In the understanding of this author Sraffa rationality may be interpreted as implying a price system which ensures that the factors of production as a whole
earn the same reward per unit output in whichever sector they are employed, so that there is no tendency for them to move in search of better rewards. This implies
that the structure of total output at these prices must exactly correspond to the structure of value-added in the economy, and therefore also to the structure of
material input costs which are the residual when value-added is subtracted from total output. This requirement implies that wp = pA, where A stands for the
familiar Leontief matrix of direct input coefficients and represents the ‘generator’ a
1
b
1
, in this particular case. This we simplify by interpreting as output only those products which are sold by the producing sector outside itself, thus reducing the
generator matrix to
A =
b
1
a
1
which makes the model precisely conformable to that discussed in the previous section with Eq. 6a applicable as well as all the subsequent commentary. In
particular any time-path of the physical efficiencies e1t and e2t will be reflected in the timepath
e
2
te
1
t followed by the relative value-price of the first sector.
9. Marxian labour values and production prices
Ever since the publication of Stalin’s Economic Problems of Socialism in the USSR which gave legitimacy to a resumption of research and discussion on the
‘Law of Value’ under Socialism in 1952 Soviet economists have cast about for a new price system to bring order into the chaotic system of administrative, historic,
or randomly fixed prices inherited from the past. Their quest was in the Marxist tradition not for a system of ‘functional’ prices which would push the economy in
a certain direction, e.g. optimise the allocation of resources, but rather for what I have elsewhere called a ‘diagnostic’ system which would claim to penetrate or see
through the veil of actual, adventitious prices to some more illuminating underlying reality, more clearly distilling what was thought to be the essence of the social
system, such as the Marxian ‘labour values’ or ‘production prices’ to which we must now turn.
The Marxian labour values impute value prices 6 which would equalise the ratio of ‘surplus’ over prime costs to wage payments in every sector of the economy,
thus demonstrating a uniform ‘rate of exploitation’ everywhere and with it the homogeneity of the working class as an object of exploitation of their capitalist
oppressors. To make this explicit it is convenient to ‘augment’ the technological input coefficients A by the ‘biological’ requirements of the workers directly em-
ployed in each sector, i.e. the wage-financed consumption per unit earnings, say E,
additionally needed to secure each unit of output. In this way the ‘augmented technology matrix’ F = A + E is formed, which enables us to establish the list of
prime costs for material and labour. The requirement that the surplus generated at these costs be a uniform proportion, say e
, of the wage payments can then be
put in the form 61 − F = e
6 E, or
6 1 − e
E1 − F
− 1
= 61 − e
E = 0
7
where E = El − F
− 1
will be recognised as the matrix of ‘total’ input coefficients which take account not merely of labour inputs carried by the material products
absorbed in production, but also of those inputs necessary to ‘feed’ or sustain the workers of the sector in question by means of subsistence- wage-financed con-
sumption, thus presenting a higher degree of ‘indirection’ than the ‘full’ coefficients 1 − A
− 1
. The Marxian labour values 6 are thus shown to be the left-hand
eigenvector of E , and their generators are the total labour input coefficients in the
sense just explained. It is to them that Eq. 6 has to be applied to calculate the changes in value prices in the wake of technological change.
In the Soviet price debates of the 1950s and 1960s one group of economists favoured a switch or transition from the chaotic operative price system to or
towards the labour values as given by Eq. 7 on the grounds that this would be the system ‘appropriate’ to a socialist economy which had overcome capitalism
with the ‘rate of exploitation’ aptly renamed ‘the rate of withholding’ or some such term. Another group, however, argued that this system would only be appropriate
to the ‘full communist’ stage which had not been reached yet, and that the system to be favoured was still a price structure which would equate the rate of profit on
prime costs material plus labour and therefore of the surplus to the prime cost, say f
, the system defined as ‘production prices’ in Marxian parlance, say u, where
uI − f F
= 0, with F = FI − F
− 1
8 The generators of these value-prices to which Eq. 6 applies are evidently the total
prime cost coefficients per unit output.
10. Eigenprices
