Faculty of Economics and Business Administration Publications Database

Only a Few Techniques Matter! On the Number of Curves on the Wage Frontier

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Abstract:

Wage curves have become the main tool for the analysis of technical choice, but what does their envelope look like? Joan Robinson used to say that one should expect one technique to dominate all others, independently of distribution. It sounded like a polemical remark to counteract all reference to neoclassical substitution, and she was more cautious in her writing, but the drawing on the blackboard resembled Figure 3.1, w1, w2 representing two techniques. (The reader not familiar with the Sraffa analysis and the notation used here can pick it up in the first paragraph of Section 3.2.)

The surrogate production function, on the other hand, looked like that shown in Figure 3.2. The maximum rates of profit R1, ..., R4 of the individual techniques were in inverse permutation to the wage rates paid at r = 0.

Sraffa spoke of a ‘rapid succession of switches’ of techniques along the envelope, and there was reswitching and reverse capital deepening (Figure 3.3).

Reverse capital deepening is opposed to the equilibrating mechanism postulated by neoclassical theory. Consider the Samuelson case and suppose the economy is in a state of full employment at P0 in Figure 3.2. Suppose further that real wages are forced up by trade union action (money wages rise more than prices). It then becomes profitable to use the technique of wage curve w2 (r) for which the intensity of capital is higher.

Year: 2013
Book Title: Sraffa and the Reconstruction of Economic Theory
ISBN: 9780230355262
Adress: Basingstoke
Editor: Enrico Sergio Levrero, Antonella Palumbo, Antonella Stirati
Volume: 1
Publisher: Palgrave Macmillan
Pages: 46 - 69
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