Economics Dictionary of ArgumentsHome
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| Economic surplus: Economic surplus is the total benefit society gains from economic transactions, combining consumer surplus and producer surplus. Consumer surplus is the difference between what consumers are willing to pay and what they actually pay, while producer surplus is the difference between what producers receive and their production costs._____________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 Economic Surplus - Dictionary of Arguments
Kurz I 23 Economic surplus/Production theory/Sraffa/Kurz: Systems with a surplus are the object of what Sraffa called his ‘second equations’. More precisely, the latter deal with a system of production that produces a surplus over and above the necessary physical real costs, including the means of sustenance of workers, and in which the surplus is distributed according to a uniform rate of interest on the value of capital invested. Sraffa, thus, at first retained the earlier assumption of given real wages in commodity terms in each of the different industries. Therefore, both in his first and second equations Sraffa felt no need to invoke, and then define, the concept of ‘labour’: all that mattered were physical real costs, that is, amounts of commodities used up in the course of production. In his 1960 book Sraffa aptly spoke of ‘the methods of production and productive consumption’ (Sraffa, 1960, p. 3)(1). There is, however, a crucial difference between the no-surplus and the withsurplus case: ‘When we have got surplus, natural economy stops’ (D3/12/11: 42)(2) and social and institutional factors become important. Technically this is reflected in the fact that ‘the equations become contradictory’ (D3/12/6: 16)(2). Materially, ‘the “absolute values” have no more the appeal to commonsense of restoring the initial position – which is required if production has to go on’ (D3/12/6: 10). Indeed, in the with-surplus economy, a whole range of exchange ratios is, in principle, compatible with the condition of self- replacement (see D3/12/6: 9)(2). Sraffa stressed that ‘within those limits value will be indeterminate’. And: ‘It is therefore necessary to introduce some new assumption, which in substance will amount to determine … according to which criterion the surplus is distributed between the different industries’ (D3/12/6: 16)(2). With free competition, and focusing attention on the case of only circulating capital, the surplus is distributed in terms of a uniform rate of interest on the value of the ‘capital’ advanced in the different industries. Obviously, with heterogeneous material inputs (means of production and means of subsistence) the value of capital cannot be ascertained independently of, but only simultaneously with, the prices oft he commodities. >Production theory, >Costs, >Prices. Kurz I 24 By mid 1928 Sraffa had managed, with the help of his colleague and friend Frank Ramsey, to establish that a solution existed and what it was (see Kurz and Salvadori, 2001, pp. 262–264)(3). The system he and Ramsey discussed on 26 June 1928 was the following one: VaA = (vaa1 + vbb1 + c1)r VaB = (vaa2 + vab2 + c2)r VaA = (vaa3 + vbb3 + c3)r Here νi is the value (or price) of one unit of commodity i (i = a, b), with the third commodity serving as standard of value, and r is the interest factor (= 1 + interest rate); the meaning of the other magnitudes should be evident. Ramsey transformed the linear homogeneous system into its canonical form and set the determinant equal to zero in order to ascertain the non-trivial solutions. 1. Sraffa, P. (1960) Production of Commodities by Means of Commodities. Prelude to a Critique of Economic Theory (Cambridge: Cambridge University Press). 2. Taken from the work Sraffa carried out in the period 1927–1931 (unpublished papers). 3. Kurz, H.D. and Salvadori, N. (2001) Sraffa and the Mathematicians: Frank Ramsey and Alister Watson, in: T. Cozzi and R. Marchionatti (Eds) Piero Sraffa’s Political Economy. A Centenary Estimate, pp. 254–284 (London: Routledge). 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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