manuscript was published under his own signature and not as an anonymous
official U.N. document.

The famous text not only claimed that in the region “reality” was
undermining much of past and present economic doctrines and the
international division of labor, it also argued that the Periphery had an
inherent external disequilibrium (“desequilibrio” not “desbalanceado” =
“unbalanced”) tendency. Its stop and start shaky growth process denotes the
limitation of the traditional external pull of the Periphery’s growth: its export-
led growth (“hacia afuera”) process of the past now required an alternative
driving force mechanism, *one* of which is the industrialization process
of certain sectors, which in turn presupposes a whole series of “structural
reforms”: land, fiscal, state reform, etc.

The inherent disequilibrium is not simply a product of fiscal
mismanagement or badly thought investment priorities, in the long run,
balance of payments receipts decline as the deterioration of its terms of
trade vis-à-vis the products which the Center manufactures makes its
presence felt.

Prebisch thought that this process materialized through the cyclical
repetitive process, which meant that unlike the industrial Centers, the
Periphery did not manage to retain the fruits of its own technical progress.
The Center even manages to appropriate for itself those productivity gains
via price decline of raw materials elaborated by the Periphery. He argued that
the asymmetry between the Center and the Periphery and its negative effects
can be seen in many areas of the industrial countries and within the Periphery
itself, a notion of power that would be developed extensively by Furtado in
his interregional and country analysis.

But what a well-designed and programmed process of investment did
ensue in Prebisch’s proposal, requiring the incorporation, the integration, of
higher numbers of the population within the “modern” circuits of production,
especially given the importance of the reforms (land, fiscal). The “liberation” of
the work force from traditional forms of “bondage” of all sorts (heterogeneity)
was also a prerequisite, industrialization and the cities were to soak up that labor
producing a sort of “social mobility” coupled with the rising of productivity
levels and standards of living. That explains Prebisch’s insistence in the Central
Latin American common market and other arrangements between and within
countries to expand markets and make possible economies of scale.

Prebisch was well aware of the ubiquity of the “heterogeneous” nature of
much of the technical and social relations in the region, a notion which in the
coming years, especially with the work of Furtado, would become central: the
“structural heterogeneity” of the Periphery was to be transformed through
structural reforms: at the technical and geographic social division of labor.

He agreed with Furtado on the transformation of those societies and
their industrialization, but always thought industrialization *per se* had its

limits given the asymmetries involved.<fnref n="14" /> The issue was not “caching up”
with the West but rather simultaneously prepare the Periphery to withstand
the necessary downswing of the cycle as well as promoting the conversion
of the technical division of labor: economic development was precisely
the transformation and the rise of the productive capacity of its societies.
As mentioned previously, distribution of productivity gains between the
Center and the Periphery was an issue related to the power asymmetries
in question, theoretically examined through the lenses of *time*. Classical
and neoclassical economics eluded this issue by introducing money as a
“vicarious” entity to restore a balance between the real and financial levels
of the economy. <fnref n="15" />

Although Prebisch did not make explicit many of the theoretical
considerations,<fnref n="16" /> he was adamant that his purpose for heading ECLAC’s
project for Latin America was to produce practical and well-organized
policies and technical advice to development projects (Prebisch 1952: 24).
Prebisch’s reminder of ECLAC’s mission and objectives represents just one
of a series of difficult episodes at the organization, among them with Furtado
as mentioned previously. Especially, Furtado’s argument of a specific
version of the growth process examining the power asymmetries among and
between diverse heterogenous agents evading the so called “inflationary”
policies, aspects of which remained an unresolved problematic between
Prebisch and Furtado.

Growth in Brazil was realized under a very positive socializing cost
effects that fell on coffee exporters and importers of consumer goods
given the existent foreign exchange controls then in force, which in turn
favored the introduction of capital goods. The narrative questioned the
idea that the recent growth of Brazil in the 1945-1954 years was a product
of an “inflationary” process unless one forgets the parallel product growth
during the period. The accounts of inflation, which later was to be named
“structural,” implied differentiating the “static” orthodox notion vis-à-vis the
“dynamic” heterodox one in Furtado’s terms. It was the Mexican colleague J.
F. Noyola (1956)<fnref n="17" /> who managed to synthesize those views a couple of years
later as “structural.” Noyola, following the trails of Furtado, argues:

<footnote n="14">¹⁴ See Toye in Mallorquin (2003), also Mallorquin (2006).</footnote>

<footnote n="15">¹⁵ See chapter on Prebisch for the evolution of his ideas.</footnote>

<footnote n="16">¹⁶ And yet Prebisch could not help himself. In 1953, after many important economists of North-American universities visited Brazil: G. Harbeler, J. Viner, R. Nurkse, L. Robbins, in a sense to counter ECLAC's ascendancy, E. Gudin wrote a series of articles in *O Correio Da Manha* with the title "The mystical planning", to which Prebisch responded with "The Spontaneous Mystical Equilibrium of the Economy": "its proof that Dr. Gudin continues to believe in the tendency towards equilibrium, inherent in the economic system, when perturbing elements are not introduced in the economy. I don't believe in all of that. The cycle is the typical form of growth of the capitalist economy, that is to say, an uninterrupted succession of disequilibriums." (Prebisch 1953a)</footnote>

<footnote n="17">¹⁷ Noyola seems to be the only one to have reviewed Furtado 1954 (Noyola 1955). On Furtado and Noyola relation, see first chapter in Mallorquin (1998, 2020) and C. Danby (2006).</footnote>
inflation is not a monetary phenomenon; it's the result of disequilibriums whose characteristics are real that are manifested in the form of a general price level rise. The real character of the inflationary process is much more perceptible in underdeveloped countries than in the industrial ones. (1956: 67)

Although Noyola said that “inflation is in each Latin American country a specific and distinct problem” (1956: 68), its comprehension needs a distinction between “basic inflationary pressures” and the “propagating mechanisms.” The first aspect refers to its causal origin which generally is observed in growth “disequilibriums localized nearly always in two sectors: foreign trade and agriculture”; the second is about a “propagating” mechanism that could vary among many, but they can be “grouped around in three categories: fiscal mechanism (in which it has to be included the system of social welfare), and the mechanism of readjustment of prices and incomes” (Noyola 1956: 69).<fnref n="18" /> But for Furtado, the *original* forces of the inflationary “pressures” were the antagonistic mechanisms generated by the agents through which they defended their income, or the distribution patterns in place. Therefore, the intensity of the inflation is measured not by the circulating mass money or its velocity, but rather considering the “pressures” (the antagonistic moment) and “propagating” forces (by Banks and monetary logic).

Years before Nurkse's visit to Brazil in 1952, we encounter one of the first "misunderstandings" on the role of growth/inflation couple between Furtado and Nurkse, claiming he was misread by the latter:

> If I understand correctly, he advocates in the last part of his essay a deliberate concentration of domestic as well as foreign investment on export industries and on industries producing import substitutes, as a mean to meet the pressures on the balance of payments that arise in the process of economic development. I must confess I have little faith in this prescription. It will not avert inflationary trends and balance of payments difficulties unless an attack is made on the root of the trouble; the tendency of money income to run ahead of productive capacity. In my view these pressures may have not even be related to high income elasticity of demand for imports. Besides, the very concept of income elasticity is usefully applicable only if the basic relationship between income and imports (that is, the 'import function') can be assumed to be fairly stable. If, as I am inclined to believe, the main trouble lies in the so-called 'demonstration effect' and its influence on the propensity to consume, a change in the direction of the current flow of investment may accomplish little or nothing. The problem is rather to 'make room' for his investments by keeping a firm check on the growth of expenditures

other than capital outlays. To recognize that inflation may have various underlying causes is one thing; but to say (as Furtado seems to say) that inflation is therefore *not* a monetary problem is quite another thing and, in my opinion, misleading. (Nurkse 1953: 80, my emphasis)

Prebisch certainly took his time to get involved in these discussions. Given his insistence on the importance of taking care of monetary aspects with anticyclical policies, he still thought he could find room for a non “orthodox monetary stabilization” formula (Prebisch 1961: 53). Prebisch argued that income contraction *per se* was not recommended when the structural factors were the primary origin of inflation, but:

> It would be a serious error to attribute exclusively to the structural vulnerability of the economy the cost and investment inflation. Because Latin American experience has shown repeatedly the importance of monetary and financial policies. There is no automatic relation between the structural vulnerability and inflation or the intensity with which it develops. (1961: 58)

Certainly Prebisch, during the 1950s, did not think structuralism could encompass the whole field of economics, Furtado on the other hand developed a general conception that not only referred to specific problems of the “underdeveloped economies,” but also could explain the “structural obstacles” of developed countries. In Furtado’s vision, the power asymmetries which Prebisch brought to light between the Center and the Periphery could be translated to any other social or geographic spaces, because what was at issue was the disparity, power asymmetry between and within certain economic agents whose main characteristic was their heterogeneity. The structural heterogeneity was a universal phenomenon, manifesting itself in a wide variety of power and institutional forms through which certain agents possess in separation certain of their conditions of their existence.

In Hirschman's terms it could be said that the driving force and organizational structure of the production units within and between sectors and regions depended on their inherent “unbalanced” *empowerment*. Hence the importance of structural reforms that addressed those “disequilibriums.”

This is one of the aspects of Latin American Structuralism which has been less understood: the state was needed not just for implementing and creating investment opportunities, just as important was its role in “creating” the “market(s).” Establishing rules of possession in separation of the conditions of the existence of the units and sectors of production, as well as more “modern” social relations for the labor force which was going to join a new social-technical division of labor, aspects of which had to be taken into account by the industrial policy to follow. Structural obstacles meant that the incorporation and articulation of new technologies and social relations was not an automatic process.<fnref n="19" />

<footnote n="18">¹⁸ O. Sunkel published a similar article two years later, but here he talks of three types of “pressures”: “basic,” “circumstantially inflationary,” and “accumulative”, which turns problematic the causality explicitly developed by Noyola who insisted, on the double pronged division between “pressure” and “propagation” of the inflationary forces. (Sunkel 1958)</footnote>

<footnote n="19">¹⁹ For an expanded discussion of these issues see section “Mobile Army of Metaphors”.</footnote>
Mr. Hirschman Through the Looking Glass

If Muslims are obliged at least once in their lifetime, if conditions permit, to visit Mecca, Western-centric economists should themselves be under the same constraint to stopover at the Mecca of Development. Hirschman made it his lifelong laboratory center: theoretically and existentially.

By the mid-fifties Hirschman also had reached a notorious disbelief about the capacity of economic discourse to explain specific rationalities that motivate change and transformation of societies; he initiated the task of reconstructing a perspective that could be “fitted” in underdeveloped regions.

Once you assume that capitalization or aggregate investment cumulatively does not tell the whole story of development, that it does not incorporate various human and capital resources, an argument is required in respect of the best way to combine these elements. In other words, you need a “binding agent” (Hirschman 1958: 6) to explain the particular way in which it will make decisions and get the economy growing, in other words, Keynesian remedies are insufficient. The growth models have no problem in this respect because they consider investment or “induced investment” as an automatic behavioral process of the functional relationship between output and capital formation. Therefore, Hirschman deliberates on the importance of the inducement mechanisms of investment, a phenomenon that in contrast to the developed nations, in underdeveloped countries saving and investment decisions are “interdependent” (Hirschman 1958: 32).

The notion that development requires a simultaneous process of investment along a series of sectors or production units, or otherwise a negative vicious circle ensues, is also questioned by Hirschman. In underdeveloped countries, something else is required, a mechanism which Hirschman calls the “complementary effect,” it:

> Reinforces and supplements the slowly growing ability to invest (...)
> The investments of one period call forth complementary investments
> in the next period with a will and logic of their own, they block out
> part of the road that lies ahead and virtually compel certain additional
> investment decisions (...) is therefore the essential mechanism by
> which new energies are channeled toward the development process
> and through which the vicious circle that seems to confine it can
> be broken. To give maximum play to this effect must therefore be a
> primary objective of developmental policy. (1958: 42)

The complementarity effects dissipate as the economy reaches "higher levels of development," some investment exhausts its importance since the input-output matrix of the economy has most of its boxes filled. But all in all, Hirschman has no intention to displace Rostow's notion of the "take off" period. H. A. Simon (Hirschman 1958: 48) is brought to the rescue to explain

Post-Keynesianism and Latin American Structuralism" in chapter 6.

the learning process of investment by which is meant that the preliminary
process of development will need some initial force to enhance the pace so that
the agents in question don't give up once they become conscious of the cost of
reaching the task in hand. Thus, Hirschman insists that he is not proposing a
"rigid" model of development, but steady growth has to do with the ability to
invest, considering the great variety of negative forces that can appear, which is
the reason why a conscious "development strategy" is needed.

One of its ingredients supposes the deconstruction of the “balanced
growth” perspective (Rosenstein, Nurkse, Lewis) which presupposes an
initial effort of investment in various sectors at the *same time* so that they can
complement each other, but the theory fails as a theory of *development*. As
Hirschman observes:

> Development presumably means the process of *change* of one type of economy into some other more advanced type. But such process is given up as hopeless by balanced growth theory which finds it difficult to visualize how ‘underdevelopment equilibrium’ can be broken into at any one point. (1958: 52)

But that perspective assumes an absence of differences between sectors and production units, and wants to impose an “entirely new, self-contained modern industrial economy [...] on the stagnant and equally self-contained traditional sector” (Hirschman 1958: 52). This is not “growth” since in a dualistic division conception both aspects of the economy require an articulation. According to Hirschman, even if this is an exaggerated view of the balance theorist’s account, what makes it its worst ally is the notion that it:

> requires huge amounts of precisely those abilities which we have
> identified as likely to be in very limited supply in underdeveloped
> countries. (...) In other words, if a country were ready to apply the
> doctrine of balance growth, then it would not be underdeveloped in
> the first place. (1958: 53)

Hirschman maintains that if the balance growth theory is put forward
precisely to get governmental intervention, then it’s “hardly “convincing,”
because what “private enterprise” does not undertake, public authorities
may not be able to guarantee. There are thus some activities which cannot be
undertaken, no matter who it is entrusted to realize them. And a multitude of
centrally planned investments so that it internalizes *only* “external economies”
and simultaneously excludes external diseconomies and social costs of new
ventures is hardly possible. But the image behind it, says Hirschman (1958:
56), is what defeats it since it presupposes sectors that won’t be touched by the
process of development while maintaining the idea of a rise of a “brave new
sector to be built from the ground up in isolation”. In this fashion, all those
who might possibly suffer losses in the course of the development process
are effectively assumed away. (...) But in general, economic development
means transformation rather than creation ex novo: it brings disruption of
traditional ways of living, of producing, (...) and (...) social costs. (Hirschman 1958: 56)

Thus, Hirschman's answer is “unbalanced growth”:

Just as on the demand side the market can absorb ‘unbalanced’ advances in output because of cost reducing innovation, new products, and import substitution, so we have isolated forward thrusts on the supply side as inputs as redistributed among users through price changes, and at the cost of some temporary shortages and disequilibria in the balance of payments or elsewhere. In fact, development has of course proceeded this way, with growth being communicated from the leading sectors of the economy to the followers, from one industry to another, from one firm to another. In other words, the balanced growth that is revealed by two still photographs taken at two different points in time is the end result of a series of uneven advances of one sector followed by the catching up of other sectors. (...) this kind of seesaw advance over ‘balanced growth’ (...) is that it leaves considerable scope to *induced* investment decisions and therefore economizes our principal scarce resource, namely, genuine decision-making. (...) An ideal situation obtains when (...), one disequilibrium calls forth a development move which in turn leads to a similar disequilibrium and so on ad infinitum. If such a chain of unbalanced growth sequences could be set up, the economic policy-makers could just watch the proceedings from the side lines. (1958: 62-63 and 71)

Thus, development presupposes a “chain of disequilibria.” The retroactive decisions to invest will produce the possibility to precisely jettison those forces and disequilibria which brought it on. As Hirschman explains:

> our aim must be to *keep alive* rather than to eliminate the disequilibria of which profits and losses are symptoms in a competitive economy (the task of development policy is to maintain tensions, disproportions, and disequilibria. That nightmare of equilibrium economics, the endlessly spinning cobweb, is the *kind* of mechanism we must assiduously look for (...) Therefore, the sequence that ‘leads away from equilibrium’ is precisely an ideal pattern of development from our point of view. (Hirschman 1958: 66)

Although all investment can be considered as induced investment, the notion of the complementarity effect mechanism supposes that those investments are “*net beneficiaries* of external economies” (Hirschman 1958: 71). Therefore, each induced investment should remind everyone of the multiplier effects: each new investment induces a series of subsequent ones, although not all investments will necessarily converge. Now, obviously external diseconomies will appear with new investments, damaging established plants, but its effects will spread over longer periods while novel investments inaugurate and renew a positive cycle of external economies in a

different sector. It is in this context that Perroux is brought to the attention of the reader as “closer to our viewpoint” (Hirschman 1958: 74).

The election or “guidepost” of the optimal developmental strategies requires a reflection on the order or sequences of the investment pattern, which means that “profitability” *per se* cannot be assumed *a priori* to be the best way to generate a continuous reinvestment process. Thus, the election process for Hirschman requires a more complex system in terms of a *jigsaw puzzle*: “The fitting in of individual pieces would represent the taking of discrete development steps. The problem would again be to minimize the time needed to put the puzzle together” (Hirschman 1958: 81). Since the aim would be to surround the neighbor’s parts, “the process becomes more determinate since you’ll chose those pieces that take less time to install” (Hirschman 1958: 82). Thus “efficient sequences” will necessarily entail a variable dependent on the pieces that have been installed initially. The exercise is a way to establish that there is no preordained order or sequence that the productive chains should follow. This also takes Hirschman to discuss the issue as to the priority or otherwise of pushing the investment in Social Overhead Capital (SOC) versus Directly Productive Activities (DPA). Again, no necessary order can be established beforehand. Although investment in SOC is “safer” than in DPA, since it is supposed to materialize throughout the economy it can also be a burden because planners are basically blinkered and thus unable to articulate it to the DPA sectors. Thus, only history and economic analysis can help to see which would be the more “productive” sequence: “whether DPA investments lead to SOC or vice and versa, better still which ‘maximizes’ ‘induced decision-making,’ as Hirschman observes:

> it is the experience of unbalanced growth in the past that produces, at an advanced stage of economic development, the possibility of balanced growth” (1958: 93).

What makes Hirschman much more than just the “traditional developmentalist” of the epoch is that he is willing to reconstruct a series of categories to fill the theoretical void once you question the basic notions implied by the maximizing agent. Thus, the process of industrialization does not have a preordained sequence either in terms of the sectors or the factories. Within the DPA sectors, the derived demand can be thought in terms of “*backward linkage effects*” (Hirschman 1958: 100), that is, the inputs needed for the unit of production, or output utilization products: *forward linkage effects*, in other words, intermediary inputs needed by other sectors or production units.

Thus, traditional complementarities and external economies, cumulative causation, etc., cannot help to think a “developmental path,” even though we might have the input-output statistics requirements at hand. But with the “well-known backward and forward effects” (Hirschman 1958: 100) development policy can supersede traditional analysis and evaluate the strength of the
industrialization. Hirschman insists that those forces were “less powerful,” and received simultaneously a matching response in terms of a periodic price decline. But in latecomers the pressure towards a downward price movement cannot be compared with those of the industrialized world because the equipment in use has already gone through the competitive price/cost cut struggle. The benefit in the “high” technological advances is exhibited in most capital imports. Thus, avoiding inflation in underdeveloped countries is much more difficult given the sectoral price movements. But Hirschman seems to have forgotten his thesis that not all of imports are manufactured goods.

Therefore, the relative high price rises make for better signals for investment in certain sectors, but low supply elasticities do not explain the whole picture since it also depends on the skill and “determination” of the monetary and fiscal management (Hirschman 1958: 161).

Of a possible scenario of four types of price and output behavior, the most convenient one is that which promotes investment in certain sectors where price rises acted and thus overcome those “imbalances” that engendered price rises. As Hirschman argues:

> But there is a real difference between an economy that solves *new* supplies problems in every round of inflation and one in which it is the same supply problem that is constantly causing prices to resume their upward course. (1958: 162)

And yet in some areas Hirschman argues that price signals are not always the only or best incentive mechanism: “Fortunately the strategy of unbalanced growth does not stand or fall with the efficacy of price signals” since alternative “methods for restoring balance between sectors” create those “uneven growth” and “economic tensions” (Hirschman 1958: 163), which in turn promote additional forces for development.

Unlike Latin-American structuralists, Hirschman seems dubitative to say the least on shedding traditional notions of inflation: although the so-called “price-price spiral” (Hirschman 1958: 163) is more *akin* to the “wage-spiral inflation of developed nations,” its problems and difficulties are much more pronounced than the usual excess demand for “investment and consumption,” notwithstanding that the latter explanation is “correct at times”. As Hirschman explains:

> Nevertheless, anti-inflationary policies must certainly be re-examined if excess demand is not considered to be the only or even the principal villain. In the first place, we can understand why both the commercial banks and the central bank are often taken aback by the admonition that they must not finance an investment boom. All they are doing, they will maintain, is adjusting existing credit lines to the higher prices that have come to rule for some commodities. We see now that this opinion may not be as naive as we usually tend to think. The role of the banking system in a price-price spiral inflation is far more passive than in a demand inflation. The banks merely permit their clients to pass on

all price increases, in the interest (...) maintaining economic activity at previous levels, not of expanding it. (1958: 164)

He concludes that inflation in “underdeveloped countries arises principally from supply imbalances that are characteristic of the growth process” (Hirschman 1958: 164). On the other hand, balance of payments difficulties is seen because of excess demand. But in underdeveloped countries balance of payments difficulties could be a product of the typical growth sequences and hence not a reflection of domestic inflation. Shortages could be solved importing goods under that circumstance, if foreign exchange is available, and the demand in question will not necessarily generate any rise in prices. In these cases, it will be sane for a government not to allow the price to signal movements in demand, especially if it cannot guarantee that additional production will be forthcoming.

Thus a “respite granted” by an import surplus can be extremely valuable, provided it is utilized by the public authorities to push through some of the reforms required to “increase supply elasticities” (Hirschman 1958: 167).

The thesis that the balance of payment difficulties are seen as a consequence of “output-input imbalances and disproportionality” during the growth process, becomes something close to the notion of “structural factors” as the cause of those complications rather “than the inability of developing countries to live within their means” (Hirschman 1958: 169).<fnref n="21" />

Also, fluctuations in foreign exchange earnings are an endemic part of the underdeveloped economy given the price fluctuations of their products, however Hirschman does not waver an inch to convey his support for the Singer-Prebisch thesis.<fnref n="22" />

Whereas much of Hirschman’s argument on unbalanced growth can be seen in terms of interregional and international power asymmetries, terms which evoke much more within structuralists’ circles, he prefers the use of the “polarization effects” within and between different regions or sectors, or countries. But then power asymmetries become central in his consideration. If a region could in some instances be “treated as *though they were a country* and, in some others, *treat a country as though it were a region*” (Hirschman 1958: 199), it would be easier to create situations favorable to all parties in development.

Much depends on the mechanisms of transmission of growth which he labels the “trickling-down” and “polarization effects.” Instead of using the developed and underdeveloped couple or for that matter Prebisch’s *Center-Periphery* one, Hirschman uses “north and south,” a kind of spatial

<footnote n="21">²¹ Hirschman’s “Preface” (1961: viii) of the paperbound edition of the book acknowledges similarities with the Latin American “structuralists.”</footnote>

<footnote n="22">²² The only appearance of “Prebisch” in Hirschman’s classic work can be seen in the longest footnote of the book in which he mentions the Singer-Prebisch thesis and the negative effects of the deterioration terms of trade: “need not be a losing proposition for the primary producing countries provided they industrialize” (Hirschman 1958: 159), a thesis which does not necessarily contradict Prebisch’s argument, as I hope I made clear. See the first two chapters.</footnote>
metaphor to portray the process of growth via their interaction to think the policies necessary to limit the “polarization effect.” One of the effects of the north’s growth as a stimulating force on the “south” would be the “trickling-down effects” by certain demands for its products. But it could also be the foundation of the profound interregional polarization, which in turn could drive the south to sponsor policies to counteract these effects.

But the fact that the trickling-down and polarization effects can be overturned shows that what is needed is some sort of “sovereignty” for the south as a mechanism to counteract the polarization effects. Therefore “the polarization effects will be stronger when there are no frontiers to cross, [and] so will the trickling-down effects” (Hirschman 1958: 197). In an international context between countries, the “trickling-down effects will mean an important force as a promoter of development if some sort of mutual dependency is involved. The problem is when a country has no goods or resources to articulate itself to the international transmission of growth pattern, which can be seen when a region is integrated *into a larger country*” (Hirschman 1958: 197). Although interregional, the north might have the possibilities to acquire its necessities outside the shared space with the south, internationally the obstructions for the trickling-down effects are much “stronger, just as the trickling-down effects themselves are weaker, than in interregional relations” (Hirschman 1958: 198).

In other words, given the absence of an international entity, “forces making for interregional transmission of growth are likely to be more powerful than those making for international transmission” (Hirschman 1958: 198).

But for Hirschman there are no general optimal institutional arrangements. The mere posing of the question is a mirage because “closing the gap” between “north and south” requires the use of instruments that would ordinarily be thought to be disruptive of the very integration they are designed to achieve. While it is the purpose of these instruments to cut down the strength of the polarization effects, great care must be taken, of course, not to interfere with the efficacy of the trickling-down effects:

> Thus, economic policies are designed to insulate the South sufficiently so that it may undertake certain industrial and export activities in competition with the North; but, at the same time, the complementary relationships that make the South a supplier of the North must be preserved and intensified. (1958: 200)

In contrast, Hirschman asserts:

> For *international* transmission of growth (...) The task here is to keep the polarization effects as weak as they normally are among independent nations, but to increase the strength of the trickling-down effects. In other words, the underdeveloped countries ought to retain the developmental advantages of sovereignty. (1958: 200)

Nonetheless, Hirschman feels “uneasy” about the argument that “pressures,” “tensions and disequilibrium” *are* virtuous, which is the extension of the argument that “economic growth creates profitable opportunities and the concept of disequilibria include these opportunities” (1958: 208),<fnref n="23" /> since not all productive sectors and induced investment have the same scope for growth.

## Remembering the Future

It could be assumed that the recovery of Latin American Structuralism as perhaps one of the earliest theoretical currents to engage on issues of development forms part of a Latin-American nationalist chauvinism or worse still “fanaticism.”<fnref n="24" /> A case for its paternity can certainly be made. But it would take a Hirschman’s like stance, but which is frowned upon in other quarters. Hirschman is explicit in assuming the role of grandfather to “dependency”<fnref n="25" /> theory, and equally in his revised version of his 1945 book *National Power and the Structure of Foreign Trade*, he states priority for developing the notion of “Gini index or coefficient” (Hirschman 1945: xviii).

But what is at issue is a very distinct problem: Latin American Structuralism forms part of a very long tradition in social and economic thought that once in a while reappears to reiterate the theoretical central importance of power asymmetries in social relations, and the examination of the calculating agent in specific historical contexts. Perhaps Perroux and his followers had said something similar having also questioned the mechanical notions of general equilibrium, hence the study of inter and intra-regional asymmetries (“poles of development”), power asymmetries that underlie the exchange/production mechanisms among the various sectors and production units.

Economic thought has been haunted constantly by this future, that is, the return of power relations to think the economy: see the Schumpeter and the German historical debate Morishima (1998), or the early questioning in classical political economy (William Thomas Thornton) of the price and market mechanism as simple consequence of the supply and demand schedule (Mirowski 2004), as well as Talcott Parsons whose strategy during the 1930s simultaneously assigned the question of power to “political theory” and evaded the matter which was preeminent among those who were until then his intellectual mentors: the institutionalists.

Structuralists in Latin-America certainly constructed the tradition from which they searched alternatives and emancipation, and although their reading of the classical Western-centric tradition could be a source of debate, what was central was the need of a new vocabulary for its own policies. We mentioned that Furtado denied classical political economy as simply a comedy of errors because it did not address the question of “underdevelopment” and also

<footnote n="23">²³ “development also draws new strength from the tensions it creates.” (Hirschman 1958: 209)</footnote>

<footnote n="24">²⁴ Term used about Furtado in the conversation between Gudin and Harbeler (Furtado 1985: 124).</footnote>

<footnote n="25">²⁵ For an account of dependency theory, see Kay (1989).</footnote>
Prebisch’s critique of economics and its downfall for not considering the notion of “time.” Hirschman in turn with the question of the inherent “disequilibria” of the economy as its driving force certainly did not attempt to retrace these notions in economic thought but given that there was already, in its initial phase, a theoretical space in academic life that maintained that “underdeveloped countries” had to be treated with a different set of lenses, it was perhaps futile. And yet much of his subsequent work is undertaken in the field of the history of social thought especially around the notion of the “market.”

The most important part of this episode, in terms of Furtado and Hirschman alike, is that it became the laboratory which was to witness the transformation of a particular discourse that privileged its questions on a specific geography of the world economy into a general conception. In this context, Hirschman observed:

> It appears, therefore, that the very characteristics on which I had sought to build economics specially attuned to the underdeveloped countries have a wider, perhaps even a universal, range and that they define, not a special strategy of development for a well-defined group of countries, but much more generally valid approach to the understanding of change and growth. In other words, I set out to learn about others, and in the end learned about ourselves. (1984: 95)

On the other hand, Latin-American development process between 1950 and 1980 cannot be seen simply as the materialization of “structuralist” policies, although it’s a period of high rates of “growth,” which it’s difficult to compare with what happened afterwards under the so-called neoliberal era.

The “black legend” created by neoliberalism on state intervention and “closed economies” of the region to engender changes in policies cannot be read simply as the result of structuralists’ proposals during the 1950s and 1960s. ECLAC and Prebisch were the first to criticize the exaggerated level of protection in some industries and countries in the region. And perhaps what is the most misunderstood aspect of the structuralist thesis is the so-called state and market opposition (especially in Western-centric literature): great part of the aims of the structural reforms during the 1950s was to reconstruct the rules of the game, institutions, not state intervention. To recreate the relations of possession in separation of the conditions of existence of production units, generating the “market.” How the articulation of the production units gets organized is a different matter and debate. But structuralist analysis of the region’s economies found that they were hardly consolidated as “totalities” as such, and sometimes not even at a regional level. State “intervention” not only meant facilitating financial help for potential entrepreneurs but also sponsoring policies with the aim to establish the social and political conditions for the market. Which did not mean that the heterogeneity, technologically or socially speaking, would just evaporate with the reforms, but that was precisely what a developmental perspective had in mind. Given the notion

that structural heterogeneity is the product of diverse and distinct power conditions, the more “modern” were those institutional rules, the better.

Another aspect of the history of the policies sponsored by structuralists has also been “misconstrued.” Let us hear it from the man himself. For Prebisch, the option whether to produce locally certain industrial products or to import them had to consider the proportion of the income which was to remain in the local economy:

> Let us first clarify one important point. Industrial costs higher than import prices do not necessarily mean that an industry is not economic for a country as is sometimes assumed. Of course, the smaller the difference the better. The problem has to be considered from another angle. It is not really a question of comparing industrial costs with import prices but of comparing the increment of income obtained in the expansion of industry with that which could have been obtained in export activities had the same productive resources been employed there. (1959: 255)<fnref n="26" />

Also it was never recommended that countries should fill all their input-output matrix sectors by local production: it was always thought that as economies evolved what actually changed was their *import composition*, a rate of substitution which could not be sustained given foreign exchange limitations, hence the inherent disequilibria of these economies and the need to think of rates of growth by sectors. Last but not least, industrial countries were not, and have not been a haven to the export of manufactures from economies “in development.”

This brings us to another theme which was only to become clearer later in the sixties: “development” is the way economies evolve, how they transform themselves, which in turn requires certain “rates of growth” but development and growth don’t necessarily coincide.<fnref n="27" /> That is why structural reforms

<footnote n="26">²⁶ The paragraph sends the reader to a footnote: “This was the assumption made by the Currie Mission on the iron and steel industry in Colombia, in the report presented to the International Bank some years ago.” It has been argued by Villamizar (2013) that Colombia could be classified as the country in Latin America where “structuralist” ideas were the least important, and where Lauchlin Currie invested much of his lifelong academic and political ideas. But Albert Hirschman and Lauchlin Currie diverged as to the role of the economic expert. According to Maas: “both were concerned with the patchwork approach to economic planning which they experienced during their consulting work in Colombia, they took opposing messages from this, with their respective positions premised on their divergent perspectives on the interplay between ‘sound economic principles’ and the force of local circumstances. While Currie was a believer in both sound principles and the need to adapt them to local circumstances, Hirschman was more skeptical about the existence of any such principles” (Maas et al. 2019: 203). In fact, the publication of “Commercial Policy in the Underdeveloped Countries (from the point of view of Latin America)” of 1958 has a unique characteristic given Prebisch’s posture. It was planned as a text in English with the view to open up a channel of communication with the “Western-centric” academy and published *before* its Spanish version. Published in *American Economic Review* 49(2): 251-273.</footnote>

<footnote n="27">²⁷ Latin-American structuralists should appropriate for themselves Hirschman’s graphics (1984: 107) on “balanced and unbalanced growth” and “antagonistic growth” to represent the</footnote>
were thought as the generators of reservoirs of capital and social energy unaccounted for by our national statistics.

But tracing these problems and theoretical debates to World War II “planning debates” as Arndt (1987) does leaves unaccounted the theoretical work done in the region. Is this to be blamed on the absence of reading of Spanish or Portuguese literature? It is easier to confront Latin American Structuralism if it’s made out to appear as an anti-market discourse when what was at issue for structuralists was precisely how to think the market and reform institutions so that “markets” could be thought of as more precise “information” providers.<fnref n="28" /> Thus the importance to analyze the specific social relations of the agents and the productive units, as well as the notion of heterogeneity in terms of power symmetries of the social relations and technologies, and the time horizons of the entities in question. The structural obstacles that could be the causes of a series of “bottlenecks” as Western-centric discourse theorists name them, required specific policies and structural reforms. But in the last instance all economies are ridden by heterogeneities and structural obstacles.

Before I conclude some readers must be wondering what transpired to the whole deterioration of the terms of trade conundrum, the so-called “Prebisch-Singer” thesis.<fnref n="29" /> The point is that even if the deterioration in question could not be “proved” some structuralists would still argue that their conception of how to reorganize the economy and transform its technical division of labor is much more efficient and profound with respect to its aims to incorporate the masses to its circuits of production than orthodox versions of economics. Given that the price mechanism is the reflection of power asymmetries these are always the object of struggle to be transformed with all sorts of policies which are practiced in a day to day basis in the industrial countries and last but not least it’s plainly a matter of making “sovereignty” matter through our own policies.

# Chapter 5

## How Economics Forgot Power

That much economic theory is based on ridiculously narrow assumptions and unrealistic a priori premises should, at this stage, be obvious. But it is worth being clear how the types of people that espouse this sort of thing can be used by political forces that they do not understand and cannot comprehend. I have always been averse to the idea that economics as it is currently taught is some sort of organic outgrowth of the ideology of the ruling class. I do not find the Marxist story convincing that economics as it is currently taught is a mere reflection of the interest of the ruling class. Rather, I think that the explanation is much simpler: economists have cast such darkness over their own discipline that they can make themselves believe in basically anything that suits them at any given moment of time. All one has to do is feed them a very simple argument that seems internally consistent, and they will mistake this consistency for some Absolute Truth about the real world. Such people are very useful to the powers-that-be (...) Contemporary mainstream economics is less the ideology of the ruling class than it is the opiate for the establishment intellectuals who find that their little models and their ridiculously simplistic arguments get them invited to all the right parties

Pilkington (2016: 332)

### Introduction

The heading of what follows takes its title paraphrasing a book by G. Hodgson (*How Economics Forgot History*), revealing the central aspects of my comments on a book written in 2016 by P. Pilkington (*The Reformation in Economics: A Deconstruction and Reconstruction of Economic Theory*). My critique has a “southern” tone vis-à-vis the “northern” theoretical vocabularies (Connell 2007, Lander 2000), irrespective of which, it is a book which should be cheered by academics in general.<fnref n="1" /> Interestingly, and unknowingly it vindicates “economics” as reconstructed in Latin America from the 1940s onwards in its goal for an *alternative*, independent theoretical vocabulary from the Western-centric “imports,” centering its analysis on the role of power asymmetries. In terms of the conception of a “discursive formation” (“power-knowledge”) *a la Foucault* (Foucault 1972), the “war of interpretations” repudiates the notion of the existence of a necessarily “superior” discourse.

Pilkington’s theoretical “demolition” reminds us of the Latin American Structuralism perspective. The author of this book is certainly very brave and daring to pronounce and publish what many members of the economic profession think about the dismal state of their discipline, theoretically as well as codes of conduct, but of which are disinclined to express overtly. The image of the congeries in question, its manners and shallow “natures” are reminiscent of the Luis Buñuel movie *The Exterminating Angel* (no pun intended!), which in Buñuel terms deals with a plot in which “a group

<footnote>process of development.</footnote>

<footnote n="28">²⁸ I mean, has anybody out there read Polanyi's *The Great Transformation*..? Is economics in such a state, that with all due respect which Chang's (2002) work deserves, the latter book needs to be produced?</footnote>

<footnote n="29">²⁹ Luis Daniel Torres (2006) has reviewed the whole literature of the past 30 years, and incorporated new calculations and cross references of new data and the case for the existence of a deterioration of the terms that the Periphery endures is difficult to avoid.</footnote>

<footnote n="1">¹ I thank equally Philip Pilkington and Colin Danby for their inputs; responsibility for what follows is absolutely mine.</footnote>
of persons [inexplicably] cannot do what they wish to do: leave the room”
(Buñuel 1982: 232).

With profuse perseverance, given the unveiled discussions dedicated to
the “profession”, the narrative shows little leniency, bestowing very “harsh”
words towards its incumbents (Pilkington 2016: 353). However, an absence
in certain sections of the text related to an explicit concept which might help
differentiate “ideological” from “nonideological” theoretical discourses
replicated by these “well meaning” persons, gives the impression that they
should be forgiven, for as the Christian saying goes: “they know not what
they are doing.” The Neoclassical or marginalism cloak is presented as a
misguided “ideology” chasing the “Holy Grail,” with an erroneous role of
mathematics in the “real sciences”: “everyone remains trapped in his/her
own personal political prison. But it is a happy incarceration” (Pilkington
2016: 353).<fnref n="2" />

A book of this nature is a prologue, a “promise,” which carries severe
responsibilities. It might sound strange that a book dedicated to something
called “economics” implicates a decision, an ethical command to act
otherwise. The question is whether Pilkington is ready to fully embark on
that path. If not, then the procedure of “deconstruction” undertaken is
just another irresponsible ploy of the kind he so thoroughly and correctly
critiques in “mainstream” and/or “marginalism economic” profession.
“Philosophizing with a sledgehammer” (paraphrasing Philip Mirowski),
implies a critical decision to reconstructively pick-up *certain pieces* given the
fallen (?) edifice of mainstream economics. It is difficult, given my political
perspective and Latin American prejudices not to share much of the criticism
of “equilibrium economics” stated by Pilkington. It’s the logical and political
consequence of Raúl Prebisch and Celso Furtado’s work (among others),
whose reconstruction of development discourse during the 1950s and 1960s,
for and from the “south”, assumed querying the discourses emanating in the
“north.”

Absence of space and objective of what follows only touches in passing
Pilkington's critique of the IS-LM and Krugman's interpretation of the
"liquidity trap" concept, but once it is accepted that money is an "endogenous"
creation, and not related necessarily with its supply and the "rate of interest,"
the LM-curve is always flat and the "liquidity trap theory" "loses one of the
legs on which it stands" (Pilkington 2016: 181),<fnref n="3" /> and therefore the level of
economic activity does not automatically grow with "cheap money."

On the other hand, if Krugman's statement is sincere ("the theory of economic development was correct" (Krugman 1997: 29)) it follows that economics recovers and supersedes in Hegelian fashion "classical political economy" in both its "neoclassical" and "Marxist" offspring, which implies the examination of the power asymmetries constituting the social relations and agents in the "economic" realm.

Having displaced the IS-LM “workhorse,” Pilkington does the same
with mainstream’s theorization of the rational calculator, “maximizing”
or “representative agent,” which hinders comprehending “investment”/
accumulation,” growth and/or evolution of economies. Equally the agent in
question should not be accorded the theoretical role in question since the
economy as a whole cannot be reduced to the respective sums and actions
of those “agents” in their capacity as individuals, and therefore “economics”
should deal with “general categories” privileging macro abstractions related to
“accountancy” rather than “sociology” or group psychology, those categories
associated with “income flows.”

An approach to recover the importance of considering the productive and
distributive aspects of those social categories, implies linking theoretically
the latter in terms of the asymmetries of power of which are its effects: agents
and their conditions of existence are the consequence of the antagonisms
and power asymmetries, and these agents need not necessarily be “human
individuals” (all sorts of corporations, “universities,” “trade unions,”
“households,” “states,” etcetera), all of which have the pertinent recognition
mechanisms through which to undertake choice-decisions. On the other
hand, their antagonistic mode of constitution (the social relations), are always
a contingent, transient characteristic, which forms part of the explanation to
understand the heterogenous features of most agents. The power asymmetry
generates the heterogenous characteristic of the agents: relates to the mode
by which agents possess in separation certain of their conditions of existence
or of the production units, the “remainder” of which have to be, negotiated,
bought, etcetera, especially with other “economic” agents strictly speaking.<fnref n="4" />
Therefore the antagonistic moment, always contingent, is constitutively
associated with the “price” or “value” which they can enforce or assume,
whether “capital” or “labor”: Latin American Structuralism claims that these
categories have no general form of being or unity: on the one hand, these
entities are not necessarily “human,” but on the other, most importantly
they possess in separation, with respect other agents, no more than specific
aspects of their conditions of existence. The heterogeneous quality of
the agents presupposes no “general conditions,” given the contingent-
antagonistic power asymmetries of power within and between agents.
Therefore “price demand and supply elasticities,” as well as “comparative
advantage specialization” are theoretical concoctions of marginalism, which

<footnote n="2">² See also Mirowski and Nik-Khah (2017) and Lawson (2019).</footnote>

<footnote n="3">³ The model is “not innocent” (Pilkington 2016: 181), it shapes the mind of those trained by it, and is “inherently conservative,” in a sense it is an “updated version of the Quantity Theory of Money” but “harder to attack,” because its underlying assumption of the “LM-curve” is that “money is scarce” which “if money is not created in line with some very rigid, mystical and usually arbitrary rule or set of rules, something awful will happen. Typically (...) hyperinflation” (Pilkington 2016: 182). See also De Vroey and Hoover (2004).</footnote>

<footnote n="4">⁴ Pilkington’s use of the “kaleidoscopic” (see further ahead) or the “non-ergodic” (Pilkington 2016: 55) logic of the realm in question require assuming these notions.</footnote>
hide the historical construction and the power asymmetries involved as well as their potential transformations.

Both within and between specific economic formations, as “Center-Periphery” entities for example, as Prebisch purports, refer to notions which are not necessarily a geographical “developed-developing” couple, since the “Periphery” also exhibits a mixture of “Center-Periphery” antagonisms and power asymmetries. The heterogenous constitutive aspects within and without of the “economies,” “Center” and “Periphery,” alike, are the product of those power asymmetries mentioned before, and which, can be reinforced with Pilkington’s Kaleckian vocabulary.

What ensues intends to portray the interesting aspects of his proposal, as well as the ambiguous nature of certain facets of his work to revert economics to theorize power,<fnref n="5" /> by incorporating Latin American Structuralism and Kaleckian vocabulary. The text is subdivided into various sections, namely “Businessmen Pay Profits To Each Other,” in which we devote much space to the reconstruction of the investment-profit elaborated by the author. Next, there is a segment (“Ruling the Roost”) that concentrates in certain aspects of the narrative on the “international trade” logic among differing economic formations, and finally, in the last part “You Want the Social?” we insist on the importance of engaging “politically” or “ethically” in economics, which, paraphrasing Marx, then becomes much more a strategy to transform the world than to interpret it.

The persistence and dominant characteristics of the institutions that generate the diffusion of mainstream economics or “marginalism,” those “social and ideological” practices that doubtlessly require a discussion and explanation, and of which there is plenty in Pilkington’s book will be left aside for another occasion. What we wish to underline is the generally explicit theoretical insistence that agents and “markets” are constitutively “antagonistic” given the power asymmetries and although this nomenclature might be distasteful to Pilkington, it is necessary to stress this aspect since on certain occasions the ambivalent quality of his “deconstruction-reconstruction” initiative could be associated with dodging the ethical political consequences involved.

## “Businessmen Pay Profits to Each Other”

The expression with which we initiate this section, using Prebisch’s words (Prebisch 1948b: 336, 1949a: 417), represents one of the mechanisms by which profits, and the macroeconomic investment carrousel process can be

explained, or equivalently, Kalecki’s singular turn of phrase “when workers spend what they earn capitalists earn what they spend” (Kalecki in López and Assous 2010: 31), both alike point to the same outcome. Both focus their account in terms of power asymmetries among and between the agents. Although Pilkington’s very interesting posing of the problem of “investment” and/or accumulation incorporates some Kalecki’s and Keynesian themes (especially Shackle’s work), Kalecki’s explicit notion of “degree of monopoly” (López and Assous 2010: 78)<fnref n="6" /> to understand the investment decision process, tends to recede in the background in Pilkington’s account, aspects which will be discussed later.

On the other hand, the undulatory or wave-like movement, or “cyclical” image of “capitalism’s” growth in Prebisch’s work, which can be represented by Minsky’s remark: “Keynes put forth an investment theory of fluctuations in real demand and a financial theory of fluctuations in real investment” (Minsky in López and Assous 2010: 243), is obligatory by the narrative in question and of which Pilkington is well aware. Growth and investment observe a “rise to either a stable path of low-inflation equilibrium growth” or “unstable path of high-inflation disequilibrium growth” (Pilkington 2016: 198), but the story sometimes does not assimilate fully the antagonistic contingent existential element determined by power asymmetries, which in Pilkington’s own words “ultimately determines the profit margin” (Pilkington 2016: 197).

Although aiming to formalize Keynesian “marginal efficiency capital argument” (Pilkington 2016: 251), he concedes that allusions to the question are not necessarily an “accurate depiction” of how “investors make investment decisions”:

> there is good reason to suspect that this is not an altogether accurate depiction of how investors make investment decisions and it needs to be modified. Shackle reports that when he interviewed businessmen, they did not think too much about the levels of interest rates when

<footnote n="6">⁶ Not to be confused with “monopoly power” (López 2008: 52). Furthermore, as López and Assous insist: “Kalecki rejected the view that macroeconomic results can be reached by simply adding up what is valid at the level of a particular firm” (Kalecki in López and Assous 2010: 74); “firms operate in imperfect markets, within which they possess a certain monopolistic power, due to the differentiation of their products. In this context, firms can fix their price by applying a certain margin to their unitary prime unit costs. The existence of this margin, whose level depends on the firm’s monopolistic power, implies that the marginal productivity of labor will exceed the real wage per worker, so that there is *no univocal association in existence* (least of all a negative one) between employment and wages. As to the relation between the price and prime unit costs established at the aggregate scale, [Kalecki] calls ‘degree of monopoly’ (a concept which is distinct from ‘monopoly power’)” (López 2008: 52, my emphasis). For an interesting account of Kalecki’s meeting with Joan Robinson and the Cambridge group, see Chapter 1 (López and Assous 2010). Robinson’s recollection in 1977 declares: “I received a letter, evidently from a foreigner visiting England, who said that he was interested in my article as it was close to some work of his own. I thought this very strange. Who could claim to be doing work that was close to this –the first fruits of the Keynesian revolution?” (Robinson in López and Assous 2010: 7).</footnote>

<footnote n="5">⁵ I use the term revert because “political economy” lost those potentialities with the hegemonic role which Ricardian economics instilled during the 19th Century. There is no space here to develop the idea that Marx unwittingly forms part of a discourse which also requires “deconstruction,” which in part the account here in process conveys. For example, Armando Di Filippo’s theoretical recent description of the past is interesting in this line of thought (Di Filippo 2013), as well as that of Osvaldo Sunkel (1970).</footnote>
making investment decisions (Shackle, 1966, pp. 150-59) (...) Shackle
found that businessmen typically make decisions based on whether a
given piece of capital equipment can pay itself off (amortize) over a
short period of time (...) based on their subjective evaluation or their
animal spirits, but these are cast over the short term because they
believe that they are completely uncertain with regard to the long run.
It seems likely that different people within a modern firm undertake
investment decisions to the people who allocate internally generated
funds and seek to borrow money. (...) it is likely that the people who
make decisions about how much to invest are typically given a sort of
menu of the funds available to them (...) they (...) weigh up potential
profits against their potential losses and try to come to a decision
about how much to invest. (...) the above framework is probably still a
good starting point to understand the complexities of the investment
decision-making process. (Pilkington 2016: 251).

The emphasis above aims to characterize those heterogenous aspects of
the internal *organization* of the agent, and the “participants” of the decision-
choice response process, and likewise the agency itself with respect to other
potentially antagonistic agents. We therefore encounter a double contingent
moment of the choice-decision process: internally, the disparate sectoral
management’s division of labor and those engaged in the final decision-choice
vis-à-vis the “external” contesting agents.

Hence, the double heterogenous movement complex, a kaleidoscopic
form of organization, as an outcome of the power asymmetries, in a context
in which their conditions of existence are themselves “heterogenous”: they
are not general, nor predetermined, given their intrinsically antagonistic and
contingent character: “markets” are themselves composed of heterogenous
motley of agents, whether in “financial” or in “productive” sectors, in other
words, they do not conform a unity form of being.

Notwithstanding the above, firms (agents) and their pricing mechanisms
or profit schedules have relatively few problems to calculate since these
aspects, like “prices,” are a convention or an “institution,” which are sustained
by a set of “habits” (Hodgson 2004, 2006).

Prices do not represent “marginal revenues” at all, they are the consequence
of simple summation of “direct material costs, labor costs and overhead costs
determined at a ‘standard’ volume of output” (Pilkington 2016: 196), after
which, firms simply added a “percentage-based” ‘mark-up’ “that included
both a profit element and also took into account any costs related to selling
goods together with any interest payments the firm had to make” (Lee in
Pilkington 2016: 196). Also, and most importantly, Pilkington and Lavoie
(2006) recognize production units rarely work at full capacity, hence their
ability to increase production immediately if demand rises.<fnref n="7" /> In other words,

the book excludes the typical section explaining the cost and supply-demand
schedules as an outcome of the relative “demand-price elasticities” of the
goods in question.

According to Pilkington, firms check each other's profit margin levels, which in turn serve to give the industry a sense of "stability" (Pilkington 2016: 196), *avoiding undercutting* each other, or price wars, nor aiming to raise too much their profit margins. The logic of this action stabilizes the horizon for the decisions-choice in an uncertain environment, conforming to certain patterns fitting common practice (Hodgson 2004, 2006) notion of agency and routines guide example, the "mark-up theory of profit" explains why "profit does not simply disappear over time. Profit margins are conventions and they exist in the form that they do so as long as people believe that they should exist in this form." (Pilkington 2016: 197). The important principle of this long explanation aims to underline that profits are a " creature not so much of competition as they are of convention " (Pilkington 2016: 197), but Pilkington, having grasped the image of the profit logic, strives to answer a further question which is not necessarily mandatory: why is the "customary norm" not broken? It hinges on something he mentions as "toleration" (Pilkington 2016: 197) wage and/or profit margins and/or higher prices, which can be reframed instead in terms of the respective asymmetric power relations among and within agents.

In an ambiguous fashion, the description above tends to underplay what
is crucial to the whole explanation, which Pilkington calls “tension” or “class
tension.” Again, it seems that what can be called the antagonistic choice-
decision moment is evaded: agents need not necessarily keep the same profit
margins or level of wage/prices. It is an antagonistic contingent existential
element determined by power asymmetries, which “ultimately determines
the profit margin” (ibid.: 197) and it is this “tension” that gives “rise to either
a stable path of low-inflation equilibrium growth or unstable path of high-
inflation disequilibrium growth” (ibid.: 198). In marginalist economics, this
attribute only belongs to specific “monopolistic” firms, assuming a certain
“size” and the rule of economies of scale, otherwise it has no sovereign
power to impose “mark-up” costs to establish certain “prices” and hence
“profit margins,” which must be said, is contradicted by most of the literature
which examines firms’ costs and behavior projections. The “mark-up pricing”
(Pilkington 2016: 198) responds, as mentioned before, to that which Kalecki
terms as the “degree of monopoly,”<fnref n="8" /> or “asymmetric power relations” (in
Latin American Structuralism), notions which are not ubiquitous nor
constant, given the heterogeneous characteristics of the agents in question
and their conditions of existence. The potential profit “margin” within and

<footnote>be broken up into *money value* (Pilkington 2016: 196): *I + SAL + π ≡ θ; θ* mark-up in money
terms, *I* payments on interest and SAL, cost incurred, transactions costs, and π actual profit
of the firm.</footnote>

<footnote n="8">⁸ Not to be confused with “monopoly power.”</footnote>

<footnote n="7">⁷ (1 + θ) AVG = p; p prices, θ percentage mark up, AVG, average costs. Now this formula can</footnote>
among production units, the unitary prices, and wage-salary levels, are the consequence of these power asymmetries. On the other hand, in Prebisch and Kalecki's argument, there is no "unique and univocal (much less a negative one)" tendency "between employment and salaries" (López 2008: 52). In Prebisch's vision, the pricing procedure does not assume nor require following a general rule, and salary levels are related to the "unions' action," (Prebisch 1948b in 1993: 358) "workers' pressure" (Prebisch 1948b: 341),<fnref n="9" /> whether at the micro or macroeconomic scale: during the "upswing" prices rise, at real wages expense, or other sectors, allowing henceforth for profits to materialize in the entrepreneur's hand, as well as incrementing the savings rate, but it is during the downswing that the "fruits of technical progress" are transferred with less or greater extent depending on the antagonistic context of the community in question, aspect which has nothing to do with "competition": as prices rise faster than nominal wages during the upswing, during the downswing of the cyclical movement the same forces in action are those which reduce the "prices," but since prices "don't decline with the same intensity" as wages, it is precisely during this moment of the cycle that the "fruits of technical progress are transferred" to the collectivity (Prebisch 1948b in 1993: 358).<fnref n="10" /> In other words, "wages" are lowered during the rising

prices, but not to draw, as the classical doctrine would have it, a greater “savings” ratio from top income sectors through a raise in the interest rate, but rather so that “businessmen can accumulate compulsively the savings of the rest of the collectivity” (Prebisch 1948b in 1993: 358).

Using Prebisch's expression: “businessmen pay each other profits,” in the context of Pilkington's description of the growth process, implies the idea that higher unitary profits per product during the upswing do not mean *unescapably* a lower “aggregate” level of total “profits” as a consequence of a price decrease per product during the downswing. Although the rate at which prices drop during the downswing is greater than the corresponding change of prices during the upswing, lower unitary profits per product requires considering the “distribution” antagonism between certain sectors, and/or between differing economic formations (time disparity between those incomes leaving certain areas and the time lapsed during its return Center-Periphery). Profits, in Prebisch's perspective, depend on two elements: the productive process and the monetary mass generated during the last and all preceding productive processes, therefore whatever antagonisms or “competition” for profit may have prevailed among entrepreneurs, it does not “alter its quantity or its variations,” *only* the “distribution *within* the group of the businessmen” (Prebisch 1948b in 1993: 355, my emphasis).<fnref n="11" />

The pricing procedure forms part of a contested “ritual” or of habits ingrained in the agents’ behavior repertoire, through which in turn they sail into antagonistic uncertain waters, domains where the “rational or theorist, on par or even prior to Keynes’s famous work of 1936, understood what it meant to construct the formalization of a general model of the business cycle: “what was logically required for constructing a mathematically robust endogenous explanation of fluctuations is that the stationary equilibrium must be unstable, so that the system will never reach it. Thus, abandoning the reference to random shocks, he developed a new explanation fundamentally endogenous in which fluctuations result mainly from waves of optimism and pessimism. In the second place, he enlarged the scope of his model, with the aim of formulating a dynamic system whose solution would encompass both the cycle and the long-run development of the capitalist economy (López and Assous 2010: 92). Nonetheless, there is no space to discuss that perhaps the “Frisch-Kaldor-Kalecki,” “endogeneity,” “rocking chair” illustration, to theorize the causality in question might not be a “problem” at all. See Besomi (2010), Louçã (2001).

<footnote n="9">⁹ López and Assous: “income distribution is the result of the clash between the two opposite classes. To quote Kalecki’s words used in the title of his last paper on the subject, the ‘Class Struggle [determines the] Distribution of National Income’ (Kalecki, 1971 [1991]). But the class struggle manifests itself both in the labor market and in the market for commodities in general. The *degree of monopoly* reflects the relative force of capitalists and workers in these two markets” (Kalecki in López and Assous 2010: 71, my emphasis).</footnote>

<footnote n="10">¹⁰ Kalecki, despite his own efforts to establish a “rigorous and mathematical business cycle model” (López and Assous 2010: 223), that is, a general theory of an endogenous “cycle,” finally conceded to the unlikelihood in question, which meant maintaining a certain specific parameter to explain the cycle’s (“endogenous”) movement *and*, simultaneously, accept that the contingent historical antagonistic logics of investment-choice decisions could not be generalized. Prebisch, although sharing Kalecki’s idea of an inherent “disequilibrium,” “wave-like motions” of “capitalism” as its essence par excellence, presents no general theoretical effort to argue the “endogeneity” basis of the historical movements which are represented in a graphical image (see the chapter on Prebisch), with no formalization or mathematical representation of the model. In Prebisch’s perspective, graphical representation of the movements in question (Prebisch 1949a: 484) assumes the inclusion of the notion of *time*, which is introduced in the realm of the agent’s decision-choice horizon, transforming the very concept of “time”; “Time” itself paradoxically has no “symmetry,” whatever its units, “instances,” or metric or “clock-time,” it cannot be made to follow a monotonically series of monetary units and investment and profit calculus. Literally, as the famous Shakespearian quote reads, for Prebisch, “time is out of joint,” refers not just to the issue of the asynchronous feature of the articulation between the circulating and productive capital, “cycles” in space and “time,” in which the respective “Center-Periphery” divide shows a constant reversal and “return” of income flows against the Periphery; but also that times “differ”: Time’s divergent logic is the consequence of differing antagonistic power asymmetries of the capitals, for Prebisch (in a certain sense Prebisch shares with his compatriot Borges his notion of time), “time” itself could not be made sense of in “economic” or “price” terms (Mallorquin, 2015). Hence, the “disequilibrium” implies jettisoning notions of equilibrium, or “imperfect markets”; “competitive” or “monopoly.” Kalecki, in contrast, with no detriment to his general perspective, as an aggregate demand effective</footnote>

<footnote n="11">¹¹ No space to expand on Prebisch’s theory on the appearance of “profits,” suffice for now is to mention he has an “endogenous” notion of the creation of money (Prebisch 1944a, Mallorquin 2015) on which most of Pilkington’s book is well versed. The idea of profits, combines the notion that a greater mass of money-income is presumed before the one but last productive process locates its goods in the “market,” the corresponding money mass enables to “soak up” the “fruits of technical progress”; the sources of money income in question are explained by the progressive enlargement of the monetary mass generated previously and by those productive investment projects in process: paradoxically, “today’s product” and its corresponding profits are “realized” by money incomes that were generated before. These aspects of the materialization of profit and of the productive process are irreversible, subsequent productive cycles assume certain expected profit levels from past experience. This process stalls or begins to slow down, amongst other reasons, if entrepreneurs consider a too high level of inventory accumulation and which, therefore, induces a lower rate of future investments in accordance with what is considered pertinent.</footnote>
representative agent” is off-base: “businesspeople set prices long before the goods are even produced, let alone brought to the market” (Lee in Pilkington 2016: 198), denoting the materialization of the respective differing profits rates, an “irreversible process” (Prebisch 1948b in 1993: 336). The indecisive-uncertain image, which Marx portrayed as the *Salto Mortal*, is simply impertinent: the money which will “buy” or “clear” the market of its products has been previously emerging during the ongoing or the earlier stages of the production cycles, the current act of selling is the consequence of money-income, the sources of which were initiated in previous production processes (Prebisch 1948b: 337). In performative terms, profits are established the minute when the entrepreneur does the bookkeeping. The so-called “bargaining process” to establish “prices” and “costs” of goods has taken place “before” their appearance in the market, including the divergent profit margins and shares among and between the antagonistic heterogeneous units-agents of production, related to the power asymmetries and antagonisms of the units in question (labor/firms; firms versus firms). This is an aspect associated in marginalist economics only within the “monopolist” span of agents. Given the heterogeneous nature of the agents, which is a consequence of the power asymmetries, “marginalist” economics in Pilkington’s words, executes an “enormous violence to the real world” (Pilkington 2016: 199).

However, Pilkington’s critique of marginalism underlines an intromission which he sometimes typifies as an “inherently totalitarian” mode of thought, given the varieties of “violence” which “data” and “agents” have to withstand given the “*a priori*” framework. It generates negative effects in the mode of thought of students, encouraging viewing the world in a twisted and “distorted way”. At issue once more are the power asymmetries, which form the basis of the mechanism by which some information/ideas are incorporated when specific policies are promoted and elaborated. And although Pilkington’s critique might be turning on its head the sovereignty of the “marginalist” individualist perspective, his general view of “power,” or its ambiguous references to “Kalecki” tends to obscure the specification of the asymmetries in question. For example, an alternative and more uniform arrangement of income distribution requires some form of “compulsion,” direction, regulation, which we are not sure Pilkington is willing to defend.

Another of Pilkington’s quote of Joan Robinson is instructive to highlight the *ambiguous nature* of the notion of power in his critique: “The search for the theory of a *normal* rate of profit is a bit like looking in a dark room for a black cat that probably is not there” (Robinson 1953: 227, my emphasis).

If profit margins are “largely a political, cultural or social question” (Pilkington 2016: 199), more important, and interestingly is “where profits in the aggregate come from” (Pilkington 2016: 199), and yet in the discussion of aggregate profits, Pilkington uses the classic marginalist narrative ploy of the “island,” a “silly parable” that he acknowledges in a footnote (Pilkington 2016:

215), but which allegedly in his case, in contrast to marginalism, adopts more realistic “assumptions” (Pilkington 2016: 215). In the last instance, the debate that balances a specific set of “realist” presuppositions vis-à-vis a different scheme has always been determined by a “conventionalist” discourse, the substratum of which changes easily with new trends. Therefore, in marginalism, the Robinson Crusoe imaginary, as a ploy to evade the political examination and hence power asymmetries among and between agents, wishes to escape the notion of power, or in Wade Hands’s terms (2005), it does “not want the social” as we will argue further ahead.

For the explanation about the appearance of aggregate profit, Pilkington recovers the imaginary narrative of the “silly island,” which unlike its “marginalist” version, portrays some institutionally established rules like an obligatory minimum wage (a government), and a guaranteed stock of food to sustain the workers while it labors its first working period; a bank that lends the money to the capitalists, for them to undertake the payments for the building of the factory and producing the food in question, which the workers in question will buy. At the end of the first period, there is no need to employ the same number of workers, since the factory has been completed. The capitalist has accrued to its bank account the aggregate expenditure of workers (his profit) minus the proportion he pays as interest to the bank. The possibility of laying off some workers for the next production period means that aggregate expenditure or investment will be reduced. Hence, a potentially reduced level of aggregate profit, which ultimately could generate a “deflationary” situation since the workers will receive an excess of products greater than their income. It is at this stage that Pilkington brings in “government” spending to underline that in a “closed economy with no net government spending profits are equal to investment” (Pilkington 2016: 201). Pilkington’s illustration brings to light the importance of government expenditure to sustain a certain level of investment. Government creates, through the Central Bank, the extra cash “out of thin air” (as explained by his critique of IS-LM workhorse, underlining the role of the Central Bank’s target to set the interest rate and not the total stock of money),<fnref n="12" /> the proportion of expenditure to

<footnote n="12">¹² Let us mention in passing that “creditor-debtor” entities declared are not necessarily “human individuals.” The social relations seem to determine interest rates (according to Pilkington), which are related to the asymmetries of “extractive power”. Having rejected the existence of “objective probabilities” that presume knowledge of future income and default prospects, Pilkington built a basic interest rate ratio: a debtor’s income (y) or the “information” and debtor’s “default rate” (dr) : i = dr / y, and if future income (information) and probability of default are unknown, given the absence of “objective probabilities,” it could still be argued, from a more “pragmatic” view that what is at stake here are the waves of optimism and pessimism in the credit cycle. Fortunately, Pilkington does not follow that line of thought underlining a key variable: “extractive power” (ep), which is integrated into the equation. A further aspect in the asymmetries in question i = dr / y • ep. An analogous category, instead of “extractive,” which could do the same job is “asymmetry”: “the relative extractive power, ep – the threat – that the lender holds over the borrower also plays a role in interest rate determination. The lower the magnitude of the</footnote>
sustain the level of investment previously reached, which means that the aggregate profits will return to their previous level. And profits will depend simultaneously on the “private sector” and on government sector investments. Capitalists’ profit flow level will continue the same, and with each subsequent period of production, capitalists’ profit stock will grow systematically. Obviously, if the capitalist decides to cancel their debt with the bank, the latter’s profit *stock* stops increasing. Until now, prices have been stable, wages and investment “clears” the market of products, but with a rise of a salary by the government in favor of a *specific sector* of the work force (increasing expenditure), the proportional share which each group appropriates has shifted, within the class of laborers: the higher earning sector bids up the prices and the asymmetric distribution of the product initiates its course. Meanwhile, the capitalist’s profits have been amplified through the “inflationary” wage rise procedure, but soon other workers’ sectors bid for a wage rise to recover their proportional share of the product lost by the original wage hike level. After an initial erosion of profit stock levels, given “inflationary” pulls, it subsequently recovers. Given that the banker ties his debt in nominal terms, not real terms, which is not based on the basket products it can buy, inflation swallows his interest payments away, while the capitalist’s debt in interest payments is lower in real terms as time ensues, henceforth “in an inflation real wealth will be redistributed from creditors to debtors” (Pilkington 2016: 204). This focuses on the famous Kahn multiplier,<fnref n="13" /> in which a certain increment in expenditure generates a further outflow of disbursement giving rise to a boost in the product output. It revolves around the notion of the marginal propensity to consume, which is relatively divergent among different income sources, given specified consumption threshold rates for the same set of goods on the part of certain agents.

The so-called “Levy-Kalecki Equation” $Y \equiv \pi + W^{14}$ is fetched to portray gross profits of the “economy as a whole” (Pilkington 2016: 209) (GDP) in an economic formation, which in terms of investment and consumption and excluding government and financial entities, as well as GDP, equals the gross profits plus wages and salaries.<fnref n="15" />

threat, the higher the interest rate will be, and vice-versa” (Pilkington 2016: 247).

Also, profits can be revealed with the following formula $I + C_p - Sw = \pi$.<fnref n="16" /> But this expression has excluded the possibility of examining the intrinsic *potentiality* of the antagonism in question, for example, a recurrent recap of another cycle of higher wage demands by labor, since these shares or proportions cannot be ethically upheld or reasoned by the so-called “marginal productivities” dictated by the “competitive” market narrative of marginalism. The agents “might not know” their actual standing income level regarding their experience.

The expansion of the money mass, through the appropriate financial channels, to cover these advances, is often perceived as essentially “inflationary”, a perspective from which Pilkington perhaps has not fully distanced himself. A narrative that claims that all “inflation” is “too much money chasing few goods” or a “monetary phenomenon.” Therefore, the “low-inflation equilibrium growth” or “unstable path of high-inflation disequilibrium growth” (Pilkington 2016: 198) specification tends to obscure those antagonistic moments characterized by the growth process. Although Pilkington discusses four types of inflation, “demand-pull inflation,” “cost-push inflation,” “speculative inflation,” “exchange-rate inflation,” which he says may overlap, he considers sufficient the assertion that it relates to a “complex phenomenon” (Pilkington 2016: 175).<fnref n="17" />

Having “demolished” the “maximizing individual” or representative agent, Pilkington must incorporate a mechanism to explain the logic and practice of choice-decision related to investment. Equally having displaced the pertinence IS-LM model as a source of a unified horizon to reflect on the manner by which agents can be seen to undertake their

<footnote n="13">¹³ (1 / 1 - MPC).</footnote>

<footnote n="14">¹⁴ $Y = \text{income}, \pi = \text{profits}, W = \text{wages}$.</footnote>

<footnote n="15">¹⁵ $I_R + C_p - Sw_R = \pi_R$ is the profit formula with no government (p. 272). National income with taxes can be expressed as $Y \equiv (\pi - T_{\pi}) + (W - Tw) + (T_{\pi} + Tw + T_i)$ (p. 210); taxes on profits, $T_{\pi}$; taxes on wages, $Tw$; and $T_i$ indirect taxes. Therefore, gross profits excluding taxes: $I + (X - M) + (G - T) + Cp - Sw = (\pi - T_{\pi})$; net gross profits are the sum of $I$, gross investment + net exports + budget deficit + capitalist consumption - worker saving; $X - M$ net exports, exports minus imports; $G - T$ is the budget deficit, government expenditure minus taxes again, $Cp$ consumption out of profits (capitalists consumption), $Sw$, workers savings. Notice that in the latter expression, the three-bar denotation has given way to a causality implied by the two-bar</footnote>

<footnote>identity (=) symbol which means that it is in the left-hand side that we find agents’ decisions changing the process in question. Pilkington is aware of the tautologies of formulas or “truisms” in Fisher’s terms (Fisher 1911: 157); see also Sunkel (1957).</footnote>

<footnote n="16">¹⁶ $I$ is gross investment, $C_p$ consumption out of profits (capitalists’ consumption), $Sw$, workers saving (wages minus consumption of workers, or $W - Cw$; ($Y \equiv E$) Income in terms of expenditure, hence $E (\equiv) I + C_p + Cw$ and $W \equiv Cw + Sw$). It follows that $I + Cw + Cp \equiv \pi + C + Sw$, cancelling and reshuffling $I + Cp - Sw = \pi$. The three-bar notation ($\equiv$) is a sort of “truism” (p. 223), while the two-bar notation is the identity symbol, which has “behavioral connotations” or a presumed causality. So, Pilkington’s notation is a different way to distinguish dependent from independent variables.</footnote>

<footnote n="17">¹⁷ Latin American Structuralism discusses, for which there is no space here, treats this “complex” phenomenon questioning the classic quantity theory of money and its impertinence for the Periphery, but unlike Pilkington, “inflation,” is “always and everywhere” an antagonistic moment, a defiance of the “distributism” pattern which Pilkington discusses, but on which he does not expand theoretically nor its consequences: “inflation is fundamentally a struggle among groups for the redistribution of real income and the price level rise is just one outward manifestation of the phenomenon” (Furtado 1954: 181), “inflation (...) as we have seen is not, in its origins, a monetary phenomenon. It results from the action of certain groups that tend to increase their participation in the real income” (Furtado 1954: 183).</footnote>
investment choice-decisions (interest rate-investment), and/or financial markets, Pilkington is under an obligatory theoretical mandate to explain the indeterminate realm of “savers and investors” (Pilkington 2016: 223) and the “varying interest rates” and investment projects, especially given the heterogenous and/or “kaleidoscopic” (Shackle) characteristics of the agents in question.

It initiates by distinguishing two processes, which Pilkington formalizes mathematically, whereby agents take decisions-choices, whether related to “financial investment sector”, where liquidity preference ($Lp = \text{Bear} / \text{Bull}$), plays a primary role and the “real investment” activity represented as “animal spirits” ($As_R$), although he concludes with a more general formula subsuming the former within the latter:

> the bear/bull ratio (i.e. liquidity preference) is actually synonymous with the velocity of money in the market in any given period. As the amount of bears increases relative to bulls, the velocity of money in the market slows as those bears hoard money and the price of securities in that market falls. As the amount of bulls increases relative to bears, the velocity of money in the market speeds up as bulls increase their expenditure of money and the price of securities increases. (Pilkington 2016: 241-242)

Certainly, by breaking with “Keynesian” or “post-Keynesian tradition”,<fnref n="18" /> he uses the notion of “animal spirits,” reconstructing the concept by incorporating aspects of the “marginal efficiency of capital” to which Keynes pointed only to ponder on the formal aspects of the investment process. This line of argument implies that the notion of “liquidity preference” also must be brought to shoulder the agent’s action course. Thus, to explain the activity of the “real sector,” which corresponds to the “animal spirits” dominium: “animal spirits”: ($As_R \bullet (1 / i) \bullet Q_R = I_R$)<fnref n="19" /> (animal spirits $As_R$; i = interest rate in that particular market; $Q_R$,

expected profits; $I_R$ = real investment), Pilkington advances the idea in which “animal spirits” are “the liquidity preference of the real investment market. They are, however, the inverse of liquidity preference” (Pilkington 2016: 249). The “liquidity preference” refers to the ratio movement of pessimism/optimism, bidding, buying, or selling bonds/assets. The yield-price vitality (Bear / Bull) in the “financial” market can be seen simply as the inverse of “animal spirits.” Synonymous to the money velocity notion.

The contrast between the notion of “animal spirit,” viewed as the inverse (Bull / Bear) of the liquidity preference ($Lp \equiv \text{Bear} / \text{Bull}$), means, paraphrasing Pilkington, a rising impulse to the increment of “real investment,” enlarging new “productive capacities,” borrowing money or liquidating financial holdings, which culminates in new “productive capacity” (Pilkington 2016:249), contradicting the liquidity preference ratio that entails a reduction of acquisitions levels by financial investors protecting their purchasing power by amplifying their “liquid assets” or cash.

Perhaps, the distinction between $Lp = \text{Bear} / \text{Bull}$ and the $As_R$ formula, financial and real investment respectively, becomes an important necessary qualification in the investment process for those economic formations in the “Center” which exhibit an important multi-layered and “deep” bond-assets and “stock-market institution” and all sorts of money substitutes (Ms), which cannot be generalized to reflect the investment process in the peripheral countries. In certain center or core economic formations, these financial underpinnings are crucial to the investment choice-decisions patterns, the rise of the hegemonic role of the “bullish” “vitality” of the market, whether “financial” or “real” forms part of the changing transient antagonistic conditions between and among agents or firms.

Pilkington insists that the agents in question (Bears / Bulls), are “people,” optimistic-pessimistic about a future increase (decrease),<fnref n="20" /> of bonds-assets yield-price, but for the critique that follows, I underline the notion that the reference to “people” as those whose pathway between “Bear” to its opposite “Bull” (indeterminate in time and process), are not necessarily “human individuals.”

It refers to movement of the “ratio”: proportions of changes of those flipping from one position to another, a consequence of a diverse set of heterogenous-not add or subtract anything from it.”

<footnote n="18">¹⁸ “Note that Keynes used this terminology in his *Treatise on Money*, but we are using it in an entirely different way, one which incorporates Keynes’s more mature ideas about liquidity preference (Keynes, 1930). The present usage is more similar to the manner in which Joan Robinson used the terminology in her monetary theory, but she abstracted away from the existence of bulls themselves (...) an enormous step backwards (...) the closest to the present usage is G. L. S. Shackle” (Pilkington 2016: 269). The formula would be $1 / [\text{Bear} / \text{Bull}] \bullet M = A \bullet B$; M is money; A refers to the price of the first but last bid of an asset / bond which is B. The formula for Capital Gains$_{t+1} = A_{t+1} \bullet B_{t+1}$. Therefore, $Lp = \text{Bear} / \text{Bull}: 1 / [Lp] \bullet M = A \bullet B \equiv 1 / \text{Liquidity preference} \bullet \text{Money} = A \bullet B \bullet Lp \equiv \text{Bear} / \text{Bull}$.</footnote>

<footnote n="19">¹⁹ Subscript “F” represents real investment in contrast to “B,” financial investment: “If we refer to the actual money that changes hands due to financial transaction as financial expenditure or financial income, then we can say, again being careful to distinguish from real expenditure and income, that” (Pilkington 2016: 237) $E_F \equiv I_F \equiv Y_F \equiv S_F$. In these cases, we are dealing with “financial expenditures”, a bond ($E_F$), or financial investment ($I_F$), or if the receiving of an income ($Y_F$), financial income, or financial saving ($S_F$), it’s just an analogy to the real economy, it “does</footnote>

<footnote n="20">²⁰ Pilkington’s explanation underlines a crucial point at issue, the contrasting logic of the price of bonds regarding stocks: “the price of a bond is inversely related to the interest rate or yield on that bond. Thus, when the price rises/falls, the yield will fall/rise. This is, however, not the case with stocks. Stocks do not have interest rates per se. Rather they pay out dividends and the relationship between the price of a stock and its dividend is by no means simple. The reason that economists historically discuss bonds rather than stocks is because of the simple price/interest rate trade-off that characterizes the market. The stock market is a far more complicated beast, but the basics can still be understood by utilizing the liquidity preference theory. Just remember that *when the price on a given bond rises, its interest rate declines, while when the price on a stock increases its dividend should not be directly affected.*” (Pilkington 2016: 267)</footnote>
kaleidoscopic agents, but most of which are not “people,” among whom we
can mention great corporate entities or bond-stock associations and their
respective “algorithms” coupled to decisions/options:

in what proportion those in the market are net selling and to what extent they are net buying. The manifestation of the bulls and bears represents the liquidity of the market as a whole at a given moment in time. As liquidity preference rises bulls turn to bears and as it falls bears turn to bulls. So, the liquidity preference rising leads to a heavier weighting of bears in a given market than of bulls and vice versa or: (Lp ≡ Bear / Bull). (Pilkington 2016: 239)<fnref n="21" />

The “animal spirits” are displayed through the “kaleidoscopic” notion of Shackle’s work: a diverse and non-determinant mode of calculating (assessing) modes of investment projects, the “equiprobable” case of certain future events occurring is excluded, and stresses the “potentially infinite” (Pilkington 2016: 286) events or outcomes, which means that we are in a completely “different space” to the “dice” or the “coin” illustration of “chance” implied by certain models of econometrics or schools, whether Bayesian<fnref n="22" /> or not. Shackle is brought to enlighten the “subjective” nature of our evaluations: “human imagination and storytelling comes to the fore, we are no longer in a world of the probable, rather we are in a world of the possible” (Shackle in Pilkington 2016: 286). The “individual’s” “uncertainty”<fnref n="23" /> in question, can nevertheless separate “sense from nonsense” (Pilkington 2016: 287), putting aside conjecture and imagining alternative situations, which is defined through Shackle’s work as “bounded uncertainty” (Shackle in Pilkington 2016: 287) which, in turn, reminds us of Simon’s use of “bounded rationality” (Hodgson 2004).

Before describing the description of the formalization process by which
“animal spirits” (AS<sub>R</sub>), investment-profit are realized, in bookkeeping terms,
it is necessary to represent the notion of profit in question.

The “animal spirits” (AS<sub>R</sub>) are the consequence, the result of the ratio movement of Bulls to Bears in the market for “real investment,” which Pilkington formalizes:

$$
\begin{align*}
& (\text{Bull} / \text{Bear}_R) \cdot \left[ 1 / \left( \frac{(1 / \text{M} + \text{Ms})}{(\text{Bull} / \text{Bear}) / \text{A}} \right)_F \right] \cdot \text{Q}_R = I_R \\
& (1)
\end{align*}
$$

(Pilkington 2016: 250)

or

$$
\begin{align*}
& (\text{Bull} / \text{Bear}_R) \cdot (i_{\text{rt}} + T_c + D_r^e + \Delta i_{\text{rt}}^e) \cdot Q_R = I_R^{24} \\
& (2)
\end{align*}
$$

(Pilkington 2016: 271)

Pilkington launches the discussion of investment to an endnote and
in which he is aware of a similarity with something “like an ‘accelerator
principle’” to think the notion of the “rate of investment” (Pilkington
2016: 271).

According to him, the:

accelerator principle performs rather well empirically, but it fails to
explain why investment every now and again simply falls. This can
be explained much better using a framework that integrates liquidity
preference and animal spirits. We should also note that while the above
is a good way of thinking about the economy, it is not entirely accurate.
After the 2008 financial crisis and the subsequent recession, corporate
profits in the USA soared due to the large government deficits that
were being run at the time. Nevertheless, investment was extremely
slow to pick back up. This was because the firms were able to meet their
present orders without needing to expand their productive capacity,
and so they turned to wash their profits back into the financial markets.
In Keynesian terms, we might say that the marginal efficiency of capital
was very low relative to the going interest rates in the financial markets
at the time. This example shows quite clearly that it is to oversimplify
to say that profits determine investment in some mechanical manner.
(...) We have only laid out the above provisional account as a sort of
guide, which is by no means definitive. In order to understand the real

<footnote n="21">²¹ The reason that explains why the capital market horizon does not reflect a hurricane of untamed forces has to do with “social norms within investment communities. Optimism and pessimism tend to come in waves (...) and during these waves, swings are somewhat bounded. But there is a deeper explanation, and it is one that economists like James Steuart and Karl Marx knew well: the interest rate is a question of distribution grounded in legal, social, and political norms. The interest rate - or the rate of return on accumulated wealth- is determined by the relative social power of creditors” (Pilkington 2016: 246).</footnote>

<footnote n="22">²² The book also presents a well-prolonged theoretical discussion, between different “schools” of econometrics and the role given to “objectivity” of the calculus in question.</footnote>

<footnote n="23">²³ Pilkington devotes much space to discuss the notion and its differences between Keynes and Knight. For his part, Danby (2017: 158) merely distinguishes the Keynesian idea as necessarily an “ontological” condition; see also Hodgson (2011).</footnote>

<footnote n="24">²⁴ The interest rate thus determined is the consequence of $i_{rt}$ (overnight target interest rate), $T_c$ transactions costs for borrowing money and $Lp_{irt}$ stands for the liquidity preference in an IRT market, in which “the central bank does not intervene directly in these [financial markets] by engaging in assets purchases” (p. 244), hence the interest rate $i = i_{rt} + T_c + Lp_{irt}$ (Pilkington 2016: 245). But “liquidity preference” under the IRT market liquidity preference has to take into consideration the Default risk ($D_r^e$) and the expected change in the overnight target interest rate, hence $Lp_{irt} \equiv D_r^e + \Delta i_{rt}^e$ ($\Delta$ = proportion of change). Therefore, the expression $i_{rt} + T_c + D_r^e + \Delta i_{rt}^e = i$, means that as the number of bonds grows money mass expands, which in turn entails the issue of money's risks, whether to keep idle or invest it.</footnote>
nature of investment, one must be appreciative of the kaleidoscopic
nature of investment decisions in capitalist economies and be prepared
to fully engage with the ‘state of the news.’ This is why economics can
never aspire to being a ‘hard’ science like physics or chemistry. The
subjective and evolutionary element therein is simply far too great.
(Pilkington 2016: 271-272)

“Ruling the Roost”<fnref n="25" />

The title of this section intentionally aims to provoke certain ambiguities of Keynes's famous aviary image by which he advances the argument explaining which particular “asset” becomes the dominant benchmark for examining potential investment strategies, which is also a distinctive aspect when analyzing diverse economic formations, or the Center-Periphery power asymmetries. In other words, that which appears a clear-cut choice decision response on the part of certain agents, is belied by the context and by the power conundrum. The “ruling” and “rules” dichotomy implies some explicit dominium *and* following instructions. An evaluating agency *and* a “policing” practice, hence the role of the FMI in most negotiations to restructure loans-debts, for example, and/or credit rating agencies.

The “broader conclusion” is that “the interest rate is ultimately determined
by the relative power of creditors in a society” (Pilkington 2016: 270).

Since the loan shark operates outside of the law, his extractive power is
higher than that of the bank which operates inside of the law. This means
that interest rates are always determined by the prevailing structures of
the era. (...) always precede the existence of capital markets (Pilkington
2016: 247).

Bankruptcy laws represent the embeddedness of “legal frame works” (Pilkington 2016: 248), there is always a regulatory, customary, and / or traditional regime. Capital markets function because there are all sorts of regulatory regimes:

The key determinant of interest rates is the relative social power of creditors. We as society determine this relative social power. If a society is set up in such a way that the creditors control the mechanics of power, then the relative return on wealth should be low, then it will be low. What is more, there is no ‘market rate of interest’ prior to these arrangements already in place. Certainly, there are various market rates of interest within a given legal-institutional, but there cannot logically be any market at all prior to the legal institutional arrangements being

in place. (...) because mainstream economics can say nothing about
the relative power of creditors in society, (...) their theories are still
completely irrelevant because they say literally nothing about the
relative power of creditors in the economy. (Pilkington 2016: 248-249)

Power asymmetries between the Center-Periphery antagonism, focused within the context of trade policies, are equally central to the Latin American perspective, initially defined by Prebisch as the “Ricardian loss” probe, which unfortunately does not receive much space in Pilkington’s book: one chapter, the shortest, bringing once again to light a certain undecided theoretical aspect of his work, the antagonistic character and power-driven nature of the notions of agents and their milieu. In “Non-Dogmatic Approaches to the Economics of Trade,” the critique of the relative comparative advantages of the international “division” of labor doctrine, underlines once again the importance of “uncertainty” to deliberate on investment decisions and their diversification: you “should never put your eggs in a single basket.” This is coupled with revealing the shallowness of those arguments that sponsor “free trade” under whatever circumstance. Therefore, that which is taught as “the theory of comparative advantage,” is portrayed as David Ricardo’s struggle in the 19th Century to promote the “free trade” strategy by the then ruling “Empire.” But today, in the so-called “promotion,” by the “Washington Consensus,” of trade between “open economies,” Pilkington’s representations of its consequence are underlined by the simple example of the role of production specialization on those products with which a country performs better than its trading counterpart, allegedly propagating a higher total product for those economic formations involved, a perspective which hides a series of unsustainable presuppositions, which “development policies” should challenge, especially in the Periphery.

The criticism stresses the distance, once again, between the models and
the “abstract world of ideas” (Pilkington 2016: 326). Models of comparative
advantage assume full employment in both entities/countries implicated,
and the existences of unemployed resources can be put to work literally
“cost-free” Free trade deals often bring about the loss of employment and the
narrative in question insists that these losses are “matched by gains in a new
export sector” (ibid.). Synthetically, it resuscitates “free market clearing”
arguments as well as the assumption that a more dynamic efficient productive
sector will materialize. But as economic formations not only in the “Center”
but especially those in the “Periphery” as well have found out:

it becomes by no means clear that if a factory geared towards domestic
production closes down in Detroit due to a free deal, it will be replaced
with a new factory geared towards export production. A whole host
of factors will have come into play here to rebalance the economy
from this shock and ensure that it reaches some sort of equilibrium;
otherwise, the result will simply be unemployment and a serious

<footnote n="25">²⁵ “For it may be that it is the greatest of the own-rates of interest (as we may call them) which rules the roost (because it is the greatest of these rates that the marginal efficiency of a capital-asset must attain if it is to be newly produced); and that there are reasons why it is the money-rate of interest which is often the greatest (because, as we shall find, certain forces, which operate to reduce the own rates of interest of other assets, do not operate in the case of money)” (Keynes 1936: 223).</footnote>
downward pressure on wages in the higher wage country. (Pilkington
2016: 326)<fnref n="26" />

Pilkington’s USA example elaborates the narrative on the importance of
the positive effects of free trade and open economy generating a higher level
of efficiency around the world, but which simultaneously and collaterally
undermines “worker organizations” through unemployment augmentation
which, in turn, induces some form of stagnation in effective demand, debt rise
and instability. Once again, the comparative advantage doctrine assumes away
institutional factors, resuscitating “flexibility” and perfect factor substitution.
This theory is certainly “static” in the sense that the specializing trajectory
in certain sectors or segments inhibits their future development into higher
technological areas. Ricardo’s Portugal/Britain open trade example (cloth/
wine respectively), obviously was pondered from within the British empire
perspective, which might have ruined an impending “textile” industry. The
example of protection policies in the USA is a clear case that demolishes
any sort of “level playing” field by limiting imports and thus generating local
positive effects for local companies.

The dominium of the aviary image of the dominant “rooster,” (“ruling
the roost”), in the context of “open economies” and “free trade” in a world
of multiple antagonistic “exchanges” obscures the latter configuration, to
say the least. Hence, “free trade” specialization can become a negative and
damaging long run consequence in certain areas or Center countries too.
In the Periphery, the prices of their export (primary) products exhibit
a haphazard tendency, which, contrary to Center economic formations,
have limited power trade mechanisms by which to counteract internally
and externally a “purchasing power” loss, or income level vis-à-vis the
“external shocks.”

Prebisch's arguments on these aspects during the early 1950s are clearly
reflected in the negative consequences for the balance of payments and the
functional income distribution within the Periphery. The predominance
of policies for an “inward growth” strategy vis-à-vis the one sided “export
driven” perspectives of “pre-Second World War,” implied recovering the
importance of the “multipliers” effect of local capital investments.

Once a period of deterioration of the terms of trade sets in, the Periphery's
limitations to sustain external payments to cover not only certain aspects of
current but also the capital account to maintain certain levels of imports is
underlined, a thesis which again, during the 1970s, in the Eurocentric discourse
was *tangled* (sorry for the pun intended) to the name of A. Thirwall's<fnref n="27" /> thesis

on the “balance-of-payments-constrained growth models.” Pilkington is all
for “diversification” of the economy, which allows the economy to withstand
the:

unforeseen swings in the supply and demand of certain goods. Again,
we should always remember that it is not a good idea to put all one’s eggs
in one basket lest that basket fall to the ground. (Pilkington 2016: 328)

Nonetheless, first, it is urgent to displace the aviary vocabulary, and the
“chicken run” images, which do not reflect the antagonistic characteristics
of the realm in question. Previously, we mentioned the semblance related
to the inadvertent “dropping the basket,” which only masks the potential
power asymmetries among some countries (agents) to undertake and
sponsor policies to counteract the negative consequences of the reduction of
purchasing *power* of its exports and hence its imports level capacity. During
the 1950s and 1960s, the movement to construct a sort of “buffer stocks” to
stabilize prices for certain primary goods like coffee, cocoa, sugar goods, was
defeated during the 1980s with the neoliberals’ narrative of “open economies”
and non-intervention in the so-called “market” by the State. Although the
encouragement of export policies for certain sectors was not an antithesis to
an inward led development policy proposed by Prebisch and Latin American
Structuralism, the struggle to undertake reforms in the Periphery to *selectively*
open certain sectors of those economic formations became prohibited during
the external debt renegotiations during the 1990s negotiations.

Terms matter (Center-Periphery antagonisms) especially when the aim
is to explain agents’ behavior and outcomes vis-à-vis each other during their
“interaction.” The early illustration that Pilkington posed in the book, on the
outcomes of a certain football spectator’s behavior, forcing or determining
the “upright” position to those behind him if he stood up, evades the
consideration that the event reflects a potentially antagonistic confrontation
with those spectators that do not want to see the game in an upright position
and, worse-case scenario, those groups of individuals that have “organized
themselves” to act otherwise as a “unified” agent, bringing to light the
indeterminate heterogenous nature of the agents in question, “individuals”
or a “unity of spectators,” both of which require some sort of deliberation
of the choice-decision moment. The process might generate a collective

<footnote n="26">²⁶ No space to touch on Pilkington’s rejection of the notion of equilibrium or Latin American Structuralism critique, but Nadal’s deconstruction of the mathematics in question is counterpoised by Debreu’s dictum that: “in proving existence (...) one is not trying to make a statement about the real world, one is trying to evaluate the model” (Debreu in Till and Roy, 2014). For a general appreciation of the concept of equilibrium, see Russett (1968).</footnote>

<footnote n="27">²⁷ Again, no space here to describe Prebisch’s theoretical vocabulary during the 1950s which</footnote>

<footnote>would certainly displace the “odd couple” narrative repeated in Western-centric academia in the 1970s with the so-called “Thirwall-Prebisch” thesis, in López’s words: “the Prebisch-Thirwall notion (...) has become a workhorse in Keynesian-inspired open-economy macroeconomics. Its main message is that when exports grow (or when the import elasticity of output falls), private demand is stimulated. Besides that, note that growth of exports induces growth of imports, which, however, is lower than the original growth in exports, such that the government has room to implement expansionary demand policies without endangering the trade balance.” (López 2018: 337). Furthermore, the insistence in recent decades with policies for the Periphery, which *exclusively* concentrates on the “export driven” sectors as the *only powerful multiplier* dynamism for growth vis-à-vis local capital development investment can be questioned (see Perrotini and Vázquez-Muñoz, 2018).</footnote>
“agency,” pushing, shoving, and threatening those in front if they don’t sit down, it is an undecidable and contingent “situation.” We cannot discern what response will ensue due to the behaviors in question. That requires us to examine the historical data, otherwise, we would be receding into the predetermined rational actions of the “representative agent of marginalism,” which Pilkington demonstrates as being unviable.

Although Pilkington, as mentioned previously, is not consistent on the vocabulary and its tone, since he advises awareness of the “institutional nuance” (Pilkington 2016: 329) of “free trade,” which he acknowledges: “free trade is an inherently political issue: what political forces within the countries in question are for the free trade policies and what political forces are against them” (ibid.):

> What changes will opening up an industry to free trade have in the countries in question? Is there reason to believe that the labor that loses employment will automatically find it elsewhere and will the jobs be of equal quality? Are we making a country too reliant on a single good when we open them up to free trade and enforce specialization? What effects will the opening up of a country to free trade have on income distribution? (...) In order to understand the agenda behind any trade policy at any given moment in time, you must examine it in critical detail. What free trade dogma does is it tricks economists fooled by their own simplistic narratives into becoming propagandists for whatever powers-that-be want to impose on various countries at any given moment in time? (Pilkington 2016: 331)

Accepting Pilkington's dictum that “free trade” is not always “bad,” and contingent on the political and economic forces in question, a “development strategy” is of prime importance in countries at the extreme end of the asymmetric power contingent chain effect, which again cannot be examined independently of the specific power asymmetries in question: countries and enterprises (agents) involved, the range and capacities of debt, evaluated by agencies in Center countries. The Periphery's product's future, or purchasing power incomes is equally examined, and “policed” with WTO rules, which limit the pertinency of using the “market” narratives as the best pick of the bunch to elaborate the long and short view of the investment projects. Equally, the sole idea of “free trade,” as well as “opening up a country,” accepts most of the presupposition of the “Ricardian Zealotry,” evaporating the asymmetric power relationships which world trade organizations enforce systematically and sometimes even against the trade conventions, a consequence, as said before, of the power the asymmetries between the nations in question. It is in this discussion that Pilkington's strategic critique of “Ricardian Zealotry” might miss the mark, since he assumes a “consensus,” “quite terrifying” (Pilkington 2016: 330) among economists, about the positive role of “free trade.” Although it is very easy to agree with Pilkington's critique of the

“Ricardian Zealotry” in question, which underlines the substantive childish theoretical presuppositions originating in “market efficiency” and EMH arguments, Latin American economic discourse, as seen before, contradicts the apparent “consensus” by Eurocentric academia. Sharing Pilkington’s “exaseration” and “shocking” disbelief of the theoretical vocabulary and preaching when Eurocentric economists discuss the issue of “free trade,” this opinion is not unanimous, as the above has shown among “economists” in the “Periphery,” despite its hegemonic role in most of the economic reforms over the last three decades by the Latin American governments.

In order to underline my argument, and perhaps to reinforce Pilkington's use of Krugman to that effect, I may concur with most of the limitations which Krugman's position's "patronizing tone" generates in the theoretical discussion about the status of the "comparative advantage" narrative, but then Pilkington himself could be under the same insular sway by not taking into consideration the distinct and alternative discourses outside his own geographic milieu, notwithstanding his allusion to the struggle by French students to reform the economic discipline.

Krugman's theoretical evolution shows just as well the “exasperating” institutional conditions of the profession in question mentioned by Pilkington, in which confessions on theoretical waverings are not really made to count. Let us not forget Pilkington's presentation of the ambivalent nature of most of Krugman's appreciation and position on the IS-LM model discussions, with the “comparative theory” narrative, and the “ambiguous nature” of the author's ideas. Krugman's discussion and propagandist thesis on “Ricardo's difficult idea” was followed (and I am not going to say paradoxically, because it is exactly the practice of the economic profession which I wish to underline), by a text, during which it is claimed, A. O. Hirschman's work on development theory, “proves” that “equilibrium theory” was wrong and “the theory of economic development was correct” (Krugman 1997: 29). And yet there seems to be not even a hint or impression of the theoretical consequences which should follow from this revelation, for his own previous “decades” of work or the economic profession at large for that sake. I am not just implying the “limited” knowledge of Hirschman’s work<fnref n="28" /> by Krugman, rather it relates to the inexistence of any sort of theoretical reconsideration which such a recognition should generate, and especially because “disequilibrium economics” presupposes a totally different set of notions about the agents’ conditions of existence and their perspective to undertake certain decisions-choices.

Hence, “disequilibrium economics” implies taking seriously the terms of trade and their consequences especially for the Periphery vis-à-vis the Center. If we retrieve Pilkington’s final profit equation, with no government ($I_R + C_p - Sw_R = \pi_R$) (Pilkington 2016: 272), and twist it a little, national income with taxes can also be expressed as $Y \equiv (\pi - T\pi) + (W - Tw) + (T\pi + Tw + T_i)$

<footnote n="28">²⁸ See chapter on Hirschman above.</footnote>
(Pilkington 2016: 210); and global profit as: I + (X - M) + Cp - Sw = π, which is the sum of I, gross investment + net exports + budget Deficit + capitalist consumption - worker savings; X - M net exports, exports minus imports; G - T the budget deficit, government expenditure minus taxes again, Cp consumption out of profits (capitalists' consumption), Sw, workers' savings. Notice that in the latter expression, the three (≡) bar denotation has given way to a causal process implied by the two-bar identity (=) symbol, which means that it is the left-hand side where we find agents' decisions changing the process in question.

The antagonistic “trade” relations between Center and Periphery are hidden somewhat, since the Periphery’s export volume is concentrated in a reduced number of products, often “primary” products, although not necessarily. Therefore income, which in distinct periods tends to display a deterioration of its value in terms of those it acquires from the Center (industrial goods), becomes the source that generates the series of “devaluations” and “higher import prices” and not necessarily a financial mismanagement. Aspects of which, in Western-centric academia, Prebisch’s name is joined to Singer.<fnref n="29" /> Given the Center-Periphery power asymmetries,<fnref n="30" /> it’s the Periphery that modifies its “prices” or “costs” during the downturn of the cycle, while in the Center, a better organized labor force manages to retain certain levels of income previously reached, and therefore manages to keep those “fruits of technical progress,” an entitlement, to which, it must be emphasized, is deservedly acquired in view of their previous toil and sacrifice, but a process towards which the Periphery wants access through a selective process of social and technical transformation, by a variety of industrial and social reform policies. The deterioration of the Periphery’s terms of trade vis-à-vis the core countries, in Prebisch’s view, is not an “iron law” (Prebisch 1951b: 6-7)<fnref n="31" />. The wave, undulatory “movement - reality” of “capitalism,” the upswings and downturns, imply taking into consideration aspects of the balance of payments and the trade relations as intrinsically “uncertain” and volatile, which in the last instance are the consequence of time disparities

among and between economic formations (Center-Periphery) and the
productive and circulating realms.

The current mode of organizing a selective “open” devaluation process among and between diverse economic formations, Center-Periphery, does not allow for much room for an autochthonous adjustment without penalizing “development” policies in the Periphery (Nadal 2004). The Center-Periphery power asymmetries are related to the existent, although challengeable, constraints imposed by certain historical trajectories, requiring reconfiguring the previously diverse and heterogenous conditions of existence of trade and productive exchanges.

Furthermore, the periodical relative reduction or purchasing power "loss" of income by the Periphery given its trade and commercial links, contributes negatively to its "external" balance sheet, and capital account, requiring borrowing from the "Center" at a certain interest rate, with a currency unit (generally the dollar) as an "asset" whose value as Keynesians say, "own rate of interest," oscillates, not only regarding the Periphery's monetary unit, but also other international standard currencies (euro, yuan). As we know from Pilkington's presentation, local and international interest rates are the product of power asymmetries themselves. Different trade zones and economic formations (Center - Periphery - agents) aspire to "control," through their portfolio, the payment's management, which is articulated and pegged to the value of the dominant and most used currency in the zone in question. Corporations, commercial enterprises, and countries must fine-tune their payments to the changing nature of what Keynes described as the "rules of the roost" antagonism (Keynes 1936: 223) or the asset/commercial entity whose value level "disciplines" a ranking order by which debts and investments are calculated (Minsky 1986). Recently, it has been argued that there exists an asymmetric "hierarchy" of international monetary anchor-units (dollar first, euro often second, and Japan's currency third in its region),<fnref n="32" /> a ranking order, once again, a power asymmetry relation between and within Center and Periphery dominating the scale and shares worldwide used of the international currency which clears the great part of the "transactions."

Unlike the post-World War II international agreements of Bretton Woods, which pegged on “dollar-gold” the currencies in question, the current open and antagonistic struggle to occupy the “rule of the roost” position, or convert to a certain anchor currency preference as the unit for trade, and therefore debts, it’s “normal” to encounter contingent and transient periods whereby countries balance accounts change dramatically, as the unfortunate image goes, several agents transform their assets and “fly to safety” from the Periphery headed towards the Center, anchoring its portfolio value set into

<footnote n="29">²⁹ Once more the “Prebisch-Singer” thesis requires a theoretical “decoupling” process: the “de-
terioration” process appears in his writings during the early 1930s and the vocabulary “Cen-
ter-Periphery” is quite dissimilar to Western-centric academia notions of trade between indus-
trial and primary producing countries.</footnote>

<footnote n="30">³⁰ Please take note that we do not use the term “unequal,” which does not mean the absence of imperialist policies.</footnote>

<footnote n="31">³¹ After the appearance of various texts (Prebisch 1949b, 1950, 1951) where Prebisch presented these aspects in detailed fashion, in a course of lectures in October 1951 to the Training Center of Latin America in programs and agricultural projects and related subjects, he explicitly denounced the then misinterpretation of his posture: “I was made responsible for having formulated an immanent law of the process of economic development by which the prices of primary products tend to depreciate in relation to those of industrial products. I have not formulated any sort of such immanent law, but I simply called the attention to the phenomenon that has occurred in a determinate period of time under the pressure of certain forces. We don’t know what will occur in the future, it depends on a series of factors” (Prebisch 1951b: 6-7).</footnote>

<footnote n="32">³² Rogerio P. Andrade and Daniela Magalhães Prates (2013); Bruno De Conti, Daniela Magalhães Prates (2018); Luiz Fernando de Paula, Barbara Fritz and Daniela M. Prates (2017); Daniela Magalhães Prates (2017); Daniela Magalhães Prates and Luiz Fernando de Paula (2016); Meireles (2016)</footnote>
those international monetary currencies considered of the highest relative
“value.”<fnref n="33" /> Once again, displacing the “aviary” metaphor, it’s the “monopoly”
of the possibility to create and use the dollar, by the U.S.A, lowering
transactions costs both internally and externally, which forms the basis for its
dominant international role as an account unit: fewer negative dangers and
risks of the so-called “flight to safety” conundrum, despite all vulnerabilities
and impending crisis intimated since remote times, by the economists of the
Bretton Woods era (Triffin 1960, Kregel 2018, Minsky 1986).

Since the 1980s debt “crisis” that the Periphery sustained, the IMF has become (which was not its original role)<fnref n="34" /> the “financial and monetary agent” of the private banks in the Center to negotiate debts and new loans vis-à-vis the Periphery, which unshackled those entities (corporations) *individually* from assuming the responsibilities and risks of bad lending and low insurance predispositions when dealing with the Periphery. On the other hand, the Periphery’s representation in the administrative echelons of the IMF, given its very low voting rights, has limited areas where it can induce certain discussions to push for a reform of the institution or a worldwide financial reform, despite very important economic transformations within the appearance of several countries like China and Brazil, for example.

“Do You Want the Social?”

It is in a note at the end of Chapter 10 that we find Pilkington contemplating the reasons of the persistence of why “people” or economists hold “marginalism” as a worthy academic enterprise, despite information to the contrary. He makes references to some sort of explanation, relating to a certain “fatal attraction” among men, their belief, with “certain types of theory” (Pilkington 2016: 319), and points to the fallacy of struggling to convince people otherwise:

it becomes obvious that you really cannot convince people who adhere
to these theories that they might be wrong. So, the goal becomes rather
to allow a space within economics for those that think they might be
and see who, in the aggregate, produces more functionally useful work.
(Pilkington 2016: 319)

But this is the nitty-gritty of the matter of the dispute as to “who
decides?” and which are the mechanisms available for that undertaking?,
the construction of such a contested space is what is at issue, it is a political
issue on which Pilkington is ambivalent, and which simultaneously
acknowledges its existence by demonstrating the hegemonic struggle which
“deconstruction” implies: a decision of some form, of some type of “coercion,”
exclusion/inclusion or *rule* with which to uphold the space in question. It is
*commendable* Pilkington’s use of the “justice model” example as a contesting

ruling behavior resolution procedure precisely because it reiterates the
importance of undertaking a “judicious democratic decision.”

Hence, the gross profit equation and its sources are how Pilkington displays the question, which be an undecided ethical-political problematic, since according to Pilkington we are not sure whether the issue is “political” or “partisan” (Pilkington 2016: 219). Having posed “profits as a moral dilemma” (Pilkington 2016: 211), the narrative transforms both Marx and the marginalists into a “subjective” “war of interpretations” story, steering clear from aiming for an “objective” description of their respective notions of profits or their existence. Pilkington does mention the unsustainable and contradictory version of the marginalists’ story of the non-existence or, un-normal “presence” of profits in the literature, and/or the quasi orthodontist Marxist “extraction” metaphor of surplus labor power by the capitalist. And yet “hidden,” in a profound note number 13 at the end of Chapter 8, we are offered a brief theoretical description that questions the notion that income “is distributed in line with the marginal productivities of capital and labor” (Pilkington 2016: 218). The mention of the Cambridge Capital Controversies underlines precisely the narrative that should have been introduced into the text given its importance:

> They were trying to demolish any deterministic distribution theory
> and put forward the idea that the distribution of wealth in any given
> society is a moral, political, and historical issue. This opens up the
> space for us to have a real discussion as to whether any given income
> distribution is fair or not, and it prevents the zealots from telling us that
> left to itself the system will largely determine this distribution in some
> sort of efficient manner which, if we tamper with it, will result in chaos
> and disorder. For a decidedly politically partisan view of the question,
> although one that does succeed in getting to the heart of the issue in a
> way that economists are generally unable to do” (Pilkington 2016: 218)

Therefore:

> the competitive market economy no longer contains any necessary
> mechanisms pushing the various wage rates or the profit rate to any
> determinate level. Rather, history and custom, as well as politics, laws
> and struggle, will determine who gets what. It’s a system of grab what
> you can. (Ackerman in Pilkington 2016: 219)

If “wage income and profit income are merely two types of income”
(Pilkington 2016: 107), there is no *necessary* inverse relation between
those incomes, which was precisely the reason for introducing the name
of Kalecki in the story. Marx’s account of the process may well be branded
as “metaphysical” (Prebisch 1949a in 1993: 417), given its value/price
dichotomy, but which should not be the excuse to dodge the mother of all
issues: the asymmetries of power among and between agents (labor-capital;
capitals vis-à-vis capitals), which evolve through the mechanisms by which

<footnote n="33">³³ See also Regantiquili (2016).</footnote>

<footnote n="34">³⁴ Furtado (1989, 1981), Ugarteche (2014), Danby (2017), Helleiner (2014).</footnote>
certain conditions of the productive and circulatory process are held: the
possession in separation thereof. That possession in separation of certain
conditions of the productive among and between diverse heterogenous agents
becomes the foundation of what is called the “market,” the links of the units
or production among themselves and to labor power, are the consequence of
a series of contingent rules and historical practices which, in turn, can explain
the absence of a “representative rational agent.” The antagonism between
and among agents in their struggle to determine their “prices” generates,
instead of a general “rational” mechanism, a multiple heterogeneous universe
of agents with no guaranteed representative agent kingpin, required by
“marginalism” and its “system” of equilibrium. On the other hand, the same
antagonism, within the multiple and heterogeneous agents, breeds a variety
of alternatives (a heterogeneous milieu) in which agents have to organize the
production process, under no necessary logic or relation to the evolution of
the “organic composition of capital” on which Marx’s narrative depends. Not
the consequence of “competition” nor its opposite “monopoly,” but rather
the outcome divergent profit margins and prices, each an outcome of the
contingent configuration of asymmetric power relations among and between
agents, “degree of monopoly” in Kalecki’s term.

In occasions, Pilkington's narrative is not scrupulous enough to distinguish
the degree to which the "distribution of income" implies a political partisan
examination which supersedes "moral aspects," although he does assert that
the "relationship between wages and the mark-up will determine to what extent
income is distributed between wages and profits" (Pilkington 2016: 211).

But the use of the notion of the “mark-up” amplifies the conundrum, the
implied antagonism, which is the mechanism we are trying to underline, but
lies hidden with the reiteration that it is just a “conventional” contingency:

Conventions are not immutable. They are subject to moral or ethical
evaluation and the political change that may result from such an
evaluation. When discussing profits (...) we can never lose sight of the
moral dimension. Marx and the marginalists sought to hide this moral
dimension behind a veil of what can only be described as metaphysics,
in the most pejorative form in which that word can be used. The
marginalist sought to justify the existence of profits as a sort of
transitory phenomenon stimulating entrepreneurship that had nothing
to do with power or underlying social relations. Marx, on the contrary,
completely ignored that profits might stimulate entrepreneurial activity
and instead insisted wholly on power relations. His implicit working
premise was that only labor adds value to goods produced and those
who come up with the idea and take the risk in putting it into action
by investing and hiring workers are vile leeches. (Pilkington 2016: 212)

For Pilkington, both narratives are fictions to justify their divergent
perspectives since each of them has an “element of truth” (Pilkington 2016:

212). Therefore, if entrepreneurship is encouraged by profits, they are also
the consequence of power asymmetries organized by the social relations
in question. Simultaneously, both aspects of the account are considered
as pertinent, endorsing their own particular *“a priori” political position*
(Pilkington 2016: 212). On the one hand, marginalists insist on the fairness
and efficiency of the free market organization, while Marxists highlight
the importance of abolishing profit so that a free society can arise. While
Pilkington rejects the idea of generating a new “gospel”. His own task is
to propound these postures as merely subjective “moral judgements” and
should not be surrendered since it reflects “our ability to be individuals and
ultimately our freedom as individuals” (Pilkington 2016: 212). Hence, those
who are trying to impose their brand of subjective truth in economics as the
“robe objective science” (Pilkington 2016: 213), are merely zealots unlike
“moral philosophers” that help us explore certain moral dilemmas.

Economists can sustain arguments about profits because they can
establish where these “profits come from” and how “they work through
the system. But there is really nothing that we can say with regard to the
justness or unjustness of profits that a non-economist can have just as valid
an opinion on” (Pilkington 2016: 213). Economists have no “more objective
validity than a similar statement made by, for example, a trade unionist or an
anarcho-capitalist” (ibid.). Although in principle Pilkington’s posture seems
impregnable, it can be argued that specific and “relative profit shares” of a
certain set of class agents, can be “reduced,” which entails an “ethical or moral
political judgment” and yet “objective” in the sense that it is simply a question
of adding and/or subtracting taxes, or differentiating levels of subsidies for
the productive sectors/agents involved.

The standpoint, although defensible, reluctantly finds itself undoing its
own evaluation: “economics” is a “non-conservative” discipline, implying
that the “system can be changed”:

> It is based on conventions, opinions and evaluations of what is good and bad in a given society at a given moment in time. It is not immutable or ‘natural’ and, above all, catastrophe will not occur if it is tampered with (...) It gives us the tools we need to make changes to the system to produce desired outcomes. It does not tell us that we should definitely make particular changes (...) mankind should have no more need for those silly pseudo-objective stories sought to buttress certain political tendencies while shutting down the debates surrounding them. Anyone who requires such stories to justify their political proclivities is likely not someone who has much to contribute to real, practical and moral political debate. (Pilkington 2016: 213-214)

However, certain specific policies, for example, distributional struggles
require the use of clear and concise arguments, even if not explicit, these
contain “subjective” or ethical-moral judgements: relative shares of profits
and/or salary levels, between and among agents and potential consequences cannot be washed away through a purely “objective” formula. The clear cut or un-stained distinction between the ethical and evaluative space and the objective formula are problematical for the same reasons that Pilkington underlines in much of his book: “social relations” are organized by conventional standards imposed by power asymmetries, the struggle for their transformations require politics and thus ethical-moral viewpoints, and hence, in the last instance, it implies “upsetting” to say the least, certain “liberties” or “individual freedoms.” In other words, reconstructing politically the “individual-collective” divide. It is true that no discourse or discipline can offer a general objective conception of the “truth” which should be followed by all or else pay the consequences here or in heaven, but “deconstruction,” and thus the disappearance of ultimate foundations, offered in Pilkington’s book, implies or compels him to make a decision on matters which he *sometimes* rebels. On occasions, the sanctity of the idea of “individual freedom” on which he sustains certain arguments cannot be safeguarded without the liability of reverting to marginalism and its notions of the attributes of the agents in question.

On the other hand, the problem with the metaphor or analogy for an “objective” formula, and “switching” concepts of the hard sciences as a support to construct the conceptual realm (social) of the social sciences, finds an uncanny disruptive irony as we travel along Pilkington’s book, since among one of the main arguments stressed to sustain the flawed character of marginalism, Pilkington points that the “material we deal with, economics” (Pilkington 2016: 283), is unlike modern sciences, and therefore “replicability,” “causality” and calculability of experiments are a nonstarter.

Pilkington appropriately underlines that the “material” with which it deals, the phenomena, molecules, etc., cannot be generalized in the social realm. In other words, even if we concede and accept the hegemonic consensus that in the “hard sciences” the notion of “emergent properties” is pertinent, its incorporation as an explanation into the social realm begs thousands of questions, not only pertaining to the anthropomorphism which it engenders, but also notions of causality and determinism both implicit or explicit in the “hard sciences.” But what must be underlined is the effort and decision to engage theoretically in this problem among others, which has become a kind of folklore by the publication of recent texts (King 2012, Hoover 2012, Backhouse and Boianovsky 2013, Chavance 2008, Hodgson 2004, Wade Hands 2012).

Although I am aware that the process described by Pilkington by which an individual football fan's behavior creates a specific “collective” response, is assuming the analogous outcome posed by Keynes's example of the negative effects when a “community” behaves in terms of the individual action by clearing his debts, the argument of the inadequacy of the metaphor

“emergent properties” becomes theoretically unmanageable given the heterogenous characteristics of the agents, on the one hand, and Pilkington’s own appreciation that the “realm” of “social sciences” cannot be examined by the logic of the “hard sciences.”

My genuine concern is not really this aspect of the debate, but rather that agents (individuals, humans, non-humans) have to be observed as “heterogeneous” entities, within an antagonistic power-institutional realm, which, again, cannot be posed as a consequence and product of a necessary “individual” decision-choice, as the “methodological individual” posture portrays it. In contrast, a contingent instituted power process, whose “origin” does not need to be known in advance, does not require the banishing of “individuals” decision-choices, and/or insisting that the “social comes first.”

The undetermined and contingent nature of the “social” realm (individual, agents, institutions)<fnref n="35" /> is the theoretical aspect which is in dispute, and which in certain sections of the book becomes central. On the other hand, the empowering relations which individual or agents can generate, producing the “order” and “rules,” whose origin in some quarters is argued as “spontaneous” (for example, the “Austrian” approach. See Hodgson 1994, 2007) as an “emergent property,” tends to challenge the most important aspect of the argument: the antagonistic and contingent character of the social relations which would in turn demolish the assumed association and ties between the “elements” and “properties,” on which the concept of “emergent properties” is built and on which “hard sciences” thrive.

As a concluding note, Pilkington’s book should be an opportune publication, both brave and daring given the academic and political context. I tried to develop only specific theoretical aspects regarding the historical nature of agents, and the “economies,” as well as the power asymmetries, a discourse which unwittingly was developed by Latin American Structuralism during the 1950s. Explicitly, I have radicalized certain themes which I believe follow from Pilkington’s own argument and problematize certain apparently ambiguous theoretical and ethical standpoints; a new text would be needed to discuss his idea of the “subject” in Sartre, or his appreciation, of the discourse-reality distinction in his “schematism” model. Hopefully, his Shackle-Keynesian renovation, to think the investment process, was not lost by the “peripheral” reading and the critique carried out in this chapter.

From my personal prejudices, the decisive *par excellence* theme of the book was the examination of the “economic” realm and its agents, as a set of asymmetric power relations. That cleared the ground to underline the ethical-political obligation to undertake a critique of the actual situation of the discipline, which in turn, given the contingent characteristic as to the manner income is generated and distributed, economics cannot become the

<footnote n="35">³⁵ See De Vroey’s notion of “trade technology” to think the problem of the organization of the “market,” which is not solely related to “labor”. De Vroey (2004a, 2004b)</footnote>
theoretical fountain to “justify” the latter. Given that the origin of profits is, to say the least, distinct from the fable portrayed by “mainstream economics,” and as Prebisch contends “its quantity and its variations are determined by the increment of money and production” then “it is impossible to know to what extent profit is justified or not, because we lack elements of judgement” (Prebisch 1948b in 1993: 359), from the economic point of view.

But if we accept the existence of a monetary “compulsory mechanism” (Marxists perhaps use “exploitation mechanism”) through which businessmen, after some interlude or cycle retrieve a supplement over their original inputs, it becomes a political issue as to what extent this enhanced amount of purchasing power is “justified.” “Economics” cannot decide this aspect if it is accepted that the notion of “efficiency” can only make sense in terms of “profit.” If during the upswing businessmen seem to “reap where they did not sow” (independently whether they incorporated new technology or not), the brunt of the decline of prices during the downswing is on their shoulders. The ethical-political dilemma implicit in the schematic representation of the antagonistic contested space is clearer if we, for example, incorporate the idea that the agents in question are not “human individuals” but rather, cooperatives or certain other collective forms, which possess in separation certain of their reciprocal conditions of their existence, then equally the issue of distribution and price bounds and the residual or “profit” does not evaporate. Hence, we cannot evade the individual-collective divide (Mirowski 2019), we cannot negate the “other”: a decision is to call forth a political engagement to discuss our forms of economic organization.

# Chapter 6

## All that is Solid does not necessarily Melt into Air

### Introduction

Scholars looking for a new vision to rethink economics and its evolutionary story may find no better service than Colin Danby's text *The Known Economy: Romantics, Rationalists, and the Making of a World Scale*.<fnref n="1" /> It personifies perhaps one of those rare, unique unprovincial theoretical moments, which disrupts “Western-centrism”<fnref n="2" /> social science by acknowledging and describing the appearance of “alternative” discourses beyond its traditional language and geography. The angle from which I will undertake the assessment of Danby's critique of economics reports a theoretical lineage back to Latin America in the 1940s, which is generally designated in English or French academia as “Latin American Structuralism.” The quotations are important given the internal theoretical variations.

My critique of Danby's account on the discourse of “modernization” while acknowledging his dazzling seductive and un-submissive tone when demonstrating the *unsustainable conceptual* conditions of its existence and the images generated thereof by the discursive formation in question (which is beyond reproach) wants to convey that the author's strategy of exposition may actually hinder, *unwittingly*, alternative modes of presentation, and thereby constrain radicalizing political strategies to transform the “cruelly unequal” (Danby 2017: 162) world we live in. However, although I imagine sharing significant aspects of the author's critique of the “European self-imagination” (Danby 2017: 98), my analysis aims to supersede certain of Danby's positions in various aspects of his story.

The critique of economics that emerged in Latin America in the second half of 1940s relates to a period that runs correlatively to Danby's own object of analysis in certain sections of his text. The discourse in question challenged Western-centric discourses as inadequate and impertinent to comprehend the “Periphery” as an economic formation (on the term see ahead), and therefore requiring the displacement and reconstruction of the Western-centric economics vocabulary, a process which ultimately culminated in questioning its validity within those very “spaces” (the “Center”)<fnref n="3" /> from which the discourse surfaced. In other words, Latin American Structuralism was simultaneously rebuffing the indefensible vehement ethnocentricity of the

<footnote n="1">¹ Danby, C. (2017) *The Known Economy: Romantics, Rationalists, and the Making of a World Scale*. Routledge.</footnote>

<footnote n="2">² Anglo-Saxon and/or Eurocentric discourses.</footnote>

<footnote n="3">³ For an “outline,” see first three chapters.</footnote>
Western-centric economic discourse in question,<fnref n="4" /> and *also* its problematical theoretical characteristics for examining the “developed” economic formations (the Center).

Therefore, Danby’s “post-colonial” economics experience is an important substratum of his narrative and criticism, but what is certainly singularly distinct is the author’s description of a unique chapter in the history of “economics” highlighting the rationalist/romanticist divide, a “combination of repulsion and attraction,” a “bad- tempered collaboration” (Danby 2017: 9)<fnref n="5" /> through which the discourse of modernization gets its life and force. Limitations of space will not permit the detailed descriptions whereby the rationalist/romanticist dichotomy allows a stylistic mode of analysis of a great range of authors and periods. The “productive nature of the rationalist/ romantic split” (Danby 2017: 94) can be stabilized by thinking the dichotomy through Max Weber’s category of the “ideal type” with which to understand the counterposed camps and on the other, the modernization discourse as a sort of an “iron cage” (Weber), which should certainly be questioned as an *unescapably* encompassing force. I share Danby’s profound disbelief of the “fantastic” qualities of Western-centrism’s “European self-imagination,” a fairytale more akin to the likes of Borges or Lewis Carroll.

What follows this “Introduction” is a section (“Where Does Modernism Come From?”), describing the rise of those conceptual entities constructed by the “rationalist/romanticist” dichotomy of “modernism” in economics and the source of the “household/business” split which explains the income-productive carrousel: the theoretical accounting definitions as the mother of all debates during the 1940s. This is continued by “The diffusion of the ‘European self-imagination’: Western-centric Discourse and the Rise of Development Economics,” which expounds the economics taught in the Western world and the initial efforts to transfer it to the Periphery of the world economy having previously underlined Danby’s own *sui generis* presentation of the vision “auto-imagination” in question the IS-LM model. The partition (“‘The White Man’s Burden’ Curse”), examines in detail the theoretical and practical consequences and difficulties encountered by succession of economists trained within the “statistical” and “Keynesian” revolution, but whose categories became an obstacle to understand the African plains under its gaze, a horizon dominated by peculiar social relations. The last section

(“Mobile Army of Metaphors: Post-Keynesianism and Latin American Structuralism”), is an effort to engage with and transform-radicalize Danby’s own account of “Post-Keynesian” economics by means of Latin American Structuralism’s insistence on converting the study of “power asymmetries” as the object of economics.

Notwithstanding the above, Danby insisted that the “modernist ideology” “is a poor way of sorting out the complex social world” (Danby 2017: 162), and, in fact, “hides” “much of the world from view” (Danby 2017: 162) (with which I have no “beef”). However, Latin American Structuralism, focuses on the existent power asymmetries as its economic object of economics. In other words, in contrast to Danby it *does* imply proposing a “political alternative” (Danby 2017: 162) which Danby seems to *explicitly* eschew, which to some perhaps is not unescapably negative.

As I hope to show further ahead, to transmute what apparently implies a counterposed theoretical difference, a general notion of power asymmetries of social relations is necessary, compelling a decision on alternative political strategies, in other words ethical foundations are important.<fnref n="6" />

From a Foucauldian perspective, there seems to be no univocal rule by which categories in certain discursive formations evolved or reconstructed, not univocally “episteme”<fnref n="7" /> constraining the enunciative modality strategy, in other words, the enunciative modalities and the agents/subjects in question, are in a sense “polymorphous.” Danby recognizes the proliferation of discourses in the modernist conundrum narrative, through the presence of an “obligatory,” “power-knowledge complex” (Danby 2017: 8). Hence, discourses do not possess any necessary unity and/or consistency, a thesis inclusive even when “mainstream” economics is cited. However, the dichotomous and strategically “ideal types” counterparts (“rationalists” and “neo-romantics”) as distinct fields of research in academia storytelling jettison any sort of potential theoretical bridge or trans-disciplinarity, where economics and psychology dominate the former camp and “interpretative social sciences,” the latter. Both mainstream and “heterodox” (Danby 2017: 10) economics suffer from a cultural specificity blind spot syndrome. Therefore, an inescapable ethical obligation seems in order: an engagement and theoretical “disagreement” with “modernist” discourse in a quest for a “non-modernist” and “trans-disciplinary Economics.”

We intend to question specific conceptual assumptions implicit or explicitly in the “modernization” narrative by radicalizing Danby’s critique put forward in Marx’s classic phrase in the Communist Manifesto of 1848:

<footnote n="4">⁴ See also Connell (2007) and Lander (2000). Collaterally, the critique includes considering how certain theorists from the so-called “developed” economies faced having to deal with the specter of the “‘The white-man’s burden’ curse,” aspects of which haunted Seers’s work (see further ahead), despite having traversed theoretical routes coinciding with the Latin American structuralists in the 1940s and 1950s.</footnote>

<footnote n="5">⁵ “Modernity is not *just* the doctrine that human societies tend to move from a solidaristic, locally rooted tradition to an individualistic, functionally divided modern society. It’s *also* a stylized ritual combat between two variants of this story, the rationalist and the romantic. Ideas about economy have played key roles in the shared doctrine, and in the ritual combat between its two variants” (Danby 2017: 7).</footnote>

<footnote n="6">⁶ “Ethical doctrines are vulnerable to ethical critiques. Might it be wiser to avoid the danger of ethical critique by disclaiming *any* ethical foundation” (Danby 2017: 26).</footnote>

<footnote n="7">⁷ Hence, in my interpretation, the *Archeology of Knowledge* (Foucault 1972) seems the more profound of Foucault’s books, to comprehend specific discursive formations, notwithstanding the encyclopedic nature of the *The Order of Things*... (1970).</footnote>
"All that is solid melts into air",<fnref n="8" /> which is simply the zenith of a hegemonic theoretical trend or style of the period (Berman 1988, Said 1978).

Through the “rationalist/romanticist” protracted counterparts or war of interpretations since the 19th century, Danby explains the proliferation of the “modernization” discourse.

Here the idea is to assess the possibility of alternative discourses whose logic of evolution may disrupt the dichotomy between rationalist/romanticist divide making the “modernization” narrative superfluous.

Danby retraces and appraises, within the field of “economics,” the fantastic! (my term) modernization narrative, simultaneously termed “the modernist template” (Danby 2017: 162), “European self-imagination” (Danby 2017: 98), and “modernist ideology” (Danby 2017: 63).<fnref n="9" /> The account can be said to have done one better on today’s classic text: Marshall Berman’s *All That Is Solid Melts Into Air* (1988), which by no means is a small feat. Amongst other objectives of the textbook, one of Danby’s central strategies examines how Post-World War II mainstream “economics” constructed its “object of knowledge” (Danby 2017: 29), by instantaneously running theoretical rings around the dominant vocabulary by showing its elusive and unstable conceptual basis:

> What Marshall, Kuznets, Rao, and Gilbert share is the story that the ‘economy’ as an object of knowledge emerges via a modernist split of home from business, a split which in turn lets us divide the world into fully modern (where the split has happened) and non-modern (where it has not happened) (...) It’s a folk theory about mentalities. It’s an

assertion that there has occurred a profound shift in how some people think and act, and how they understand themselves, their surroundings (...) It's the people who have made this shift who are the subjects of economic science. (Danby 2017: 29)

Equally, it is an account that unravels the theoretical conditions of existence of the “love” and “money” divide, the “domesticity” and “work” couple or the “household/business” split implicitly, if not explicitly, linked to the so-called “statistical revolution.”<fnref n="10" />

Contrary to what may be believed, L. Robbins's move towards expelling the “ethical” (Danby 2017: 28) from economics, the theoretical sentimentalizing of households essentially abounds in the literature. Danby's discussion about the concept of what constitutes “domesticity” unravels its hegemony and proliferation as an “ideological category” (Danby 2017: 28). The problematization of its theoretical consistency, “the folk theory” (Danby 2017: 29) described by Collier and Yanagisako, is actually the flip side of the “modernity” narrative critiqued by Danby:

> I question the emergence of economy and find that it has a required opposite in households. The two halves are distinguished not by the kind of work done, but by what is imagined to be in the minds of people doing work. The ‘folk theory’ that Collier and Yanagisako describe corresponds fairly closely to what I am calling (...) modernist ideology. (Danby 2017: 29)

## Where Does Modernism Come From?

Danby’s distaste of the “modernist” narrative is unhesitant:

> My beef with modernity is that it reduces this shaggy social world to individuals and nations. Modernists are fascinated with the *individual’s* psychology, mentality, rationality. And culture. When they recognize larger institutions like firms and households, modernists prefer to theorize them as though they were individuals. Modernists rely on the *nation* to explain how individuals came to be the way they are. The nation embodies the individual’s ‘culture’. It guarantees and provides the rights that the individual needs to act freely. Its government is called on to provide whatever individuals cannot manage. (...) that humanity exists in discrete societies, (...) by a simple typology: ‘traditional’ societies are face-to-face, solidaristic, and have little functional differentiation; fully ‘modern’ societies are impersonal, bureaucratic, exhibit a sharp functional differentiation, and contain only little islands of face-to-face, personal ties in the form of the nuclear families. (...) all societies start as ‘traditional’ and then move at different speeds towards full modernity, driven either by internal dynamics or competition with other societies. They assume that more ‘modern’ people or societies enjoy some

<footnote n="8">⁸ According to Berman: "The innate dynamism of the modern economy, and of the culture that grows from this economy, annihilates everything that it creates -physical environments, social institutions, metaphysical ideas, artistic visions, moral values - in order to create more, to go endlessly creating the world anew. This drive draws all modern men and women into its orbit, and forces us all modern men and women into its orbit, and forces us all to grapple with the question of what is essential, what is meaningful, what is real in the maelstrom in which we move and live" (Berman 1982: 288).</footnote>

<footnote n="9">⁹ There is no space here to delve on the category of “ideology” but for what follows, I assume discourses as the means by which certain specific set of practices are materialized; another occasion is necessary to scrutinize the theoretical assumptions whereby we might be able to differentiate “ideological” from non-ideological discourses, without excluding the possibility of questioning the very worthwhileness of the distinction. Danby’s note number 15 in the “Introduction” exhibit these worries: “I use terms like ‘full modernity’ or ‘tradition’ to refer to images in an ideology, not to the actual state of the world. It remains a discursive hurdle that ‘modernity’ is often used by adherents to mean *both* the specific assumptions described above *and* the entire thinkable social/historical horizon, a ‘how we are’ with no conceivable outside. I follow Latour (1993) and Fabian (1983) in denying the reality of ‘modernity’ as a historical stage and finding it counterproductive both as a category of social science and as an ethical guide” (Danby 2017: 12). My disagreement with Danby refers to the statement that we are dealing with an “ideological project” (Danby 2017: 98), since it requires presupposing the existence of a general discursive mechanism whereby to discriminate among discourses those “free” from the iron cage. Rather, discourses should be evaluated as forming part of the war of interpretations.</footnote>

<footnote n="10">¹⁰ Morgan and Bach (2018), Moshe (2018).</footnote>
advantage over their ‘traditional’ counterparts, an advantage that more
or less explains history. The theory of space and time functions for
adherents as a *social ontology*, which is to say something you assume
*before* you begin to study society. (Danby 2017: 8)

Hence, ‘modernity’ encompasses “two sub-discourses” (Danby 2017: 9),
namely the rationalist and the romantic ones, and their differentiation, “boils
down to whether the modernist narrative is told as triumph or tragedy”:

Rationalists are unimpressed with traditional knowledge and are
anxious to escape obligations to kin and clan. In their view, full
modernity frees us to pursue our disparate ambitions. Modernization
theory is a good example. By contrast, romantics are deeply impressed
with the psychological integration and deep understanding they
attribute to ‘tradition’. In the romantic view, traditional society was
solidaristic and attuned to nature. Goods and services bore meanings
that expressed the culture everyone shared. (...) intermediate family
and church (...) [are] (...) mainly mechanisms by which individuals are
taught the single shared culture. (Danby 2017: 9)

The second difference within the “two sub-discourses” relates to whether
you mourn the dying of traditional society or not, reconstructing the demise
of cultural “homogeneity” and its “alienating” effects.

As we can see further ahead, the economy/household distinction is
theoretically articulated to the romantic/rationalist dichotomy, although
Danby’s questions equally relate to the process by which certain hegemonic
discourses were constructed, culminating in a “powerful global apparatus”
(Danby 2017: 15). Its dominant status required examining how “nations” were
to be defined in accounting terms, through which theoretical experiments
could then be enacted, for example in “Palestine and British colonies in
Africa where the ‘nation’ of national income accounting did not yet exist”
(Danby 2017: 15).

Genealogically the idea of romanticism is traced to back to Herder in
Danby’s narrative. The romanticist discourse explanation seemingly appears to
be opposing the role and function of GDP data construction as the fountain
head to represent the well-being or lack thereof by citizens. Given that national
accounts do not represent certain types of “well-being” and were not elaborated
to represent them, this aspect is exemplified by the exclusion of the female
“unpaid” labor role in the household. The household/economy distinction was
constructed by establishing distinct roles for the gender born “body.”

For Danby the rationalist/romanticist modernist divide plays a decisive
role in the intellectual history of the last two and a half centuries, although
I must retort, *within the “Western-centric” intellectual gaze*. The rationalists/
romantics disputes, or “war of interpretations,” on notions of markets, trade,
consumption, and commodification made “plausible,” simultaneously, the
“economic ideas” in “the modernist theory of history” (Danby 2017: 9).

The consequence of the “experience of modernity” that Danby described:
confined to a quintessentially modernist debate, holding the national
unit sacred, [was] committed to the idea that the world is divided into
discrete social units that are closer to or farther from full modernity, and
confirming itself to a stereotyped back-and-forth between (rationalist)
modernizationists and (romantic) traditionalists. The back-and-forth
works for everyone: rationalists economists get to create new measures;
romantic traditionalists get to keep their permanent grievance against
economists; politicians get to empathize with suffering citizens. These
performances license both earnestness and cynicism about statistical
representation. (Danby 2017: 7)

The rationalist/romanticist divide established the symbolical or theoretical
conditions of existence for a series of practices in the contested realm of
measuring and comparing the promotion of certain policies. The romantic
thinkers would praise those critiques that relativize the importance of the
category of “price” as a medium to evaluate “quality of life” within those
partaking similar geography, language or “nation.” The realm of commercial
transactions of all species cannot be the basis of a consistent privileged unit
of “value” to gauge “objects” or the cultural hierarchy; however, romantics
deny and conflate (consciously), distinct notions of “value” when using the
category, which results in non-ending debates as to which values “should” be
primal, as well as the incumbent “costs” of reaching them.

The “national unit” is the sacred entity: a world divided by a diverse set
of these groupings exhibit their distance from or “vicinity” to the modernist
conundrum in two “spaces”: on the one hand, an internal configuration
within and between their own “subjects,” and on the other, that which relates
to other (dis)similar totalities.

The author insists that the produce, distribution, and services reflect
activities in “varied institutional contexts” (Danby 2017: 8), which can include
households, “kingship networks,” small firms, large firms, governments. In
turn, these imply “markets” with distinct characteristics, such as competitive,
oligopolistic, monopolist, regulated, unregulated, “financial systems” and
“legal systems” (Danby 2017: 8), which hinder or empower “different kinds
of production,” distribution, and consumption.

“Different kinds of institutions interpenetrate. (...) Institutions that
undergird economic activity typically exclude some people in order to include
others” (Danby 2017: 8) Hence, the “material world” is “messier and more
variegated” (Danby 2017: 8), a phenomenon that Latin American Structuralism
reconstructed with a more general category called “heterogeneity.”

According to Danby the “national economy” and the “world economy”
distinction implies an economic/non-economic differentiation as well as the
bonding of economic parts into a representable national ensemble, which in
turn refers to a superior totality: a “world economy” in which the national compartments are to be found. Equally, the distinction between economy and household is theoretically articulated to the dichotomy between romantic and rationalist. The analysis of the hegemonic discourses that culminated in a “powerful global apparatus” (Danby 2017: 15), entailed examining how “nations” were to be defined in accounting terms.

Chronologically, the inception of the narrative regarding the divide between household and business advances the seemingly deceptive traditional figure of A. Smith in political economy. I said “deceptive” because Danby’s reading contradicts most of the deliberations espoused by “neoliberalism” as its intellectual hero.¹¹

In contrast to Smith, J. S. Mill “fences” off a specific area for “business,” deconstructing Smith’s “holistic” idea of a unified field of action for the agents in question. Political economy is reconstructed on a “narrower” and “easy” ground: a sentimental division between a loving and self-sacrificing household sphere, and a competitive and rational business sphere. For 20th Century modernists, this division became not just a background assumption, but an imperative: once you accepted household/business as an *essential* divide, as a condition of civilization, then you had to take care lest either compartment contaminate the other. (...) Exclusion of housework from contemporary measures of national output is often regarded as a scandal. (Danby 2017: 17, my emphasis)

Danby argues that the “exclusion of love is the *constitutive* taboo upon which a visible ‘economy’ has been brought into being” (Danby 2017: 17). The taboo in its Levy-Strauss’s or Freudian genealogy, necessarily implies a ratification of a *universal* principle reinforced or materialized by means of distinct and *particular* cultural-historical configuration.

Although for A. Smith it was senseless to assume an autonomous, separate, “market psychology” to understand agents’ behavior, Mill’s critique in the context of the recent emergence of “modern political economy” (Danby 2017: 18), is met in turn with an audacious repellent diatribe by the “romantic” prose, and although too “disparate” to be “easily summarized” (Danby 2017: 18), rejects notions of “self-interest,” which is perceived as cultures’ foe or the collective will of the nation.

Mill’s countered with the traditional move: first, he mocked Coleridge and company’s incomprehension of Political Economy’s object, giving way to theorize the object despite its aberrant quality: “With respect to those parts of human conduct of which wealth is not even the principal object, to these Political Economy does not pretend that its conclusions are applicable” (Danby 2017: 19).

Mill inaugurated the modernist discourse: “a society divided into separate compartments with distinct rationalities and distinct sciences” (Danby 2017: 11 See also Tribe (2008).

20). Danby then assisted the story with the participation of Marshall as his most important “successor” (Danby 2017: 20). Marshall *historicized* the rise of the differentiation of the economy from distinct aspects of the social. The “primitive” and “modern” divide presupposes a teleological movement by which an “emancipation from custom” materializes in the quintessential mentality of modern “industrial life”: family life becomes more “intense” and therefore the traditional “neighbors/family” congeries are relocated, in which “neighbors” and “strangers” now conform the “distant” positioning with respect to the secluded family. Modern configuration of society exhibits a double “virtuosity”; “thoughtful planning in businesses” and “loving self-sacrifice in families”:

> Marshall presented a more sophisticated and confident response to the romantics. Instead of conceding loyalty and love, Marshall argued that the romantics were wrong about *both* the household and the business spheres. And rather than conceding that the business sphere was governed by the selfish desire for wealth, Marshall contended that the core principle of business was thoughtful and deliberate rationality. (Danby 2017: 22)

A social ontology guided by “separate” and diverse motivations presupposes the demise of traditional society, but Marshall vetoed as impertinent “romantics’ ethical valuation” as exclusive to the household. The economic ensemble is the consequence of “motivated” acts, “feelings and sentiments,” but whose distinct rationality were to be specialized: “love” was to rule in the household and business “deliberateness” within the firm. Hence, Marshall’s opposition to women’s remuneration exhibited a clear militant modernist project in which gender politics implied the salvaging of the “family” by disallowing women’s incorporation into the educational structure precisely because they were as “capable” as their “male” counterparts of the household.

The advent of debates to “measure national income,” which were initially a scholarly individual effort, gets supplanted by a clear state-run strategy by the 1930s. Early in the 20th century, an evenly divided field among scholars was perceived arguing in favor or against “inclusion” of “housework in national income” (Danby 2017: 22); “unpaid domestic work” estimates in some countries may well show a 20 to 25 percent augment in “total national output”; “disagreements” did not arise just from the apparent *technical inconvenience* of its monetary representation.¹² Danby highlighted the ¹² Mitchell’s and Kuznets’s “perspective” was sidelined by the new Keynesianism, to say the least. Rockoff has pointed out an interesting estimate on the “value” of unpaid household activities during the 1920s: *Income in the United States, Its Amount and Distribution, 1909–1919* was published in two volumes (National Bureau of Economic Research, Mitchell et al. 1921). Nearly 600 pages in all, it far surpassed anything that had come before in terms of the amount of data utilized and the care taken in thoroughly double-checking the component estimates. The study made a clever use of the circular flow. King was tasked with estimating national income from the payments-for-final-products side, and Knauth with estimating it from the pay-
theoretical episode among its participants, aiming to offer an explanation through which to comprehend why quite important scholars, like Kuznets, for example, repudiated the existence of a highly antagonistic theoretical field with regard to whether “cleaning, child bearing, child minding and the like” (Danby 2017: 23) should be considered as “economic activity.”

Danby contended that these postures represent an “ideological, boundary-policing” mechanism:

> These economists were operating from the same ethical and social template as Marshall, in which the exclusion of the loving household made economy possible and conceptualizable. In different language, the taboo on housework was a *productive* taboo, because it licensed a particular vision of economy: large-scale, rational, and impersonal. Hence any suggestion of including housework in the measured economy had to be ruled out” (Danby 2017: 23).<fnref n="13" />

The economy is made up of agents whose aim is to make “a living” vis-à-vis those destined to make “profits,” respectively “households” and businesses, and, therefore, it is “motivated by forces of quite different nature” and it has an “approach to income as an *appraisal* concept” (Danby 2017: 23, my emphasis). In other words, national accounting categories can be viewed as a representation of “appraisals” and “motives.”<fnref n="14" /> We must not forget the *contested* instability of the theoretical space of the measurable power complex space by those elaborating the national income categories.

Economists Kuznets and Mitchell, considered “institutionalists” in their days, were central in the statistical construction of the national income accounts and, therefore, can be easily conjoined to the German “historical school” and “romantic nationalism,” and thus be made unwittingly into the heirs of Herder’s relativism. In the U.S., they commanded the central data gathering machine without parallel, displaced-defeated (take your pick) by Keynes’s hegemonizing alternative project, which jettisoned those potentially specific “historical” aspects to construct data in terms of income, placing his proposals in a better standing to “generalize” data gathering across the world.

ments-for-productive-services side. The two estimates turned out to be reassuringly close. The study identified and tried to deal with many of the problems inherent in estimating national income that continue to be sources of debate and criticism. For example, it noted that its estimate of the national income in 1918 of $61 billion did not include the monetary value of unpaid work in the household, which probably amounted to “several billions” (Rockoff, p. 155).

Those “relativist” assumptions of the institutionalist school which aimed to highlight specific historical processes appeared as a deficit in the struggle for a general perspective on data gathering.

Hence, Kuznets’s distinction between “business” and “household” in “highly developed” economies intended to “draw a line between economic activity and economic goods” and “active life,” a distinction which would “not be easy to formulate” for both “primitive tribes” and “nations of North America and Western Europe” (Danby 2017: 24).<fnref n="15" />

For Kuznets, the “fundamental institutional fact” (Danby 2017: 25), and social diversity is presented as the question that *“underlays”* (Danby 2017: 25) the categories through which to measure the economies and endorse the “exclusion of housewives’ services” because these activities are “motivated largely by non-economic considerations and form much more a part of life in general than of professional economic life proper” (Kuznets in Danby 2017: 25).

In Danby’s reckoning, Kuznets’s “economy” was an entity “outside” households, whose role was the provision of a “flow of good and useful things” (Danby 2017: 25). These objects of desire became the potential entities to be measured. The stream of flowing objects “desired” by households simultaneously explains Kuznets’s understanding on the basis on which to exclude “criminal enterprises” as conforming an aspect of “national income” output: “their illegality was a societal judgement of the badness of their output. The excluded household, therefore, stood outside the ‘economy’ in order to provide the ethical standpoint from which to measure it” (Danby 2017: 25).

The calculating procedure and its ethical categorial underpinnings to measure national income were, according to Danby the source of Kuznets’s “welfare approach.” National income accounts can actually be quite diverse in their modes of “partitioning of a common, underlying” (Danby 2017: 32) entity which is being measured, and the “list of ‘evils’” necessary “to make a living, could be potentially very long” (Danby 2017: 25) to estimate “net services” to the individuals and households. Quoting Beckerman, who worked under M. Gilbert, Danby underlines the practical consequences:

> the whole economy would be included inside the productive sector. Even the household sector would be included, since it would be simply one more industry converting inputs of food, clothing, shelter, and recreation and so on, into another intermediate product, labor, which would be inputs into the other productive sector. (Beckerman in Danby 2017: 32)<fnref n="16" />

<footnote n="13">¹³ Notwithstanding the consistent substantive narrative of the taboo in question, a construction of “women’s household activities” requires, both in ethically and political terms, an alternative discursive strategy in which what seems decisive is what is considered “productive.” The category might need deconstruction and/or reconstruction, which in turn implies examining the implicit or explicit power asymmetries in question not just of the household participants, but also between and among the heterogenous agents (all kinds of “businesses”).</footnote>

<footnote n="14">¹⁴ But anticipating my doubts, not all agents are individuals or “people,” and furthermore, those very same “appraisals” and “motives” are constructed by an ensemble of antagonistic discourses for the accomplishment of those objectives. In a power asymmetric context, heterogeneous agents are not necessarily “economic,” nor human individuals as such.</footnote>

<footnote n="15">¹⁵ However, as we will see ahead, the same could be said of the alternative Keynesian victorious discourse on data reconstruction and its assumptions.</footnote>

<footnote n="16">¹⁶ See note 21 in Danby (2017: 32).</footnote>
Therefore, the theoretical existence of the “household” was substantiated by differentiating an inside/outside divide, a specific cultural distinction (love/money) that enabled a measurable flow. Kuznets’s measures of estimates of individuals’ “welfare,” by means of the monetary unit, could be translated as comparing so-called “valuable” objects of production and simultaneously as the preferred elected “valuable” in terms of a pre-established ordinal scale. The “valuable” intervenes as a monetary and/or “ethical” entity. Hence, a “tight focus on benefits to households” (Danby 2017: 26) limits clarity in the estimations, since countless activities may be helpful to increase livelihood (“welfare”).

However, despite Kuznets’s frustration, the household/business divide remained “foundational.” It persisted under the veil privileged by so-called “economic” qualities, which excluded the “love” side of the equation, a move which was accomplished through the reintroduction of the figure of Marshall via the work of Robbins. Danby’s reservations about Robbins economics as a mechanism to calculate “scarce means to alternative uses,” derives from the absence of an “obvious criterion for excluding household production” (Danby 2017: 26) since “laundering, cooking, cleaning, and child-minding consume scarce time and energy” (Danby 2017: 26).

When Rao’s work is being discussed, “ideology is powerful” (Danby 2017: 26), housewives’ “services” (“non-economic motives”) should be excluded from the national income ledger and given the characteristics in question could not be conceptualized in terms of choices between “scarce resources” *a la* Robbins; but significantly Rao did not dismiss the probability of considering those “household” chores in a forthcoming society. In the time being, American economist Milton Gilbert enrolled under Keynes’s model of national income accounting, reinstating worldwide the modernist household/economy divide:

> The precise difference between economic and non-economic activity is not that one is useful and the other is not, but that the effort spent in non-economic activity is not available for an alternative use in economic sphere. (...) knitting a garment, (...) helping with the children (...) Neither of these activities should be included in the national product. (...) one or the other does not affect the supply of scarce factors of production. (Gilbert and Kravis in Danby 2017: 27)<fnref n="17" />

The household/business couple split, “lets us divide the world into fully modern (where the split has happened) and non-modern (where it has not happened)” (Danby 2017: 29), which enables the notion of a “heteronormative theory of gender” (ibid.) without specifying the features of the agents and practices which apparently must be institutionalized. Hence, the household is posited as the unitary agent, necessarily run by individual human beings,

but it must be advanced, that kids need not be “raised” necessarily in the traditional “household” unit, it could be an “extended” space where distinct “families,” like the school, leave their offspring to be cared for.

But most significantly, Danby perseveres with the idea that modernity does not relate necessarily to the presence of “urban” or industrial images. The ideological narrative, its folk theory, is about “mentalities”:

> It is an assertion that there has occurred a profound shift in how some people think and act, and in how they understand themselves, their surroundings, and their opportunities. It is the people who have made this shift who are the subjects of economic science. (Danby 2017: 29)

## The Diffusion of the “European Self-Imagination”: Western-centric Discourse and the Rise of Development Economics

The evolution of the history of economics within the Western-centric vision often describes as an interregnum period that which relates to studying “backwards” areas, which became dominant after World War II: it underscores the existence of “economies” whose features seem singularly out of place within economics’ vocabulary. But Danby tends to displace the centrality of the latter narrative by examining theoretical alternatives through the “instituted” “romanticist/rationalist” dichotomy, as the guiding thread to understand the discursive evolution on “economics.” Escorting the reader to the period underscoring the unique manner by which those theoretical obstacles are encountered through the Western-centric imaginary, it is important to mention that Latin American Structuralism engendered its own species of economics during the 1950s. With hindsight, it is easy to display the conceptual transformations which bore fruit the so-called “economics for development” worldwide during the period, as well as its demise with the return of “neoclassical” thought during the 1980s, but generally the rise and revolt of alternative discourses is mostly forgotten including Latin America’s own brand of “Marxism,” a principal theoretical adversary of the region’s “Latin American Structuralism.”

Before depicting the theoretical transition, the “European self- imagination” needs to be described. Therefore, a “messy social world” (Danby 2017: 50) was reorganized theoretically into “households” and “businesses,” entities which “interacted” with each other through their respective “flows”:

> the monetary flows (...) must equal each other over any span of time: all payments to the business sector produce incomes for somebody, which are spent on output (...) it is customary to specify *two* ways of looking at the same flow of output from businesses to households: as *expenditure* on output, from the household point of view, and as *production* of output, from the business point of view. (Danby 2017: 50)

<footnote n="17">¹⁷ “The household emerges as a space of leisure, of non-work. Rao’s and Gilbert’s descriptions of what goes on in the household sphere (...) are romanticized” (Danby 2017: 27).</footnote>
Hitherto, national income estimations had been a sporadic and private endeavor. Income, expenditure, and output were targeted individually. The period that Danby described refers to alternative efforts to “measure all three” (Danby 2017: 51) and “check them against each other” (Danby 2017: 51).<fnref n="18" /> What counted “as national income/output” (Danby 2017: 51) entailed excluding “domestic production,” “goods/services,” childcaring and cooking meals, activities inside the household. Danby underlines the theoretical discussions arising from those perspectives that lost out to Keynes’s disciples, concentrating on “capital goods” and “government.”

The first formal “appearance” (Danby 2017: 69) of the “framework” $Y = C + I + G$ was in Keynes’s 1940 text *How to Pay for War*, which had previously undergone a sustained theoretical dispute, to say the least, vis-à-vis the then denominated “Treasury View.”<fnref n="19" /> The identities $Y = C + I + G$ and $Y = C + S + T$<fnref n="20" /> describe the consumption/productive carouseI: the circular nature of the flows from households as payments for business firms’ goods, and businesses generating income through their payments to households.

The inclusion of the “government purchases” and its potential role in generating inflation were central to Keynes’s whole view of the economy, in which “Keynesian national income accounting shines an especially bright light on what governments do -it brightly illuminates government’s taxing and spending and borrowing” (Danby 2017: 54), a legacy asserted and enforced by the IMF’s discourse. Hence the impulse by “international bureaucrats” to standardize the Keynesian “national income accounting” to scrutinize “national governments.”

Keynes had “imagined a new thing, a national economy linked by money flows and guided by financial markets” (Danby 2017: 56), which was turned into the IS-LM “workhorse” contraption, losing, perhaps, the most interesting theoretical aspects of what Keynes “really meant” (Danby 2017: 56), although “easily-shared representation” which in turn the Newlyn-Phillips machine sought to upstage (as we will examine ahead).

Danby illustrates the IS-LM into an “image”: “the body visible,” through a “hydraulic computer” (Danby 2017: 56). In 1949, William Phillips and Walter Newlyn developed a “physical model” of a “two-equation” model of a national economy, which should serve for teaching purposes, aiming to enlighten the circular nature of income and expenses flows, through a pipe connection with a series of valves which would open or close depending on the water level of the tanks, which in turn would automatically reach some sort of equilibrium level, generating a signal for a control mechanism to action initiating the opening once again of the chambers of the tanks permitting the flow of water.<fnref n="21" />

Danby’s description of the Newlyn-Phillips machine explains all but one of the impulsion processes, and just to get an idea of the picture exhibited as the “body” by the water flows lets quote Danby:

> The top flow (...) represents the flow of production of a good. The tank represents the total unsold stock of that good in the shops. The lower flow represents consumer purchases of that good. A rise in unsold stocks causes mechanisms to reduce the market price; if stocks fall merchants raise market price. (Danby 2017: 59)

Hence the fantastic “European self-imagination,” and its general approach to measure and compare economies can also be represented by a mechanical contraption. The quote underlines one of the criticisms which can be generalized to all the “mechanical” representations still implicit if not explicit in economics, where an antagonistic contingent event like “price making” is exemplified as a simple “pressure” point between counteracting “physical forces,” or alternatively as analogies/metaphors to a body or a machine<fnref n="22" /> ignoring the fact that those “machines” require a “first push” so to speak, to initiate the flow to transfer the liquid upwards and in a circular fashion during its downward phase. In other words, it entails a mechanism “outside” of the machine, a “switch,” or someone to initiate its dynamic process.

According to Danby the “model” is a:

> physical analogue of a social institution. It is a model of how a competitive market in a single good might function, with a single market price equilibrating two flows. The idea for a ‘micro’ (just one market) model of this kind was not original to Newlyn and Phillips. Their originality was in recognizing that you could construct a ‘macro’ (national economy) model incorporating multiple adjustment mechanisms of this kind within a larger circular flow (...) Other relations hypothesized in Keynesian theory, such as the idea that consumption spending was a stable function of income, could be turned into physical connections between flows. You could set the machine up to simulate a particular set of theoretical assumptions plus policy variables, turn it on, and let it ‘solve’ the system: when it did this it was essentially computing multiple simultaneous differential equations. (Danby 2017: 59)

Danby’s daring compactness narrative of the working “machine,” as a veritable example for what “Keynesian” (“hydraulic”) economics post-World

<footnote n="18">¹⁸ Bach (2018).</footnote>

<footnote n="19">¹⁹ See also Chapters 5 and 7 in Peden (2000 and 2004).</footnote>

<footnote n="20">²⁰ Income (Y); Consumption (C); Investment (I), Government (G); Saving (S); Taxes (T).</footnote>

<footnote n="21">²¹ “Gresham’s Law” is represented by Fisher’s (1916, pp. 105, 116, 119, 128) as water-gold-silver</footnote>

<footnote>reservoirs, connected by pipes as a hydraulic automatic process, although *driven* by forces whereby bad money pushes good money out, its “propulsion” mechanisms aimed to show the accumulation and drain of “gold” reserves which induced changes towards an alternative coinage.</footnote>

<footnote n="22">²² Paradoxically, the metaphor itself, of the machine or the body displays a visibility previously inexistent: “multitude of social processes and restless circulatory that we call the economy and recognize only via its abstractions can, with this model, be viewed in its entirety” (Stevenson in Danby 2017: 64).</footnote>