Blaug Versus Garegnani on the ‘Formalist Revolution’ and the Evolution of Neoclassical Capital Theory

Abstract

In a series of papers, Mark Blaug has accused modern, mainstream economic theory of sterility because of the abandonment of “competition as a process,” tracing the cause to the Formalist Revolution of the 1950s. The paper agrees with the criticism but disagrees on the cause, which is, rather, to be found in the shift from the treatment of capital as a single factor of variable ‘form’ to a Walrasian specification of the capital endowment as a given vector, a datum incompatible with the role of equilibrium as a center of gravitation of time-consuming adjustments. The shift was due, as shown by Pierangelo Garegnani, to unease in the 1930s with the conception of capital as a single factor, a fact neglected by Blaug but historically evident and a cause of great uncertainty in capital theory in subsequent decades. The conclusion is that, to avoid the sterility of neo-Walrasian equilibria, one cannot return to Alfred Marshall with his inconsistent notion of capital as a single factor, but Blaug himself indicates another possible direction.

General equilibrium and the neo‐Ricardian critique: On Bloise and Reichlin

“…In case this were indeed the case, I make here one more effort to be clear on what (in my view, at least) the 'neo-Ricardian critique' really questions. To assess this critique is one of the purposes of Bloise and Reichlin's article; at several points, the authors advance comments that tend to question the relevance or the internal consistency of that critique; I will argue that these comments indicate an imperfect understanding of the 'neo-Ricardian' argument at least in its most developed form, the one in P. Garegnani (1990Garegnani ( , 2012, that I have tried to take up and develop in Petri (2004Petri ( , 2011Petri ( , 2014Petri ( , 2015Petri ( , 2017 and in Dvoskin and Petri (2017).…”

“…In fact, no objection to the treatment of prices as constant in the equations determining long‐period relative prices and rate of interest was ever raised by marginalist economists before the birth of the dissatisfaction with the treatment of capital as a single factor of variable ‘form’, which was the real reason for the shift to neo‐Walrasian versions (Garegnani, 2012, pp. 1426–1427, Petri, 2014, p. 468).…”