Alternative Post-Keynesian Analyses — II

Abstract

In marked contrast to the approach of Kaldor are the long-run equilibrium models of Luigi Pasinetti. Although occasionally drawing directly on Kaldor’s work, Pasinetti’s approach is primarily technical and logical. His models are worked out to find what conditions and assumptions are the ‘necessary relations to achieve full employment’ in conditions of long-period equilibrium growth. Pasinetti takes very seriously the methodological approach (and limitations) implied by the long-run analysis of equilibrium growth at full employment. He has on one occasion explained this approach as follows:

To those readers who still find it difficult to follow the logic of the long-run equilibrium growth models I would suggest a device. We have normally been used to think in terms of a free market economy and then to extend the results to the case of a centrally planned economy. Here, it turns out to be much more helpful to reverse the procedure and to think first in terms of a centrally planned economy. For, in this case, the relationship (an equilibrium relationship) between the long-run rate of profit and the natural rate of growth emerges immediately. The corresponding relationship for a free market economy will then appear much easier to grasp. [67, p. 77].