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Critique of the neoclassical theory of growth and distribution

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  • Luigi L. Pasinetti

    (Universitˆ Cattolica del S.Cuore, Istituto di teoria economica e metodi quantitativi, Milano (Italy))

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    Abstract

    The paper surveys the main theories of income distribution in their relationship with the theories of economic growth. First, the Classical approach is considered, focusing on the Ricardian theory. Then the neoclassical theory is discussed, highlighting its origins (Bohm-Bawerk, Wicksell, Clark) and the role of the aggregate production function. The emergence of a "Keynesian" theory of income distributionin the wake of Harrod's model of growth is then recalled together with the surprising resurgence of the neoclassical theory (following the contributions of Solow and Meade). But, as the paper shows, the neoclassical theory of income distributionlacks logical consistency and has shaky foundations, as has been revealed by the severecritiques moved to the neoclassical production function. Mainstream economic literature circumvents this problem by simply ignoring it, while the models of endogenous growth exclude the issue of distribution theory from their consideration. However, while mainstream economics bypasses the problems of incomedistribution, this is too relevant an issue to be ignored and a number of new research lines, briefly surveyed, try new approaches to it.

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    Bibliographic Info

    Article provided by Banca Nazionale del Lavoro in its journal BNL Quarterly Review.

    Volume (Year): 53 (2000)
    Issue (Month): 215 ()
    Pages: 383-431

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    Handle: RePEc:psl:bnlaqr:2000:42

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    Related research

    Keywords: Distribution; Economic Growth; Growth; Income Distribution; Income; Neo Classical; Neoclassical;

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    1. Alberto Alesina & Dani Rodrik, 1991. "Distributive Politics and Economic Growth," NBER Working Papers 3668, National Bureau of Economic Research, Inc.
    2. Bertola, Giuseppe, 1991. "Factor Shares and Savings In Endogenous Growth," CEPR Discussion Papers 576, C.E.P.R. Discussion Papers.
    3. Atkinson, A-B, 1996. "Bringing Income Distribution in from the Cold," Economics Papers 117, Economics Group, Nuffield College, University of Oxford.
    4. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
    5. Robert M. Solow, 2000. "The neoclassical theory of growth and distribution," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 53(215), pages 349-381.
    6. Pasinetti, Luigi L, 1978. " Wicksell Effects and Reswitchings of Technique in Capital Theory," Scandinavian Journal of Economics, Wiley Blackwell, vol. 80(2), pages 181-89, July.
    7. Perotti, Roberto, 1992. "Income Distribution, Politics, and Growth," American Economic Review, American Economic Association, vol. 82(2), pages 311-16, May.
    8. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
    9. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
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    11. Harcourt, G C, 1969. "Some Cambridge Controversies in the Theory of Capital," Journal of Economic Literature, American Economic Association, vol. 7(2), pages 369-405, June.
    12. Labini, Paolo Sylos, 1995. "Why the interpretation of the Cobb-Douglas production function must be radically changed," Structural Change and Economic Dynamics, Elsevier, vol. 6(4), pages 485-504, December.
    13. Burmeister,Edwin, 1980. "Capital Theory and Dynamics," Cambridge Books, Cambridge University Press, number 9780521297035, April.
    14. Fisher, Franklin M, 1971. "Aggregate Production Functions and the Explanation of Wages: A Simulation Experiment," The Review of Economics and Statistics, MIT Press, vol. 53(4), pages 305-25, November.
    15. Pasinetti, Luigi L, 1969. "Switches of Technique and the "Rate of Return" in Capital Theory," Economic Journal, Royal Economic Society, vol. 79(315), pages 508-31, September.
    16. Sato, Kazuo, 1974. "The Neoclassical Postulate and the Technology Frontier in Capital Theory," The Quarterly Journal of Economics, MIT Press, vol. 88(3), pages 353-84, August.
    17. Hahn, Frank, 1982. "The Neo-Ricardians," Cambridge Journal of Economics, Oxford University Press, vol. 6(4), pages 353-74, December.
    18. Baranzini, Mauro, 1991. "A Theory of Wealth Distribution and Accumulation," OUP Catalogue, Oxford University Press, number 9780198233138.
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    Cited by:
    1. Alessandro Roncaglia, 2011. "Macroeconomics in crisis and macroeconomics in recovery," PSL Quarterly Review, Economia civile, vol. 64(257), pages 167-185.
    2. Angelo Reati & Jan Toporowski, 2005. "An economic policy for the fifth long wave," GE, Growth, Math methods 0510008, EconWPA.
    3. Angelo Reati, 2001. "Total factor productivity - a misleading concept," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 54(218), pages 313-332.
    4. Avi J. Cohen, 2003. "Retrospectives: Whatever Happened to the Cambridge Capital Theory Controversies?," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 199-214, Winter.
    5. Emiliano Brancaccio & Giuseppe Fontana, 2013. "'Solvency rule' versus 'Taylor rule': an alternative interpretation of the relation between monetary policy and the economic crisis," Cambridge Journal of Economics, Oxford University Press, vol. 37(1), pages 17-33.
    6. Angelo Reati, 2001. "Total factor productivity - a misleading concept," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 54(218), pages 313-332.
    7. Dünhaupt, Petra, 2013. "Determinants of functional income distribution : theory and empirical evidence," ILO Working Papers 484122, International Labour Organization.

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