Robinson J

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Prelude to a Critique of Economic TheoryAuthor(s): Joan RobinsonSource: Oxford Economic Papers, New Series, Vol. 13, No. 1 (Feb., 1961), pp. 53-58Published by: Oxford University PressStable URL: http://www.jstor.org/stable/2661830 .

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PRELUDE TO A CRITIQUEOF ECONOMIC THEORYBy JOAN ROBINSON

IT is no wonderthat this book' took a long time to write. t will not beread quickly. Addicts of pure economic logic who findtheircravingillsatisfiedby the wishy-washy roductspeddled in contemporaryournalshave herea double-distilled lixirthat theycan enjoy, drop by drop,formany a day.For some, indeed, the logic may be too pure. We plunge immediatelyintothe argumentwithoutany preliminary iscussionofassumptions nddelimitationof topics. Evidentlywe are in a capitalist economy,but toavoid the ambiguitieswhichhave clusteredaround the word, capital isnevermentioned. There is profit, ut no enterprises;wages,but no pay-packets; prices,but no markets. Nothing s mentionedbut the equationsofproduction nd the necessaryconditionsofexchange.There is a greatdeal to be said forthis methodofexposition over and

above its apidarystyle),for very ttemptbyan authorto explainhimselfin termsofthepreconceptions f one reader confuses nother. Best leaveeach to work t out forhimself.To finda clue, let us go back a stage and pick up the argumentfromSraffa'sPreface to Ricardo's Principles. Postulate that corn is the onlycommodityconsumedby workersand that the corn-wagerate is fixed.Corn srequired lso as seed,and there s no othercommodity requipmentnecessaryfortheproductionof corn. Then a stockof corn n existenceatthe beginning fa yearhas reproduced tselfwitha surplusat the end ofthe year. The ratio of the surplusto the stock is the rate of profit.Theworkers are, so to speak, intermediategoods, like machines,necessaryforthe processby which cornproducescorn.The corn-profit aybe used to employmoreworkers oproduce uxuries,orto carryout investment;or itmayrot n the barns. The way it is usedcannotaffect herate ofprofit,which s fixedby technical conditions, ndthe equilibriumprices of all otherproducts are determined n termsofcorn and so in termsof each other)by theircosts ofproduction,ncludingprofitt thecorn-rate ponthecapital (valued incorn)required oproducethem.Can thepropositions erivedfrom his modelsurvivethe removalof thepostulatethat onlycorn s requiredto produce corn?

1 ProductionofCommodities yMeans ofCommodities. Preludetoa CritiqueofEconomicTheory, y Piero Sraffa CambridgeUniversityPress).

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54 PRELUDE TO A CRITIQUE OF ECONOMIC THEORYThe first tep-here the present argument begins-is to introduce avariety of wage goods. Let there be a numberof distinct commoditieseach ofwhich s required, n a particularquantity, to be consumed by aworker,ust as particularquantitiesof oil and fuel are requiredto operatea machine. The commodities are also required to produce each otherand themselves. To set us off n the right ack, wheat, iron,and pigs arementioned. But they soon become commodities , b, . .. , k.) The sameargument pplies as before. The commodities eproducethemselveswitha physical surplus. The condition hat therateofprofit s uniformhrough-out the economysettles their relative prices. The value of the stock ofcommodities t thebeginning fthe yearand ofthe surplus fter heyhavebeen replaced can be expressedin termsof any one of the commodities.The value of the real wage (which is fixedin physical composition bytechnicalnecessity) s also determined, nd the cost ofproductionofanycommodities hat do not enter ntotherealwage (subjectto the conditionthat theyyieldthe rulingrate ofprofit) ettles theirprices. This merelyelaborates the corn-wagemodel withoutaltering ts essence.The next step takes us much further. nstead of the real wage beingfixedby physical necessity,the workersreceive a share of the surplus.The authortoyswiththe idea ofseparatingthewage into a partwhich snecessaryand the rest; he rejects it in deference o ordinaryusage. Hemakes this concessionwithevidentreluctance,but readersmaywelcomeit, not onlyto avoid verbal clumsinessbut also because we could hardlyimagine that, when the workershad a surplus to spend on beef, theirphysical need for wheat was unchanged. Wage goods thus cease to benecessary for production n technicallyfixedproportions. Thereremain,however,commoditieswhich are necessary as means of productionforthemselvesand each other. (The pigs and wheat presumablydrop out,but the ironremains.)They reproducethemselveswiththe aid of labourand yield a surplusout of which the labour is paid.We are now launched on the main problem-the effect pon prices ofchangesin the divisionofthe surplusbetweenwages and profits.Nothing s said about what determines he division. We are to considerthe consequences,not the causes, ofchangesin the real wage.It is this,not the austere style,that makes the book difficult.We areconcernedwithequilibriumpricesand a rate ofprofit niformhroughoutthe economy,but we aregiven onlyhalfof an equilibrium ystem o standon. We need a fence to prevent us plungingoff nto the abyss. Theauthor suggestsas a helpful but not necessary)provisionalassumptionthat constantreturnsprevail. I, forone, found that this only made meall the moredizzy. It seems betterto assume that changes n the share ofwages do not affect he compositionofoutput.



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JOAN ROBINSON 55There is a further ifficulty. he wage 'changes' onlyin the sense thatthe value of x changes as we run our eye up and down a curve. In theyear that we are examining, ach change has already happened. So longas all commodities reproduce themselves within a year, this is easy toaccept; but when long-lived machines come into the picture (in a laterchapter) it causes discomfort. Can the equalization of the rate of profitthroughout he economy come about except through the equalization ofexpected profits n new investment n various lines ? If the rate of profithas changed duringthe life-time f machines n existence thisyear, thereis no equality between expected and realized profits n any one line-why should therebe equality between realized profits n differentines?Let us add to theprotectivefenceofprovisional ssumptionsthatweneednot take the word change' literally. We are onlyto comparethe effects fhaving differingates of profit,with the same technical conditions nd thesame composition f output. Thus reassured,we can remainon the narrowledgewithoutvertigo.When the wage is not given by technical conditions,what do pricesmean? A change in the division of the surplus between wages and profitsaltersrelative prices. But we need to knowthe pricesto value the surplusthat is to be divided. This was the problem that flummoxedRicardo.Sraffa's solution is ingenious and satisfying. He isolates those basiccommoditieswhich enter directlyor indirectly nto the productionof allcommodities nd,from he technicalequations which showhoweach entersinto theproductionofthe others,he constructs standard ofvalue in theformof a composite commodity nto which each particularitem enters,as means ofproduction, n the same proportion s it appears as output.The beauty of this is that, as the wage reckoned n termsof this stan-dard rises,the pricesofsome of the commodities omposing t (in whichwages are a high proportion fcost) rise, nd others inwhichprofits re ahighproportion fcost) fall, o just suchan extent s to balance eachother,and leave the ratio of thevalue of the surplusto the value of the meansofproduction unchanged. This provides a technically determinedratio ofsurplusto means ofproductionwhich s independentof the divisionof thesurplusbetweenwages and profits.Now, giventhe n technicalequations forn commodities, nd the wagerate in termsof the standard,then-I prices and the rate of profit redetermined. Or, given the n equations and the rate of profit, he wageis determined.Assuming that wages are paid at the end of the year (no capital is re-quired to finance wage fund) there is a linear relationshipbetween theshare ofwages in the surplusand the rate ofprofit.This having been established, the standard commoditycan be leftto



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56 PRELUDE TO A CRITIQUE OF ECONOMIC THEORYlook after tselfand the argument s conducted in terms of the rate ofprofit orrespondingo zero wages (thatis, the ratio of surplusto means ofproduction), nd theactual rate of profit, iththe wage ratethat it entails.

In order to construct he standard commodity t must be possible tofind a quorum of basics-commodities that enter directlyor indirectlyintotheproduction f all commodities. o long as there renecessarywagegoods there are bound to be basics, for,via labour, the wage goods enterinto all production. But whenwages are part of the surplus we have tofall back on an assumption that there is at least one basic commodity.Certainlythat is plausible enough,but it is natural to ask what wouldhappen if there were none. Does the whole method stand or fall on thisassumption? I thinknot.Suppose that technical equations could be divided into two systemswithout ny overlap, n one of which ron entersdirectly r indirectly ntothe productionof all commodities,and in the other,wood. The twosystemsof equations belong to the same economyin the sense that therate ofprofit nd thewage rate are the same inboth. Now,when the rateofprofits given,thewage rateintermsof theiron-standard s determinedfor the iron systemand the wage rate in terms of the wood-standard sdetermined for the wood system. The fact that the wage is uniformdetermines he price of iron in the wood-standard. The assumption ofat least one basic commoditythus appears to be a mere simplification,not a crucialstep in the argument.Afterexploringthe propertiesof a systemin which each productiveprocess takes one year and produces one commodity,we are shown theapplicationof the methodto joint products,fixedcapital and land, and tothe choiceoftechniquewhen alternativemethodsare available forproduc-inga singlecommodity.The argument henceases as suddenly s itbegan.In elaboratingthe method to deal with complexities uch as long-livedmachines,many pointsofgreat nterest re turnedup (including versionof the formulaforthe relationof the value ofa machineto its cost whichwas worked out, presumably,much later, though published earlier, byKahn and Champernowne),but the main point of dealing with theseproblems s just to showthatit can be done. The essenceof the argumentremains that which s exhibitedwithcirculating apital only.The sub-title ivesa hintofthepurposeforwhich thas been established-Prelude to Critique fEconomicTheory. n thepreface, fter eferringoa draft fthe book whichhe discussedwithKeynes in 1928,Sraffawrites:

As was onlynatural duringsuch a long period,othershave from imeto timeindependentlyaken up pointsof viewwhichare similar o one or otherof thoseadoptedin thispaperand have developedthemfurtherr n differentirections romthosepursuedhere. It is, however, peculiarfeature fthe set ofpropositions owpublished hat, lthough heydonot enter ntoanydiscussion fthemarginal heory



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JOAN ROBINSON 57of value and distribution, heyhave nevertheless een designed o serve as the basisfor critiqueof that theory.

The significantword s 'however'. Others have developed input-outputsystems nd process analysis to higher degrees of elaboration than areshown here,but theyhave notbrought hemto bear on the foundations forthodox doctrine.Can we divine what the critiquewill be? There are threemainproposi-tions which can be derived from the corn-wagemodel and which havebeen shown to survive all the necessarymodifications hat follow fromelaborating ts assumptions.The first s that, when we are provided witha set oftechnicalequationsfor production and a real wage rate which is uniform hroughout theeconomy,there s no room for demand equations in the determination fequilibrium rices. Whenwe take downourprotective ence, ndallowthatchanges in distribution ffect he compositionof output,we shall needa fresh et of equations relating hem,but that is quite anothermatter.)Some might omplainthatthis s only flogging dead Marshallianhorse(which Sraffahimselfhelpedto kill,even before1928). But to mymind temphasizesa point which,both in its scholasticand in itspolitical aspect,is ofgreat importance; in a marketeconomy,either theremay be a ten-dency towards uniformityfwages and the rate ofprofitn differentinesofproduction, rpricesmaybe governedby supplyand demand,but notboth. Where supplyand demandrule,there s no room foruniformevelsofwages and the rate ofprofit.The Walrasian systemmakes sense ifweinterpret t in termsofan artisaneconomy,where each producer s com-mittedto a particularproduct,so that his income depends on his outputand its price. Each can have a prospectiverate of returnon investmentin his own line, but thereis no mechanismto equalize profitsbetweenone line and another. In real life,no one expects to see an equalization oftherates ofprofit btainablefrom ugar nCuba and cocoa inGhana orcaneven say what an equal rate ofprofitwould mean.The intrusion f demandequationsinto thetheory fthewage economy,and the attemptto foist rate ofprofit nto the exchangeeconomy,haveled to endlessconfusion;a critiqueto clearit up is longoverdue.The second proposition s mentionedby Sraffa n his Referenceso theLiterature. t is the rejectionof the claim 'that thepriceofeverycommo-dity,either mmediately r ultimately, esolves itselfentirely that is tosay,without eaving any commodity esidue) intowage, profit, nd rent.'In thecorn-wage conomy, heproduction f cornthisyearrequires hatthereshould be a stock of cornalready in existence,to provide seed andthe subsistenceoftheworkersuntil thenext harvest. Sraffahas removedthe assumption of a technicallydeterminedphysical real wage. This



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58 PRELUDE TO A CRITIQUE OF ECONOMIC THEORYthrowsgreat weight upon commoditiesregardedas means ofproduction,a weightmade all the greater by the assumption that capital is notrequired for a wage fund. Productionof Commodities y means of Com-moditiess his centraltheme.It leads to the very strikingpropositionthat there is a technicallydetermined maximum notionally possible rate of profit,which wouldobtain at zero wages. (It is only notionally possible, for even when thepostulate of a precise physicallynecessary wage has been abandoned,there s still a vague but tough lower limit to possible real wages and soan upper limit to the possible rate ofprofit.)The thirdproposition, f we may indulge n a loose mode ofexpressionthat the authorcarefully voids, is that the marginalproductivity heoryofdistribution s all bosh.Sraffadoes not deny any sensible arguments hat can be expressedinmarginal terms. His treatmentof diminishing eturnsfrom and and ofthe choiceoftechniquemakesroomfor egitimateuses of the concept ofaproductive function.What he demonstratesdecisively thoughdoubtlessthe deaf adders will take no notice) is that there is no such thing as a'quantity ofcapital' whichexists independently f the rate ofprofit.

It is important to realize that the thirdpropositiondoes not dependupon the second.Certainlythe propositionthat no production,by the methodsknowntoday, could take place without somepre-existing ommodities, s highlyplausible, but it is a matter of fact, not of logic. It does not mean that ifprices could be reduced, withoutresidue, to wage, profit nd rent, thenthe marginalproductivity heoryof distributionwould be cogent.Flint mines were dug with antlers picked up in the forest. If thiseconomy was run on capitalist lines, it must have been necessary toadvance wages to the men collectingantlers (otherwise they would beself-employed raders). Men dug the pits and shaped the flints. Allprocesses couldbe reduced to termsof dated inputsof abour. To find hecapitalrequiredforproduction in thesense n whichcapital is theprincipalon which profit s the interest)we must knoweitherthewage in terms ofaxes or the rate ofprofit.Certainly,Sraffa s right that in Ricardo's time, or our own, com-moditiesare necessaryto produce commodities. But even the neolithicrate of profitwas not determined y the 'marginal productof capital'.Presumably, t will be a little time beforethe critiqueto whichthis isthe prelude will be published. We might have some self-criticismmean-while.Cambridge

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