Keynes, Sraffa and the Cambridge tradition: notes on diversity of paradigms

Abstract

Abstract

This paper reviews the interpretation of John Maynard Keynes’s economic theory inspired by the perspective of Piero Sraffa’s work on prices. After some initial remarks, the second section asks whether the multiplier, as advanced by Sraffian authors, exhausts the principle of effective demand without taking into account the Cambridge tradition of economic analysis through psychological lenses, as well as the notion of uncertainty put forward in the General Theory. Section three deals with the monetary aspects of Keynes’s thought, examining its compatibility with Sraffa’s definition of normal prices assuming a uniform profit rate. The fourth section revises the controversy over the reswitching paradox, its connection with the multiplicity of internal return rates, and the relationship between productive structure and income distribution. The concluding remarks highlight the bifurcation points between the Keynesian and the Sraffian theoretical paradigms.

Keywords: effective demand; expectations; gravitational center; capital productivity; profit rates.

JEL Codes: B22, B24, B41