Essays on Theories of Value in the Classical Tradition is an outstanding collection of essays that deals with the theoretically most critical aspects of the controversy surrounding Classical theories of value and distribution. The author, Ajit Sinha, argues that the concepts of ‘human labour’ and ‘surplus product’ are the two crucial concepts around which the theoretical problem of Classical Economics revolves. The question of how to measure the net output and its distribution to various classes, however, gets entangled with the question of what is the ultimate cause of value of a commodity in the controversy on the theory of value.

Adam Smith reckoned that if the ultimate cause of value of a commodity could be found then all the commodities could be reduced to this homogeneous unit, which in turn could be used as an unambiguous Standard to measure the changes in the net output produced. This led Adam Smith to think of Man’s primordial state when he must have had to act directly against Nature to wrest his basic needs of survival from it. For Adam Smith this primordial act of Man against Nature is both an act of production as well as an act of exchange. Expenditure of labour in the process of production is also a sacrifice in terms of ‘toil and trouble’, which is a payment of price for the product appropriated from Nature. Thus all prices or all economic values must be measured by this ‘original’ or the ultimate price, which measures the ‘real’ value of the commodity as opposed to the ‘nominal’ value measured by the money-commodity as gold or silver.

Ricardo realized that Adam Smith’s measure of value had a problem. If the value of a commodity is measured by the ‘sacrifice’ of labourers then the rise or fall in the wages must cause the value of commodities to fall or rise, which would result in the fall or rise in the measure of the net output. Ricardo argued that this cannot be so because the size of the whole should remain constant no matter in what proportions it is divided into its parts. Therefore, he rejected the ‘subjective aspect’ of Adam Smith’s measure of value and argued for human labour as the ultimate cause of value because it is the ultimate input in the production of a commodity — all inputs in the production of a commodity can be, in the final analysis, reduced to human labour. From this perspective, Ricardo needed to show that all changes in the relative values of commodities can be traced back solely to changes in the direct plus indirect total human labour used in their production. But Ricardo had to admit that once it is accepted that technique of production of various industries may have different ratios of direct to indirect labour then in that case it cannot be denied that changes in wages will have independent effect on relative values of commodities. All Ricardo’s efforts to find a Standard of measure of value that could ensure his fundamental proposition remained unsuccessful.

Marx does not follow the path of Adam Smith or Ricardo in identifying human labour as the ultimate cause of value. For Marx, the field of economics itself is defined by human labour —economics is all about human labour. The foundation of any social formation is a ‘mode of production’, which is an ensemble of human relations that Men inter into with each other in order to (re)produce their material conditions of existence. In this context, Marx was able to distinguish ‘prices’ from ‘values’ as separate theoretical concepts. Values of commodities are simply congealed or embodied human labour in absolute terms, whereas prices are relations between commodities through which values make their appearance. For Marx, there are two kinds of human relations that must be taken into account in order to understand the relation between values and prices of commodities. One relation is the social division of labour in a society, which necessitates exchange of commodities for its reproduction. When one looks at this relationship in isolation then one finds that the values of commodities relate to prices as their mirror images. However, there is another human relationship that needs to be considered. This is the relationship between Men that dominates the productive activity and therefore is prior to the exchange of commodities — the notion of ‘surplus’ comes into being at this stage itself. This relationship determines how the values produced by the labouring activity is distributed among the various recipients of income. Marx’s contention was that the rules of income distribution of competitive capitalism create a refraction in the mirror image of the relations of values of commodities in terms of their prices. All the complications of Marx’s transformation of values to prices of production is related to his attempt to prove that prices are nothing but the refracted images of the values of commodities — a proposition he could not prove because this too implicitly relies on the Classical proposition that human labour is the ultimate input in the production of commodities.  

Sraffa rejects the classical proposition that in the final analysis production can be reduced to the originary act of Man against Nature on the grounds that once commodities enter in the production process as inputs then it is impossible to reduce the commodity residue to zero by going back and back in the production chain — the road to the primordial state or the ultimate cause of value is blocked forever. He also understood that Marx’s insistence on human labour as the essence or the substance of an economy was metaphysical. From a purely scientific point of view human contribution to production is nothing but a contribution of mechanical energy, which in essence is no different from animal’s energy or even energy contributed by machines in the production process. Thus looking at production from a scientific or rather a technical point of view, one finds that production entails certain amounts of commodities used or consumed as inputs that results into net outputs. An economic system gets defined by the manner in which these commodity inputs and outputs get intertwined. The discovery of ‘commodity residue’ reveals that the maximum rate of profits or the productivity of a system of production is a physical property of the system — profit is a non-price phenomenon. On the basis of this, Sraffa goes on to show that production and distribution of the net output is independent of the determination of values or prices of commodities; however, values are dependent on the distribution of income. To establish these propositions one does not need to reduce commodities to human labour, there is enough information in the physical input-output data to discover an ‘average commodity’ of the system, which Sraffa called, the ‘Standard commodity’. All one needs is to use the ‘Standard commodity’ as the Standard of measure for values and wages to establish his fundamental propositions.

Ajit Sinha is Professor of Economics at Azim Premji University, and author of Essays on Theories of Value in the Classical Tradition (Palgrave Macmillan, 2019 – available in print only) and A Revolution in Economic Theory: The Economics of Piero Sraffa (Palgrave Macmillan, 2016).​​​​​​​  ​​​​​​​