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«Preliminary notes on the surplus approach to value and distribution1 0. Introduction The “social surplus” is defined generally as a quantum of ...»

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The Physiocrats expressed the social surplus within the “feudal shell” of agricultural production, hence for them only the agricultural sector was “productive” in the sense that it alone was thought to yield the excess of product above cost, hence their calling the social surplus the “gift of nature”.

Yet despite this shortcoming, the fact remains that it was the social surplus that acted as the fulcrum from which the famous circular flow diagram of social reproduction7 in Quesnay’s Tableau originated. In other words, the creation of a social surplus was the origin and initial position from which social reproduction commenced.

This idea we can express in an variant of Quesnay’s famous Tableau, here utilizing the numeric example that appears in the joint work with Mirabeau Rural Philosophy attached to an input-output table analysis introduced in Pasinetti (1977, pg. 7). In our extension of the Tableau we distinguish between use-value magnitudes, all expressed in quarters of “corn” (qtr), and monetary magnitudes, expressed in currency units ($). Under these simplifying assumptions the output of the manufacturing sector consists of manufactured goods made out of “corn”, hence these are “cornmachines” used in the farming sector for the production of “corn”, as well as “corn-finished goods” consumed by the different sectors of production. Under Physiocratic assumptions the manufacturing sector (MFG) is “sterile” in that the MFG output is of exactly the same value as the inputs used to produce it; thus it is “simple productive”, not “net productive”. The output of the farming sector consists of food and raw materials, each expressed in quantities of “corn”, which under the same Physiocratic assumptions is “net productive” in the sense that the resultant output is of a magnitude greater than the input requirements. Finally the “landlord” sector represents the unproductive consumers – i.e. pure consumption without equivalent. Under these simplifying assumptions the monetary value of the surplus product accrues wholly as rent to this class of words to construct what we would call today an


theoretical model of the economy” (Meek, 1962 {reprint 2003}, The economics of Physiocracy, pg. 19).

7 The circular flow concept in Quesnay has little to do with the notion of circular flow one finds in modern introductory “principles” of economics textbooks, the latter of which conceives of the “circuit” as a simplistic positing of a relationship between “agents” (i.e. households and firms) to “markets” (i.e. factors and commodities). The Physiocratic circular flow concept is much more sophisticated and represents abstract macroeconomic sectors of social production and reproduction and attendant necessary conditions of such reproduction. Indeed it was directly from the account in Quesnay that Marx developed his reproduction schemes of Volume II of Capital, the first two-sector model developed in the history of economic thought, which includes the conditions of both simple reproduction as well as reproduction on an expanded scale. On Marx’s own acknowledgment of his debt to Quesnay regarding his schemes, see especially his letter to Engels from July 6, 1863 and especially his important “Digression” on Quesnay’s Tableau Economique which appears as Chapter VI of Theories of Surplus Value, Part I. On the relationship between Quesnay and Marx on this score, see Tsuru’s Appendix A to Sweezy (1942) Theory of Capitalist Development as well as Pasinetti’s (1977) reproduction of Tsuru’s diagrammatic schema. See Peter Liechtenstein (1983, An Introduction to Post-Keynesian and Marxian Theories of Value and Price, Chapter 2) for an account (diagrammatic and otherwise) of the difference between orthodox and heterodox notions of circular flow.

unproductive consumers. And it is from this class of unproductive consumers that the cycle of social reproduction expressed as a circular flow commences.

–  –  –

The solid arrowed lines represent flows of money and the dashed flows of commodities. The “rounds”, both ex ante and ex post, do not represent rounds of production but rather rounds within the circular flow circuits. Under the simplifying assumptions in this adaptation of the Tableau, by the start of circuit round 3 the original conditions of production are once again re-established.

Production once again commences, and a rent (to the tune of $4000) once again accrues to the unproductive consuming class of landlords, thus setting the circuitous cycle off again.

Moving to developments by Economists on the British Isles, one of Adam Smith’s many original contributions to the then-budding science of political economy was precisely the generalization of the Physiocratic “gift” from agricultural production to manufactured production proper. Rejecting the old mercantilist notion that national wealth consisted of hoarded precious metals and the necessity of favorable terms of trade manifest from protectionist international trade policy prescriptions, for Smith the “wealth of nations” was instead expressed in the net productivity of a nations’ industry and workforce. We may perhaps conceive this as the “gift of net productivity” that modern surplus producing society is able to enjoy.

The Classical economists proper, specifically David Ricardo and Thomas Robert Malthus, also conceived of an economic system within a surplus approach paradigm. For his part Ricardo placed great emphasis not only on net productivity, but even more importantly on the distribution of this net productivity to the three original “classes of the community”. Here we find the primal role given to the distribution of the “produce of the earth” as the remunerated revenues of wages to the class of laborers, rents to the class of landlord, and profits to the class of capitalists. Malthus too worked within the surplus approach paradigm, and the fundamental differences between him and Ricardo revolved not around the efficacy of the approach as such but rather on certain nuances within this approach such as the correct measure of value and the possibility and implications of overproduction/underconsumption (what in modern parlance would be associated with a debate of Say’s law), just to name two of the most important points of contention between these English contemporaries.

The developments by Karl Marx, although strictly speaking a critique of then-extant (bourgeois) political economy, also remain within the confines of the surplus approach paradigm. Marx’s developments are actually less clear-cut, and it is here we find a different interpretation of the notion of “surplus”. Whereas with the Physiocrats, Smith, Ricardo, and Malthus, the “surplus” is in the main conceived as surplus product – i.e. a surplus quantum of output over and above the necessary conditions of social reproduction, in Marx we meet quite explicitly with the idea that this surplus product in fact is the material expression of surplus value explicitly conceived as unpaid labor time. This is to say, for Marx the idea of a “social surplus” lay squarely in the exploitative nature of a skewed class societal structure (actually Smith too adopts this; see TSV I where Marx makes this quite explicit).

The idea that the creation of a social surplus was the origin and initial position from which social reproduction commenced is a crucially important point, and is the reason why Marx in his (very favorable) account of the contributions of the Physiocrats in Part I Theories of Surplus Value (hereafter

TSV) begins his notes with the observation that:

“The analysis of capital, within its bourgeois horizon, is essentially the work of the Physiocrats. It is this service that makes them the true fathers of modern political economy” (Marx, 1963, p. 44).

Further into this important chapter we read:

“[T]he foundation of modern political economy, whose business is the analysis of capitalist production, is the conception of the value of labour-power as something fixed, as a given magnitude – as indeed it is in each particular case. The minimum of wages therefore correctly forms the pivotal point of Physiocratic theory. They were able to establish this although they had not yet recognised the nature of value itself…if they made the mistake of conceiving this minimum as an unchanging magnitude…this is no way affects the abstract correctness of their conclusions, since the difference between the value of labour-power and the value it creates does not at all depend on whether the value is assumed to be great or small” (Marx, 1963, p. 45, emphasis in text);

“The Physiocrats transferred the inquiry into the origin of surplus-value from the sphere of circulation into the sphere of direct production, and thereby laid the foundation for the analysis of capitalist production” (Marx, 1963, p. 45);

And lastly, on the feudal remnants as regards the primacy given to agricultural production Marx

notes that:

“The difference between value of labour-power and the value created by it – that is, the surplusvalue which the purchase of labour-power secures for the user of labour-power – appears most palpably, most incontrovertibly, of all branches of production, in agriculture, the primary branch of production…In agriculture [the surplus-value] shows itself directly in the surplus of use-values consumed by the labourer, and can therefore be grasped without an analysis of value in general, without a clear understanding of the nature of value” (Marx, 1963, p. 46).

These passages in Marx warrant full citation because of the vital points that he makes that:

(i) The surplus-product is in fact the use-value expression of surplus-value, i.e. the difference between the value–added by labor and the value that labor is remunerated.

This clearly locates the “surplus” as an expression of unpaid labor, the source of which is the exploitation of the worker under capitalistic social relations of production;

(ii) That this in fact constitute the definition of “capital” – i.e. “capital” represents a quantum of value advanced that commands a magnitude greater than its initial cost;

(iii) That the merit of the Physiocrats was to discern this aspect of capitalistic production, albeit expressed in the feudal shell such that net productivity was exclusively regulated to the agricultural sector, and;

(iv) That it was due to this focus on agricultural (gross and net) product (and the difference engendered therein as regards the surplus) that the problem of value did not arise; or to use a phrase Ricardo’s wrote to James Mill some years later in December 1815, the Physiocrats were not “stopped by the word ‘price’” (Ricardo to Mill, Letter 149; Works VI, p. 348; see also Sraffa’s Introduction to Works I, p. xiv).

These are very important points that we return to, primarily because it is our opinion that they have much resonance with Sraffa’s own interpretation of the notion of the social surplus as revealed through archival evidence.

2. The Surplus Approach in Sraffa’s unpublished archival notes: Sraffa’s peculiar mode of exposition of the surplus We now consider the peculiar mode of exposition that Sraffa ultimately chose for his book, as seen in its first five chapters. There Sraffa adopts a physicalist approach to the transition to capitalist commodity production, a manner of exposition which we feel downplays the distributive aspect of the story. The “ideal type” system of the first type is found in Chapter I’s production for subsistence model. No mention is given to a unitary wage share; we are only told that this “simple society…produces just enough to maintain itself”, and to illustrate Sraffa gives us a simple numeric example that shows the summed economy-wide inputs “necessary” for production are exactly equal to the quantity of resulting outputs. The model for capitalist commodity production is presented in Chapter II’s production with a surplus model. The physicalist nature of the inquiry is retained with surplus production conceived here as the case where for at least one commodity more output is produced than is “necessary” as inputs for systemic production. Here the surplus is conceived as surplus product, resulting in “extra” output left over after the conditions of production have been replaced. The numeric examples of the two chapters highlighting this “physicalist” aspect is seen

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