Reflections on the Significance of the Labour Theory of Value in Pasinetti’s Natural System

Luigi Pasinetti’s Structural Change and Economic Growth is a remarkable piece of economic theory which will have a lasting impact on the future development of political economy. Although the subtitle of this work, A theoretical essay on the dynamics of the wealth of nations, clearly establishes a link with Adam Smith, the main purpose of the book is to adapt David Ricardo to modern times, thus laying the analytical foundations for reestablishing the classical approach within economic theory (see on this also Roncaglia, 1988). Given this, Pasinetti (1981) is unusual both with respect to content and to method. With respect to content, because the book has grown out in a straightforward way of classical political economy and constitutes as such an unfamiliar element in a neoclassical world. The method, which is in fact Sraffa’s and Ricardo’s, is also unusual because of the very high degree of abstraction which brings out analytical results with great clarity; in addition, abstraction is of a particular kind in that production is put to the fore whilst exchange, considered to be secondary, is left aside. Consequently, the ‘theoretical scheme of a natural economic system’ (Pasinetti, 1981, p. 128) has been received with some astonishment. Among others, three features of the natural system have caused considerable surprise, i.e. the important role played by the labour theory of value; the fact that production, not exchange, constitutes the conceptual starting point in Pasinetti’s system; and, finally, that this system should be a natural one, a term about which queries immediately arose.