ABSTRACT
The Sraffian theory of profits starts with what it means for the economy to be "productive" and its ability to produce a physical economic "surplus". After presenting the Sraffian theory of profits, this chapter discusses the three problems with the Marxian theory. Three problems are: As in the case of prices, labor values are not necessary to explain profits, that is they are redundant; The choice of labor power as the input capitalists "exploit" is arbitrary since any other input can be used to tell the same story; The implication that only one input is an "exploitable" source of profits is misleading because in fact capitalists mark-up on the cost of every input they buy. Capitalists achieve positive profits by markups on every input, not just labor. Marxians explain profits as the result of exploiting a unique input to production, labor power. Sraffians explain profits as the result of denying workers in productive economy all of surplus goods they produce.
