Production of Commodities by Means of Commodities: Prelude to a Critique of Economic Theory — Piero Sraffa (1960)

Written nearly a century after Capital, Sraffa reexamines one of political economy’s central questions: how prices, wages, and profits are determined.

Rather than grounding value in labor, he argues that an economic surplus can exist simply because production creates more goods than are needed to reproduce the economy, fundamentally reshaping debates over profit, exploitation, and distribution.

1. Prices and profits can be explained without the labor theory of value.

2. An economic surplus is what makes profits possible.

3. Prices are determined by the entire production system, not by supply and demand alone.

4. Wages and profits are two competing claims on the same surplus.

5. Income distribution is independent of how prices are determined.

6. The rate of profit depends on how the surplus is divided between wages and profits.

7. The “Standard Commodity” provides a stable way to measure prices, wages, and profits.

8. Marginal productivity theory cannot adequately explain value and distribution.

9. Production is a circular process in which commodities produce other commodities.

10. The classical approach of Smith, Ricardo, and Marx offers a stronger foundation for political economy than marginalism.

10.1 How Sraffa Responds to Marx

🧠 Conclusion

Sraffa argues that profits do not require the labor theory of value. ⭐

Instead, if production creates more goods than are needed to replace the inputs used, an economic surplus exists. ⭐

The central question then becomes how that surplus is divided between wages and profits. ⭐

By explaining prices through the production system rather than marginal productivity, Sraffa revived the classical tradition of Smith and Ricardo while offering a major alternative to both Marx and mainstream economics.

His work shifted the debate from where profit comes from to who receives the surplus and why, making it one of the most influential works in modern political economy. ⭐