Production, Value and Income Distribution

A Classical-Keynesian Approach

Enrico Bellino

• Publisher: Routledge
• Year: 2021
• eBook ISBN: 9781000522464
• Edition: 1
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

This book investigates the relationship between wages, profits, values and labour employment from a classical-Keynesian perspective. The starting point of this approach is classical political economy (in particular, Smith, Ricardo and Marx), suitably reformulated in modern terms by Sraffa and then integrated with the Keynesian theory of employment. Such an approach proves to be more appropriate in understanding the complexities of current economies and in identifying the instruments to pursue the final goal of economic systems: putting each person in a position to earn what is necessary to live with dignity.

The approach undertaken by these chapters is in contrast to the 'marginalist' or 'neoclassical' school, which constitutes the mainstream of economic analysis. Especially in recent decades, several critical analyses of the present state of economic research have emerged due to the failure of contemporary economic analysis to acutely penetrate and guide the workings of actual economic systems. But these analyses have not always been effectively presented in a coordinated manner. This work presents one possible unifying framework—grounded in a solid tradition of economic thought—which aims to describe the basic forces operating in capitalistic economies and to identify the main objectives to pursue in production economies in order to fully exploit their potential. Most importantly, the focus of such classical-Keyensian analysis concerns the production of goods and services, and this book shows how several factors typical of contemporary (post-)industrial societies thus can be understood in a way that the standard economic theory has not been able to explicate (due to the reduction of everything to a question of exchange).

The book provides key reading for those on master level economics courses. Moreover, it constitutes a solid introduction to modern classical-Keynesian analysis. It may also be of interest to readers who are keen to develop a critical view of economics, political economy and history of economic thought.

Part I Brief historical excursus

DOI: 10.4324/9780429296178-1

A common practice in Continental Europe, when teaching political economy, was to start courses with a historical excursus aimed at reconstructing the evolution of the arguments that lay behind the economic thought presented in the lectures. This custom was gradually abandoned over the last 30–40 years, mostly with the justification that the knowledge of ‘frontier research’ was sufficient to introduce the subject at hand. However, the arguments presented in this book require that the habit be resumed.

Without any pretension to provide a systematic account of the evolution of economic thought over the last two centuries, I will go directly to the origin of some of the central ideas that are considered in this book, to show how they have been formed and how they have changed within the theoretical elaborations on production, income distribution, value of commodities and the determinants of the level of labour employment.

1 Forerunners of classical political economy The physiocrats

DOI: 10.4324/9780429296178-2

1.1 Introduction

The emergence of political economy as an autonomous field of study is normally linked to the publication of Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations, in (1776). Physiocracy is a branch of economic thought that comes before the development of political economy: it is, in all respects, the forerunner of classical political economy. The most influential author of this school is François Quesnay (1694–1774). He was a surgeon linked to the French Royal Court. However, he was also very interested in economic issues. He conceived a representation of the flows of commodities among the various sectors of a stationary economic system (which was essentially the French system of those years), which became immediately famous and known as the Tableau économique. It can be considered the first rudimentary input-output table (see later, Chapter 6), published around the middle of the XVIII century.

1.2 The Tableau économique

The Tableau économique is built on three basic ideas¹:

1. the production process is conceived as a circular process, that is, a process where the same kind of commodities are represented for the means of production and the final products. This characterization immediately puts us in the position to ascertain if and by how much outputs exceed inputs, which leads us to the second basic idea;
2. the notion of surplus, or of net product, that is, a physical excess of the quantities produced with respect to the quantities of the various commodities that have been employed and that should be re-introduced into the production process to keep output levels unchanged;
3. the division of society in classes, according to the economic activity carried out. Quesnay distinguishes between:
   • the productive class, which is constituted by people employed in agriculture and mining; it is called ‘productive’ as these activities produce a quantity of commodities higher than those employed as means of production: it is the class that produces the net product;
   • the sterile class, constituted by artisans and manufacturers; it is called ‘sterile’ as it only transforms what has been produced by the productive class, without adding anything to the net product;
   • the landlord class,...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• About the author
• Preface
• Part I Brief historical excursus
• Part II Inter-industry analysis: A reappraisal of classical political economy
• Part III Income distribution and structural economic dynamics