Transcript The implications of Mr. Sraffa for economic policy

Lecture 1: the Keynesian Hypothesis, Harrod,
the Cambridge equation, the neo-Kaleckians
Sergio Cesaratto
Professore ordinario di Politica economica
Università di Siena
Dipartimento di Economia Politica e Statistica (DEPS)
Piazza San Francesco 7
53100 Siena
338 1768793
[email protected]
http://www.econ-pol.unisi.it/cesaratto/
http://politicaeconomiablog.blogspot.com/
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Basics
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3 main points made by Sraffians:
A) criticism of neoclassical capital theory (negative part) (Petri)
B) recovery of the Classical theory of distribution (positive) (Petri)
C) interpretation of Keynes and extension of his theory to the long
run (positive)
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Sraffa, Marx, Keynes, Kalecki: a synthesis
• The concept of social surplus central in Classical theory of
distribution and growth. The availability of a surplus is the prime
mover of economic development (to let political, intellectual, military
class to exist, to be exchanged with foreign goods and technology
etc). In a planned economy the size of the surplus limits economic
development. In a market economy the inequality in income
distribution limits the realisation of the surplus by capitalists.
• In this respect Marx, Keynes, Kalecki criticised Say’s Law.
• Sraffa reinforced this criticism by demolishing the marginalist version
of Say’s Law, and recovered and reinforced the Classical surplus
approach. In Kalecki the connection between Classical distribution
theory and the criticism to Say’s Law is clearer than in Keynes.
• Sraffa-Garegnani reinforced the Keynesian theory of Effective
Demand which is, however, limited to the short run (given capacity).
It must be extended to the long-run (the main focus of this course)
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The Keynesian Hypothesis and further implications
• The main tenant of the Sraffian theory of accumulation is the
Keynesian Hypothesis (KH): investment determines savings both in
the short and in the long run. In the short-run by a fuller exploitation of
existing capacity; in the long-run by increasing capacity.
• In a demand-led theory, resources (capital and population) adjust to
demand growth, not the other way round.
• Monetary and fiscal policy affects output also in the long run
• Inflation has not a monetary origin, it is due to the conflict over
income distribution
• There is not a natural rate of unemployment. The latter is basically
involuntary. When unemployment falls, inflation rises not to cheat
workers – as in Friedman’s story – but because they have an higher
bargaining power.
• The limit to accumulation is mainly political: capitalism must preserve
an industrial reserve army to keep workers calm; duty of the
(independent) Central Bank is to do the dirty job of preserving social
peace by threatening higher unemployment.
• We shall not say much on open economies, so let us say something
now.
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Steady state
• We shall often talk of steady-state or balanced-growth. We mean
situation in which output and the capital stock grows at the same
rate, and K/Y = v is thus constant at its normal/desired level.
• (we neglect here technical progress)
• Steady states or normal accumulation paths are only an
approximation: in reality capitalism evolves through economic
cycles. Depressions can last very long (as we see in Europe)
• Digression: is heterodox growth theory only interested on the
demand-side only? No.
• Supply-side heterodox story  mercantilist-nationalist tradition of
pro-active industrial policies and developmental state.
• See e.g. Marianna Mazzuccato (SPRU Univ.Sussex), The
Entrepreneurial State: debunking private vs. public sector myths
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