On Sraffa's Standard commodity: is its price invariant with respect to changes in income distribution?

In his 1960 book, Sraffa suggested using a composite commodity,which he called the ‘Standard commodity’, to solveRicardo's search for an invariable measure of value, i.e., astandard capable of isolating the price movements of any othercommodity induced by changes in income distribution. The absencein Sraffa's book of an explicit proof of the invariance propertyof this standard gave rise to many misunderstandings about itsmeaning and its role as an invariable measure of value. In orderto clear up these questions, Bellino (On Sraffa's Standard commodity,Cambridge Journal of Economics, vol. 28, 121–32, 2004)has proposed a ‘proper’ definition of an ‘invariablemeasure of value’, showing that Sraffa's Standard commoditydoes fulfil the requirements of this definition. He claims thatthe fulfilment of this property (but not the constancy of its‘nominal’ price) qualifies the Standard commodityas an invariable measure of value. In this paper, a proof ofthe invariance of the price of the Standard commodity with respectto changes in income distribution is given, and the equivalenceof this property with Bellino's definition of invariance isshown.     

Dealing with the Duhem-Quine thesis in financial economics: can causal holism help?

Acceptance of the Duhem–Quine thesis implies a recognitionthat empirical tests of individual hypotheses are in fact testsof individual hypotheses in conjunction with the networks fromwhich those hypotheses are derived. This leads to a problemin the evaluation of disconfirming evidence: is it the individualhypothesis or the network that is refuted? This paper examineshow financial economists deal with this ‘joint-testing’problem in their empirical evaluation of the efficient marketshypothesis. Causal holists argue that the holistic testing theyespouse circumvents the difficulties surrounding joint-testingproblems. This paper assesses whether a causal holist approachcan resolve the ambiguity surrounding the evidence against theefficient markets hypothesis. It concludes that, without a resolutionof the ontological–epistemological tension in causal holismidentified by Fleetwood (Cambridge Journal of Economics, 2002,vol. 26, 27–45) and a clearer outline of the nature ofholistic testing, causal holism cannot help financial economistsdeal with the implications of the Duhem–Quine thesis forempirical testing.     

The financial system and the Pasinetti theorem

Palley (Inside debt, aggregate demand, and the Cambridge theoryof distribution, Cambridge Journal of Economics, vol. 20, no.4, 465–74, 1996; Financial institutions and the Cambridgetheory of distribution, Cambridge Journal of Economics, vol.26, no. 2, 275–7, 2002) considers the Pasinetti theoremin the context of the credit money system where banks generatedebts endogenously, and claims that the theorem ceases to holdin such a system, being valid only in the loanable funds system.This paper traces the root of Palley's claim to his assumptionregarding the ownership of banks, sets out an alternative (morerealistic) ownership arrangement, and thereby restores the Pasinettitheorem unscathed in the credit money system (at least in thekind Palley must have considered). The paper, however, uncoversthe case where the theorem indeed collapses and discusses thereason for it: the hoarding of a non-interest-bearing asset.     

On Sraffa's Standard commodity

The necessity of expressing the relative price of a commodityin terms of another commodity makes it impossible to distinguishthat part of any change that can be ascribed to the characteristicsof the commodity itself from the part of that change that isto be ascribed to the characteristics of the commodity of reference,i.e., the numéraire. Ricardo (1817) was the first topoint out this problem and the need to find an ‘invariablemeasure of value’, but he was not able to solve the problem.In 1960, Sraffa suggested using a bundle of commodities, thathe called ‘Standard commodity’, to accomplish thisfunction, claiming that it was a standard of value invariantwith respect to changes in the distribution of income. But inSraffa's book there is no explicit proof of this claim. Thisgave rise to many misunderstandings about the Standard commodityand its role as invariable measure of value. This paper proposesa proper definition of an ‘invariable measure of value’,and then proves that the Sraffa ‘Standard commodity’does fulfil the requirements of this definition.     

A materialist development of some recent contributions to the labour theory of value

The paper offers a novel interpretation and affirmation of theopening arguments of Capital, answering the fundamental butneglected question of why labour is the substance of value.Marx's arguments require that two philosophical threads, oftenseparated in the literature on value, be woven together. Theargument that value is the intrinsic ‘content’ makingcommodities exchangeable employs the thread of realism. Theargument that abstract labour is the emergent ‘socialsubstance’ of value employs the thread of dialectics.This interpretation develops the materialist and dialecticalphilosophy of E.V. Ilyenkov and deepens the approach to valuetheory initiated by Ben Fine.     

Announcement: Publishing Online Ahead of Print

We are pleased to announce that in 2005 the Cambridge Journalof Economics will be publishing articles online in advance ofprint publication. Once accepted, articles will enter the     

Hollander, de Vivo and the 'further evidence' for the corn model interpretation of Ricardo: a conspiracy of silence?

This paper reconsiders the debate between de Vivo and Hollanderover the ‘further evidence’ in favour of Sraffa's‘corn model’ interpretation of Ricardo in the lightof Torrens's Letter to Lord Liverpool (1816). It is argued thatthe Letter provides unique evidence of the influence on Torrensof Ricardo's Essay on Profits (1815); and that, contrary tode Vivo, the evidence is not that of a ‘corn model’influence. It is further argued that the manner in which theLetter has been dealt with is unsatisfactory. The shortcomingsin Hollander's position are traced to peculiarities in his long-standinginterpretation of the early Ricardo.     

Some Cambridge reactions to The General Theory: David Champernowne and Joan Robinson on full employment

This essay analyses early reactions put forward by Cambridgeeconomists David Champernowne and Joan Robinson to J. M. Keynes'streatment of the labour market in The General Theory. Champernowne'sand Robinson's critical reactions represented attempts to fillthe gap of the determinants of changes in money-wages, whichthey both identified as a weak spot in the argument of the book.They rejected, albeit for different reasons, Keynes's notionof the point of full employment as an upper limit defined bythe equality between the real wage rate and the marginal disutilityof employment. Instead of Keynes's taxonomy of types of unemployment,Champernowne and Robinson introduced, respectively, the conceptsof ‘monetary employment’ and ‘monetary unemployment’,and of ‘critical levels’ of employment.     

Hicks on monetary theory and history: money as endogenous money

Hicks was never tired of saying that monetary theory is in history.What he meant was that monetary theory is intrinsically relatedto real events, and more importantly that monetary issues needto be analysed in a dynamic sequential context in which timeplays an essential part. He went on developing a particularsequential analysis: the study of what happens within a singleperiod (‘single-period theory’) and the study ofthe linkages between a succession of those periods (‘continuationtheory’). It is suggested that this distinction providesa useful lesson for modern endogenous money theorists.     

The Evolution of Income-related Health Inequalities in Switzerland Over Time

This article presents new evidence on income-related healthinequality and its development over time in Switzerland. Weemploy the methods lined out in Van Doorslaer and Jones (2003,"Inequalities in self-reported health: validation of a new approachto measurement", Journal of Health Economics 22(1), 61–78)and Van Doorslaer and Koolman (2004, "Explaining the differencesin income-related health inequalities across European Countries",Health Economics 22(7), 609–628) measuring health usingan interval regression approach to compute concentration indicesand decomposing inequality into its determining factors. Nationallyrepresentative survey data for 1982, 1992, 1997, and 2002 areused to carry out the analysis. Looking at each of the fouryears separately the results indicates the usual positive relationshipbetween income and health, but the distribution is among theleast unequal in Europe. No clear trend emerges in the evolutionof the inequality indices over the two decades. A small butsignificant increase over the first 15 years is followed bystabilization if not a slight decrease in total income-relatedhealth inequality. The most important contributors to healthinequality are income, education and activity status, in particular,retirement. Regional differences including the widely varyinghealth care supply, in contrast, do not exert any systematicinfluence. (JEL codes: D32, I10, I12)     

Driven to abstraction? Critical realism and the search for the 'inner connection' of social phenomena

This paper examines critically the method of abstraction offeredby critical realism. Our main argument is that critical realismfails to articulate the synthetic side to abstraction. For thisreason, the critical realist method is unable to capture the‘inner connection’ of social phenomena. We arguethat critical realism is prone to extend a method (partially)applicable to the local and specific level of analysis to thehistorical level. The paper develops a method of abstraction,‘systematic abstraction’, that is appropriate tothis historical level. We argue that systematic abstractionconstitutes a radical addition to critical realism, one whichchallenges the fundamental precepts of the critical realistapproach to abstraction.     

New Labour, energy policy and 'competitive markets'

By the end of New Labour's first term four central objectivesof energy policy had become established: ‘cheap’energy, the relief of fuel poverty, a major reduction of carbondioxide emissions, and energy security through maintaining awide diversity of primary fuel supplies, all to be achievedthrough ‘competition’. After surveying New Labourenergy policy documents, the paper argues that New Labour failedto appreciate (i) the extent to which, under such a laissezfaire policy regime, these objectives were mutually inconsistent;(ii) that the apparent successes of energy market liberalisationduring the preceding Conservative Governments had little todo with ‘competition’; and (iii) that the transactioncosts of injecting increasing ‘competition’ intoboth British and European energy systems are likely to exacerbatethe growing threat to energy security. The paper concludes witha brief examination of the implications of transaction costeconomics for the organisational structure of the UK energysupply industry.     

The Dahrendorf hypothesis and its implications for (the theory of) economic policy-making

The sociologist R. Dahrendorf has recently suggested that thereis no and there ought to be no convergence of economic policiestowards some common ideal model. On the contrary, he statesthat ‘diversity is [...] at the very heart of a worldthat has abandoned the need for closed, encompassing systems’.It is shown in this paper that the Dahrendorf hypothesis isdifficult to reconcile with orthodox economic approaches toeconomic policy-making. A perspective on policy-making thatintroduces either fundamental uncertainty or endogenous policypreferences or both is, however, shown to be consistent withthe Dahrendorf hypothesis.