Cambridge Journal of Economics 2005, 29, 837–848

doi:10.1093/cje/bei073

The Cambridge School of Keynesian

Economics
Luigi L. Pasinetti*

There have been strong ties between the Cambridge Journal of Economics (CJE)
and the Cambridge School of Keynesian Economics, from the very beginning.
In this paper, the author investigates the environment that saw the birth of the
CJE at Cambridge (UK), in 1977, and the relationship that linked it to the
direct pupils of Keynes. A critical question is explicitly examined: why didn’t
the ‘Keynesian revolution’ succeed in becoming a permanent winning para-
digm? Some behavioural mistakes of the members of the Keynesian School may
explain this lack of success, but only to a certain extent. In any case, there were
and there still are remedies too. But what we are inheriting is a unique set of
analytical building blocks (the paper lists eight of them) that makes this School
of economics a viable (and in some directions definitely superior) alternative to
mainstream economics. Admittedly, there is some important work still to be
done. The paper highlights the need for a two-stage approach, addressing pure
theory and extensive institutional analysis. It is argued that a combination of
the two would strengthen the coherence of the theoretical foundations, and at
the same time would provide a fruitful extension of economic analysis to
empirical, institutional and economic dynamics investigations.

Key words: Keynesian economics, Cambridge School

JEL classifications: E120, B220, B400, B500

1. Introduction
I am pleased and honoured to open, with this lecture, the celebration of the 25th
anniversary of the Cambridge Journal of Economics (CJE).1
I shall try to convey my enthusiasm for this anniversary and, above all, for the
subject the organisers have chosen as title of the Conference: ‘Economics for the
Future’.
I thought I could talk, with some insight, about ‘the Cambridge School of
Keynesian Economics’. My contention is that, from such a School, we can learn

Manuscript received 19 September 2003; final version received 8 July 2005.

Address for correspondence: Universita Cattolica del Sacro Cuore, Largo A Gemelli 1, 20123 Milan,
Italy; email: llp@unicatt.it
* Universita Cattolica del Sacro Cuore, Milan. I am grateful to GianPaolo Mariutti for research
assistance; and to Università Cattolica S.C., Milan, for financial support (research project D.3.2).
1
I had been looking forward to being in Cambridge for this occasion, but a family emergency has
kept me at home. Geoffrey Harcourt was kind enough to deputise for me and to read the text of this
lecture to the audience.
Ó The Author 2005. Published by Oxford University Press on behalf of the Cambridge Political Economy
Society. All rights reserved.
838 L. L. Pasinetti
a lot, in two opposite ways: from its mistakes and from its achievements. I shall start
from the former, but I shall concentrate my efforts on the latter.

2. Strong ties between the Cambridge School of Keynesian Economics

and the Cambridge Journal of Economics
There is a strong connection between the Cambridge School of Keynesian Economics
and the Cambridge Journal of Economics—not only because they were both born in
Cambridge. The connection goes much deeper. The Cambridge School and the
Cambridge Journal have shared, since the beginning, a common vision of what
economics should be about—what its questions are and what the best framework is
within which to look for answers.
I do not need to recall all the details of what happened in the initial stages of the
Journal. But it is worth calling to mind a few crucial events in the relations between the
newborn Journal and the original members of the Cambridge School, especially
Richard Kahn, Joan Robinson, Nicholas Kaldor and Piero Sraffa.
During the 1970s, in Cambridge, some young economists, very critical of
mainstream economics, formed a new society, the Cambridge Society, in order to
meet weekly to discuss and share ideas. These young economists, of non-orthodox
tendencies, were facing a hard time in Cambridge. The neoclassical paradigm was
increasingly making serious inroads into the Economics and Politics Faculty of
Cambridge University, while heterodox political economy was slowly but inexorably
being pushed out. Most of these junior economists (if not all of them) were on the
whole sympathisers with the Cambridge Keynesian group, who at that time were in the
natural process of retirement from university positions.
The actual setting up of the Journal took off in 1977. The young Editors asked
senior members to support their initiative, but in a way that would not entail
interference with their choices, though of course welcoming suggestions and criti-
cisms. In this spirit, they invited those whom they judged to be significant members of
the Cambridge School to become Patrons of the Journal. At the very beginning only
Richard Goodwin, Luigi Pasinetti and Joan Robinson accepted the invitation. Two-
and-a-half years later, Kaldor and Sraffa were also persuaded to join. Kahn decided to
remain aloof but, during those years, he did contribute papers to the new Journal (see
Kahn, 1977).
This short recollection of events should be sufficient to raise awareness of the strong
ties that existed, from the beginning, between this Journal and the members of the
Cambridge School of Keynesian Economics. Not all the initial intentions of the
Editors of the Journal were shared by the Patrons (I remember Dick Goodwin
regretting that Joseph Schumpeter was not included among the economists mentioned
for inspiration). But they supported the initiative and appreciated the freedom of
thought above anything else.

3. Pitfalls and remedies

My interest in focusing this lecture on the protagonists of the Cambridge School of
Keynesian Economics is not to be a ‘Remembrance of Things Past’—to use Proust’s
words. It is aimed towards the present, and the future, more than one might think, in
 The Cambridge School of Keynesian Economics 839
the sense that any argument about what did occur in the past 50 years is meant to
evaluate the extent to which the Cambridge School of Economics may have a place
(and which place) in the ‘economics of the future’.
In recent months, I have been struggling over the preparation of the final draft of
a book for the Cambridge University Press, which discusses the achievements and
non-achievements of the Cambridge School of Keynesian Economics (Pasinetti,
forthcoming).
An undoubtedly intriguing question that underlies part of my book is the following.
How could this remarkable School win so many important battles and, at the same
time, fail to make of the ‘Keynesian revolution’ a permanent winning paradigm? They
were extremely bright scholars, some of them very original and rigorous, others very
prolific in presenting and diffusing the new ideas; all of them were rather unconven-
tional. Yet, they have not been able to keep the ‘Keynesian revolution’ rolling at
a sufficient pace. They eventually failed to establish it as a viable (if not winning)
economic paradigm. Why?
I think two types of reasons should be mentioned. There was, first, a temperamental
reason. The Cambridge group certainly misbehaved in the process of organising
a proper School. In many scientific disputes, they often displayed individualistic
attitudes, and sometimes even egoistic behaviour, rather than adopting a spirit of
cooperation, which would have kept and fostered the unity of the Keynesian School.
Their voices were sometimes discordant. Though they always agreed on fighting the
Neoclassical School, they often quarrelled among themselves, usually over trivial
issues. But all this could be considered a venial sin, even a colourful imprint of the
group, and one that made it unique. In fact, those who could be witnesses for that
period (including myself) would argue that the cohesion of the original members of the
School was never in doubt. A more serious matter was how this strong cohesion should
have taken shape. This was usually done in a way that typically excluded others. It
excluded newcomers; it did not pay sufficient attention to the young generation of
economists so as to induce them to participate in the discussion and contribute to it on
an independent basis. This was in disregard of the obvious fact that any scientific
revolution, to keep going, requires new stamina, which eventually becomes essential
for facing new challenges and consolidating past victories. Thus, new potential
members of the Cambridge School were somehow discouraged or not placed in
a position to participate fully.
The role played during the past 25 years by the Cambridge Journal of Economics has, I
think, been a remedy against this misbehaviour and lack of wisdom of that part of the
original Cambridge group. The Journal and the regular meetings of its Editors have
been a receptive and fertile place for a very explicit discussion of any issue, orthodox
and non-orthodox, and have acted as an open forum for attracting external
contributions, which have enriched the whole economic debate. These features of
openness and frank debate, without fear of being considered on the wrong track, were
precisely what the original Cambridge group lacked most. The Editors of the
Cambridge Journal of Economics should be paid a sincere tribute for what they have
done in this respect.
There is, however, a second reason that may help to explain the failure of the
Cambridge School in establishing a successful alternative paradigm to mainstream
economics. This is a reason that relates to a lack of theoretical cohesion in the various
840 L. L. Pasinetti
pieces that emerged from the Keynesian School. The Cambridge group paid scant
attention to discussing the fundamentals on which an alternative, but coherent,
paradigm could be built. This was in part due to the variety of their attitudes. Yet,
precisely because of these differences and, at the same time, of the richness of their—
apparently various—approaches, an open search for the common foundations of their
efforts should have been assigned paramount priority. But this was hardly done.
Richard Kahn, the acting organiser of the group, in his Milan ‘Mattioli Lectures’
(Kahn, 1984), almost 50 years after the publication of The General Theory, was still
referring to the nature and substance of the breakaway from orthodoxy by just
reiterating the title of Keynes’s book.
I am convinced that the Cambridge Journal of Economics has been helpful in this
respect too, but by no means to a sufficient extent. Its founding ‘mission statement’ of
providing ‘a focus for theoretical and applied work, with strong emphasis on realism of
analysis, the provision and use of empirical evidence, and the formulation of economic
policies [based on an] economic approach rooted in the tradition of Marx, Kalecki and
Keynes’ has attracted many economists willing to refine, assess, adjust and develop the
‘Keynesian Revolution’.
Yet, I fear that a satisfactory blueprint for a coherent theoretical framework that
could house, beneath one single roof, the development of the existing ideas along the
Keynesian lines and most of all the development of entirely new ideas are still lacking.
For an economist like myself, who lived through the experience of the original
Keynesian group, this need for a solid and comprehensive theoretical framework
would seem to be the more urgent and important task to be carried out for the
economics of the future.

4. Looking for theoretical coherence: what makes it so difficult?

While taking a critical view of the Neoclassical paradigm, we should not be so blind as
not to recognise its apparent formal solidity and coherence. The question is: will it ever
be possible to gain a comparable (hopefully a better) solidity and coherence for an
alternative paradigm along Keynesian lines? As one may easily appreciate, this is
a question for the future—not one of the past. In the few pages that remain, I should
like to concentrate on attempting to answer this key question.
Let me say from the outset that, in my opinion, it is indeed possible to sketch out
a coherent basic framework, sufficiently general to capture and absorb into an overall
scheme the apparently diverse contributions that have been made already by the
Cambridge School of Keynesian Economics. Moreover, I feel that it is also possible,
by starting from such contributions—and this is the most challenging aspect—to build
a complete, cohesive and viable paradigm, alternative to the dominant one. One
should recognise, however, that the task involved in constructing such an alternative
paradigm is much more complex and difficult than the one which Arrow–Debreu–
Samuelson and others have had to face for neoclassical economics. And this is for at
least two reasons.
First, a basically (Keynesian) coherent framework cannot rely on a closed model. The
scheme to be built must also be open to, and to be able to absorb, contributions
and ideas coming from other social sciences, as they became relevant to
 The Cambridge School of Keynesian Economics 841
economics. This is particularly true in the fields of human behaviour and social
organisation, which require an open eye on what other disciplines have to offer.
Second, the reality which the scheme should allow us to investigate cannot be that of
an idealised purely competitive market economy, in which goods are given once
and for all, and all that is needed is the search for their optimal allocation. If this
were the case, the tools already provided by the dominant paradigm for finding
the existence (and uniqueness) of an optimal equilibrium would be sufficient.
The aim we have is more difficult, but also more challenging. It consists in giving
an account of what happens—as Keynes put it—in a ‘monetary production
economy’, which is more complex than a pure exchange stationary economy,
because it is intrinsically dynamic, continually affected by history, and subject to
changes both in scale and in structure.

5. Some building blocks provided by the Cambridge School of

Keynesian Economics
We do not start from nothing. The contributions of the Cambridge School of
Keynesian Economics are there to help. It may be interesting to review briefly some of
the building blocks, which—despite an undoubted lack of homogeneity—can be
identified in the works of this School. It may also be interesting to notice that some of
the points I shall mention can be seen hinted at in the Notes to Contributors that the
CJE still displays on its cover.
One can single out—to my mind—at least eight ‘constructive’ features character-
ising the works of the Cambridge School of Keynesian Economics.
(1) Reality (and not merely abstract rationality) as the starting point of any economic
theory. This has been a typical characteristic inherited from Keynes, who had the
courage to say—‘When the facts change, I change my mind’. The whole
Cambridge School showed an aversion to a purely ideal rational reasoning that,
though apparently respectful of logic, does not show respect for facts. According
to the Cambridge School, any theory needs to be strongly based on factual
evidence from the start, and not just be left to be empirically tested at the end.
This feature is particularly important when the reality under investigation is that
of industrial societies, with their tendency towards change and towards an
evolving structure, as against the more static conditions of pre-industrial
societies. Kaldor, who often repeated in his own words Keynes’s phrase
mentioned above, used to begin many of his works with an accurate list of
‘stylised facts’, that needed to be explained, as he repeatedly stressed (Kaldor,
1961); the term ‘stylised facts’ meaning some empirical regularities that were
sufficiently general and persistent, so as to capture some objective features of
reality. When the CJE is asking its contributors for ‘realism’, it touches precisely
on this characteristic.
(2) Economic logic with internal consistency (and not only formal rigour). The Cambridge
School does not rely only on an economic theory that is respectful of facts from the
start. It also relies on an economic theory that keeps an overall vigilant eye on
economic reality, while the analysis is being carried out. This is particularly
842 L. L. Pasinetti
important when the economic system under investigation is a typically complex
and evolving one, where it is important to single out—and never lose sight of—the
underlying emerging patterns. Keynes (1921, p. vff.), Kahn (1988), Robinson
(1969), and Kaldor (1989) always stressed that economics is an art, which requires
qualitative judgements about seemingly contradictory evidence: it requires in-
tuition to organise a maze of ideas and phenomena into a coherent whole; it needs
caution to draw policy implications, because ‘the theory of economics does not
furnish a body of settled conclusions immediately applicable to policy’ (Keynes,
1922).
It has also been stressed that the basic theoretical framework should never
violate internal consistency. This feature has taken clear prominence in the
elaborations of Sraffa’s Production of Commodities (1960)—a masterpiece in this
respect. Saying that a theory needs internal consistency is not the same thing as
saying that it needs ‘formal rigour’—a term today adopted to mean the combined
use of mathematical language, axiomatic deductive logic and formal proofs. It
should be borne in mind that, deliberately, Sraffa’s book was not written in
purely mathematical language—a choice that Sraffa made, with some vindica-
tions and recognitions, even against the advice of distinguished mathematicians1
whom he consulted, and with whom he discussed at length, in Cambridge. I take
it that the CJE captures this characteristic, when it asks the authors ‘to use
mathematics only when its application is a necessary condition for achieving the
stated objective of the paper’ (emphasis in the original).
(3) Malthus and the Classical economists (not Walras and the Marginalists) as the inspiring
School from the History of economic thought. The characteristic of breaking with
Marginalist orthodoxy has always been a clear and distinctive mark of the
Cambridge School. Contrary to those who look at this only in a negative,
destructive, sense, I should like to stress that this characteristic has many positive
connotations. Among them, there has been that of inducing a revival of the
Classical School of Economics (especially Smith, Malthus, Ricardo, Marx). The
revival and reappraisal of the Classical economists also seems to be instrumental in
helping to insert the contributions of the Cambridge School into a framework
mainly devoted to ‘production’ rather than to ‘exchange’, which is what is badly
needed to understand industrial societies. Again, I take the CJE as stating its
interests along these lines when it asks its contributors for an ‘approach rooted in
the traditions of Marx, Kalecki and Keynes’.
(4) Non-ergodic (rather than stationary, timeless) economic systems. The Cambridge
School believed that any economic system should be analysed in a framework of
historical time. This was true not only for the long run, but also for short-run
analysis. The recognition of the importance of historical time is connected to the
idea that economic systems do not have a point of rest, and that neither do they
allow us to turn the clock back—a notion which is summarised here with the
rather technical word of ‘non-ergodic’.2 To put the matter more simply, this
means that the future, though connected with the past, can never coincide with

1
See the Preface to Sraffa (1960).
2
The felicitous idea of using this term to express Keynes’s concept is due to the American Post-
Keynesians.
 The Cambridge School of Keynesian Economics 843
it. This characteristic showed itself among the members of the Cambridge School
in various ways. Keynes stressed the role of uncertainty and the unpredictability
of future events. Sraffa believed that an evolving, unpredictable economic system
forces theory, at least to begin with, to take only pictures of reality at a specific
point in time, so as to avoid counterfactuals. Joan Robinson, more than anybody
else, emphasised this characteristic, by making a sharp distinction between
historical time and logical time. While the former is crucial to the understanding
of economics because it allows the organisation of the flow of events from an
irreversible past to an unknown future, the latter may often become a misleading
concept precisely because human history is crucially far away from the idea or the
analogy of an hydraulic system, that can be run forwards or backwards,
indifferently.
(5) Macroeconomics before microeconomics. The Cambridge School proposed an
analysis in which the macroeconomic dimension always came first with respect
to the microeconomic dimension. The theoretical propositions of each member
of the School always avoided starting from subjective behaviour (or preferences)
and from the study of single individuals. The Cambridge economists, from
Keynes (1936A, especially ch. 19) to Sraffa (1960, especially ch. 12) showed very
clearly that the behaviour of the economic system as a whole is not reducible—
except under very restrictive conditions—to the sum of its single individual parts.
This does not mean a denial of the role of microeconomics as a field of economic
investigation, but it does mean the impossibility of explaining crucial economic
phenomena on the sole basis of microeconomic behaviour.
There are many examples of fallacy of composition that the Cambridge School
highlighted, in connection with attempts—by mainstream economists—to extend
what is true for the single individual to the behaviour of the economic system as
a whole. No one could have stated the difference between macroeconomics and
microeconomics better than Keynes himself, when he stressed that ‘[there is a]
vital difference between the theory of economic behaviour of the aggregate and
the theory of behaviour of the individual unit’ (Keynes, 1936A, p. 85).
(6) Disequilibrium and instability (not equilibrium) as the normal state of the industrial
economies. This characteristic, which was prominent in Kahn (1972), Robinson
(1976) and Kaldor (1985), springs from the conviction that the normal state of
a modern production economy cannot be likened—in Keynes’s words—to the
image of ‘a flat ocean’ (Keynes, 1923). And for at least two reasons. First,
because goods are not given once for all, but are themselves the object of
changing conditions. And second, because the demand for goods is highly
affected by uncertainty. Kaldor focused his ‘Okun Memorial Lectures’ at Yale
University in 1983 entirely on this characteristic, and called the lectures ‘Eco-
nomics without equilibrium’.
The recognition that the economic system may be out of equilibrium and may
remain in this condition for a long time removes many thaumaturgic properties of
the dominant paradigm, such as the belief in ‘Say’s Law’, in the optimal
outcomes of ‘the market mechanism’, and in the neutrality of money. It calls
instead for better policy-making for the economic system than that of laissez faire.
On the one hand, this opens up the search for a more comprehensive institutional
844 L. L. Pasinetti
set-up; on the other, it demands a deeper analysis of the sources that lie behind
the instability of economic systems.
(7) Economic growth and income distribution as key topics. In a letter to Roy Harrod, after
the completion of The General Theory, Keynes (1936B) recognised the need to
extend his theoretical framework to dynamic analysis. After the contribution of
Harrod himself—Towards a Dynamic Economics (1948)—the topic of economic
growth became probably one of those around which the Cambridge group carried
on their research more expeditiously and, to a certain extent, more coherently.
Since the beginning, the Cambridge School found a connection between
economic growth and the distribution of income, and in these two fields they
made many original contributions. Sraffa reopened the Pandora’s box of Marxian
inconsistencies, and offered an entirely new framework (along Classical lines), in
which to place the issues concerning income distribution (Sraffa, 1960).
(8) A strong, deeply felt, social concern. The Cambridge group wholeheartedly shared
and developed Keynes’s view that, in a dynamic industrial economy, an uncritical
laissez-faire attitude could not be adopted. Since economic stability could never
be taken for granted, the Keynesian group always attempted to give substanti-
ation, with specific proposals, to active economic policy, owing to at least two
crucial risks that modern economies are constantly facing—the risk of mass
unemployment and the risk of an inequitable distribution of income, both at the
national and at the international level.
This list may be a rough, but it seems to me an appealing starting point. Yet, we must
recognise, as already mentioned, that a coherent theoretical framework cannot simply
grow out of listing a series of building blocks, if they remain unconnected with one
another.
We must aim at the achievement of some sort of heuristic device that may allow us to
use them to construct a full theoretical scheme, capable of embodying the complexity
of a modern industrial economy.

6. Placing the contributions of the Cambridge School of Keynesian

Economics in a coherent framework—for the future
How can we tackle the complexity of a dynamic, unstable, economic system? And,
above all, how can we manage to deal with this complexity, without losing sight of the
many—sometime even contradictory—features of industrial economies? These are
two frightening questions such as to discourage the enthusiasm of most, as is revealed
sometimes even by papers appearing in the CJE. But we should not give up.
As far as I am concerned, I shall try to give here, in an inevitably brief and
incomplete form, a proposal which is argued in detail in my forthcoming book
(Pasinetti, forthcoming).
The place to begin—it seems to me—is to stress convincing reasons why a new
paradigm, radically different from the dominant one, should be attempted.
For me, the main reason lies in the first characteristic common to the works of the
members of the Cambridge School of Keynesian Economics. Theory should start
from facts, hence from history. If the course of history shows dramatic and radical
change, theory should follow suit.
 The Cambridge School of Keynesian Economics 845
I have already argued elsewhere (see, in particular, Pasinetti, 1981) that the process of
increase in wealth that has taken place in the past few centuries has gone through two
quite clearly identifiable phases: the ‘phase of commerce’ and the ‘phase of industry’.
When—after the Middle Ages—a few basic improvements in the technique of
transportation led to the discoveries of new lands and extended the horizon of the
known world to include countries with climates and products previously unknown,
new possibilities of trade were opened up, with a profound impact on the economic
conditions of the world. The trading nations were suddenly better off, not because of
a rise in world production, but because of better utilisation of the resources that were
already available. The neoclassical economic paradigm has all the characteristics to
make it suitable for investigating the impact of this historical phase.
But, after the end of the eighteenth century, a dramatic change took place in human
history—the ‘Industrial Revolution’.
Industry is a process of augmenting wealth through a material increase in the
quantity and number of products, to be achieved by the practical application of the
advances of science, the division and specialisation of labour, better organisation,
invention and utilisation of new sources of energy and new materials. Unlike trade,
industry requires continuous changes in the organisational structure of society. Of
course trade remains the natural and necessary complement of industry but, as a cause
of further increases in wealth, it is bound to subside. Industry, in contrast, is bound to
remain a permanent cause of increase in wealth and to become pre-eminent as time
goes on, owing to the very nature of its cumulative processes.
My contention is that, if history has changed dramatically in this way, an equally
dramatic change is needed in theory, in order to understand, and deal with, what has
happened. It is well known that the early title that Keynes gave to his masterpiece in
the making was ‘The Monetary Theory of Production’—a theory that is aimed at
explaining the economies that emerged from the Industrial Revolution. These are
economies that move and evolve through time, that show an intricate interaction
between natural resources, technological factors and social institutions. Goods are not
given once and for all. They are produced and, to an increasing extent, invented anew.
Consumption evolves too, as we learn new way of using our goods and our time.
The eight basic features characterising the Cambridge School of Keynesian
Economics outlined above capture important aspects of the complex economic
systems that have emerged from the Industrial Revolution. But they are not enough.
We should go further. And I shall be provocative in this respect.
The starting point—I shall stress the word ‘starting’—of the heuristic device I am
proposing in order to give a coherence to the works of the Cambridge School of
Keynesian Economics is to be found not in Keynes but in Sraffa. Methodologically,
the proposal consists in looking at the complex systems of the modern economies,
through two logically distinct—but interconnected—stages.1
At the first stage, which I shall call the stage of ‘pure theory’, the focus is on those
objective elements of reality that have a high degree of persistence through time. The
relationship between these elements should be studied carefully and through an
exercise of abstraction organised in a logically coherent theoretical framework. The
result, as yet, will not reach an all-comprehensive theoretical framework, but it will

1
I had various occasions to insist on this point (see, e.g., Pasinetti, 1994, 2003).
846 L. L. Pasinetti
provide an essential—and in this sense, a general—economic theory. Unlike the
Arrow–Debreu General Equilibrium model (which is at the basis of mainstream
economics, and which is a closed model) this ‘pure theory’ inspired by Sraffa is an
‘open’ theory. It is able to show and clarify basic, objective relations, but it also still
contains many degrees of freedom that are left open. It does not offer—nor need it
offer—a unique solution. It shows, on the contrary, the possibility—and sometimes
the risk—of obtaining many different outcomes. It expresses the effort to show how to
deal normatively with certain economic issues. For instance, it shows how to maintain
the economic system in a condition of full employment. But, from a logical point of
view, the theoretical system does not require the fulfilment of this condition. Logically,
it also works with unemployment (just reflecting the facts of real life).
At this point, one may legitimately claim that, in any economic system, these many
degrees of freedom will have to be closed, and the obvious source for this closure is
through human decisions. I am, in fact, arguing that a full economic analysis is not
complete at the first stage of economic investigation, which, following an expression
used by Sraffa, I have called the stage of ‘pure theory’. We need to enter a second stage
of investigation, precisely because a real economic system is a much more complex
entity than an essential, objective, coherent, core of logically interconnected elements.
There are many mutable, varied, sometime unpredictable events that cannot be
ignored by our analysis, if we want to study an actual economic system.
I have called this second stage of investigation, for short, the stage of ‘institutional
analysis’, because the main factors it deals with concern individual and social
behaviour. It is at this second stage of enquiry that we may introduce different
(sometimes alternative) institutional set-ups through which society is organised.
Precisely because the first stage of investigation leaves open so many degrees of
freedom, we are not constrained at this stage to deal exclusively with only one type of
institution (e.g., a ‘market economy’) or one kind of behaviour (e.g., ‘rational’
individualistic behaviour), as is the case with the dominant paradigm, although such
types of institution and of behaviour are not excluded. I do not need to stress, but
rather just to remind my audience, that very many of the contributions of the
Cambridge School concern this second (institutional) stage of investigation. I am
thinking in particular of Joan Robinson and Nicholas Kaldor.
There are many advantages in using this two-stage approach to frame a coherent,
non-reductionist, Keynesian-Sraffian theoretical framework. First, by avoiding any
subjective hypothesis about human behaviour at the first stage of investigation, we can
aim at a theory that, though with many degrees of freedom, is more solid in its structure.
Second, by developing a theory that is, so to speak, pre-institutional (in the sense that it
is open to diverse kinds of individual and social behaviour), we are enabled later to
insert, into its framework, patterns of behaviour which may be various, and indeed even
alternative to one another. Third, we are able to open up the second stage of economic
investigation to the contributions of other social sciences, which may have much to say
about human behaviour, above and beyond what economists may envisage.
Furthermore, we are able to take full account of the historical and geographical
specificities of each economic system. When the Cambridge Journal of Economics, in its
opening statement, asks the authors ‘to contribute to the understanding and treatment
of current economic and social issues’, I take it that it is confronting us with this kind of
openness.
 The Cambridge School of Keynesian Economics 847
The purpose is to achieve an economic analysis that is, at the same time, logically
coherent in its basic theoretical framework and more flexible in its explanatory
possibilities.

7. Finale
Keynes is not only the most celebrated economist of the twentieth century; he also was
the most complete one. He made a remarkable effort to change radically the basis of
orthodox theory—though, up to the present, still with less success than he deserved.
He was shocked by the Great Depression—a historical event that made him change his
mind and pushed him to carry out the masterful job of combining ‘pure theory’ with
‘institutional analysis’, obtaining an unsurpassed mix of qualitative judgment, deep
perception of the economic problems, and careful considerations of the solutions.
It is difficult to imitate him, but not so difficult to take stock of his contributions and
go ahead, persisting in spite of all on the road of a ‘revolution in economics’, which he
so dearly cherished and so intensely tried to sketch out. Those who believe in the
greatness and relevance of his work should not fear to continuing his endeavours
towards completing it.

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