TY - JOUR
T1 - A few counter-factual hypotheses on the current economic crisis
AU - Pasinetti, Luigi Lodovico
PY - 2012
Y1 - 2012
N2 - The economic and financial problems of the present devastating crisis are terribly practical. Sraffa’s little book is highly theoretical. To relate the two we must avoid stopping at Keynes, and include the whole group of economists around him in Cambridge, resuming the discussions that have been pushed into oblivion by the mainstream. The capital theory controversy was not the only one. Here, more relevant is the controversy on growth, income distribution, savings and profits
between Samuelson–Modigliani and Kaldor–Pasinetti. As a result, a theorem,
associated with Modigliani–Miller, was brought to fame and hailed as ‘the core of modern corporate finance’. Its surprisingly wide acceptance is here harshly criticised and indicted of major responsibility for the present crisis. Inevitably, this is argued
through counter-factual hypotheses. Yet, even with less sophisticated analytical tools, a framework does exist, much nearer to common sense, implying the needed flexibility and openness of mind for the major restructuring of financial institutions,
which today so clearly emerges as the major task to undertake.
AB - The economic and financial problems of the present devastating crisis are terribly practical. Sraffa’s little book is highly theoretical. To relate the two we must avoid stopping at Keynes, and include the whole group of economists around him in Cambridge, resuming the discussions that have been pushed into oblivion by the mainstream. The capital theory controversy was not the only one. Here, more relevant is the controversy on growth, income distribution, savings and profits
between Samuelson–Modigliani and Kaldor–Pasinetti. As a result, a theorem,
associated with Modigliani–Miller, was brought to fame and hailed as ‘the core of modern corporate finance’. Its surprisingly wide acceptance is here harshly criticised and indicted of major responsibility for the present crisis. Inevitably, this is argued
through counter-factual hypotheses. Yet, even with less sophisticated analytical tools, a framework does exist, much nearer to common sense, implying the needed flexibility and openness of mind for the major restructuring of financial institutions,
which today so clearly emerges as the major task to undertake.
KW - Growth and distribution theories
KW - Modigliani-Miller Theorem
KW - alternative views on the foundations of economic theory
KW - corporate dividend policies
KW - current crisis of capitalist economies
KW - Growth and distribution theories
KW - Modigliani-Miller Theorem
KW - alternative views on the foundations of economic theory
KW - corporate dividend policies
KW - current crisis of capitalist economies
UR - http://hdl.handle.net/10807/40368
U2 - 10.1093/cje/ber009
DO - 10.1093/cje/ber009
M3 - Article
SN - 0309-166X
VL - 36
SP - 1433
EP - 1453
JO - Cambridge Journal of Economics
JF - Cambridge Journal of Economics
ER -