Classical Economics and Modern Theory Heinz D. Kurz and Neri Salvadori are two well-known economists working in economic theory and the history of economic thought. Their previous collection of essays, Understanding Classical Economics, sparked intriguing debates within economics and this new volume shows the development of the authors’ thinking since that book appeared. Areas covered by the book include: • alternative interpretations of classical economists; • new growth theory; • the relationship between Sraffian theory and von Neumann; • the collaboration between Sraffa and his mathematical friends; • the treatment of capital in neoclassical long-period theory; • the analysis of exhaustible resources in a ‘classical’ framework. The essays reprinted in the book contain original findings and new vistas on old problems and show the reader how the different parts hang together. As such the book will be of great interest to every scholar working within the field of economic theory and the history of economic thought. Heinz D. Kurz is Professor of Economics at the University of Graz, Austria. Neri Salvadori is Professor of Economics at the University of Pisa, Italy. “fm” — 2003/5/16 — 10:35 — pagei—#1 Routledge studies in the history of economics 1 Economics as Literature 11 Equilibrium and Economic Theory Willie Henderson Edited by Giovanni Caravale 2 Socialism and Marginalism in 12 Austrian Economics in Debate Economics 1870–1930 Edited by Willem Keizer, Bert Tieben Edited by Ian Steedman and Rudy van Zijp 3 Hayek’s Political Economy 13 Ancient Economic Thought The socio-economics of order Edited by B. B. Price Steve Fleetwood 14 The Political Economy of Social 4 On the Origins of Classical Credit and Guild Socialism Economics Frances Hutchinson and Brian Burkitt Distribution and value from William Petty to Adam Smith 15 Economic Careers Tony Aspromourgos Economics and economists in Britain 1930–1970 5 The Economics of Joan Robinson Keith Tribe Edited by Maria Cristina Marcuzzo, Luigi Pasinetti and Alesandro 16 Understanding ‘Classical’ Roncaglia Economics Studies in the long-period theory 6 The Evolutionist Economics of Heinz D. Kurz and Neri Salvadori Léon Walras Albert Jolink 17 History of Environmental 7 Keynes and the ‘Classics’ Economic Thought A study in language, epistemology E. Kula and mistaken identities 18 Economic Thought in Communist Michel Verdon and Post-Communist Europe 8 The History of Game Theory, Vol 1 Edited by Hans-Jürgen Wagener From the beginnings to 1945 19 Studies in the History of French Robert W. Dimand and Mary Ann Political Economy Dimand From Bodin to Walras 9 The Economics of W. S. Jevons Edited by Gilbert Faccarello Sandra Peart 20 The Economics of John Rae 10 Gandhi’s Economic Thought Edited by O. F. Hamouda, C. Lee and Ajit K. Dasgupta D. Mair “fm” — 2003/5/16 — 10:35 — page ii — #2 21 Keynes and the Neoclassical 32 John Ruskin’s Political Economy Synthesis Willie Henderson Einsteinian versus Newtonian 33 Contributions to the History of macroeconomics Teodoro Dario Togati Economic Thought Essays in honour of R.D.C. Black 22 Historical Perspectives on Edited by Antoin E. Murphy and Macroeconomics Renee Prendergast Sixty years after the ‘General Theory’ 34 Towards an Unknown Marx Edited by Philippe Fontaine and A commentary on the manuscripts Albert Jolink of 1861–63 23 The Founding of Institutional Enrique Dussel Economics 35 Economics and Interdisciplinary The leisure class and sovereignty Exchange Edited by Warren J. Samuels Edited by Guido Erreygers 24 Evolution of Austrian Economics 36 Economics as the Art of Thought From Menger to Lachmann Essays in memory of G. L. S. Shackle Sandye Gloria Edited by Stephen F. Frowen and 25 Marx’s Concept of Money: The Peter Earl God of Commodities 37 The Decline of Ricardian Anitra Nelson Economics Politics and economics in 26 The Economics of James Steuart post-Ricardian theory Edited by Ramón Tortajada Susan Pashkoff 27 The Development of Economics in 38 Piero Sraffa Europe since 1945 His life, thought and cultural heritage Edited by A. W. Bob Coats Alessandro Roncaglia 28 The Canon in the History of 39 Equilibrium and Disequilibrium in Economics Economic Theory Critical essays The Marshall–Walras divide Edited by Michalis Psalidopoulos Edited by Michel de Vroey 29 Money and Growth 40 The German Historical School Selected papers of Allyn Abbott The historical and ethical approach to Young economics Edited by Perry G. Mehrling and Edited by Yuichi Shionoya Roger J. Sandilands 41 Reflections on the Classical Canon 30 The Social Economics of in Economics Jean-Baptiste Say Essays in honor of Samuel Hollander Markets and virtue Edited by Sandra Peart and Evelyn L. Forget Evelyn Forget 31 The Foundations of Laissez-Faire 42 Piero Sraffa’s Political Economy The economics of Pierre de A centenary estimate Boisguilbert Edited by Terenzio Cozzi and Roberto Gilbert Faccarello Marchionatti “fm” — 2003/5/16 — 10:35 — page iii — #3 43 The Contribution of Joseph 53 Economic Thought and Policy in Schumpeter to Economics Less Developed Europe Economic development and The 19th century institutional change Edited by Michalis Psalidopoulos and Richard Arena and Cecile Dangel Maria-Eugenia Almedia Mata 44 On the Development of Long-run 54 Family Fictions and Family Facts Neo-Classical Theory Harriet Martineau, Adolphe Quetelet Tom Kompas and the population questions in 45 F. A. Hayek as a Political Economist England 1798–1859 Economic analysis and values Brian Cooper Edited by Jack Birner, Pierre 55 Eighteenth-Century Economics Garrouste and Thierry Aimar Peter Groenewegen 46 Pareto, Economics and Society 56 The Rise of Political Economy in The mechanical analogy the Scottish Enlightenment Michael McLure Edited by Tatsuya Sakamoto and 47 The Cambridge Controversies in Hideo Tanaka Capital Theory A study in the logic of theory 57 Classics and Moderns in Economics development Volume I Jack Birner Essays on nineteenth and twentieth century economic thought 48 Economics Broadly Considered Peter Groenewegen Essays in honor of Warren J. Samuels Edited by Steven G. Medema, 58 Classics and Moderns in Economics Jeff Biddle and John B. Davis Volume II Essays on nineteenth and twentieth 49 Physicians and Political Economy century economic thought Six studies of the work of Peter Groenewegen doctor-economists Edited by Peter Groenewegen 59 Marshall’s Evolutionary Economics Tiziano Raffaelli 50 The Spread of Political Economy and the Professionalisation of 60 Money, Time and Rationality in Economists Max Weber Economic societies in Europe, Austrian connections America and Japan in the Stephen D. Parsons nineteenth century Massimo Augello and Marco Guidi 61 Classical Macroeconomics Some modern variations and 51 Historians of Economics and distortions Economic Thought James C. W. Ahiakpor The construction of disciplinary memory 62 The Historical School of Economics Steven G. Medema and Warren J. in England and Japan Samuels Tamotsu Nishizawa 52 Competing Economic Theories 63 Classical Economics and Modern Essays in memory of Giovanni Theory Caravale Studies in long-period analysis Sergio Nisticò and Domenico Tosato Heinz D. Kurz and Neri Salvadori “fm” — 2003/5/16 — 10:35 — page iv — #4 Classical Economics and Modern Theory Studies in long-period analysis Heinz D. Kurz and Neri Salvadori !l Routledge ~ ~ Taylor & Francis Group LONDON AND NEW YORK “fm” — 2003/5/16 — 10:35 — pagev—#5 First published 2003 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN 711 Third Avenue, New York, NY 10017, USA Routledge is an imprint of the Taylor & Francis Group, an informa business © 2003 Heinz D. Kurz and Neri Salvadori Typeset in Times New Roman by Newgen Imaging Systems (P) Ltd, Chennai, India The Open Access version of this book, available at www.taylorfrancis.com, has been made available under a Creative Commons Attribution-Non Commercial-No Derivatives 4.0 license. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Kurz, Heinz-Deiter. Classical economics and modern theory: studies in long-period analysis / Heinz D. Kurz and Neri Salvadori. p. cm. – (Routledge studies in the history of economics ; 63) Includes bibliographical references and index. 1. Neoclassical school of economics. 2. Classical school of economics. 3. Economic development. I. Salvadori, Neri. II. Title. III. Series. HB98.2.K87 2003 330.153–dc21 2002037167 ISBN 13: 978-0-415-36952-7 (hbk) “fm” — 2003/5/16 — 10:35 — page vi — #6 Contents Acknowledgements ix 1 Classical economics and modern theory: an introduction 1 HEINZ D. KURZ AND NERI SALVADORI PART I Classical theory and its interpretations 7 2 Understanding ‘classical’ economics: a reply to Mark Blaug 9 HEINZ D. KURZ AND NERI SALVADORI 3 ‘Classical’ roots of input–output analysis: a short account of its long prehistory 38 HEINZ D. KURZ AND NERI SALVADORI 4 Friedrich Benedikt Wilhelm Hermann on capital and profits 68 HEINZ D. KURZ 5 Burgstaller on classical and neoclassical theory 100 GIUSEPPE FRENI AND NERI SALVADORI PART II Growth theory and the classical tradition 105 6 Theories of ‘endogenous’ growth in historical perspective 107 HEINZ D. KURZ AND NERI SALVADORI 7 What could the ‘new’ growth theory teach Smith or Ricardo? 137 HEINZ D. KURZ Appendix: comment 160 KENNETH J. ARROW “fm” — 2003/5/16 — 10:35 — page vii — #7 viii Contents 8 A linear multisector model of ‘endogenous’ growth and the problem of capital 163 NERI SALVADORI 9 A linear multisector model of ‘endogenous’ growth: a post-script 177 GIUSEPPE FRENI AND NERI SALVADORI PART III On Sraffa’s contribution 185 10 Sraffa and the mathematicians: Frank Ramsey and Alister Watson 187 HEINZ D. KURZ AND NERI SALVADORI 11 Sraffa and von Neumann 217 HEINZ D. KURZ AND NERI SALVADORI 12 Production theory: an introduction 238 HEINZ D. KURZ AND NERI SALVADORI PART IV Exhaustible resources and the long-period method 257 13 Classical economics and the problem of exhaustible resources 259 HEINZ D.