2012년 12월 27일 목요일

[책: Great Thinkers in Economics Series] Piero Sraffa

자료(pdf): Piero Sraffa
지은이: Alessandro Roncaglia,
Palgrave Macmillan

차례:

Introduction

1 Early Life and Writings: The Critique of Marshallian Theory
1.1 The early writings: Money and banking | 1.2 Friendship with Gramsci | 1.3 Critique of Marshallian theory | 1.4 Imperfect competition | 1.5 Criticism of the representative firm and the evolutionary side of Marshall’s analysis
2 An Italian in Cambridge
2.1 Cambridge | 2.2 Wittgenstein 25 | 2.3 Friendship with Keynes and criticism of Hayek | 2.4 The critical edition of Ricardo’s writings 
3 Production of Commodities by Means of Commodities
3.1 From Ricardo to Sraffa | 3.2 Production of Commodities by Means of Commodities | 3.3 Sraffa’s analysis and the classical approach: Critique of ‘cost of production’ theories, distinction between market and natural prices | 3.4 Socially necessary techniques | 3.5 The post factum wage payment and the period of production | 3.6 The Sraffian revolution 
4 Basic and Non-Basic Products
4.1 Basics, non-basics and wage goods: Sraffa and the classics | 4.2 The classical distinction between necessaries and luxuries | 4.3 The distinction between basic and non-basic products | 4.4 The wage–profit relationship | 4.5 Subsistence goods and the distinction between basics and non-basics | 4.6 The relation to von Neumann’s theory of proportional growth | 4.7 The effect of taxes on basic, non-basic and wage goods | 4.8 On the existence of positive prices for non-basic commodities
5 The Standard Commodity
5.1 The standard of measure in Smith and Ricardo | 5.2 Marx on Bailey on Ricardo | 5.3 Sraffa’s specific problem and its solution | 5.4 Standard commodity, labour commanded and the von Neumann system | 5.5 The relation of the standard commodity to the
average commodity
6 Critique of the Marginalist Approach
6.1 The analytical structure of the marginalist approach6.2 Critique of the Austrian theory | 6.3 Critique of capital as a factor of production | 6.4 Extensions of the critiques
7 Interpreting Production of Commodities by Means of Commodities
7.1 Interpreting Sraffa: The assumption of given quantities | 7.2 The clash between the classical and marginalist approaches | 7.3 Classical versus marginalist conceptions of competition | 7.4 The realisation problem | 7.5 Sraffa and Wittgenstein: The problem of method in economics | 7.6 Sraffa and Keynes | 7.7 Summing up
8 The Sraffa Legacy
8.1 Introduction | 8.2 The rediscovery of the classical approach | 8.3 The analytical contributions stemming from Sraffa | 8.4 The ‘Ricardian’ reconstruction: Pasinetti | 8.5 The ‘Marxian’ reconstruction: Garegnani | 8.6 The ‘Smithian’ reconstruction: Sylos Labini | 8.7 A preliminary evaluation of the three lines of enquiry
* * * * *
※ references on Hayek in this book: 
Hayek F. von (1931a) Prices and Production, London: Routledge.
—— (1931b) ‘Reflections on the pure theory of money of Mr. J. M. Keynes’,
Economica, 11: 270–95 (reprinted in Hayek 1995, vol. IX).
—— (1932) ‘Money and capital: A reply’, Economic Journal, 42: 237–49.
—— (1995) Contra Keynes and Cambridge, ed. by B. Caldwell, Collected Works,
vol. IX, Chicago: University of Chicago Press.
* * * * *

Excerpt of which: 2.3. Friendship with Keynes and criticism of Hayek

(... ...)

The fourth episode has to do with the development of an analytic construct, namely the own rate of interest that Keynes uses in chapter 17 of the General Theory (1936: 222ff). This analytical tool was utilized by Sraffa in an article published in the March 1932 issue of the Economic Journal which amounted largely to a markedly critical review of Prices and Production by Hayek (1931a). The following issue of the Economic Journal included a reply by Hayek(1932) and a brief rejoinder by Sraffa.

The review article came just six months after the publication of Hayek's workㅡa reaction as prompt as it was sever, justified by the need to stress as drastically as possible the difference between Keynsian analysis presented in the ^Treatise on Money^ and Hayek's theory of money and business cycle, which rests explicitly on the marginalist(Austrian, to be precise) apparatus of value theory. Sraffa's paper was thus part of a reaction, stimulated by Keynes himself, against attempts at reabsorbing Keynes's analysis into the general current of traditional marginalism, much as was to be successfully attempted by the exponents of the so-called neoclassical synthesis after the publication of the General Theory.[14] The incisiveness of Sraffa's criticism of Hayek had a significant role in deepening, at least for a time, the abyss separating Keynes from the more rigorous versions of the marginalist tradition, i.e. the continentalㅡand in particular Austrianㅡversion.[15]
[15] Significantly, it is precisely for this reason that a dim view is taken of these debates by a Keynsian of conservative bent like Roy Harrod(1900-78), who rejoiced when Keynes and Hayek subsequently drew closer together: cf. Harrod(1951). At the analytical level, in the ^General Theory^ Keynes was to adopt a framework differeing at least in part, the Kahnian marginalism of short period equilibrium, which can however be seem mainly a handy sort of sacffolding: cf. Tonveronachi(1983).
Hayek observes that 'monetary influences play a dominant role in determining both the volume and direction of production' (Hayek 1931a: 1). 
  • For traditional marginalist analysis, however, 'at a condition of equilibrium  [...] no unused resources exist' (1931a: 31), among other things because any fall or rise in the interest rate would bring about 'a transition to more or less "roundabout" methods of production' (1931a: 33). 
  • Thus Hayek sets himself the task of reconciling marginalist theory and reality.[16] 
[16] In this respect, Hayek followed a road already suggested by Marshall and Wicksell, attributing to real forces the determination of equilibrium, and to monetary forces the origin of (short run) disturbances. While Hayek referred mainly to Wicksell (and to Boehm-Bawerk, with respect to the determination of equilibrium), British economists such as Robertson(1915) and Hawtrey(1919) anaylsed trade cycles on Marshallian lines.
  • Evidently, Hayek's analysis of the influence of monetary factors on real variables cannot be a matter of 'static analysis': it only concerns 'fluctuations of production', 'to build on the foundations given by the concept of a tendency towards an equilibrium'(1931a: 31). 
  • In other words, Hayek elaborates an analysis of the 'dynamics of disequlibrium' with particular reference to situations where the 'monetary' rate of interest diverges from the 'natural' rate (as understood by Wicksell 1898), focusing on the effects of monetary perturbations on the relative prices of consumption goods and producer goods(cf. also Hayek 1932: 238).
Hayek's analysis, with its theory of real economic equilibrium, rests on (1) the concept of 'average period of production', as developed by Boehm-Bawerk(1889), and on (2) his proposition that the capital intensity of production processes is a decreasing function of the interest rate. This thesis is but a variety of the marginalist tenet of an inverse relation between the 'quantity of capital', however measured, and its price
  • As we shall see later(6.2), the concept of the average period of production comes in for destructive criticism from Sraffa in Chapter 6 and 12 of his 1960 book; 
  • in the 1932 article his attention focuses, instead, on Hayek's monetary analysis.
By characterising monetary phenomena as disequilibrating elements in the system, Hayek draws attention to bear on the 'forced saving' brought about by the deviation of the market interest rate from the 'natural' interest rate. Thus he purports to demonstrate how under sufficiently general hypotheses the capital accumulated through forced saving in the ascending phase of the cycle is economically destroyed in the descending phase, restoring the economy to its original equilibrium.

In short, the mechanism described by Hayek runs as follows: 
  • when (a1) the natural rate of interest is higher than the money rate, (a2) entrepreneurs are induced to apply for bank loans in order to cope with investment expenditures aiming at lengthening the period of production. This implies, at some stage, (b1) a decrease in the production of consumption goods, and hence (b2) an increase in their price, which provokes (b3) 'an involuntary reduction in consumption' (Hayek 1931a: 75). These elements constitute the ascending stage of trade cycle.
  • However, the increased incomes of the productive forces are transformed into  (c1) greater demand for consumption goods; hence, (c2) 'a new and reversed change of the proportion between the demand for consumers' goods and the demand for producers' goods, in favour of the former' (ibid.). (c3) The relative prices of consumption goods increase.
  • Thus (d1) it becomes more advantageous {for entrepreneurs} to shorten the average period of production, and (d2) the capital goods characterised by higher duration lose value. Hence the descending phase of the trade cycle.
Given the sequence of cause and effect linkages determining the latter stage, a policy in support of demand for consumption goods as proposed in under-consumption theories (which Hayek took to include Keynes's theory) proves counterproductive. Indeed, according to Hayek, the capital accumulated in the ascending stage of the trade cycle (corresponding to forced saving) is economically destroyed in the descending stage, so that the economic system returns to its original equilibrium. The only consequence of active anti-cyclical intervention is to postpone adjustment to full employment equilibrium.[17]
[17] ‘If the proportion [between the demand for consumers' goods and the demand for producers' goods] as determined by the voluntary decisions of individuals is distorted by the creation of artificial demand, it must mean that part of the available resources is again led into a wrong direction and a definite and lasting adjustment is again postponed. [...] The only way permanently to "mobilise" all avaiable resources is, therefore, not to use artificial stimulants [...] but to leave it to time to effect a permanent cure by the slow process of adapting the structure of production to the means available for capital purposes.’ (Hayek 1931a: 87).
In his review Sraffa points out that Hayek's argument fails to take into account certain feature typical of a monetary economy, where money is not only a means of payment but also a unit of measurement in contract and a store of value, so that inflation (and monetary policy) affects income distribution (Sraffa 1932: 42-3 and 48). It can therefore by no means be taken for granted thatㅡin the presence of debts and money contracts, wage agreements  and rigid pricesㅡcapital accumulated with forced saving will be economically destroyed through the play of actions and reactions of market automatisms; in general the new capital will imply bringing about a new state of equilibrium in the economic system.

Here Sraffa adds a further critical observation. When relative prices as a whole are not constant in time, there is no single 'natural' interest rate to be compared with the money rate of interest: each commodity has its 'own interest rate', defined as the interest paid on the money necessary to buy spot a unit of the commodity added to the (positive or negative) difference between spot and forward prices of the commodity, in per cent. This happens even in barter economies, in phases of transition from one equilibrium to another, since relative prices change over time due, for instance, to differential technical progress in the various sectors.[18] Thus, apart from the highly unlikely case of invariance in technology or homothetic variations, growth phases are characterised by the impossibility of defining ^one^ equilibrium interest rate, whether in barter or monetary economies. Hayek's answer on this accountㅡthat ‘there might, at any moment, be as many "natural" interest rates as there are commodities, ^all^ of which would be ^equilibrium rates’(Hayek 1932: 245)ㅡmay be taken as one of the first signs of the appearance of a new analytic concept, namely that of intertemporal equilibrium (cf. Milgate 1979), but amounts to renouncing the idea of automatic mechanisms ensuring a tendency to a macroeconomic equilibrium of the economy.
[18] A point that Sraffa did not stress in his comment on Hayek is that not only are there multiple 'own rates of interest', but also that, due to the impossibility of foreseeing with a sufficient confidence the future path of technical progress for more than a very limited time span, it is impossible to rely on them for analysis of the structure of the economy, namely in the context of the theory of value and distribution. (... ...)
We may well imagine Hayek's dismay, faced with a position such as Sraffa's must have appeared to him.[19] Here we are in a world where monetary factors exert an evident influence on real variables, and where the marginalist theory of value is universaly accepted. What, then, could the outcome possibly be of rejecting what appeared as the only possible way to recocile faithfulness to the theoretcal foundations of marginalism with the realities of unemployment and cyclic trends in the economy? Today it appears quite clear that what to Hayek seemed like nihilism on the part of Sraffa was simply rejection of the marginalist approach (much like the attitude he showed towards Marshallian theory in the 1930 article)ㅡnot as a 'leap into the dark', but in favour of a reconstruction of political economy based on the alternative approach of the classical school.
[19] Hayek(1932: 238) perceives in Sraffa's article 'an extreme theoretical nihilism which denies that existing theories of equilibrium provide any useful description of the non-monetary forces at work'.

2.4 The critical edition of Ricardo's writings

The difficulties economists like Hayek and Robertson met in understanding just what Sraffa was getting at (and, generally speakin, the widespread opinion that Sraffa's critiques were destructive, but not constructive) shows the extent to which the marginalist approach had encroahed on the classical tradition in the first half of the 20th century, actually submerging it. Sraffa's critiques were considered as solely destructive simply because the possibility of an alternative approach was not recognised: hence the goal Sraffa set himself with critical edition of Ricardo's works, namely to clarify the framework that the classical economists had built for political economy, which was also the framework Marx had taken up and further developed. It was already clear to Sraffa, at the time, that the classical approach couldㅡalbeit with significant modificationsㅡprovide a better foundation for economic theorising than the marginalist one.

(... ...)

Excerpt of which: 6 Critique of the Marginalist Approach

6.1 The analytical structure of the marginalist approach

As already noted, Sraffa aims at a complete turnaroun in economic science, rejecting the dominant marginalist approach and proposing in its place the classical economists' approach, though modified so as to take Keynes's contribution into account. The first step he takes in the direction of his critique of the marginalist approach i to tackle the Marshallian variety that dominated the academic teaching of economics both in Italy and England (Sraffa 1925, 1926, 1930). The second stemp is taken with his critical edition of Ricardo's writings (Ricardo 1951-5). where the conceptual framework and the analytical scheme constituting the foundations of classical political economy are re-proposed, cleared from the misinterpretations superimposed on it in nearly a century of marginalism. Finally, the third and analytically decisive step is the publication in 1960 of ^production of Commodities by Means of Commodities^: an analysis of the relationship between relative prices and income distribution that provides both a solution to fundamental problems left unsolved by classical theorists and the basis for an internal critique of the traditional marginalist theories of value and distribution.

Traditionally, the marginalist approach conceive the problem of value as concerning the determination of equilibrium prices and quantities, such as to ensure equality between supply and demand. Such equilibrium values stem from confrontation between, on one side, the endowment of resources and, on the other side, the preferences of economic agents.

This interpretation of how the economic system works remains unchanged when, having considered pure exchange model (where productive activities are ruled out and the endowments consist of final consumption goods), we go on to models concerning both exchange and production. In the latter case, endowments include productive resources; the relationship between endowment and consumers' preferences is mediated by productive activity, which comes into play side by side with exchange and consumption activities. Three groups of givens are here considered: preferences of economic agents, initial endowments and technical knowledge. This basic model can then be further extended when produced means of production are included among the initial endowments, and it is recognised that they can be increased in amount over time through an accumulation process, the pace of which depends on investment decisions on the part of economic agents.

Thus, Sraffa is pointing to central features of the marginalist approach when referring, in the very first lines of his book (Sraffa 1960: v) to 'anyone accustomed to think in terms of the equilibrium between supply and demand', as well as when referrng, at the end of his book(Sraffa 1960: 93), to 'a one-way avenue that leads from "Factors of production" to "Consumption goods" '.

These central characteristics hold whatever variety of marginalism we conside. Scarce endowments and final consumption (or satisfaction of the needs and desires of economic agents) are confronted and connected by market mechanisms acting in such a way as to bring out a balance between the two opposite sides, so that for each commodity supply is equal to demand. Differences in specification of this basic scheme may be seen, for instance, in the extent of the role attributed to the subjective element, which may underlie the demand side alone, or the supply side as well, as in Jevons's analysis of the producer's equilibrium, based on the distutility of working, or in Wicksteed's opportunity cost approach. Other differences are to be found in the specification of the original resources: either a detailed list of commodities in general equilibrium models, or the usual textbook list of 'factors of production'ㅡland, labour and capital. In the latter case income distribution between rent, wages and profits[1] is not conceived as a separate issue, but as an aspect of the general question of value, with distributive variables being simply the prices of a particular kind of commodities, namely the 'factors of production'. Still other differences may emerge in aggregation (for instance, with the use of the category of 'industries' as intermediate entities between the individual producer and the economy as a whole), or the way of dealing with the elements of time (as we shall see in 6.2 below when dealing with the notion of the average period of production).

Now, it is obvious that no critique can have direct and immediate application to all varieties of marginalist theory. Notwithstanding, as we shall endeavour to show, Sraffa's analysis can be attributed with general impact on the marginalist approach as a whole. Indeed, unless it is defined in such general terms (as in Debreu's axiomatic general equilibrium model) as to be inapplicable to the interpretation of any real issue,[2] then Sraffa's criticism, suitably modified, will apply. This is due to the very basic structure of the marginalist approach, where original resources are taken as given, unlike the classical approach, which represent 'the system of production and consumption as a circular flow' (Sraffa 1960: 93).

(...) Of course, any theory requires abstraction; the point to be considered is whether the specific abstractions involved(for instance, the idea of a single price for each commodity, or that of a uniform rate of profits), though far from being perfectly and systematically realised, are admissible simplifications for the purpose of the specific analysis under consideration. This requires, among other things, that, whenever a main feature of the model utilised in our analysis simplifies away the compliexities of the real world, such complexities can be introduced in our model as successive approximation analysis. For instance, the aggregate income multiplier in its simplest form is based on the assumption of a closed system, with no external trade, and no government sector; but a generalised multiplier can easily be constructed without substantive modifications to the results of our first-approximation theory. On the contrary, generalisations of one-commodity models into multi-commodity models imply drastic changes in the analytical results; for instance, the monotonically inverse relation between the rate of profits (the price of the factor of production capital) and the 'quantity of capital' per worker no longer holds, as we shall see below.

Secondly, the theory must provide some results in terms of delimiting the scope of possible events. For instance, as we have seen earlier in Chapter 4, Sraffa's analysis brings out the distinction between basic and non-basic products with a number of interesting implications. Conversely, general equilibrium analysis, notwithstading certain very restrictive assumptions (such as the convexity of productive sets), does not provide definite results: we can have mulitiple equilibria (which rules out comparative static analysis), instability (which rules out the 'invisible hand of the market' thesis, together with the possibility of indicating the direction of change whenever there is a change in endowments, preferences or technology) and even no univocal relationship between the available quantity of individual original resources and their price (Montesano 19950). As a matter of fact, whenever the so-called 'general equilibrium models' are employed to say something about specific features of the real world, new restrictions are introduced within the model(a one-commodity world, a single representative agent, and so on) in order to obtain some definite results.[3]

(... ...)

Sraffa's criticisms concerns, in various ways, the main attempts at building marginalist theories aiming at robust results in interpretation of the real-world economy. Such is the case of the Marshallian theory of the firm and the industry, in the 1925, 1926, and 1930 articles; such is the case of the Austrian theory, based on the average period of production, in Chapter 6 of the 1960 book; and, more generally, such is the case for all theories interpreting 'capital' as a 'factor of production' the demand for which is inversely related to its price (Chapter 12 of his 1960 book). In the following sections of this chapter we shall briefly illustrate the latter criticisms, the case of the Marshallian theory of the firm and the industry having been considered already(1.3-1.5). Viewed in its general outline, Sraffa's point is that the marginalist representation of the economy encounters difficulties because we are confronted with a multi-commodity world in which 'capital' cannot be conceived, together with natural resources, as part of the given data of the problem.


6.2 Critique of the Austrian theory

As we have seen, Sraffa's 1960 book provides not only a theory of prices of productin within the framework of the classical conception of the economic system but alo the tools for a radical critique of the traditional marginalist theory of value, aiming at its very foundations. In this respect we can focus our attention on two chapter: the sixth, on the average period of production, will be considered in this section, while the final, twelfth chapter, on the choice of techniques, will be discussed in the next section.

The concept of the average period of production was first proposed by Jevons(1879, Chanpter 7), to be later taken up and developed within Austrian marginalist theory, and in particular Boehm-Bawerk(1889), as a measure of the capital intensity of production.[4] Capital is here interpreted as 'waiting' measured in terms of time, and more precisely as the length of the average period of time between the employment of (direct and indirect) inputs of labour and the completion of the process of production.

In order to compute the average period of production, each commodity input in the production process is substituted by the labour directly required for its production, plus its commodity inputs; the operation is then repeated on the latter, until we have a series  (as long as we like) of dated labour inputs and a residuum (as small as we like) of commodities. Sraffa(1960: 34) calls this procedure 'reduction to dated quantities of labour'. We can then compute the average period of production by taking a weigted average of the intervals of time between the date of each direct labour input and the date on which the output is obtained, where for each interval the corresponding amount of direct labour input is utilised as weight, once the total amount of labour directly or indirectly required to obtain the commodity under consideration ha sbeen set equal to one.[5] Austrian capital theory then interprets the average period of production as a measure of the quantity of capital employed in the production process thus considering 'time'. together with labour, as the factors of production.
[5] For an algebraic treatment cf. Kurz and Salvadori(1995: 437).
The rate of interest is thus obtained by balancing of two forces.[:]
  • On the one hand we have the supply of capital, namely waiting, corresponding to the readiness of economic agents to postpone consumption: the length of time agents are willing to wait is assumed to be a positive function of the rate of interest. 
  • On the other hand, we have the demand for capital, namely the relationship between additional waiting (increased lengthe of the average period of production) and additional product; the postulate of decreasing marginal productivity implies a decreasing relation between the average period of production and the rate of interest. 
  • Thus, the rate of interest can be considered as the price of 'capital', determined by the usual mechanism of equilibrium between supply and demand.
This construction is criticised by Sraffa(1960: 37-8). The point is that the average period of production is computed without allowing for compound interest; when it is considered, the results may change dramatically. Thus Sraffa shows that if the inputs of the various productive processes are reduced to dated quantities of labour, when the rate of profits changes we can have 'complicated patterns of price-movements with several ups and downs'. This is shown with an example, where the price of product a('old wine') at first rises, then falls, then rises again relatively to product b('oak chest') as the rate of profits increases from zero to its maximum value. The reversals in the direction of the movement of relative prices, in the face of unchanged methods of production, cannot be reconciled with ^any^ notion of capital as a measurable quantity independent of distribtion and prices'.[6] The difficulty had already been sensed by Wicksell(1901), but later exponents of the Austrian school went on utilising the notion of the average period of production. In particular, Hayek(1931a) built his analysis of employment and the trade cycle on it. 
[6] A critique similar to Sraffa's was developed by Garegnani(1960), with a direct analysis of the theories of the various authors who made similar attempts to construct a theory of distribution based on this conception. The criticisms of the average period of production are now generally accepted. Cf. for example Samuelson(1966).

The full implications of Sraffa's criticism were not immediately grasped. In a review of Sraffa's book, Harrod(1961) tried to defend the average period of production by pointing out that it can alway be calculated, given the rate of profits. Apprarantly, Harrod failed to realise that in such conditions the average period of production can no longer be used to explain the distribution of income, for its very defintion depends on an exogenously given rate of profits, as Sraffa(1962) pointed out in a short reply to Harrod. This, of course, is precisely the import of Sraffa's orignial criticism of the Austrian method of measuring 'capital'.

The difficulties illustrated above must be borne in mind also when evaluating later attempts at utilising dated quantities of labour for the analysis of dynamic issues. References here is to the so-called 'neo-Austrian' approach proposed by Hicks(1973) for the analysis of such issues as the transition between different technologies.
In fact, Hicks's model involves bothe the use of a static framework for the analysis of dynamic issues and a serious underevaluation of the capital theory difficulties mentioned above. Let us consider this issue in somewhat more detail.

Sraffa's analysis makes it clearㅡand indeed the point was denied neither by Boehm-Bawerk nor by Hayekㅡthat the reduction to dated quantities of labour is a theoretical construct, simply presenting in a different way the technology which underlies the Sraffian system of simultaneous equations illustrated earlier(3.2) and not a historical reconstruction of the way in which the different means of production have actually been obtained. Marginalist capital theory aims at determining static equilibrium solutions, hence marginalist analysis of techincal change refers to static substitution between capital and labour; technological changes over historical time are not considered. This should be borne in mind for two reasons. First, it is clear that the difficulites in capital theory stemming from the existence of a multiplicity of commodities cannot be overcome by shifting to a presentation of technology in terms of dated labour inputs: if no new restrictive assumption is in one way or another introduced in the shift, such difficulties cannot but reappear in the latter presentation as well.[7] Second, what is analysed with the reduction to dated quantities of labour are the implications of a given technology, ruling at a given moment in time: the presence of dated quantities is an analytical construct, which does not correspond to periods of historical time. Comparison between two different technologies is simply an exercise in static comparative analysis.[8]

Analysis of what Hicks calls 'traverse', namely the transition between two different technologies, involves either historical analysis, leaving aside any attempt at theoretical construction, or an exercise in comparative static analysis: the comparison, that is, between an initial and a final equilibrium. The latter case implies that there must be a unique equilibrium both in the initial and in the final position. Also, analysis of the 'out of equilibrium' transition between the two techniques requires specific assumptions concerning the 'laws of movement' of the variables out of the equilibrium position, which in turn can give definite results only under restrictive assumptions. Typical in this respect is the (usually tacit) assumption of no basic commodities in the modelㅡan assumption even more restrictive than that of a one-(basic)-commodity world.

Even if the presence of just one basic commodity, the series of labour inputs is potentially infinite: the residuum of commodities, though small as we like, can never be fully eliminated; however small, it becomes all-important in the determination of the price system when the rate of profits is at its maximum. This leads us to conclude that, while the simultaneous equation method and the series of dated labour inputs can be considered as equivalent ways of representing technology,[9] the former method is safer. In other words, no result derived under the second method that cannot also be reached by the simultaneous equations method can be accepted as having full generality in a multi-commodity world with baic commodities.

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