Pasinetti on Ricardo

Pasinetti’s (1960) early work on Ricardo shows his mastery of the interconnections between value, distribution, and growth. The paper is an outstanding classic in the history of economic analysis. Its principal object was to show how an analytical model could capture the ingredients of Ricardo’s system and (re)produce his results. The model contained the essence of Ricardo’s theory of value—that it was principally embodied labour which in practice determined the natural exchange ratios of reproducible commodities. It also highlighted Ricardo’s own stress on persistent and permanent or dominant factors at work in the economy which expressed themselves in the forces which determined natural prices. The short-term factors associated with supply and demand and the determination of market prices were relegated to a secondary position. No more so was this the case than in Ricardo’s theory of the natural wage and changes in population cum labour force, with which was associated his theory of accumulation. In Pasinetti’s model of Ricardo’s system, the Malthusian principle of population, which Ricardo adopted, is treated as though it works instantaneously so that the wage is always at its natural level even though accumulation is occurring. (As with Ricardo, Pasinetti does not suppose the natural wage to be a physiologically determined subsistence wage; habit and history also influence its size.) This simplification allows a much more clear-cut picture of the accumulation process and of the approach to the stationary state.

We may recall that a number of authors (John Hicks, Samuel Hollander, and Carlo Casarosa) had in the late 1970s and early 1980s suggested a model of the Ricardian theory of distribution and economic growth which, contrary to the Sraffa-Pasinetti interpretation, emphasized the forces of supply and demand for the determination of the wage rate. This version has been challenged by Pasinetti, for whom the interpretation of the Ricardian theory of distribution and growth followed by the above-mentioned scholars simply belongs to a stream of economic thought going back to Marshall’s interpretation of Ricardo. Such an interpretation tries to incorporate the basic propositions of Ricardo into the analytical framework based on the working of supply and demand. The pre-Sraffa economic literature included several attempts (Marshall’s being one of the better known) written with the purpose of reconciling Ricardo with marginal economic theory.