Sraffa’s Response to Eaton’s Review: A Note on the Standard Commodity and Marx’s General Profit Rate.

Abstract

In his letter in response to Eaton’s review of Production of Commodities by Means of Commodities, Sraffa analyses the relationship between Marx’s general profit rate and sectoral profit rates determined by exchange ratios proportional to the labour values. The conclusion is that the competitive rate of profit can be expressed as a weighted average of this profit rates. The weights are the transformation coefficients of the actual system into the standard system. However, Sraffa’s conclusion is far from intuitive. Sraffa’s notes, not included in the letter, contain the analytical basis of his conclusion. However, even in Sraffa’s notes, not all the necessary logical steps are clarified.

According to the classical and Marxian approaches, Sraffa considers the physical quantities of inputs increased with the amounts of subsistence wage goods ‘anticipated’ by capitalists. In this case, determining prices proportional to values requires a modification of the quantities of living labour considered.

More interesting is the determination of the transformation coefficients. The author equals the capital employed in each industry to unity. Thus, the proportions between the productions of the industries change relatively to the non-standardised actual system. Consequently, after standardisation, the transformation coefficients also must change. It will be shown that the transformation coefficients are the values of sectorial capital in the standard system.

Finally, we will show that the method developed by Sraffa also allows us to determine the relationship between the general rate of profit and sectoral rates of profit in a non-competitive market, where the rates of profit in different industries are stably different from each other.

Keywords: Sraffa, Marx, General Rate of Profit, Labour-Values, Standard System

JEL Classification: B14, B24, B51