The Optimal Lifetime of Capital Goods: a Restatement of Sraffa's Analysis of Fixed Capital

Giuseppe Vitaletti

Review of Political Economy, 2008, vol. 20, issue 1, 127-145

Abstract: Determining the optimal life of capital constitutes an important problem in economic analysis, one that has been extensively addressed in the Sraffian literature. In Sraffa's system the lifetime of fixed capital is posited as a given parameter. In the most recent literature on the topic, the lifetime of capital goods becomes endogenous, the outcome of entrepreneurial decisions concerning alternative techniques. This paper concentrates on the problem as an issue separate from, but not antithetical to, the choice of techniques. By changing some fundamental aspects of Sraffa's framework, which is adopted as a point of departure, a solution displaying interesting properties is worked out. In particular, for the determination of commodity prices, the importance of an equation emerges, in which only intermediate input and labour costs appear.

Date: 2008
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DOI: 10.1080/09538250701622436

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