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About this book

Luigi L. Pasinetti (born 1930) is arguably the most influential of the second generation of the Cambridge Keynesian School of Economics, both because of his achievements and his early involvement with the direct pupils of John Maynard Keynes. This comprehensive intellectual biography traces his research from his early groundbreaking contribution in the field of structural economic dynamics to the ‘Pasinetti Theorem’. With scientific outputs spanning more than six decades (1955–2017), Baranzini and Mirante analyse the impact of his research work and roles at Cambridge, the Catholic University of Milan and at the new University of Lugano. Pasinetti’s whole scientific life has been driven by the desire to provide new frameworks to explain the mechanisms of modern economic systems, and this book assesses how far this has been achieved.

Table of Contents

Frontmatter

1. Introduction: Luigi L. Pasinetti—A Leading Scholar of the Second Generation of the Cambridge School of Keynesian Economics

Abstract
Baranzini and Mirante maintain that Luigi Pasinetti, born in 1930, is a leading scholar, probably the most influential, of the second generation of the Cambridge School of Keynesian Economics, both because of his achievements and for his early involvement with the direct pupils of Keynes. Pasinetti, with Geoff Harcourt and a few others, belongs to that generation that was not directly involved with Keynes but that was in direct contact with his pupils. In this introductory chapter, the authors underline three distinctive features of Pasinetti’s programme: he is a ‘tool-maker’ rather than a ‘tool-user’; he has always operated within the production (versus the exchange) paradigm, and he has always focused on the ‘causality’ versus the ‘interdependence’ framework. Finally, the main lines of Pasinetti’s research programme are outlined.
Mauro L. Baranzini, Amalia Mirante

Life and Research Activity of Luigi L. Pasinetti

Frontmatter

2. Youth at Zanica, Bergamo, and Academic Studies at the Catholic University of Milan, then Cambridge, Harvard and Cambridge Again

Abstract
Baranzini and Mirante reconstruct the youth and the 1950–59 years of undergraduate and graduate studies of Luigi Pasinetti. His family background is rebuilt, by evidencing his difficult youth characterized by the aftermath of the Second World War and by the early death of his mother. The authors portray his undergraduate studies in economics at the Catholic University of Milan, during which years Pasinetti had to combine work with study. In 1956, thanks to a British Council scholarship, he won a place at Gonville and Caius College at Cambridge, where, on and off, he would work for the next 20 years in close contact with ‘that unique group of scholars [Goodwin, Kahn, Kaldor and Sraffa in particular] in that unique intellectual environment that was the Cambridge of the late 1950s and early 1960s.
Mauro L. Baranzini, Amalia Mirante

3. Nuffield College, Oxford (1959–61) and then King’s College, Cambridge (1961–76)

Abstract
Baranzini and Mirante illustrate how the period 1959–76 was certainly the most challenging and creative part of Luigi Pasinetti’s life. He first wins a scholarship and then a research fellowship at Nuffield College, Oxford, and then in 1961 he takes up a fellowship at King’s College, Cambridge. There was fierce competition for his appointment at King’s, but he had the clear backing of Richard Kahn. Before returning to Milan in 1976, Pasinetti rose in the Cambridge Faculty of Economics and Politics to the rank of University Reader, a distinction that he shared with Piero Sraffa in that period. During his staying at Cambridge, Pasinetti stirred three ‘Two-Cambridge Controversies’ with several future Nobel Prize recipients: on productivity measurement, on income distribution and on capital theory.
Mauro L. Baranzini, Amalia Mirante

4. Back to the Catholic University of Milan (1976 Onwards)

Abstract
Baranzini and Mirante illustrate how Pasinetti’s scientific activity continued relentlessly after his return to the prestigious Catholic University of Milan, where he was also a Chairman of its Faculty of Economics. Since 1976 he has published several volumes with top publishing houses. We might mention his ‘Essays in the theory of joint production’, ‘Structural change and economic growth: a theoretical essay on the dynamics of the wealth of nations’, ‘Structural economic dynamics: a theory of the economic consequences of human learning’, and ‘Keynes and the Cambridge Keynesians. A “revolution in economics” to be accomplished’ and ‘A theory of value’ (forthcoming). He has also played a leading role in scientific societies, like the National Lincei Academy of Rome, and helped to set up new universities, like the University of Lugano, Switzerland.
Mauro L. Baranzini, Amalia Mirante

Pasinetti’s Main Research Lines

Frontmatter

5. Pasinetti’s Main Research Lines. On Productivity Changes and on Ricardo

Abstract
Baranzini and Mirante maintain that by taking into account the whole of his activity, Pasinetti’s scientific contribution may be divided into nine, strongly inter-related, strands. They are on: (1) the measurement of technical progress; (2) Ricardo; (3) income distribution and profit determination; (4) capital theory; (5) structural economic dynamics and vertical integration; (6) pure labour theory of value; (7) natural versus institutional relations; (8) stylized facts and resource scarcity; (9) the roots of the recent financial crises and the Modigliani-Miller Theorem. In this chapter Baranzini and Mirante expound in detail the first ‘Two-Cambridges controversy’ on the measurement of productivity changes (which saw Pasinetti fiercely debating with Bob Solow back in 1959), and the seminal contribution by Pasinetti on ‘Ricardo and classical political economy’.
Mauro L. Baranzini, Amalia Mirante

6. Pasinetti on Post-Keynesian Income Distribution and Growth Theory: The Basic Issues

Abstract
Baranzini and Mirante consider here the basic issues of the second ‘Two-Cambridges controversy’ on income distribution and profit determination. It was sparked by Pasinetti in 1962; and the controversy saw him, Nicky Kaldor, Richard Kahn and Joan Robinson on the Cambridge UK side, and Samuelson, Modigliani, Stiglitz, Meade and even Frank Hahn on the Cambridge US side. This controversy has generated at least 400 papers in scholarly journals, numerous books and a ‘must’ reference in a large number of textbooks. Pasinetti’s paper has about 350 quotations in the Social Science Citation index. This chapter expounds the origins and the implications of the so-called Pasinetti’s Theorem (‘Cambridge equation’), as well as of the Anti-Pasinetti, or Dual, Theorem formulated by Samuelson and Modigliani in 1966.
Mauro L. Baranzini, Amalia Mirante

7. Pasinetti on Post-Keynesian Income Distribution and Growth Theory: Further Developments

Abstract
The second ‘Two-Cambridges controversy’, on income distribution, over the last 60 years has generated a stream of 400 contributions, continuing even today (for instance, sparked off in 2014 by Piketty). Baranzini and Mirante investigate nine related lines of research, as (1) the introduction of a different rate of return on wealth, (2) the introduction of money and financial constraints, (3) the introduction of the public sector, (4) the inclusion of other socio-economic classes and class struggle, (5) the introduction of the micro-foundations, (6) the analysis of the long-term distribution of wealth and of the income share of classes, (7) overlapping generations models cum inter-generational transmission of wealth, (8) the applicability of the Meade-Samuelson and Modigliani’s Anti-Pasinetti Theorem and (9) the extension towards an Islamic macro-model of distribution.
Mauro L. Baranzini, Amalia Mirante

8. Pasinetti on Capital Theory

Abstract
In 1965 Pasinetti triggered a third controversy, on capital theory. Paul Samuelson was convinced of a strictly monotonic relation between the profit rate and capital intensity. His pupil Levhari claimed that reswitching and capital-reversing may occur in an industry, but not at macro-level. The refutation of Levhari’s thesis came promptly from Pasinetti at the First World Congress of the Econometric Society in 1965. His paper stirred a huge controversy between the two Cambridges. In the special 1966 issue of the Quarterly Journal of Economics, Levhari and Samuelson admitted that ‘The Nonswitching Theorem is False’. However, Leijonhufvud has recently written: ‘It is truly remarkable how the mainstream has managed to resign to oblivion the clear-cut victory of Old Cambridge in the Capital Controversy, in which Pasinetti played a prominent part’.
Mauro L. Baranzini, Amalia Mirante

9. Pasinetti on Structural Economic Dynamics and on the Pure Labour Theory of Value

Abstract
Baranzini and Mirante stress how up to 1962 economic theory did not offer an analysis of ‘structural economic dynamics’. The theory of growth was confined to one-sector macro-models; from here to multi-sector models the step is complex. Pasinetti was first in formulating in his 1962 Cambridge Ph.D. a simple multi-sectoral growth theory subject to changing production coefficients (technical progress) and changing consumption coefficients (according to Engel’s Law). Moreover, Pasinetti’s vertically hyper-integrated sectors possess remarkable analytical and normative properties; a generalization may be obtained of Adam Smith’s pure labour theory of value. Pasinetti’s current project is to formulate a theory of value that goes back to Adam Smith, bypassing the frame of analysis of economists like Leontief, Sraffa, Marx, Ricardo and many others.
Mauro L. Baranzini, Amalia Mirante

10. Pasinetti on ‘Natural’ Versus ‘Institutional’ Relations: Two Conferences in His Honour

Abstract
Pasinetti has always stressed, from the early 1960s onwards, that economic relationships belong to two different categories, implying distinct methods of analysis. The first corresponds to that set of relationships that are independent of the institutional set-up, labelled as ‘natural dynamics’. The second is very much determined by the institutional framework. Pasinetti has concentrated his attention on this ‘natural dynamics’. A distinctive feature of Pasinetti’s ‘natural dynamics’ is that the determinacy of a given path of structural change is obtained by means of specific ‘equilibrium’ requirements (full-employment and full-capacity utilization), independently of the institutional set-up and thus also independently of particular behavioural and motivational features. At the end of this chapter, Baranzini and Mirante refer to two important conferences recently organized in Pasinetti’s honour.
Mauro L. Baranzini, Amalia Mirante

11. Finale and Pasinetti’s Legacy

Abstract
Baranzini and Mirante first report on Pasinetti’s article ‘A Few Counterfactual Hypotheses on the Current Economic Crisis’, where he underlines the relevance of the second Cambridge controversy on income distribution in explaining the financial crises started in 2008. This controversy between the two Cambridges brought to fame the Modigliani-Miller Theorem and deeply influenced modern corporate finance. The wide acceptance of this theorem is, for Pasinetti, partly responsible for the present financial crisis. The authors conclude that thanks to Pasinetti’s original approach, a number of empirical rules and theoretical frameworks, often incompatible with traditional theories, were more satisfactorily explained and understood. Pasinetti’s whole scientific life has been driven by the desire to provide new frameworks for the explanation of the mechanisms at the bases of modern economic systems.
Mauro L. Baranzini, Amalia Mirante

Backmatter

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