Theories of Value from Adam Smith to Piero Sraffa

384 Pages·2018·1.242 MB·English

by  Ajit Sinha

THEORIES OF VALUE
FROM ADAM SMITH
TO PIERO SRAFFA
SECOND EDITION
Ajit Sinha
THEORIES OF VALUE FROM
ADAM SMITH TO PIERO SRAFFA
This book presents a comprehensive account of more than 200 years
of controversy on the classical theories of value and distribution. The
author focuses on four, perhaps the most critical classics — Adam
Smith’s Wealth of Nations, David Ricardo’s Principles of Political
Economy, Karl Marx’s Capital and Piero Sraffa’s Production of
Commodities by Means of Commodities. The book highlights several
significant differences in the widely celebrated theories of the four
authors as it searches for the ‘classical standpoint’ that separates
them from the ‘moderns’. It also challenges canonical interpretations
to analyse their flaws and weaknesses, in addition to the already
obvious strengths, and critically engages with the major alternative
interpretations and criticisms of the theories.
With a new Afterword that follows up on the debates and
developments since the first edition, this book will appeal to scholars
and academics of economic theory and philosophy, as well as to the
general reader.
Ajit Sinha is Professor of Economics at Azim Premji University,
Bengaluru, India. He has published extensively on the history of
economic theory. He is also the author of A Revolution in Economic
Theory: The Economics of Piero Sraffa (2016) and Essays on Theories
of Value in the Classical Tradition (forthcoming).
“Ajit Sinha’s Theories of Value from Adam Smith to Piero Sraffa
exemplifies the best characteristics of proper scholarship. Sinha has
combined critical yet sympathetic analysis of primary sources with keen
understanding of the secondary literature. He has definite points of view
which are always established by deep analytical arguments combined
with careful attention to the relevant evidence. His book is a splendid
example for all those interested in the best ways of understanding the
relevant links between the past of our discipline and the present.”
— G.C. Harcourt, Emeritus Reader in the History of Economic
Theory, University of Cambridge, Professor Emeritus, University of
Adelaide, Emeritus Fellow, Jesus College, University of Cambridge
“The excess confidence of contemporary economists in the strength
of the existing body of their knowledge has been struck by the recent
crisis. The same excess confidence had often fed the belief that the
history of ideas did not matter. In fact, the understanding of the limits
of any knowledge in the field of social sciences cannot be separated
from the understanding of the conditions of its construction. The work
of Ajit Sinha, as conveyed in the present book, provides a brilliant
illustration of the fact that the history of economic thought, on the one
hand, and economic analysis, on the other, are neither antagonistic,
nor substitutes, but necessary complements.”
— Roger Guesnerie, Honorary Professor and Ex. Chair, Economic
Theory and Social Organisation, Collège de France, Paris, Founding
President, Paris School of Economics
“This excellent book will be of interest to a wide range of scholars,
especially historians of economic thought, and also heterodox
economists in general. … I learned a good deal from reading this book,
especially about Sraffa’s theory, and I recommend it highly despite my
disagreements with some of its interpretations, especially about Marx’s
theory. The quality of scholarship is high throughout. Sinha states in
the Preface that he hopes that his book will be particularly useful for
graduate students and young scholars, and I think it will be.”
— Fred Moseley, Review of Political Economy
“Readers of Ajit Sinha can look forward to a lively and engaging
discourse that displays the author’s meticulous scholarship and
breadth of vision. Both graduate students and teachers of political
economy will find in the book an excellent reader on the state of the
art in classical and Marxian theories of prices. They are also themes
that we may hope will shape the future course of economic science.”
— G. Omkarnath, Economic and Political Weekly
THEORIES OF VALUE
FROM ADAM SMITH
TO PIERO SRAFFA
SECOND EDITION
With a new Afterword
Ajit Sinha
Second edition published 2019
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN
and by Routledge
711 Third Avenue, New York, NY 10017
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2019 Ajit Sinha
The right of Ajit Sinha to be identified as author of this work has been asserted by
him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act
1988.
All rights reserved. No part of this book may be reprinted or reproduced or utilised in
any form or by any electronic, mechanical, or other means, now known or hereafter
invented, including photocopying and recording, or in any information storage or
retrieval system, without permission in writing from the publishers.
Trademark notice: Product or corporate names may be trademarks or registered
trademarks, and are used only for identification and explanation without intent to
infringe.
First edition published by Routledge 2010
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
A catalog record has been requested for this book
ISBN: 978-1-138-33801-2 (hbk)
ISBN: 978-0-429-44199-8 (ebk)
Typeset in Sabon
by Apex CoVantage, LLC
Dedicated to my parents
Satyabhama Sinha and the late Dr B.P. Sinha
and also for
Anne and Alice

CONTENTS
Preface to the Second Edition viii
Preface to the First Edition x
1 The Theory of Value in Adam Smith’s Wealth
of Nations 1
2 The Theory of Value in Ricardo’s Principles 71
3 The Theory of Value in Marx’s Capital 149
4 The Theory of Value in Sraffa’s Production
of Commodities 256
5 Conclusion: On the ‘Classical Standpoint’ 306
Afterword: A Response to My Critics 310
References 346
Index 365
vii
PREFACE TO
THE SECOND EDITION
I am happy that Routledge has decided to bring out a second edition
of the Theories of Value from Adam Smith to Piero Sraffa. It is a testi-
mony not only to how well the book was received by the wider audi-
ence but more importantly to the fact that the intellectual community’s
interest in classical economic theory is alive and well. Though the
book received a few positive and sympathetic reviews, many reviews,
mostly coming from the ‘Sraffian quarters’, ranged from unsympa-
thetic to hostile, particularly to my chapter on Sraffa. In the Afterword
to this edition, I have responded to my critics in the hope of clarifying
and furthering the understanding of intricate theoretical and interpre-
tive issues involved. It has been eight years since the first edition was
published and it is natural that my own ideas on various issues dealt
with in the book have gone through further development and refine-
ment. In this context, I would only mention a few later publications of
mine that the reader may find useful to consult along with this book.
On Smith: ‘Centrality of “corn” in Adam Smith’s Theory of Value’ in
Essays on Theories of Value in the Classical Tradition, 2018, Cham:
Palgrave Macmillan; on Ricardo: ‘A Comment on Sraffa’s “Classi-
cal Economics” ’, Cambridge Journal of Economics, 2017, 41(2),
pp. 661–677, also reprinted in the Essays on Theories of Value in the
Classical Tradition; on Marx: ‘On Marx’s law of the falling rate of
profit: disentangling some entangled variables’, Review of Radical Polit-
ical Economics, 2014, 46(2), pp. 184–89, also reprinted in the Essays
on Theories of Value; and on Sraffa: A Revolution in Economic Theory:
The Economics of Piero Sraffa, 2016, Cham: Palgrave Macmillan.
It is natural for an author to want to tinker with old publications but
following the good advice of the publisher, I have refrained from fid-
dling with the text and have kept the changes only to minor typo cor-
rections. I, however, must point out to one ‘non-typo’ mistake that had
viii
PREFACE TO THE SECOND EDITION
slipped through my fingers last time and remains in the text because of
technical reasons related to reprinting. There is a widespread misun-
derstanding that Sraffa’s Standard commodity solves Ricardo’s prob-
lem of the ‘invariable measure of value’. In the famous ‘Introduction’
to Ricardo’s Principles, Sraffa (1951) argued that Ricardo was worried
that the size of the pie appears to change with changes in how the pie
is cut when it is measured by any arbitrary commodity as the Standard
of measure. This happens because the measuring Standard itself gets
affected with changes in how the pie is divided. Therefore, Ricardo
looked for an ‘invariable measure of value’, which will ensure that the
size of the pie remains constant while it is cut in different proportions:
‘If measured in such a standard, the average price of all commodities,
and their aggregate value, would remain unaffected by a rise or fall of
wages’ (Sraffa 1951, pp. xliv-xlv). The general misunderstanding is
that Sraffa’s Standard commodity developed in his book (Sraffa 1960)
solves this problem, that is, when the Standard commodity is used
to measure the prices and wages then the size of the net output of an
economic system remains constant with respect to changes in the rate
of profits or the wages. I had accepted this general misunderstanding
without much reflection while I was writing this book and it shows
up on page 101 in the footnote 24. Now I am convinced that this is a
mistake. Sraffa’s Standard commodity does not solve Ricardo’s ‘prob-
lem’, if that was Ricardo’s problem. What Sraffa’s Standard commod-
ity ensures is that the ratio of net output to capital remains constant
with respect to changes in the rate of profits or wages and not the size
of the net output itself. Sraffa himself clarifies this in para 32 of his
book (Sraffa 1960, p. 23).
Bengaluru
April 2018
ix