ABSTRACT
Prices are here those of a system in a self-replacing state: prices are equal to unit costs of inputs (valued at the same price as outputs) plus wages (paid at the end of the period of production, for reasons that I shall discuss), plus profits according to a uniform rate. Now, although an actual economic system will in all relevant cases fulfil the condition for replacement in that at least as much of every commodity (if not of every item in the natural environment outside the realm of market valuation) is produced as is used, no actual economic system will ever show uniform rates of profit or wages or, indeed, uniform prices. The system under consideration is nevertheless important because the prices of production can be regarded as reference points for economic analysis. As long as the technological data of the economy, the distribution between the classes, the levels of economic activity and the composition of output are not subject to too drastic changes, actual market prices cannot diverge very far from prices of production as defined by the technology and distribution in use in the period under consideration. The rates of profit, the rates of wages and
prices are not subject to too much dispersion in reasonably tranquil conditions because of competition. A consideration of prices of production as reference points in this sense is all one needs to answer most of the important questions of classical and neoclassical analysis.
