On Luigi Pasinetti’s characteristics of Keynesian financial economics

After resigning from the UK Treasury in 1919, Keynes decided not to pursue a full–time academic career—instead, “he plunged into the world of finance”. Accepting that the policy he had adopted in the 1920s—credit cycling—had been a failure, he effected a volte face early in the 1930s, devising a new and very successful policy based on completely different investment principles. It is these that constitute the essence of Keynesian portfolio theory and management, which is increasingly being recognised as a new field of Keynesian studies. In his 2007 book, Keynes and the Cambridge Keynesians, Luigi Pasinetti identified “a series of essential building blocks belonging to an alternative economic paradigm, with respect to the neoclassical one”. These nine building blocks were to him “quite clear characteristic features” of the Cambridge School of Keynesian Economics. In this article, we examine whether Pasinetti's conception, appropriately amended, can be applied to this new field. On detailed assessment, we confirm the relevance of each of the nine to the new context, thereby demonstrating the generality of Pasinetti's conception and, incidentally, consolidating the place of portfolio theory and management in the Keynesian canon.