Roberto Scazzieri

Capital theory: paradoxes

prologue. The idea that capital theory might lead economists to discover forms of ‘paradoxical’ behaviour has emerged in the economic literature of the 1960s largely as an outcome of developments in the field of production theory (theory of linear production models). What happened in capital theory is in fact a special instance of a more general phenomenon. Economists sometimes tend to examine a large domain of economic phenomena by adapting theoretical concepts that had originally been devised for a much narrower range of special issues. The discoveries of ‘paradoxical’ relations derive from the fact that their process of generalization often turns out to be ill-conceived and misleading, if not entirely unwarranted.

Structural Economic Dynamics: Looking Back and Forging Ahead

The literature of structural economic dynamics emerged from the attempt to extend Keynes-type macroeconomics to the analysis of the long run. After Roy Harrods exploration of capital accumulation requirements in a macro economy subject to technical progress and population growth, economists broadly associated with the Cambridge tradition attempted the identification of consistency conditions for a disaggregate, multi-sectoral economy undergoing changes in relative proportions. Moving from the criticism of the aggregate methodology and from the implementation of inter-industry analysis in empirical research, a first set of theoretical principles for the explanation of long-run structural changes were developed. The paper discusses the analytical core and developments of the structural dynamics tradition starting from the early discussion of the relationship between technical progress and Engels law, and of the structural interdependence between growth, resource utilization and capital accumulation. It is argued that the original research programme gave way to contributions along two main lines of inquiry. On the one hand, the relationship between economic theory and economic history became a central concern; on the other hand, the analytical representation of economic structure became an important focus of research. The paper emphasizes that a distinctive feature of the structural dynamics tradition is its emphasis upon the differentiated evolution of the various components of any given economic system, and the prominence assigned to relatively permanent structures in shaping historical evolution, or in constraining the achievement of long-run policy objectives.

Pietro Verri's Political Economy: Commercial Society, Civil Society, and the Science of the Legislator

PietroVerri (1728–1797) emerged in the latter half of the eighteenth century as one of the outstanding figures of the European Enlightenment. Within the Milanese school of the time, by initiative, cultivation, and age, Verri was the natural leader of the group of young intellectuals he had gathered at the newly founded Accademia dei pugni. His overall intellectual image was destined, however, to be somewhat diminished by the presence among his younger followers of Cesare Beccaria. Beccaria’s lightning rise to international fame came soon after the publication of Dei delitti e delle pene in 1764, the world-famous pamphlet on crimes and punishment. Its message provided a plea for dropping the death penalty, argued from an economic conception of public law as well as with a perceptive and timely application of utilitarian principles. That Verri had in fact inspired Beccaria to write the pamphlet hardly got Verri any credit at all. Concerning his views on polity and society,

Commodity Flows and Productive Subsystems: An Essay in the Analysis of Structural Change

The purpose of this paper is to consider alternative clustering criteria, based upon different analyses of commodity flows within the economic system. These may be used in order to group together productive activities that share a number of features distinguishing them from the remaining parts of the economic system.

Social Models, Growth and Key Currencies

Is there a trade-off between social protection and economic growth? Cuts in social protection and welfare expenditures have been advocated as a recipe for faster growth in Europe, both in the recent past, when Europe as a whole was ‘typecast’ as a ‘sclerotic under-achiever’ (The Economist, 14 July 2007, ‘Can Europe’s Recovery Last?’, p. 13) and during its subsequent recovery. In both the press and economic journals, this approach proposes the American Model as the successful alternative to the ‘European Social Model’, considered either as a whole or in its regional specifications (‘the French Social Model’, etc.).1

Resources, Production and Structural Dynamics

Economists since the First Industrial Revolution have been interested in the links between economic growth and resources, often pointing to resource scarcities as a hindrance to growth. Offering a counter perspective, this volume highlights the positive role that scarcities can play in inducing technical progress and economic growth. It outlines a structural framework for the political economy of scarcity and rents, and offers a novel way of organizing the evidence concerning the role of resources in industrial growth. This book proposes a major shift in the treatment of scarcity issues by focusing on bottlenecks and opportunities arising within the production system, and will appeal to economists and policy makers interested in the role of resources as triggers of structural change.

Political Economy as Theory of Society

This chapter argues that political economy must consider the variety of objectives within the polity as well as the internal structure of the constraints to their pursuit that are imposed by the material sphere. The chapter starts by tracing the divide between traditions focussing on means-ends reasoning and those investigating the structures of division of labour. The former theorize action but do not have a theory of the internal structure of constraints posed by the material sphere, whereas the latter focus on economic structures but do not have an explicit theory of action. This divide is to some extent exemplified by the distinction between the ‘materialist’ and the ‘scarcity’ views of political economy (Cannan versus Robbins). The chapter argues that, despite the different priority accorded to economic phenomena and the different requirements being considered (the viability requirement for the ‘materialist’ view and the efficiency requirement for the ‘scarcity’ view), both views are concerned with conditions for the effective arrangement of human activities to fulfil individual or collective requirements. In this sense, the two views point to complementary aspects of political economy as the study of structurally constrained social action of the means-aims type. The chapter concludes by outlining a view of political economy that brings together the attention for means-ends reasoning and for the structure of material constraints.

Political Economy of Economic Theory

Political Economy involves both the material conditions for the life of the polity and the political conditions for the governance of the economy. This chapter considers economic theory as a means to investigate this dual character of political economy. This is done by distinguishing between two fundamental approaches in economic theory: the exchange-based approach (Hicks’ catallactics) and the production-based approach (Hicks’ plutology). It is argued that catallactics and plutology highlight alternative economic arrangements for the provision of material needs within the polity and different political conditions for those economic arrangements to be feasible and implemented. The chapter outlines the foundations of a political economy approach to economic theory and charts lines of further research in the field.

Markets, Money and Capital: Between theory and history: on the identity of Hicks's economics

John Hicks was one of the most influential economists of the twentieth century. His contributions have shaped the core theories of rational choice and human welfare, value and money, capital and growth. At the same time, Hicks’s contributions often address contentious issues, and sometimes suggest unconventional and controversial points of view. In John Hicks, we see economic theorizing at its most fundamental, almost formative, stage. In his writings, economic theorizing strives to achieve, and succeeds in maintaining, a balance between the requirements of analysis and the explicit recognition of the relevance of history and institutions. In short, Hicks’s contribution to economics belongs both to the so-called ‘mainstream’ and to its critique. This characteristic feature of Hicks’s work derives from a seemingly simple, but in fact highly sophisticated, approach to the construction of economic theory. Hicks takes theories to be the product of a particular ‘concentration of attention’ (Hicks, 1976a: 209). Theories are focusing devices that may be effective in bringing to view certain causal patterns, while leaving other (possible) causal patterns aside. This makes theories essential to economic analysis (as some concentration of attention is a necessary condition for the identification of a causal relationship). The same approach makes multiple theories possible, however. Indeed, the possibility of distinct theoretical frameworks is a most natural consequence of changes in the concentration of attention (see Scazzieri, 1993b). Moreover, such changes are often necessary to preserve the relevance of theories vis-a-vis historical or institutional changes. In Hicks’s view,

Reverse capital deepening

It has long been taken for granted that there is an inverse monotonic relationship between the rate of interest (or the rate of profit) and the quantity of capital per man. This belief was founded on the principle of substitution, whereby ‘cheaper’ is substituted for ‘more expensive’ as the relative price of two inputs is changed.