Theoretical and empirical considerations towards the integration of the Leontief and Sraffa systems
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The production equations of the Sraffa system have an agrarian point-input point-output character. This paper presents a generalization of the Sraffa system to cover continuous-input continuous-output processes. The resulting system turns out to be identical with Leontief's dynamic price model. It is shown that the generalized model possesses all the important properties of the usual Sraffa system such as the impossibility of devising a physical measure of capital, possibility of reswitching of techniques, etc. A further generalization to cover fixed capital has been made to show how the problems of joint utilization, transferability of fixed capital between industries and changing efficiency of machines over their lifetimes can be tackled. Some empirical observations on the general relation between the rate of profit, the on-cost markup rate and the rate of capital turnover have also been presented. These form the basis for a new formulation of the dynamic price and output systems that can facilitate the empirical application of the dynamic systems. The new formulation automatically incorporates imperfectly competitive industries into the system of inter-dependent industries.
- GIPE Working Papers