Under the High Patronage of the President of the Italian Republic
International Conference
Sraffa's Production of Commodities by Means of Commodities 1960-2010.
2nd-4th December 2010, Roma Tre University, Faculty of Economics


On the present state of the capital controversy
Pierangelo Garegnani

Thanks to the unambiguous phenomena of reswitching and reverse capital deepening, the first stage of the post-war Capital controversy was conclusive in discarding from pure theory the traditional versions of neoclassical theory relying on the notion of capital as a single quantity. Subsequently however when the implications of those phenomena came to the centre of the controversy, together with the reformulations of the theory of Hicksian descent intended to do away with that notion of capital, several misunderstandings prevented it, is here contended, decisive analytical progress and we had an inconclusive phase of the discussion.

                  The misunderstandings, we shall also contend, are also those which left space for the credence that, whatever their methodological deficiencies, those reformulations are immune from the inconsistencies on capital of previous theory. This has in turn allowed for a second unwarranted consequence ― a feeling that since the reformulations, seem to confirm at the level of pure theory the essential validity of the neoclassical demand-and-supply apparatus, they would also provide some validation for the admittedly imperfect previous concepts ― foremost that of a quantity of capital ― as workable approximations in applied work.

                  In the paper the role will be pointed out which the notion of capital as a single quantity played in originating neoclassical theory by an extension of the Malthusian theory of rent to cover also the division of the product between wages and profits and engendering a general principle of substitution among factors of production .This will incidentally allow to make clear the role of the critique of the notion of capital contained in Sraffa’s Production of Commodities (1960), for the invalidating of the neoclassical explanation of the phenomena of a market economy, and for opening the space for the alternative surplus-founded classical theory of distribution of the Classical economists ― confirming the essential ‘causative’ nature of the contribution of Sraffa’s Production of Commodities (1960), in the face of some recent conjectures concerning.

                  After recalling then the essential terms of the problem of capital for neoclassical theory ― i.e. the impossibility to conceive of that single magnitude in the required terms independent of  distribution and prices ― we shall examine the attempted way out of the problem influentially proposed in Hicks’s Value and Capital, based on Walras’ s conception of capital as the physical vector of capital goods. That conception will be considered by us together with the radical changes in the notions of equilibrium it implies and (of whose necessity Walras was not originally aware) ― thus giving rise to the reformulations of the theory which came to the centre of the Capital controversy in its second phase. This will allow proceeding to the misunderstandings which we contend have marred that phase of the controversy and which are associated with the erroneous identification between the ‘normal position’ traditionally at the centre of economic analysis and stationary or steady states, and the consequent disappearance of the normal position. Referring then to the arguments I developed elsewhere according to which the reformulations in question of the theory ultimately depend on the notion of capital as a single quantity and are affected by the deficiencies of that notion, not unlike the traditional versions of the theory which had been found indefensible, at the level of pure analysis, after the early stage of the controversy.

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