In Chapter 8, I conclude by addressing the promise of capitalism from the perspective of those who have joined the search for a moral foundation. I first discuss how both classical and neoclassical economic theory have proven to be incomplete views of economic reality. Recent evidence suggests that, while highly descriptive of economic growth prior to the first industrial revolution in England, classical economic theory is incapable of explaining economic growth after around 1800. The neoclassical economic theory out of Chicago has also proven to be incomplete following persistent evidence of norm-based behavior in the lab and recurring market crashes, including the latest severe market crash in 2007–08. I then discuss three types of responses to the latest crisis of capitalism and how they have left the theoretical landscape ripe for future development and innovation. To further reveal the potential for theoretical development, I summarize key insights from the economists and philosophers covered in this book. After summarizing key insights from my own search, including a paper I presented at a recent research conference in Australia, I conclude by discussing why the search for a moral foundation for capitalism may be the critical challenge of our age.

The chapter uses Adam Smiths wealth of nations to complicate simple laissez-faire notions of economic development. Adam Smith argued that public works were crucial for economic development. Since they wouldnt always be provided by private firms there would need to be some government involvement. However, Smith argued that government waste and debt would continue to be risks of infrastructure, so he argued that infrastructure should be governed by cost-internalizing principles. Also, Adam Smith argued for natural monopoly, which would be exempt from market forces, which provided the groundwork for the idea of public utilities.

Many of the great masters of post-Keynesian economics – think of Lunghini, Garegnani, Graziani, but the list is long – are no longer with us. Those belonging to the following generation have been marginalised and reduced to irrelevance, at least in the academic arena. The ‘neoclassical group’, on the other hand, has closed its ranks and built a powerful machine of cultural hegemony. It is very difficult for those who pursue non ‘mainstream’ lines of research to build an academic career – and thus continue to do research. And still, if paradigm shifts are most likely to happen in the wake of epochal transformations, the world is changing rapidly enough to advocate for one.

The building-blocks of this ‘new’ paradigm are all there. All we have to do is to circumscribe its perimeter, and close ourselves our ranks to join forces and knowledge and provide a complete, coherent and alternative interpretative framework to the dominant one. In this chapter, I make the bold attempt to connect these blocks, giving a (non-comprehensive) list of readings, authors or research lines which could fruitfully cooperate in creating the school of thought Pasinetti is advocating for.

Thomas Roberts Malthus is typically considered a ‘classical’ economist together with Adam Smith and David Ricardo. However, in important respects his view differed fundamentally from theirs, as Keynes emphasised in his biographical essay on Malthus. Most importantly, Malthus vehemently opposed Ricardo’s doctrine that it was impossible for effective aggregate demand to be deficient. Keynes, who also insisted on the possibility of effective demand failures, therefore considered Malthus to have been a precursor of his own view. The chapter discusses the following themes. What was the classical conception of ‘Say’s law’ and what were the reasons why Ricardo endorsed and Malthus rejected it? What were the main lines of reasoning in the ‘general glut’ controversy between Malthus and Ricardo? Was Keynes justified in considering Malthus’s doctrine to foreshadow his own doctrine, and if not, why not? What are the reasons why according to Pasinetti the classical (Ricardo-Sraffa) approach to the theory of relative prices and income distribution is compatible with Keynes’s principle of effective demand?

The role of government has evolved significantly over the past 150 years. In the late nineteenth century, only about 10% of GDP passed through the hands of government. This was consistent with the prevailing view that government should only be minimally involved in the economy. By 1960, public spending had increased to 25–30% of GDP as governments focussed on delivering their core tasks: rules of the game, public goods and services and basic safety nets. Private choice still predominated and safeguarded both economic and financial freedom. The Keynesian ‘revolution’ from 1960 to about 1980 saw government grow to 50% and 60% of GDP in some countries and to over 40% on average. Over the next two decades, the classical ‘counter-revolution’ propagated smaller states. Many countries began fiscal reform and rules-based policy-making gained prominence. Spending growth came to a halt, and in some cases reversed. The years since 2000 have seen a revival of Keynesian thinking. Countries engaged in expansionary policies before the global financial crisis and experienced new record highs in public expenditure and debt thereafter. Another wave of reforms brought spending down in some crisis countries in the 2010s. However, public spending ratios on average rose well above the level of 2000.