A Revolution to be Accomplished: Keynes and the Cambridge Keynesians

The essay examines the recent volume by L. Pasinetti "Keynes and the Cambridge Keynesians": A 'Revolution in Economics' to be Accomplished" by first assessing its relationship with the Cambridge economic tradition and then investigating the new lines of research that the volume brings to the fore. The first part of the essay explores Pasinetti's interpretation of the Keynesian revolution as an effort to overcome the individualistic premises of 19th century market liberalism within the broad framework of a liberal polity. Pasinetti's search for a unifying framework behind the different Keynesian development are associated with the belief that Keynes' principle of effective demand is "a principle that descends far below the superficial level of a particular institutional mechanism (i.e. far below what simply appears from the operation of the market)" (Pasinetti, 2007, p.15). The second part of the essay explores the latter point of view by examining Pasinetti's separation theorem, which calls attention to the need to differentiate between the pre-institutional and the institutional levels of investigation. At the first, and fundamental, level of analysis, it is possible to find that the roots of effective demand failures do not coincide with capital utilization failures, as they may be detected even in the case of an economic system in which no capital goods are needed (a pure labour economy). This suggests that effective demand policies aimed at full employment could rely not only on demand increases from existing productive sectors but also from new sectors or a different distribution between working time and leisure.