A Revolution in Economic Theory: The Economics of Sraffa

This research project contends that Piero Sraffa tried to develop an economic theory that could stand up as an alternative to the orthodox theory of value and provide a foundation for the Keynesian and post-Keynesian alternatives.

The notion of equilibrium has played a critical role in economic theory since Adam Smith, and it is almost invariably invoked as an ideological support for the efficiency of the market in dealing with economic crises. It is in the theories of value that the notion of equilibrium has played a crucial role, and to the extent that a theory of value is fundamental to any economic theory of the capitalist market economy, it has remained essential to economic theorizing in general. One of the critical weaknesses of the heterodox economics, however, is a lack of a coherent theory of value or prices in their theories. Unless this lacuna is plugged it would remain very difficult for the current heterodoxy in economics to stand up as a sound alternative to the orthodoxy. However, Sraffa’s theory of value in Production of Commodities by Means of Commodities does not depend on the notion of equilibrium. This project rediscovers Sraffa’s revolutionary theory and develops its consequences for the Keynesian alternative as well as a fresh critique of the modern Walrasian theory of value.