The Standard System and the Tendency of the (Maximum) Rate of Profit to Fall — Marx and Sraffa: There and Back

In notes written in the 1940s Sraffa rejected Bortkiewicz’s critique of Marx’s theory of the tendency of the rate of profit tofall. First, he claimed that Marx’s law was logically consistent and not flawed and that Bortkiewicz’s criticism failed to grasp the essential meaning of Marx’s theory, based on the determination of the maximum rate of profit in the economic system. However, Sraffa interpreted technical change that causes an increase in the organic composition of capital as a change that occurs given the technical knowledge available. The substitution of already-invented machinery for labour becomes profitable only when the wage rate increases. On the contrary, according to Sraffa, ‘real’ technological progress is generally neutral and does not involve an increase in the organic composition of capital. This interpretation is very interesting because it stresses the distinction between the analytical and logical aspects on the one hand, and the historical aspect of Marx’s analysis on the other. Second, when writing his notes, Sraffa believed that even in the ‘actual’ economic system the relationship between aggregate income and aggregated capital does not change when the distribution of income varies. This assumption seems to play an important role in Sraffa’s vindication of Marx’s law. Thus the problem arises whether Sraffa’s defence of the logical structure of Marx’s law can be upheld even when this ‘Hypo’ regarding the ratio between aggregate income and aggregate capital is dropped.