Mike Woodford Confused: Is Money Like Oil Or Like Sand In The Gears?

The 2026 'Nobel' prize in economics goes to Robert E. Hall and Michael Woodford. I happen to already have an opinion that Woodford's work, and 'New Keynesianism', is misconceived.

Woodford's textbook is widely cited, as I understand it. Robert Solow was Woodford's thesis advisor. He acknowledges Axel Leijonhufvud for introducing him to Wicksell's approach to monetary theory. New Keynesianism is widely drawn on, I gather, by the Federal Reserve and other monetary authorities.

New Keynesianism is named in a misleading way. Keynes, in the General Theory tries to explain persistent unemployment when wages and prices are flexible. The explanation of persistent unemployment with sticky wages or prices or other imperfections is pre-Keynesian. We now know that no tendency can exist for the labor market to clear in any run, even under ideal conditions.

Another issue is confusion about the role of money in neo-Walrasian General Equilibrium Theory. Prices in terms of an arbitrary numeraire are not nominal, that is, money prices. The pure theory is one of barter. Money has no 'essential' role. The Hahn problem is how to modify the theory so that the equilibrium depends, in some essential way, is known as the Hahn problem. You can claim that some commodity or another is stored across time periods, talk about banks, and so on. Rhetorically, money makes the transition to equilibrium smoother. But this way of talking is disconnected with, perhaps contradicted by, the mathematical theory.

Another approach is to model money as a friction. I once explored a cash-in-advance model for a bit. This approach seems confused, too.

I draw heavily on Colin Rogers in this post.

Selected References

• Frank Hahn. 1965. On Some Problems of Proving the existence of an equilibrium in a monetary economy. In Hahn & Brechling (eds.). Theory of Interest Rates
• Frank Hahn and Robert Solow (1995). A Critical Essay on Modern Economic Theory, MIT Press
• Colin Rogers. 1989. Money, Interest and Capital: A Study in the Foundations of Monetary Theory . Cambridge University Press.
• Colin Rogers. 2024. Whitehead's fallacy of misplaced concreteness and the unfortunate uselessness of all monetary-macro theory micro-founded on Walrasian-Pareto general equilibrium theory. Cambridge Journal of Economics 48(2): 235-256.
• Colin Rogers. 2026. Understanding the General Theory after 90 Years. Review of Political Economy
• Michael Woodford. 2003. Interest and Prices: Foundations of a Theory of Monetary Policy. Princeton University Press.

Anwar Shaikh (1945 - 2026)

Anwar Shaikh has died. Those who knew him or are more familiar with his work will have more to say. I know a few elements of his work:

• His development of the humbug production function (Shaikh 1974). The apparent good empirical fit of aggregate production functions is an accounting identity when functional income distribution is stable.
• His reading of Marx's solution to the transformation problem as the first step in an iterative algorithm converging to prices of production (Shaikh 1977).
• Criticisms of neoricardian economics (Shaikh 1981, 1984).
• Empirical application of the labor theory of value with Leontief input-output matrices (e.g., Shaikh and Tonak 1996). That book goes into depth in distingusihing productive and unproductive labor.

I still have not read his comprehensive book 2016 book emphasizing 'turblent regulation' and 'real competition'. Currently, his archives are available on-line.

Shaik was born in 1945 in Pakistan, before the partition from India. He lived as a child in various cities in various countries. His undergraduate degree was from Princeton, in 1965. He spent a couple of years as an engineer and in Kuwait teaching physics, math, and social science. His doctorate is from Columbia in 1973. He lived in Harlem, and participated in various protests at Columbia. He joined the New School in 1972.

I like this story:

"While at Columbia I wrote to Joan Robinson and brashly asked her if she would be willing to speak at the Economics Department. On receiving an affirmative response, I excitedly rushed to tell the Department Chair. To my astonishment, the department originally declined to invite her but, after some pressure from students, finally acceded. When the time came, she strode into the room, resplendent in a coat given to her by Mao, having just come from conversations with Fidel. She proceeded to say sharply critical things about aggregate production functions and the marginal productivity theory of distribution. The hall was full of students. But a mandatory department meeting just happened to have been scheduled at the same time, and only two faculty members from the Economics Department attended her talk. They spent their time during the discussion period attempting to defend standard theory." -- Anwar Shaikh

Somewhere else, I think, he says he did not realize graduate students were not supposed to invite guest speakers.

Update: Obituary from Vivek Chibber in Jacobin

Very Selective References

• Shaikh, Anwar. 1974. Laws of algebra and laws of production: the humbug production function, Review of Economics and Statistics 61(1).
• Shaikh, Anwar. 1977. Marx's theory of value and the 'transformation problem', in Jesse Schwartz (ed.), The Subtle Anatomy of Capitalism Goodyear Publishing Co.
• Shaikh, Anwar. 1981. The Poverty of algebra: critical notes on Neo-Ricardian economics. In The Value Controversy. New Left Books.
• Shaikh, Anwar. 1984. The transformation from Marx to Sraffa: prelude to a critique of the neo-Ricardians’. In E. Mandel (ed.), Marx, Ricardo, Sraffa. Verso
• Shaikh, Anwar and E. Ahmet Tonak. 1996. Measuring the Wealth of Nations: The Political Economy of National Accounts. Cambridge University Press.
• Shaikh, Anwar. 2001. Anwar M. Shaikh. In: Philip Arestis and Malcolm Sawyer (ed.), A Biographical Dictionary of Dissenting Economists, 2nd edition. Edward Elgar.
• Shaikh, Anwar. 2016. Capitalism: Competition, Conflict, Crises. Oxford University Press.

Finding Rents By Solving A LCP

This post is a continuation of this previous one. I solve a numerical example at a given rate of profits. In this example combining extensive and intensive rent, the order of fertility is opposite the order of rentability.

I find that Andreas Almqvist and others have implemented a pivoting algorithm in Matlab for solving an arbitrary LCP. Mathworks has a description of the interface, [x,z,retcode] = LCPSolve(M,u);. The implementation is here. I provide my main routine as an appendix to this post. A better main program would improve the interface with the user.

I solve my numerical example for a rate of profits of 14 percent. Table 1 presents the solution for four increasing levels of final demand. The order of fertility is Type 3, 2, and 1 lands. This order is the order in which different types of land are taken up for cultivation as final demand expands. Both the order of fertility and the order of rentability vary with the rate of profits.

Table 1: Selected Solutions for the LCP

Cost-Minimizing Technqie	Delta	Kappa	Pi	Omega
Final demand	5 tons 5 bushels	10 tons 10 bushels	30 tons 30 bushels	55 tons 55 bushels
Iterations of Lemke algorithm	6	8	14	10
Operated processes	I and V	I, III, and V	I, II, III, and V	I, II, III, IV, and V
Lands	None scarce. Type 3 partially farmed.	Type 3 pays extensive rent. Type 2 partially farmed.	Types 2 and 3 pay extensive rent. Type 1 partially farmed.	All scarce. Intensive rent paid on Type 3.

The order of rentability is the order of lands, from high rent to low rent per acre, at a given rate of profits and a given level of final demand. When Pi is cost-minimizing in the example, rents are approximately 0.0067 and 0.0128 labor-units per acre on Type 2 and 3 lands, respectively. The order of rentability is Type 3, 2, 1 lands, matching the order of fertility. All rents with expanding final demand are extensive rents up to this point.

Further expansion of final demand leads to the Omega technique being cost-minimizing, as shown in the rightmost column in Table 1. No new type of land is taken up for cultivation, and the order of fertility remains unchanged. Landlords now receive a combination of extensive and intensive rent. Rents are approximately 0.03625, 0.030248, and 0.024781 labor-units per acre on Type 1, 2, and 3 lands respectively. The order of rentability is exactly opposite the order of fertility.

Marginalist economics, also known as neoclassical economics, was developed as a generalization of Ricardo’s theory of intensive rent (Campus 1987). It is also an imitation of energetics, a nineteenth century approach in physics emphasizing the conservation of energy (Mirowski 1989). In the example, the owners of the most fertile land, the type of land that is farmed first, ultimately receive the lowest rent per acre. The owners of the least fertile land, the type of land that is farmed last, receive the highest rent per acre. Is this result consistent with the theory of supply and demand? Is it consistent with supposedly intuitive tales some economists tell about prices as signals of relative scarcity?

Appendix: Source Code

% Casts the choice of technique in a model of extensive rent into a LCP and solves it.
%
% Author: Robert L. Vienneau
% Date: 3 October 2026

% 1.0 Define and echo data.
% Define vector of direct labor coefficients.
a0 = [1, 9/10, 3/5, 29/50, 9/20];

% Define input vectors. The first row is inputs of iron; the second of corn.
A = [[9/20, 1/40, 3/2000, 29/500, 2/30]; ...
[2, 1/10, 9/20, 13/100, 13/100]];

n =(size(A))(1);
m = (size(A))(2);

% Define output vector.
B = [[1, 0, 0, 0, 0]; ...
[0, 1, 1, 1, 1]];

% Define land coefficients.
C = [[0, 1, 0, 0, 0]; ...
[0, 0, 49/50, 0, 0]; ...
[0, 0, 0, 2/50, 2]];

k = (size(C))(1);

% Define endowments of land.
t = [100; 100; 100];

% Define final demand (I want to update this often and rerun).
% d = [5; 5]; % Delta. Processes 1 and 5 are operated.
% No land pays rent.
% 6 iterations in outer loop.
% d = [10; 10]; % Kappa. Processes 1, 3, and 5 are operated.
% Type 3 land pays extensive rent.
% 8 iterations in outer loop.
% d = [30; 30]; % Pi. Processes 1, 2, 3, and 5 are operated.
% Types 2 and 3 lands pay rent.
% 14 iterations in outer loop of Lemke algorithm.
d = [55; 55]; % Omega. All processes are operated in the cost-minimizing
% technique All lands pay rent. Type 3 pays extensive rent.
% 10 iterations in outer loop.
% Rents are 0.03625, 0.030248, and 0.024781 labor-units per acre.
% Order of rentability is 1, 2, 3.
% Order of fertility is 3, 2, 1.

% Define rate of profits. (I want to rerun this often and rerun).
r = 0.14;


% Echo data.
printf( "Vector of direct labor coefficients:\n");
a0
printf( "Input matrix:\n");
A
printf( "Output matrix:\n");
B
printf( "Matrix of land coefficients:\n");
C
printf( "Endowments of land:\n");
t
printf( "Final demand:\n");
d
printf( "Rate of profits:\n");
r
printf( "\nNumber of produced commodities:\n");
n
printf( "Number of production processes:\n");
m
printf( "Number of types of land:\n");
k


% 2.0 Define and echo block-structured matrices, from Erreygers (1995).
Atilde = [A; [0, 0, 0, 0, 0]; [0, 0, 0, 0, 0]; [0, 0, 0, 0, 0]];
Btilde = [B; -C];
dtilde = [d; -t];

% Echo data.
printf( "\nNew input matrix:\n");
Atilde
printf( "New output matrix:\n");
Btilde
printf( "New final demand vector:\n");
dtilde


% 3.0 Define and echo matrices for Linear Complementarity Problem (LCP).
% This is my invention, although suggested by Bidard's work.
M = [[zeros(n + k, n + k), Btilde - Atilde]; ...
[(1 + r)*transpose(Atilde) - transpose(Btilde), zeros(m, m)]];
u = [-dtilde; transpose(a0)];

printf( "\nMatrix for LCP:\n");
M
printf( "Vector for LCP:\n" );
u

% 4.0 Solve LCP.
[x,z,retcode] = LCPSolve(M,u);


% 5.0 Echo solution.
x
z
retcode


Finding Rent By Solving A Linear Complementarity Problem (LCP)

1.0 Introduction

This post is revisiting this example of extensive and intensive rent. I find writing up examples of rent difficult because they quickly get too complicated. This time, I'm thinking of confining myself to a small range of the rate of profits, where the order of fertility is opposite the order of rentability. This post is the first exposition I know of that explicitly sets out a LCP for rent. Maybe Bidard has something in French. (I should stick to GIFs, not JPEGs as below.)

2.0 Specification of Parameters as Matrices and Vectors

The data for this problem in the analysis of the choice of technique consist of technology, the endowments of lands of three types, and requirements for use. This data is specified by a number of matrices and vectors.

The technology consists of five production processes. Each process takes a year to complete and completely uses its inputs of produced commodities, iron and corn. Corn is an agricultural commodity, grown on a specified type of land. Each type of land comes out of a production process as good as it was when it went into it. Each process exhibits constant returns to scale (CRS), up to the limit imposed by the endowments of land.

Labor inputs are specified by the row vector, a₀, the vector of labor coefficients:

Each labor coefficient is the physical input of labor, measured in, say, person-years, required to operate the corresponding process at unit level. The inputs of iron and corn required to operate each process at unit level are specified by the input matrix A:

Each column of the input matrix is the physical inputs of iron and corn for a process. The columns of the output matrix, B, are the physical outputs of iron and corn for each process, when operated at a unit level:

The matrix of land coefficients, C, is the last matrix for specifying the technology.

Each column of the land coefficients specifies the services of the types of land, in acres, required to operate a process at unit level. Iron is produced without land services, while corn can only be produced on a type of land. The existence of two processes for producing corn introduces the possibility of intensive rent in a model that would otherwise be one of extensive rent.

Another parameter is the available endowments of land, expressed in the column vector t:

Endowments of each type of land are measured in acres.

Requirements for use, d is the final parameter specified in this section:

Requirements for use is also known as final demand. The first element of the above vector is the tons iron in final demand. The second element is the bushels corn in final demand. I am considering the case when both elements are numerically equal. To calculate the order of fertility, I need to consider the choice of technique as final output expands.

3.0 Conditions on Matrices

The above specifications of vectors and matrices is a numerical example of a more general model. Clearly, there can be any number of industrial commodities, types of land, and processes available on each type of land. Here I specify a set of sufficient conditions that the above example satisfies.

Direct labor is needed as an input to operate each process. All of the elements of the vector of labor coefficients are positive. Commodity inputs are assumed to be needed for each process. Thus, each column of A contains some non-zero entries. By assumption, no pure joint production, such as the production of mutton and wool, is possible. Each column of B contains exactly one positive entry. All the rest are zero. Some process produces each (non-land) commodity. Therefore, each row of B contains at least one non-zero entry.

The input and output matrices have a specific structure. Suppose the produced commodities consist of n - 1 industrial commodities and one agricultural commodity, called corn. More specifically, the output matrix has the following structure:

The subscripts represent the size of each submatrix. The upper left submatrix is the identity matrix. The upper right is a matrix of all zeros. The lower left is a row vector of zeros. And the lower right submatrix is a unit row vector. The first n - 1 processes produce the industrial commodities. The remaining processes produce corn.

The input matrix for land is assumed to have a certain structure too. Land is not needed as a direct input to produce the industrial commodities. The elements of the first n - 1 columns of C are all zero. Each process for producing corn requires an input of the services of one type of land. That is, each of the last m - n + 1columns of C contain exactly one non-zero element. Each type of land is used in at least one process for producing corn. Each row of C contains at least one non-zero element.

Each technique is associated with a solving subsystem (Quadrio Curzio & Pellizzari 2010), as defined by an n-element row vector of labor coefficients and a nxn square matrix of input coefficients:

A solving subsystem resembles the vector of direct labor coefficients and the input-output matrix for a model with circulating capital alone. The first (n ― 1) labor coefficients and columns in the solving subsystems are from the industrial processes specified by the technology. The last labor coefficient and last column are from a corn-producing proces. So far, I have only considered solving subsystems for extensive rent.

Suppose all produced commodities are basic commodities and that the technique represented by each of the matrices in solving subsystems is productive. A commodity is basic if it enters, directly or indirectly, into the production of all commodities. For a matrix representing a productive technology, there exists some level of operation of these processes such that a surplus product remains after the replacement of the commodity inputs.

What about solving subsystems for intensive rent? Consider two processes that produce corn on the same type of land. These would be the last two processes in the numeric example above. Sraffa (1960) shows how a linear combination of these two processes can eliminate the input of the land services. Let this linear process be the last column in a matrix where the first n - 1 columns for the input matrix are the processes for producing the industrial commodities. The corresponding vector of labor coefficients and this matrix constitute the solving subsystem for a technique that pays intensive rent.

Consider the special case in which all the elements of the solving subsystems for techniques that pay intensive rent are non-negative. Furthermore, as with the solving subsystems for extensive rent, all produced commodities are basic commodities, and all of these matrices are productive. I speculate that under these assumptions, a cost-minimizing technique, possibly combining intensive and extensive rent, exists at a given rate of profits, if a feasible technique exists. And I claim such a solution is unique, except at switch points and for a fluke case when a type of land is just fully farmed. The numeric example demonstrates that this special case is non-empty.

4.0 Block Structured Matrices

Following Erreygers (1995) and Kurz & Salvadori (1995), the choice of technique can be formulated in terms of certain block structured matrices. The new matrix of input coefficients is:

The new matrix of output coefficients is:

The new matrix of final demand is:

The new row vector of prices is:

The vector p is the n-element vector of prices of produced commodities, iron and corn in the example. The vector ρ is the k-element vector of rents for the different types of land.

5.0 The Choice of Technique

The problem of the choice of technique is to find a m-element column vector q of levels of operation of the processes and a (n + k)-element row vector of prices that satisfy a certain set of inequalities and equalities.

The quantity of each commodity must meet or exceed the requirements for use:

The above inequality includes the condition that the use of land services cannot exceed those available from endowments. Each process must be operated at a non-negative level:

The two inequalities complete the quantity system.

Two inequalities also specify the price system. The cost of no process falls below revenues. In other words, no extra profits are possible:

In this formulation, a unit of labor is the numeraire. All prices are non-negative:

Finally, the cost-minimizing technique must satisfy two duality conditions. The law of free goods holds. Any commodity in excess supply, including a type of land, has a price of zero:

The law of non-operated processes holds. Any process in which costs exceed revenues is not operated:

Given the rate of profits, a solution to this combination of equalities and inequalites is a cost-minimizing technique.

6.0 Mapping Block-Structured Matrices to a Linear Complementary Problem

I now consider a mapping of these block-structured matrices and vectors to a LCP. The top of one column vector is the excess supply of commodities and land:

The bottom of this column vector is the excess of costs over revenues for each process:

A vector is defined that contains both levels of operation of each process and the prices of each commodity:

A vector is defined for the right-hand side of an equation in the LCP:

The LCP can be specified in terms of these vectors and matrices.

7.0 The Choice of a Technique as a Linear Complementary Problem

The LCP is to find column vectors x and z such that:

All the elements of x and z are non-negative:

Elements of x are positive only when elements of z are zero and vice-versa:

The solution of the LCP specifies:

• Which processes are operated
• The levels of operation of these processes
• The prices of produced commodities
• The rents of land, including rents of zero for non-scarce land.

A large amount of theory exists for this problem in mathematical programming.

8.0 Conclusion

The above LCP differs from my previous exposition of a LCP for the choice of technique in that:

• It supports a theory of rent and is in terms of block matrices that include land.
• It does not allow for a positive steady-state rate of growth.

I know of solutions for my numeric example. The LCP, as I see it, allows one to find bounds on final demand and the rate of profits for which a solution is optimal. I do not know that I need iterate through an algorithm yet to solve thje LCP.

A Bibliography Of Articles On Rent, Natural Resources, and the Space Economy

I have various results in examples with rent, and unsolved problems exist in the literature. Vienneau (2022) shows an example of the reswitching of the order of fertility and of the order of rentability in non-overlapping regions of the parameter space. D’Agata (1983) shows that, with intensive rent, the choice of technique can be non-unique away from switch points. Some wage curves along the frontier can slope up, and a cost-minimizing technique may not exist because of a cycle in a market algorithm. I have a well-behaved example with extensive and intensive rent. So some theorem might demarcate where intensive rent does not cause these issues. In my example, the order of fertility and of rentability are exactly opposite for some range of the rate of profits. In another reswitching example, intensive and extensive rent arise with a technology in which multiple agricultural commodities can be grown on each type of land. I would like to see a simple example of reswitching with exhaustible resources, if that makes sense

The following bibliography is not complete, but the later works are probably sufficient to locate additional earlier works. I probably should have more references for ecological economics.

• Baranzini, M. L., Rotondi C., and Scazzieri R. (eds.) 2015. Resources, Production and Structural Dynamics, Cambridge: Cambridge University Press.
• Barnes, Trevor and Eric Sheppard. 1984. Technical choice and reswitching in space economies. Regional Science and Urban Economics 14(3): 345-362
• Bidard, Christian. 2010. The dynamics of intensive cultivation. Cambridge Journal of Economics 34 (6): 1097-1104.
• Bidard, Christian. 2014. The Ricardian rent theory: an overview. Centro Sraffa Working Papers 8.
• Bidard, Christian. 2018. Ricardo and Ricardians on the order of cultivation. Journal of the History of Economic Thought 40(3): 389-399.
• Bidard, C and G. Erreygers. 2001a. The corn–guano model. Metroeconomica 52(3): 243–253
• Bidard, C and G. Erreygers. 2001b. Further reflections on the corn–guano model. Metroeconomica 52(3): 254–268
• Bidard, C and G. Erreygers. 2020. Exhaustible resources and classical theory. Oeconomia 10(3).
• D'Agata, Antonio. 1983. The existence and unicity of cost-minimizing systems in intensive rent theory. Metroeconomica 35(1-2): 147-158.
• Erreygers, Guido. 1995. On the uniqueness of cost-minimizing techniques. Manchester School 63(2): 145-166.
• Erreygers, Guido. 2026. Land, rent and reproduction. On Walras’s criticism of the classical theory of rent. Revue d'histoire de la pnesée économique 1(21)
• Fratini, Saverio M. 2016. Rent as a share of product and Sraffa's price equations. Cambridge Journal of Economics 40(2): 599-613.
• Gehrke, Christian. 2013. Rent, as a share of the produce, not governed by proportions. In: Levrero, E. S., A. Palumbo, and A. Stirati (eds.) Sraffa and the Reconstruction of Economic Theory: Vol. Three
• Gibson, Bill and Darryl McLeod. 1983. Non-produced means of production in Sraffa’s system: basics, non-basics and quasi-basics. Cambridge Journal of Economics 7(2): 141-150
• Huang, Biao. 2018. An exhaustible resources model in a dynamic input–output framework: a possible reconciliation between Ricardo and Hotelling. Journal of Economic Structures 7(1).
• Ianni, Guido. 2026. Class struggle and the international division of surplus: the distributive surface in the open economy. Metroeconomica
• Kurz, H. D. and N. Salvadori. 2011. Exhaustible resources: rents, profits, royalties and prices. In: Caspari, V (ed) The evolution of economic theory: essays in honour of Bertram Schefold. Routledge, London.
• Kurz, H. D. and N. Salvadori. 2015. The classical approach to exhaustible resources: Parrinello and the others. In: Kurz, H. D. and N. Salvadori N. Revisiting classical economics: studies in long-period analysis. Routledge, London
• Metcalfe, J. S. and I. Steedman. 1972. Reswitching and primary input use. Economic Journal 82(325): 140-157.
• Montani, Guido. 1975. Scarce natural resources and income distribution. Metroeconomica 27: 68-101.
• Montet, C. 1979. Reswitching and primary input use: a comment. Economic Journal 89(355): 642-647.
• Parrinello, S. 2004. The notion of effective supply and the theory of normal prices with exhaustible natural resources. Economic Systems Research 16(3): 311-22.
• Pasinetti, Luigi L. 2015. On the origin of the theory of rent in economics. In Mauro L Baranzini, Claudia Rotondi, and Roberto Scazieri (ed.) Resources, Production and Structural Dynamics. Cambridge: Cambridge University Press.
• Pavlik, C. 1990. Technical reswitching: a spatial case. Environment and Planning A: Economy and Space 22(8): 1025-1034.
• Quadrio Curzio, Alberto. 1980. Rent, income distribution, and orders of efficiency and rentability, in Pasinetti, L. L. (ed.) Essays on the Theory of Joint Production, New York: Columbia University Press.
• Quadrio Curzio, A. and Pellizzari, F. 2010. Rent, Resources, Technologies. Berlin: Springer.
• Ravagnani, Fabio. 2008. Classical theory and exhaustible natural resources: notes on the current debate. Review of Political Economy, 20(1): 79-93.
• Sau, Ranjit. 1986. Ground rent and super profit in the Sraffa system. Indian Economic Review. New Series 21(1): 51-60.
• Schefold, B. 1989. Mr. Sraffa on Joint Production and other Essays, London: Unwin-Hyman.
• Sheppard, E., and T. J. Barnes. 1990. The Capitalist Space Economy. London: Routledge.
• Verger, Yoann. 2015. A critique of attempts to introduce Hotelling's rule in Sraffa's theory.
• Verger, Yoann. 2021. Sraffa and the revenue of the owner of non-renewable natural resources: a note on the literature. In: Sinha, Ajit (ed.), A Reflection on Sraffa's Revolution in Economic Theory.
• Vienneau, R.L. 2022. Reswitching in a model of extensive rent. Bulletin of Political Economy 16(2): 133-146.
• Zaffari, Gabriel and Giacomo Sbrenna. 2026. Sraffa goes to space: spatial elements of political economy. Review of Political Economy 38(3): 840-861.

Marx: Why Have Any Science At All?

I like to point out that Marx had sense. Engels lent him the necessary pence.

The Unpaid Working Day As The Source Of Surplus Value

As demonstrated by Ian Steedman in the 1970s, the working day can be broken out into time paid to the worker and unpaid time. Steedman is echoing results established previously by Michio Morishima.

This decomposition takes the technique in use as given. A complication arises for the general case of joint production. The production of wool and mutton, both from sheep, is often cited as an example of joint production. The proper treatment of fixed capital, such as lathes and other machinery, is another example of joint production.

When calculating the part of the day that is required to produce the commodities that the workers buy out of their wages, the technique is not given. In the circulating capital case, the processes being operated, are scaled down. But in the case of general joint production, a different set of processes might be operated. The labor required to produce a net product of a given commodity basket, contrary to Marx, is not a sum of the labor values of the commodities in the basket. An explanation is provided in the closing chapters of Morishima's and Steedman's respective books. The labor required to produce a commodity basket is the solution of a linear program (LP) in which the processes are operated to produce the basket such that labor input is a minimum.

The decomposition of the working day is not dependent on Marx's theory of value. The unpaid part of the working day is the source of surplus, part of which is paid out as the revenue of the capitalist.

Illusions Of The Market

This decomposition of the working day is not necessarily apparent. The employer of a worker at Walmart sees they are being paid so much an hour. All of labor appears to be paid. Marx is quite aware of this appearance:

"Hence, we may understand the decisive importance of the transformation of value and price of labour-power into the form of wages, or into the value and price of labour itself. This phenomenal form, which makes the actual relation invisible, and, indeed, shows the direct opposite of that relation, forms the basis of all the juridical notions of both labourer and capitalist, of all the mystifications of the capitalistic mode of production, of all its illusions as to liberty, of all the apologetic shifts of the vulgar economists." -- Karl Marx, Capital, Vol. 1, chap 19.

These necessary illusions are not just for wages. A financial analyst does not calculate the rate of return for a firm based on how much a company expends on payroll. Rather the entire capital investment is examined, with conventional accounting for depreciation.

Here is another apposite paragraph from Marx:

"Vulgar economy actually does no more than interpret, systematise and defend in doctrinaire fashion the conceptions of the agents of bourgeois production who are entrapped in bourgeois production relations. It should not astonish us, then, that vulgar economy feels particularly at home in the estranged outward appearances of economic relations in which these prima facie absurd and perfect contradictions appear and that these relations seem the more self-evident the more their internal relationships are concealed from it, although they are understandable to the popular mind. But all science would be superfluous if the outward appearance and the essence of things directly coincided. Thus, vulgar economy has not the slightest suspicion that the trinity which it takes as its point of departure, namely, land - rent, capital - interest, labour - wages or the price of labour, are prima facie three impossible combinations." -- Karl Marx, Capital, Vol 3, chap 48: The Trinity Formula

It is no refutation of Marx to note that things look different in appearance.

Concluding Observations

I try to read Marx under the influence of the later Wittgenstein. Some sort of deeper essence does not exist that appears in empirical reality. Marx tries to be more systematic than Wittgenstein, but both are gathering observations for a purpose. Only a change in our form of life will remove the need for these reminders.

The Reswitching Pattern: A Fluke Case For Macaulay's Duration

This post documents an allusion to a reswitching pattern in a paper by Saverio Fratini.

Fratini refuted Cachanosky and Lewin' attempt to create a justification for Austrian capital theory and, thus, for the Austrian business cycle theory. Their justification is built on Macaulay's Duration as a measure of the average period of production. Duration is the elasticity of a stream of costs with respect to the interest factor (1 + r).

Capitalists want to adopt a technique with a longer Duration around any switch point. But an increased Duration can be associated sometimes with an increased output per worker and sometimes with a decreased output per worker. Austrian capital theory remains unfounded, ad hoc, and arbitrary. So does the Austrian theory of the business cycle.

The working paper version of Fratini's refutation is not behind a paywall. Fratini considers a flow-input, point-output technology, in which two techniques are available for producing a single consumer good: Fratini writes:

Proposition 3. Let R^* be an interest factor such that p_a(R^*) – p_b(R^*) = 0. In a small neighbourhood of R^*, if dp_a/dR – dp_b/dR ≠ 0, then a rise in the rate of interest entails a change of the method in use and the incoming method has an average period of production shorter than the outgoing one.

In the above proposition:

• r is the interest rate.
• R = (1 + r) is the interest factor.
• R^* is the interest factor t a switch point.
• p_a(R) is the cost of producting the commodity with technique A when the interest factor is R.
• p_b(R) is the cost of producting the commodity with technique B when the interest factor is R.

What happens when the derivatives of the cost of producing the commodity, with respect to the interest factor, are equal at the switch point? Then the techniques do not switch at the switch point. Two wage curves are tangent at a switch point. I call this fluke case a 'reswitching pattern'.

Computational Complexity For Linear Complementary Problems (LCPs) And Linear Programs (LPs)

1.0 Introduction

This post just states what I believe I know about the topic. I am interested in LCPs because the choice of the technique can be formulated as an LCP. Most of the references are beyond me.

2.0 Pivoting Algorithms and Interior Point Algorithms

Two types of algorithms exist for both LCPs and LPs:

• Pivoting methods: These methods start out with a feasible solution, more or less. This solution is improved by improving the basis, until an optimal feasible solution is found, if one exists.
• Interior point methods: These methods work outward, iteratively imposing constraints, until an optimal feasible solution is found.

George Dantzig's simplex algorithm is a pivoting method for LPs. The Lemke algorithm, originally formulated for bimatrix games, is a pivoting method for LCPs. The AI overview, from a Goole search, tells me:

"The Lemke algorithm is a general complementary pivoting method for solving linear complementarity problems (LCPs), whereas the Lemke–Howson algorithm is a specialized combinatorial variant specifically designed to find a Nash equilibrium in two-player (bimatrix) games."

For my purposes, then, I want to focus on the Lemke algorithm, not the Lemke-Howson algorithm.

While not the first, the Karmarkar algorithm is an interior point method for LPs.

3.0 Complexity Classes

A general LCP is NP-complete (Chung 1989). The general LP falls into the complexity class P.

A problem is in the complexity class NP if a non-deterministic algorithm exists that can solve it in polynomial time. If so, a deterministic algorithm also exists that can check a solution in polynomial time. Deterministic algorithms exist for solving problems in the complexity class P in polynomial time. Whether P is equal to NP, or merely a proper subset, is the great unsolved problem in computer science. If an algorithm can be found to solve any one of a number of problems in polynomial time, the equality of P and NP follows. Such problems, like the LCP, are said to be NP-complete (Cook 1983).

Some problems in algorithmic game theory are in complexity classes that lie between P and NP, if these complexity classes are indeed unequal (Roughgarden 2010). The class Polynomial Parity Arguments on Directed graphs (PPAD) is one of these intermediate classes.

4.0 Complexity of Algorithms for Solving LPs

The worst case of some interior point methods for solving LPs is polynomial time. The worst case for the simplex method is exponential, which is worse than polynomial time. The simplex method mostly performs in practice in polynomial time and better than interior point methods. For a long time, why this is so was a mystery.

Daniel Spielman and Shang-Hua Teng solved this mystery in 2004. They were awarded the Gödel prize a couple of year later for this work.

5.0 Special Cases of the LCP

Algorithms for solving the LCP in polynomial time have been found in special cases. These algorithms take advantage of special structures or properties of the square matrix that arises in the specification of a LCP. For example, Cottle, Pang, & Stone (2009) note the existence of a polynomial-time, interior-point algorithm for a LCP with a positive semi-definite matrix.

The solution to the LCP for specifying a long period position can be solved in polynomial time if the given rates of growth and profits are equal.

References

• Chung, S.-J. (1989). NP-completeness of the linear complementarity problem, Journal of Optimization Theory and Applications 60(3), pp. 393-399
• Cook, Stephen A. (1983) An overview of computational complexity, Communications of the ACM 26(6): 401-408.
• Cottle, Richard W., Jong-Shi Pang, & Richard E. Stone (1992, 2009) The Linear Complementary Problem, Society for Industrial and Applied Mathematics
• Karmarkar, N. (1984) A new polynomial-time algorithm for linear programming, Combinatorica 4: 373-395.
• Lemke, Carlton (1965) Bimatrix equilibrium points and mathematical programming, Management Science 11(7): 681-689.
• Lemke, C. E. & Howson, J. T. (1964). Equilibrium points of bimatrix games, SIAM Journal on Applied Mathematics 12 (2): 413–423
• Murty, Katta G. (1997) Linear Complementarity, Linear and Nonlinear Programming, Lemgo, Germany: Heldermann Verlag.
• Roughgarden, Tim. (2010) Algorithmic game theory, Communications of the ACM 53(7): 78-86.
• Spielman, Daniel A. & Shang-Hua Teng (2004) Smoothed analysis of algorithms: Why the simplex algorithm usually takes polynomial time, Journal of the ACM 51(3): 385–463.

Marx Did Not Care About Prices

Richard Wolff Responding To A Question On The Transformation Problem

The marginal revolution of the 1870s not only changed the answers. It also changed the questions. Neither the classical economists nor Karl Marx were studying the allocation of scarce resources among alternate uses.

The dynamic vision of classical political economy was about the wealth of nations, and the accumulation of capital. The latter concern meant classical political economists cared about distribution. They treated workers as consuming their wages, the landed gentry as spending their income on luxuries, and capitalists as investing their income back into growing their wealth. The classical political economists found they needed to know something about value or prices to pursue their main concerns. The theory of value was an unavoidable complication.

At one point, David Ricardo deplored the need for this complication:

"...After all[,] the great questions of Rent, Wages, and Profits must be explained by the proportions in which the whole produce is divided between landlords, capitalists, and labourers, and which are not essentially connected with the doctrine of value...

...The greater the portion of the result of labour that is given to the labourer, the smaller must be the rate of profits, and vice versa. Now this portion must essentially depend on the facility of producing the necessaries of the labourer - if the facility be great, a small proportion of any commodity, the result of capital and labour, will be sufficient to furnish the labourer with necessaries, and consequently profits will be high." -- David Ricardo, letter to McCulloch, 13 June 1820

Karl Marx took over this problem, to a considerable extent. In 1904, Hilferding tried to explain:

"In striking contrast with Böhm-Bawerk, Marx looks upon the theory of value, not as the means for ascertaining prices, but as the means for discovering the laws of motion of capitalist society." -- Rudolf Hilferding, Böhm-Bawerk's Criticism of Marx, Chapter 1: Value as an economic category

Joan Robinson had a low opinion of Marx's labor theory of value. But she was very clear that Marx's point was not about prices:

"Marshall did something much more effective than changing the answer. He changed the question. For Ricardo the Theory of Value was a means of studying the distribution of total output between wages, rent and profit, each considered as a whole. This is a big question. Marshall turned the meaning of Value into a little question: Why does an egg cost more than a cup of tea? It may be a small question but it is a very difficult and complicated one. It takes a lot of time and algebra to work out the theory of it. So it kept all Marshall's pupils preoccupied for fifty years. They had no time to think about the big question, or even to remember that there was a big question, because they had to keep their noses right down to the grindstone, working out the theory of the price of a cup of tea." -- Joan Robinson, 1953, An open letter from a Keynesian to a Marxist

I conclude with a bit from Richard Wolff, above:

"Marx's labor theory of value... has more to do with this notion of how labor is allocated in a society... Marx was not - let me put it another way. When I teach in the American university system, we begin by assuming all students want to understand the great mystery of economics which is why is the price of something what it is. Why is the price of a hamburger $5 and the price of a Mercedes much more than that? And we begin. That's very nice. It's perfectly good to make an economics built of that question. I'm going to now exaggerate to make my point. Marx wasn't interested in that, and I'm not either. I got many more interesting things I want to understand about this economy than why the prices of things are what they are. I understand if you're a capitalist you're very concerned about prices, but if you’re somebody else, you might have all sorts - you might be interested, but you have much more higher priority subjects... Marx is coming at it with a different agenda. And so he starts in a different place and takes it in a different way." -- Richard Wolff

Marx was interested in how can there be a return to ownership, at all, in a competitive market economy.

On The Suppression Of Lorie Tarshis' Keynesian Textbook

The General Theory of Employment, Interest, and Money, by John Maynard Keynes, precipitated an intellectual revolution. It presents a macroeconomic theory that supports policies for eliminating severe depressions in capitalist societies. Some economists produced their own works in trying to understand it. I think of Joan Robinson's Essays in the Theory of Employment & Introduction to the Theory of Employment Alvin Hansen's A Guide To Keynes, for example, or A. C. Pigou's Keynes's General Theory: A retrospective view. Given Keynes' attacks on Pigou's work, the last is fairly extraordinary.

Lorie Tarshis wrote the first undergraduate textbook, from a Keynesian perspective, for students in the United States. Initially, it seemed that this textbook would be successful. Here is an account at the time of an ignorant, reactionary intercession into university teaching:

"Once the atmosphere of hysteria is ignited, the most dubious creatures rush to exploit the honest fears of decent Americans. The recent textbook witch-hunt provides an edifying example. In August, 1947, on the letterhead of an organization calling itself The National Economic Council, Inc., a man named Merwin K. Hart wrote to every member of the boards of trustees of colleges using Elements of Economics, an economics text written by Professor Lorie Tarshis of Stanford University. An enclosed review denounced the book for its exposition of the doctrines of Lord Keynes and identified Keynesianism as a form of Marxism.

Hart's letter had an immediate effect. Organizations of small businessmen passed resolutions in his support. Trustees and alumni wrote outraged letters to college presidents. Yet who was Merwin K. Hart? His record had long been known to students of the American proto-fascist demimonde. He revealed his own notion of Americanism some months later when, in a speech before Harvard's Free Enterprise Society, he inveighed against the Marshall Plan and 'the international Jewish group which controls our foreign policy.' And, at the height of Hart's campaign, the ideas of Keynes were under equal brutal and ignorant attack from another source: that is, from the Communists themselves. 'Keynesianism,' wrote William Z. Foster, 'collides with Marxism at every point.' Foster and Hart, in fact, agreed in objecting not only to Keynes but to such proposals as the Marshall Plan as well; by the kind of reasoning Hart uses on other people, he should have had to classify himself as a Moscow agent.

Fortunately enough college presidents knew Hart's record to stand up courageously to the uproar. Dr. A. I. Strand of Oregon State College wrote bluntly to Hart: 'Your hands are dirty and you smell of foul associations, and now you have the effrontery to set yourself up as the protector of American youth! A greater insult to education has never come to my attention.' The American Economic Association eventually appointed a special committee to deal with the attacks on the Tarshis book and on other economic texts.

The issue is more fundamental than simply the fatuousness of mistaking Keynes for Karl Marx. If all Communism meant was deficit financing, then it would be hard to persuade anyone that it was very terrible. A genuinely Communist textbook would be unacceptable for its distortions of fact, as a Communist teacher, who imported his party views into the classroom, would be an incompetent teacher. The deeper issue is the freedom of the teacher to teach his subject according to his most responsible understanding of it, and not according to the ukase of a board of trustees, a legislature, a political party or a foreign country." -- Arthur Schlesinger, Jr. 1949. The Vital Center: The Politics of Freedom. Boston: Houghton Mifflin: 205-207.

Schlesinger turned out to be wrong. Tarshis’ textbook was successfully suppressed. By the way, my sometime correspondent, William F. Buckley, was equally ignorant and vile in God and Man at Yale. Paul Samuelson, in writing his textbook, consciously tried to avoid Tarshis' fate. He wrote lawyer-like.

Schlesinger's book is depressing. He deplores the ‘lurid atmosphere’ created by Attorney General Mitchell Palmer, with his 'notorious red hunts'. He says the House Un-American Activities Committee (HUAC) is going too far. But, as you can see above, Schlesinger, one of the co-founders of the Americans for Democratic Action (ADA), is all about denying communists employment. He says that the US State Department should be promoting the non-communist left (NCL) in Europe and elsewhere. We need a Third Force. Perhaps Graham Greene read this before writing his novel, A Quiet American. Pyle, the title character, sponsors murder and mayhem in Vietnam in order to find this Third Force. Schlesinger did not have his priorites sorted.

If this is the best of liberalism, I do not want it. (I have yet to read Sam Moyn's 2023 book, Liberalism Against Itself: Cold War Intellectuals and the Making of Our Times.) There will be none of Matthew McManus' The Political Theory of Liberal Socialism if liberals remain afraid of socialism.

Histories Of Heterodox Economics: A Small Bibliography

This is an aspirational bibliography in that I have not read Mata's book. I long ago read his doctoral thesis. I probably have forgotton most of the other books. Katzner's book, about the economics department at the University of Massachusetts at Amherst, is only a memoir in the last chapter.

• Donald W. Katzner. 2011. At the Edge of Camelot: Debating Economics in Turbulent Times. Oxford.
• J. E. King. 2004. A History of Post Keynesian Economics since 1936. Edward Elgar.
• Frederick S. Lee. 2011. A History of Heterodx Economics: Challenging the Mainstream in the Twentieth Century. Routledge.
• Tiago Mata. 2026. Radical Expectations: How the New Left Changed Economics. Cambridge.

Sraffa On Marx Being Approximately Correct

Sraffa (1960) is an epoch-making book. It is a part of a demonstration that neoclassical economic theory is incoherent and incorrect.

Ian Steedman created a stir in the 1970s. He turns Sraffa's theory against some aspects of Marx's theory of value. He argues that labor values are redundant in explaining prices of production and the rate of profits. This was a novel accusation. He also argues that many analyses, such as the effects of variations in the length of the working day, can be made at the level of prices of production.

Sraffa did not see his book as refuting Marx, either before or after publication. John Eaton wrote a review of Sraffa's book. Eaton was the pen name of Stephen Bodington. Sraffa wrote him a letter, in 1961, after this review. A draft is in Sraffa's archives:

"Dear Bodington,

It was most kind of you to send me through M[aurice] D[obb] an offprint of your article in Societa. I am grateful for this splendid review, which presents the subject in a more lucid and interesting way than I should have thought possible; it certainly sets a high standard for the discussion which I hope it will stimulate [initiate?].

should like to take this opportunity to try and give a brief answer to the question you hint at, when you express some doubts as to the usefulness of the construction of the 'Standard Commodity'. First of all I am convinced that it does represent a real property of the econ[omic] system; and while this could be described in other ways, it should not be ignored, even if it did not find immediate application. It is, however, applied in one or two cases in the book: For instance, in the proof that there is a unique set of all-positive prices in the case of single-product industries. (the proof isn't without importance for the number of sets of solutions is very large, being equal to the number of commodities in the system; if any appreciable proportion of these sets could be all-positive, a large element of uncertainty would be introduced.) Another application is for defining basic and non-b[asic] comm[oditie]s. (This can be done intuitively in a system of s[ingle]-p[roduct] industries, but in complicated cases of multi-product industries, this or some equiv[alent] math[ematical] construction is, I think, necessary.)

There are besides, many possible applications, which I have not mentioned in the book, in problems discussed by Marx. Take, e.g., the determination of a general rate of profits, from the rate of surplus value. Marx takes an average of the rates of profits, obtained from the proportion of the different commodities on the basis of 'values', and he gets, as he acknowledges, an approximately correct result. An exact result could however be obtained by taking, instead of a simple average, a weighted average: and it can be shown that the appropriate weights can be derived directly from the proportions in which the comm[odities] enter the st[andard] comm[odity]. Similarly, in th application of M[arx]'s notion of the comm[odity] produced by 'a cap[ital] of av[erage] org[anic] comp[osition]': for an exact result the average must be found in the same way. In other words, that comm[odity] is the st[andard] comm[odity].

I doubt, however, that it would at the present [time?] be wise to direct the discussion onto these lines.

With kind regards,

Yours sincerely," -- Piero Sraffa. D3.12.111/132

I cite Eatwell (1975) in explaining how the standard commodity is a commodity of average organic composition of capital. It provides a solution of the transformation problem.

In finding the general rate of profits, Sraffa starts with the value rate of profits in each industry. The value rate of profits is the ratio of surplus value to the sum of the value of variable capital and constant capital, with each found in the system of labor values. The rate of profits in the system of price of production is the weighted sum of the value rates of profits, where the weights are a modification of the weights for Sraffa's standard system. This weighted sum is one way that Sraffa draws a connection between labor values and prices of production. I have written about this before. Perri (2023) explains further.

Inasmuch as Marx's solution of the transformation problem is not exactly correct, it can be and has been set right.

References

• Enrico Bellino. 2006. Banfi, Eaton, Dobb and Johnson review Sraffa's Production of Commodities. Storia Del Pensiero Economico
• John Eatwell. 1975. Mr. Sraffa's standard commodity and the rate of exploitation. Quarterly Journal of Economics. 89(4): 543-555.
• Stefano Perri. 2023. Sraffa's response to Eaton's review: a note on the standard commodity and Marx's general profit rate.
• Piero Sraffa. 1960. Production of Commodities by Means of Commodities: A Prelude to a Critique of Economic Theory. Cambridge University Press.
• Ian Steedman. 1981. Marx after Sraffa. Verso.

Keen On Steedman On Marx

I have been reading Steve Keen's 1990 doctoral thesis. As I understand it, Marx explains the origin of surplus value, in Capital, by the distinction between the use value and exchange value of labor power. The use value is the labor expended under the capitalist's direction. This labor is generally more than the labor embodied in labor power. The labor embodied in labor power, under volume 1 assumptions, is the money wage.

Keen argues that Rudolf Hilferding's treatment of skilled labor is an application of Marx's use value/exchange value dialetic. Skilled labor is to be explained by the training that goes into upgrading a worker's skill. The value created by skilled labor is not to be explained by the transfer of the labor embodied in skilled labor as being depreciated over time. Hilferding writes, "The labor of the technical educator thus transmits, not only value (which manifests itself in the form of the higher wage), but in addition its own value-creating power." The value created by a skilled worker in a hour of time is not required to be in the same ratio to the value created by a unskilled laborer in a hour of time as the ratio of their respective wages. Their rates of exploitation can vary.

Why can this dialectic not apply to fixed capital, also known as machinery? According to Keen, Marx did momentarily so apply it in the Grundrisse. The use value of a drill, for example, is so many holes drilled over the life of the drill. But, at a more abstract level, the use value of the drill is a value-creating power. Just as the concrete labor performed by a particular kind of skilled laborer is, strictly speaking, incommeasurable with a particular expenditure of unskilled labor, so the concrete application of a drill is also incommeasurable. But, if you think of the one as having value-creating power, in units of abstract labor time, why cannot the other have value-creating power? If so, fixed capital is just as much a source of surplus value as labor power.

The point of this post, though, is to record a footnote for my commonplace book:

"Rosdolsky['s] contribution certainly called into question the traditional interpretation of Marx, but as for actual revisions of Marx's theory on the basis of Rosdolsky's work, little of merit has happened. Marxian theory in general has been in turmoil since the publication, at much the same time as The Making of Marx's Capital was translated into English, of Steedman's Marx after Sraffa (NLB, London, 1977). In fact Sraffian criticism of Marx predates Steedman's book - as Meek's second edition clearly illustrates. However Steedman's work was the most accessible of these critiques, and the most strident. Steedman's demonstration of the implications for the labour theory of value of Sraffian analysis has left Marxism in disarray, with many deserting the fold. Meek's introduction and appendix to his second edition of Studies , and his Smith, Marx and After (Chapman and Hall, London, 1977) imply that he was amongst the many inclined to this position. Those that remain are split into two camps, with one calling for the theory of value to be dropped from Marxism altogether (l.c. Carling, Hodgson, Bose) while the other argues that value, somehow, is fundamental. This second camp is itself heavily divided, with some for business as usual along the lines of the traditional interpretation (l.c. Sweezy and Shaikh), others explaining surplus on the basis of unequal exchange (l.c. Desai, Bowles and Gintis), and still others seeking refuge in Marx's discussion of concrete versus abstract labour (l.c. Mohun, Carling, Sekine) or the non-commodity nature of labour (Bowles and Gintis, Mohun, Laibman)." -- Steve Keen (1990).

I should expand the list of references below to contain more than one.

I tend to not like dialectical arguments, and I try to confine my analysis to to the level of prices of production. I need to look at labor values, in some sense, in calculating the labor expended in a stationary state to produce a given net output. I do this, following, say, Samuelson, in noting a switch point exhibits capital-reversing. I can see why some find the level of prices of production too confining. Marx goes further in volume 1. For example, consider his presentation of primitive accumulation and the 'double freedom' of the worker under capitalism. Or his distinction between absolute and relative surplus value. Maybe a good analysis should treat labor values anyways.

In contrast to Steedman, Sraffa did not see his book as refuting Marx. After the publication of his book, he wrote a letter to John Eaton (pseudonym of Stephen Bodington) responding to Eaton's review (Perri 2023). In it, he started with the value rate of profits in each industry. The value rate of profits is the ratio of surplus value to the sum of the value of variable capital and constant capital, with each found in the system of labor values. The rate of profits in the system of price of production is the weighted sum of the value rates of profits, where the weights are a modification of the weights for Sraffa's standard system. This weighted sum is one way that Sraffa draws a connection between labor values and prices of production.

References

• Stefano Perri. 2023. Sraffa's response to Eaton's review: a note on the standard commodity and Marx's general profit rate

Yanis Varoufakis Has A Podcast

Varoufakis Interviewing Richard Wolff

I recently stumbled across the podcast Econoclasts. Usually, he co-hosts with the Wolfgang Munchau, a journalist. The above is an extract from the end of an episode where Varoufakis, by himself, interviews Richard Wolff.

It takes lots of study to show why marginalist economics is wrong. Varoufakis says that he no longer can recommend to students that they do that study. He asks Wolff what he does. Wolff responds:

"Well, here's what I tell them. And again I share much of what you have to say. In the ten years I spent at Harvard, Yale, and Stanford, I had to learn, I had to teach neoclassical microeconomics and Keynesian macroeconomics and all the rest. I believed then as I guess you did, too, that this was necessary. I had to understand how the system, not just how it worked, but how it rationalized itself, how it imagined itself to be working.

I did learn early on that the system also understands that dichotomy. So, it has economics departments who develop the ideological cover, as you put it, the rationale, why it all works out for an optimal - look at the language - an equilibrium - more silly language, you know - a system that is neither optimal nor presenting itself as all of that.

And then they have a business school where you actually learn a little bit about how to market something, how to go. They recognize the separation of function.

So, I say to students, you have to do something else, which I had to figure out how to do. I'm going to save you the time. And they look at me, but this is what I do, and I'm answering your question. You have to learn Marxian economics. You do. You have to immerse yourself in the volumes of Capital, in the other literature. Not because everything is clear there, it isn't. Not because there aren't contradictions, there are. Not because there's nothing in neoclassical economics you can't make use of. It's not that.

It's that if you think what I am doing is interesting, it's not me. And it's not what I got at Harvard and Yale. What it is, it comes out of trying to squeeze useful understanding out of the Marxian tradition, separated from the propaganda and from the mistakes and the lessons that weren't learned that should have been, in order to do that - you have to do, and the university cannot do that for you precisely because it fits your description. It’s not - it could care less.

It never was interested in - I never had a class in 10 years and except for Paul Baran, I never had a class in which anybody ever put together a Marxian idea, a neoclassical idea, and then went with us as students through what they had to say, where they were silent and shouldn't have been, where ' etc., etc. None of that was ever done. I had to do all that myself or with a few other students. But the payoff is you get a way of thinking, a way of posing questions that you can then use for all of the new material that Marx, you know, died long before it became relevant.

You know that you try to do that when you try to understand the Cloud. What does the Cloud make possible? What are these conglomerations of wealth and power able to do that capitalists couldn't do before? Where does that take us? Where are the obstacles? What is our best - You need a critical mentality.

And I know many people believe they can develop that on their own. I don't think so. I think if you really want to get beyond Marx, which is fine, you got to go through it to get beyond it. You can't skip over it At least, I’ve never seen anyone pull that off." -- Richard Wolff

I learned Marx on my own. It would be challenging to get through even the first volume of Capital in a semester. The teacher could use one of a number of textbooks. (For some reason, I do not have Resnick and Wolff's Contending Economic Theories in that list.)

Ludwig Von Mises Led A Cult In New York City

When Von Mises came to American, he could not get an academic position. He ended up at New York University, funded by the Volker fund and the Foundation for Economic Education (FEE), not the normal academic position. He had a seminar, so to speak, from 1948 to 1969. I should find these experiences inspiring. Von Mises started his seminar past retirement age, when he was older than me

His students consisted of the usual youngsters seeking credit for a grade and a weird cohort of adults, who attended year after year.

"As Robert Nozick … said, 'In 18 years of teaching at Princeton and Harvard, I never encountered any professor teaching a seminar where non-degree-seeking adults would continue to attend year after year . . . [Mises was] unique in attracting mature minds without demanding discipleship.'" -- Brian Doherty. 2008. Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement.

Israel Kirzner describes what many saw as Von Mises’ arrogance:

"But by the time I was at his seminar, he was of advanced age and had heard all of the arguments in favor of other points of view. There's no doubt he felt convinced that he knew what was valid and invalid. That awareness on his part was fairly obvious to anyone, from body language if you like, and it could be that some members of the seminar might have felt put off." -- Kirzner, quoted by Doherty

Kirzner also comments on the weird cohort:

"Another aspect of those years that has to be kept in mind is that for various sociological reasons Mises became surrounded by people who were very eager to protect him. Some of those well-meaning individuals may have projected an image Mises is not to be criticized, not to be disagreed with. That was unfortunate..." -- Kirzner, quoted by Doherty

Margit Von Mises, the great man's wife describes the behavior of his acolytes:

"four or five students had formed a group in order to protect the professor against dissident students who opposed his views. They occupied a table ahead of the class next to the professor in order to be ready to protect him against any possible violence." -- Margit Von Mises, quoted by Doherty

Murray Rothbard was one of these followers. Others included Bettina Bien Greaves, Richard Cornuelle, Percy Greaves, Leonard Liggio, Ralph Raico, George Reisman, Hans Sennholz, Louis Spadaro, and Leland Yeager. George Koether was another admirer:

"Mises's friend George Koether, an editor at Look magazine, commissioned a bronze bust of the great scholar." -- Doherty

I have not exhausted the oddities of Von Mises' seminars. These cult meetings were important in preserving the Austrian school until the 1974 South Royalton Conference on Austrian Economics