Piero Sraffa

Verified Timeline

Lore & Background

Sraffa was born in Turin, Kingdom of Italy, to Angelo Sraffa (1865–1937) and Irma Sraffa (née Tivoli) (1873–1949), a wealthy Italian Jewish couple. His father was a professor in commercial law and later dean at the Bocconi University in Milan. Despite being raised as a practising Jew, Sraffa later became an agnostic. Due to his father's academic wanderings (University of Parma, University of Milan and University of Turin), the young Piero met Antonio Gramsci, leader of the Communist Party of Italy, and they became close friends partly due to shared political views. Sraffa was also in contact with Filippo Turati, a leader of the Italian Socialist Party, whom he allegedly met and frequently visited in Rapallo, where his family had a holiday villa. At age 18, in spring 1917, he began military service as an officer of the Military Engineer Corps under the First Army as rear-guard. From the end of World War I (November 1918) until March 1920 he was a member of the Royal Commission of Inquiry into the violations of the right of the people committed by the enemy. He graduated in November 1920 with a thesis on inflation in Italy during the Great War, tutored by Luigi Einaudi, later a president of the Italian Republic. From 1921 to 1922, he studied at the London School of Economics. At Cambridge, he met twice John Maynard Keynes, who invited him to collaborate. This led to two articles on the Italian banking system published in 1922: 'The Bank Crisis in Italy' in *The Economic Journal* and 'The current situation of Italian banks' in the *Manchester Guardian* supplement. Keynes also entrusted Sraffa with the Italian edition of *A Tract on Monetary Reform*. In 1922 Sraffa was appointed director of the provincial labour department in Milan, where he frequented socialist circles and befriended Carlo Rosselli and Raffaele Mattioli. After Mussolini's seizure of power, Sraffa's father Angelo was attacked by a fascist squad and received two threatening telegrams from Mussolini demanding a public retraction by Piero of his second *Manchester Guardian* article; Sraffa did not retract. In November 1926, after Parliament passed the 'defence of the state' law, Antonio Gramsci was arrested on 8 November 1926. During Gramsci's incarceration, Sraffa supplied books and the material—literally pens and paper—with which Gramsci would write his *Prison Notebooks*. In 1925 and 1926, Sraffa wrote on returns to scale and perfect competition. In the 1926 article 'The Laws of Returns under Competitive Conditions' in *The Economic Journal*, he showed the inconsistency of Marshallian partial equilibrium theory. He argued that the law of decreasing returns (from Ricardo's rent theory, applied to the whole economy) and the law of increasing returns (from division of labour, applied to the individual firm) have different origins and cannot explain the same supply curve. He concluded that under competition, production costs must be regarded as constant for small variations in quantity, and price is determined by production costs alone, breaking the neoclassical symmetry between supply and demand. In 1927, Keynes invited Sraffa to the University of Cambridge, where he initially held a lectureship, then a librarian position. At Cambridge, he joined the cafeteria group with Frank P. Ramsey and Ludwig Wittgenstein, discussing Keynes's theory of probability.

Reader's Guide

Sraffa's significance lies in his critique of neoclassical price theory and his revival of classical political economy. His 1926 article demonstrated that the Marshallian supply curve, based on both decreasing and increasing returns, was logically flawed because those laws apply to different contexts: decreasing returns stem from scarce inputs (like land), while increasing returns arise from division of labour. This critique undermined the symmetry of supply and demand in determining price, leading Sraffa to argue that in competition, price is determined by production costs, not by demand. His later book *Production of Commodities by Means of Commodities* is taken as founding the neo-Ricardian school of economics, which re-examined Ricardo's theories of value and distribution. Sraffa's work influenced debates on capital theory and the critique of marginalism. His personal history, including his friendship with Gramsci and his defiance of Mussolini, also marks him as a figure of intellectual integrity during a turbulent political era.

Did You Know?

• Sraffa served as an officer of the Military Engineer Corps under the First Army as rear-guard from spring 1917.
• From November 1918 to March 1920, he was a member of the Royal Commission of Inquiry into violations of the right of the people committed by the enemy.
• Mussolini personally sent two threatening telegrams to Sraffa's father demanding a retraction of Sraffa's *Manchester Guardian* article; Sraffa refused to retract.
• During Gramsci's imprisonment, Sraffa supplied the pens and paper with which Gramsci wrote his *Prison Notebooks*.
• Sraffa joined the cafeteria group at Cambridge with Frank P. Ramsey and Ludwig Wittgenstein to discuss Keynes's theory of probability.

Roots in Turin and the Seeds of Dissent

Piero Sraffa was born on 5 August 1898 in Turin, Kingdom of Italy, to Angelo Sraffa (1865–1937) and Irma Sraffa (née Tivoli) (1873–1949), a wealthy Italian Jewish couple. His father was a professor in commercial law and later dean at Bocconi University in Milan. Despite being raised as a practising Jew, Sraffa later became an agnostic. His father's academic wanderings took the family to the University of Parma, University of Milan, and University of Turin, and it was during these years that the young Piero met Antonio Gramsci, leader of the Communist Party of Italy. They became close friends, partly due to shared political views. Sraffa was also in contact with Filippo Turati, a leader of the Italian Socialist Party, whom he allegedly met and frequently visited in Rapallo, where his family had a holiday villa. At age 18, in spring 1917, he began military service as an officer of the Military Engineer Corps under the First Army as rear-guard. From the end of World War I (November 1918) until March 1920 he was a member of the Royal Commission of Inquiry into the violations of the right of the people committed by the enemy. He graduated in November 1920 with a thesis on inflation in Italy during the Great War, tutored by Luigi Einaudi, later a president of the Italian Republic.

The Keynes Encounter and a Career Redirected

From 1921 to 1922, Sraffa studied at the London School of Economics. During this period, at Cambridge, he met twice John Maynard Keynes, who invited him to collaborate. This request led Sraffa to write two articles about the Italian banking system published in 1922: the first, 'The Bank Crisis in Italy', in *The Economic Journal* (edited by Keynes), and the second, 'The current situation of Italian banks', in the supplement of the *Manchester Guardian* (now *The Guardian*). Keynes also entrusted Sraffa with the Italian edition of his *A Tract on Monetary Reform*. The meeting with Keynes was undoubtedly a fundamental turning point in Sraffa's career. In 1922 Sraffa was appointed director of the provincial labour department in Milan, where he frequented socialist circles and made friends with Carlo Rosselli and Raffaele Mattioli, both assistants of Luigi Einaudi at the time.

Defiance Under Fascism and the Gramsci Bond

The march on Rome, with the consequent seizure of power by Mussolini, was an event destined to affect deeply his future. His father Angelo was the target of aggression by a fascist squad and received two very threatening telegrams from Mussolini himself who required a public retraction by Piero on the content of the second article published in the *Manchester Guardian*. Piero did not write a retraction. In May 1924 his friend Antonio Gramsci, who found himself stuck firstly in Moscow and then in Vienna due to the advent to power of fascism, returned to Rome on his election to Parliament. From now on the relations between the two intellectuals intensified. On 26 November 1926 Italian Parliament approved the law 'defence of the state', thus giving rise to the totalitarian state. On 8 November 1926, Antonio Gramsci was arrested. During Gramsci's incarceration, Sraffa supplied books and the material, literally pens and paper, with which Gramsci would write his *Prison Notebooks*.

Challenging the Marshallian Orthodoxy and Founding a School

In 1925, Sraffa wrote about returns to scale and perfect competition. In the 1926 article 'The Laws of Returns under Competitive Conditions', published in *The Economic Journal*, Sraffa resumed and developed his work of 1925 to show the inconsistency of the Marshallian theory of partial equilibrium. He noted that the law of decreasing returns and that of increasing returns have different origins and areas of application: the law of diminishing returns was originally applied to the entire economy and resulted from the scarcity of agricultural land as a mean of production (the rent theory of David Ricardo); while the law of increasing returns applied to the individual firm and resulted from the benefits of division of labour. Sraffa argued that these two tendencies could not be unified into one single law of non-proportional productivity as a basis for price theory. He concluded that under competition, production costs must be regarded as constant in respect of small variations in the quantity produced, and that the long-run supply curve of an industry is horizontal. Price is determined by production costs alone, while quantity produced is determined by demand. This broke the neoclassical symmetry between supply and demand. His later book *Production of Commodities by Means of Commodities* is taken as founding the neo-Ricardian school of economics.