By Ajit Sinha
This e-book attracts at the paintings of 1 of the sharpest minds of the 20 th century, Piero Sraffa. Ludwig Wittgenstein credited him for 'the such a lot consequential rules' of the Philosophical Investigations (1953) and positioned him excessive on his brief checklist of geniuses. Sraffa's progressive contribution to economics was once, even if, misplaced to the area simply because economists didn't be aware of the philosophical underpinnings of his economics. in response to exhaustive archival examine, Sinha offers an exhilarating new thesis that exhibits how Sraffa challenged the standard mode of theorizing by way of crucial and mechanical causation and, as a substitute, argued for a descriptive or geometrical idea in response to simultaneous family. A end result of this method used to be a whole removing of 'agent's subjectivity' and 'marginal strategy' or counterfactual reasoning from financial research – the 2 basic pillars of orthodox financial theory.
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The practical question that had to be decided, according to this opinion, was whether the revaluation of lira should be done rapidly or gradually over a long period of time. Sraffa argues, on the one hand, that the policy of revaluation has serious downsides. He maintains that revaluation of the lira would most likely lead to economic recession or rather ‘crisis’, because a contraction in the money supply would lead to a high rate of interest compounded with falling prices, leading to industrial losses due to the necessary time lag between the prices of raw materials that industries have to pay out and the prices they would receive after the sale of their products.
11 In other words, increasing returns due to a fixed factor assumes that getting rid of the factor is either impossible or requires cost; that is, the fixed factor has negative marginal productivity throughout the range of increasing returns on the doses of variable factors. After differentiating the causes of diminishing and increasing returns, Sraffa wonders how diminishing returns in production turn out to be so similar to diminishing utility in consumption? His answer to this question is that both of them are rooted in the same human nature— diminishing returns in production is not a technical factor but rather a rational human arrangement of successive production programs in a similar way as diminishing utility is a rational human arrangement of successive consumption programs.
A highly noteworthy feature of this dissertation is the author’s style of writing. It is written with such authority as befits the world masters of the subject—a feature that remains constant in all his subsequent writings. This is even more remarkable given the fact that Sraffa, by all accounts, was never an outstanding student3 and that economics was not his major area of study. 7–26. 2 Sraffa was born on August 5, 1898 in Turin. 3 See Naldi (2001) for a detailed account of Sraffa’s early life and student career.