Geoffrey Harcourt, Alessandro Roncaglia and Robin Rowley (editors) INCOME AND EMPLOYMENT IN THEORY AND PRACTICE

Transcription

1 THE JEROME LEVY ECONOMICS INSTITUTE SERIES General Editor: Dimitri B. Papadimitriou, Levy Institute Professor of Economics, Bard College, Annandale-on-Hudson, New York Geoffrey Harcourt, Alessandro Roncaglia and Robin Rowley (editors) INCOME AND EMPLOYMENT IN THEORY AND PRACTICE Dimitri B. Papadimitriou (editor) ASPECTS OF DISTRIBUTION OF WEALTH AND INCOME Dimitri B. Papadimitriou and Edward N. Wolff (editors) POVERTY AND PROSPERITY IN THE USA IN THE LATE TWENTIETH CENTURY

2 Income and Employment in Theory and Practice Essays in Memory of Athanasios Asimakopulos Edited by Geoffrey Harcourt Reader in the History of Economic Theory University of Cambridge and Professor Emeritus University of Adelaide Alessandro Roncaglia Professor of Economics University of Rome I and Robin Rowley McGill University Montreal

3 the Jerome Levy Economics Institute 1995 Softcover reprint of the hardcover 1st edition All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London WI P 9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published in Great Britain 1995 by MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 2XS and London Companies and representatives throughout the world A catalogue record for this book is available from the British Library ISBN ISBN (ebook) DOI / First published in the United States of America 1995 by Scholarly and Reference Division, ST. MARTIN'S PRESS, INC., 175 Fifth Avenue, New York, N.Y ISBN Library of Congress Cataloging-in-Publication Data Income and employment in theory and practice : essays in memory of Athanasios Asimakopulos I edited by Geoffrey Harcourt, Alessandro Roncaglia, and Robin Rowley. p. em. Includes indexes. ISBN I. Income. 2. Employment (Economic theory) 3. Saving and investment. 4. Keynesian economics. 5. Asimakopulos, A., I. Harcourt, Geoffrey Colin. II. Roncaglia, Alessandro, Rowley, J. C. R. HB '5--dc

4 Contents Foreword by Dimitri B. Papadimitriou Preface by Geoffrey Harcourt, Alessandro Roncaglia and Robin Rowley Addresses of the Contributors Notes on the Contributors ix X xiv xvii 1 The Structure of Tom Asimakopulos 's Later Writings Geoffrey Harcourt 2 Asimakopulos and Keynes's General Theory Gilles Dostaler 17 3 The Asimakopulos View of Keynes's General Theory Paul Davidson 40 4 Causality and Real Time in Asimakopulos's Approach to Saving and Investment in the Theory of Distribution Jan Kregel 67 5 The Keynesian Project: Tom Asimakopulos and 'The Other Point of View' Heinz Kurz 83 6 On the Compatibility between Keynes's and Sraffa's Viewpoints on Output Levels Alessandro Roncaglia On the Classical and Marshallian Foundations of Keynesian and Post-Keynesian Economics Bertram Schefold 'Demand' in Production of Commodities by Means of Commodities Neri Salvadori 154 v

5 vi Contents 9 The Efficiency Wage Hypothesis in the Long Period Sergio Parrinello Interpretations of Kalecki Claudio Sardoni 185 l1 The Partition of Aggregate Investment Robin Rowley Public Pension Theory for the Real World LouisAscah Economic Growth and the Distribution of Income Terry Gigantes 237 Subject Index 286 Author Index 291

6 The Jerome Levy Economics Institute of Bard College Founded in 1986, the Jerome Levy Economics Institute of Bard College is an autonomous, independently endowed research organisation. It is non-partisan, open to the examination of diverse points of view, and dedicated to public service. The Institute believes in the potential for economic study to improve the human condition. Its purpose is to generate viable, effective public policy responses to important economic problems. It is concerned with issues that profoundly affect the quality of life in the United States, in other highly industrialised nations, and in countries with developing economies. The Institute's present research agenda includes such issues as financial instability, poverty and problems associated with the distribution of income and wealth. Other research interests include the issues of public and private investment and their relationship to productivity, competitiveness and the prospects for growth and employment. In all jts endeavours, the Institute places heavy emphasis on the values of personal freedom and justice. The opinions expressed in this volume are those of the authors and do not necessarily represent those of The Jerome Levy Economics Institute of Bard College. Board of Governors Peter C. Aldrich Leon Botstein David A. Levy, Vice Chairman Leon Levy S. Jay Levy, Chairman Jack Nash Dimitri B. Papadimitriou, Executive Director Edward V. Regan, President Brian F. Wruble vii

7 Foreword The death of Athanasios (Tom) Asimakopulos marks the absence of a forceful and often critical voice in economics. Tom's own strong insistence that his contributions were representative of a minority view confirm the modesty that characterised him. His modesty notwithstanding, Tom's writings, reflecting his sharpness of mind, intellectual integrity and profound scholarship, have had a considerable impact on the discipline, and have aroused the interest of scholars in both mainstream and alternative paradigms that continues to persist. Asimakopulos's scholarly endeavours were wide and his contributions revealed his deep understanding of economic theory and policy. The Jerome Levy Economics Institute is particularly pleased to have made possible a conference focusing on Asimakopulos's contributions. The conference, held at the Institute on September 1992, brought together a distinguished roster of participants some of whose thoughtful and provocative presentations can be read in the pages of this volume. Although the essays selected touch on many aspects of Asimakopulos's work, they certainly do not constitute an exhaustive survey of his contributions. The papers cover a variety of themes chosen by the authors, revealing their own research, but unquestionably demonstrate the influence of Asimakopulos's far-reaching contributions. This book is a fitting tribute to Asimakopulos's distinguished career as a gifted teacher and devoted scholar. In the words of one of his students, David Ress: 'Asimakopulos didn't teach answers. He taught analysis: a mind set free of cant, that questioned assumptions that strived for rigorous logic. He was the kind of man, and the kind of teacher, who makes me very proud to say: "I studied with Asimakopulos, at McGill."' We all recognise that his untimely death has made our discipline, and us, much poorer. There is a lot to be discovered in Asimakopulos and his work. We hope the papers collected in this volume will provide an appropriate beginning. Dimitri B. Papadimitriou ix

8 Preface The essays in this book were written in memory of Athanasios (Tom) Asimakopulos. He died of leukemia on 25 May 1990, just three days before his sixtieth birthday. Most of the essays in this book deal with the interpretation and elaboration of the Keynesian theory of employment- a central theme of Tom's work. As Tom did, the contributors view economic research as a persistent process, in which healthy debate and dissent play a central role. We shall miss his friendly and clearly-expressed contributions to the common search for progress. The various avenues of research pursued by Tom and our contributors may be loosely labelled as 'Cambridge Keynesian ism cum Kaleckianism'. More important than labels, though, is th~ commonly-held belief that economic research plays a decisive role in the development of a civilised, humane society. As we worked on this book, we have realised our loss all the more. Tom's careful scholarship, his integrity and, above all, his friendship were sorely missed. In the opening chapter, Geoffrey Harcourt provides a portrait of Tom as an economist, through the main points of Asimakopulos's reconstruction of a Keynesian-Kaleckian approach to economics. Unlike most of the other European Kaleckians, Marx had no direct influence on Tom, except indirectly through Kalecki and Joan Robinson. Subsequent chapters deal with Asimakopulos's contributions to the interpretation and development of Keynes's theory of employment. Gilles Dostaler's essay is the logical starting-point for this group of papers, since it is specifically devoted to an evaluation of Tom's interpretation of Keynes's General Theory. Paul Davidson takes issue with Tom's ideas on the liquidity motive for holding money, and with his characterisation of the multiplier process as a process 'in historical time'. This chapter spells out Davidson's position in a debate which frequently pitted him against Tom. We doubt they would have convinced each other this time around, but as Tom always saw, debate can still be progressive if it leads to improvements in both positions. The effort to clarify the issues involved in the debate comes through in Jan Kregel's chapter. Here Kregel tries to identify the particular hypotheses underlying Asimakopulos's position, which could lead him to a possible reversal of the Keynesian causal relation- X

9 Preface xi ship between investment and saving. Both the Davidson and Kregel chapters are relevant for discussion of the 'scarcity of saving' doctrine - a theme which comes up again, from a different perspective, in Terry Gigantes' s chapter at the end of the book. The next four chapters, by Heinz Kurz, Alessandro Roncaglia, Bertram Schefold and Neri Salvadori, all tackle the theory of employment from a somewhat different perspective, and one that is nearer to the Classical approach revived by Piero Sraffa. Kurz compares Asimakopulos's reconstruction of the Keynesian theory of employment with the 'longperiod' line of research developed from Sraffa's analysis, and argues that Keynes could hardly have considered his theory 'general', had he not been concerned with explaining also the long-run trend of employment. The same comparison, but with different results, is at the centre of Roncaglia's paper. He analyses the debate between Asimakopulos and Garegnani on 'natural quantities' and propounds a 'Keynesian' interpretation of Sraffa's analysis as the basis for bridging the gap between the two main (now contending) non-neoclassical approaches. Schefold tackles a similar issue in a more indirect way, by considering Malinvaud's disequilibrium interpretation of Keynesian unemployment theory and the Marshallian elements embedded in so-called 'fundamentalist' interpretations of Keynes. Then he proceeds to illustrate the Classical approach to the analysis of employment, and its links to the longperiod analysis of growth and distribution. Salvadori stresses the role of demand in Sraffa's analysis, starting from an exchange of letters between Asimakopulos and Sraffa. The difficult but central issue of the relationship between long- and short-period analysis is considered in the two concluding chapters of this section. Sergio Parrinello considers the theory of employment and distribution from a long-period perspective, in the light of different notions of efficiency wages and heterogeneous labour. Claudio Sardoni discusses alternative interpretations of Kalecki's analysis: an area where Asimakopulos made important contributions, and in which the relationship between long- and short-period analysis also plays a central role. The last three chapters belong to the field of applied economics. As we have hinted above, Asimakopulos avoided the narrow specialization which is so common among mainstream economists: the practical relevance of theoretical debates was always crucial to him. The reader will be able to verify this from the degree to which he integrated theory and application. In his chapter, Robin Rowley shows the difficulty of partitioning aggregate investment into net investment and replacement of used-up productive capacity, a central theme for national accounting and analyses

10 xii Preface of productivity. He questions the use of a 'user cost' notion that neglects dynamic interaction and thus fails to discriminate between the analysis of equilibrium and that of change. Louis Ascah takes up the theme of public pensions. This is an area in which Asimakopulos and his close friend Jack Weldon were actively involved. It is yet another example of the congruence between the Keynesian approach and a progressive stance on social issues. Ascah discusses Asimakopulos's views in the context of the current debate on these issues, showing their enduring relevance. In an evaluation of current macroeconomic trends, Terry Gigantes brings together the main themes of Asimakopulos's theoretical research (economic growth and income distribution) with a discussion of ineffective capacity constraints and factors influencing the marginal propensity to consume. He confirms the feebleness of mainstream economics in the analysis of current economic events and indicates suitable improvements which are made possible by adopting a Keynesian framework. Considered as a whole, the various essays provide fresh contributions to a non-neoclassical line of research. They are also very much in keeping with the kind of progressive debate to which Asimakopulos contributed. Like Tom, we do not consider economics to be an established body of thought, but rather a field of enquiry, where a genuine interest in the social implications of theoretical findings provides passion and motivation, while scientific rigour and a constant confrontation with reality provide an invaluable measuring rod. Most of the essays collected in this book were originally presented at a conference held in Tom's honour at the Levy Economics Institute in September The conference was the result of the initiative of Hyman Minsky and Dimitri Papadimitriou. Although the conference and this book originated separately, their integration was helped in part by Marika Asimakopulos. The conference played a key role in stimulating the requested papers, and served as a forum for discussing them. All the papers presented at the conference and published here have been revised in the light of the discussion; in three instances, new papers were submitted for this book in lieu of the papers presented at the conference. Unfortunately, it has not been possible to include all the papers and comments presented at the conference. We are grateful to Marika Asimakopulos, who has prepared the indexes as well as helping out with the copy-editing and proofreading chores. It is impossible to convey to our readers the spirit in which the conference was held. It was a remarkable tribute to Tom, a time when his friends and colleagues from all round the world gathered and, as

11 Preface xiii was his wont, engaged in serious and open debate. For three days, we followed his contributions and his example. His legacy is not only in his papers and books, but also in the touching, deeply personal memories that his friends, and former students came forward to share. We think that Tom would have left such material out of a book like this, but we cannot resist quoting Abe Tarasofsky's account of Tom's rejection of mainstream orthodoxy: In early 1966, Joan Robinson visited the university where I was teaching and outlined, in astonishingly strong language, her quarrel with the 'Bastard Keynesians', as she called them... When I conveyed this to Tom by telephone (he was spending a sabbatical year at MIT), he was as unimpressed by her claims as he was unmoved by her anger. He said, in effect, that her claims serve to make economic analysis impossible. His attitude had changed profoundly by Easter of that same year, when I visited him and Marika in Cambridge in order to settle my dissertation topic. This was accomplished in short order, and he then took me to Kendall Square to hear a lecture by Robert Solow. I was amazed to see how Tom, usually so controlled, was agitated throughout the lecture, repeatedly muttering to himself such Robinsonian epithets as 'word games', and the like. The drama... resumed that same evening after dinner. Marika finally went to bed, but Tom insisted we stay up: the teacher needed to unburden himself to his student. I could not take in everything he said, but this was clearly a new and different Tom. What I most vividly recall concerned the 'Samuelson-Solow' aggregate production function, their reliance on marginal product to detennine factor prices and, most memorably, the 'murder' of historical time at the heart of their dynamic analysis - the very issues raised by Robinson... It was a moving and inspiring experience to witness Tom's repudiation of long-held views, not out of ambition but because... his conscience left him no choice. He kept repeating... : 'I am not trying to reform the world: all I want is to do honest work.' Geoffrey Harcourt Alessandro Roncaglia Robin Rowley

12 Addresses of the Contributors ASCAH, Professor Louis Universite de Sherbrooke Faculte des lettres et sciences humaines SHERBROOKE, Quebec JlK 2R1 ASIMAKOPULOS, Mrs Marika McGill University Physical Sciences & Engineering Library 809 Sherbrooke Street West MONTREAL, Quebec H3A 2K6 Tel Fax: DAVIDSON, Professor Paul The University of Tennessee, Knoxville College of Business Administration Department of Economics 508 Stokely Management Center KNOXVILLE, Tenn Fax: DOST ALER, Professor Gilles Universite du Quebec a Montreal Departement des sciences economiques Case Postale 8888, Succursale A MONTREAL, Quebec H3C 3P8 Tel Fax: GIGANTES, Mr Terry 50 MacDonald Street OTTAWA, Ont. K2P 1 H4 Tel Fax: xiv

13 Addresses of the Contributors XV HARCOURT, Professor Emeritus Geoffrey University of Cambridge Faculty of Economics and Politics Austin Robinson Building Sidgwick A venue CAMBRIDGE CB3 9DD Tel Fax: KREGEL, Professor Jan Universita degli Studi di Bologna Dipartimento di scienze economiche Strada Maggiore BOLOGNA Tel. (051) Fax: (051) KURZ, Professor Heinz University of Graz Department of Economics 8010 GRAZ Fax: PAPADIMITRIOU, Professor Dimitri The Jerome Levy Institute of Bard College ANNANDALE-ON-HUDSON, NY Tel Fax: PARRINELLO, Professor Sergio Universita degli Studi di Roma 'La Sapienza' Facolta di Economia e Commercio Dipartimento di economia pubblica Via del Castro Laurenziano ROMA Tel. (06) Fax: (06)

14 xvi Addresses of the Contributors RONCAGLIA, Professor Alessandro Editoriale Lavoro Via Lucullo ROMA Tel. (06) Fax: (06) ROWLEY, Professor Robin McGill University Department of Economics 855 Sherbrooke Street West MONTREAL, Quebec H3A 2T7 Tel Fax: SAL V ADORI, Professor Neri Universita degli Studi di Pisa Dipartimento di scienze economiche Via C. Ridolfi PISA Tel. (050) Fax: (050) SARDONI, Professor Claudio Universita degli Studi di Roma 'La Sapienza' Facolta di Scienze Statistiche Demografiche e Attuariali Dipartimento di scienze economiche Via Nomentana ROMA Tel. (06) Fax: (06) SCHEFOLD, Professor Bertram J. W. Goethe Universitiit Institut fur Markt und Plan Schumannstr. 60 Postfach FRANKFURT/MAIN Tel Fax:

15 Notes on the Contributors Louis Ascah is professor of economics at the Universite de Sherbrooke, Quebec. Paul Davidson holds the J. Fred Holly Chair of Excellence in Political Economy at the University of Tennessee, and is the editor of the Journal of Post Keynesian Economics. Gilles Dostaler is professor of economics at the Universite du Quebec a Montreal. Terry Gigantes was head of input-output research and development at Statistics Canada, and was the Director of Data Processing and Statistical Services of the OECD. Geoffrey Harcourt is Reader in the History of Economic Theory at the University of Cambridge; Fellow of Jesus College, Cambridge; and Professor Emeritus, University of Adelaide. Jan Kregel is professor of economics at the Universita degli Studi di Bologna. Heinz Kurz is professor at the University of Graz. Sergio Parrinello is professor of mathematical economics at the Universita degli Studi 'La Sapienza', Rome, and is the editor of Metroeconomica. Alessandro Roncaglia is professor at the Universita degli Studi 'La Sapienza', Rome, and is the editor of Banca Nazionale del Lavoro Quarterly Review and Moneta e Credito. Robin Rowley is professor of economics at McGill University, Montreal. Neri Salvadori is professor of economics at the Universita degli Studi di Pisa. xvii

16 xviii Notes on the Contributors Claudio Sardoni is professor of the history of economic thought at the Universita degli Studi 'La Sapienza', Rome. Bertram Schefold is professor of economics at the J. W. Goethe Universitat, Frankfurt-on-Main.