The Consequences of Sraffa for Economic and Social Policy Issues

In this paper I look at some controversial economic and social policy topics with which I have been concerned in my research work in order show the role that the Classical Approach and the theory of long period effective demand can play in clarifying them. In sections 1 and 2, I deal with growth theory and policy, while in sections 3 and 4 I am concerned with distribution and social policy issues. More specifically, in the first two sections I discuss whether technical change can be considered a main source of economic growth, as argued on different bases by the neoclassical and Schumpeterian traditions. In this view growth is seen as a result of the natural forces of capitalism. The alternative view sustained in the paper puts greater emphasis on the national and international economic and political circumstances that affect long-period effective demand. According to the long period theory of effective demand advocated in this paper, government spending plays a prominent position in the explanation of economic growth. In recent years, however, social spending and the Welfare State have increasingly been seen as an obstacle to economic growth. In this regard, in section 3 I examine the debate on pension systems in relation to economic growth, and in the final section 4 I look at the relation between the Classical Theory of Distribution and the Welfare State.