Routledge Dictionary of Economics, Second Edition
neo-Ricardian theory (B2, D0)
A return to the LABOUR THEORY OF VALUE of RICARDO, based on SRAFFA’S seminal work of 1960 which attempted to solve problems such as the formulation of a satisfactory theory of a surplus-producing economy A class analysis, rather than a NEOCLASSICAL approach, is used to show how the surplus produced is divided into PROFITS, INTEREST and RENT. Prices are not explained by labour time values but by a cost of production theory, stating the socially necessary conditions of production. Thus prices= physical quantities of machines and raw materials employed+wages paid to the workforce+a mark-up on those costs.
The theory develops Marxian theory, discarding the view that the tendency of the rate of profit is to fall and the development tendencies of the capitalist mode of production. Neo-Ricardian analysis has been applied to specific aspects of twentieth-century capitalism, especially oligopoly.
References
Fine, B. and Harris, L. (1979) Rereading Capital, New York: Columbia University Press.
Steedman, I. (1977) Marx after Sraffa, London: New Left Books.
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