Pasinetti, Luigi
Pasinetti, Luigi 1930-
Luigi Lodovico Pasinetti was born in Zanica, Italy (near Bergamo), on September 12, 1930. Since 1962 he has been a professor of economic analysis at the Catholic University of Milan, where he had obtained his degree in economics in 1954 under the tutelage of Francesco Vito (1902–1968) and Siro Lombardini (b. 1920).
Pasinetti moved to Cambridge University in 1956. He completed his PhD there in 1962 and later became a reader in economics. Study at Cambridge, with research visits at Oxford, Cambridge (Massachusetts), and elsewhere, allowed him to gain access to the top economic journals. His early paper on Ricardian economics (Pasinetti 1960; Pasinetti 1974) remains a classic.
Pasinetti’s own research is, first and foremost, an inquiry into the dynamic theory of economic growth and income distribution. His doctoral dissertation, “A Multi-Sector Model of Economic Growth,” developed into a well-known piece of analysis (Pasinetti 1965), which would further develop into his 1981 book Structural Change and Economic Growth (see also Pasinetti 1993). His entire body of work, in a characteristic Cambridge fashion, is explicitly rooted in classical economic analysis. Pasinetti, who has always felt a deep attachment to Cambridge, became the senior heir of the Cambridge post-Keynesian school (Pasinetti 2006). He was closely associated, in particular, with Richard Kahn (1905–1989), Nicholas Kaldor (1908–1986), Joan Robinson (1903–1983), and Piero Sraffa (1898–1983). From 1976 onward, Pasinetti turned full-time to his Milan Chair at the Catholic University, where he was elected dean of the faculty of economics. A dedicated teacher, he is also the author of a well-known textbook on the theory of production (Pasinetti 1977).
During the 1960s Pasinetti’s theoretical hits were outstanding and surprising. His 1962 theorem (also in Pasinetti 1974) on the Cambridge equation would soon become famous and give rise to a vast literature. This equation is a long-run equilibrium relationship between the rate of profit and the rate of growth, usually given as rsc = n, where r is the rate of profit, n is the rate of growth of the population, and sc is the rate of savings of capitalists. Pasinetti’s contribution demonstrated that, surprisingly, the workers’ rate of savings has no effect whatsoever on the equilibrium rate of profit. Pasinetti’s creative insight thus provided a correction and an intriguing generalization of the Kaldor model of growth and distribution. This theorem has also been called the Pasinetti paradox. Thereafter, it became customary to speak of the Kaldor-Pasinetti model of growth and distribution. Mauro Baranzini and G. C. Harcourt (1993, pp. 12–17) discuss in detail the various strands of analysis to which the Pasinetti paradox has given rise.
Pasinetti was an important participant in the Cambridge capital controversies. In 1965 David Levhari, a student of Paul Samuelson, published a paper that sought to demonstrate that some of the paradoxes in capital theory that had emerged in the literature and had been brought into full light in 1960 by Sraffa only had limited validity. However, Pasinetti proved conclusively that there were no grounds for such an attack on Sraffa and the Cambridge view. Pasinetti’s paper was first presented in 1965 in Rome at the First World Congress of the Econometric Society. The following year it opened a special issue of the Quarterly Journal of Economics (Pasinetti 1966), where Levhari’s theorem was acknowledged to be false by the author and by Samuelson himself. It was an impressive showdown that honors the economic profession and has since given rise to a full range of insights in the theory of capital (Pasinetti 1969).
Pasinetti’s scientific contributions focus on two main issues: (1) the critique of the neoclassical system; and (2) the completion of the Keynesian system and its extension to distribution and growth. Pasinetti’s most significant contribution on both accounts is found in Structural Change and Economic Growth (1981), one of the outstanding achievements in economic dynamics. Along with his dissatisfaction with aggregate dynamic models and the deceiving character of a number of disaggregated models (e.g., John von Neumann’s model), it is the historical fact of the widespread unevenness of development processes— Pasinetti himself argues—that provides the drift to structural dynamics.
Pasinetti’s contribution to economic growth theory has a special place: His system provides the only theory focusing on the conditions under which an economic system will reach and maintain full employment and full capacity utilization in the long run when the system is subject to structural change. Classical economic analysis, here again, provides the foundation to his framework. But Pasinetti has no interest in establishing a canon or dogma on value and distribution: Rather, by building on the open and innovative side of the classical tradition, his schemes of structural economic dynamics focus on technical progress and human learning and form a pathbreaking contribution to growth theory.
SEE ALSO Cambridge Capital Controversy; Pasinetti Paradox
BIBLIOGRAPHY
Baranzini, Mauro, and G. C. Harcourt, eds. 1993. The Dynamics of the Wealth of Nations: Growth, Distribution, and Structural Change: Essays in Honour of Luigi Pasinetti. London: Macmillan.
Pasinetti, Luigi L. 1960. A Mathematical Formulation of the Ricardian System. Review of Economic Studies 27 (2): 78–98.
Pasinetti, Luigi 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, Luigi L. 1965. A New Theoretical Approach to the Problems of Economic Growth. Pontificiae Academiae Scientiarum Scripta Varia 28: 571–677. Reprinted in The Econometric Approach to Development Planning, 572–696. Amsterdam: North Holland.
Pasinetti, Luigi L. 1966. Changes in the Rate of Profit and Switches of Techniques. Paradoxes in Capital Theory: A Symposium. Quarterly Journal of Economics 80 (4): 503–517.
Pasinetti, Luigi L. 1969. Switches of Techniques and the “Rate of Return” in Capital Theory. Economic Journal 79: 508–531.
Pasinetti, Luigi L. 1974. Growth and Income Distribution: Essays in Economic Theory. Cambridge, U.K.: Cambridge University Press.
Pasinetti, Luigi L. 1977. Lectures on the Theory of Production. London: Macmillan.
Pasinetti, Luigi L. 1981. Structural Change and Economic Growth: A Theoretical Essay on the Dynamics of the Wealth of Nations. Cambridge, U.K.: Cambridge University Press.
Pasinetti, Luigi L. 1993. Structural Economic Dynamics: A Theory of the Economic Consequences of Human Learning. Cambridge, U.K.: Cambridge University Press.
Pasinetti, Luigi L. 2006. Keynes and the Cambridge Keynesians. Cambridge, U.K.: Cambridge University Press.
Pasinetti, Luigi L., and Bertram Schefold, eds. 1999. The Impact of Keynes on Economics in the 20th Century. Cheltenham, U.K: Elgar.
Pasinetti, Luigi L., and Robert M. Solow, eds. 1994. Economic Growth and the Structure of Long-term Development: Proceedings of the IEA Conference Held in Varenna, Italy. London: Macmillan.
Teixeira, Joanílio R. 1998. Luigi L. Pasinetti. In Italian Economists of the 20th Century, ed. Ferdinando Meacci, 272–294. Cheltenham, U.K.: Elgar.
Pier Luigi Porta