Wednesday, February 01, 2023

Luigi L. Pasinetti (1930 - 2023)

I have been inspired by Pasinetti's clear expositions. A lot of my work is an attempt to build on his theory of structural economic dynamics. Some highlights of Pasinetti's career as an economist:

  • A derivation, in Pasinetti (1962), of the Cambridge equation, r = g/sc. Along a steady-state growth path, the rate of profit must be equal to the quotient of the rate of growth and the savings rate out of profits. This is an extension of Keynes' theory that investment creates the needed savings to the long run, and it applies whether or not workers save.
  • First numerical example of the reswitching of techniques in a model of an economy as a whole, with multiple industries producing inputs for one another. Pasinetti (1966) is an update of a paper presented previously in Rome and a refutation of Levhari's supposed non-switching theorem. Pasinetti (1969), in which he points out Solow relies on an 'unobtrusive postulate' that a lower rate of profits is always associated with the adoption of a more capital-intensive technique, is another classic contribution to the Cambridge Capital Controversy.
  • Pasinetti (1973) develops tools for understanding vertical and hyper-vertical integration in input-output models.
  • Pasinetti (1977), although not considering joint production, is a typically clear exposition of post-Sraffian price theory. I also often turn to Pasinetti (1980).
  • Pasinetti (1981) and Pasinetti (1993) set out the theory of structural economic dynamics. In the second, for clarity, he considers production in which labor is the only input.

In industrial economies, production and consumption take place in a man-built world, with technology embodied in the plant and equipment available at the start of a production period. Pasinetti argues that one should analyze such an economy on two levels, a 'natural' level and an institutional level. The term 'natural' suggests a connection to Adam Smith's analysis. He attempts to provide a theory organized around nine principles.

The 'natural' level considers prices of production. Pasinetti allows the coefficients of production to decline with human learning. The composition of demand evolves as described by Engel curves. He notes that, at this level, a macroeconomic principle arises that must be met if effective demand is to be such that prices of production are to be realized. So, like Richard Goodwin, he draws a connection between Leontief's input-output analysis and Keynes' theory. Much of Keynes' theory, such as liquidity preference, I think is about what Pasinetti calls the institutional level. Pasinetti's work has inspired many, for example, Ian Wright.

  • Baranzini, Mauro L. and G. C. Harcourt (eds.) 1993. The Dynamics of the Wealth of Nations: Growth, Distribution and Structural Change: Essays in Honour of Luigi L. Pasinetti. Macmillan.
  • Baranzini, Mauro L. and Amalia Mirante. 2018. Luigi L. Pasinetti: An Intellectual BiographyPalgrave Macmillan.
  • Bellino, Enrico and Sebastiano Nerozzi (eds.) 2021. Pasinetti and the Classical Keynesians: Nine Methodological Issues. Cambridge University Press.
  • Pasinetti, L. L. 1960. A mathematical formulation of the Ricardian system. Review of Economic Studies 27 (2): 78 - 98.
  • Pasinetti, L. L. 1962. Rate of profit and income distribution in relation to the rate of economic growth. Review of Economic Studies 29 (4): 267 - 279.
  • Pasinetti, L. L. 1966. Changes in the rate of profit and switches of technique. Quarterly Journal of Economics 80 (4): 503 - 517.
  • Pasinetti, L. L. 1969. Switches of technique and the 'rate of return' in capital theory. Economic Journal, 79(315): 508 - 531.
  • Pasinetti, L. L. 1973. The notion of vertical integration in economic analysis. Metroeconomica. 25 (1): 1 - 29.
  • Pasinetti, L. L. 1974. Growth and Income Distribution: Essays in Economic Theory. Cambridge: Cambridge University Press.
  • Pasinetti, L. L. 1977. Lectures on the Theory of Production. Columbia University Press.
  • Pasinetti, L. L. (ed.) 1980. Essays on the Theory of Joint Production. Columbia University Press.
  • Pasinetti, L. L. 1981. Structural Change and Economic Growth: A Theoretical Essay on the Dynamics of the Wealth of Nations. Cambridge: Cambridge University Press.
  • Pasinetti, L. L. 1993. Structural Economic Dynamics: A Theory of the Economic Consequences of Human Learning. Cambridge: Cambridge University Press.
  • Pasinetti, L. L. 2007. Keynes and the Cambridge Keynesians: A 'Revolution in Economics' to be Accomplished. Cambridge: Cambridge University Press.

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