Marx, Sraffa and Classical Price Theory[On the significance of recent controversies on capital theory: a Marxian view]

Five major propositions in classical price theory are discussed. First, Marx explicitly follows Smith’s analytical starting point to show that prices differ from labor values not because of competition or capitalist relations (wages and profits), but only when the latter interact with intersectoral capital–labor differences. Second, Okishio, Morishima and others long ago demonstrated that Marx’s transformation procedure was an iterative process, and Marx himself refers to a ‘standard’ industry immune to this process. Third, Sraffa correctly argues, in favor of Marx, that empirical economic aggregates are essentially the same in prices and values. Fourth, as matrix size increases the subdominant eigenvalues of IO matrices approach a smooth limiting curve, so contrary to Bródy, the first step in any price or quantity iterative process (such as Marx’s) does not become increasingly exact. Finally, Sraffa prices in large US matrices are overwhelmingly simple and extremely well approximated by Bienenfeld’s quadratic form.