Hayek’s analysis, with its theory of ‘real’ economic equilibrium, rests on the concept of ‘period of production’ and the thesis that the ‘capital intensity’ of production processes is a decreasing function of the interest rate. This thesis comes in for destructive criticism from Sraffa in chapters 6 and 12 of his 1960 book, but in the 1932 article his attention focuses on Hayek’s monetary analysis. [...] We may well imagine Hayek’s dismay faced with a position such as Sraffa’s must have seemed to him. Here we are, in a world where monetary factors exert an evident influence on real variables, and where the marginalist theory of value is universally accepted. What, then, could the outcome possibly be of rejecting out of hand what seemed to be the only possible way to reconcile faithfulness to the theoretical foundations of marginalism with the realities of unemployment and cyclic trends in the economy? Today it appears quite clear to us that what to Hayek seemed like nihilism on Sraffa’s side (much like the attitude shown towards Marshallian theory in the 1930 article) was simply rejection of the marginalist approach –not as a ‘leap into the dark’, but in favour of the reconstruction of political economy based on the alternative approach of the classical school.

What It Means

This is a placeholder explanation generated by the low-overhead model. It interprets "Hayek’s analysis, with its theory of ‘real’ economic equilibrium, rests on the concept of ‘period of production’ and the thesis that the ‘capital intensity’ of production processes is a decreasing function of the interest rate. This thesis comes in for destructive criticism from Sraffa in chapters 6 and 12 of his 1960 book, but in the 1932 article his attention focuses on Hayek’s monetary analysis. [...] We may well imagine Hayek’s dismay faced with a position such as Sraffa’s must have seemed to him. Here we are, in a world where monetary factors exert an evident influence on real variables, and where the marginalist theory of value is universally accepted. What, then, could the outcome possibly be of rejecting out of hand what seemed to be the only possible way to reconcile faithfulness to the theoretical foundations of marginalism with the realities of unemployment and cyclic trends in the economy? Today it appears quite clear to us that what to Hayek seemed like nihilism on Sraffa’s side (much like the attitude shown towards Marshallian theory in the 1930 article) was simply rejection of the marginalist approach –not as a ‘leap into the dark’, but in favour of the reconstruction of political economy based on the alternative approach of the classical school." in the context of "Alessandro Roncaglia, Piero Sraffa: His life, thought and cultural heritage (2000), Ch. 1. Piero Sraffa" to mean that wisdom is timeless.