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A Revolution in Economic Theory: The Economics of Piero by Ajit Sinha

By Ajit Sinha

This booklet attracts at the paintings of 1 of the sharpest minds of the 20 th century, Piero Sraffa. Ludwig Wittgenstein credited him for 'the so much consequential rules' of the Philosophical Investigations (1953) and positioned him excessive on his brief record of geniuses. Sraffa's progressive contribution to economics used to be, although, misplaced to the area simply because economists didn't concentrate on the philosophical underpinnings of his economics. in response to exhaustive archival study, Sinha offers an exhilarating new thesis that exhibits how Sraffa challenged the standard mode of theorizing by way of crucial and mechanical causation and, in its place, argued for a descriptive or geometrical concept in line with simultaneous family. A outcome of this technique used to be an entire elimination of 'agent's subjectivity' and 'marginal technique' or counterfactual reasoning from fiscal research – the 2 basic pillars of orthodox fiscal theory.

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Now, if a positive rate of interest exists then it is obvious that the person would prefer $10,000 today over $1,000 per year for ten years. However, if the rate of interest is zero then the person may prefer the alternative option because it protects her from the temptation of frivolous expenditures up front and guarantees her a steady income for ten years. Some people may be even prepared to pay a small fee for saving their current income for future consumption. The point is that discounting of future consumption is obvious rational human behavior only if a positive rate of interest exists.

On the question of justice, Sraffa’s main counter-argument is that when it comes to the lenders to the state it is quite unlikely that those who hold the state’s debt bonds after the war are the same people who held them at the beginning of the period of inflation. 6 Furthermore, the consequences of this on the state’s exchequer would be rather serious as its real debt, in terms of current value of money, would increase about sevenfold at a time when the economy would be contracting and, as a consequence, its revenue would be falling.

Capital’ is not a generalization but it is a ‘real thing’, Clark maintains, which has a capacity to change its shape and form in all sorts of ways. In other words, capital is something like the atma of Hindu philosophy that never dies but transmigrates (or ‘transmutates’, in Clark’s terminology) from one body to another. Once this magical power is granted to ‘capital’, it is just a short step for Clark to argue that, with every change in the ratio of total value of capital to total labor employed (leaving land aside), the shape and form of the physical capital changes to ensure full employment of both capital and labor, that is, there is always an appropriate change in the technique of production.

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