Interpreting Sraffa’s Approach vis-a-vis a Statement by Pantaleoni
We now turn to Sraffa’s annotations in the second edition of Maffeo Pantaleoni’s Principii di economiapura, published in 1894 (see Sraffa’s Library, item 2302), a book he was familiar with and had read at an early time of his career as an economist.9 Pantaleoni writes, “La ragione quindi per fermarsi soltanto sulla utilita delle cose come una funzione della loro quantita, e non altresι sulla loro utilita come una funzione dei nostri bisogni, o una funzione delle loro proprieta fisico-chimiche, sta esdusivamente nella maggior fecondita di questo concetto” (1894, 99-100; emphasis added).10
Sraffa puts two straight lines in the margin of this passage, signaling it to be very important.
The question is why? We know that from an early time onward he doubted the alleged “superior fecundity” of marginal utility theory that Pantaleoni extolled. What were the reasons the latter gave in support of it, and could they be sustained in Sraffa’s view?When singling out marginal utility theory as the best option available to economists, Pantaleoni had to show that alternative approaches to the theory of value and distribution were untenable or at any rate inferior. Sraffa was especially interested to hear what Pantaleoni had to say against attempts to see the values of commodities as rooted in the “physical-chemical properties” of commodities. Why did Pantaleoni think that the values of commodities, that is, “things” (cose), could not be explained in this way? Pantaleoni saw such approaches as carrying overJohn Dalton’s atomic theory straight away to the sphere of economics. However, Pantaleoni was convinced that this was not possible. Dalton’s atomic theory is based on two laws: (1) the law of the conservation of mass and (2) the law of definite proportions or constant composition: in any given chemical compound, the elements are always combined in the same proportion by mass.
Are commodities not just embodiments of well-specified amounts of various things, elements or atoms “productively consumed” when produced? The analogy with chemical compounds is indeed close at hand. Water, for example, is both a chemical compound and typically also a commodity and can be represented by 2H2O = 2H2 + 2O. It is always “produced” in the same way by combining elements H and O in a given composition. If this analogy were to extend to all commodities, then all commodities could be conceived of in terms of the elements constituting them.Pantaleoni disputed the second of the two laws, the law of constant composition, because in economics one and the same commodity can typically be produced not only in one way but also in different ways involving different proportions of the physicalchemical elements out of which the commodity is made. This follows from two facts. First, producers are commonly faced with a choice among a set of alternative methods of production to produce the same commodity, which is known as the choice of technique problem. Second, even if there would be only a single method available, workers who operate the method could be fed, clothed and housed in different ways, again implying that the object they produce may be conceived as exhibiting, or “embodying,” different physical-chemical compositions.
These observations are obviously correct and must not be ignored. They speak against the possibility of carrying atomic theory over to economics in a straightforward manner, and Sraffa was perfectly aware of this. But did this mean that the physical cost approach to the theory of value and distribution had to be entirely abandoned in favor of marginal utility theory, as Pantaleoni concluded, or could it serve as the starting point of a theory that could be given a coherent form and was possessed of a great fecundity? And what can be said about the coherence, or otherwise, of the marginalist theory of value and distribution? Was it really possessed of a superior fecundity, as Pantaleoni opined?
Here we cannot provide detailed answers to the two questions raised.
We ask the reader to consult some works of ours in which we dealt with them in greater detail (see Kurz, 2012, 2016; Kurz and Salvadori, 2005; Salvadori and Signorino, 2007). Here it suffices to point out the following. First, in case Dalton’s atomic theory could directly serve as the foundation of the theory of value, the distinction between short and long period would collapse, because natural laws hold at any moment of time and the production of any commodity would always consist in the transformation of well-specified amounts of energy and mass into a new form of energy and mass.11 Photographs taken at any instant of time of this process would always show the same picture. This explains perhaps why in the early phase of his constructive work Sraffa vacillated as to the importance of the distinction between long and short period.12Second, in November 1927 Sraffa began to elaborate his “first” equations relating to an economic system without a surplus, that is, a system in which no more is produced of the different commodities than is consumed productively (means of sustenance of workers and means of production). In a document entitled “Physical Costs & Value,” contained in a folder “Nov. [1927],” he noted as regards the values determined in terms of his simultaneous equations,
When I say that the value of a product is “determined” by the physical volume of commodities used up in its production, it should not be understood that it is determined by the value of those commodities. This would be a vicious circle, because the value of the product is equal to the value of the factors [...].
What I say is simply that the numerical proportions between amount of factors and amount of product is, by definition, the absolute value of the product. (Sraffa Papers, D3/12/11/101, first emphasis added, “not” is underlined twice in the original)
And in a document contained in the same folder, he also talked of “physical value” (Sraffa Papers, D3/12/11/75).
Sraffa also made it clear that the physical cost approach to the theory of value was not his discovery or invention, but was anticipated in earlier works. What he, Sraffa, did was simply to provide a consistent formulation of the approach (followed by its extension to systems with a surplus, without and with fixed capital, joint production proper and scarce natural resources). The physical cost approach, he surmised, was foreshadowed, for example, in the just price doctrine of the canonists, but it essentially derived from the “veduta essentialmentefisiocratica, che il valore sia una quantita intrinseca degli oggetti, quasi una qualitafisica o chimica,” as he put it in a document composed in the summer of 1929 (Sraffa Papers, D3/12/12/7).13 He was on the lookout for traces of the physical cost approach in the classical authors and encountered many of them. The perhaps most remarkable statement in this regard he came across was contained in the third edition of James Mill’s Elements of Political Economy, in which Mill stated, “The agents of production are the commodities themselves [.] They are the food of the labourer, the tools and the machines with which he works, and the raw materials which he works upon” (1826, 165). In summer 1929, Sraffa stated explicitly that he was keen to elaborate an “atomic analysis” (Sraffa Papers, D3∕12∕13∕16[9]), and in August 1931, in a critical retrospect, he characterized his previous analytical efforts as having been concerned with developing “an entirely objective point of view,” which is “the natural science point of view” (Sraffa Papers, D3/12/7/161[3]).14
Before we proceed, the following deserves to be stressed. In terms of his first equations Sraffa was able to show convincingly that Pantaleoni’s rejection of an approach based on the physical-chemical properties of things (i.e., commodities) was not well grounded. In the case of the no-surplus economy, which is the realm of pure necessity, this approach was the only one capable of explaining “necessary prices,” that is, those prices that allow the self-replacement of the system.
The question then was whether the approach could also be successfully carried over to the with-surplus case, and for a while Sraffa appears to have been convinced that it could. This was possible, he thought, by extending the realm of necessity to include it. He felt that this could be accomplished by distinguishing between natural costs, on the one hand, and necessary social costs, on the other, which implied interpreting the surplus (profits) as a necessary social cost levied upon workers by the capitalist society. Extending the “natural science point of view,” Sraffa insisted, implied that “we shall have to adopt that definition which makes the scale of absolute values identical with what it was when there was no surplus” (Sraffa Papers, D3∕ 12/6/14; emphasis added). In this way the logic applying to values in the case of production for subsistence was taken to apply also to the with-surplus case. This necessitated reducing the surplus—that is, an “effect” for which there had to be “sufficient cause” (as Sraffa wrote in Sraffa Papers, D3/12/7/ 161)—to some “cost” or other. Interest, Sraffa at the time insisted, reflects some objective necessity, rooted in some objective “social” as opposed to “natural” obstacles that have to be overcome: “Interest appears thus as the necessary means of overcoming an obstacle to production. It is a social necessity as distinguished from the material necessity of, say, putting coal into a locomotive that it may do its work” (Sraffa Papers, D3/12/18/11; emphases added).15If this extension of the natural science point of view was admissible, a purely physical cost of production approach to the theory of value would have been possible. Alas, it was not as Sraffa found out toward the end of the first period of his constructive work. Here we need not dwell on the reasons that prompted Sraffa to abandon the undiluted natural science point of view he at first had endorsed; see therefore Kurz (2012, 1546-51). It suffices to mention that he saw very clearly that with a choice of technique and flexible consumption patterns of workers the Law of definite proportions could not be carried over to economics and the problem of income distribution could not be reduced to one of necessary cost.16
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