From general equilibrium dynamics to the political economy: the influence of Austrian tradition on E. Fossati

Eraldo Fossati (1902-1962) can be considered as one of the leading exponents of the Paretian tradition in Italy. In his research he tried to dynamize the Paretian theory of general equilibrium. In this approach an important role can be assigned to the State. In the first phase he emphasized the role of the true uncertainty following the Austrian tra-dition. After the second world war he supported the Keynesian theory and made an original proposal to reconcile Pareto and Keynes, considering the latter not as a revolu-tionary economist but rather as an innovator who furnished new tools with which to un-derstand the real workings of contemporary economic systems with their chronic unem-ployment. In this perspective the role of the State is substantial. The uncertainty of the economic life and the difficulties of coordination among economic agents are, in the Fossati’s approach, the roots of the necessity of the intervention of the State in the mod-ern economic systems.