Sraffa’s Theory of Price

The third and last of the modern theories of price to be considered in the present work is that of the great Italian economist, Piero Sraffa. Sraffa’s major (published) contributions to price theory are to be found in three works. The first of these is his 1926 Economic Journal article on Marshallian price theory, which served to undermine the foundations of this theory, but not enough to prevent successive generations of economists from continuing to use these. Then there is the aforementioned excellent 1951 Introduction to the Collected Works of David Ricardo. The third, and perhaps most important, work by Sraffa on price is his 1960 magnum opus, Production of Commodities by Means of Commodities (hereafter Commodities). It is in this work that Sraffa provides his own theory of price, and to which most attention will be paid in what follows.1 Although Sraffa’s theory of price has often been regarded as an important pillar of the general Post Keynesian theory of price, it will be argued below, in keeping with what was already argued in Chapter 7, that the two theories are very different.