THE DYNAMICS OF THE WEALTH OF NATIONS

I

Luigi Pasinetti Drawing by Gino Arzuffi

The Dynamics of the Wealth of Nations

Growth, Distribution and Structural Change Essays in Honour of Luigi Pasinetti

Edited by Mauro Baranzini Professor of Economics, Univel'sita di Verona

and

G. C. Harcourt Reader in the History of Economic Theory, University of Cambridge, Fellow of Jesus College, Cambridge, and Professor Emeritus, University of Adelaide

M St. Martin's Press

© Mauro Baranzini and G. C. Harcourt 1993

Softcover reprint of the hardcover 1st edition 1993 978-0-333-57397-6

All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission.

No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London WIP 9HE.

Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages.

First published in Great Britain 1993 by THE MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 2XS and London Companies and representatives throughout the world

A c:atalogue record for this book is available from the British Library.

First published in the United States of America 1993 by Scholarly and Reference Division, ST. MARTIN'S PRESS, INC., 175 Fifth Avenue, New York, N.Y. 10010

Library of Congress Cataloging-in-Publication Data The Dynamics of the wealth of nations: growth, distribution, and structural change: essays in honour of Luigi Pasinetti / edited by Mauro Baranzini and G. C. Harcoun. p. em. Includes bihliographical references and index.

I. Economics. 2. Economic history. 3. Pasinetti, Luigi L. i. Pasinetti, Luigi L. II. Baranzini, Mauro. III. Harcou~ Geoffrey Colin. HB171.D97 1993 33()-.{1e20 92-46517

CIP

ISBN 978-1-349-22730-3 ISBN 978-1-349-22728-0 (eBook) DOI 10.1007/978-1-349-22728-0

ISBN 978-0-312-09587-1

ISBN 978-0-312-09587-1

Contents

List of Tables

List of Figures

Preface

List of Contributors

Introduction

vii

viii

x

xii

Mauro Baranzini and G. C. Harcourt 1

PART I: RICARDO AND CLASSICAL POLITICAL ECONOMY 43

1 Marshall on Ricardo Peter Groenewegen

2 Physiocratic Dichotomy in Price Determination and its Ricardian Resolution Izumi Hishiyama

3 The 'Standard commodity' and Ricardo's Search for an 'Invariable Measure of Value'

45

71

Heinz D. Kurz and Neri Salvadori 95

4 Ricardian Comparative Advantage and the Perils of the Stationary State Andrea Maneschi 124

PART II: ON CAPITAL THEORY 147

5 Samuelson and the 93% Scarcity Theory of Value A vi 1. Cohen 149

PART III: POST-KEYNESIAN INCOME DISTRIBUTION AND GROWfH THEORY 173

6 The Method of the Pure Ratio in Economic Analysis Amit Bhaduri 175

v

VI Contents

7 A Post-Keynesian Theory of Growth, Interest and Money Amitava K. Dutt and Edward J. Amadeo 181

PART IV: STRUCTURAL DYNAMICS AND VERTICAL INTEGRATION 207

8 Commodity Flows and Productive Subsystems: An Essay in the Analysis of Structural Change Michael A. Landesmann and Roberto Scazzieri 209

9 On Economic Science, its Tools and Economic Reality Alberto Quadrio-Curzio 246

PART V: DEVELOPMENT ECONOMICS AND MODELS OF UNSTABLE GROWTH 273

10 Development Economics: Some Basic Issues Sukhamoy Chakravarty 275

11 The Economy as a Chaotic Growth Oscillator Richard M. Goodwin 300

12 Long-Run Changes in the Wage and Price Mechanisms and the Processes of Growth Paolo Sylos-Labini 311

PART VI: INSTITUTIONS AND ECONOMIC STRUCTURE: HUMAN ACTIONS AND THE PURE LABOUR THEORY OF VALUE 349

13 Reflections on the Significance of the Labour Theory of Value in Pasinetti's Natural System Heinrich Bortis 351

14 Rationality and Economic Behaviour Siro Lombardini 384

Bibliography of the Works of Luigi Pasifletti 403

Name Index 413

Subject Index 419

List of Tables

Table 4.1: Possible stationary-state patterns of specialization

Table 7.1 : [untitled] Table 12.1: Trends of prices and wages, 1800-1989 Table 12.2: Public expenditure in the United States

1903-87 Table 12.3: Italy: economic growth, public expenditure

133 187 312

329

and fiscal receipts 333

List of Figures

Figure 4.1 Figure 4.2 Figure 4.3 Figure 4.4 Figure 7.1 Figure 7.2 Figure 7.3 Figure 7.4 Figure 11.1 Figure 11.2 Figure 11.3 (a) Figure 11.3 (b) Figure 11.4 Figure 11.5 Figure 11.6 Figure 11.7 Figure 11.8 Figure 11.9 Figure 11.10 (a) Figure 11.10 (b) Figure 12.1:

Figure 12.2: Figure 12.3 (a):

Figure 12.3 (b):

Figure 12.4:

Figure 12.5:

United Kingdom: industrial production and national income United States: national income United Kingdom: industria.!. prices (P i) and raw material prices (RM) (rates of change): 1800-1913 United Kingdom: industrial prices (P i) and raw material prices (RM) (rates of change): 1923-39 and 1948-89 United Kingdom: wages (rates of change) (W) and unemployment (U) three periods: 1861-1913, 1923-39, 1948-90 United States: wages (rates of change) (W) and unemployment (U): three periods: 1890-93, 1923-39, 1948-89

viii

131 134 136 137 191 192 195 198 303 305 305 305 305 306 306 307 307 308 308 308

323 323

339

339

340

341

Figure 12.6:

Figure 12.7:

List of Figures

"-Raw material prices (RM) and world industrial output (Y i) (rates of change) 1956-89 United States: industri~l prices (P i) and raw material prices (RM) (rates of change) 1948-89

ix

342

343

Preface

On 12 September 1990 Luigi Lodovico Pasinetti turned sixty, and it seemed fitting to mark this occasion by presenting him with a volume of essays specifically written by a number of his teachers, colleagues or former colleagues, pupils and fellow economists. The relatively young age of Pasinetti is witnessed to by the fact that this volume includes contributions by two of his teachers, Siro Lombardini (then at the Catholic University of Milan) and Richard Goodwin (then at the University of Cambridge). The year 1990 also marks the thirtieth anniversary of the publication of two early and most significant essays by Pasinetti: 'A Mathematical Formulation of the Ricardian System' and 'Cyclical Fluctuations and Economic Growth' appeared in The Review of Economic Studies and Oxford Economic Papers respect­ively (see the Bibliography of the Works of Luigi Pasinetti at the end of this volume). Finally, 1990 also represents the thirtieth anniversary of Pasinetti's election to a Fellowship at an 'Oxbridge' College (first at Nufficld College, Oxford and, one year later, at King's College, Cambridge) where he was to spend a long stretch of his scientific life and where he laid, precisely in those years, the foundations of his ambitious research programme on the 'dynamics of the wealth of nations' .

This volume of essays does not only represent a tribute to the scientific achievements of a distinguished scholar; it also represents a comprehensive and specifically planned assessment of the six most important lines of inquiry of Pasinetti's vast research programme, by evaluating his contributions and by giving new insights. Last, but not least, this volume provides a more general assessment of the signifi­cance of a number of issues of the 'pure' Post-Keynesian School of economic thought, which had and still has in the University of Cambridge its stronghold and of which Pasinetti has been the 'senior heir' since the deaths of its founding members Piero Sraffa, Joan Robinson, Nicholas Kaldor and Richard Kahn, in the 1980s.

The preparation of this volume has been made possible by a number of institutions and persons who have supported our project in different ways. First of all thanks are due to our present academic institutions, respectively the University of Verona (in particular the Institute of Economic Sciences) and the Faculty of Economics and Politics of the University of Cambridge and Jesus College, Cam-

x

Preface xi

bridge. Mauro Baranzini would also like to thank the University of Fribourg, Switzerland, The Queen's College, Oxford, and the Cath­olic University of Milan (Centre for Research in Economic Analysis, CRANEC), for providing at various stages of the preparation of this volume, research facilities and an intellectual environment which has stimulated our work in an important way. Finally, research help has been provided through grants of the Swiss Science Foundation, the Italian National Research Council and the Italian Ministry for the University.

Mauro Baranzini G. C. Harcourt

Notes on the Contributors

Edward J. Amadeo is Professor of Economics at Pontificia Universi­dade Catolica Do Rio de Janeiro, Brazil.

Mauro L. Baranzini is Professor of Economics at the University of Verona and Catholic University of Milan. He was formerly Lecturer and Tutor in Economics at The Queen's College, Oxford.

Amit Bhaduri is Professor of Economics at the Indian Institute of Management, Calcutta, India; he was formerly Professor of Econ­omics at Jahwaharlal Nehru University, New Delhi, India.

Heinrich Bortis is Professor of Economics at the University of Fribourg, Switzerland.

Sukhamoy Chakravarty was Professor of Economics at the Delhi School of Economics and Chairman of the Indian Economic Advis­ory Council, New Delhi, India.

Avi J. Cohen is Professor of Economics at York University, Toronto, Canada, and Fellow of Clare Hall, Cambridge.

Amitava K. Dutt is Professor of Economics at the University of Notre Dame, Indiana, USA.

Richard M. Goodwin is Professor of Economics at the University of Siena. Italy; he was formerly Reader in Economics at the University of Cambridge and Fellow of Peterhouse, Cambridge.

Peter Groenewegen is Professor of Economics at the University of Sydney, Australia.

G. C. Harcourt is Reader in the History of Economic Theory at the University of Cambridge, Fellow and former President of Jesus College, Cambridge, and Professor Emeritus of the University of Adelaide, Australia.

xii

Notes on the Contributors xiii

Izumi Hishiyama is Emeritus Professor of Economics at the Univer­sity of Kyoto and Professor of Economics at the Industrial University of Osaka, Japan.

Heinz D. Kurz is Professor of Economics at the University of Graz, Austria; he was formerly Professor of Economics at the University of Bremen, Germany.

Michael A. Landesmann is a Senior Research Officer in the Depart­ment of Applied Economics, University of Cambridge, and Fellow of Jesus College, Cambridge.

Siro Lombardini is Professor of Economics at the University of Turin; he was formerly Professor of Economics at the Catholic University of Milan, Italy.

Andrea Maneschi is Professor of Economics at Vanderbilt Univer­sity, Nashville, Tennessee, USA.

Alberto Quadrio-Curzio is Professor of Economics and Chairman of the Faculty of Political Sciences at the Catholic University of Milan, Italy.

Neri Salvadori is Professor of Economics at the University of Pisa, Italy.

Roberto Scazzieri is Professor of Economics at the University of Bologna; he was formerly Professor of Economics at the University of Padua, Italy.

Paolo Sylos-Labini is Professor of Economics at the University of Rome, 'La Sapienza', Italy.