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This book accounts for the work done around the two central aspects of Piero Sraffa's contribution to economic analysis, namely the criticism of the neoclassical theory of value and distribution and the reconstruction of economic theory along the lines of the Classical approach.





It is widely recognised that Sraffa’s Production of Commodities by Means of Commodities (PCMC) is not simply a variant of a class of linear models, nor an incomplete general equilibrium model with stationary prices. Together with Sraffa’s 1951 ‘Introduction’ to Ricardo’s Works, Sraffa (1960) revived the old classical economists’ approach to value and distribution, proving that a correct price theory can spring from within that approach, and illustrating properties of the price system and of the choice of techniques which have resulted in a sharp contrast with the foundations of neoclassical (or marginalist) theory.
Enrico Sergio Levrero

The Capital Controversy and General Equilibrium Analysis


1. On the Present State of the Capital Controversy

The post-war capital controversy seems to have had two distinguishable stages. Thanks to the unambiguous phenomena of reswitching and reverse capital deepening, the first stage was conclusive in discarding from pure theory the traditional versions of neoclassical theory that relied on the notion of capital as a single quantity. Subsequently, however, when the implications of those phenomena took centre stage in the controversy, together with the reformulations of the theory which intended to do away with the ‘quantity of capital’, several misunderstandings prevented, I shall contend, decisive progress in the analysis and we entered an inconclusive phase of the discussion.
Pierangelo Garegnani

2. Two Strands of Thought in Pierangelo Garegnani’s Capital Theory Critique

Two lines of thought may be discerned in the half-century arc of critical writing on capital theory which extends from Garegnani (1960) to Garegnani (2010). The first concerns the conception of the quantity of capital as an endowment to be put on a par with land and labour - the traditional three ‘factors of production’ (which is not to discredit Marshall’s fourth factor, organisation, which, like capital, is produced). The second draws attention to a related methodological shift within neoclassical theory prompted by a seeming recognition, originally on the part of Hicks, but essentially found in Walras (as Garegnani has repeatedly pointed out), that the treatment of a given capital endowment as an arbitrary vector of capital goods—each one a separate resource or factor input—is inconsistent with ‘the uniformity of returns on capitals’ supply prices pertaining to the “normal position”’ (Garegnani, 2010, p. 81). A central point in this second line of argument is that the ‘normal position’ was the bedrock upon which both classical and traditional neoclassical theory had been built.
Harvey Gram

3. Only a Few Techniques Matter! On the Number of Curves on the Wage Frontier

Wage curves have become the main tool for the analysis of technical choice, but what does their envelope look like? Joan Robinson used to say that one should expect one technique to dominate all others, independently of distribution. It sounded like a polemical remark to counteract all reference to neoclassical substitution, and she was more cautious in her writing,1 but the drawing on the blackboard resembled Figure 3.1, w1, w2 representing two techniques. (The reader not familiar with the Sraffa analysis and the notation used here can pick it up in the first paragraph of Section 3.2.)
Bertram Schefold

4. On the Stability of the Ramsey Accumulation Path

Infinite horizon neoclassical optimal accumulation theory is characterised by an analytical apparatus that now pervades several fields of theoretical analysis: capital theory, growth and value theory, macrodynamics, etc. In this context the equilibrium solutions take the form of saddle paths which are, therefore, unstable paths. The convergence of these solutions to the steady-state equilibrium is then ensured by imposing a transversality condition, that is, a condition which guarantees the optimality of the solution when time tends to infinity.
Enrico Bellino

5. Malinvaud on Wicksell’s Legacy to Capital Theory: Some Critical Remarks

Because of the neo-Walrasian shift in general equilibrium theories of value and distribution symbolically associated with the publication of Hicks’s Value and Capital,1 Wicksell’s contribution to economic theory has been forgotten by most of the modern mainstream economists. There is, for example, no reference to him in Debreu’s Theory of Value (1959) or Arrow and Hahn’s General Competitive Analysis (1971).
Saverio M. Fratini

6. Capital and Stationary States: Considerations on the Reasons Adduced for Abandoning the Method of Normal Positions

As is well known, the method on which the dominant (marginalist or ‘neoclassical’) economic theory is based at present is constructed upon the notions of ‘temporary’ or, more frequently, ‘intertemporal’ equilibrium. In several respects these two notions differ widely from one another; they have, however, this in common: they both refer to positions of the economic system that do not imply a uniform rate of net return on the supply price of the capital goods existing in that system. In this crucial respect, therefore, the method employed today is, whatever its particular formulation, in stark contrast to the method used both by the classical economists and by the founders and the first systematisers of the marginalist theory who, in order to study value and distribution, always referred to positions of the economic system in which that uniformity - and more generally the uniformity of the rate of profit - was assured.
Paolo Trabucchi

The Revival and Development of the Classical Theory of Distribution


7. Marx’s Theory of Wages and the Revival of the Surplus Approach

This work aims to clarify some aspects of classical wage theory, looking at the form in which it was advanced by Marx. It also aims to analyse the ability of this theory to explain income distribution in the context of the present capitalist societies, especially with respect to the relationship in a fiat money economy between money wages and real wages. In particular, Sections 7.2–7.4 reconstuct the notion of the subsistence wage and the determinants of distribution according to Marx; Sections 7.5 and 7.6 consider the effects of technical changes on the secular trends in real wages; Section 7.7 focuses on the different possible forces at work in determining income distribution, and thus in ‘closing’ Sraffa’s price system, when the wage rate happens to be above the subsistence level; lastly, Appendix A deals more exhaustively with the relationship between money wages and real wages, and the effects on price inflation and income distribution of a discrepancy between the real wage rate pursued by the workers in wage bargaining and the real wage rate targeted by the monetary authorities.1
Enrico Sergio Levrero

8. On Advanced Capitalism and the Determinants of the Change in Income Distribution: A Classical Interpretation

It is useful to start our analysis with the question of technological change, since it is in these terms that the general increase in inequality experienced by advanced capitalism over the last 30 years has, by consensus, been explained.
Massimo Pivetti

9. Alternative ‘Closures’ to Sraffa’s System: Some Reflections in the Light of the Changes in Functional Income Distribution in the United States

The last 30 years have witnessed a dramatic change in income distribution, with the wage share1 falling in all major industrialised countries (Figure 9.1).
Antonella Stirati

10. Sraffa and Keynes: Two Ways of Making a ‘Revolution’ in Economic Theory

This chapter aims to show how a true ‘revolution’ in economic theory during the last century can be attributed jointly to Sraffa and Keynes. Despite following different research paths, both went deeply into the foundations of established economic theory, to the point of subverting, within their own framework, traditional ways of thinking about and representing the functioning of an economic system. We will also reflect on the persistence, despite Keynes’s and Sraffa’s corrosive critiques, of the very uncomfortable state of contemporary economic theory.
Guglielmo Chiodi, Leonardo Ditta

11. Causality and Structure in Piecemeal Macroeconomic Modelling

This work defends a number of assertions concerning some basic features of post-Keynesian macroeconomic models.
Sergio Parrinello

12. On the Link between Functional and Personal Distribution in Italy

Italian wage and salary earners have experienced a critical change in their position in recent decades. This change has two dimensions. On the one hand, since the mid-1970s, Italian employees have obtained a lower share of value added.1 On the other hand, since the late 1980s, wider disparities in workers’ pay structure have meant that a small segment of the salaried workforce has not seen its share decline.2 The proportion of income allotted to the bulk of the working class has thus been reduced not only by the expansion of other incomes, but also by the expansion of the income of employees at the top of the pay scale.
Aldo Barba

13. Exchange Rate Policy, Distributive Conflict and Structural Heterogeneity: The Argentinean and Brazilian Cases

This chapter is a comparative study of monetary policy and the inflationary process in Argentina and Brazil, based on the classical approach to the determination of prices and distribution. Our aim is to suggest some lines of inquiry in a specific framework for the analysis of inflation, and its relation to macroeconomic policies and structural heterogeneity in Argentina and Brazil.
Fabián Amico, Alejandro Fiorito


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