The 'Sraffian' Critique of General Equilibrium Theory, and the Classical-Keynesian Alternative

Abstract:     
The paper surveys the criticisms of general equilibrium theory advanced by Sraffian authors in the last twenty-five years. It is argued that an important change undergone by general equilibrium theory, from long-period versions to neo-Walrasian versions, has made it very difficult for neoclassical theorist to grasp the importance of the critique of the conception of capital as a single factor. This conception was indispensable to neoclassical long-period equilibria, i.e. equilibria reachable through time-consuming disequilibrium. Neo-Walrasian models are argued to be unable to indicate the tendencies of economies where adjustments to equilibrium are not instantaneous. They are shown to provide no foundation for neoclassical macroeconomics; these foundations lie on the contrary in the conception of capital as a single factor. In the second part of the paper it is argued that a solid alternative to the neoclassical approach exists already: the classical approach to wages and the Keynesian approach to employment and growth.

Number of Pages in PDF File: 64

JEL Classification: D50, E11, E22

working papers series