Sraffa's Circular Process and the Concept of Vertical Integration

Piero Sraffa’s Production of Commodities by Means of Commodities (1960) is probably at the root and one of the most solid contributions for the revival of interest in classical economics. It is, as its author stated, a Prelude to further work in two directions: as a critique of current economic theory, as a reconstruction of economics along the lines of “the old classical economists”. Sraffa’s book is centred on theories connected with the price system (mainly theories of value and income distribution). It does not deal with the economics of physical quantities, which are taken as given. This is the main differentiations from the theories which, from Keynes to the post-Keynesians, have shared the same critical attitude to prevailing theory and have pursued the same aim of reconstructing economic theory along the lines of the old classical economists. But, they, in striking contrast with Sraffa, have concentrated on movements of macro-economic magnitudes through time, while neglecting the relations at the inter-industry stage and normally taking the price structure as given. The Author of the present paper adopts an approach to economic reality which is the same as Sraffa’s but aims at considering an economy which is moving though time. The Author goes beyond Sraffa’s assumptions of given physical quantities and thus reaches out with a harmonization – along classical lines – to the economic theory that stemmed from Keynesian and post-Keynesian analysis.