1Piero Sraffa published only a single analytical and constructive contribution during his lifetime, namely his 1960 Production of Commodities by Means of Commodities (henceforth PCMC) (Sraffa, 1960)—subtitled, however, “Prelude to a Critique of Economic Theory.” For more than three decades, PCMC provided the sole source of information for those trying to understand what Sraffa “had really meant.” The opening of the Sraffa Archives in the Wren Library, Cambridge, in 1993 changed this situation by giving scholars access to a very large number of mostly unpublished manuscripts and contributions by Sraffa, thereby rendering the task of uncovering Sraffa’s original message in specific areas of investigation less difficult. One such area of investigation, for which this is particularly true, is the role played by technical and/or social factors in Sraffa’s distinction between “necessaries” and the surplus, especially in the context of his attempt to reconstruct Classical economics. In a theoretical framework aimed at restoring and renewing the economic message of the Classical school, the notion of surplus plays a pivotal role, and it is therefore natural to return to its definition and its characterization and to explore its real meaning and operationality. The main purpose of this paper is thus to investigate this central role of the notion of surplus. Focusing on the role of technical and social factors in the distinction between necessities and surplus allows us to lend support to an interpretation of “snapshots” as “perspicuous representations” (in Wittgenstein’s sense, see Arena, 2013) of different surplus-based societies. These societies can be associated with different rules of distribution of the price of the surplus, and therefore made distinct and compared. This opens the way to a conception of Sraffa’s contribution as concerned with a typological analysis of different economic systems.
1 – Technical and/or social factors in PCMC
2To date, two different ways of re-writing the “system of production with surplus” in chapter 2 of PCMC have been proposed. As noted by Kurz and Salvadori twenty years ago in their Theory of Production (see Kurz and Salvadori, 1995: 33, 43 and 95), the first option consists of transforming the initial diagonal matrix of outputs - derived from Sraffa’s own notation and including Sraffa’s diagonal data A, B,…K (see Sraffa: 1960, 6) - into a unit diagonal matrix I, assuming that A = B = ….= K =1. Each quantity of output A, B…K is then taken to be equal to 1 and each quantity Aj, Bj, …, Kj of input used in industry j is conventionally represented by the proportion of the total quantity A, B, …K used in this industry. In this case, the quantity part of Sraffa’s system only implies the description of a “recipe”, that is, the mere description of the various quantities of commodities which are necessary to produce a “given quantity”; it therefore excludes the use of “a model of fixed coefficients à la Walras-Cassel-Leontief”.
3The second option consists of assuming constant returns to scale—an assumption, however, which Sraffa did not actually retain. This approach also links up with another core assumption, noted by Kurz and Salvadori, namely the existence of a steady-state growth path—a concept that is not present in PCMC either:
Whenever the economic system under consideration is assumed to be growing, it will be taken to grow along a steady state growth path with all endogenous variables expanding to a given and constant growth rate; this state of affairs is also known as a “quasi-stationary economic system” […]. Steady state growth requires constant returns to scale throughout the economy.
5This second alternative therefore implies the rejection of what Roncaglia long ago referred to as the “given quantities assumption” (Roncaglia, 1978, chapter 1, section 8 and chapter 2 section 4; and 2001). It furthermore requires one to adopt a conception of economic dynamics that is not neutral, being strongly reminiscent of a Solowian understanding of economic growth and excluding Pasinetti’s conceptualization of structural change or Goodwin’s 1967 cyclical growth model, for example. Even so, some scholars still continue to incorporate fixed coefficients, to adopt price/quantity dual systems and to argue that the constant returns to scale assumption is natural or even necessary in a Sraffian framework (for instance Bidard, 2004; or Benetti, Bidard and Klimovsky, 2007).
6To return to the first approach to re-writing Sraffa’s ‘system of production with surplus’ mentioned above, this was first developed as long ago as 1976, and has recently been re-visited by Cartelier (2015). Cartelier defines what he calls a “classical system of prices,” namely a system of prices which excludes constant returns to scale as well as quantity changes. These systems are supposed to be made up of two components. The first is a technique of production and the set of these techniques in the economy is supposed to generate a non-negative surplus product. The second is a rule of imputation of the price of the surplus, attributing to each industry a given fraction of the value of the surplus product. This second component makes it possible to define different rules of income distribution and therefore different “societies,” to use Sraffa’s own term (Sraffa, 1960, p. 3). Thus, for example, and based on diverse rules of imputation, Cartelier characterizes various classical price theories (Petty, Cantillon, Quesnay, Smith, Ricardo, Torrens but also Steuart). These differ in regard to their rules of income distribution, but adopt a shared view of an analogous set of techniques of production and therefore a “classical system of prices” based on reproduction. In Cartelier’s terminology, Sraffa’s system of “production with a surplus” is nothing other than a specific classical system of prices.
7The notion of technique of production is related to two different concepts. The first concept corresponds to the necessity of the repetition (Sraffa, 1960, p. 3) of industrial methods of production (Sraffa, 1960, p. 3, where Sraffa’s ‘method of production’ is equivalent to Cartelier’s “technique of production”). It is furthermore associated with the notions of “self-replacement” or “viability” of the economic system. However, the fulfilment of the viability or the self-replacement constraint is also the condition of the “society” maintaining itself, mentioned in the first two lines of chapter 1 of PCMC. The notion of reproduction therefore includes a distinction between the technological self-replacement or viability of the economic system, on the one hand, and society maintaining itself, on the other.
8Technological self-replacement implies a process of destruction and recreation of commodities, namely the “production of commodities by means of commodities.” At this point a new issue emerges: how many commodities have to be destroyed productively to obtain more than a simple reproduction of the initial commodities? The answer can also be found on the first page of chapter 1 of PCMC. Commodities are assumed to be “used, in part as sustenance for those who work, and for the rest as means of production” (Sraffa, 1960, p. 3).
9A global surplus may appear “if the economy produces more than the minimum necessary for replacement” (Sraffa, 1960, p. 6). In this context, Sraffa also refers later to “the necessaries of consumption” (Sraffa, 1960, p. 10) or the “necessaries for subsistence” (ibid., p. 12).
10In PCMC, therefore, we first understand that economic systems are not “societies” but only a part of them. However, PCMC does not tell us much about the nature of the distinction between technological and social factors. We only learn that, as far as the technological conditions of production are concerned, only means of production and “necessaries for subsistence” have to be taken into account and nothing else. The real composition of the surplus only depends on these technological factors and not on social ones. To put this differently, the net product of an economy first depends only on technology and production. Concerning means of production, techniques and commodities as such are not the only ingredients to take into account. The simple reproduction of capitalists also plays its part in economic and social reproduction as a whole, if, however, we consider capitalists who have the control of their production processes:
the life of the owner of the “worker” (productive tool) is necessary, in a wage regime, in order for the worker to be able to produce […]. The refunding of production expenses provides a utility not only to the worker, but also to capital: indeed, if capital was not used in production, it would be used up very quickly, and there would be no source to renew it. If it is true that a worker, even if he receives only a bare subsistence wage (expense repayment) has a net satisfaction, […] a capitalist, regardless of the profit, also obtains significant benefit from the fact that, by using capital in production, it is continuously reinstated, that is retained: this would be impossible, with the exception of a few cases, if it were not used. In short, irrespective of any surplus, both the worker and the capitalist receive, by producing, the satisfaction of being kept alive.
12Yet it is uncomfortable to regard the “necessaries of subsistence” as an exclusively technical factor. Sraffa, in fact, notes:
We have up to this point regarded wages as consisting of the necessary subsistence of the workers and thus entering the system on the same footing as the fuel for the engines or the feed for the cattle. We must now take into account the other aspect of wages since, besides the ever-present element of subsistence, they may include a share of the surplus product. In view of this double character of the wage it would be appropriate, when we come to consider the division of the surplus between capitalists and workers, to separate the two component parts of the wage and regard only the “surplus” part as variable; whereas the goods necessary for the subsistence of the workers would continue to appear, with the fuel, etc., among the means of production.
14At this stage, therefore, we learn something new. There are two parts to wages: a “technical” part which is all that is required to help us understand the real composition and size of the surplus or net product, and a “social” part that does not contribute to this investigation but allows us to enter into the issue of the distribution of net national income. This is why we now turn in more detail to this distinction.
2 – The technical and social necessity of wages
15A confirmation of the existence of this distinction is given by the fact that, for Sraffa, in a capitalist society, the part of wages corresponding to subsistence is not different from the real costs related to the working of a machine or of an animal. The idea is that in our society, wage-earners are often considered by producers as a pure cost of production when they are not sufficiently powerful to claim a share of the surplus:
‘Labour’
There appears to be no objective difference between the labour of a wage earner and that of a slave; of a slave and of a horse; of a horse and of a machine; of a machine and of an element of nature (? this does not eat)
It is a purely mystical conception that attributes to human labour a special gift of determining value. Does the capitalist entrepreneur, who is the real “subject” of valuation and exchange, make a great difference whether he employs men or animals? Does the slave-owner?
17The same conclusion can be drawn when Sraffa considers what he calls the “slave community” (Sraffa D 3/12 7: 62). He also highlights the fact that the productive use of slaves allows us to consider that the necessaries of their subsistence are only determined by the necessities of technology and productive logic. The determination of the volume of food of slaves and the satisfaction of their basic needs has nothing to do with any utilitarian or subjective assessment of their necessary inducement to work. Its purpose is to determine the necessities which are just sufficient to allow slaves to continue to provide the volume of labour required. Moreover, in the case of the slave community, if technological requirements are the only ones to take into account, the determination of their incomes does not depend at all on social considerations, as would be the case with wage-earners capable of claiming part of the surplus. This is why their incomes “are not determined outside economics” (Sraffa, ibid.), that is by social institutions, forms of organization or social conventions.
18More accurately, necessities appear to be defined as the condition of the permanence of wage-earners’ lives and include all the expenses which ensure this permanence:
all the expenses required for maintenance of the worker (expenses that are vital to production), as well as all those required for depreciation, namely, for reinstatement of the worker (the insurance share for “working life,” that is […] child care expenses), should be deducted […]: the life of the owner of the “worker” (productive tool) is necessary, in a wage regime, in order for the worker to be able to produce
20However, as we saw earlier, two different problems co-exist here. The first is related to the issue of the inclusion of necessities related to subsistence in the technical cost of production. The second is related to the issue of income distribution. Now, on this issue, Sraffa notes:
The problem therefore arises in a slave community: how is the surplus distributed? and how if at all, does the way of distributing it, affect the values of the surplus?
This is a convenient way of positing the question of value and distribution in its simplest form: it eliminates the (supposed) puzzles connected with the freedom of workers in working more or less or not at all. It shows clearly that the “wages” (i.e. maintenance) of the slave-worker are not to be regarded as a share in the product but as a part of the initial stock, i.e. that they are paid in connection with a work that has not yet yielded a product, before and not after production; that their significance is not “to induce” the worker (which is superfluous, since he is not free) but to “enable” him to work. It also shows that the sort of “cost” which determines values is the collection of material things used up in production and not a “sum of efforts and sacrifices.”
22The existence of a distinction between technical and social determinants of wages is certainly an essential point. However, it keeps open another issue: where is the border between the technically necessary determinants of wages and the determinants which facilitate claiming a larger part of the surplus? To answer this, it will be important now to broaden our field of investigation and ask what can be considered really necessary and what cannot when we try to distinguish necessary costs from the net product.
3 – Defining "necessity"
23Sraffa fully realized the issue of defining “necessity” when he had to cope with a system of “production with a surplus” (Sraffa, 1960, chapter 2) after having considered a system of “production for subsistence” (ibid., Chapter 1). His unpublished manuscripts highlight the difficulties he encountered. One route he explored was to favour “an entirely objective point of view” or, to use an equivalent expression, a “natural science point of view” (Sraffa D 3/12/7 161 3). However, this choice raised two problems. First, this required the introduction of a reflection on the use of mechanistic causality in social sciences, which Sraffa, in fact, was investigating at the time. Sraffa was not satisfied by the application of “the principle of sufficient reason” (Sraffa, D 3/12/7 161 5) to the issue of “necessity.” He feared that the conclusion might be tautological: “This is the great difficulty: the surplus is the object of the inquiry, but as soon as it is explained, a cause is found for it, and it ceases to be a surplus. This sounds as of the object of the inquiry had been defined as ‘the unknown,’ but if the inquiry is successful it becomes known, & the object of the inquiry ceases to exist!” (Sraffa D 3/12/7 161 3 and 4). Second, “a natural science point of view” would neglect the object of the investigation itself, namely, the distinction between technical and social factors. This is why Sraffa followed a different path:
Thus there must be a leak at one end or the other: The “closed system” is in communication with the world. When we have defined our “economic field,” there are still outside causes which operate in it; & its effects go beyond the boundary. This must happen in any concrete case.
Consider, e.g. the so-called “natural causes” of rent.
The surplus may be the effect of the outside causes; & the effects of the distribution of the surplus may lie outside.
25In other words, Sraffa began to admit that prices included in a system of equations are partially but directly determined in a “closed system,” namely, by technically necessary costs, but also partially but indirectly by “outside causes” related to social or institutional factors. This obviously is not contradictory to the fact that the real composition and size of the surplus only depends on technically necessary factors. We can now better understand the importance of the dichotomy between techniques of production and the rule of imputation of the price of the surplus.
26It is, however, essential to take the analysis further and to investigate the dividing line between technical and social factors more closely. An important passage in the Sraffa Archives provides a significant point of departure for this analysis:
Interest appears thus as the necessary means of overcoming an obstacle to production. It is a social necessity as distinguished from the material necessity of, say, putting coal into a locomotive that it may do its work.
There are many other such socially necessary costs which appear as technical necessities. Thus, the work of a ticket collector on a bus or a railway: obviously, the railway would run equally well if no tickets were collected; but, if everybody travelled without paying, the shareholders would stop it; the work of the ticket collector prevents the shareholders from stopping the railway; the shareholders would be as effective in stopping trains as lack of coal in the engine. The ticket collector is therefore as productive as the fireman.
28This passage reiterates the importance of the distinction between “social” and “material necessity.” Even if a technical or material necessity is similar to a social necessity, the two must not be confused or conflated. Hence, even if a “ticket collector is as productive as a fireman,” we cannot consider them as equivalent. The ticket collector’s primary role is to safeguard, at least indirectly, the interests of the shareholders, whereas the fireman’s principal task is to protect the technical viability of the bus or the railway; without the latter there is a real risk of the destruction of capital. This is also why for Sraffa interest cannot be justified as a productive and necessary ingredient related to production, but rather as a strictly legal and conventional tool depending on institutions and conventions in a given society (Sraffa, D1/15 2). This is finally why Sraffa often expresses his doubts on the usual justifications for the necessity of interest (Sraffa, D1/15 6 and D3/12 7 44).
29We also need to take account of differences between social necessities. Some are very closely related to technical necessities, while others pertain to the social environment of the economic system. In the sentences following the above quotation, Sraffa notes that social necessities only appear when the producer is not in complete control of these:
For wages to appear as a necessity ownership of labour force must be separated from ownership of means of production. For interest to appear as a necessity ownership of means of production must be separated from control (as in modern companies). If the capitalist is in control, his own income appears only as utilities; since he takes the decisions, how can there be any question of his “inducing” himself to do unpleasant things? if he does them, since he is perfectly free of doing them or not, this means that they are pleasant, by definition. (id. for the independent artisan with his wages: his own consumption, far from being a cost which must be undergone in order to produce, is the very end of production). But the abstract “firm” or “company” (and its managers as its spokesmen) regards the shareholders, bankers and creditors as vampires: just as the workers: it is an unpleasant necessity to pay them a “fair” dividend or “fair” wage to keep them quiet; but the less is given to them, the better, since it appears as pure waste.
31However, if modern wage-earners are not slaves, and if “shareholders, bankers and creditors” are distinct from the company, the producer no longer has full control over them. These agents have acquired some degree of autonomy, and this implies the possibility of a contradiction between their self-interest and that of the producer, thus also of social conflict. This is why Sraffa noted that “the abstract ‘firm’ or ‘company’ (and its managers as its spokesmen) regards the shareholders, bankers and creditors as vampires: just as the workers” (Sraffa, D3/12 18/11). The interest of the company is to attribute incomes to these various agents, and to try and keep these income flows as low as possible. Again, these remarks by Sraffa confirm the fundamental importance, in his reflections, of the distinction between the notion of technological necessities and the issue of the division of the surplus price. Thus, in the two last cited passages, it is clear that minimum wages refer to the first element of this distinction, whereas interests, dividends and surplus wages refer to the second. Therefore, interest, surplus wages and dividends are not a part of the necessary costs but are surplus incomes related to a given social and institutional system located “outside economics.” Obviously the representation of necessary costs and the share of surplus in a Classical system of prices cannot be neutral but is related to the representation of “society” inherent in the theoretical point of view adopted by the economist:
Therefore, according to what an economist selects as the “subject” of his economy (usually identifying himself with it), the “surplus” will be different.
The standpoint of capitalist society itself, is that of the ruling class, & therefore the surplus is composed of rent, interest & profit: Marx is the only economist who takes explicitly & consistently this point of view, —& also Ricardo (spec. in Notes to Malthus) but not consistently.
Marshall, who tries to take a classless human standpoint, regards all men as responsible subjects, & therefore all human consumption (he includes savings: this question of the inclusion of savings in income is also a question of who is the “subject”), i.e. wages, interest & rent as parts of the surplus (which he calls the national dividend).
[…] Keynes, who takes the standpoint of the company director, regards only the “entrepreneur’s” (who is responsible for production) (specially defined) profits as surplus, all the factors having to be induced or paid according to contract (he goes so far as to regard past contracts of the company as part of the given circumstances).
33These observations by Sraffa lend support to Cartelier’s reconstruction of various Classical systems of price, each of which is associated with a specific rule of imputation of the price of the surplus. This is also why Sraffa makes it clear that in PCMC he considered “the standpoint of the capitalist society itself” (Sraffa, D2/12/7 161.1).
34He also noted that means of production and labour had to be paid before production, “enabling” the various technical processes to work. By contrast, other incomes are paid after production has taken place, distributing the whole or a part of this net product. In using a specific mode of distribution to share produced net output, the system also responds to the necessity of “inducement” mentioned by Sraffa (see Sraffa, D 3/12 10.97).
4 – Inducement, profit, interest and speculative gains
35This conclusion is often confirmed by Sraffa in the Archives, such as, for example, in manuscript D 3/12/7 34, in which he compares “two sorts of carrot.” The first sort corresponds to “inducement”. The capitalists do not require that their income—in the form of profit (when the capitalist is also the manager) or interest (when managers and capitalists differ) as a part of profit—be paid prior to production, as is the case for the minimum wages included in the advances. They will be paid after production has taken place and will receive a part of the price of the surplus. Therefore, when they decide to begin a productive cycle, the capitalists form expectations about a future income and the prospect of obtaining this income in the future induces them to act. By contrast, wages enable wage-earners to work. This distinction is related to the opposition between cost and inducement.
Cost is means not inducement.
The possibility to produce depends upon the absolute real size of the remuneration: there is no trick possible, it is a physical material necessity.
The willingness to produce depends upon the way in which payment is made: time wages or piece wages, premiums etc (which can be deducted from initial wage, so as to make the total wage equal to physical necessaries), payment conditional upon delivery of the goods (Robertson in Economica) etc. It is a psychological necessity only and can be overcome by tricks, cheating, etc.
Cost in the sense of means belong to natural economics, i.e. they are equal in all forms of society and are independent of institutions.
Cost in the sense of inducements belong to institutional economics, they vary according to “social standards”, examples, envy, desire for equality, for rising in social standing, etc. (slavery, wage earners, managers, politicians, artists, all have the same physical needs but require varying inducements)
[Means are habitual necessaries, as Ricardo says, i.e. physical since that habit is physical; not conventional necessaries, as Marshall says – these are psychological and therefore are part of inducement, not of possibility
37However, this representation of capitalists and wage-earners is furthermore dependent on the characterization of production and exchange as a circular flow—this being the famous “year” that Sraffa inherited from James Mill. Yet, in this context, even if wages are part of the necessary costs and interests and profits of the surplus, “in a recurring process of production ‘before’ and ‘after’ are interchangeable terms (or rather, the objects can occupy either place, as the egg and the chicken)” (Sraffa 3/12/7 34).
38When individual capitalists are replaced by joint stock companies, as is the case for instance in Sraffa’s Lectures on Industry, things become more complex. As we know, management and ownership are separated and therefore profits, interests, dividends and speculative gains have to be made distinct. Under the old type of capitalism, capitalists—who shouldered the investment risk—received residual profits after the payment of contractually fixed and advanced wages, as well as interest payments on debt on the surplus (Sraffa, Lectures on Industry, 7 (3)). Under the trustified type of capitalism, the only contractually fixed incomes are wages. Asset price fluctuations on the stock market affect the incomes of capitalists through the daily variations of the value of the firm and speculative activities. The firm profits are also affected and therefore financial uncertainty becomes a new factor to consider once we enter the period of trustification. However, profits, interest and dividends still remain a part of the surplus. Production is the only source of wealth and of the division of wealth among social groups.
39Sraffa also addressed the difference between industrial profits and speculative gains (Sraffa D1/18 17). He obviously highlighted the differences between these two types of surplus incomes, but he also noted that these differences must not hide the fact that both types of income represent the remuneration of risk. Speculative gains are a reward for risk arising from activities akin to gambling, whereas industrial profits are a reward for risks arising from the activities of the firm (market supply and industrial investment).
5 – Abstinence, waiting, saving and interest
40In some of his unpublished papers, Sraffa also concerned himself with the question of the justification of interest. If it is the case that interest is paid as part of the surplus of the net product, this raises the problem of its economic justification: Why is interest necessary? Is it useful to production or is it only related to the social and institutional features of the society?
41Sraffa is particularly clear and sharp when he refers to the existing economic justifications:
The reward of abstinence
It is a Pity that modern economist should have changed that charming “reward of abstinence” into the more businesslike and far less picturesque “payment for waiting”. It is hard to see what is the point in changing it unless it is a device for making obscure a clear question.
43For Sraffa, it is obvious that abstinence from consumption, that is saving, cannot be considered a serious justification for the remuneration of interest (Sraffa D 1/15 2). Thus, for him, the decision to “abstain” from burning down one’s own house can be compared to the decision to “abstain” from burning down the house of one’s neighbour. In both cases what is at stake is not an intertemporal choice based on economic rationality but the legal consequences of engaging in arson. In both cases house-owners are afraid of the legal consequences, the risk being in the first case of losing the interest, and in the second case of going to prison. Consequently, the justification of interest is not based on individual behaviour revealing some economic or moral motivation. Rather, what matters is social behaviour based on the respect of social and legal norms. We are not far here from John Searle’s conception of “rationality in action” (Searle, 2001).
44For Sraffa, the concept of waiting is no more convincing than that of abstinence, and the same arguments are employed to explain why the justification of interest cannot be located in individual behaviour—except for the agent’s subjectivist decision, a factor which for Sraffa, however, does not provide any explanation:
“Interest is the reward of waiting” may be true from the point of view of the individual capitalist, who, the more he saves the more he gets interest: but from the point of view of the capitalists as a whole, interest is paid, not because they wait, but because they don’t wait: the more they wait, the less interest will they get. The less they wait, the more interest […]
But it may be asked, can it not be said also of wages. No, so long as we use wages in the current sense (i.e. inclusive of costs of producing labour) we cannot. This depends upon the fact that both rent and interest are reckoned net of all the expenses that are necessary for restoring land or capital to their former condition, before production was done, wages are reckoned gross of these expenses. Therefore, while rent and interest can be reduced to zero without affecting in the least the productive capacity in the future of the agents of production to which they are paid, wages, not only cannot fall to zero without entirely destroying the productive ability of the labourer, but cannot even be reduced below the efficiency level without decreasing such productiveness. […]
46We again find here the fundamental difference between wages and other types of income in capitalist society. To a large extent, wages are indispensable for society maintaining itself, whereas other incomes are not and are derived from legal norms and institutions.
6 – Rents
47Here the core question is whether or not rent is part of real costs. Sraffa considered that the answer depended on the type of rent under consideration. Absolute rent is related to the existence of diminishing returns on a given piece of land and therefore can be considered as part of the cost. If producers use a given parcel of land, they have to pay this rent since this can be compared to an input, such as a quarter of wheat, a ton of iron or the daily work of a wage-earner. The situation is different when we consider differential rents related to the different fertilities of several pieces of land. In this case, several pieces of land of different qualities are used to produce a given commodity. Because of the assumption of the uniformity of the rate of profit, the less fertile land will determine the price production associated with a zero rent. Other pieces of land will benefit from a kind of extra-profit corresponding to the value of the differential rent derived from their respective degrees of fertility. The well-known result which derives from this approach is that, contrary to the case of absolute rent, differential rent ceases to be a component of the real costs of the production price and becomes the result of a price effect which concerns the value of the surplus. Therefore, differential rent becomes another surplus income related to the social relations between capitalists and land-owners:
It might be said that if different units pay different rents, and they have equal value, their “costs” will be different (since they must be equal to the difference between price and rent). Not at all. Rent is paid out of the product, but not out of the price of any unit of product. The farmer hands over to the landlord a proportion of the produce: what remains to him has, for all farmers (whether they cultivate good or poor lands) the same cost per unit: and this he must sell at a price that covers costs (wages & profits). Then the landlord may sell his share on the market, at any price he can fetch: he cannot change the amount he sells (including to himself) if the price falls – this is done by the farmer, who has a “necessary price”: in fact, the lan[d]lord sells his corn at the price fixed by the conditions of production of the farmer. Nothing changes, of course, if the farmer sells for the landlord his corn and then hands him the money received – or if the farmer is his own landlord.
7 – Concluding remarks
49In this paper we have looked at the distinction between technical and social factors in order to better understand the difference between necessities and the surplus. Our observations now lead us to four concluding remarks:
50First, the introduction of this distinction requires a depiction of the economic system in terms of a circular flow which assumes “an annual cycle of production and an annual market” (Sraffa, 1960, pp. 3 and 10). This interpretation of Sraffa’s system of production prices fits perfectly with the notion of “Classical system of prices.”
51Second, this system belongs to a “society” defined by its rule of imputation of the price of the surplus. The existence of this rule, in turn, requires us to consider what is “inside” economics and essentially concerns techniques of production, quantities and prices. However, economists must also take into account what is “outside” economics, and in particular must concern themselves with the “bridge” that connects these “inside” and “outside” aspects of the analysis, namely the rules of income distribution resulting from the institutional setting, the forms of organization and from social conventions (Arena, 2014). This analytical architecture is very close to what Garegnani called the “core,” even if it differs from the interpretation of Sraffa’s contribution in terms of long-run positions.
52Third, the distinction between “inside” and “outside” economics is also compatible with a conception of economics that characterizes the economy as an open system, and not as a closed or self-contained system of the type the neo-classical tradition has defended, at least until recently and for more than a century. In fact, the term “self-contained” was first employed by Schumpeter to emphasize one of the main original features he attributed to Léon Walras’s Eléments d’Economie Pure (see Schumpeter, 1939, p. 41; see also Arena, 2006). In other words, Schumpeter interpreted Walras’s theory of general economic equilibrium as the core of a self-contained science, crediting it with having made it possible for economics to acquire its “autonomy” from other social sciences, such as psychology and sociology (via the use of utility and preferences), engineering (via the use of production functions), law, philosophy and political science (via the use of initial endowments).
53Finally, the distinction between technical and social factors is also in line with a morphological interpretation of Sraffa’s contribution based on Wittgenstein’s concept of “surveyable representation.” Applied to Sraffa’s approach, this implies an interpretation of what Cartelier calls a “classical system of prices” as the representation (the “snapshot,” to use Sraffa’s own words) of the economic core of a given society (the capitalist society), rather than simply as a pure contribution to the theory of relative prices (see Arena, 2013 and 2014). A morphological interpretation indeed leads us to distinguish different surplus-based “societies” (to use Sraffa’s term at the beginning of PCMC) characterized by different rules of imputation of the price of the surplus and associated to given techniques of production; these “societies” can be represented by “snapshots” which have in common a family resemblance and therefore offer analogies with Wittgenstein’s “perspicuous” or “surveyable representations” (Arena, 2015).
