Habits and Expectations: Dynamic General Equilibrium in the Italian Paretian School

Abstract

The Paretian school was one of the most important schools of economic\ud thought in the interwar period in Italy. It comprised a small but combative\ud group of economists, among whom the names of Luigi Amoroso and\ud Giulio La Volpe stand out. The most ambitious project undertaken by\ud the Paretians was to make dynamic the theory of general equilibrium\ud by grounding it in the use of then sophisticated mathematical instruments,\ud such as functionals, differential equations, and the calculus of variations\ud drawn by analogy from mechanics. Amoroso, utilizing his scientifi c background\ud to emphasize analogies with the physical sciences, in particular\ud with rational mechanics, proposed a view of economic dynamics based\ud on the past; La Volpe took a totally different tack by concentrating on\ud choices based on plans and predictions, that is, on the future. The Paretian\ud approach to dynamics was one of the most original products of the Italian\ud tradition between the two world wars, at least in the fi eld of pure theorizing;\ud but, for reasons that we will explore, it did not have a signifi cant impact\ud on the working out of economic dynamics in the postwar period

Economic Dynamics and the Calculus of Variations in the Interwar Period

“…The theory of dynamic equilibrium was the main research topic in Italy during the 1930s, and the Paretian School made significant contributions to it in that decade. All the members, and particularly Amoroso, Giulio La Volpe, Eraldo Fossati, Felice Vinci, and Giuseppe Palomba, made important contributions, although they had followed different routes (Pomini and Tusset 2009). For my purposes here, I shall restrict the treatment to Amoroso and La Volpe, not only because they probably made the most significant contributions to the dynamics, but also because they used functional calculus drawn from the American mathematicians.…”

The Great Depression and the corporatist shift of Italian economists

“…Amoroso's position in the Paretian school deserves particular consideration because of its notable analytical results (Pomini and Tusset 2009), but above all because Amoroso's intellectual path can be considered paradigmatic. He was one of the few economists who immediately aligned with the fascist regime, doing so for ideological reasons that had little to do with the economic theory of corporativism.…”

How Influential Was Mechanics in the Development of Neoclassical Economics? A Small Example of a Large Question

“…His paper was significant for its generality and for the solutions as examples of time series analysis; 25 but its mechanical analogies are rather weak, and the usual reservations about relying upon mechanics apply. A similar judgment applies to those students of economic dynamics of that time who relied on a mechanical background for their work; for example, Italian followers of Pareto (Pomini and Tusset 2009).…”