Education
From 1921 to 1922 he studied in London at the London School of Economics.
From 1921 to 1922 he studied in London at the London School of Economics.
In 1922, he was appointed as Director of the provincial labour department in Milan, then as Professor in Political economy first in Perugia, and later in Cagliari, Sardinia. In 1925, he wrote about returns to scale and perfect competition, underlining some doubtful points of Alfred Marshall's theory of the firm. As Sraffa reminds us, in classical political economy the 'law' of diminishing returns was associated mainly with the problem of rent (theory of distribution), while the 'law' of increasing returns was associated with the division of labour, that is, with general economic progress (theory of production). Marshall, and other neoclassical economists, attempted to merge these 'laws' into a single 'law' of non-proportional returns, utilizing it in the field of price theory to establish a functional connection between costs and quantity produced. This relationship constituted the basis of the rising supply curve as opposed to the corresponding downward-sloping demand curve derived from the 'law' of diminishing marginal utility. Sraffa admitted that changes in the level of production in one industry can lead to changes in unit cost. However, as he showed, these changes derive from causes that also have an influence on costs in other industries (the existence of scarce factors of production for decreasing returns and economies of scale for increasing returns). Consequently, changes in the costs of the industry in question will mean changes in costs of comparable size in other industries, and cannot be considered in isolation as Marshall does with his partial equilibrium method. This was amended for British readers and published in 1926 as The Laws of Returns under Competitive Conditions.
In 1927, Sraffa moved to England, having been offered a lectureship at Cambridge University. Sraffa hated lecturing, which was normally explained by his shyness. But perhaps he declined teaching an economic theory he found wanting. So, he stopped collaborating in the making of Keynes' General Theory as Keynes used a subjective propensity to consume. After a few years, Keynes created ex novo for Sraffa the charge of Marshall Librarian.
Sraffa joined the so-called "cafeteria group", together with Frank P. Ramsey and Ludwig Wittgenstein, a sort of informal club that discussed Keynes's theory of probability and Friedrich Hayek's theory on business cycles.
Sraffa's Production of Commodities by Means of Commodities was an attempt to perfect Classical Economics' theory of value, as originally developed by David Ricardo and others He aimed to demonstrate flaws in the mainstream neoclassical theory of value and develop an alternative analysis. In particular, Sraffa's technique of aggregating capital as "dated inputs of labour" led to a famous scholarly debate known as the Cambridge capital controversy.
Economists disagree on whether Sraffa's work refutes neoclassical economics. Many post-Keynesian economists use Sraffa's critique as justification for abandoning neoclassical analysis and exploring other models of economic behavior. Others see his work as compatible with neoclassical economics, as developed in modern general equilibrium models, or unable to determine a long-period position, just like the Walrasian approach.
Nonetheless, Sraffa's work, and particularly his interpretation of Ricardo and his Production of Commodities by Means of Commodities (1960), is seen as the starting point of the Neo-Ricardian school in the 1960s. His approach there has been described as serving "to help judge Ricardo's editor and to illuminate the unity in [his] scientific vision, from before 1926 until death in 1983".
Sraffa was described as a very intelligent man, with a proverbial shyness and a real devotion for study and books. His famous library contained more than 8,000 volumes, now partly in the Trinity College Library.
In 1972, he was awarded an honorary doctorate by Sorbonne, and in 1976 he received another one from Madrid's Complutense university.
The Laws of Returns under Competitive Conditions (1926)
Production of Commodities by Means of Commodities: Prelude to a Critique of Economic Theory (1960)
The Works and Correspondence of David Ricardo (1951-1973)
