ABSTRACT
Piero Sraffa, a pioneer of the modern ‘classical’ theory of production, distribution and value (see Sraffa, 1960; Unpublished Papers and Correspondence, Trinity College Library, Cambridge, UK, as catalogued by Jonathan Smith), was perfectly aware of these difficulties already at an early stage of his work. As is well known, he adopted the concept of production as a circular flow, which he had encountered in the writings of the physiocrats and the classical economists, and also in Marx. However, he was clear that the assumption of self-replacement of an economic system, which is to be found in these authors and on which he based some of his analysis, was a bold one. In the following note dated 25 March 1946 from his hitherto unpublished papers1 he first points out a difference between
a physical real cost approach to the problem of value and distribution, which he endorsed, and the labour theory of value:
The difference between the ‘Physical real costs’ and the Ricardo-Marxian theory of ‘labour costs’ is that the first does, and the latter does not, include in them the natural resources that are used up in the course of production (such as coal, iron, exhaustion of land) [Air, water, etc. are not used up: as there is an unlimited supply, no subtraction can be made from ∞]. This is fundamental because it does away with ‘human energy’ and such metaphysical things.
