Edward Elgar, Cheltenham, 2006, xxii+318pp, hardback, 1 84542 309 7, £69.95
The accumulation of capital is the only true engine of economic growth, for it ‘leads to an improvement in the productive capacity of labour’ (Adam Smith, quoted in Renato Balducci’s chapter, p.3).
Beginning with Ricardo and Smith, the authors of these thorough and mathematically expressed chapters chart the history of economists’ understandings of growth (understood here as growth of national product measured in financial terms) and distribution (again, understood in financial terms). So we travel via Smith (ch.1) and Ricardo (chs. 1, 2 and 3) to Marx (ch.4) to the neoclassical (chs. 5 to 8) and Keynesian (chs. 9 to 13) economists of the latter half of the twentieth century, though the fact that Keynesian and neoclassical effects can be found together (cf. p.184) suggests that not too much notice should be taken of the attempt to divide chapters into different schools of thought. Of particular interest is evidence of more nuanced models among neoclassical and Keynesian theorists. For instance, in chapter 6, Mario Pomini concludes that political and social mechanisms condition accumulation and growth and that ‘the debate has reopened on the most appropriate economic policy measure for stimulating and sustaining economic growth, a much richer and more complex process than traditional [neoclassical] theory was prepared to admit, in which the public operator can perform a key role’ (p.143); and in chapter 12 Antonio Agata shows that within post-Keynesian theory ‘the economy can be stuck in an underemployment or overemployment steady state and that there is no automatic mechanism driving the economy toward a steady state with full employment, even if nominal prices and real wages are perfectly flexible’ (p.281).
Such loosening of theoretical boundaries in the context of a complex ideological, fiscal and financial world should encourage welfare economists of all persuasions to loosen their own boundaries, to ask about detail and practicality, and to seek usable theory wherever it might be found.
While this book is designed for readers comfortable with mathematical expression of economic theory, its conclusions will be of interest to anyone interested in economic growth and distribution.