The General Theory and Keynes for the 21st Century
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The General Theory and Keynes for the 21st Century

Edited by Sheila Dow, Jesper Jespersen and Geoff Tily

This book is devoted to the lasting impact of The General Theory (and Keynes’s thought) on macroeconomic theory, methodology and its relevance for understanding the post-crisis challenges of the 21st Century. A number of contributions take their departure from Keynes's presentation during the 1930's of his new macroeconomic understanding and its policy implications. Other chapters take a more pluralistic view of Keynes's ideas and their importance for contemporary debates. Further, it is demonstrated that many textbooks often misrepresent The General Theory and therefore cannot be a reliable guide to 21st Century economic policy.
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Chapter 12: Sraffa’s prices of production understood in terms of Keynes’s state of short-term expectation

M.G. Hayes


Joan Robinson argued that it is the task of Post-Keynesians to reconcile the work of Keynes and Sraffa. The central difficulty is to reconcile equilibrium with uncertainty and the solution lies within Keynes’s distinction between short-, medium- and long-term expectation and furthermore between the long term and the technical long period. Recognition that the ‘expectations’ of Keynes’s state of short-term expectation are equilibrium prices, in a carefully defined and qualified sense, makes it possible to replace his Marshallian concept of normal prices with Sraffa’s prices of production. There is a definite case for seeking to recast the principle of effective demand without the Marshallian theory of value. The task is to achieve this without losing either an empirically useful concept of equilibrium or the concept of fundamental uncertainty.

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