Economics 527 Theory of Value: Classical Origins and Neoclassical Critique
The development of the theory of value and distribution
Fall 2015
Professor:
Email:
Office:
Office Hours:
TA
Email
John Eatwell
je24@cam.ac.uk
KAP 360
Tuesday 4:00pm-5:00pm
tba
tba
Students with disabilities:
Students requesting academic accommodations based on a disability are required to
register with Disability Services and Programs (DSP) each semester. A letter of
verification for approved accommodations can be obtained from DSP when adequate
documentation is filed. Please be sure the letter is delivered to me as early in the
semester as possible. DSP is open Monday – Friday, 8:30 – 5:00. The office is in
Student Union 301 and their phone number is (213) 740-0776.
Course description/Goals:
Although this is a course in the History of Economic Thought, the focus of the course
will be the development of analysis, rather than a concern with history. The approach
will attempt to answer the following questions: What analytical problems was a
particular author trying to solve? How was the solution constructed? Was it
analytically sound?
The class will analyse first, the development of the classical theory of value and
distribution by Smith, Ricardo and Marx; second, the critique of classical theory by
the early neoclassical economists, Edgeworth, Walras and Marshall; third the revival
of classical theory following the critique of neoclassical capital theory by Sraffa; and
finally, the implications of the these three bodies of analysis for modern general
equilibrium theory, and for macro-economics. There will be an emphasis on reading
original sources.
Pre-requisites:
Econ 303 and Econ 305.
1
Requirements:
In-class examinations on 10th September and 1st October, and a term paper on a topic
agreed with the instructor to be handed in no later than 12 noon on Friday, November
27th.
Readings
You will need to read substantial parts of four great classics:
Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 1776.
David Ricardo, The Principles of Political Economy and Taxation, (Sraffa edition,
Volume I of the Collected Works, Cambridge University Press, 1951), 1821.
Léon Walras, Elements of Pure Economics, (Jaffé edition, Irwin, Illinois, 1954), 1874.
Piero Sraffa, Production of Commodities by Means of Commodities, Cambridge
University Press, Cambridge 1960, Part One.
Everyone should familiarise themselves with the set of mathematical results that are
central to the argument of the course: the Perron-Frobenius Theorems on nonnegative square matrices. See G. Debreu and I.N. Herstein, ‘Non-negative square
matrices’, Econometrica, 1953; or, for a relatively simple introduction, L.L. Pasinetti,
Lectures on the Theory of Production, Macmillan, London, 1977; pages 267-77.
A useful source of material is J. Eatwell, M. Milgate and P. Newman (editors), The
New Palgrave: A Dictionary of Economics, 4 volumes, Macmillan, London, 1987.
For analysis of the relationship between theories of value and distribution and
macroeconomics see J. Eatwell and M. Milgate, The Fall and Rise of Keynesian
Economics, Oxford University Press, New York, 2011.
The readings marked with an asterisk should be prioritised.
2
25 August - Foundations of the theory of value and distribution, Smith’s
concepts of natural and market price, Marshall’s long-run and short-run.
*Adam Smith, Wealth of Nations, Book 1, chapter 7.
*G. Vaggi, ‘Natural price’, in The New Palgrave: a Dictionary of Economics.
J. Clifton, ‘Competition and the development of the capitalist mode of production’,
Cambridge Journal of Economics, 1977.
Karl Marx, ‘Introduction to the critique of political economy’, in D. Horowitz, ed.
Marx and modern Economics, Monthly Review Press, New York, 1968
*P. Garegnani, ‘On a change in the notion of equilibrium in recent work on value and
distribution’, in Murray Brown et al., eds., Essays in Modern Capital Theory,
North Holland, 1976
27 August - The “surplus approach” to the theory of value and distribution,
Smith’s labour commanded theory of value, Ricardo’s Theory of Profits and the
labour embodied theory of value.
*David Ricardo, Principles, The Works and Correspondence of David Ricardo,
Volume I, chapter 1; and ‘Absolute and exchangeable value’, Volume IV.
*G. de Vivo, ‘David Ricardo’, in The New Palgrave: a Dictionary of Economics.
P. Garenani, ‘Surplus approach to value and distribution’, in The New Palgrave: a
Dictionary of Economics.
*P. Sraffa and M.H. Dobb, ‘Introduction’, The Works and Correspondence of David
Ricardo, Volume I.
J. Eatwell, ‘The interpretation of Ricardo’s Essay on Profits’, Economica, 1975
1 September - Marx’s transformation problem, Sraffa’s Production of
Commodities.
*Karl Marx, Capital, Volume 3, Chapter 9.
M. Desai, ‘Value and price’, in The New Palgrave: a Dictionary of Economics.
*J. Eatwell, ‘Mr. Sraffa’s standard commodity and the rate of exploitation’, Quarterly
Journal of Economics, 1975.
A. Shaikh, ‘Surplus value’, in The New Palgrave: a Dictionary of Economics.
*P. Sraffa, Production of Commodities, Part One.
I. Steedman, Marx after Sraffa, NLB, London, Chapters 1-4.
3 September - Ricardo’s theories of intensive and extensive rent, modern
extensions of the theory of rent.
*N. Kaldor, ‘Alternative theories of distribution’, in Essays on Value and
Distribution, Duckworth, London, 1980.
*P. Sraffa, Production of Commodities, Chapter XI.
G. Montani, ‘Extensive and intensive rent’, in The New Palgrave: a Dictionary of
Economics.
*J. Eatwell, ‘Returns to scale’, in The New Palgrave: a Dictionary of Economics
J.S. Metcalfe and I. Steedman, ‘Reswitching and primary input use’, Economic
Journal, 1972.
3
8 September - A round-up of topics in classical theory: joint-production, Say’s
Law, Mill’s critique of Ricardo.
J.S. Mill, ‘Notes on N.W. Senior’s Political Economy’, published in Economica,
1965.
*P. Garegnani, ‘Notes on consumption, investment and effective demand, Part One’,
Cambridge Journal of Economics, 1978.
T. Sowell, ‘Say’s Law’, in The New Palgrave: a Dictionary of Economics.
*B. Schefold, ‘Joint production in linear models’, in The New Palgrave: a Dictionary
of Economics.
10 September – Midterm 1
15 September – Jevons, Menger and Walras, foundations of the neoclassical
critique of the classical theory of value and distribution.
K. Vaugn, ‘Carl Menger’, in The New Palgrave: a Dictionary of Economics.
T. Peach, ‘Jevons as an economic theorist’, in The New Palgrave: a Dictionary of
Economics.
*Léon Walras, Elements of Pure Economics, Lessons 38-40.
*J. Eatwell, ‘Competition’, in Classical and Marxian Political Economics, ed. I.
Bradley and M. Howard, Macmillan, London, 1982.
17 September - Walras’s theory of capital, Morishima’s extension of Walras’s
model, existence proofs.
Léon Walras, Elements of Pure Economics, Part V.
*J. Eatwell, ‘Walras’s theory of capital’, in The New Palgrave: a Dictionary of
Economics.
*M. Morishima, Equilibrium, Stability and Growth, Clarendon Press, Oxford, 1964.
Note to Chapter III.
22 September - The critique of the neoclassical theory of profits.
*P. Garegnani, ‘Quantity of capital’, in Capital Theory, ed. J. Eatwell, M. Milgate and
P. Newman
P.A.Samuelson, ‘Parable and realism in capital theory: the surrogate production
function’, Review of Economic Studies, 1962
P. Garegnani, ‘Heterogeneous capital, the production function, and the theory of
capital’, Review of Economic Studies, 1970.
24 September - Solow’s rate of return, Arrow-Debreu equilibrium and the
theory of profits.
*R.M. Solow, ‘The interest rate and transition between techniques’, in C.H. Feinstein,
ed. Socialism, Capitalism and Economic Growth, Cambridge University Press,
Cambridge, 1967.
*L.L. Pasinetti, ‘Switches of technique and the rate of return in capital theory’,
Economic Jourmal, 1969.
4
L.L. Pasinetti, ‘Again on capital theory and Solow’s rate of return’, Economic
Journal, 1970.
*J. Eatwell, ‘Irving Fisher’s ‘rate of return over cost’ and the rate of profit in a
capitalistic economy’, in Essays in Modern Capital Theory, ed. Murray Brown
et al., North Holland, 1976
K.J. Arrow and F.H. Hahn, General Competitive Analysis, Holden Day Inc, San
Francisco, 1971; chapters 1 and 2
J. Eatwell and M. Milgate, ‘Some deficiencies of Walrasian intertemporal general
equilibrium’, in G. Mongiovi and F. Petri, eds, Value, Distribution and
Capital: Essays in Honour of Pierangelo Garegnani, Routledge, London,
1999.
*P. Garegnani, ‘On a change in the notion of equilibrium in recent work on value and
distribution’, in Murray Brown et al., eds., Essays in Modern Capital Theory,
North Holland, 1976.
F. Petri, General Equilibrium, Capital and Macroeconomics, Edward Elgar,
Northampton, Mass., 2004; chapters 1 to 6.
29 September - Classical and neoclassical theories of value and distribution in
the analysis of output and employment.
*P. Garegnani, ‘Notes on consumption, investment and effective demand, Part Two’,
Cambridge Journal of Economics, 1978
*J. Eatwell and M. Milgate, The Fall and Rise of Keynesian Economics, Oxford
University Press, New York, 2011; Preamble and chapters 8, 10, 12 and 13.
J. Eatwell, ‘The long-period theory of unemployment’, Cambridge Journal of
Economics, 1983
1 October – Midterm 2
5