Tools versus Concepts

The classical economists proceeded essentially in the following two steps. (1) They iso­lated the kinds of factors that were seen to determine income distribution and the prices supporting that distribution in well specified situations, that is, in a given place and time.

It is another characteristic feature of the classical approach to profits, rents and relative prices that these are explained essentially in terms of magnitudes that can, in principle, be observed, measured or calculated. The objectivist orientation of classical economics has received its perhaps strongest expression in a famous proclamation by William Petty, who was arguably its founding father. Keen to assume what he called the “‘physician’s’ outlook”, Petty in his Political Arithmetick, published in 1690, stressed that he was to express himself exclusively “in Terms of Number, Weight or Measure” (Petty 1899 [1986]: 244), citing the Bible. James Mill noted significantly that “The agents of production are the commodities themselves... They are the food of the labourer, the tools and the machinery with which he works, and the raw materials which he works upon” (Mill 1826 [1844]: 165, emphasis added). Sraffa thus interpreted the classical authors as advocating a concept of physical real cost. Man cannot create matter, but can only change its form and move it.

The classical authors saw modern production as a circular flow. This concept can be traced back to William Petty and Richard Cantillon, and was most effectively advocated by Franςois Quesnay (1759 [1972]) in the Tableau economique. Accordingly, commodi­ties are produced by means of commodities. This is in stark contrast with the view of production as a one-way avenue leading from the services of original factors of produc­tion, typically the services of labour and land, via some intermediate products to con­sumption goods, as it is entertained not only by “Austrian” economists. However, the classical economists failed to elaborate a consistent theory of value and distribution on the basis of the twin concepts of (1) physical real costs and (2) a circular flow of produc­tion. According to Sraffa (see Kurz and Salvadori 2005; Kurz 2012), a main, if not the main, reason for this consisted in a discrepancy between highly sophisticated analytical concepts, on the one hand, and inadequate tools available to the classical authors to deal with them, on the other. More specifically, the tool needed in order to bring to fruition one with another conceptual elements (1) and (2) were simultaneous equations and the knowledge how to solve them and what their properties are. Unfortunately, this tool was not at the disposal of the classical authors. They therefore tried to solve the problems they encountered in a roundabout way, typically by first identifying an “ultimate stand­ard of value” by means of which heterogeneous commodities were meant to be rendered homogeneous and thus commensurate. Several authors, especially Ricardo, Robert Torrens and Marx, had then reached the conclusion that “labour” was the sought stand­ard and had therefore arrived in one way or another at some version of the labour theory of value.