ABSTRACT
Production must be analyzed in value terms as well, that is, with prices explicitly taken into account. How those prices are established—the process as well as the determinants—is an essential part of the analysis, one that must be consistent with the theory of production itself. The most appropriate starting point, in attempting to explain the set of prices that must be established in the long period if the value condition for continuous growth is to be satisfied, is the model that is found in Piero Sraffa’s 1960 classic, Production of Commodities By Means of Commodities. Based on the mathematics of the von Neumann model, the Sraffian approach can be shown to yield a fully determinate price as well as output vector. The costs of production for the enterprise sector are thus largely reducible to the cost of labor, as already brought out in the discussion of the Pasinetti model of vertically integrated production.
