The new interpretation of Sraffa's prices: a response to Heinz Kurz

Abstract

In Sinha (2012) I argue that ‘Sraffa’s prices are completely independent of demand considerations or the condition of equilibrium of demand and supply’ (Abstract, p. 1323). I also argue that the received interpretation of Sraffa’s prices ‘involves reasoning in terms of counterfactuals. Sraffa, however, consistently refrains from counterfactual reasoning’ (Sinha, 2012, p. 1335). In his comment on my paper, Kurz (2012) asserts that both my claims are ‘simply false’ and then goes on to add that ‘[w]hile Sraffa rejected the marginalist theory of demand and supply, it was of course clear to him that “effectual demand” and thus gross output levels matter in ascertaining prices and the unknown distributive variable’ (Kurz, 2012, p. 1566). I begin with an examination of the evidence Kurz provides in support of this claim and then consider the issue of ‘counterfactuals’. Kurz provides five examples as evidence, four from Sraffa’s unpublished notes and letters and one from Sraffa’s Production of Commodities by Means of Commodities (PCMC) (Sraffa, 1960).