Production Prices with Oil and the Metaphor of the Snapshot

Let us distinguish the general notion of price of production from its definition within a specific model. The notion of price of production as a center of gravitation of mar­ket prices is useful, like the notion of stable equilibrium prices in a neoclassical context.

conforms to the following passage of Sraffa’s (1960, 4; emphasis added) book: “There is a unique set of exchange-values which if adopted by the market restores the original distribu­tion of the products and makes it possible for the process to be repeated; such values spring directly from the methods of production.”

In his book, Sraffa uses only impersonal expressions and so avoids “agents” or “indi­viduals” from being mentioned. In particular, in the passage quoted above we read “if adopted by the market” and “makes it possible for the process to be repeated.” I suggest that, if those prices adopted by the market make the reproduction of the economic process possible,¹¹ the given quantities, which describe the methods of production in use, should be inter­preted as quantities in demand and supply at (conditional on) the prices of production determined as a solution to the same price equations. Should this condition not be satis­fied, it would not make it possible for the process to be repeated. Such a correspondence between prices and quantities is consistent with the nonsymmetrical role attributed to demand and supply, granted some margin of unused capacity The demand for produced commodities can be assumed to determine the actual quantity of products supplied; this conforms to Keynes’s notion of effective demand.

I have argued that the given quantities should be interpreted as quantities in demand and supply, respective of produced and nonproduced commodities, and correspond— although it is not meant to be a one-to-one correspondence—to the income distribution and to the prices that satisfy the price equations. This seems to be at odds with the dis­tinction between data and unknowns in Sraffa’s price equations, where the prices are determined by given quantities, but not the other way around.¹³ However, this appears as a plausible interpretation among the different meanings that might be attributed to Sraffa’s clause “if adopted by the market.” Note that the notion of quantities in demand and in supply do not presuppose the existence of demand and supply functions or math­ematical correspondences between quantities and prices of production.

Roncaglia has used the metaphor of the snapshot of an economy to describe the approach based on given quantities¹⁴ and to argue that the prices of production have a meaning independent of their interpretation as centers of gravitation (another meta­phor) of market prices.¹⁵ In his view the quantities, which describe the methods of pro­duction in use and are parameters in Sraffa’s equations, can be conceived of as part of a picture fixed by a snapshot of an actual economy, instead of being theoretical quantities that satisfy the demand and supply.¹⁶ It has been argued above in favor of Roncaglia’s claim of the independent meaning of the production prices. Instead the metaphor is hardly sustainable for the purpose at issue, if it means a snapshot of an actual economy, arbitrarily observed.¹⁷

Any observation in science is theory laden. For example, the data of national accounts are typically theory laden.

THE OIL QUESTION, THE PRICES OF PRODUCTION AND A METAPHOR 197 that a snapshot can represent an actual economy in a reproduction state, where the number of produced commodities is equal to the number of techniques in use. Only in principle can the quantities of Sraffa’s equations be observed and fixed by a snapshot of an actual economy. Also, the exchange values determined by those equations can, in principle, be represented in the same picture. Such a comprehensive snapshot can be used only to test the consistency between the prices observed and those predicted by Sraffa’s equations, given the same quantities.¹⁸

4.