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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))

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.

Suggested Citation

  • Luigi L. Pasinetti, 2000. "Critique of the neoclassical theory of growth and distribution," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 53(215), pages 383-431.
    • Handle: RePEc:psl:bnlqrr:2000:42
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    More about this item

    Keywords

    Distribution; Economic Growth; Growth; Income Distribution; Income; Neo Classical; Neoclassical;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics

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