The relationship between Sraffa and Keynes: Toward a reconciliation.

Piero Sraffa and John Maynard Keynes have been the two most important critics of orthodox neoclassical economics in the late twentieth century. Despite their close personal relationship, their writings appear vastly different. This has led to considerable controversy over the feasibility of combining their various insights into a coherent whole. Such a synthesis has been attempted by a group of theorists led by Pierangelo Garegnani, John Eatwell, and Murray Milgate. This synthesis has been challenged by those who view uncertainty as the crucial element of Keynes's analysis because it is excluded within Sraffa's model. This essay critiques the proposed synthesis and suggests another approach toward reconciling Sraffa and Keynes. There is evidence that the two engaged in an ongoing exchange that has not previously been recognized in the literature. Analysis of the texts relevant to this exchange generates original interpretations of both writers, according to which the indeterminacy of the economic world is a decisive element. Based on his own writings, Sraffa's model in Production of Commodities is construed as an extreme case designed to illustrate the non-existence of a unique standard of value rather than as a general theory of value. The indeterminacy of value troubled Ricardo and has important implications for modern theory. This indeterminacy is similar in its effects to that which results from uncertainty in Keynes's theory, as interpreted by Hugh Townshend and others. The central role of indeterminacy in Sraffa suggests an approach to reconciliation based on the role of convention as discussed by Keynes in the context of uncertainty in the stock market. Institutions based on convention are compatible with the theoretical indeterminacy expressed in the writings of Keynes and Sraffa, while also helping to explain the degree of stability which is observed in the world.PhDEconomicsUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/103360/1/9319478.pdfDescription of 9319478.pdf : Restricted to UM users only