ABSTRACT OF PAPER
Title: Pasinetti, Say’s Law and the Classical Barter Model
Author: Trigg Andrew
The Great Glut controversy between Ricardo and Malthus in the early nineteenth century provides a key starting point for subsequent disputes in economics about the relationship between supply and demand in a macroeconomic context. This paper offers a contribution to understanding some of the core issues involved by employing the model of pure labour introduced by Pasinetti (1993). The model is designed by Pasinetti to provide an abstract foundation to both classical and Post-Keynesian economic theory. Its classical foundations, which are the focus here, stem from an emphasis on production carried out by labour, as the sole factor of production, and the operation of a pure labour theory of value. The particular contribution of this paper is to show how Pasinetti’s approach can also be used to model pure barter exchange between producers. Ricardo, together with Mill and Say, employed the methodological device of barter in order to model real relationships between producers. On this basis Say’s law of markets was established by letting the outputs of each producer generate demand for the outputs of other producers. This early formulation of the law of markets can be modelled by highlighting a property of the Pasinetti model that, as far as can be established, has not been noted in the literature. It will be shown that the off-diagonals of the intersectoral flows matrix between producers are symmetric. This is critical to defining a model of barter in which producers are engaged in equal pairwise exchange. Say’s law is to say the least is a most tangled set of propositions and sub propositions, with Baumol (1977) finding there to be at least eight different versions. The Pasinetti model allows a precise definition of the law of markets in an equilibrium framework, using the concept of Say’s equality. This modelling of the Ricardo-Mill-Say barter system is suggested as an analytical starting point for considering the wider literature on Say’s law. Having set up the modelling of Say’s law under an equilibrium framework, it is also possible to consider situations of disequilibrium. As argued by the early critics of Say’s law, such as Malthus, gluts can occur where goods are overproduced, and hence cannot be sold or must be sold at below their value. Using the Pasinetti model, an exploration can be carried out of the conditions under which partial and general gluts can be established. Baumol, W.J. (1977) ‘Say’s (at least) eight laws, or what Say and James Mill may really have meant’ Economica 44: 145-162. Pasinetti, L.L. (1993) Structural Economic Dynamics. Cambridge: Cambridge University Press.
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