ABSTRACT
Following Marx and Piero Sraffa’s Production of Commodities by Means of Commodities, a new historiography of economic thought began to assert itself. Sraffa’s book was seen as a revival of classical economics, which was interpreted as representing a surplus tradition in economics. This tradition views itself as fundamentally opposed to neoclassical supply and demand theory. Sraffa, in a sense, completed Marx and established a general equilibrium system in which the rate of profit and the relative price structure were solved based on the technical requirements of production, given the wage. This system of equations contained no supply and demand equations, such as those that populated neoclassical general equilibrium models. The Sraffa system rested on a physical concept of surplus, which in his model was divided between wages and profits, but in earlier Classical writing (Marx especially), it was appropriated by the property-owning classes. This chapter makes the point that Smith’s value theory is a supply and demand theory, not at all similar to Marx’s or Sraffa’s. The main points are that Smith did not hold to an exogenous, subsistence wage, and he stressed human agency in the form of contextual models to explain all social phenomena, relative prices included.
