Structural Economic Dynamics

by Luigi Pasinetti

• ISBN13: 9780521029766
• ISBN10: 0521029767
• Edition: 1st
• Format: Paperback
• Copyright: 2006-11-02
• Publisher: Cambridge University Press

Summary

This book is a theoretical investigation of the influence of human learning on the development through time of a 'pure labour' economy. The theory proposed is a simple one, but aims to grasp the essential features of all industrial economies. Economists have long known that two basic phenomena lie at the root of long-term economic movements in industrial societies: capital accumulation and technical progress. Attention has been concentrated on the former. In this book, by contrast, technical progress is assigned the central role. Within a multi-sector framework, the author examines the structural dynamics of prices, production and employment (implied by differentiated rates of productivity growth and expansion of demand) against a background of 'natural' relations. He also considers a number of institutional problems. Institutional and social learning, know-how, and the diffusion of knowledge emerge as the decisive factors accounting for the success and failure of industrial societies.

Table of Contents

Preface	xiii
Acknowledgements	xvii
List of symbols	xix
Economic theory and the neglect of structural change	1	(14)
Structural economic dynamics -- definitions	1	(1)
From classical theory to von Neumann's `proportional dynamics'	1	(2)
The serious shortcomings of proportional dynamics	3	(6)
Empirical studies on structural change	9	(2)
Innovative methodological lines of research	11	(3)
A note of warning	14	(1)
A pure labour production economy	15	(12)
Introduction	15	(1)
A pure labour economy within a given period of time	15	(4)
A Smithian pure labour theory of value and the Keynesian principle of effective demand	19	(1)
A macro-economic condition for the achievement of full employment	20	(2)
The two opposite situations of macro-economic disequilibrium -- unemployment and inflation	22	(1)
The `natural' level of employment and the `natural' wage rate	23	(1)
Importance of effective demand for the configuration of an economic system	24	(1)
Towards a dynamic analysis	25	(2)
Proportional dynamics	27	(9)
Analytic procedures	27	(1)
Population growth	28	(2)
Uniform technical progress and homothetic growth	30	(3)
Quasi-proportional growth	33	(1)
Beyond proportional dynamics	34	(2)
Structural dynamics	36	(24)
Introducing technical progress	36	(1)
Technical change and the evolution of consumption patterns	36	(4)
The basic hypotheses	40	(2)
Further specifications of the basic hypotheses	42	(1)
Resuming earlier analytic formulations	43	(2)
Structural dynamics of prices	45	(1)
Structural dynamics of production	46	(1)
Technology and effective demand, as determinants of `natural' prices and sectoral production	46	(1)
The dynamic role of the `natural' wage rate	47	(2)
Available labour and full employment	49	(1)
Structural dynamics of employment	50	(1)
Sectors with declining employment in a process of economic development, and the challenge of labour mobility	51	(2)
Ways to counter the tendency towards technological unemployment	53	(2)
Problems of employment connected with technical progress: non-uniqueness and time specificity of the full employment solution	55	(2)
A few remarks on familiar problems relating to Keynes' principle of effective demand	57	(1)
The challenging task of pursuing the goal of full employment -- problems of macro-economic coordination	58	(2)
The evolving structure and level of prices	60	(22)
Asymmetries between the price system and the system of physical quantities	60	(1)
Two degrees of freedom in the exponential dynamics of prices	60	(3)
Physical numeraires and nominal numeraires -- an important asymmetry	63	(1)
Physical numeraire and `non-stability' of prices	64	(3)
The search for a particular physical numeraire that keeps the general price level stable over time	67	(2)
The `standard' rate of growth of productivity	69	(1)
The `dynamic standard commodity'	70	(3)
Formal properties of the `dynamic standard commodity'	73	(1)
Inflation from structural dynamics	74	(2)
A nominal or `monetary' unit of account	76	(1)
Unconstrained monetary inflation (made possible by decoupling the two degrees of freedom inherent in the price system)	77	(2)
Breaking down the general dynamics of prices into an inflationary component and a structural component	79	(1)
The goal of stability of the general price level -- another macro-economic objective	80	(2)
Consumption, savings, rate of interest and inter-temporal distribution of income	82	(23)
Impossibility of transferring consumption over time for the economic system as a whole	82	(1)
Wide possibilities of personal savings and dissavings	83	(1)
Public savings and dissavings	84	(1)
The coming into being of financial assets and liabilities	85	(1)
The emerging of a rate of interest	86	(1)
A whole set of own-rates of interest, implied by the same (actual) rate of interest	87	(2)
Nominal or `money' rate of interest	89	(1)
The relation between nominal rate and real rates of interest -- the `standard' (real) rate of interest	90	(1)
Which rate of interest?	91	(1)
The `natural' rate of interest	92	(3)
A `labour principle' of (inter-temporal) income distribution	95	(2)
An alternative definition of `natural' rate of interest	97	(1)
The rentier in a pure labour economy	98	(2)
Income redistribution due to money inflation	100	(1)
Public debt or taxation -- remarks on the meaning of `Ricardian neutrality'	101	(1)
More on the importance of the effective demand macro-economic condition	102	(3)
On the evolving structure of long-term development	105	(12)
Foreword	105	(1)
The puzzling sources of technical progress	106	(1)
Consumption decisions in a dynamic context	107	(2)
Social choice theory -- public goods and public services	109	(3)
On the evolving structure of production in the industrial economics	112	(1)
Fluctuations as a consequence of economic growth	113	(2)
Some speculations on the eventual destiny of industrial societies	115	(2)
From the `actual' towards the `natural' economic system -- the role of institutions	117	(31)
The `institutional problem'	117	(1)
The non-existence, in the economic field, of `natural' institutions	118	(1)
The `natural' magnitudes to be aimed at	118	(1)
Fixing the prices -- centralized methods and methods relying on competition and freedom of initiative	119	(1)
Market prices and the emergence of Schumpeterian profits (and losses)	120	(1)
Discrepancies between effective demand and productive capacity	121	(1)
A physical quantity self-adjusting mechanism with fixed prices	121	(2)
Short-run physical quantity adjustments with flexible prices (a Marshallian market mechanism)	123	(1)
More complex institutional arrangements for the realisation of the `natural' physical quantities	124	(1)
`Natural' wage and full employment	125	(1)
Aiming at the `natural' wage	125	(3)
Aiming at full employment -- another genuinely macro-economic Task	128	(1)
Can market clearance of the labour market be relied on?	129	(3)
Wage differentials as incentives to labour mobility -- an efficiency-inducing use of the market-price mechanism	132	(1)
Full employment in institutionally more primitive economic systems, and the relevance of `Say's Law'	133	(2)
Paper money -- a major institution of modern economic systems	135	(1)
Monetary production economies -- the breaking down of `Say's Law'	136	(2)
Money and bonds	138	(1)
The actual versus the `natural' rate of interest	139	(1)
Can market clearance of financial markets set in a tendential fulfilment of `Say's Law'?	140	(2)
Insufficiency of a demand and supply `loanable funds' theory, and the role of monetary and fiscal policies	142	(2)
Financial institutions and the risks of financial instability	144	(1)
A programme for research, and a challenge for action	145	(3)
Boundedness of economic systems, and international economic relations	148	(29)
Multiplicity of economic systems	148	(3)
International comparisons at the same (identical) price structure	151	(1)
Different relevance, for advanced and for less developed countries, of the disparities in technical knowledge	152	(1)
Learning of technical knowledge as the primary source of international economic benefits	153	(1)
The hierarchical order of the expansion of demand as a rigid constraint on international learning	154	(2)
Some important practical implications	156	(2)
Disparities of comparative costs -- a secondary source of international economic benefits	158	(3)
Static and dynamic aspects of the principle of comparative cost advantages	161	(1)
Updating previous results to account for differences in price structures	162	(1)
The benefits of international trade	163	(1)
What international trade cannot do	164	(1)
Movements through time -- the substantial closure of economic systems with regard to productivity growth	165	(3)
Changes in the terms of trade and leakages of the gains of productivity	168	(1)
Necessity of reconsidering the problem of international economic relations	169	(1)
International mobility of labour	170	(2)
International mobility of information and of technical knowledge	172	(3)
The `causes' and the `nature' of the wealth of nations	175	(2)
References	177	(5)
Index	182