The Making of Ricardian System

This chapter reconstructs the genesis of the mathematical formulation of the Ricardian system Pasinetti published in 1960, taking advantage of some of Pasinetti&s;s unpublished manuscripts. Our main results are as follows. First, ever since he began to translate Ricardo&s;s economics into mathematical language for his Economics 214 examination term paper, Pasinetti was convinced that a logically consistent Ricardian model could be identified and revealed by stripping away the many layers of ambiguity, complications, and exceptions with which Ricardo himself had permeated the three editions of his Principles of Political Economy, and Taxation. Second, the interaction with an economist of solid neoclassical training yet eclectic in his approach, Franco Modigliani, Pasinetti&s;s supervisor of the term paper on Ricardo, allowed the young Pasinetti, on the one hand, to clearly spot the analytical shortcomings of his own model while, on the other hand, to experience firsthand the difficulties faced by an orthodox economist in translating Ricardo&s;s economics into the analytical categories of mainstream economics. Third, so soon as Pasinetti left the unrealistic and oversimplified world of the one-commodity model and started investigating the formal properties of an n -commodity model, he became aware of the critical role played by the assumptions regarding the consumption patterns of the various social classes to close the Ricardian model. Pasinetti acknowledged that the absence of a definitive theory of demand represents one of the primary drawbacks of the Ricardian model and that reliance on Say&s;s Law limits the model&s;s validity to equilibrium situations.