Power Relations and Economic Paradigms, or Why Post-Keynesian Theory Is Not Dominant

Abstract

In spite of its substantial results in understanding modern capitalism and the fact that, until the 1970s, Keynesian theory inspired the economic policy of most countries, the classical/post-Keynesian paradigm failed to become dominant on the theoretical scene. Why? Pasinetti’s book provides an answer by first pointing out the “unwise behavior” of the Cambridge group of Keynesian scholars, then by suggesting how to overcome the present theoretical impasse by the methodological device of the “separation theorem.” Economic enquiry, he argues, should distinguish the phase of “pure theory,” to be elaborated at a logical stage that precedes institutions, from the (applied) institutional analysis. The review concludes by maintaining that, while Pasinetti’s suggestion is fully valid, the theoretical strength of a paradigm is a necessary but not sufficient condition for becoming dominant. As the last decades show, the success or failure of a paradigm is also crucially dependent on social and power relations in society. JEL classification: B50; B31; E12