Economics Dictionary of ArgumentsHome
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| Capitalism: Capitalism is an economic system where private individuals or businesses own and operate the means of production for profit. It is characterized by competition, markets, and a focus on individual wealth accumulation._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Luigi Pasinetti on Capitalism - Dictionary of Arguments
Harcourt I 215 Capitalism/Pasinetti/Harcourt: (…) the debate is concerned with important empirical characteristics of capitalist economies, in particular, with the role of the class that accumulates capital, both by making investment decisions and by organizing the saving (their own or borrowed) to finance investment. We call this class 'pure' capitalists; they are defined as those whose only source of income is profits, which derive from their ownership of capital (see Pasinetti [1964](6), p. 489). It is in the spirit of the analysis to regard the class as profit-retaining companies organized by, say, Dr. Marris's managers (Marris [1964](1)), as Kaldor [1966](2) does in his reply to Samuelson and Modigliani (…). The managers might well have the saving behaviour of workers in their private lives (this is not all that fanciful when the consumption and other perks of expense account living are added to managerial incomes - as reported to the Inland Revenue - in order to obtain their mpss = apss), yet, simul taneously, organize the savings of companies in their role of good organization men. Harcourt I 216 The other group in the community - Pasinetti's 'workers' - may receive two classes of income, wages and profits on the financial capital which they own. It is financial capital because it results from lending their savings, as they accrue, to the 'pure' capitalists, who invest them in real, productive assets. Both classes are assumed to have simple proportional saving functions - Sw = sw(W+∏w) and Sc = sc∏c. Stiglitz: Stiglitz [1968](3) has suggested that if workers think they're capitalists when they consider the disposal of their income from profits, Uw may be subsumed along with ric in an all-embracing II. But this would drive a wedge between classes and income classes and only allow the determination of the income distribution of the latter. It does solve Nell's puzzle, and Kaldor's problem, (…). It is, of course, an empirical issue. Be that as it may, the two classes are permanent classes of incomereceivers - once there, always there - otherwise the respective property holdings of each will not grow at the rates assumed in the model. This is easier to accept for the 'pure' capitalists, where companies as going concerns immediately spring to mind, than for workers. MeadeVsPasinetti: This takes some sting out of Meade's comment [1963](4), pp. 671-2, that: 'For Mr. Pasinetti's results to have practical use we must assume a self-perpetuating class of property-owners who do no work and who, even after allowing for death duties, save a proportion of their income greater than 1/1 —T times the saving proportion of the rest of the community.' (r is the proportional marginal product of labour, i.e. labour's exponent in the neoclassical model which Meade uses partly to go over the same ground as Pasinetti.) If T = 3/5 —3/4, the ratio is 2 1/2 — 4 and the requirement is sc > 2 ½ sw - 4sw. Lf sw = 0.05 - 0.10, we get sc>0.125-0.40, which, for companies, does not seem unreasonable. Growth/investments: The debate may be seen, therefore, to relate to an integral part of the theory whereby 'the rate of growth … is determined in a modern economy by the investment decisions (of business firms) which can be actually financed and carried out within the monetary and resource constraints of society' (Davidson [1968b](5), p. 268). PasinettiVsVs: Pasinetti first got into the act by pointing out that Kaldor, in his Keynesian theory of distribution, see pp. 207-10 above, either did a Stiglitz or forgot that workers' saving would also lead to their accumulating financial capital and receiving profits - or interest - on it. 1. Marris, Robin [1964] The Economic Theory of 'Managerial Capitalism (London: Macmillan). 2. Kaldor, N. [1966] 'Marginal Productivity and the Macro-Economic Theories of Distribution', Review of Economic Studies, xxxm, pp. 309-19. 3. Stiglitz, J. E. [1968] [1968] Letter to author. 4. Meade, J. E. [1963] 'The Rate of Profit in a Growing Economy', Economic Journal, LXXIII, pp. 665-74. 5. Davidson, Paul [1968b] The Demand and Supply of Securities and Economic Growth and Ist Implications for the Kaldor-Pasinetti Versus Samuelson-Modigliani Contro- versy', American Economic Review, Papers and Proceedings, LVIII, pp. 252-69. 6. Pasinetti, L. [1964] 'A Comment on Professor Meade's "Rate of Profit in a Growing Economy" ', Economic Journal, LXXIV, pp. 488-9._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Pasinetti I Luigi L. Pasinetti Structural Change and Economic Growth: A Theoretical Essay on the Dynamics of the Wealth of Nations Cambridge 1983 Harcourt I Geoffrey C. Harcourt Some Cambridge controversies in the theory of capital Cambridge 1972 |
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