Luigi L. Pasinetti’s structural dynamics: a methodological appraisal

Over the course of six decades, Luigi L. Pasinetti pursued an ambitious project to incorporate structural change into the analysis of economic growth. His aim was to take growth theory beyond the steady state by scrapping the unrealistic assumption of balanced growth. Yet his own framework rests on a set of highly restrictive assumptions about how technical change and the pattern of demand evolve over time. We argue that Pasinetti’s formal model is not intended as an abstract representation of an actual economy but as an anchor for rigorous but less formal investigations of the institutional arrangements necessary to maintain full employment in the face of complex structural change. We then examine the affinities between Pasinetti’s work and that of Piero Sraffa and Pierangelo Garegnani. The lesson of their work is that economic theory ought to become again what it was for the classical economists and Marx: an investigation of how institutions are formed and evolve, of how they shape, and are shaped by, the real-world dynamics of a socioeconomic system that is perpetually undergoing structural transformation.