Kenesian Economics

        During the Second World War, Keynes acted as adviser to HM Treasury again, negotiating major loans from the US. He helped formulate the plans for the International Monetary Fund, the World Bank and an International Trade Organization at the Breton Woods conference, a package designed to stabilize world economy fluctuations that had occurred in the 1920s and create a level trading field across the globe. Keynes passed away little more than a year later, but his ideas had already shaped a new global economic order, and all Western governments followed the Keynesian prescription of deficit spending to avert crises and maintain full employment. One of Keynes' pupils at Cambridge was Joan Robinson, who contributed to the notion that competition is seldom perfect in a market, an indictment of the theory of markets setting prices. In The Production Function and the Theory of Capital (1953) Robinson tackled what she saw to be some of the circularity in orthodox economics. Neoclassical assert that a competitive market forces producers to minimize the costs of production. Robinson said that costs of production are merely the prices of inputs, like capital. Capital goods get their value from the final products. And if the price of the final products determines the price of capital, then it is, argued Robinson, utterly circular to say that the price of capital determines the price of the final products. Goods cannot be priced until the costs of inputs are determined. This would not matter if everything in the economy happened instantaneously, but in the real world, price setting takes time - goods are priced before they are sold. Since capital cannot be adequately valued in independently measurable units, how can one show that capital earns a return equal to the contribution to production? Piero Sraffa came to England from fascist Italy in the 1920s, and worked with Keynes in Cambridge. In 1960 he published a small book called Production of Commodities by Means of Commodities, which explained how technological relationships are the basis for production of goods and services. Prices result from wage-profit trade offs, collective bargaining, labor and management conflict and the intervention of government planning. Like Robinson, Sraffa was showing how the major force for price setting in the economy was not necessarily market adjustments.
Citation:

 Keynes, J,M. (1919). The economic consequence of the peace.