The preceding remarks originated in a discussion, at the Accademia Nazionale dei Lincei, of Luigi Pasinetti's Keynes and the Cambridge Keynesians. Naturally, then, it consists mostly of comments on the work of the Cambridge Group and on the significance Pasinetti attaches to that work. The developments dedicated to structural dynamics are rather limited in the preceding exchange: an expression of strong support of the basic idea, a reference to earlier strands of work on multisector growth models and patterns of economic development, and the concrete suggestion that analyzing the sources and consequences of the well-documented shift from goods to services in modern economies is an excellent example of structural dynamics waiting to be undertaken. I should have seized that occasion to emphasize that the shift seems to be a response to the relatively high income elasticity of demand for services such as education, recreation, travel, food preparation and health care, and therefore a clear example of the need to think about demand side and supply side together. I would like to add a few more general remarks here.

I cannot imagine how anyone could be ‘against’ the goal of a structural dynamics. Multisector growth models and one-sector growth models are complements, not rivals. The main reason for pursuing one-sector and two-sector analysis is transparency. The role of certain fundamental principles, like the central importance of diminishing returns to factors of production that can be accumulated, or the role of biased technological progress, is easier to understand in a fully aggregative context. But the way these principles work themselves out in practice may need to be studied in an explicitly multisectoral model. The same is true of basic demand-side influences, like different income elasticities of demand. Long-run variations in the composition of aggregate output are visible to the naked eye. They need to be understood.

This would hardly need saying to anyone who thinks of macroeconomics as a pragmatic discipline, not an ideological opportunity. In precisely that spirit I want to suggest one more currently salient issue about which an empirically validated structural dynamics would almost surely have useful things to say.

I have in mind a rather less clear-cut example. There are hints in the past decade or so that the wage share of national income may have fallen relative to the property share. Since the measured ‘wage share’ includes a return to human capital, and the human-capital component itself may have been increasing, the share of ‘raw’ labour may have decreased more sharply. In the US at least, however, the measurement of income shares has been strongly affected, and may have been distorted, by the growth of the financial services industry, which may be transitory rather than ‘structural’. Suppose, however, that there does indeed turn out to be something of a long-run character to explain.

Then once again a multisector, multi-factor growth model would be the natural vehicle. Relative shares in national income are weighted averages of sectoral shares in value added. Long ago I wrote an article that showed, using fairly primitive methods, that much of the apparent time-series stability of relative income shares could be accounted for simply by this averaging process. A full explanation would have to account both for shifts in the intra-sectoral distribution of value added and for endogenous and exogenous shifts in the sectoral weights. Something might need to be said about both factor substitution elasticities within sectors and demand-side substitution elasticities among sectoral outputs. There may be other, more purely macroeconomic, forces at work. Incorporating them in a multisector growth model would force an explicit formulation of any such forces that is in any case desirable.

I remember a joke from my childhood. Scholars of many different nationalities are shown an elephant and asked to write a brief essay about it. The German writes An Outline of an Introduction to a Treatise on the Fundamental Nature of the Elephant, the Frenchman writes on L'Elephant et l'Amour, the Pole writes on The Elephant and the Polish Question, and so on. The point I am trying to get across is that structural dynamics is a natural extension of ordinary economics and worth continued attention, not some exotic addendum to be attached to near-irrelevant special interests.