Sunday , September 20 2020
Home / Post-Keynesian / A Derivation Of Sraffa’s First Equations

A Derivation Of Sraffa’s First Equations

Summary:
1.0 Introduction Piero Sraffa wrote down his 'first equations' in 1927, for an economy without a surplus. D3/12/5 starts with these equations for an economy with three produced commodities. I always thought that they did not make dimensional sense, but Garegnani (2005) argues otherwise. This post details Garegnani's argument, albeit with my own notation. There are arguments about how and why Sraffa started on his research project I do not address here. The question is how did he relate what he was doing at this early date to Marx. In addition to Garegnani, DeVivo, Gehrke, Gilibert, Kurz, and Salvadori are worth reading here. 2.0 Givens I assume an economy in a self-replacing state in which n + 1 commodities are produced. c0,0 is the input of the first commodity used in producing the

Topics:
Robert Vienneau considers the following as important: , , ,

This could be interesting, too:

Robert Vienneau writes Visualizing The Effects Of Markups: A Numeric Example

Robert Vienneau writes Visualizing the Effects of Markups on the Choice of Technique

Robert Vienneau writes Unpublished Reviews of Sraffa’s Book and Related Matters

Robert Vienneau writes Why Do Mainstream Economists Not Make More Out Of The CCC?

1.0 Introduction

Piero Sraffa wrote down his 'first equations' in 1927, for an economy without a surplus. D3/12/5 starts with these equations for an economy with three produced commodities. I always thought that they did not make dimensional sense, but Garegnani (2005) argues otherwise. This post details Garegnani's argument, albeit with my own notation.

There are arguments about how and why Sraffa started on his research project I do not address here. The question is how did he relate what he was doing at this early date to Marx. In addition to Garegnani, DeVivo, Gehrke, Gilibert, Kurz, and Salvadori are worth reading here.

2.0 Givens

I assume an economy in a self-replacing state in which n + 1 commodities are produced.

  • c0,0 is the input of the first commodity used in producing the output of the first industry.
  • (c., 0)T = [c1,0, c2,0, ..., cn,0] are the inputs of the remaining n commodities used in producing the output of first industry.
  • c0 = [c0,1, c0,2, ..., c0,n] are the inputs of the first commodity used in producing the output of the remaining industries
  • The element ci,j, i, j = 1, 2, ..., n, of the matrix C is the input of the ith commodity used in producing the output of the jth industry.
  • q0 = is the quantity produced of the first commodity.
  • (q)T = [q1, q2, ..., cn] are the outputs of the remaining n commodities used in producing the output of first industry.

All quantities are given in physical units. I abstract from fixed capital; all inputs are used up in the production of the outputs. Table 1 presents these parameters for the first example in the first chapter in Sraffa 1960.

Table 1: The Example from Sraffa (1960), Chapter 1
InputIndustry
IronWheat
Ironc0, 0 = 8 tons ironc0 = [12 tons iron]
Wheatc., 0 = [120 quarters wheat]C = [280 quarters wheat]
Outputq0 = 20 tons ironq = [400 quarters wheat]

The following must hold for economy to be in a self-replacing state:

qi = ci,0 + ci,1 + ... + ci,n, i = 0, 2, ..., n

All quantities are non-negative. The economy must hang together in some sense. In Sraffa's terminology, all commodities are basic.

3.0 Coefficients of Production

I like to think of the coefficients scaled for unit output in each industry. Accordingly, define:

a0, 0 = c0, 0/q0
(a., 0)i = (c., 0)i/qj, i = 1, 2, ..., n
(a0)j = (c0)j/qj, j = 1, 2, ..., n
(A)i,j = (C)i,j/qj, i, j = 1, 2, ..., n
4.0 All Quantities Measured in Unit Outputs of the First Industry

The given inputs can be thought of as produced in the previous year. The amount of, say, iron directly used as input in producing other commodities is (a0q). Table 2 indicates how much iron is needed as input in all previous years.

Table 2: Iron Inputs for Other Commodities
YearIron
0a0q
1a0A q
2a0 (A)2q
......
na0 (A)nq
......

Even though my notation picks out the first commodity, there is nothing special about it. Suppose some commodity is selected. Let v0 be the quantity of this commodity needed directly and indirectly to produce a unit of the first commodity. Let v be the quantities of this commodity needed directly and indirectly to produce each of the remaining commodities. v0 and v must satisfy the following system of n + 1 linear equations:

v0a0, 0 + v a., 0 = v0
v0a0 + v A = v

For a non-trivial solution to exist, the determinant of the matrix in Table 3 must be zero, which it is in the case pf the Sraffa example.

Table 3: A Matrix
1 - a0, 0 = (3/5) tons-a0 = [(-3/100) tons]
-a., 0 = [-6 quarters]I - A = [(3/10) quarters]

I set v0 to unity. The amount of this commodity used directly and indirectly in the production of all other commodities is easily found:

v = a0(I - A)-1
5.0 Rescaling the Givens

I then rescale the givens.

b0, 0 = v0c0, 0
bi, 0 = vi (c., 0)i, i = 1, 2, ..., n
b0, j = v0 (c0)j, j = 1, 2, ..., n
bi, j = vici, j, i, j = 1, 2, ..., n
s0 = v0q0
si = viqi, i = 1, 2, ..., n

Table 4 presents Sraffa's example with these calculations. Here, a unit of wheat is 10 quarters. That is, one ton iron is used directly and indirectly in producing 10 quarters of wheat.

Table 4: Sraffa's Example Again
InputIndustry
IronWheat
Ironb0, 0 = 8 tons ironb0 = [12 tons iron]
Wheatb., 0 = [12 tons wheat]B = [28 tons wheat]
Outputs0 = 20 tons irons = [40 tons wheat]

I then have Sraffa's 'first equations':

b0, j + b1, j + ... + bn, j = sj, j = 0, 1, ..., n

For the economy to be in a self-replacing state, the following must hold:

bi, 0 + bi, 1 + ... + bi, n = si, i = 0, 1, ..., n

Even though I am adding together, say, quantities of iron and wheat, the dimensions are consistent.

6.0 A Re-interpretation

Suppose the first produced commodity is labor, not iron. c0, 0 becomes the amount of labor performed in households (outside the market) to reproduce the labor force. c., 0 is the commodity basket paid out in wages when the workers obtain all of the surplus product. a0 are the direct labor coefficients for each industry, and A is the Leontief input-output matrix. v is the vector of labor valus (also known as employment multipliers). Under the assumptions, prices of production are identical to labor values.

This model is descriptive. The givens do not show how required inputs might decrease with innovation or the formal and real subsumption of labor.

References
  • Garegnani, Pierangelo (2005) On a turning point in Sraffa's theoretic and interpretative position in the late 1920s. European Journal of the History of Economic Thouht 12 (3): 453-492.
  • Gehrke, Christian, Heinz D. Kurz, and Neri Salvadori (2019) On the 'origins' of Sraffa's production equations: A reply to de Vivo. Review of Ploitical Economy 31 (1): 100-114.

Leave a Reply

Your email address will not be published. Required fields are marked *