Whither Sraffa's Theory of Price?

Abstract

The article looks critically at Piero Sraffa's theory of price and implied theory of money against a backdrop of renewed interest in the great economist's work. The focus is the theory of price in his Production of Commodities by Means of Commodities . It is argued that for all its apparent logical (read mathematical) rigor, Sraffa's explanation of prices (and implied theory of money) is (are) essentially flawed. The flaws are traced to his concern to eliminate the labor theory of value from this explanation. It is this concern that causes Sraffa to make the numerous dubious assumptions and constructs which underpin his explanation of prices and that ultimately brings into question its validity as an explanation of actual price magnitudes and their movement.