Pricing of commodities in a mixed economy

Capital theory of the Cambridge School has, during the last three decades, cast doubts on the neoclassical methods of determining prices. The Sraffa analysis, on the one hand, and Neumann analysis, on the other, independently applied to the determination of properties of a Robinsonian golden age, supplied alternative modes of determining prices. The questions is often asked as to why so much stress is put on correct valuation of capital when the real problem is correct allocation of resources to industry.The author examines the system whereby the solution of the Sraffa-Neumann input-output system for prices yields corresponding equations which determine allocations as the dual. Hence, he concludes that unless the system is so posed as to give the correct price equations, it cannot give the correct allocations equations. Thus the insistence on correct theory of valuation of capital stems from a desire to achieve an optimal allocation vector for any planned economy, especially for a mixed economy where a private sector exists and follows price signals.