Heinz Kurz: Pierangelo Garegnani Obituary (1930-2011)

Por Heinz D. Kurz

From the obituary:

"Pierangelo Garegnani was a major economic theorist and historian of economic analysis. To him economic theory and its history were but two sides of a single coin. He was possessed of great intellectual power and an uncompromising dedication to his work, which in the tradition of Piero Sraffa propelled the revival and further elaboration of classical political economy. As a person he was not always easy to deal with – the solemnity of purpose, as he saw it, could overshadow his behaviour. He was one of the deepest thinkers I encountered. His work can be expected to have a lasting impact on the economics profession".

 "Garegnani provided compelling support of Sraffa’s interpretation that the classical economists from Adam Smith to Ricardo and then Marx had determined the general rate of profits and relative prices in terms of the following ‘intermediate’ data (i.e. data in the theory of value and distribution, but variables in other parts of the theory): (a) the gross output levels of the various commodities, (b) the real wage rate(s) or the share of wages in national income and (c) the technical conditions of production actually in place (Garegnani 1981, 1984, 1987). Most important, in the classical economists the distributive variables, the rate of profits and wages, were not explained in terms of the marginal productivities of capital and labour". ...

  

"In accordance with Sraffa, Garegnani (1981, 1984 and elsewhere) insisted that the classical surplus-based approach does not stand or fall with the labour theory of value. Therefore it did not come as a surprise that Garegnani got involved in debates with some Marxists, who contend that the labour theory of value is indispensable in demonstrating the ‘exploitative’ nature of profits. According to Garegnani this involves a misunderstanding. Already the fact that workers do not get the whole net product could be read in this way. More important, when Marx was writing, that is, before marginal productivity theory began to filter into the academic and public discourse, one might still have been content with the observation that positive profits presuppose a positive surplus value (or surplus labour). But once marginalist theorists had argued that profits do not express exploitation but rather the productivity enhancing effect of the employment of capital, an entirely new situation emerged. What if marginal productvity theory happened to be correct? As Samuelson’s surrogate production function shows, marginal productivity theory and the labour theory of value are not incompatible with one another.(1) 

 "The Irony of it is, that if the “Labour Theory of Value”applied exactly throughout, then, and only then, would the “marginal product of capital” theory work!"  

"It is ironic to see that the classical approach, coherently developed, actually undermines Say’s law – the law for which Keynes had thought he could put classical analysis to one side. If we cannot rely upon the conventional principle of substitution in production according to which the demand for an input (e.g. labour) per unit of output can be expected to increase as the price (the wage rate) of the input falls, then there is no reason to presume that the economy will bring about a tendency towards the full employment of all productive ressources. This result does not depend on the (downward) stickiness of prices. Even if prices are flexible, a fall in the real wage rate need not lead to rising levels of employment, as conventional economic theory predicts. Garegnani praised Keynes for having established the principle of effective demand, that is, there is no presumption that aggregate investment will oscillate around full employment savings"...

"However, he was critical of Keynes for having retained important elements of the marginalist doctrine and especially the concept of the ‘marginal efficiency of capital’, which was but the orthodox investment function in new garb. Yet the concept could not be sustained, because it was based on the untenable marginalist principle of substitution between factors of production"...

"With the analysis not constrained by the straightjacket of the full employment assumption, one does not encounter in classical economics such concepts as Pareto optimality: a system which, in normal conditions, exhibits smaller or larger margins of unused productive capacity and work force is subject to different laws than a system characterized by full employment and full capacity utilization. In conditions of idle productive capacity the usual marginalist reasoning does not apply. In the marginalist world aggregate effective demand, by definition, has no impact on actual output as a whole and its growth over time, whereas in the world of the revived classical economics it has. According to Garegnani the principle of effective demand matters, in the long run no less than in the short run. While in the short run it is reflected in higher or lower degrees of capacity utilization and employment, in the long run it is reflected in a larger or smaller growth rate of productive capacity".

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