Piero Sraffa Biography Summary Ideas

Piero Sraffa Early Academic Career

Nor does it seem possible to attribute to Keynes any particular influence on Sraffa's research. However he did play a decisive role in securing for Sraffa the best possible conditions for his work.

As already noted, Sraffa had met Keynes for the first time in August 1921. He had been preceded by a letter from Mary Berenson, a friend of both Keynes and Gaetano Salvemini. She introduced him as 'a young friend of the Salveminis, who think very highly of him'. Until this time, and for some time to come, Sraffa had been largely concerned with monetary questions. His graduation thesis, debated in November 1920 with Luigi Einaudi, was entitled 'Monetary Inflation in Italy During and After the War'. Immediately after his graduation Sraffa worked for a brief period, before the advent of fascism, to help set up an office of Labour Statistics for the Milanese Socialist administration.

Some time later, Keynes requested from Sraffa a description of the running of the Italian banking system. The first article, 'The Bank Crisis in Italy', published in the Economic Journal for June, 1922 is a strongly worded and accurate indictment of the rescue of the Banca Italiana di Sconto, and concludes with an account of the pliability of the Government when confronted by important financial concerns:

Even if [the banking] laws were not futile in themselves what could be their use as long as the Government is prepared to be the first to break them so soon as it is blackmailed by a band of gunmen or a group of bold financiers?

This article passed without comment. But when, in December, the second article (on the Italian banking system after the First World War) was published in four languages in the widely distributed Supplement of the Manchester Guardian dedicated to the Reconstruction of Europe, it was Mussolini himself who reacted. Pressure was put on Sraffa's father Angelo to obtain a retraction - which he did not get.

With these articles and his graduation thesis completed, Sraffa began his academic career as Professor of Political Economy in the Jurisprudence Faculty of the University of Perugia. He remained there until January 1926, when he obtained a chair at Cagliari University. The journey between Perugia and Milan, where Sraffa had settled with his family, and then the journey to Cagliari, were a handicap for the young professor's research. But the obligation to run a general course in Political Economy directed Sraffa's attention to the academic school dominant in Italy at that time - Marginalism, in Maffeo Pantaleoni's Mar-shallian version.

Amongst other things, Sraffa was occupied with the translation into Italian of Keynes's Tract on Monetary Reform. But his main interests were shifting from the field of applied economics to that of theory and he was working on a critique of the Marshallian theory of value. His argument is set out in a long article 'On the Relationship Between Cost and Quantity Produced' published in 1925 in Annali di Economia.

Sraffa's claim is that the Marshallian theory of value is invalidated by a logical contradiction between two of its most fundamental elements - the concept of perfect competition and the use of intersecting demand and supply curves to determine price and quantity produced. In particular, Sraffa criticised the tendency to establish a functional relationship between unit cost and quantity produced - that is, the idea that it is possible to determine precise laws of returns to scale.

As Sraffa reminds us, in classical political economy the 'law' of diminishing returns was associated mainly with the problem of rent (theory of distribution), while the 'law' of increasing returns was associated with the division of labour, that is, with general economic progress (theory of production). Marshall, and other neoclassical economists, attempted to merge these 'laws' into a single 'law' of non-proportional returns, utilizing it in the field of price theory to establish a functional connection between costs and quantity produced. This relationship constituted the basis of the rising supply curve as opposed to the corresponding down­ward-sloping demand curve derived from the 'law' of diminishing marginal utility. Sraffa admitted that changes in the level of production in one industry can lead to changes in unit cost. However, as he showed, these changes derive from causes that also have an influence on costs in other industries (the existence of scarce factors of production for decreasing returns and econ­omies of scale for increasing returns). Consequently, changes in the costs of the industry in question will mean changes in costs of comparable size in other industries, and cannot be considered in isolation as Marshall does with his partial equilibrium method.

At Keynes's request the problem is taken up again in an article aimed at the Anglo-Saxon public and published in the Economic Journal in 1926. This article, shorter and somewhat less detailed than the Italian one, was sufficient to earn Sraffa a good deal of prestige in the English academic community for the 25 years preceding the publication of Production of Commodities by Means of Commodities (1960) and his critical edition of Ricardo's works. This article also embodied traces of the theory of imperfect competition, although the development of this theory by students like Joan Robinson was a far cry from the road along which Sraffa was to pursue his research.

In the summer of 1927, Sraffa moved to England, having been offered a lectureship at Cambridge University. This offer came from Keynes, who had taken it upon himself to find work for Sraffa in England, and saw to all the organisational problems involved.