Sergio Cesaratto

Technical Change, Effective Demand and Employment

Ricardo and Marx saw technological change as a possible cause of long-period unemployment. Neoclassical and Schumpeterian economists regard technological unem ployment as a transitory phenomenon. This paper argues that the capital critique (i) demolishes the neoclassical claim that market mechanisms will restore full employment whenever workers are displaced by technical change, and (ii) rehabilitates the old Ricardian argument that automatic compensation factors are generally absent. The neo-Schumpeterian notion of autonomous investment is also rejected, in favour of the view that, in the long period, all investment is induced. By extending Keyness theory of effective demand to the long period through a model based on the supermultiplier, this paper suggests that the ultimate engines of growth are located in the autonomous components of effective demand--exports, government spending and autonomous con sumption. Technical change plays a role in the accumulation process through its effects on consumption patterns and the material input requirements. However, the impact of technical change is now seen to depend upon circumstances such as income distribution, the availability of bank liquidity and exchange rate policy.

Neo-Kaleckian and Sraffian Controversies on the Theory of Accumulation

Abstract Non-orthodox economists generally share the Keynesian Hypothesis of the independence of investment from capacity savings, in the long run no less than in the short run. This hypothesis marks an essential point of difference from neoclassical theory. Keynes showed that within the limits of the existing capacity utilisation, investment determines savings rather than the other way around. How best to extend this conclusion to the long run is the object of the current paper. The paper assesses the controversy on demand-led growth that has taken place since the mid-1980s between neo-Kaleckian and Sraffian authors. The Sraffian front may be divided into a first and a second Sraffian position, the latter being the Sraffian supermultiplier approach. I shall argue that this second approach is the most promising framework for analysing economic growth.

The Economics of Pensions: A non-conventional approach

This paper examines two alternative pension systems, pay-as-you-go (PAYGS) and the capitalisation system (CS) in the light of alternative economic theories. It starts from a critical discussion of the insurance-fiction model of PAYGS proposed by Samuelson in 1958. The pros and cons of that model are illustrated by taking into consideration the non-orthodox views of Keynes, Lerner, Pechman, de Finetti and Eisner. Next, the paper investigates the relationship between CS and the marginalist capital theory. It is shown that, interpreted in a neoclassical framework, CS presents endogenous mechanisms of adjustment to demographic shocks. The problems of the transition between PAYGS and CS are then examined. The paper then discusses some main features of the current US policy debates on the Social Security system. Finally, the alleged advantages of a wider adoption of CS are criticised in the light of the Keynesian theory of effective demand reinforced by the Sraffian criticism of neoclassical capital theory.

Pension Reform and Economic Theory

The book is the first of its kind to attempt to deal with the economics of pensions and ageing on the basis of a rigorous theoretical framework alternative to neoclassical economics. Sergio Cesaratto breaks the dominant conformism in the current pension debate and explains that the strength of the various reforms proposed depends on the validity of the economic theories on which they are respectively based. He also illustrates the relevance of the Sraffian criticism to undermine the theoretical core of the mainstream proposals.

Are PAYG and FF Pension Schemes Equivalent Systems? Macroeconomic Considerations in the Light of Alternative Economic Theories

Abstract Conventional wisdom holds that Fully Funded (FF) pension schemes would better prepare the community for ongoing demographic change. Many critics of FF schemes argue that these plans would encounter problems similar to those that create financial difficulties to Pay-As-You-Go (PAYG) schemes. More specifically, they maintain that, whereas in a PAYG scheme a decrease in the working population with respect to an increasing elderly population undermines the financial source of pension transfers, by the same token in an FF scheme a diminished number of young savers would make the absorption of the capital assets accumulated by the pension funds difficult. This paper assesses the mainstream claim and its criticism in the light of the neoclassical foundations of the dominant view. It will emerge that the criticism is partially correct, but we arrive at this conclusion through reasoning that does not bypass the theoretical foundations of the mainstream claim. The capital theory critique is shown to be relevant in this respect.

The Italian Ph.D ten years on: Educational, scientific and occupational outcomes

The doctorate in Italy is a new institution. In this paper we present the results of an investigation that attempts to assess the experience from three main points of view: (i) the didactic structure of the courses (ii) their scientific output and (iii) the employment of Ph.Ds. From the survey, the didactic structure of the courses appeared weak, i.e. they were based on occasional activities. The main reason might be the unclear location of the Ph.D within the departmental activities. The scientific productivity of Ph.Ds seems promising. Only an extremely low percentage of Ph.Ds work in industrial R&D, a fact explained by the small amount of original R&D carried out by Italian firms. We found, however, a significant degree of co-operation between industry and university at doctorate level. Obstacles have also been encountered by Ph.Ds in obtaining jobs in the University or in public research institutes, not only because of the scarcity of job openings, but also because of the absence of the social convention whereby in most countries the doctorate is regarded as the normally necessary background for these careers.

Long-period method and analysis of technological change: is there any inconsistency? ∗

A recurrent theme in economic analysis is the criticism of the traditional method based on the investigation of ‘normal’ or long-period positions (LPP) considered as centres of gravitation for the actual positions of the economy. The paper discusses this criticism with particular reference to the consistency of the long-period method (LPM) with the analysis of technological change and competition. It is argued that the role of the tendency towards the LPP was seen by traditional economists as part of the process of selection from among competing technologies. This process was regarded as leading to the emergence of dominant techniques determining normal prices and profitability. The concept of competition covered by the notion of gravitation towards the LPP is not, therefore, restricted to the diffusion of given technologies, but includes the introduction of new techniques. In addition, traditional economists did not look at the adjustment towards the LPP as a fully accomplished process, but only as tende...

Balance of Payments or Monetary Sovereignty? In Search of the EMU’s Original Sin

Abstract: In a recent paper, Marc Lavoie (2015) criticized my interpretation of the Eurozone (EZ) crisis as a balance of payments (BoP) problem. He identifies the original sin “in the setup and self-imposed constraints of the European Central Bank.” This is referred to here as the monetary sovereignty view, which belongs to a more general view that sees the source of EZ troubles in its imperfect institutional design. According to the (prevailing) BoP view, sustained in different ways by a variety of economists from the conservative Sinn to the progressive Frenkel, the original sin lies in the current account (CA) imbalances brought about by abandoning exchange rate adjustments and in inducing peripheral countries to become indebted with core countries. An increasing number of economists would add German neomercantilist policies as an exacerbating factor. While the BoP crisis is a fact, better institutional design would perhaps have avoided the worst aspects of the current crisis and permitted more effective action by the European Central Bank (ECB). Leaving aside the political infeasibility of a more progressive institutional setup, it is doubtful that this would fix the structural imbalances exacerbated by the euro. Be that as it may, one can of course blame the flawed institutional setup and the lack of ultimate action by the ECB for the crisis, as Lavoie seems to argue. Yet, since this institutional set up is absent, the EZ crisis manifests itself as a balance of payment crisis.

Pensions in an Ageing Society: a Symposium

Two major demographic events, the progressive fall in fertility and greaterlongevity, are changing the structure of the world population, although atvarious rates in different regions (UN, 2005). What has been called by demogra-phers the demographic transition should be welcomed insofar as it is likely tobring about a much needed stabilization of the world population that, nonetheless,is expected to increase by one third by the end of this century, from the currentlevel of 6.5 billion. Moreover, the greater control women have over fecundityand the fall in child mortality rates—factors that help to explain the decline infertility—and the expectation of a longer old-age are significant achievements.These achievements come at a price, however: i.e. population ageing—since bydefinition, populations with low fertility (the dominant factor) and with long lifeexpectancy (a subsidiary factor) are, on average, older than populations withhigh fertility and short life expectancy.While the trend depicted above is global, the variety of regional situations isstriking. The demographic transition is at an advanced stage in the more developedcountries, where it started two centuries ago; the post-World War II baby boom doesnot contradict the secular patterns. In a few years, the demographic transition willbring about dramatic consequences in some countries, namely the European Medi-terranean countries and Japan, but also in Germany, where the native population isexpected to fall, and where, despite substantial immigration, the ageing processwill scale upwards.

Pierangelo Garegnani, the Classical Surplus Approach and Demand-led Growth: Introduction to the Symposium

Sraffian economics has recovered the surplus approach to the theory of value and distribution that was developed by the classical economists and Marx and then obscured by the emergence of marginalist economics in the second half of the 19th century (Garegnani 1984). It has also laid the foundations for a robust capital-theoretic critique of the marginalist theory of distribution. By virtue of this twofold contribution, Sraffian economics is well-suited to absorb and reinforce the more revolutionary insights of Keynes’s legacy. A research programme in this direction was launched in the early 1960s by Pierangelo Garegnani (1962) in a report he wrote for the private research institute SVIMEZ. The SVIMEZ report is divided into three parts. The first and second parts are concerned with theoretical matters; the third part is an empirical study, grounded in the theoretical results, of investment and capacity utilisation in the Italian economy for the period 1950 to 1960. The first part of the report (Chapters I and II) has a critical focus; it undermines the residual marginalist elements of Keynes’s General Theory (1936). These orthodox elements—the idea that in equilibrium the real wage must be equal to the marginal revenue product of labour; and the treatment of investment spending as a decreasing function of the interest rate—enabled mainstream economics to absorb Keynes’s theory of effective demand in weakened form via the neoclassical synthesis. Garegnani’s 1958 University of Cambridge doctoral thesis (published in Italian as Garegnani 1960) and Sraffa’s Production of Commodities by Means of Commodities (1960) had already exposed serious weaknesses in the orthodox treatment of capital. Their work had shown that the interdependence of distribution and relative Review of Political Economy, 2015 Vol. 27, No. 2, 103–110, http://dx.doi.org/10.1080/09538259.2015.1026092