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Economics in a Different Key

In 1965, Luigi Pasinetti, whom INET is delighted to interview here, produced a decisive counterexample arguing that the Neoclassical approach to analyzing production needed to be abandoned in favor of something much closer in spirit to Classical Economics.

The famous scene in Gabriel García Márquez’s One Hundred Years of Solitude epitomizes Magical Realism: army troops machine gun striking banana workers and their families in the town square and toss the bodies into railway cars for disposal. But José Arcadio Segundo is only lightly wounded and jumps from the train when he comes to. When he finally picks his way back to his hometown of Macondo, a surprise awaits: everyone flatly denies any massacre took place. At night the authorities hunt for rebels from house to house; by day, they deny everything. Eventually, an extraordinary proclamation is made to the nation, repeated until finally accepted: “there were no dead [and] the satisfied workers had gone back to their families.”

Contemporary Economics has more than one Magical Realist moment like this – just look at how the basic building block of the Keynesian Revolution – the decisive role of the principle of effective demand – all but vanished from sight after the late nineteen seventies. But there is another, almost equally fateful: the Cambridge Capital Controversy, which came to consummate expression in a memorable issue of the Quarterly Journal of Economics in 1966.

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