Krishna Bharadwaj on the Role of Expectations in Economic Theory

Abstract

In this article, I discuss the approach favoured by Bharadwaj, in the tradition of classical political economy and of Sraffa, where the focus is on those factors that are observed as opposed to the subjective factors that are neither observable nor measurable. Unlike neoclassical theory, with this approach, there is no room for concepts such as ‘utility’ and the like; insofar as ‘expectations’ are conceived as subjective, non-observable entities, they are not attributed with an explanatory role in the theory of prices and distribution. Moreover, since expectation formation is seen as the effect rather than cause of behaviour, the focus shifts to those social, historical and contingent elements that seem to have a better explanatory force. In this approach, what matters is the persistence of forces leading the system to tend, in the long period, towards a position of rest. JEL Codes: B2, B31