Critical Essays on Piero Sraffa's Legacy in Economics
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Critical Essays on Piero Sraffa's Legacy in Economics Edited by HEINZ D. KURZ University of Graz, Austria CAMBRIDGE UNIVERSITY PRESS Downloaded from Cambridge Books Online by IP 216.165.126.139 on Sat May 24 21:40:56 BST 2014. http://ebooks.cambridge.org/ebook.jsf?bid=CBO9781139166881 Cambridge Books Online © Cambridge University Press, 2014 CHAPTER 2 Revisionist findings on Sraffa Paul A. Samuelson Piero Sraffa was a great economist whom I remember with warm admira- tion. He wrote too little, which is our loss. His reputation tends to get tied up with ideological jockeyings within our profession. Perhaps this is inevitable but I regret it - for, ideology aside, mainstream economists of the mathematical or literary persuasion can benefit much from Sraffa's contributions and also from the problems that his works pose for further investigations. By chance, the New Palgrave (Eatwell, Milgate and Newman, 1987) contains two articles on Sraffa, both of some length. The one by me originated accidentally: I was not the editors' natural choice for this topic, but they wanted my participation and were willing to indulge my preferences to write out some views on Wicksell and also on Sraffa. The other Palgrave article on Sraffa, by John Eatwell and Carlo Panico, is seen to have some overlap with mine; still readers of this valuable new reference will, I daresay, benefit from the differences in viewpoint regis- tered by the different authors. (It should be said that, until the finished volumes appeared, I could not benefit from the thoughtful Eatwell- Panico treatment; that is perhaps all for the better since differences can be more interesting than agreements.) Here, also by invitation of hospitable editors, are some further thoughts on Sraffa. They are neither listed in strict chronological order nor ranked by relative importance. 1 Scholar as young man One yearns to know more of Sraffa's early Italian years. Schumpeter, in his graduate lectures at Harvard in the mid-1930s, referred to Sraffa as unfortunately spoiled by having been born too affluent. No doubt 25 Downloaded from Cambridge Books Online by IP 128.122.253.228 on Sat Jan 10 11:23:19 GMT 2015. http://dx.doi.org/10.1017/CBO9781139166881.003 Cambridge Books Online © Cambridge University Press, 2015 26 P. A. Samuelson Schumpeter was expressing regret that Sraffa did not write more, but this diagnosis as to cause for that seems quite unwarranted. (Rumour has it that Sraffa did die well off, leaving behind him gold in Swiss vaults for Trinity College. According to Kaldor's obituary piece on Sraffa for the British Academy, this legacy seems to have been the fruit of a daring coup in which Sraffa staked his all on the comeback of Japanese bonds after that country's defeat. What theory of inductive inference, I wonder, could have persuaded me to make a like investment?) 2 Writer's block The myth of Sraffa as dilettante gained from such stories as I heard in the 1930s (perhaps from Robert Bryce, the Canadian John the Baptist who brought Keynes' message to America in 1935). Sraffa is supposed to have begged off being named director of research at Cambridge when he learned this might require his attending an occasional before-noon meet- ing; as assistant director he could avoid that risk, and for many years the 'graduate' curriculum at Cambridge was reported to involve attending a seminar with other non-Englishmen at which Sraffa presided while class- mates presented papers in turn. Several times I have head the following sample of Keynes' wit. When Maynard was told that a mysterious ailment of Nicky Kaldor's was diagnosed as athlete's foot, he is reported as saying: 'I don't believe it. Next you'll be telling me Piero suffers from writer's cramp.' Sraffa's block against lecturing was even more pathetic than his writ- er's block. The story used to be repeated in Cambridge of a series of lectures Professor Pigou had arranged on great economists. Sraffa of course was to speak on Ricardo. But as the day approached, he could not face the ordeal, pacifying Pigou by a gift of gooseberry jam and the promised substitution of Kaldor, who cheerfully agreed to volunteer as substitute. Posterity is grateful to the incident for Kaldor's brilliant 1955 article in which Ricardo's model is artfully presented as one alternative to neoclassical Clarkianism. (Since writing these words I have read the 1984 Italian interview with Kaldor - Christina Marcuzzo, 1986 - where a definitive version of this incident is told.) 3 Thursday conversations at Trinity One yearns to know more about Sraffa's precise influences on Wittgenstein. Downloaded from Cambridge Books Online by IP 128.122.253.228 on Sat Jan 10 11:23:19 GMT 2015. http://dx.doi.org/10.1017/CBO9781139166881.003 Cambridge Books Online © Cambridge University Press, 2015 Revisionist findings on Sraffa 27 4 The spectacles one peers through Sraffa's relationship to the Communist Party and to various Marxian factions, whatever its biographical interest and testimony for Italian intel- lectual history, has little bearing on his scholarly economics. Sraffa's general interest in Marxian economics is quite another matter. He was 50 when I first knew him; and the puzzlement this sophisticated intellec- tual engendered in me by orally defending such a notion as Smith's concept of productive labour (whereby concrete goods are given a primacy over ephemeral services) suddenly evaporated when I came to hypothe- size that this sophisticated mind had a penchant for Marxian notions. This paradigmatic insight for understanding Sraffa served the observer well. 5 Monetary insights One should constantly nominate suspicions in economics. Marx's legacy is valuable in this regard. But of course nomination and election are quite distinguishable procedures in an empirical science, and in this regard the algebraic worth of Karl's value-added is problematic. Eatwell and Panico (1987, pp. 448-9) point out that Sraffa's early monetary writing - his 1920 Italian thesis and 1922 work for Keynes - sided with the angels (Cassel, Keynes and Hawtrey, as against Wicksell and Einaudi) in opposing a return to pre-war gold parities with the entailed deadweight losses from deflation. So far, so good. But one hopes that the following paraphrase of Sraffa's 1920 thought is taken out of context: '... the normal value of a currency is completely "con- ventional", i.e. it can be at any level that common opinion expects it to be.' Chancellor Churchill made his 1925 boo-boo in part because the current ephemeral belief that the pound would be restored to its 1914 value made it float temporarily and misleadingly near to that disastrous level of overvaluation. Of course, Wicksell was wrong and Cassel was right on post-war restorations of parity. Any absolute price level can obtain (if the right things are done to sustain it); but Coueism is silly monetary economics. Also, Sraffa's nominated suspicion that class interests shape price-level policy decisions and achieve significant alterations in income distribution fares poorly under the test of economic history. To be sure, the indus- trialist Hugo Stinnes was splashed in the 1920-3 inflation and Heidelberg University was permanently penalized. But, as Schumpeter used to say, the rooms of capitalism's hotel are fully occupied, albeit, with a changing set of people. Even Keynes' eclectic view of the 1923 Tract, that long Downloaded from Cambridge Books Online by IP 128.122.253.228 on Sat Jan 10 11:23:19 GMT 2015. http://dx.doi.org/10.1017/CBO9781139166881.003 Cambridge Books Online © Cambridge University Press, 2015 28 P. A. Samuelson waves in the price level generate systematic changes in the terms of trade between risk-taking entrepreneurs on the one hand and rentiers on the other, has had to be attenuated in this century. What is surprising is not how much hysteresis there is of the type Sraffa suspected, but rather how little! One capitalist gains when waves move sand to his Florida beach; another loses. But this speaks little for a Marxian model of oceanogra- phy. 6 Reproduction models of Quesnay-Marx Sraffa's 1960 input/output economics, like that of Leontief in the 1925- 39 years (and that of Adolph Lowe and Fritz Burchardt in Kiel around 1930), one had supposed was influenced by Marx's Volume II tableaux of steady and expanded reproduction. It is useful to learn from Eatwell and Panico (1987) that Marx's reproduction schemes were indeed the source of the initial notes that Sraffa showed to Keynes around 1927 and from which the 1960 Sraffa classic evolved. There seems no evidence that Sraffa knew the related 1898 works of the Russian V. K. Dmitriev; although von Bortkiewicz was Leontief s Berlin mentor, he tells me he knew Marx's work but not Dmitriev's. For the Metzler Festschrift (Samuelson, 1974b), eschewing the puffery in which Morishima (1973) declared Marx to be the peer of Walras as mathematical (!) economist, I pronounced Marx's most important analytical contribution to economics to be those reproduction models from Volume II, which gets least read. Marx's admiration (merited admiration) for Quesnay stemmed from his own struggle with reproduction tableaux. Marx's successful struggle - which was purely arithmetic rather than mathematical and which avoided groping (successfully or otherwise) with the so-called 'transformation' problem - was motivated by Marx's erroneous belief that Adam Smith cheated in claiming to break down a good's price and a society's national income into the eclectic triad of wage component, land-rent component and interest (or, sans uncertainty, profit) component. Marx suspected that a fourth component of used-up capital goods somehow escaped appropriate inclusion: in a world where iron needs coal input and coal needs iron input - indeed where corn needs as input corn itself - Marx suspected Smith of perpetrating on his reader a value-added calculus that involved the swindle of an infinite regress.