Where do the Pasinetti Rule and the Pasinetti Index Come from?

Abstract

ABSTRACT The article describes the origins of the Pasinetti index and Pasinetti rule and links both notions to debates over concerns regarding which socio-economic income group in a modern capitalist economy was being hurt and which broad income class was benefiting from the high interest rate policy, especially during the Volcker era of the 1980s. These were statistical constructs as well as distinct normative concepts that resulted from a close reading of Pasinetti’s original writings published in 1980–81. The purpose of the Pasinetti index was to measure and monitor the actual transfer between the rentier and non-rentier sectors of an economy both cyclically and over the long term. As discussed in some detail, both authors of this article had directly participated in those debates and had basically initiated the early discussions around these concepts among post-Keynesians and other heterodox economists. The first part of our article, after the introduction, is primarily focused on what came to be called the Pasinetti rule, while the following section of the article recounts how the different variants of the Pasinetti index came to be constructed and used. We conclude with a discussion of the possible continued relevance of the Pasinetti norm in today’s world.