Ajit Sinha - Piero Sraffa’s Price Theory Without Equilibrium

 

Piero Sraffa’s classic work Production of Commodities by Means of Commodities has been variously interpreted as a special case of modern neoclassical general equilibrium or a foundation stone for the revival of the classical tradition of Smith and Ricardo.

Ajit Sinha breaks new ground by viewing the book through the eyes of Sraffa himself, using archival resources to uncover the philosophical underpinnings of the book in the work of Wittgenstein and others.

Sinha argues that Sraffa’s framework doesn’t require equilibrium conditions to work - while most other theories of price do - allowing for an empirical understanding to economics that is closer to the real-world situation of market disequilibrium. According to Sraffa, the prices we observe in the world are simply the way the economic system achieves a given distribution of income at a given moment in time. This new interpretation opens up the revolutionary possibility of a microeconomic foundation in price theory that’s compatible with the macroeconomics of Keynes.