Wages, competition and the surplus of labour: a classical contribution to explaining profit

This paper proposes a reconstruction of one of Torrens’ little-known pieces of work on the making and the distribution of income among the social classes. The framework assumes a single-good economy with fixed production coefficients. It differs from the contemporary Ricardian theory (i.e. Sraffa’s) in three ways: (i) the real wage is depicted as the economic outcome of competition in the labour market; (ii) the allocation of the net product between wages and profits is determined with no obligation to fix exogenous variables of distribution; and (iii) the model suggests an innovative concept of surplus labour to define profit apart from the labour theory of value. Finally, Torrens’ approach lays the foundations of an original conception of profit explained by a specific transaction of capitalism economy.