Wednesday, August 24, 2011

The meaning of structuralist macroeconomics


Semester started again.  Teaching Intermediate Macroeconomics, and trying to explain to students what is the meaning of structuralist macroeconomics.  The origins of the term are well known, and associated to the development of the theory of inflation by Juan Noyola Vázquez, and other economists at the Economic Commission for Latin America (ECLA). Development implies changes in the structure of production, with an increase of the industrial and service sectors, and a reduction of the agricultural sector, accompanied by significant increases in the levels of labor productivity in all sectors.

As the agricultural sector's size decreases, and its productivity increases, and workers migrate from rural to urban areas, the price of foodstuff goes up, and wage resistance by workers implies that costs increase in general.  In other words, inflation resulted from the transformation of the structure of production.  Hence, the term structuralism, that at the same time, in 1950s, was being popularized by Claude Levi Strauss. Structuralism in Latin America was, as a result, a response to Monetarist views of inflation, and seemed to be aligned with Keynesian economics.

However, there is a more profound meaning to structuralism.  Levi Strauss argued that science proceeds in two ways; it is reductionist when the object of analysis is simple, and it is structuralist when it deals with complex systems.  I tend to believe that a more productive understanding of social sciences should not distinguish between simple and complex phenomena, but emphasize the difference between methodological individualism and structuralism, that is, the presumption that one cannot understand social behavior unless one understands individual behavior, and the counter-argument that individual behavior is by definition constrained by social relations.

In that sense, classical authors (surplus approach), that emphasized the role of class as a central determinant of individual behavior, and Keynes, whose belief in the fallacy of composition implied that the whole is more than the aggregation of its parts, would be structuralists.  For example, it might seem reasonable to assume that an individual worker would accept to work for a lower wage in order to find a job, but if lower wages in the whole system lead to lower demand and a reduction in labor demand, the individual firm reducing wages, and the individual worker accepting it may not solve the problem. One has to understand the functioning of the system as whole first, in order to understand how the individual parts interact.  Or put it simply one needs macro-foundations for microeconomic behavior, not the other way round.

PS: The classic book on macroeconomic structuralism in the anglo-saxon world is Lance Taylor's one (image above).  A simple intro to structuralism in Spanish and Portuguese was the book by Carlos Lessa and Antônio Barros de Castro, the latter sadly passed away last Sunday.

2 comments:

  1. And Levi Strauss was at Sao Paulo for a time, right?

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  2. Yep, in the 1930s, and then did some field research in Mato Grosso. Then during WW-II taught at the New School.

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