Reading Notes on Value and Distribution in the Classical Economists and Marx - by P. Garegnani, Oxford Economic Papers 26, 1984, 291-325.
Theories of value and distribution that seek to explain distribution and prices by means of price equilibrium between the forces of supply and demand. Keynes refuted the idea that a competitive economy tends toward an equilibrium between the supply and demand of labor, creating an equilibrium wage.
Another refuted idea (by Sraffa and Robinson) is that factors of production can be measured independently of distribution, challenging assumptions that distribution is governed by supply and demand of said factors.
The classical surplus theory, as expressed by Quesnay, states that the (agricultural) produce beyond what is required to pay the wages of the laborers and provide for the next year’s crop are social surplus and available to the society to dispose of without jeopardizing social survival. Production and distribution are linked because the subsistence of the laborer is required for production and reproduction. Smith extended Quesnay’s surplus to apply to all production, not just agricultural production, making profit the equivalent of social surplus.
Thus, the surplus is the share of the product going to non-laborer classes of society. Wages are determined by the habits of the country as the assign what constitutes subsistence. Ricardo argued that any rise in the wages of agricultural laborers would be absorbed by an increase in population or that the new standard of living would become permanently expected.
Adam Smith described the relationship of workmen and masters in wage disputes as unequal: masters can hold out longer in such disputes than workers as workers have a more immediate need for the masters than the masters have for the worker. Smith saw this as keeping the average wage reluctant to rise. Marx extended this idea to relating the average wage to the current pool of un/under-employed laborers willing to work for the lower wage.
The common view among these economists is that the wage is governed not so much by social levels of subsistence, but rather from the institutional circumstances unrelated to social production and therefore ought to be studied separately.
(To be continued…)
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