ABSTRACT
After the publication of the “Liquidity Preference” article, which placed Modigliani among the leading young economists in United States, he returned to reasoning about the future of the capitalistic system and the relationships between individual and collective interests. This chapter deals with a long essay on the organization of a socialist economy Modigliani wrote between 1944 and 1945 and published in an Italian journal in 1947. This essay not only provides the concrete rules to be applied for an efficient functioning of a socialist economy but also considers “necessary” and “urgent” the transition towards the socialization of production. Among the shortcomings of a capitalistic system, Modigliani identifies over savings at the origin of chronic unemployment. The acknowledgment of the crucial role of savings is at the basis of his interest in this topic, on which he wrote a first paper with Hans Neisser in 1946. It represents the departure point of Modigliani’s relative income hypothesis and Modigliani and Richard Brumberg’s life cycle hypothesis they developed in the 1950s.
The chapter also discusses the so-called Meat Plan Modigliani elaborated to face the problem of meat shortage, suggesting fiscal actions alternative to price control.
