The Surplus Interpretation of the Classical Economists

The Surplus - 11 The Surplus Interpretation of the Classical Economists Heinz D Kurz Subject Economics History of Thought Key-Topics classical

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11. The Surplus Interpretation of the Classical Economists Heinz D. Kurz Subject Economics » History of Thought Key-Topics classical tradition DOI: 10.1111/b.9780631225737.2003.00012.x 11.1 Introduction The economy that the classical economists from William Petty to David Ricardo experienced typically generated an annual social surplus , which was distributed amongst the propertied classes in the form of rents or profits, and was used for the purposes of consumption and capital accumulation. The surplus refers to those quantities of the different commodities that were left over after the necessary means of production used up and the means of subsistence in the support of workers had been deducted from the gross outputs produced during a year. In this conceptualization, the necessary real wages of labor were considered no less indispensable as inputs and thus agents of production than raw materials, tools, or machines. What became known as the “surplus interpretation” of the classical economists focuses attention on the mature classical economists' approach to how the surplus is distributed and which system of exchange values of the different commodities can be expected to emerge as the result of the gravitation of “market” or “actual” prices to their “natural” or “ordinary” levels, or “prices of production.” In conditions of free competition - that is, in the absence of significant barriers to entry and exit from markets - prices can be taken to oscillate around levels characterized by a uniform rate of profits on the value of the capital advanced at the beginning of the uniform production period and a uniform rate of rent for each of the different qualities of land. The determination of the general rate of profits, the rents of land, and the corresponding system of relative prices constitutes the analytic centerpiece of classical political economy. It was designed to lay the foundation of all other economic analysis, including the investigation of capital accumulation and technical progress; of development and growth; of social transformation and structural change; and of taxation and public debt. The pivotal role of the theory of value and distribution can be inferred from the fact that the latter is typically developed right at the beginning of major classical works: think of Adam Smith's Wealth of Nations (WN, I. vi-xi), or of David Ricardo's Principles (Works , vol. I, chs. I–VI). The importance of this part of classical analysis is also reflected in the following. When in 1951, in his introduction to Ricardo's Principles in volume I of The Works and Correspondence of David Ricardo ( Sraffa, 1951 ), and then in 1960, in his book Production of Commodities by Means of Commodities ( Sraffa, 1960 ), Piero Sraffa reestablished the surplus interpretation of the classical economists, which had been “submerged and forgotten since the advent of the ‘marginal’ method” ( Sraffa, 1960 , p. v), after some notable delay this caused a
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This note was uploaded on 03/31/2010 for the course ECONOMICS 321 taught by Professor H during the Spring '10 term at Kadir Has Üniversitesi.

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The Surplus - 11 The Surplus Interpretation of the Classical Economists Heinz D Kurz Subject Economics History of Thought Key-Topics classical

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