Sembe , Flo encia R.
A icle
The Solow-Pasine i deba e on he measu emen o
p oduc i i y in he ligh o mode n g ow h heo y
PSL Qua e ly Re iew
P o ided in Coope a ion wi h:
Associazione Economia ci ile, Rome
Sugges ed Ci a ion: Sembe , Flo encia R. (2024) : The Solow-Pasine i deba e on he measu emen
o p oduc i i y in he ligh o mode n g ow h heo y, PSL Qua e ly Re iew, ISSN 2037-3643,
Associazione Economia ci ile, Rome, Vol. 77, Iss. 309, pp. 127-143,
h ps://doi.o g/10.13133/2037-3643/18492
This Ve sion is a ailable a :
h ps://hdl.handle.ne /10419/324105
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ol. 77 n. 309 (June 2024)
The Solow-Pasine i deba e on he measu emen o
p oduc i i y in he ligh o mode n g ow h heo y
FLORENCIA R. SEMBER*
Abs ac :
This a icle aims o s udy he Solow-Pasine i deba e on
he agg ega e p oduc ion unc ion and echnical p og ess
as an e en ha an icipa ed a di ide in he subsequen
heo ies o economic g ow h and echnical change.
Ul ima ely, he deba e mani es s wo comple ely di e en
app oaches, no only o he pa icula ques ion o
echnical change bu also o poli ical economy ou cou .
Pasine i ga e pa amoun impo ance o he ac ha he
ac o s o p oduc ion could no be ea ed as symme ical,
as he neoclassical heo y ea ed hem. Rela ed o his is
Pasine i’s dismissal o he dis inc ion neoclassical
economics made be ween shi s in he p oduc ion unc ion
o e alua e echnical change and mo emen s along i . In
ac , he dismissed he neoclassical p oduc ion unc ion
al oge he .
Uni e si y o Buenos Ai es and CONICET, A gen ina
email: lo encia.sembe @ ce.uba.a
How o ci e his a icle:
Sembe F.R. (2024), “The Solow-Pasine i deba e on he
measu emen o p oduc i i y in he ligh o mode n g ow h
heo y”, PSL Qua e ly Re iew, 77 (309), pp. 127-143.
DOI: h ps://doi.o g/10.13133/2037-3643/18492
JEL codes:
B22, B41, O40
Keywo ds:
Solow, Pasine i, p oduc ion unc ion, p oduc i i y measu emen
Jou nal homepage:
h p: //www.pslqua e ly e iew.in o
Luigi Pasine i’s wo ks co e a ious opics, such as economic g ow h, income dis ibu ion,
s uc u al change, and in e na ional economic ela ions.
1
In pa icula , he was a g ea c i ic o
neoclassical economics, which led him o build an al e na i e sys em o unde s and he main
p oblems o indus ial economies. This c i icism o neoclassical economic heo y, simul aneously
wi h his own al e na i e heo e ical cons uc ion, led him o p opose a dynamic model o an
indus ial economic sys em in S uc u al Change and Economic G ow h (Pasine i, 1981).
In his book Keynes and he Camb idge Keynesians, Pasine i a i med ha all economic heo ies
since Adam Smi h could be associa ed wi h wo main pa adigms. The ma ginalism and
neoclassical heo ies could be associa ed wi h he pa adigm ocusing on exchange, u ili y and
subjec i e alue, and he Classical and Keynesian app oaches could be associa ed wi h a pa adigm
ocusing on p oduc ion, labou and objec i e alue (Pasine i, 2007, pp.18-21).
Pasine i associa ed hese wo pa adigms wi h wo di e en phases o economic his o y. The
phase o comme cial capi alism, when coun ies begin o exchange a ailable p oduc s and hus
* I am g a e ul o he pa icipan s o he AISPE-SISE 2023 Con e ence in Pale mo, whe e I bene i ed om e y in e es ing
and s imula ing discussions, and he wo anonymous e e ees o hei help ul sugges ions. All emaining e o s a e my
own esponsibili y.
1
Fo a gene al su ey o Pasine i’s ajec o y, see Hale i (2016).
Special issue on he Solow-Pasine i deba e on p oduc i i y measu emen
128 The Solow-Pasine i deba e on he measu emen o p oduc i i y in he ligh o mode n g ow h heo y
PSL Qua e ly Re iew
inc ease hei ma e ial well-being, can be associa ed wi h he “exchange pa adigm” and he
eme gence o me can ilis economic heo ies. The phase o indus ial capi alism, when weal h
inc eases p og essi ely wi h echnological and o ganisa ional imp o emen s in p oduc ion, can
be associa ed wi h he eme gence o he “p oduc ion pa adigm”; his began wi h he Physioc a s,
ollowed by Pe y and hen Classical Poli ical Economy. Indus y and i s con inuous and
cumula i e echnological changes become he pe manen cause o he inc ease in socie y’s weal h.
Acco ding o Pasine i, he concep o ade is s a ic by na u e: i is abou alloca ing exis ing
esou ces in he bes possible way. When he economy mo es om a phase in which coun ies do
no ade wi h each o he o a new phase in which hey exchange he goods hey possess, each
coun y expe iences a once and o all imp o emen in i s wel a e. Ma hema ically, he p oblem
is abou maximising a unc ion unde ce ain es ic ions. The concep o indus y, on he con a y,
is dynamic by i s na u e, since i is implici ha new me hods a e disco e ed h ough indus ial
p oduc ion. Thus, he e is a con inuous lea ning p ocess. In his case, any ma hema ical
o mula ion mus be a unc ion o ime, since he lea ning p ocess is cumula i e and in ol es a
a e o change.
Pasine i s essed his di e ences wi h he neoclassical heo y o g ow h on se e al occasions
(Pasine i, 1981, 2000, 2007) bu , a he same ime, he admi ed ha neoclassical heo y had a
uni ying p inciple ha he al e na i e heo ies did no achie e. The heo ies belonging o he
p oduc ion pa adigm – among which Pasine i placed he Keynesian and Kaleckian sho - un
heo ies, Leon ie ’s inpu -ou pu analysis, S a a’s p oduc ion o commodi ies scheme, he
heo ies o he beha iou o he i m,
2
he Ha od-Doma and o he pos -Keynesian heo ies o
g ow h and dis ibu ion – all p esen ed hei con ibu ions independen ly o one ano he . They
lacked a uni ying p inciple analogous o he ma ginal p inciple. To his, Pasine i added ha pos -
Keynesian economics did no igh back ha d enough a he i s a emp s o abso b Keynes’s
app oach in o mains eam heo y. Al hough he Camb idge Keynesians con ibu ed signi ican ly
in he 1950s and 1960s in se e al ields o s udy, he sp ead o he Camb idge School o pos -
Keynesian economics came o a hal . One o he causes, as s a ed by Pasine i, was ha he e was
much c i icism o mains eam economics bu he amoun o wo k necessa y o build an al e na i e
pa adigm o a mone a y heo y o p oduc ion had been unde es ima ed. Addi ionally, he
Camb idge pos -Keynesians ailed o lea e a younge gene a ion o academics ollowing in hei
acks. In his way, a conc e e possibili y o b inging back he p oduc ion pa adigm ailed.
In he mode n heo y o economic g ow h, he di ide desc ibed by Pasine i s a ed as soon as
Solow and Swan abso bed he seminal con ibu ions by Ha od and Doma in o neoclassical
economics. Ha od p esen ed his dynamic heo y as “a ma iage o he ‘accele a ion p inciple’ and
he ‘mul iplie ’ heo y” (Ha od, 1939, p. 14). Ha od’s wa an ed a e o g ow h, 𝐺𝑊=𝑠𝑣
⁄, is
de e mined by he p opensi y o sa e, 𝑠, and he capi al/ou pu a io, 𝑣. This line aced by 𝐺𝑊
“ ep esen s he one le el o ou pu a which p oduce s will eel in he upsho ha hey ha e done
he igh hing, and which will induce hem o con inue in he same line o ad ance” (Ha od, 1939,
p. 22). Ha od also in oduced he no ion o he na u al a e o g ow h,𝐺𝑁, which is he maximum
a e o g ow h allowed by he inc ease in popula ion and echnological imp o emen . Ha od
showed ha , when he a e o g ow h ac ually p oduced is di e en om he wa an ed a e,
disequilib ium is sel -agg a a ing.
Addi ionally, he e is no inhe en endency o wa an ed and na u al a es o coincide. I he
wa an ed a e is abo e he na u al a e, he economy will end o dep ession and unemploymen ,
2
Pasine i e e s o he heo ies o he i m de eloped a e S a a’s c i icism o Ma shall, ollowed by Robinson’s and
Chambe lin’s heo ies o impe ec compe i ion, he o mula ion o he ull-cos p inciple and manage ial heo ies o he
1960s.
F.R. Sembe 129
PSL Qua e ly Re iew
and, in he opposi e case, i will end o exhibi successions o p o i booms. Thus, he capi alis
economy is highly uns able. Mains eam economics inco po a ed Ha od’s con ibu ion in he
amewo k o neoclassical p oduc ion unc ions, in e p e ing Ha od’s case as he pa icula case
o p oduc ion wi h ixed coe icien s and p oposing p oduc ion unc ions whe e he echnological
magni ude, 𝑣, was a iable. The economy can adap o he na u al g ow h a e h ough he pe ec
subs i u abili y o capi al and labou . Con e sely, pos -Keynesians buil heo ies in which he
p opensi y o sa e a ies and he dis ibu i e sha es, 𝑃/𝑌 and 𝑊/𝑌, a e de e mined sequen ially.
The Solow-Pasine i deba e on he agg ega e p oduc ion unc ion ha is he objec o his
a icle ook place in he Re iew o Economics and S a is ics be ween 1957, when Solow’s a icle
“Technical change and he agg ega e p oduc ion unc ion” was published, and 1959, when
Pasine i esponded wi h his a icle “On concep s and measu es o changes in p oduc i i y”.
Pasine i’s esponse mo i a ed a ejoinde om Solow and, in u n, a new esponse om Pasine i
(Pasine i, 1959; Solow, 1957, 1959). Fo y yea s la e , in 1998, he publica ion o an a icle by
Richa d S one igge ed ano he exchange be ween he wo au ho s, showing ha he
disag eemen s exp essed in he i ies pe sis ed (S one, 1998; Solow, 1998; Pasine i, 1998). This
is no su p ising since, in he end, bo h heo ies a e embedded in di e en pa adigms, i.e.,
neoclassical heo y is embedded in wha Pasine i called he exchange pa adigm and Pasine i’s
heo y is embedded in he p oduc ion pa adigm.
This a icle p esen s he Solow-Pasine i deba e o he end o he i ies as an episode ha , o
he i s ime, mani es s he wo di e en di ec ions he heo y o economic g ow h was beginning
o ake. La e , he mos known mani es a ion o his di ide was he Two Camb idges con o e sy.
Howe e , he ge m o his di e ence can al eady be ound in he Pasine i-Solow deba e, which
was no gi en much impo ance in he li e a u e.
3
The deba e mani es s wo comple ely di e en
app oaches, no only o he pa icula ques ion o echnical change bu also o poli ical economy
ou cou .
In sec ion 1, we p esen he Solow-Pasine i deba e on he measu emen o p oduc i i y,
which an icipa es al eady he main di e ences be ween neoclassical and al e na i e heo ies o
economic g ow h. He e, we ind a i s ou line o wha will la e be Pasine i’s main c i icisms o
he neoclassical heo ies o g ow h and echnological change, as well as some elemen s ha will
play an impo an ole in cons uc ing his heo y o s uc u al change and economic g ow h.
In he ollowing sec ions, we p esen wo aspec s ha condense he main poin s o he di ide
be ween pos -Keynesian heo ies and neoclassical heo ies o economic g ow h and hei
implica ions. In sec ion 2, we discuss he ques ion o he asymme y o he ac o s o p oduc ion.
Pasine i con ended ha he heo ies o classical inspi a ion we e well awa e o he di e en
na u es o land, labou and capi al. Neoclassical economics, on he o he hand, ea ed all ac o s
o p oduc ion as symme ical, which has consequences on he explana ion o income dis ibu ion
as well.
Sec ion 3 p esen s he deba e o e he ele ance (o no ) o dis inguishing be ween
mo emen s along he p oduc ion unc ion and shi s in he p oduc ion unc ion when discussing
echnical change. Pasine i conside ed his dis inc ion i ele an . On he o he hand, his
dis inc ion is he co e o he explana ion o echnological change o neoclassical economics.
Finally, in sec ion 4, we d aw some conclusions.
3
Fo a e iew o he deba e and a e o mula ion o Pasine i’s o mula, see Ga bellini and Wi kie man (2023).
130 The Solow-Pasine i deba e on he measu emen o p oduc i i y in he ligh o mode n g ow h heo y
PSL Qua e ly Re iew
1. The Solow-Pasine i deba e on he measu emen o p oduc i i y
Solow’s 1957 a icle aimed o desc ibe “an elemen a y way o seg ega ing a ia ions in ou pu pe
head due o echnical change om hose due o changes in he a ailabili y o capi al pe head”
(Solow, 1957, p. 312). This was equi alen o dis inguishing be ween shi s in he p oduc ion
unc ion and mo emen s along i . In o de o do his, Solow assumed ha ac o s o p oduc ion
a e paid hei ma ginal p oduc s and he e is neu al echnical change, de ined as a shi in he
p oduc ion unc ion ha lea es he ma ginal a es o subs i u ion unchanged.
4
He de ines he
p oduc ion unc ion as:
𝑄=𝐴(𝑡)𝑓(𝐾,𝐿) (1)
whe e 𝑄 ep esen s ou pu , 𝐾 and 𝐿 ep esen capi al and labou in physical uni s, and 𝑡 appea s
o allow o echnical change. The unc ion 𝐴(𝑡) measu es he accumula ed e ec s o shi s o e
ime.
Solow p oceeded o show ha , i all he ac o s o p oduc ion can be classi ied as capi al o
labou , he sum o he ela i e sha es o capi al and labou , 𝑤𝐾 and 𝑤𝐿, is equal o one. Assuming
ha 𝑓 is homogeneous o deg ee one and de ining 𝑞=𝑄𝐿
⁄,𝑘=𝐾𝐿
⁄, Solow ob ained he equa ion:
𝑞𝑞=𝐴
𝐴+𝑤𝐾𝑘𝑘 (2)
In his case, om he se ies o ou pu pe man-hou , capi al pe man-hou , and he sha e o capi al,
i is possible o es ima e he echnical change index, 𝐴(𝑡).
5
Solow p esen ed his es ima e o
echnical change o he US economy o he pe iod 1909-1949. Se ing 𝐴(1909)=1, he ob ained
𝐴(1949)= 1.809. F om his and he ime se ies u ilised, he concluded ha p oduc i i y pe man-
hou almos doubled, and ha 12.5% o ha change co esponded o inc eased capi al pe man-
hou
6
(𝐾/𝐿) and he emainde 87.5% o echnical change.
In his esponse, Pasine i s a ed ha his ype o analysis “al hough sa is ac o y o land and
labo , is s ill incomple e wi h espec o capi al, because i does no ake in o accoun he
cha ac e is ic ha capi al is no some hing which comes om hea en, o om ou side, bu om
he p oduc ion p ocess i sel : i is ep oducible” (Pasine i, 1959, p. 272). This migh seem an
ob ious asse ion, bu i has consequences because i implies ha capi al p oduc ion is also
subjec o echnical change.
To show why Solow’s ea men is misleading, Pasine i began ea ing he p oblem along
adi ional lines. He assumed a ime 𝑡 he p oduc ion unc ion 𝑄=𝑓(𝐿,𝐾) and a ime 𝑡+𝜙 he
p oduc ion unc ion 𝑄=𝜙(𝐿,𝐾), whe e:
4
This is he concep o neu ali y p oposed by Hicks: echnical change is neu al i i inc eases he ou pu a ainable
om gi en inpu s, lea ing he ma ginal a es o subs i u ion unchanged. Pasine i uses, ins ead, neu ali y in he sense
o Ha od, which conside s echnical change neu al i labou p oduc i i y in he consump ion goods sec o changes in
he same p opo ion as o e all capi al p oduc i i y does. Pasine i does no use neoclassical p oduc ion unc ions, so
he concep o he ma ginal a e o subs i u ion makes no sense o him in his con ex .
5
Solow also conside s he case o non-neu al echnical change bu a i es a equi alen conclusions. In his a icle, we
will limi he s udy o he simple cases, since i does no a ec he essence o he discussions.
6
Solow calls he capi al pe man-hou capi al in ensi y. Ins ead, Pasine i calls his he deg ee o mechanisa ion and
de ines capi al in ensi y as he capi al-ou pu a io. This is impo an , because capi al in ensi y and he deg ee o
mechanisa ion do no necessa ily ha e o a y in he same di ec ion. Hence, a ia ions in he deg ee o mechanisa ion
a e no , in gene al, an indica o o he a ia ion o capi al in ensi y ( o mo e de ails, see Pasine i, 1981, pp. 180-184).
F.R. Sembe 131
PSL Qua e ly Re iew
𝑄: numbe o pieces (one piece being he quan i y which was sold in he base yea a $1 million)
𝐿: man-yea s
𝐾: ons o s eel (one on being equal o he quan i y ha was bough in he base yea a $1 million)
As men ioned abo e, Pasine i ema ked ha Solow’s analysis was incomple e because,
besides he p oduc ion unc ion o he consump ion goods indus y, i is necessa y o conside he
p oduc ion unc ion o he capi al goods indus y. Technical change migh ake place in ei he o
he wo sec o s. I he e is echnical change in he capi al goods indus y, he same quan i y o ons
o s eel o capi al does no ha e he same meaning in ime 𝑡 o in ime 𝑡+
, i a 𝑡+
he same
capi al can be ob ained om smalle quan i ies o capi al o labou . This implies ha , o he
pu pose o e alua ing changes in p oduc i i y, measu ing capi al in physical uni s is misleading.
Addi ionally, Pasine i s esses ha i is impo an o conside ha bo h indus ies a e no
symme ical, because wha e e o m echnical change akes in he capi al goods indus y (neu al,
labou -sa ing o capi al-sa ing), i s e ec is always capi al-sa ing o he consump ion goods
indus y.
In he i s simpli ied case he p esen ed, Pasine i assumed ha he p oduc ion o capi al uses
only labou and ha capi al las s o e e .
Now, o compa e p oduc i i y be ween wo di e en equilib ium si ua ions, i is necessa y o
conside , besides 𝑄/𝐾 and 𝑄/𝐿, he changes in he p oduc i i y o he capi al goods indus y, ha
is, 𝐾/𝑁 (whe e 𝑁 is he quan i y o labou ha would be necessa y o ep oduce he s ock o
capi al). To a oid he di icul ies associa ed wi h he ac ha he condi ions o p oduc ion o 𝐾 in
he pas may ha e been di e en om he condi ions a he p esen ime, Pasine i chose o
ede ine capi al, 𝐾, in e ms o i s capaci y, 𝐶.
7
Now, 𝑁 is he labou equi ed o ep oduce he
exis ing p oduc i e capaci y wi h he echnique a ailable when obse a ions a e made. The h ee
a iables ha mus be explained a e 𝑄/𝐿, 𝑄/𝐶 and 𝐶/𝑁. In he case conside ed by Pasine i a his
s age, in a neo-classical amewo k wi h ull employmen , he ou pu , 𝑄, coincides wi h he
p oduc i e capaci y o capi al, 𝐶, since, in equilib ium, capi al is ully employed. In his case, 𝑄 =
𝐶 and only 𝑄/𝐿 and 𝐶/𝑁 a e le . The i s ep esen s labou p oduc i i y in he consump ion
goods sec o , and he second is o e all capi al p oduc i i y. Pasine i p esen ed he ollowing
di ec ional index o change:
𝑄𝐿
⁄
𝐶𝑁
⁄ (3)
The index will emain cons an in ime i labou p oduc i i y in he consump ion goods sec o
changes in he same p opo ion as o e all capi al p oduc i i y. I he index inc eases, his means
ha labou p oduc i i y has inc eased mo e han o e all capi al p oduc i i y and echnical change
has been labou -sa ing; i he index dec eases, i means ha o e all capi al p oduc i i y has
inc eased mo e han labou p oduc i i y, so he change has been capi al-sa ing.
8
I is in e es ing
o no e ha , when 𝐶 = 𝑄, he index (3) becomes 𝑁/𝐿, ha is, he a io be ween he quan i y o
labou needed o ep oduce he s ock o capi al and he quan i y o labou used o p oduce
consump ion goods.
7
This will la e be a he base o his analysis in e ms o e ically in eg a ed sec o s.
8
This is neu ali y in he sense o Ha od (see oo no e 4, abo e).
132 The Solow-Pasine i deba e on he measu emen o p oduc i i y in he ligh o mode n g ow h heo y
PSL Qua e ly Re iew
A e his simpli ied p esen a ion, Pasine i in oduced a numé ai e in o de o ob ain a way
o be able o es ima e echnical change. The p ice o ou pu is se a 𝑃𝑞=1. Supposing equilib ium
9
om he p oduc ion unc ion 𝑄 = 𝑓 (𝐿,𝐾) and calling:
𝑟=𝜕𝑄
𝜕𝐾𝐾1
𝑃𝑐𝐶 he a e o p o i , whe e 𝑃𝐶 is he p ice o one uni o capaci y,
𝑎𝑞=𝐿𝑄
⁄ he inpu o labou in one uni o ou pu ,
𝑎𝑘=𝑁𝐶
⁄ he inpu o labou in one uni o capaci y,
Pasine i ob ained he a io be ween capi al and ou pu :
10
𝛽= 𝑎𝑘
𝑟𝑎𝑘+𝑎𝑞 (4)
The e m 𝑟𝑎𝑘 is he only di e ence wi h equa ion (3), and, since 𝑟 ends o be cons an o e
ime, 𝑟𝑎𝑘 does no modi y he di ec ion o change. As in he case o equa ion (3), echnical change
is neu al i 𝛽 emains cons an , labou -sa ing i 𝛽 inc eases, and capi al-sa ing i 𝛽 dec eases.
Using he index 𝛽, Pasine i ex ended his analysis o he same pe iod used by Solow and
eached opposi e esul s. While, o Solow capi al in ensi y had inc eased by 12.5%, o Pasine i
capi al in ensi y had dec eased by 20%. No e ha capi al in ensi y is measu ed as he capi al-
ou pu a io and no as he capi al-labou a io, as in Solow. The capi al-labou a io can be
conside ed an indica o o echnical change only i 𝐶/𝑁 (o e all capi al p oduc i i y) changes in
he same p opo ion (Pasine i, 1959, p. 273). Changes in p oduc i i y canno be measu ed by
changes in he p oduc i i y o labou alone, since capi al also in e enes in p oduc ion.
Solow’s commen on Pasine i’s c i ique and Pasine i’s esponse shows ha hey had
comple ely di e en iews on he ele an ac o s o conside when dealing wi h he p oblem o
echnical change.
To Solow, he adi ional ea men o echnical change is based on he dis inc ion be ween
shi s in he p oduc ion unc ions and mo emen s along i . Dismissing his dis inc ion means
abandoning he possibili y o dealing wi h echnical change. The no ion o a p oduc ion unc ion
“is mean o exp ess he ac (i i is a ac ) ha any ime a i m o indus y o economic sys em
aces a ange o echnological al e na i es anyone o which migh be chosen, and ha gi en
enough ime
11
any p e iously made choice can be changed wi hou appealing o new knowledge”
(Solow, 1959, p. 283). To Solow, Pasine i’s coe icien gi es accu a e esul s only in he case o
ixed p opo ions because he abandoned he possibili y o subs i u ing labou o capi al a a gi en
echnical knowledge.
Solow ook Pasine i’s p oposal o conside ing he p oduc ion o capi al goods as a me e
ques ion o less agg ega ion.
This doubling he numbe o commodi ies in he model inc eases i s ealism by 100 pe cen . […] I
is no qui e ue o say ha by ailing o dis inguish be ween consumables and capi al goods I igno e
9
This means ha he cos o p oduc ion o capi al is equal o i s ma ke e alua ion.
10
Fo de ails, see Pasine i (1959, pp. 273-274).
11
The exp ession “gi en enough ime” will be discussed by Pasine i when he will examine he p oblems o choice o
echniques and change o echniques.
F.R. Sembe 133
PSL Qua e ly Re iew
ha capi al is in ac p oduced. A bes , we a e dealing wi h simpli ied models (Solow, 1959, pp.
283-84).
Pasine i s essed ha he ma e is no one o mo e o less agg ega ion bu ha , a any le el o
agg ega ion, e alua ion o p oduc i i y canno be made independen ly o he echnical changes in
he p oduc ion o capi al. Bo h ypes o echnical change, in he consump ion o capi al goods, ha e
di e en impac s on he economic sys em.
In his esponse, Solow made some examples o show ha Pasine i’s measu emen o echnical
change can a y e en i he e is no echnical change. The i s o hese examples is a case whe e
consume goods a e p oduced by obo s alone and he obo s a e p oduced by labou alone. I ,
wi h a new me hod, he same quan i y o obo s can be p oduced mo e cheaply, hen he e is a
labou -sa ing in en ion in he capi al sec o , bu i is no clea why his ep esen s a capi al-sa ing
imp o emen in he consume sec o . I does no sa e obo s; i jus sa es abs ac “wai ing”.
12
Solow also d ew a en ion o he ac ha Pasine i’s coe icien will change wi h a change in he
a e o p o i o wi h changes in sa ings o demand, e en i he e has been no echnical change.
Pasine i ecognised ha his was ue, bu he s a ed his easoning by appealing o he ac ha
s a is ics show ha he a e o p o i in capi alis ic economies has emained almos cons an .
Apa om sho - un luc ua ions, he la ges pa o changes in p oduc i i y o e ime a e due o
echnical changes and no o changes in income dis ibu ion.
To Solow, he di e ence be ween bo h app oaches was no ela ed o capi al being p oduced
o no bu o he wo hiness o dis inguishing be ween e e sible subs i u ion o he ac o s o
p oduc ion gi en a s a e o echnology and shi s in echnology.
Pasine i claimed ha he was no denying he exis ence o di e en possible p oduc ion
echniques bu ha , once he choice has been made, he op ions no chosen a e i ele an and
canno be obse ed.
13
To cons ain he al e na i e bygone possibili ies in a unc ion ha canno bu be a bi a y because
non-obse able is o no use o ou pu pose i , “gi en enough ime [ o ] any p e iously made choice
o be changed”, he i m o he indus y o he economic sys em will be aced wi h he same a e o
in e es bu wi h an en i ely new se o echnical choices (Pasine i, 1959, p. 285).
In summa y, Pasine i s a ed, “The con en ion has been ha , since capi al comes om he
p oduc ion p ocess i sel , on which echnical change ope a es, i canno be deal wi h in he same
way as labo and land” (Pasine i, 1959, p. 281). Technological change canno be measu ed by
labou p oduc i i y alone, neglec ing he o he ac o s o p oduc ion. Mo eo e , he a emp s o
e alua e echnological change wi h models based on he p oduc ion unc ion o neo-classical
inspi a ion need a physical o eal no ion o capi al. Howe e , he same physical uni o capi al can
ha e di e en meanings, acco ding o he echnical knowledge ha p e ails. Tha is he eason o
ede ining capi al in uni s o p oduc i e capaci y. In his way, he wo a ios, 𝑄/𝐿 and 𝐶/𝑁, can
gi e a comple e e alua ion o he na u e o echnical change.
12
To Pasine i, his is a change in 𝑁, so ha he a io o labou locked up in he p oduc ion o capi al o he labou used
in he p oduc ion o consump ion goods dec eases, ha is, he e is an o e all inc ease in o e all capi al p oduc i i y. To
Pasine i, he e is no hing abs ac abou he inc ease in p oduc i i y; i is a physical no ion.
13
This will be ea ed in sec ion 3.
134 The Solow-Pasine i deba e on he measu emen o p oduc i i y in he ligh o mode n g ow h heo y
PSL Qua e ly Re iew
2. The ea men o he ac o s o p oduc ion
One o he big di e ences be ween g ow h models o classical o Keynesian inspi a ion and
neoclassical models is hei ea men o p oduc ion ac o s and he explana ion o dis ibu ion
de i ed om hem. The i s kind o g ow h model akes in o accoun he di e en na u e o he
ac o s o p oduc ion, which allows an explana ion o he dis ibu ion ela ed o he explana ion
o g ow h. On he con a y, neoclassical models conside p oduc ion ac o s symme ically, as
a iables o p oduc ion unc ions wi h ce ain ma hema ical p ope ies. The dis ibu ion ends up
being explained wi h he esolu ion o some sys em o simul aneous equa ions a he han as a
p ocess.
The impo ance o dis inguishing be ween he di e en na u e o he ac o s o p oduc ion
was clea since Rica do:
The p oduce o he ea h – all ha is de i ed om i s su ace by he uni ed applica ion o labou ,
machine y, and capi al, is di ided among h ee classes o he communi y, namely, he p op ie o o
he land, he owne o he s ock o capi al necessa y o i s cul i a ion, and he labou e s by whose
indus y i is cul i a ed.
[…]
To de e mine he laws which egula e his dis ibu ion, is he p incipal p oblem in Poli ical
Economy […] (Rica do, 1981, p. 5).
In Rica do’s explana ion, capi alis s sa e and in es ou o hei p o i s, and, in so doing, hey se
up a p ocess o capi al accumula ion and inc eased demand o wo ke s. In he long un, as a
consequence o diminishing ma ginal e u ns o land, he a e o p o i will dec ease un il he e
a e no mo e sa ings o in es men s. The way o a oid his ou come is in e na ional ade (which
allows ood o be impo ed wi hou ha ing o eso o less e ile lands) o a echnological
imp o emen ha inc eases he p oduc i i y o he land. In his explana ion, he ma ginal
p inciple is applied only o land, a non-p oduced ac o o p oduc ion. Labou and capi al, ins ead,
we e associa ed wi h di e en social classes: wages had an explana ion and p o i s a di e en one,
ela ed o he ole o wo ke s and capi alis s in socie y. Mo eo e , he explana ion o he g ow h
o he economy was deeply linked o he heo y o dis ibu ion.
Ma ginalism in he 1870s, by ocusing on he p oblems o demand, b ough back he exchange
pa adigm o economic heo y. The basic model p esupposes a se o u ili y-maximising indi iduals
endowed wi h a se o gi en esou ces and inds he p ices ha lead o an op imum alloca ion o
esou ces h ough exchange. The ma ginal u ili y app oach was hen ex ended o p oduc ion,
conside ing land, labou and capi al on he same oo ing. The ma ginal u ili y scheme was
duplica ed o ea p oduc ion, in oducing he well-beha ed p oduc ion unc ion, linea and
homogeneous, wi h ma ginal p oduc i i ies equa ing o he ac o p ices.
The ex ension o he ma ginal p inciple o capi al implies ha capi al is o mally ea ed like
a non-p oduced ac o : neoclassical heo y ea s all he ac o s o p oduc ion as i hey we e land
(Pasine i, 2000, p. 389). Hence, as an ex ension o he ma ginal u ili y unc ions, p oduc ion
unc ions we e se ou as con ex and di e en iable. Mo eo e , ma ginal p oduc i i ies had o be
such ha hey could be subs i u es o he ac o p ices, making he p oduc ion unc ion linea
and homogeneous. The e is no ecogni ion ha he na u e o each ac o is di e en and ha he e
is a succession by which he dis ibu ion is de e mined.
Rica do had hough o diminishing e u ns on land because i was a sca ce, non-p oduced
ac o . The main objec s o economic heo y, as in Adam Smi h, we e ep oducible goods:
F.R. Sembe 141
PSL Qua e ly Re iew
exp ess he echnology ac ually in use. Ins ead, i is in e p e ed as ep esen ing o he echniques
ha can be used as al e na i es o he one ha has al eady been chosen. Pasine i ema ks ha ,
in his way, he echniques a ailable a a ce ain poin in ime ( he choice o echniques) come o
coincide wi h he echniques ha a e ele an o he p ocess o change.
This also makes he concep o ma ginal p oduc i i y meaningless, e en i we conside
di e en possible in e p e a ions o unc ion (8).
Fi s , i unc ion (8) is in e p e ed as ep esen ing he p oduc i e s uc u e a one poin in
ime, he de i a i es a e 0. This is no a pa icula case, as ex books say, bu he gene al case.
Once echnology has been chosen, i canno be changed. I does no make sense o alk abou
subs i u abili y a a gi en poin in ime.
Second, i unc ion (8) is ep esen ed as a unc ion o he choice o echnique a a ce ain poin
in ime, he de i a i es migh no exis . The di e en echniques ha e comple ely di e en
equi emen s o physical ou pu s, gene a ing discon inui ies. Besides, he e is no eason o expec
ha a change in p ices should go in di e en di ec ions han he changes in quan i ies.
19
So, in he end, he p ocess o echnical change comes o h om he in e play o he p oduc ion
unc ions and he choice o echnique unc ions. O e ime, each choice o echnique unc ion is
en iched wi h new op ions a ailable, wi h new echnical me hods, while o he s can be elimina ed
because hey become obsole e. This does no pe se change any hing in he p oduc ion unc ions.
When new echniques a e ac ually inco po a ed in o p oduc ion in he co esponding economic
sec o , pa o he p oduc ion p ocess o his sec o will change. Consequen ly, he echnical
coe icien s will change, ep esen ing he new me hods con inually being inco po a ed.
4. Concluding ema ks
In his a icle, we showed ha he Solow-Pasine i deba e an icipa ed many aspec s o he
di e en di ec ions aken by he heo ies o g ow h and echnical change a e he ounda ional
wo ks o Ha od and Doma . Economic g ow h and echnical change we e la gely discussed in he
ollowing yea s, and he Camb idge capi al con o e sy may be he mos salien deba e. In he
ollowing decades, Pasine i de eloped his own al e na i e heo y, inco po a ing e ically
in eg a ed sec o s and elemen s om S a a and Leon ie . E en i , in his c i ique o Solow, he
ma e was ea ed along adi ional lines, Pasine i made i clea ha :
As a ma e o ac , i has been he pu pose o he las sec ion o ame he analysis in such a way
ha i can be in e p e ed also, pe haps much be e , in o he heo e ical amewo ks, such as he
Leon ie models o he dynamic g ow h models which pay mo e a en ion o ixed coe icien s and
o idle capaci y. […] This is a use ul p ope y especially o compa isons o single indus ies, whe e
he occu ence o ixed coe icien s and he no ion o capaci y acqui e much mo e p ecise con en
han o he economy as a whole and can be explici ly accoun ed o (Pasine i, 1959, p. 275).
In 1998, on he occasion o he publica ion o an a icle by Richa d S one called “Changes in
p oduc i i y”, Pasine i and Solow had ano he exchange in he jou nal S uc u al Change and
Economic Dynamics. In his pos humous a icle, S one combined Pasine i’s 𝛽 coe icien wi h
inpu -ou pu analysis o ob ain a coe icien o he classi ica ion o echnical p og ess “based on
da a which a e ac ually being p o ided by inpu -ou pu analys s wi hou any e e ence o he o m
o he p oduc ion unc ions excep a he speci ic poin s o ime unde compa ison” (S one, 1998,
p. 231).
19
See also Pasine i (1977, chap e 6).
142 The Solow-Pasine i deba e on he measu emen o p oduc i i y in he ligh o mode n g ow h heo y
PSL Qua e ly Re iew
Pasine i commen ed on his sho a icle by epea ing some o his conce ns wi h he
neoclassical heo y o echnical change (Pasine i, 1998). The ac ha echnical p og ess akes
place no only in he p oduc ion o inal goods bu also in he p oduc ion o he capi al goods
necessa y o make hose inal goods has impo an consequences o e alua ing echnical
p og ess. Thus, i is inco ec o conside bo h he capi al-ou pu a io and he capi al-labou a io
as indices o capi al in ensi y. As we ha e shown, Pasine i calls capi al in ensi y he capi al-ou pu
a io, and he calls he deg ee o mechanisa ion he capi al-labou a io. This dis inc ion was
essen ial. The a ios will mo e in he same di ec ion only in he absence o echnical p og ess, bu
hey migh mo e in opposi e di ec ions as soon as echnical p og ess comes in o he pic u e.
Pasine i also epea ed he impo ance he placed, in his o mula ion, on gi ing up he dis inc ion
be ween shi s in he p oduc ion unc ion and mo emen s along i and on enouncing assump ions
abou he p oduc ion unc ions ha a e no obse able.
Solow’s esponse again aised his issue:
I ound i as onishing hen and ind i as onishing now. […] I would ha e hough ha economics
e y o en p oceeds by hinking abou he decisions – op imising o no – made by agen s like
households and i ms. We canno unde s and a decision wi hou conside ing he ange o choices
ha we e a ailable, o pe cei ed o be a ailable, o he agen when he decision was made (Solow,
1998, p. 238).
This asse ion e lec s a mo e p o ound disag eemen . To Solow, economics had o unde s and
he decisions made by agen s among a ange o a ailable choices. This is ela ed o he concep ion
o economics as de ined by Lionel Robbins as “ he science ha s udies human beha iou as a
ela ionship be ween ends and sca ce means which ha e al e na i e uses” (Robbins, 1932, p. 15).
Pasine i, ins ead, de ended he classical concep ion o economics as he s udy o how na ions
g ow and dis ibu e hei income.
In his las book, Keynes and he Camb idge Keynesians: A ‘Re olu ion in Economics’, Pasine i
s essed ha i was necessa y o go back o classical poli ical economy and he Keynesian school,
also including some au ho s less in luenced by Keynes, like S a a and Kalecki. The aim had o be
o build an al e na i e pa adigm om all hese con ibu ions, a uni ying heo e ical scheme unde
he p oduc ion pa adigm ha accoun s o g ow h and dis ibu ion.
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