Contents List of Tables, Figures and Diagrams vii Acknowledgements viii List of Contributors ix Introduction 1 Guglielmo Chiodi and Leonardo Ditta Part I Reactions 1 Book Reviews on Production of Commodities by Means of Commodities 23 Enrico Bellino Part II Economics 2 Sraffa’s Prices 45 S. N. Afriat 3 Sraffa after Marx: An Open Issue 68 Riccardo Bellofiore 4 The Classical ‘Surplus’ Approach and the Theory of the Welfare State and Public Pensions 93 Sergio Cesaratto 5 Sraffa 1926 and Sraffa 1960: An Attempt to Bridge the Gap 114 Sergio Nisticò 6 Savings, Investment and Capital in a System of General Intertemporal Equilibrium – an Extended Comment on Garegnani with a Note on Parrinello 127 Bertram Schefold Commentary by Sergio Parrinello 7 Beyond Capitalism: Sraffa’s Economic Theory 187 Guglielmo Chiodi 8 Notes on Early Development Economics’ Story and Its Relation to Sraffa’s Contribution 199 Leonardo Ditta v
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Contents
List of Tables, Figures and Diagrams vii
Acknowledgements viii
List of Contributors ix
Introduction 1Guglielmo Chiodi and Leonardo Ditta
Part I Reactions
1 Book Reviews on Production of Commodities by Means of Commodities 23Enrico Bellino
Part II Economics
2 Sraffa’s Prices 45S. N. Afriat
3 Sraffa after Marx: An Open Issue 68Riccardo Bellofiore
4 The Classical ‘Surplus’ Approach and the Theory of theWelfare State and Public Pensions 93Sergio Cesaratto
5 Sraffa 1926 and Sraffa 1960: An Attempt to Bridge the Gap 114Sergio Nisticò
6 Savings, Investment and Capital in a System of GeneralIntertemporal Equilibrium – an Extended Commenton Garegnani with a Note on Parrinello 127Bertram SchefoldCommentary by Sergio Parrinello
7 Beyond Capitalism: Sraffa’s Economic Theory 187Guglielmo Chiodi
8 Notes on Early Development Economics’ Story andIts Relation to Sraffa’s Contribution 199Leonardo Ditta
1. This edited collection of essays is the result of a selection of papers presented atthe International Conference in remembrance of Piero Sraffa (1898–1983), held inRome in 2003 with the title ‘Sraffa or An Alternative Economics’. The essays havebeen subsequently elaborated, amended and enlarged by their respective authors.
The basic motivation for organizing the Conference with precisely that title,and the idea of publishing a collection of essays to be presented in a volume liesin the editors’ firm belief that Sraffa’s theoretical contribution, Production of Com-modities by Means of Commodities (PCC) has served more to criticize vital parts oftraditional economic theory (hereafter named post-classical, although it is usuallyand improperly called neoclassical) than to exploit its considerable potential for apositive construction of an alternative framework in economics. Thus, by setting outin directions different from those currently pursued, a more general interpretationand a more effective use of Sraffa’s theoretical contribution may be facilitated. Inturn, the effect may be to provide a fully-fledged alternative paradigm to that ofpost-classical economic theory and to challenge the continuing dominance of awide-spread economic culture based on it.
Since the late nineteenth century, there has been an ever-increasing dominationby an approach to economics whose roots can be traced to a broad class of models,all springing from post-classical economic theory. This dominance is still currentand apparently unassailable, notwithstanding the heavy criticism which at differ-ent times and in different ways has been made of that theory – criticism that hasbeen aimed at its theoretical structure and policy implications.
2. Unfortunately, Sraffa’s PCC seems to have followed what Sraffa himself sug-gested happened to the old classical economists, viz. their standpoint having been‘submerged and forgotten since the advent of the ‘marginal’ method’, (1960), p. v.In the case of Sraffa, however, things seem to be even worse.
The standpoint of the old classical economists, in fact, was weakened by the par-ticular theory of value they used; Marx’s criticism of the capitalist economy, heavily
∗ We are most grateful to Peter Edwards, Paolo Maroscia and Constance Hayes for their usefulcomments on a preliminary draft of this Introduction. Needless to say, any remaining deficiencyrests only with the authors.
based on the classical economists’ approach, no doubt stimulated the aversionand rebuttal which materialize in the well known works by Jevons (1871), Menger(1871) and Walras (1874).
In contrast, Sraffa’s 1960 book, in ‘rescuing’ the old classical economists’approach, not only proves that a formally correct theory of value can springnaturally from within that same approach, but also that the new framework canbe used ‘as a basis for a critique’ of the marginal theory of value and distribu-tion. During the 1960s many works, following suggestions made in Sraffa’s seminal1960 work, pointed out several errors and logical inconsistencies in the marginaltheory of value and distribution. Yet, what happened is quite odd: the approachunderlying that theory remained dominant, despite PCC’s critique, whereas Sraffa’scontribution practically disappeared from mainstream economic literature; indeed,it is not even mentioned in the most popular textbooks of economics. As a con-sequence, it seems quite natural to inquire into the causes which might haveproduced such a peculiar circumstance. In this connection, in order to providesome useful suggestions for such an inquiry, it would be convenient to brieflyreview, from the standpoint taken up in this Introduction, what seems to us themost relevant contributions in relation to Sraffa’s PCC. To this purpose, in chrono-logical order, we will consider those works published over a few decades beforeand after 1960.
3. Before 1960 several publications contributed to an intensive debate. There areSraffa’s critical articles (1925 and 1926), on the narrow validity of the Marshalliantheory of perfect competition, as well as Keynes’ General Theory (1936) criti-cizing the orthodox economics of ‘a lack of clearness and of generality in thepremises’, p. v, with particular regard to the inherent failure of the marketmechanism in the achievement of its fundamental goal of all-around ‘economicefficiency’. Whereas Sraffa’s articles in the mid-1920s were characterized by adestructive critique of the Marshallian logical framework, Keynes’ 1936 work caninstead be seen as a critique within the orthodox framework, whose ‘superstruc-ture’, as Keynes explicitly said, ‘has been erected with great care for logicalconsistency’, ibid.
Sraffa’s and Keynes’ critical contributions, apart from their different contentsand objectives and in relation to their different impacts on the then-dominanteconomic theory, are generally considered as characterizing what Shackle (1967)called ‘the years of high theory’; between 1926 and 1939. During these years,however, there were other contributions of far-reaching interest to include for thepurpose of interpreting the intellectual scenery under consideration .
In the early 1920s a slow but determined process of mathematical refinement ofthe Walrasian General Equilibrium model got started. It was occasioned, as is wellknown, by the publication in English of Cassel’s work (1923), in which the basicset of the Walrasian equations were presented and discussed (though no mentiontherein was made of Walras). Before the fundamental papers by Wald (1933–34and 1934–5) were published – in which a mathematical proof of the existence ofan equilibrium was given – the works by Neisser (1932), von Stackelberg (1933)and Zeuthen (1932) put under severe scrutiny the logical consistency of some vitalparts of the Walrasian system.
Wald’s proof, however, was considered too cumbersome, and in the 1950s,using Brower’s fixed point theorem (1912) and Kakutani’s generalization (1941),the Arrow and Debreu (1954) paper gave an alternative straightforward proof ofthe existence of a Walrasian General Competitive Equilibrium. The papers byMcKenzie (1954), Gale (1955) and Nikaido (1956) should also be mentioned ifwe are to have a complete panorama of those years. This process of mathemat-ical refinement was gathering momentum and consensus among economists tothe point of making Marshallian economics ‘old-fashioned’ or downgrading it asa ‘secondary’ viewpoint within economic literature. This process was greatly rein-forced by the publication of the books by Hicks (1939) and by Samuelson (1947)which, in spite of their different structures and ultimate intentions, were bothshaped within the General Competitive Equilibrium framework. It must, however,be pointed out that among the characteristics of this framework was the fundamen-tal role assigned to the market in reallocating given resources to the ‘best’ possibleuses, the latter being defined in relation to the maximization of each and every indi-vidual’s objective within an economy. The market, as the central institution withinthe General Competitive Equilibrium framework, is given as its ultimate task thecomparative evaluation of all the commodities transacted according to the ‘neu-tral’ and ‘objective’ principle of their relative scarcity only. As a consequence, theequilibrium market prices are seen as bare indices of scarcity of the commodities, andany interference from outside is therefore considered by the generality of the post-classical economists as a hindrance or a disturbance to the ‘smooth’ functioningof the market itself. In this vein, the reaction against Keynes’ critical work (1936)by the so-called Neoclassical Synthesis in the 1940s and the 1950s invite interpre-tation. Attacks against the Keynesian critique were reiterated (though in differentways) in the years to follow – with the (perhaps unexpressed) aim of making thepost-classical economic theory the monolithic and ‘untouchable’ way of think-ing in economics, as well as the only theoretical reference model for prescribingeconomic policy.
4. Over the same period, another crucial development of great interest took place.In 1932 Robbins published a book in which meticulously he tries to identify anddelimit the subject-matter of economic ‘science’.
First of all, he rejects outright the proposition according to which economics is‘concerned with the causes of material wealth’, as ‘the last vestige of Physiocraticinfluence’ p. 9, exerted especially on the English economists.1 In the search for analternative subject-matter of economics (and, as a consequence, for an alternativedefinition of that discipline), he turns instead to one of the most favoured exam-ples of the post-classical economic literature, that of the isolated man who has todivide his time between the production of real income and leisure. By supposingthat (i) he wants both (real income and leisure), (ii) he does not have enough ofeither, (iii) he can only alternatively devote his time to one of them, and (iv) hisdesire for each item of real income and leisure generally has different importance,then the isolated man is bound to make a choice. ‘This example – Robbins writes –is typical of the whole field of economic studies’ (1932), p. 12, (italics added). Also,because a scarcity of means to satisfying ends of varying importance is the univer-sal condition of human behaviour, the ‘unity of [the] subject of Economic Science’
has a natural basis in ‘the forms assumed by human behaviour in disposing ofscarce means’, p. 15. Hence his well known definition of economics was ‘the sci-ence which studies human behaviour as a relationship between ends and scarcemeans which have alternative uses’, p. 16. Coherently with this definition, Robbinsrepeatedly emphasizes that ‘Economics is entirely neutral between ends’, p. 24, (ital-ics added), ‘Economics is in no way to be conceived, as we conceive Ethics orAesthetics, as being concerned with end as such’, p. 32, (italics added), ‘Economicscannot pronounce on the validity of ultimate judgements of value’, p. 147. Incriticising Hawtrey and Hobson for arguing that Economics should instead takeinto account valuations and ethical standards, Robbins makes evident the rigidboundaries separating economics from ethics:
‘Economics deals with ascertainable facts; ethics with valuations and obligations.The two fields of enquiry are not on the same plane of discourse. Between thegeneralizations of positive and normative studies there is a logical gulf fixed whichno ingenuity can disguise and no juxtaposition in space or time bridge over.’ p. 148.
Having forcibly put any ethical judgement out of economics and having essen-tially reduced its subject-matter to problems of choices in a world of scarcity, asecond step worth noticing in Robbins’ 1932 essay is his jettisoning the notionof Social Product and, as a consequence, the entire approach of the old classi-cal economists. In this connection, he starts with emphasizing the ordinal natureimplied in any price system, that is prices considered – from the post-classicaleconomic theory point of view – as a mere reflection of an order of preferencesexpressed by single agents, with the consequence that ‘the addition of prices orindividual incomes to form social aggregates is an operation with a very limitedmeaning’ p. 57. Among these social aggregates, the Social Product can obviouslybe taken as the most representative notion at the centre of analysis of the old clas-sical economists. For example, in Adam Smith’s Wealth of Nations, the entirety ofBook I is devoted to the inquiry into the ‘causes of improvement in the productivepowers of labour, and of the order according to which its produce is naturally dis-tributed among the different ranks of the people’ (1970), p. 2, whereas according toRicardo ‘To determine the laws which regulate this distribution, [the proportionsof the Social Product among the classes of the community] is the principal problemin Political Economy’ (1951), p. 5. But the problem of the distribution of a socialaggregate seems to Robbins unsusceptible to treatment on the basis of any scientificlaw, (1932), p. 67. ‘For this reason’, he writes, ‘in recent years economists havetended more and more to abandon the traditional arrangements’, ibid. The follow-ing sentence by Robbins, which is very much worth quoting in full, is exemplaryof the way in which he eviscerates the approach of the old classical economistswhilst summarising the essential features of what in the years to follow was tobecome the basic ‘research program’ of the dominant economic theory:
We no longer enquire concerning the causes determining variations of pro-duction and distribution. We enquire rather concerning the conditions ofequilibrium of various economic ‘quantities’, given certain initial data, and weenquire concerning the effects of variations of these data. Instead of dividing our
central body of analysis into a theory of production and a theory of distribution,we have a theory of equilibrium, a theory of comparative statics and a theoryof dynamic change. Instead of regarding the economic system as a giganticmachine for turning out an aggregate product and proceeding to enquire whatcauses make this product greater or less, and in what proportions this productis divided, we regard it as series of interdependent but conceptually discreterelationships between men and economic goods. Robbins (1932), pp. 67–8.2
Robbins is the forerunner of modern post-classical economists’ attitude towardSmith. The ethical side of Smith’s thought has been completely neglected whereashis analysis of market-oriented behaviour has been the only part of his work fre-quently and profusely referred to by mainstream economics. It is as if Smith werenot also the author of The Theory of Moral Sentiments. However, as Sen put it,
The professor of moral philosophy and the pioneer economist did not, in fact,lead a life of spectacular schizophrenia. Indeed, it is precisely the narrowing ofthe broad Smithian view of human beings, in modern economies, that can beseen as one of the major deficiencies of contemporary economic theory. Thisimpoverishment is closely related to the distancing of economics from ethics.Sen (1987), p. 28.
5. In 1932, as well as the Robbins essay, Pigou’s fourth edition of The Economics ofWelfare was published. If Robbins, for the reasons explained above, can be consid-ered as an outstanding opponent of the classical economists’ approach, he shouldalso be considered as one of the most severe opponent of Pigou’s cardinal utilityapproach in economics and of the objective interpersonal comparison of utilitiesof different individuals. These two distinct aspects of Robbins’ opposition, farfrom being apart from each other, are intimately linked– as we will try to explainpresently.
In the 1930s, in fact, on the basis of Robbins’ attack on Pigou, not only didthe ‘New’ Welfare Economics easily take the place of the ‘Old’, but economicsin general was strongly influenced by a philosophy ‘uncontaminated-by-ethical-values’.3 As a matter of fact, The Economics of Welfare by Pigou was put aside andalmost completely forgotten.
Pigou’s book, however, is surprisingly not a book on ‘economic welfare’ – as Hicks(1975), p. 222, rightly pointed out.4 It is a book on the Social Product (National Div-idend in Pigou’s terminology, and underscores the fact that the main concern of hiswelfare economics was centred on the way the National Dividend was distributed).Keynes aptly noted in his General Theory that Pigou’s The Economics of Welfare ‘isspecifically directed at the problem of the national dividend […] when there issome involuntary unemployment as in the case of full employment’ (1936), p. 5.Thus, putting aside the cardinal utility approach and the objective interpersonalcomparison of utilities of different individuals, such characterizing of Pigou’s bookamounted to a slight of hand whereby that part of the early classical economists’approach of his analysis (that which addressed the notion of Social Product) was
discreetly ignored. It might be of interest at this juncture to note that Sraffa also sub-mitted to Pigou (as well as Keynes, cited in the Preface of his 1960 book) the openingpropositions of PCC – as a letter by Pigou to Sraffa, dated 1928, certifies.5 There arealso several handwritten marks by Sraffa on his personal copy of Pigou’s The Eco-nomics of Welfare, as well as some handwritten notes on Hicks, Kaldor, Scitovsky andSamuelson with regards to their contributions during the ‘New Welfare Economics’debate.6
In fact, Pigou points out from the very beginning that the ultimate goal of theeconomists’ analyses should be ‘the bettering of human life’, p. vii. In addi-tion, although he gave the narrow definition of economic welfare as ‘that part ofthe social welfare that can be brought directly or indirectly into the relation withthe measuring-rod of money’, p. 11, nevertheless he was well aware that ‘no pre-cise boundary between economic and non-economic welfare exists’, ibid. ‘In therelations between employers and workpeople in ordinary industry – Pigou writes –the non-economic element is fully as significant’, p. 16. Dissatisfaction with thestatus of wage-labour is no less important than dissatisfaction with rates of wages,as for instance ‘the feeling that the industrial system, as it is to-day, deprives theworkpeople of the liberties and responsibilities proper to free men, and rendersthem mere tools to be used or dispensed with at the convenience of others’. Pigou(1932), pp. 16–7.
In the central parts of his work, Pigou tries to find meaningful connectionsbetween the ‘size’ of the Social Product and the economic welfare of a country.In doing so, however, he faces the unavoidable difficulties in providing unam-biguous statements on the relation between the changes of the Social Product andthe welfare of a group of people. To get precise and definite statements on thisrelationship, there are two main obstacles in his view: one is represented by thecircumstance that the Social Product is generally composed by different commodi-ties and not only by one alone; the other being the changes in the distribution ofpeople’s purchasing power. At the basis of these obstacles, however, there is themore fundamental obstacle – namely, the theory of value used to price commodi-ties, and the consequent recognition that the ‘size’ of the Social Product and its‘distribution’ cannot be separated out so easily. Graaff (1957), pp. 90–92, pointedout the ‘dilemma’ with exceptional lucidity: it cannot be a ‘size’ unless decisionson ‘distribution’ have already been taken. Here lies the very crux of the matter. TheSocial Product can be seen from two distinct points of view: first, as a collection ofcommodities produced over a period of time, second as a value of those commodi-ties. The distribution of the Social Product can take place only in terms of value, butthe latter cannot be determined unless the distribution is already known. The SocialProduct is thus the real dividing line between the classical economists’ approachand that of post-classical theory. In the latter, in fact, all the relationships amongpeople receive recognition and quantitative determination through the market,which values each and every object transacted in terms of their relative scarcity.From this perspective, distribution is part and parcel of this market mechanism tothe point of being completely nullified as a separate process: it is entirely absorbedwithin the general pricing process. The immediate implication of this is that the
Social Product (and as a consequence its Distribution) has practically no meaningwithin post-classical theory, and any value judgement behind or expressed byits distribution is automatically placed outside the boundaries of economics – asRobbins made abundantly clear.
6. In Pigou’s analysis we encounter also the notion of ‘a minimum standard of realincome’ which ‘must be conceived, not as a subjective minimum of satisfaction,but as an objective minimum of conditions’, (1932), p. 759, italics added. Thisnotion has much in common with the analogous notion of ‘subsistence’ of theearly classical economists, as can be seen in Pigou’s own words:
‘The conditions, too, must be conditions not in respect of one aspect of life only,but in general. Thus the minimum includes some defined quantity and qualityof house accommodation, of medical care, of education, of food, of leisure, ofthe apparatus of sanitary convenience and safety where work is carried out, andso on. [. . .] The State must not permit anywhere hours of child labour, or ofwomen’s labour or conditions of housing accommodation incompatible withthe minimum standard.’ Pigou (1932), pp. 759–60.
The notion of Social Product and the problem of its Distribution, which hadbeen at the centre of Pigou’s analysis from the 1920s till the early 1950s, were,however, destined to disappear altogether from the landscape of economic theoryover the years preceding the publication of Sraffa’s book. As noted above, this tookplace after Robbins had ‘deported’ them from the subject matter of economics.Both within the classical approach no less than in the Pigouvian elaboration hereconsidered, the Social Product and its Distribution imply by their own nature arecourse to value judgements. The fundamental difference between the old classicaleconomists and Pigou in this connection rests, obviously enough, on the differenttheories of value they were using. This circumstance, however, looses much of itsforce when compared with the far more important fact already pointed out, viz, thesubject-matter of the old classical economists and of Pigou was the Social Productand its Distribution. Each of them were using the theory of value at their disposalat their respective times merely as an instrument for consistently aggregating theheterogeneous commodities of the Social Product and to provide meaningful com-parisons among groups or classes of people sharing in it. The ‘marginal’ conceptsPigou uses in his book turn out to be completely non-influential in this respect – aswas promptly recognized even by Samuelson (1950), p. 21, who considered Pigou’sThe Economics of Welfare ‘the classic discussion of the definition of real nationalincome’.7
Yet, since the appearance of Bergson’s Social Welfare Function (1938), it has beenSamuelson himself, (1947 and 2005), who has been one of the most strenuousdefenders of the neat separation à la Robbins between Economics and Ethics.8 Theeffect of Bergson’s publication was to provide the most appropriate tool for incor-porating the Pareto criterion of ‘social optimum’, by admitting any possible valuejudgement and taking it as given from outside the boundaries of economics. Preciselyfor this reason, Samuelson has always also been one of the strongest opponents of
Arrow’s Impossibility Theorem (1951), of which two fundamental implications areat least worth noting here. The first one is the well known basic result accordingto which a market economy, essentially based on individual judgements, is unableto express a social welfare function which satisfies certain minimal requirementsof democratic legitimacy and informational efficiency.9 The second implicationis that recourse to value judgements is, at the same time, absolutely indispensablefor rendering economic analysis socially relevant – a point which, for example, Sen(1974) has amply and forcibly stressed. This, as already stated, cannot be recon-ciled with the ‘neutral and objective’ picture of economic ‘science’ conveyed byRobbins and by mainstream post-classical economics.
7. In the same year in which the Arrow Impossibility Theorem appeared, Sraffa’sthoughtful Introduction to Ricardo’s Principles was also published, (1951). This cir-cumstance, however, is just a mere coincidence. More substantially, there is asense in which both works point in the same direction – their distance in con-tent notwithstanding. The former, in fact, demonstrates how problematic, to saythe least, the formation of collective choice in a free market economy is on thebasis of an information set made up exclusively of individualistic utility functionsand, as a consequence, how hard it is to evacuate from the subject matter of eco-nomics considerations of a political, social and ethical character.10 (Viewed fromthis perspective, the content of the Arrow theorem stands in sharp contrast to theFirst Fundamental Theorem of Welfare Economics.) On the other hand, Sraffa’sIntroduction to Ricardo’s Principles in 1951 should be considered the very first stepin reappraising the classical approach based on the notion of Social Product – anapproach, as already noted, in which no separation can uncontroversially be madebetween ‘economic’ aspects on the one hand and social, political and ethical oneson the other. In what follows, it will be shown that precisely that approach wastaken up by Sraffa in PCC.
This process of reappraising the classical approach thus started before PCC waspublished and continued throughout the years from the early 1930s, a periodduring which that approach practically disappeared from mainstream economics.Witness to this circumstance is the von Neumann model of 1937, published inEnglish in 1945, whose ‘classical’ structure would have passed almost unnoticedin the economic literature of the time had Champernowne (1945) not devoted agenerous ‘economic’ translation of its main propositions. Nonetheless, the latterwas overshadowed by the strong epistemological message widely disseminated byRobbins’ 1932 essay as well as by the more robust Neo-Walrasian model alreadyavailable at that time. Instead, the economic profession appreciated greatly andutilised the power of the analytical tools contained in the von Neumann model.It should be recalled that it was not von Neumann’s original intention to have hismodel used as an alternative to the then dominant economic thought, the lat-ter firmly pivoting around the ‘demand and supply functions’ mechanism andhaving the efficient allocation of given resources as its main economic goal. Norluckier, from the concerns that inhere the ‘alternative perspective’, have been theLeontief models (1941) and (1951): they were soon incorporated by the dominanteconomic theory into the more general class of linear programming models, the
ultimate purpose of which in each case being the best use of scarce resources à laRobbins – the tenuous classical roots of the structure of the Leontief price systembeing trodden firmly under foot.
8. The immediate reaction of the great majority of readers of PCC in 1960 wasto see Sraffa’s contribution as a simple variant of an already well known class oflinear models of production. Others simply did not grasp what lay at the basis ofSraffa’s thesis – namely, the critique of mainstream economic theory, though somedid late in the day. The reviews of Sraffa’s book are documented in the essay byBellino. This essay shows both the impact of PCC upon the economic thought ofthe time and the misunderstandings to which it gave rise. The radically differentpositions expressed by the reviewers demonstrate the extent to which the economicprofession was baffled by the Sraffian way of representing an economic systemthrough a ‘modern’ classical approach.
In contrast to this general attitude, further people took Sraffa’s PCC as the mostorganic source of inspiration for bringing to the fore all the logical difficultiesencountered by the post-classical economic theory in keeping its basic proposi-tions from being self-contradictory . In particular, this took the form of bringinginto the open the many logical difficulties inherent in the notion of ‘capital’ usuallyemployed by that theory and the many inconsistencies and paradoxes to which thestandard use of that notion gave rise, such as the phenomena of re-switching andreverse capital-deepening. The 1960s, in fact, witnessed an intense debate over thoseissues. However, the debate was without issue: no significant or radical changeof the paradigm characterizing the then-dominant economic theory came about.Mainstream economics continued to use the same analytical tools and the samebasic statements as before as if that critique was not ultimately detrimental in anyway to its own theoretical structure. In the late 1970s and throughout the 1980s, forexample, macroeconomics was ‘monopolized’ by models of rational expectationsand endogenous growth. The latter, in an extraordinary turn of events, succeededin turning the clock so far backward as to restate, in a modern fashion, a pre-Keynesian conception of the world and to reinforce, at the same time, the Walrasianmode of representing the economy. Since then, the dominant economic theory hasbeen gaining wider and wider consensus both on theoretical grounds and on theagenda of the policy prescriptions which, widely adopted around the world, areheavily based on market-oriented objectives. There were few problems not tack-led by the orthodox theory. In this respect, the remark made by Pasinetti, stating‘[t]he typical economics student entering university from the 1980s onwards hasheard nothing of the re-switching difficulties involved in the neoclassical theory ofcapital and income distribution’, Pasinetti (2000) p. 412, although correct, seemsquite inappropriate to the circumstance referred to now. It should not be askedwhy the post-classical theory has been so determined in rejecting, or so astute inavoiding, the capital theory criticism raised against it; it should instead be askedwhy that criticism has been so ineffective to the point of being ultimately incapableof undermining currently dominant economic theory. Perhaps the question whichshould be asked is whether a purely logical critique could undermine a theory withso many ideological implications. That question – one that invites no small irony
when asked about a tradition of economic theorising that prides itself on havingexcluded ethical values – surely deserves careful consideration.
9. One aspect of the criticism raised against the dominant theory in the 1960s,on the basis of PCC, should be stressed strongly: it was brought about by greatlyemphasizing what the post-classical theory was supposed to be logically wrongabout.11 From this point of view it was a negative criticism, in the specific sense ofbeing intentionally destructive of the theory criticized.
This kind of approach has unquestionably had merits of its own, for it madeit possible to open a strategically important ‘breach’ into the deep-rooted logicalfoundations of the post-classical theory, which most people had thought to beunshakeable.
The drawback of such an approach, however, was that of having practically‘squeezed down’ almost the entire Sraffian contribution of PCC into one single itemand from one single perspective only, viz. the notion of ‘capital’ and its conundrumfrom a strictly logical point of view.
If we look at the structure of PCC in its entirety, we actually find very few state-ments which explicitly refer to the criticism of the notion of ‘capital’ as a measurablequantity independent of prices and distribution, Sraffa (1960), p. 9 and p. 38, andwe have to wait until the last chapter of the book to find the issue ‘Switch inMethods of Production’.12
To this it must be added that the essence of the criticism of that notion of capitalcannot be considered an absolute novelty in economic literature. Wicksell (1901)was perhaps the first author who, at the beginning of the last century, pointed outexplicitly the basic difficulties encountered by the post-classical economic theoryin its dealing with that notion of capital – although, to be fair, Sraffa should becredited for having built the most appropriate framework in which that criticismcould be accomplished.13
In addition, the notion of capital which is generally said to characterize the post-classical theory has not received a unanimous interpretation in economic literature.Suffice it to recall the notion of ‘aggregate’ capital typical of the highly popular ‘neo-classical production function’ in contrast to the more ‘elusive’ notion of capitalwhich is found in the Intertemporal General Equilibrium (IGE) models à la Arrow-Debreu. Of these models the paper by Schefold, which originates as a comment toGaregnani’s papers (2000 and 2003), provides what the author calls a ‘direct’ cri-tique in contrast to the ‘indirect’ one made by Garegnani (according to Schefold), inthat it accepts the methods employed by that theory as well as the way in which theIGE models represent the economic reality. It should be noted that Garegnani hasalready provided his own reply and comment to Schefold’s different strategy in thecritique of the IGE models, to be published in Ciccone et al. (forthcoming). A replyto Schefold by Parrinello is instead contained in this book, to which Schefold him-self will provide a rejoinder forthcoming in Metroeconomica – the journal which hasalready published several papers on this complex and intricate issue.14
10. It was implicitly believed, during the course of the capital theory debate of the1960s, that the criticism of the notion of capital had to be based on exclusively logical
reasons in order to be effective and persuasive, so as to leave no room whatsoeverfor any possible doubt concerning the weakness of the theory criticized.
In all these circumstances, the post-classical economic theory was treated as if itwere a purely mathematical theory (whose objects are obviously abstract entities)and, as a consequence, it was improperly thought that it would have been sufficientto direct the criticism, firmly based on logical ground, to what was supposed to beone of the most vulnerable parts of the theory in order ‘to put it to death’ – neithermore nor less than it usually happens in the case of a mathematical statementwhich, once found logically faulty in some part, is automatically discarded andpossibly replaced by a new or amended one. ‘A mathematical ‘model’ can be (andshould be, inter alia) examined in its purely formal aspect, as a consistent structure’,as Dobb once pointed out, but ‘[a]t the same time, qua economic theory, its verystructure is relevant to the statement it is making about reality.’ Dobb (1973), p. 7.
What was neglected, or not sufficiently taken into account during the capitaltheory debate, was the specific as well as the crucial feature of economics being,by its own nature, a social discipline – which means that human beings and theirmutual relationships are the main objects of its inquiry. The latter circumstanceinevitably implies that the ‘scientific’ aspect of an economic phenomenon cannotbe so easily separated out from the ‘ethical’, the ‘political’ and even the ‘ideological’aspects of it. That kind of separation, as we have seen in § 4 above, was insteadgreatly emphasized and taken as the dividing line by Robbins not only betweeneconomics and all the other humanistic disciplines, but also between the approachof the classical economists and that characterizing post-classical economics.
One of the key features of post-classical economic theory is the methodologicalindividualism; coupled with the neat delimitation of economics as essentially atheory of choices, it produces a ‘universal’ science, in the sense of being indepen-dent from the historical and institutional context. The underlying assumption ofpost-classical theory of economic growth is a clear example of this ‘universalism’ –as Ditta’s paper makes it clearly evident; indeed post-classical models of growthassume that economic growth is accounted for by ‘universal laws’ across time andcountries. This is clearly shown in the profusion of econometric works attemptingto explain differences in growth performances through cross-country regressions:post-classical growth economists running thousands of regressions over large sam-ples of countries covering a time span of 25–30 years are implicitly assuming thatthe growth process is the same for every country – in other words, it is ‘universal’.This is tantamount to assuming that the relevant parameters are identical acrosstime and regions, with no differences made when including in the sample a Sub-Saharan African country or a former communist East European one. The evidencethus found is attributable to each country and related to a unique, ‘universal’, eco-nomic relationship. Thus, it is believed, this evidence can be used to draw policyprescriptions universally valid. From a Classical and Sraffian point of view, theseresults, in our opinion, are untenable either on theoretical or on methodologicalground. Processes of growth involving social groups living and acting in differ-ent historical and institutional contexts can be thought of as homogeneous onlyon ideological grounds. The policy measures stemming from this kind of analysis
cannot thus be hypothesised as having the same effect on growth in any countryat any time, as historical evidence on developing countries demonstrates. Oncethe claim of ‘universalism’ is abandoned, alternative answers to the question ofwhat explains differences in growth processes could be provided from outside thenarrow boundaries of economics marked by the mainstream.
Even if the description of a phenomenon were made through statements whosesyntax were altogether self-consistent, their semantics would be of the utmostimportance as well. On the basis of this, the post-classical theory could legitimatelybe put under close scrutiny on the grounds of the ethical and political inappropri-ateness of its premises, even if the logical consistency of its theoretical apparatuswere granted. A criticism of this kind should be considered neither less rigorousnor less important than the criticism based on logical reasons only.
11. We uphold that PCC should be viewed as primarily devoted to a meticulousconstruction of an alternative framework in opposition to the widely accepted post-classical theoretical apparatus. As has been recalled in § 9 above, if much attentionhas been devoted to the last chapter of PCC, it seems fair to say that no equivalentor comparable attention has been devoted to the first chapter of PCC. Here, nosurplus exists and therefore no capital either. Nonetheless, the basic frameworkgoing throughout the entire book is already present there. It consists, as is wellknown, of given quantities of commodities used and produced in the economy. Itis the representation of the economy in the most essential way. It is so amazingly‘simple’ that no further attention seems to be required than that of merely tak-ing them as known quantities of a system of equations, whose unknown variablesto be determined are, obviously enough, the exchange-values of the commoditiesimplied. On reflection, however, what is further worth noticing is that the solutionto the system of equations crucially depends upon those given known quantities:different sets of commodities would bring about, in general, different solutions;they would bring about different structures of the economy. Those known quanti-ties are in effect the end result of the entire history of the economy concerned.15 Inparticular, behind the composition of workers’ subsistence, which is formally noth-ing but a subset of those known quantities of commodities, there are necessarilysocial, political, and ethical principles – whatever they be – taken up by the societyconcerned. This means not only and not simply that their quantities are known,but more importantly that decisions regarding workers’ subsistence must have beentaken and been made effective before and independently of the exchange-values ofthe commodities.
The labour income is not determined on the market, simply because the labourservice is never a commodity within the Sraffa (as well as in the Classical andMarxian) frameworks, and this is unconditionally true independent of the factthat ‘market demand and supply functions of labour’ can be envisaged or notin other different frameworks. Fixing the composition of workers’ subsistence isequivalent to fixing the general living conditions of human beings. It is preciselythese conditions that influence the conditions of production, and not vice versa.From this perspective the individualization of a ‘core’ as distinct from, or opposed
to, a ‘periphery’ seems quite inappropriate, had the former been intended asincluding what is relevant from the ‘economic’ standpoint and the latter as includ-ing what is not. This misunderstanding appears to be at the basis, for instance,of Blaug’s criticism of some interpretations of PCC, which would have ultimatelyreduced, in his opinion, Sraffa’s 1960 contribution to ‘an amazingly narrow inter-pretation that omits some of the most exciting and indeed fruitful elements in thethinking of the classical authors’, Blaug (1999), p. 215. However, as Garegnani hasfinely remarked, the ‘data’, i.e. the ‘periphery’, are so exclusively in the determina-tion of the other distributive variables other than wage and the relative prices, andtherefore they are ‘not data for the theory as a whole’ Garegnani (2002) p. 243. As aconsequence, the Sraffian interpretation of the classical approach in PCC criticizedby Blaug ‘uncovers in their works [of the Classical economists] the roots of theirsociological richness’, ibid, p. 250, italics added.
The fundamental notion of a ‘surplus’ of commodities depends heavily on thecomposition and dimension of the sustenance of the workers and even more sodoes the notion of ‘viability’ of the whole system – as one of the editors has pointedout on several occasions.16 More generally, the quantities of all the commoditiesused and produced in the economy are reflections of decisions based on some social,political, and ethical principles such as, for example, the decision of producingweapons instead of potatoes, or the decision of producing potatoes with or withoutchemical fertilizers. The non-labour income is not determined by the market either,simply because its unitary measure per unit of time (the rate of profits) depends, inthe first instance, on the structure of the economy, viz. on the methods of productionand productive consumption. Moreover, if the social relationships are such that thelabour income is above subsistence, it is even ‘susceptible to being determined fromoutside the system of production, in particular by the level of the money rates ofinterest’, Sraffa (1960), p. 33 – which implicitly underlines the fundamental roleplayed by the institutions in the functioning of the economy in general and in theincome distribution in particular. Thus, once again, this is unconditionally trueindependent of the fact that ‘market demand and supply functions of capital’ canbe envisaged or not in other different frameworks. From this standpoint, the notionof ‘capital’ within the Sraffa framework turns out to be not only a mere collection ofcommodities but also a social relationship – this point, as is well known, is greatlyemphasized by Marx.17 Sraffa’s relationship with Marx is a complex issue, as canbe evidenced by some recent contributions based on Sraffa’s unpublished worksand correspondence.18 Indeed this is still an open issue, as Bellofiore maintainsin his essay. He notes a relative absence of work and debate on the Sraffa-Marxrelationship, apart from the above mentioned contributions and notwithstandingthe opportunities opened up by the Sraffa Archive at the Trinity College Library.
There is thus an abysmal difference between Sraffa’s conception of the econ-omy and of its basic ends, compared with the analogous conception characterizingthe post-classical theory. The latter represents the economy like a machine ofagents devoted to maximize some individually defined objectives under constraints.Within this picture, the fundamental role of making agents’ actions compatible andrealizable with respect to the given constraints is attributed to the market, which
consequently assumes a central place and a pivotal role. The commodity prices,which are the ultimate reflection of that very picture, are obviously market prices,for it cannot be otherwise.
By contrast, Sraffa’s alternative framework provides a completely different pic-ture of the economy and of its functioning, with the consequence that the focusof the attention is directed to a different basic end to be pursued by the society asa whole – viz. the reproduction of the economy, which essentially means the repro-duction of the chosen living conditions of the entire society: which social productmust be produced, how it must be produced, to whom it must accrue and in whichproportions. Chiodi’s paper is focused on this central role attributed by Sraffa toproduction prices and on the extension of the Sraffian theory to alternative socialcontexts other than the ‘capitalist’ one. The market is completely out of this pic-ture: it does not have any role to play in the making of any of those decisions, andit is precisely for this reason that it does not have any role to play in the deter-mination of the commodity exchange-values either. This brings us straight to theradically different meaning of Sraffa’s production prices as opposed to the meaningof the post-classical market prices. They reflect, in fact, the disproportionate dis-tance existing between the respective conceptions of the economy behind those twonotions and, as a consequence, the impossibility of a truly significant comparisonbetween them.
12. Finally, it should be noticed that Sraffa was a man always working ‘against thestream’. This is only too obvious in relation to the content of his work; it is muchless obvious perhaps, though no less important, in relation to the mathematicalapproach he used.19 He behaved like Ulysses with the Sirens, the latter stand-ing for the increasing and pervasive role of formal mathematics in the economicfield over the period in which he was building up his own alternative framework.Afriat’s paper provides a neat mathematical ‘translation’ of all the basic schemesof Sraffa and their relations to those of von Neumann and Leontief. Lippi’s essaydeals with some intricacies in mathematical proofs contained in PCC. It is specifi-cally addressed, among the others, to those scholars who want to examine Sraffa’sunpublished papers, particularly those regarding the correspondence with mathe-maticians – and the annexed commentary by Salvadori is a natural complement toLippi’s paper. Strictly in this connection, the joint paper by Kurz and Salvadori givesa significant example of the collaboration between Sraffa and Besicovitch, one ofthe outstanding mathematicians of Cambridge at the time when Sraffa was work-ing on his PCC. Maroscia’s paper contains an elementary proof of the results statedin Chapter I of PCC which provides, in particular, an explicit description of thepositive price vector whose uniqueness and existence were simply stated by Sraffa.The central point of Velupillai’s essay is that, from a purely mathematical point ofview, PCC lacks nothing. In particular, it brings about, through a meticulous his-torical and analytical reconstruction, the mathematical background of Sraffa, viz.the constructive mathematics, on which Sraffa based all existence proofs in PCC.
Also, his own philosophical way of thinking must not be forgotten in thisrespect – witness the well-known Wittegenstein connection, as analytically
reported by McGuinness’ essay. Method rather than subject-matter was indeedthe main focus of Sraffa as well as of Wittgenstein. And perhaps this constitutesthe chief legacy of both men in their respective fields of work. This is a statementthat in McGuinness’ essay attracts the attention of the readers who see in Sraffa’sworks a contribution for the construction of an alternative economics.20
This brings us quite naturally to consider the inevitable role played by ‘ideology’in economics. In this regard, Schumpeter’s view is worth reporting:
[ideology] enters on the very ground floor, into the preanalytic cognitive act ofwhich we have been speaking. Analytic work begins with material provided byour vision of things, and this vision is ideological almost by definition. It embodiesthe picture of things as we see them, and wherever there is any possible motivefor wishing to see them in a given rather than another light, the way in whichwe see things can hardly be distinguished from the way in which we wish to seethem. Schumpeter (1954), p. 42, italics added.
It is the firm opinion of the present editors that neither sufficient attention nordue weight has been given to the ‘ideological’ aspect of PCC. ‘Ideology’, as Dobbonce put it refers ‘to a whole system of thought or coordinated set of beliefs andideas, which form a framework, or higher-level group of related concepts, for morespecific and particular notions, analyses, applications and conclusions’ p. 1. Onstrictly logical grounds even the old classical economists’ theory of value was defec-tive, as well as some crucial steps in the much debated Marxian ‘transformationproblem’. Nevertheless Sraffa strongly believed in their approach, which means thathe attributed far more relevance to the ‘ideological’ aspect of their framework (inDobb’s sense already referred to above) than to the ‘logical’ tenet of their theory.
Taking into due consideration the ‘ideological’ aspect of PCC would have prob-ably brought about more easily those social, political and ethical aspects whichcharacterize Sraffa’s framework and which perhaps convey, more widely and moreaptly than its strictly logical features, his alternative ‘vision’ of the economy – toborrow Schumpeter’s own word – in contrast to the ‘vision’ expressed by post-classical theory. Edwards’ essay fills in an original way that gap by speculating onsome unexplored ethical aspects of Sraffa’s writings.
The predominant insistence on topics related to capital theory, their importanceand relevance notwithstanding, has quite naturally pushed into the backgroundthose aspects in favour of the (perhaps) less controversial logical ones, with theeffect of having hardly emphasized the ‘ideological’ characterization of PCC – ifat all. As a consequence, the constructive spirit of Sraffa’s book, as an alternativeand coherent framework to the post-classical one to be used in the shaping of themost relevant economic problems of the time, has progressively lost its strength ofpersuasion until its ultimate neglect, with the further consequence of leaving mostof the relevant economic problems of the time – such as those on welfare and oneconomic development, for example – to be tackled and shaped, on the theoreticalas well on the empirical and policy-oriented ground, almost exclusively by post-classical theory. Nisticò’s paper is an attempt to extend the Sraffian approach to
non-perfect competition markets. The aim is to provide an explanation of observ-able phenomena in real markets out of the usual demand-supply framework. Thelong period hypothesis of a uniform rate of profits is abandoned and substitutedby a dynamic context in which the working of the economic system is explainedthrough a sequence of temporary equilibrium positions. The paper by Cesarattoemphasizes the importance of the classical approach in dealing with problems ofthe welfare state and the role that social and moral norms have in this connection.
The intention of the editors in assembling the present collection of essayshas been simply that of giving some hints in the direction of an alternativeresearch program to follow for making Sraffa’s framework the basis of an effectivealternative economics.
Notes
1. The economists from Anglo-Saxon countries who were explicitly quoted by Robbins asadherents to a definition of economics as the study of the causes of material welfare, areCannan, Marshall and J.B. Clark – Robbins (1932), p. 5. Cannan, however, is the maintarget of Robbins’s attack, as is made evident in the sequel of the chapter.
2. It should be pointed out that at the end of the paragraph, in which the above quotedsentence is inserted, a footnote makes an explicit reference to Pareto’s Manuale (1906).
3. Harrod (1938) is an outstanding example.4. Hicks (1975) has the merit of having brought about the connection between Pigou’s
work and the approach of the classical economists.5. Catalogue number C239. (Capital letters followed by a series of numbers identify
Sraffa’s papers at Trinity College Library, Cambridge, according to the catalogue pre-pared by Mr Jonathan Smith.) One of the editors (Guglielmo Chiodi) is most grateful toMr Jonathan Smith and the staff of Trinity College Library for the kind assistance givenwhilst working through Sraffa’s papers.
6. Catalogue numbers D1/90 1, D1/90 2, D1/90 3, D1/90 4, D1/90 5.7. It is worth noting that Samuelson, in the article cited in the text, devotes a long Appendix
to Pigou’s treatment of Income.8. Cfr. Suzumura (2005).9. A neat account of the origin and development of the Social Choice Theory can be found
in Suzumura (2002).10. Surprisingly, Samuelson (1950), at the end of his article, seems to maintain this same
point of view.11. Cfr. Harcourt (1972) and Kurz (1987). For a different perspective see also Sen (1974a).12. It should also be noted that Sraffa’s statements referring to his criticism of the ‘Austrian’
concept of capital are all put in brackets – Sraffa (1960), p. 38.13. An evaluation of Wicksell’s capital theory can be found in Chiodi (2006).14. Cfr. Mandler (2002), Garegnani (2005), Parrinello (2005), Schefold (2005a) and (2005b).15. On this specific point see Chiodi (1993).16. Cfr. Chiodi (1992), (1998) and (2006).17. See, for example, Marx (1974), Chapter I, Section 4, and Bhaduri (1969).18. Cfr. Gilibert (2001) and (2003); de Vivo (2003)19. Velupillai (1980 and 1989) has been the first author to draw attention to this aspect of
Sraffa’s PCC.20. Sraffa’s profound anthropological feeling should not be underestimated either, as Sen
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accumulation 102adverse selection 99Afriat, S. N. 46, 52, 54–5aggregate capital 10, 130–1Aristotle 213Arrow, K. J. 8, 10, 189Arrow-Debreu model 127, 211atemporal equilibrium 175–6
basic commodities 191basic goods 59basically economic actions (BEAs) 216–18Bergson, A. 7Besicovitch, A. S. 263–70Bharadwaj, K. R. 25, 29, 32Blaug, M. 13Blinder, A. S. 105Bohm-Bawerk, E. 138, 262Bortkiewicz 76–8Brower, L. E. 3Burmeister, E. 127, 280–1
Cambridge controversies 187capital
aggregate 10, 130–1marginal productivity of 188as measurable quantity 10quantity of 129
capital theory 102–3, 105, 168–9capital theory debate 10–11, 187capitalism 1–2, 95, 96cardinal utility approach 5Cassel, G. 2Chakravarty, S. 277–8Chamberlin, E. 114class conflict 95classical economic theory 1–2, 4, 71–2,
107–9criticism of 9–10income distribution in 93–5, 97–8,
101–3long-period method in 115–17payroll taxation in 100–1pensions in 104–7
Classical ‘Surplus’ approach, to theory ofincome distribution 93–5
Clower, R. W. 139, 140, 146Clower-semiequilibrium (CSE) 135, 149,
151–3, 172, 175–6compared with Garegnani-
semiequilibrium 153–64commodities
basic 191known quantities of 12prices of 24–8surplus of 13true absolute costs of 70value of 189–90see also standard commodity
commodity prices 14, 29–30competition
imperfect 114, 118long-period method and 115–17role of 116–17role of time and 117–18
Eaton, J. 69Eatwell, J. 47economic action 216economic culture 1economic efficiency 2economic prudence 214–18economic science, definition of 3–4economic theory
development economics 199–207ethical values in 211–14ideology in 15Marshallian 2, 3mathematical models 275–90post-classical 1, 10–12, 193Sraffa’s 187–95see also classical economic theory;
neoclassical economic theory;post-classical economic theory
factor prices 128, 165–6factors of production 75, 132, 262false prices 140Feldstein, M. 104–5
Finley, M. 214First Fundamental Theorem of Welfare
Economics 8fixed point theorem 3full employment 94, 103, 127–8, 156–7,
163, 166fully funded programmes 105
Garegnani, P. 10, 13, 32indirect critique by 127–33main objections to 171–8model of 133–41Parrinello and 178–80semiequilibrium 141–7simplified model of 147–53
general equilibrium model 2–3, 139, 141,162, 168–9, 171–2
General Theory (Keynes) 2Gilibert, G. 76, 82Gough, I. 95–6, 98Graaff, J. de. V. 6gradient, proof of 263–73growth factor 62, 64, 65
Hahn, F. 52Harcourt, G. C. 29, 187Harrod, R. F. 25, 26–7, 32Hayek, F. 218–21, 286health care 99–100Hicks, J. R. 3, 118, 119Hirschman, A. O. 206, 214Hypo 76, 78, 81–2hypothetical frontier (HTF) 154
ideology 15imperfect competition 114, 118Impossibility Theorem 8income distribution
classical theory of 93–5, 97–8, 101–3neoclassical approach to 101–3welfare state and 95–8
income, minimum standard of real 7indices of scarcity 3indifference curves 163individualism, methodological 11inflation 58insurance fiction 104
Jevons’ law 178–80Johnson, H. 288, 289joint production 25, 45–6, 56–8, 63
Kakutani, S. 3Kelly, J. 283Keynes, J. M. 2, 3, 5Keynesian economics 138, 146–7, 171known quantities 12Krugman, P. 199, 202–4Kuhn-Tucker conditions 61Kurz, H. 69–70, 74Kurz-Salvadori algorithm 281
labour income 12, 13labour, market demand and supply
functions of 12–13labour market, equilibrium in 139, 142–6labour theory of value 30, 46, 70, 73–6,
189–90Leontief, W. W. 8, 9, 14, 59–62Lewis, W. A. 201linear activity system 63linear programming models 8–9Lippi, M. 253long-period method 127
abandonment of 115–17luxury goods 58
MacIntyre, A. 213macroeconomics 9Malinvaud, E. 140Mandler, M. 166marginal productivity of capital 188marginal theory
by contradiction 283–4convergence algorithm 247–52interpretation of Sraffa’s 277–81observations on 243–7proof of gradient 263–73Sraffa’s 253–9of Sraffa’s chapter 1 239–42
maximum doctrine of perfect competition47, 65
McKenzie, L. W. 55means of production 81Meek, R. L. 33metaphysics, of value 71–4method of comparison 80method, vs. theory 118–19methodological individualism 11methods of production 13minimum standard of real income 7monetary production economies,
mathematising of 284–7money
Hayek’s treatment of 218–21as peculiar commodity 221
Moore, G. E. 234moral economy view, of pensions 106–7moralizing 211–14Moudud, J. K. 103
Napoleoni, C. 27, 29, 30, 32, 69, 82national dividend 5Neisser, H. 2, 189neoclassical economic theory 71, 132–3,
160–1concept of equilibrium in 128income distribution 101–3
neoclassical economic theory – continuedpensions in 104–6see also post-classical economic theory
neoclassical production function 10Neoclassical Synthesis 3neo-Ricardians 95–6Neowalrasian/Neokeynesian School 140,
146net social wage 100–1New Welfare Economics 5, 6Newman, P. 33non-competitive markets 117non-competitive prices 119–24non-economic actions (NEAs) 217
On the Principles of Political Economy andTaxation (Ricardo) 8
output 61output levels 102–3over-employment 146
Panglossian economy 211Pareto criterion 103Parigi, F. 101Parrinello, S. 178–80, 185–6Pasinetti, L. 9, 275PAYG pensions 104–6, 108–9payroll taxation, classical view of 100–1pensions 104–9perfect competition 65
Marshallian theory of 2maximum doctrine of 47, 65
Perron-Frobenius Theorem 52, 255Picchio, A. 104Pigou, A. C. 5–7political economy view, of pensions 106–7political principles 12, 13post-classical economic theory 1, 193
criticism of 10, 11features of 11–12as mathematical theory 11see also neoclassical economic theory
Potier, J. P. 69power resource theory 95, 96price setting 24–8price systems 4, 6price theory 71prices 45–8
interdependence of 50–2market 14, 194non-competitive 119–24production 14, 190, 192, 193–5quantities and 187relative 70, 137–8, 156, 262stability of 50–2undiscounted 135–6
private sector, provision of social wagegoods by 98–100
product differentiation 115–16production 193–5
capitalist sphere of 95–6factors of 75, 132, 262joint 25, 45–6, 56–8, 63means of 81methods of 13rate of exploitation and 81–5for subsistence 48–50surplus 52–6, 262
Production of Commodities by Means ofCommodities (PCC) (Sraffa) 1–2
book reviews of 23–38ideological aspect of 15initial reaction to 9–10Marxist reaction to 31mathematical economics of 281–4style of exposition 32–4
Sen, A. 5Shackle, G.L.S. 2Smith, A. 4, 5, 117, 190, 200, 214, 215social aggregates 4social conflict 95, 104social principles 12, 13Social Product 4, 5, 6–7social wage 96–8, 100–1social wage goods, provision of 98–100Social Welfare Function 7socialism 96, 97Specker, E. 281Sraffa Archives 68, 69Sraffa, Piero 1
collaboration with Besicovitch 263–70critical contributions of 2criticism of 187–8development economics and 204–7economic theory of 187–95evolution of economic theory of 114–24Marxist theory and 1–2, 13, 68–86,
95–6, 188–90systems of equations of 261–3Wittgenstein and 227–35
263within analysis of distribution 28–9within analysis of value 29–31role of 28–31
staterole of, in development economics 201see also welfare state
steady state 45subsistence
economy 58–9production for 48–50
supply curves 24, 26supply-demand equilibria 46surplus 13, 46, 52–6, 61, 262surplus value 30, 79–81, 96surrogate production function 187systems, viability of 191, 192–3
tâtonnement process 146–7, 164, 165–71,173–4, 177–80, 185–6
taxation, payroll 100–1technology effect 165–70, 173–4technology frontier (TF) 154–6, 159temporary equilibrium method 119–24Theory of Value 45theory, vs. method 118–19time, role of 117–19Tractatus (Wittgenstein) 228–32transformation curve see technology
frontier (TF)transformation problem 15
underdeveloped countries 199, 200–1underemployment 163undiscounted prices 135–6unemployment 140–1, 146uniform rate of profits 115, 116–17, 137,
