Marquette University e-Publications@Marquette Economics Faculty Research and Publications Economics, Department of 1-1-1998 Sraffa and Keynes: Differences and Shared Preconceptions John B. Davis Marquette University, [email protected] Published version. Il Pensiero Economico Italiano, Vol. 6, No. 1 (1998): 57-78. Publisher Link. © 1998 Fabrizio Serra Editore. Used with permission. II pensiero economico italiano . VII1998/1 SRAFFA AND KEYNES: DIFFERENCES AND SHARED PRECONCEPTIONS! JOHN B. DAVIS Marquette University Department of Economics The relationship between the work of Piero Sraffa and John May­ nard Keynes, the two most influential critics of neoclassical econom­ ics, is complex and controversial. The two knew each other and each other's work from the 1920s when they shared an interest in postwar monetary policy, and Keynes arranged for Sraffa to live and work in Cambridge [cf. POTIER (1991), pp. 8-12, 44ffJ. Keynes - on Francis Edgeworth's recommendation - encouraged Sraffa to prepare his 1925 Sulle relazioni fra costo e quantita pro do tta for publication as the Laws of Returns under Competitive Conditions for the «Economic Jour­ nal» (1926), helped to start Sraffa on the project of editing Ricardo's Works and Correspondence (1951-73), and saw an early formulation of what more than three decades later would become the Production of Commodities by Means of Commodities [SRAFFA (1960), p. vi]. Sraf­ fa translated Keynes's Tract on Monetary Reform into Italian, defend­ ed Keynes's Treatise on Money against Friedrich von Hayek in the process critiquing money neutrality, participated in the « Cambridge circus" that discussed the Treatise, attended Keynes's lectures in which the ideas for The General Theory of Employment, Interest and Mon­ ey were developed, and was instrumental in developing the commod­ ity rates or own-rates of interest analysis that later occupied Chapter 17 of Keynes's book (though not as Sraffa had intended). In addition, the two were linked together through a I).umber of key individuals in interwar Cambridge economics and philosophy, notably including Ludwig Wittgenstein, Maurice Dobb, Richard Kahn, Frank Ramsey, Bertrand Russell, and Austin and Joan Robinson. Yet their later works, The General Theory and Production of Commodities lack obvious 1 Thanks for very helpful and thoughtful comments on an earlier version of this paper go to David Andrews, Geoff Harcourt, Mike Lawlor, Cristina Marcuzzo, Gary Mongiovi, an anomymous reader for this journal, and participants at the «Cam­ bridge Economics in the 1930's» session at the June 1997 History of Economics Society Meetings in Charleston, South Carolina. - sraffa and Keynes: differences and shared preconceptions 135 134 John B. Davis . tal differences between classi.cal ~nd neoclas- points of contact, and there is little evidence that by the end of Key­ appreCIate th~ fundahen h of value. An implicatlon IS that ~ey­ nes's life they had much in common. Skidelsky, for example, states: sical economI~S on t ~ teo?Theory for criticizing the neoclaSSIcal, h a While one can say a great deal about Keynes and a great deal about nes's strategy m T. e fh economy as tending to produce .full em­ Sraffa, there is surprisingly little to say about Keynes and Sraffa. They were Say's Law conceptlon 0 t e . ortant objections that denve from both economists; they were very good friends, they were both in Cambridge loyment of labo~ encOl.~nte~s Imp.. e of mar inalist value theory. for most of the interwar years; their ideas were striking, even revolutionary. ~raffa's later, cl~thcHllYi~h;~:1e~r~~~;~pts to id~ntify a set of. phil - But these ideas had few points of contact with each other [(1986), p. 1]. The secon a. 0 h d b Sraffa and Keynes regardmg ~h e sophical preconceptIOnS s ~re Yb· embedded in a wider soclal- . f . g economICS as emg . h f . Others, however, have argued that, despite important disagree­ neceSSIty 0 seem I. I conomics especially m t e eyes 0 ItS ments between them, a satisfactory alternative to neoclassical economic historical process: ~eoc aSSlca be characte;ized as a set of fo~mal :ools theory may involve combining the classical theory of value, as in Sraf­ more recent practltloners, mlY d every social-histoncal sItua­ fa's prices of production analysis, and Keynes's theory of effective of analysis ~hat may be use. m an~ ~~ reflect their wider context, are demand [e.g., EATWELL and MILGATE (1983)]. How are we, then, to tion. It demes that fechonomlc cOtn~r!d perhaps most importantly, take make sense of the relationship between Sraffa and Keynes? This pa­ in part a product 0 . t at contex , m' ic matters associated with con- . cordmg to non-econo d·ff m per attempts to create an interpretive framework to address how the on meanmg ac f 11 h . later theoretical 1 erences, see works of Sraffa and Keynes relate to one another by doing two things. text. Sraffa and Keynes, or a. t .elr textual and historical. Indeed, The first half of the paper concentrates on important differences to have agree~ Tat ecodiffe:~~tI~~lirical views, their conceptioD: 01 between the two by approaching their thought from the perspective though they a very 1.· 1 m the framework of classlca of their distinct interpretations of the economic thought that preced­ economics was that of po mca econo i' of a wider social-historical ed them. Just as one can begin to understand the relationships be­ economics that made the economy par tween contemporary post-Keynesian and neo-Ricardian critics of ne­ process. f h er then an attempt is made to map oclassical economics according to how their thought relates to the In Section Three 0 t e P1 ff dKeynes in connection with work of Sraffa and Keynes, so one can also begin to understand the out common grou~d between h~areia:i~n of economics to t~e rest of relationship between Sraffa and Keynes's thought according to how shared preconce~tlonsd abfu~ t hilosophical views of Antomo Gra~­ they each understood the work of their predecessors. The discussion society. Here use IS rna e 0 ~ e p t that the idea that there eXIst here, moreover, takes a particular perspective on this investigation by sci and Ludwig Wi.ttge~stem t? sugge:tions underlies both Sraffa and asking how Keynes was mistaken in his understanding of classical eco­ relatively di~tin~t histoncalho~I~~f~~hlstorical embeddedness of eco­ nomics. Keynes wrote a number of essays on figures in the history of Keynes's thmking about t he . fl ced Sraffa in this regard. There . G . ppears to aveln uen . d K economics (1933), but no one would say that he was as conscientious nOIDlCS. raroSCI a. f enc between Wittgenstem an ey- a scholar of the subject as Sraffa. Sraffa was perhaps the most careful also appear to be pomts 0 .tang i d in a similar light. Section Four, and painstaking of all historians of economic thought. Keynes was nes's thinki~g they ~ay ¥ehnte~p~; :hen addresses problems in gi~ing impressionistic and often insightful in works that were largely bio­ the concludmg. sectI~n 0 .t i Ep, rk an economic interpretatlon, graphical in nature. Thus Garegnani (1978-79) has persuasively ar­ this philosophlcal-~Istonca rdmb~~ over short-period versus long­ gued that Keynes, in criticizing Say's Law as it was employed in the especially where this concerns e a neoclassical economics of his time, extended similar criticisms against period. the Law's earlier, classical proponents, who in fact operated with a different conception of the Law. ES'S DIFFERENCES ON CLASSICAL ECONOMICS Using this entry point, Section One of the paper distinguishes 1. SRAFFA AND KEYN how the two differed in their interpretations of classical economics. 1·lca I hool of economics as those Section Two of the paper then distinguishes the views of the two on Keynes charactenzed the c afs d s~he theory of Ricardian eco- Marshall, who argued for continuity between Classical and neoclassi­ <{ollowers of Rica~d?» ihod«pv ecte n Say's Law·to explain the full­ cal economics. The argument of this section is that because Keynes nomics», where thIS mvo ve re lance 0 and included J. S. Mill, Mar­ was insufficiently critical of Marshall's continuity thesis, he did not employment tendency 0 f t h e economy, d . 137 sraffa and Keynes: differences and share preconcepttons 136 John B. Davis bl s associated with any imbalance ~etween shall, Edgeworth, and Pigou as its principal representatives. Keynes effective demand pro ~ '11 he miscast Malthus in thinking that believed that he was extending Marx's characterization of the classical saving and inv~stn:ent. ut st!. n entirel the part played by the rate school as including Ricardo,]ames Mill, and their predecessors whose his «defect lay m hIS o~erlo~ lttus nev~r saw the interest rate as a work had culminated in Ricardian economics. He admitted that he of inte:est» (P: 102), sl~:an;for output. was «perhaps perpetuating a solecism» in his extension of the term, factor mfluencl1?-g t~e d d the interest rate as the «balancmg factor but thought it still justified on the grounds that what he termed the Even less dId Ricar 0 see . th sha e of new investment ... «classical theory of the subject» had dominated the economic think~ .... ,hich brings the demand for safvm~ m [;"YNPES (1936) p. 165]. Ricar- .. .' h h lyo savmg» l~ , h ing «of the governing and academic classes of this generation, as it has into equalIty WIt t ~ supp d' h theory of profits, and saw t e for a hundred years past» [KEYNES (1936), p.