[A pdf version is available here]
In its break from political economy, economics as a discipline was able to make use of the most sophisticated mathematical techniques of its time. However, in adopting this form (doubtless to achieve the status of a science), it has come under fire for its tactic of applying an effectively closed system of mathematical relations to a set of market phenomena which, as contemporary microeconomists show, is growing ever more comprehensive. This in itself would not be a problem if this did not run the risk of distorting its objects: economics is lambasted for many of its heuristic presuppositions (and ‘metaphysical’ concepts such as utility) which appear blatantly untrue in practice, but nonetheless work well in making sense of empirical data. Milton Friedman famously declared that as long as a methodology works, it does not matter whether its presuppositions are correct, but to those who remain unsatisfied by this claim, the question arises of why the theorems of economics, despite their deficiencies, work as well as they do—whether it may be possible, by means of a new perspective, to gain an almost meta-economic view by way of starting from the phenomena themselves and only from there building a theoretical edifice.
The first steps toward an answer may be found in the economic theories of a man who not only convinced Ludwig Wittgenstein to change the views propounded in his Tractatus Logico-Philosophicus but who also provided the pens and paper (not to mention much of the reading material) with which Antonio Gramsci wrote his Prison Notebooks—namely, an economic methodology which does not require marginalist concepts of supply, demand, equilibrium, or capital. The initial part of this essay aims to outline in brief the life and work of Piero Sraffa (1898-1983), to unravel some of the theoretical implications of his work for the research programme of marginalist economics, and to portray in a new manner the import of his research programme: as a Non-Economics.
“Mr. Piero Sraffa, from whom nothing is hid…” ~John Maynard Keynes
Sraffa was born in Turin in 1898, his father an influential Professor of commercial law and his mother a highly cultured woman from a distinguished family. He was given a liberal education, being taught French, English, and German by his mother, in addition to his first language of Italian. He was characterized, in a polemical paper by his friend Gramsci, as having a “democratic-liberal intellectual background, that is to say, normative and Kantian, non-Marxist and non-dialectical” (Potier, 3-4), though this account cannot be accepted without reservations; the intellectual milieu of his day was “dominated by ‘neo-idealism’ or neo-Hegelianism, represented by the thinking of Benedetto Croce (1866-1952) and Giovanni Gentile (1875-1944)” (ibid, 3). He went on to study Law at Turin University, near the latter portion in his studies (1919) striking a friendship with Antonio Gramsci, who studied linguistics at the same university, which would continue until the latter’s death (ibid, 5). Shortly after this meeting, Sraffa joined the editorial team of the journal L’Ordine Nuovo and had friendly relations with the main journalists.
During the same period, Sraffa worked on his doctoral thesis on inflation in Italy since the first World War, a text which “reveals a profound knowledge of the literature on monetary and banking problems; not only the Italian…but also the English and American…and Swedish literature” (ibid, 6). The research for Sraffa’s thesis eventually led to a polemic against the banking practices of his time, then under the fascist policies of Mussolini. This rather “salty” essay (as described by the Italian committee which later awarded Sraffa the status of professor) enraged Mussolini, who demanded a retraction, which was not given because, Sraffa told his father, the paper was based on verifiable facts. Sraffa is also known to have debated via an exchange of letters with Gramsci at that time in matters of politics, one exchange being published in L’Ordine Nuovo. Sraffa’s trenchant criticism was not only directed at the fascist government of his day, however, but also at the methodological orthodoxy beginning to pervade economics departments throughout Italian universities; this culminated in an essay entitled “On The Relation Between Cost and Quantity Produced,” revealing several flaws in the work of Alfred Marshall, at that time the paragon of mainstream economics.
Jean-Pierre Potier (13-14) provides a summary of this essay (which was to earn Sraffa a full professorship at the University of Cagliari in Sardinia) that is fairly lucid even to the layperson in economics:
Between 1924 and spring 1925, Sraffa worked on a major essay that attacked the foundations of the orthodox analysis of the great English neo-classical theorist, Alfred Marshall…. Sraffa examined the law of non-proportional returns in Marshall’s model of static partial equilibrium, which established a symmetry between relations of demand and supply as regards the value of commodities. Previously, classical economists had given prominence to two separate laws of returns. The law of increasing returns was created by Adam Smith and associated with the process of the division of labour in industry―a problem of dynamics, in the category of ‘production’. The law of diminishing returns, on the contrary, set forth by Turgot, then by David Ricardo in connection with the problem of agricultural rent, is also a problem of dynamics, but in the category of ‘distribution’. Marshall tried to combine these two orientations in a single law of non-proportional returns, to set up his theory of prices. This law can be represented by a U-shaped curve, connecting average cost and output. The situation of a firm is studied, independently of that of other firms, in a framework of free competition. In this model, the normal case is that of diminishing returns (or increasing costs).
Sraffa foregrounded how Marshall’s explanation concerning the exceptional existence of increasing returns (diminishing costs) evolved ‘internal economies’ followed by ‘external economies’ of the firm. He nevertheless developed his attack to focus criticism on the problem of diminishing returns. In Marshall’s theory, the supply curve of a firm is independent of the supply curve of other firms and moving from the firm to the industry, the aggregate means a simple transposition. According to Sraffa, this analysis is unacceptable, because it does not take the interdependences into account: the conditions of production of a firm necessarily have an effect on those of its competitors. After having shown the incompatibility between the case of diminishing returns and the conditions of particular equilibrium, Sraffa concludes by considering, for the particular industry, ‘the case of constant costs as being normal, rather than that of increasing or diminishing costs’, in keeping with the opinion of Ricardo. This situation is, to his mind, the only one compatible with the equilibrium of free competition, or at least a ‘first approximation of reality’.
Sraffa was later invited by Keynes to write a summary of this essay in the Economic Journal―a prestigious opportunity granted due to the quality of an English version of his paper on the Italian banking crisis published several years before―which he entitled “The Law of Returns Under Competitive Conditions.” It is worth noting that Arthur Pigou was willing to reconsider his whole position in the light of this paper (Potier, 17). In addition to his summary, Sraffa attempts in his paper to “reformulate and rehabilitate” the concept of ‘surplus’—first developed by William Petty in the 17th century—and the notion of the economy as a circular process, first introduced by the physiocrat François Quesnay in the 18th century (Roncaglia, 31-2).
A professor at my school, Michael Gardiner, not too long ago brought to my attention the work of Mikhail Bakhtin, a Russian social theorist who lived in the initial two-thirds of the 20th century. I recently read his first book on Bakhtin, The Dialogics of Critique: Mikhail Bakhtin & The Theory of Ideology (1992). The book itself was interesting, if somewhat dense at times (though I’m sure that Bakhtin’s own texts are exponentially more dense), and admirably contextualized Bakhtin and his work’s importance within 20th century theory. On the whole, Bakhtin doesn’t appeal to my interests, but his work has gained new relevance and popularity in the face of the ‘linguistic turn’ in philosophy, notably the discourse ethics of Jürgen Habermas. Félix Guattari was influenced by his work, and Bakhtin has gained a voice in contemporary hermeneutics, sociolinguistics, and ideology critique. Rather than focusing on these subjects, however, I feel that it would be useful to outline as clearly as possible the more abstract of the new concepts which Bakhtin introduces, and to suggest ways that they can be utilized for contemporary analyses.