Reply to Yoann Verger^☆

Constant returns to scale: Mr. Verger writes that I ignored Sraffa’s warning that he was making no technological assumptions. This is simply false. I remarked quite explicitly that Sraffa makes that claim. My point was that the claim makes no sense. Without constant returns to scale or some close equivalent, there is no good reason why the price system should eliminate all “pure profit.” Mr. Verger suggests that Sraffa would simply include pure profits in his “rate of profit.” But this device would create new problems and confusions. First of all, there is no good reason why pure profit (i.e., monopoly profit, scarcity rents, and so on) should be taken as proportional to the amount of (circulating) capital tied up in production. Besides, if that were done anyway, the otherwise natural assumption of a uniform rate of profit becomes wholly artificial. This is especially clear if one takes seriously Sraffa’s assertion, quoted by Verger, that “The (sic) rate of profits … is susceptible of being determined from outside the system of production.” In that case, how can it absorb pure profit, which may depend on input prices?