A Reflection on the Samuelson-Garegnani Debate
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Sraffa’s book (1960), Production of Commodities by Means of Commodities, is perhaps the most enigmatic theoretical work ever published in economic theory. Of course, all classics are somewhat puzzling and do give rise to a number of interpretations over a period of time. But the book of Sraffa is special in this respect. Upon its publication, many contemporaries of Sraffa hailed it as a definite classic but at the same time acknowledged their inability to completely understand what the book was all about (e.g., see Harrod 1961). And Sraffa’s complete silence on explicating its terse prose was of no help. Its destructive potential for the orthodox economics, however, came to the fore in the famous capital theory debates between ‘the two Cambridges’ in the 1960s (see Harcourt 1969), when one of the leaders of the orthodoxy, Paul Samuelson (see ‘Symposium 1966’), admitted that Sraffa’s proposition about ‘re-switching of techniques’ proves that the orthodox parable regarding ‘quantity of homogeneous capital’ is wrong. Pierangelo Garegnani (see ‘Symposium 1966’) was one of the participants on the winning side of this debate. Soon after, however, the orthodoxy came to the conclusion that the destructive potential of Sraffa’s book could be confined to this simplified ‘parable’ only and that the more sophisticated general equilibrium theory, which does not need the notion of aggregate quantity of capital prior to price determination, remains unscathed. Frank Hahn (1975, 1982) further argued that Sraffa’s book can be interpreted as a special case of inter-temporal general equilibrium, and so the orthodoxy need not worry about it anymore.