Edited by Robert W. Dimand and Harald Hagemann
Chapter 58: Piero Sraffa
Keynes and Sraffa were on friendly terms with and had great respect for one another, but when it came to economics their minds did not always meet. Keynes based his analysis largely on Marshall’s theory of value and distribution, which Sraffa criticized fiercely. Sraffa therefore had difficulties with elements in Keynes’s theory that derived from Marshall, such as the supply function for output as a whole. Sraffa helped Keynes out of an impasse when Hayek attacked the Treatise. The concept of commodity rate of interest, which Sraffa introduced on this occasion, Keynes adopted in the General Theory in his theory of liquidity preference. However, Sraffa felt that Keynes had blundered and argued that the theory was unable to support the edifice erected upon it.
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