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A Southern Perspective on Development Studies

Carlos Mallorquin

Chapter 5. How Economics Forgot Power

Texte intégral

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)


  • 1 I thank equally Philip Pilkington and Colin Danby for their inputs; responsibility for what follows (...)

1The 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.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.

2Pilkington’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 of persons [inexplicably] cannot do what they wish to do: leave the room” (Buñuel 1982: 232).

  • 2 See also Mirowski and Nik-Khah (2017) and Lawson (2019).

3With 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).2

4A 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.”

  • 3 The model is “not innocent” (Pilkington 2016: 181), it shapes the mind of those trained by it, and (...)

5Absence 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),3 and therefore the level of economic activity does not automatically grow with “cheap money.”

6On 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.

7Having 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.”

  • 4 Pilkington’s use of the “kaleidoscopic” (see further ahead) or the “non-ergodic” (Pilkington 2016: (...)

8An 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.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 hide the historical construction and the power asymmetries involved as well as their potential transformations.

9Both 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.

  • 5 I use the term revert because “political economy” lost those potentialities with the hegemonic role (...)

10What 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,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.

11The 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”

  • 6 Not to be confused with “monopoly power” (López 2008: 52). Furthermore, as López and Assous insist: (...)

12The 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)6 to understand the investment decision process, tends to recede in the background in Pilkington’s account, aspects which will be discussed later.

13On 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).

14Although 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 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).

15The 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.

16Hence, 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.

17Notwithstanding 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).

  • 7 (1 + θ) AVG = p; p prices, θ percentage mark up, AVG, average costs. Now this formula can be broken (...)

18Prices 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.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.

19According 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.

  • 8 Not to be confused with “monopoly power.”
  • 9 López and Assous: “income distribution is the result of the clash between the two opposite classes. (...)
  • 10 Kalecki, despite his own efforts to establish a “rigorous and mathematical business cycle model” (L (...)

20In 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,”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 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),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).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).

  • 11 No space to expand on Prebisch’s theory on the appearance of “profits,” suffice for now is to menti (...)

21Using 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).11

22The 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 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).

23However, 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.

24Another 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).

25If 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.

  • 12 Let us mention in passing that “creditor-debtor” entities declared are not necessarily “human indiv (...)
  • 13 (1 / 1 - MPC).

26For 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),12 the proportion of expenditure to 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,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.

  • 14 Y = income, π = profits, W = wages.
  • 15 IR + Cp - SwR = πR is the profit formula with no government (p. 272). National income with taxes ca (...)

27The so-called “Levy-Kalecki Equation” Y ≡ π + W14 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.15

  • 16 I is gross investment, Cp consumption out of profits (capitalists’ consumption), Sw, workers saving (...)

28Also, profits can be revealed with the following formula I + Cp – Sw = π.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.

  • 17 Latin American Structuralism discussions, for which there is no space here, treats this “complex” p (...)

29The 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).17

30Having “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 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.

31It initiates by distinguishing two processes, which Pilkington formalizes mathematically, whereby agents take decisions-choices, whether related to “financial investment sector”, where liquidity preference (Lp = Bear / Bull), plays a primary role and the “real investment” activity represented as “animal spirits” (AsR), 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)

  • 18 “Note that Keynes used this terminology in his Treatise on Money, but we are using it in an entirel (...)
  • 19 Subscript “R” represents real investment in contrast to “F”, financial investment: “If we refer to (...)

32Certainly, by breaking with “Keynesian” or “post-Keynesian tradition”,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”: ((AsR) • (1 / i) • QR = IR)19 (animal spirits AsR; i = interest rate in that particular market; QR, expected profits; IR = 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.

33The contrast between the notion of “animal spirit,” viewed as the inverse (Bull / Bear) of the liquidity preference (Lp ≡ Bear / 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.

34Perhaps, the distinction between Lp = Bear / Bull and the ASR 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.

  • 20 Pilkington’s explanation underlines a crucial point at issue, the contrasting logic of the price of (...)

35Pilkington insists that the agents in question (Bears / Bulls), are “people,” optimistic-pessimistic about a future increase (decrease),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.”

36It 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-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:

  • 21 The reason that explains why the capital market horizon does not reflect a hurricane of untamed for (...)

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)21

  • 22 The book also presents a well-prolonged theoretical discussion, between different “schools” of econ (...)
  • 23 Pilkington devotes much space to discuss the notion and its differences between Keynes and Knight. (...)

37The “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 Bayesian22 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”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).

38Before describing the description of the formalization process by which “animal spirits” (ASR), investment-profit are realized, in bookkeeping terms, it is necessary to represent the notion of profit in question.

39The “animal spirits” (ASR) are the consequence, the result of the ratio movement of Bulls to Bears in the market for “real investment,” which Pilkington formalizes:

40(Bull / BearR) • [1 / ((1 / M + Ms) / (Bull / Bear) / A)F] • QR= IR


42(Pilkington 2016: 250)


  • 24 The interest rate thus determined is the consequence of irt (overnight target interest rate), Tc tr (...)

44(Bull / BearR) • (irt + Tc + Der + ∆iert) • QR = IR24


46(Pilkington 2016: 271)

47Pilkington 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).

48According 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 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”25

  • 25 “For it may be that it is the greatest of the own-rates of interest (as we may call them) which rul (...)

49The 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.

50The “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).

51Bankruptcy 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 determinate 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)

52Power 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.

53The 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:

  • 26 No space to touch on Pilkington’s rejection of the notion of equilibrium or Latin American Structur (...)

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 downward pressure on wages in the higher wage country. (Pilkington 2016: 326)26

54Pilkington’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.

55The 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.”

56Prebisch’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.

  • 27 Again, no space here to describe Prebisch’s theoretical vocabulary during the 1950s which would cer (...)

57Once 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’s27 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)

58Nonetheless, 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.

59Terms 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 “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.

60Although 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)

61Accepting 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 “exasperation” 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.

62In 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.

  • 28 See chapter on Hirschman above.

63Krugman’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 work28 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.

64Hence, “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 (IR + Cp - SwR = πR) (Pilkington 2016: 272), and twist it a little, national income with taxes can also be expressed as Y ≡ (π – Tπ) + (W – Tw) + (Tπ + Tw + Ti) (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.

  • 29 Once more the “Prebisch-Singer” thesis requires a theoretical “decoupling” process: the “deteriorat (...)
  • 30 Please take note that we do not use the term “unequal,” which does not mean the absence of imperial (...)
  • 31 After the appearance of various texts (Prebisch 1949b, 1950, 1951) where Prebisch presented these a (...)

65The 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.29 Given the Center-Periphery power asymmetries,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)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.

66The 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.

  • 32 Rogerio P. Andrade and Daniela Magalhães Prates (2013); Bruno De Conti, Daniela Magalhães Prates (2 (...)

67Furthermore, 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),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.”

  • 33 See also Regantiquili (2016).

68Unlike 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 those international monetary currencies considered of the highest relative “value.”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).

  • 34 Furtado (1989, 1981), Ugarteche (2014), Danby (2017), Helleiner (2014).

69Since the 1980s debt “crisis” that the Peripher y sustained, the IMF has become (which was not its original role)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?”

70It 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)

71But 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.”

72Hence, 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, unnormal “presence” of profits in the literature, and/or the cuasi 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)


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)

74If “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 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.

75In 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).

76But 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)

77For 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.

78Economists 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.

79The 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)

80However, 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.

81On 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.

82Pilkington 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).

83Although 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.”

84My 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.”

  • 35 See De Vroey’s notion of “trade technology” to think the problem of the organization of the “market (...)

85The undetermined and contingent nature of the “social” realm (individual, agents, institutions)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.

86As 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.

87From 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 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.

88But 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.


1 I thank equally Philip Pilkington and Colin Danby for their inputs; responsibility for what follows is absolutely mine.

2 See also Mirowski and Nik-Khah (2017) and Lawson (2019).

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).

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.

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).

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).

7 (1 + θ) AVG = p; p prices, θ percentage mark up, AVG, average costs. Now this formula can 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.

8 Not to be confused with “monopoly power.”

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).

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 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).

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.

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

13 (1 / 1 - MPC).

14 Y = income, π = profits, W = wages.

15 IR + Cp - SwR = πR is the profit formula with no government (p. 272). National income with taxes can be expressed as Y ≡ (π – Tπ) + (W – Tw) + (Tπ+ Tw + Ti) (p. 210); taxes on profits, Tπ; taxes on wages, Tw; and Ti indirect taxes. Therefore, gross profits excluding taxes: I + (X - M) + (G - T) + Cp - Sw = (π - Tπ); 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 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).

16 I is gross investment, Cp consumption out of profits (capitalists’ consumption), Sw, workers saving (wages minus consumption of workers, or W – Cw; (Y ≡ E) Income in terms of expenditure, hence E (≡) I + Cp + Cw and W ≡ Cw + Sw. It follows that I + Cw + Cp ≡ π + C + Sw, cancelling and reshuffling I + Cp - Sw = π. The three-bar notation (≡) 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.

17 Latin American Structuralism discussions, 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 pretend to increase their participation in the real income” (Furtado 1954: 183).

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 / [Bear / Bull] • M = A • 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 Gainst +1 ≡ At +1 • Bt+1 . Therefore, Lp = Bear / Bull: 1 / [Lp] • M = A • B ≡ 1 / Liquidity preference • Money = A • B • Lp ≡ Bear/ Bull.

19 Subscript “R” represents real investment in contrast to “F”, 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) EF ≡ IF ≡ YF ≡ SF. In these cases, we are dealing with “financial expenditures”, a bond (EF), or financial investment (IF), or if the receiving of an income (YF), financial income, or financial saving (SF), it’s just an analogy to the real economy, it “does not add or subtract anything from it.”

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)

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).

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.

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).

24 The interest rate thus determined is the consequence of irt (overnight target interest rate), Tc transactions costs for borrowing money and Lpirt 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 = irt + Tc + Lpirt (Pilkington 2016: 245). But “liquidity preference” under the IRT market liquidity preference has to take into consideration the Default risk (Der) and the expected change in the overnight target interest rate, hence Lpirt ≡ Der + ∆iert (∆ = proportion of change). Therefore, the expression irt + Tc + Der + ∆iert= 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.

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).

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).

27 Again, no space here to describe Prebisch’s theoretical vocabulary during the 1950s which 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).

28 See chapter on Hirschman above.

29 Once more the “Prebisch-Singer” thesis requires a theoretical “decoupling” process: the “deterioration” process appears in his writings during the early 1930s and the vocabulary “Center-Periphery” is quite dissimilar to Western-centric academia notions of trade between industrial and primary producing countries.

30 Please take note that we do not use the term “unequal,” which does not mean the absence of imperialist policies.

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).

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)

33 See also Regantiquili (2016).

34 Furtado (1989, 1981), Ugarteche (2014), Danby (2017), Helleiner (2014).

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)


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