support of workers – a situation reflected in what he called his ‘first equations’. He emphasized that this amounts to considering workers’ remuneration ‘as amounts of fuel for production’ (D3/12/7: 138)(3) and identified the situation as the realm of pure necessities, or ‘natural economy’. In this case the concept of physical real costs applied in an unadulterated way. The means of subsistence in the support of workers are an indispensable part of physical real costs, because only their (recurrent) consumption ‘enables’ workers to perform their function. The periodic destruction of such commodities is a necessary condition the economic system has to meet in order to realize a ‘self-replacing state’, but it is not also sufficient. The system must be able to restore periodically the initial distribution of resources in order for the (re) productive process to continue unhampered. With a division of labour and in the absence of a central coordination of economic activities, this coordination must be achieved in terms of interdependent markets. Commodities must be exchanged for one another at the end of the uniform period of production. But which exchange ratios guarantee the repetition of the process? Sraffa showed that the sought ratios, or what in his interpretation Ricardo had called ‘absolute’ values, were uniquely determined by the socio-technical conditions of production and could be ascertained by solving a set of linear homogeneous production equations. Whether actual markets led up to the same solution was a different question. Kurz I 22 Prices/equations/Sraffa: (…) setting the price of one of the commodities (or of a bundle of commodities) equal to unity allows one to determine the prices of the remaining two commodities in terms of it. (…) relative prices (or ‘absolute values’) can be ascertained exclusively in terms of the physical input–output quantities given: there is no need to have Kurz I 23 recourse to demand and supply schedules and the like. As Sraffa stated in a related note: ‘It is clear at once that these technical relations of production leave no room to play with: the values are rigidly fixed, and neither preferences nor … [the punctuation mark is Sraffa’s] can have any influence unless they change these relations. – It must be noted that they do not represent only the cost of production: they equally show the use, or disposal, of each product’ (D3/12/2: 31)(3). Second, Sraffa emphasized that a system of such algebraic equations is non-contradictory only in the case in which there is no surplus (see, for example, D3/12/6: 16 and D3/12/2: 32–35)(3). 1. Leontief, W. (1928) Die Wirtschaft als Kreislauf, Archiv für Sozialwissenschaft und Sozialpolitik, 60, pp. 577–623. 2. Leontief, W. (1936) Quantitative input and output relations in the economic systems of the United States, Review of Economics and Statistics, 18, pp. 105–125. 3. Taken from the work Sraffa carried out in the period 1927–1931 (unpublished papers). Heinz D. Kurz and Neri Salvadori 2015. „Input–output analysis from a wider perspective. A comparison of the early works of Leontief and Sraffa“. In: Kurz, Heinz; Salvadori, Neri 2015. Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). London, UK: Routledge._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Sraffa I Piero Sraffa Production of Commodities by Means of Commodities. Prelude to a Critique of Economic Theory (Cambridge: Cambridge University Press). Cambridge 1960 Kurz I Heinz D. Kurz Neri Salvadori Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). Routledge. London 2015 |
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> Counter arguments against Sraffa
> Counter arguments in relation to Production Theory
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