Causality and interdependence in Pasinetti’s works and in the modern classical approach

CSWP 10 (January 2015)

Author Enrico Bellino and Sebastiano Nerozzi

Keywords causality, interdependence, modern classical approach, Ricardo distribution theory, Keynes’s analysis, ‘given quantities’, surplus approach, structural dynamics, vertical integration

JEL B00, B24, B51, C50, E12

The formal representation of economic theories normally takes the shape of a model, that is, a system of equations which connect the endogenous variables with the values of the parameters which are taken as given. Sometimes, it is possible to identify one or more equations which are able to determine a subset of endogenous variables priory and independently of the other equations and of the value taken by the remaining variables of the system. The first group of equations and variables are thus said to causally determine the remaining variables. In Pasinetti’s works, this notion of causality has often been emphasized as a formal property having the burden of conveying a profound economic meaning. In this paper, we will go through those works of Pasinetti where the notion of causality plays a central role, with the purpose of contextualizing it within the econometric debate of the Sixties, enucleate its economic meaning, and show its connections with other fields of the modern classical approach.

Download the paper