ABSTRACT
This chapter focuses on a better formal framework for analyzing the salient properties of capitalism than the labor theory of value available to Marx in the nineteenth century. Sraffian theory provides a more straightforward and rigorous explanation of price determination in capitalism than does formal Marxian theory using the labor theory of value. It explains why profits are the result of depriving those who produce them of some of the goods they produce, without misidentifying one of many inputs capitalists purchase as the sole source of their profits. Sraffian theory easily incorporates rents for natural resources into our explanation of price and income determination, and helps rigorously to measure what ecological economists call "environmental throughput" so one can formulate sufficient conditions for environmental sustainability, which do not mislead into thinking that environmental protection is incompatible with further increases in material living standards.
