Maria da Conceição Tavares (1930-2024)

(1930-2024)

Maria da Conceição Tavares passed away last Sunday. She was among the key thinkers of the Latin American Structuralist School, often associated with the Economic Commission for Latin America (ECLA). In her case, Anibal Pinto, who was her teacher in a ECLA course in the early 1960s, and Celso Furtado, who was never formally her teacher, were her major influences. She was instrumental in introducing Kalecki in Brazilian academic circles, and in her debate with Furtado on the possibilities of growth in the late 1960s (Furtado defended a stagnationist thesis) she started to move in the direction of demand-led growth theories. She also noted in the mid-1980s that the diplomacy of the dollar (and the end of Bretton Woods) essentially implied that American Hegemony was stronger than ever. She was associated to the failed stabilization plans of the 1980s (in particular the Cruzado Plan), and was critical of the neoliberal policies of her friend Fernando Henrique Cardoso, and her co-author José Serra. She was a member of congress (I should say I did work for her campaign back in 1994), and she was close to the Workers' Party administrations. Her contributions both to academia and to Brazilian politics were without comparison, and she will be missed.

For those that read in Spanish, here a paper I wrote a few years ago on her contributions to heterodox economics. It was published in this book edited by Juan Odisio and Marcelo Rougier on several key Latin American thinkers.

An obit written with Esteban Pérez is available here.

Structuralism, Classical Political Economy and Demand-led Growth

 

Roundtable with Esteban, and Carlos Bastos Pinkusfeld on Structuralism, Classical Political Economy and Demand-led Growth at the Instituto de Economia, at my alma matter earlier this summer.

Special Issue of the Review of Keynesian Economics

New issue of ROKE on: Center-periphery analysis reconsidered, Essays in memory of Luigi Pasinetti. Possible topics of contribution to our special issue could address:

• The relevance of the center-periphery analysis and/or its limitations;
• Income and/or wealth distribution: the distributive and redistributive effects (in central and peripheral countries) of the neoliberal globalization;Debt tolerance/financial crises: the destabilizing role of central monetary policies on the peripheral economies;
• International political economy: the ongoing reconfiguration of center-periphery relations;
• Decoupling of a global West from an emerging Asia; future and crisis of globalization;
• The inherent fragility of global supply chains;
• Any other topic related to the center-periphery analysis in a classical-Keynesian perspective.

Submissions should be made using the usual channels of the journal, and they will be managed jointly by editors and guest editors. All accepted articles will be published in the special issue.
Deadline for submissions: November 30, 2023. For further information, please contact the Guest Editors: Matias Vernengo (Bucknell University, U.S.A.; mv012@bucknell.edu) and Roberto Lampa (University of Macerata, Italy; r.lampa@unimc.it)

Lance Taylor (1940-2022) and his legacy

With Lance in Beijing (2001)

I took Lance’s macro class in the Fall of 1995 at the New School for Social Research (NSSR), and then was his Teaching Assistant for two years. The book we formally used was Income Distribution, Inflation and Growth: Lectures on Structuralist Macroeconomic Theory, in which the terms (not the concepts) for wage-led and profit-led economies were first used (at least that's what I think; profit-led does not appear in the index, I must note). But classes were based on his notes, on what became his next book Reconstructing Macroeconomics (he thanked me for all the input in my copy; I had to learn how to read his handwriting, which was not easy). In many ways, my thinking was influenced more by the Sraffian professors at the NSSR, both John Eatwell (I was also his TA in the micro class) and Ed Nell (who really was the first to discuss functional finance in my classes), in part because the blend of Cambridge left-of-center Keynesianism and Latin American Structuralism, that Lance exposed, was more familiar to me coming from Brazil.

My plan was to work on inflation theory (and I did write a conflict model, that can be seen as being in Lance’s tradition later on; in my view his best book is the one that is less formal, and is on inflation, his Marshall Lecture at Cambridge, Varieties of Stabilization Experience; at the time I first read it I didn't know that the title was a quote from Henry James; the other candidate is his book with Eatwell Global Finance at Risk. Both are more books than manuals). But I started working with Wynne Godley on his stock-flow model for the joint Center for Economic and Policy Analysis (CEPA) and Levy Economic Institute project. A year into the project I told Lance that it would make sense if I worked on something related to the project, namely the sustainability of the US external account. Lance was very nice about it, and not only went along, but also provided funding, since I received CEPA’s dissertation grant.

I ended up writing something that was very close to Massimo Pivetti’s monetary theory of distribution. The theory at least. Lance provided comments and feedback, and, at some point, told me that I was obsessed with this monetary distribution thing (I was, indeed). But he also provided support, and his criticism was always constructive. Lance was the best supervisor one could have. He guided the work with frequent conversations, read and criticized what I gave him to read, and, after it passed certain standards, approved it, even if it wasn't exactly a Lance Taylor dissertation. He never tried to mold my thinking, or force me to work on own his terms. Sadly, that isn’t the norm in academia. I think he had been lucky with his supervisor too. He once spoke fondly of Hollis Chenery (his supervisor; not his mentor, which I think was Rosenstein-Rodan; I might be wrong), because he protected the radicals, which were under pressure in the late 1960s at Harvard. His intellectual generosity, among several other qualities, is something that will be deeply missed.

Lance was open to alternative methods, and approaches, what he called closures (certainly more than I am), and his comparative method was influenced by other disciplines, the qualitative "thick descriptions" a la Clifford Geertz that he liked. I actually ended up reading a bit of Geertz because of my conversations with Lance, particularly when I was the assistant director at CEPA (he was the director) and he organized a book on several comparative studies of liberalization in peripheral countries (the one on Brazil, which was supposed to appear in a previous volume, and should have been written by Edward Amadeo, was eventually written by me; photo above is from one of the conferences that led to that book). Geertz saw anthropology, as he famously put it, "not [as] an experimental science in search of law but an interpretive one in search of meaning." The thick description was essentially the interpretive work of the ethnographer. Lance took that view, in some sense, of economics, blending the description of the historical and institutional features of peripheral countries, with relatively simple models in what Paul Krugman (a co-author; Paul's first paper was the one on contractionary depreciations with Lance) called the MIT or Solow type models (my only other model in that sense, is the currency crisis one that puts Krugman's one upside down).

 

I tend to think that this methodological stance is Lance most enduring legacy, and the one that had the most influence on my own work. Most discussions of his work emphasize the gap models (which I think are problematic, the savings and fiscal gaps in particular), or the stagnationist model of growth, which builds on Bob Rowthorn's seminal Neo-Kaleckian growth model (and also on Amitava Dutt's model, which I think was part of his dissertation work under Lance). Some might even think that it was the reversal of his views on the role of exchange rates in development, his paper with Roberto Frenkel on stable and depreciated exchange rates as engines of growth (which can be seen in line with Luiz Carlos Bresser-Pereira and Jaime Ros views, and as being at the center of New Developmentalism). Others might think it's his work on Social Accounting Matrices that prefigured, and went hand in hand with his appreciation for Wynne Godley's stock-flow consistent models (on Wynne's methodological stance, see this old post).

In a way, all these models, and others (I could have added the Minsky crisis one, that is often neglected), to some extent show the use of models for Lance. He was somewhat eclectic, and use them to illustrate some of the issues with developing countries. But for him that had to be complemented by the interpretive thick descriptions. In my view, the models per se were less relevant for Lance, who was an unorthodox lefty that remained so, as someone remembered recently, even as the whole world moved to the right in the 1980s, and 1990s (he told me that a director of research at the World Bank, that had become a neoliberal, told him in his last visit to that institution, if he wasn't ashamed for still defending those structuralist views). And he did leave MIT for the NSSR, which was a strong signal of his political views. The simple model allowed him to tell the stories.

I have a tendency to prefer greater consistency in the models, and I'm less keen on accepting some possibilities of neoclassical/monetarists closures for the real world. But his methodology, which in some sense contrasts with the large stock-flow models that my other mentor (Wynne) liked, is certainly something I think it is a more fruitful way of thinking about macroeconomic problems. But again the specific models per se are less relevant, and the thick description that they illustrate with simplicity matter more.

Prebisch After ECLAC and UNCTAD

My talk at the Universidad Nacional de Colombia last Friday, in Spanish of course. Part of the argument is that Prebisch, contrary to what is often assumed, moved from an argument that emphasized the role of the external constraint in leading to underdevelopment during his United Nations years, to one that put the emphasis on the patterns of domestic consumption, and its negative impact on the surplus, following the literature on stagnation, in his last book on peripheral capitalism. I suggest that the change is problematic.

New issue of ROKE is out

The April Issue of the Review of Keynesian Economics is now out. The issue contains a collection of articles covering a spectrum of important issues. It opens with a debate over New Developmentalism which pits development relying on macro prices (especially the exchange rate) against historical state-led development policies. Next, there is an article on the role of the wage share in determining exchange rates. Thereafter, there are several articles on Post Keynesian growth theory. One addresses the evolution of income and wealth inequality, while others empirically assess alternative approaches to theorizing demand growth.

Two paper are open: "A Structuralist and Institutionalist developmental assessment of and reaction to New Developmentalism" by Carlos Aguiar de Medeiros and "Making sense of Piketty's ‘fundamental laws’ in a Post-Keynesian framework: the transitional dynamics of wealth inequality" by
Stefan Ederer and Miriam Rehm.

Theotônio dos Santos (1936-2018)

Theotônio dos Santos, one of the main authors of the Latin American Dependency School, has passed away. I had some minimal contact with him, seeing some of his talks as an undergraduate, and then at a few conferences were we could talk a bit more, including after I had published this paper.

When I was a student, I might add, I was basically taught that there were two dependency school traditions, and often the Marxist one, in which Theotônio and André Gunder Frank were the key figures, was seen, at my alma mater (the Federal University of Rio de Janeiro) at least, as the lesser one, with the Structuralist school, of Fernando Henrique Cardoso, being the 'good' one. In retrospect, given the political views (and some of the economic views too) that Cardoso came to defend from the late 1980s onwards, with his adherence to Neoliberalism, I must conclude that my teachers might have been wrong.

An obituary in Portuguese here.

Macroeconomics, mainstream and heterodox approaches

An interview with Esteban Pérez Caldentey in Tan Cerca/Tan Lejos, a radio program produced at the University of Massachusetts, Amherst. First half in English, second one in Spanish.

Bielschowsky on Furtado's "Economic Growth of Brazil"

Celso Furtado (1920-2004)

The International Journal of Political Economy, edited by Mario Seccareccia, had a special issue on Celso Furtado. There were articles by Ricardo Bielschowsky, James Cypher, and Rosa Freire d'Aguiar, Furtado's widow, among others. Below Bielschowsky's paper on Furtado's opus magnus, titled "Furtado's Economic Growth of Brazil: Masterpiece of Structuralism."

From the abstract:

This survey article reviews Celso Furtado’s most famous book and argues that he convincingly used the central elements of the Prebisch-ECLAC analytical construct—strucuturalism—to organize and study the economic history of Brazil from its discovery until the mid-twentieth century. Furtado shows how, throughout Brazilian history, successive cycles of economic growth before industrialization (mainly, the production of sugarcane in the Northeast in the seventeenth century, the gold cycle in Minas Gerais in the eighteenth century, and coffee production in the Southeast in the nineteenth and early twentieth centuries) have created, and thereafter perpetuated, some major characteristics of Brazilian underdevelopment: low production and lack of export diversity, as well as structural heterogeneity, specifically, a vast underemployed sector existing side by side with a high productivity modern sector.

Read rest here.

Interview on neo-structuralism

The World Economic Association conducted and interview with Esteban Pérez Caldentey, Miguel Torres and Romain Zivy, from Economic Commission for Latin America and the Caribbean (ECLAC), on a recently published book on neo-structuralism by Alicia Bárcena and Antonio Prado (eds.), Neo-structuralism and Heterodox Currents in Latin America and the Caribbean at the Beginning of the XXI Century. From the interview:

What is neo-structuralism?

Neo-structuralism is a modern version of the structuralist current of thought which flourished in Latin America and the Caribbean in the 1950s and 1960s based on the thinking of a group of economists mostly based in ECLAC. Famous structuralists include Celso Furtado (1920-2004); W. Arthur Lewis (1915-1991), Raúl Prebisch (1901-1986), Juan Noyola Vázquez (1922-1962); Aníbal Pinto Santa Cruz (1919-1996); Osvaldo Sunkel (1929-) and Ignácio Rangel (1914-1994). The development of structuralism also benefited substantially from the work of economists such as Nicholas Kaldor and Michael Kalecki.

Structuralist thought emerged as a response to the development problems of Latin America and the Caribbean and dissatisfaction with orthodox responses. For structuralists underdevelopment was not due to exogenous forces or shocks or to bad policy, but it was rather an intrinsic feature of Latin America and the Caribbean ingrained in its own social and economic structure. Hence structuralism was a way to conceptualize the Latin American and Caribbean reality. Structuralism ‘became a practice, before being a policy and a policy prior to becoming a theory.’

Read rest here.

PS: I had written on the evolution ECLAC's economics and structuralism here before.

Eduardo Galeano (1940-2015)

Open Veins

Galeano, famous for The Open Veins of Latin America, among several other books, has passed away. He was a leading voice of the Latin American left, as The Guardian elegantly put it, which is a more accurate description than the 'anti-capitalist' epithet used by Reuters.

I inherited the copy of the book pictured above from my mom, who loved Galeano's books, in the 1980s, I guess, when I decided to study economics. I can't say that I was influenced by his book, even though Galeano thanks one of my teachers, Carlos Lessa.* He wasn't an economist, and I normally wouldn't post about it. But I decided to post something since, not long ago, a friend told me he had disavowed the book.

If one reads the accounts of his rejection of the book, it seems that it was the language, the vocabulary of the left in the early 1970s, which Galeano seemed to suggest that was heavy and dated, what led to his criticism of his work. Also, as he got older, and found mistakes in the book (sadly he doesn't specify which ones), his older self tended to be less satisfied with the result. Note, however, that in this discussion about what message he would like Obama to get from the book, after Chávez gave the US president a copy, he summarizes the basic point, which he seems to still uphold. In his words, he wanted Obama to get: "a certain idea about the fact that no richness is innocent. Richness in the world is a result of other people's poverty. We should begin to shorten the abyss between haves and have-nots."

A cursory look at the book might give you the not altogether incorrect sense that Open Veins provides a simplified version of Dependency Theory. Galeano was a popularizer of the kind of political economy that can be broadly defined as Structuralist. One not all together different from the one used for consumption in American universities, which simplifies and blames underdevelopment on developed countries, and that sees limited space for development in the periphery.** And, in that sense, it is a good thing that Galeano could say: "Reality has changed a lot, and I have changed a lot." But it is unclear that he threw the baby out with the bath water.

* If I had to say a book that influenced my choice to study economics, that I read in high school, it was Osvaldo Sunkel's El marco histórico del proceso de desarrollo y de subdesarrollo, which has a message that is not altogether different from Open Veins, namely that underdevelopment is part of the same process that caused development. Think of the Industrial Revolution in England, that goes hand in hand with deindustrialization in India. Industry and empire, as another historian would put it, are tied together.

** For alternative and more sophisticated versions see here.

The meaning of Structuralism: a very short reply to Krugman

Praying at the altar of the Natural Rate

So the K-man explains what's the meaning of structural variables (structural confusion indeed). In his words: "Normally, what we mean by 'structural' — usually as opposed to 'cyclical' — is 'something that can’t be cured with higher demand'." He complements this definition with a comment: "there used to be a Latin American school of thought which saw inflation as structural, but I don’t think it ever made much sense."

So first the definition. Yes, structural is the antipode of cyclical (well duh), but it is by no means something that cannot be affected (cured if you think of unemployment as a disease) by demand. The only reason to think that the trend cannot be affected by demand is because Krugman believes (based on faith, since logic and evidence are against it) on the Natural Rate. Output is supply constrained in the long run, in his view. Actually, you can bring the average rate of unemployment (the trend or structural one, not the fluctuations) down by expanding demand. During the Golden Age of capitalism, average (structural) unemployment was lower, since there was a macroeconomic regime in place that allowed for consistent demand pressure and higher rates of growth. It involved capital controls and on average low rates of interest, high government spending in defense and infrastructure (in the case of the US), and increases in wages with productivity, so workers could expand consumption.

By the way, his lack of appreciation for Structural theories of inflation is also based on this obsession with the Natural Rate. For him all inflation is caused by excess demand (it turns out that Krugman is a Monetarist). Latin American structuralists pointed out that the changes in the structure of production created cost push causes for inflation. Logic and evidence suggest that they were right. By the way, same reason you shouldn't, as Krugman isn't, afraid about inflation in the US right now. Not close to full employment, and bargaining power of labor class at all time low, with no wage cost pressures. For a slightly longer discussion see this entry on the meaning of structuralist macroeconomics, and this one on the evolution of Latin American Structuralism which is still around (yep, the news of our demise are greatly exaggerated).

PS: I believe that you cannot understand inflation unless you have some structuralist view of it. For more go here.

Raúl Prebisch on Cyclical growth and center-periphery interaction

New Working Paper at the IDEAs Network. From the asbtract:

Prebisch believed that understanding the evolution of capitalist economies over time and in different contexts required a general cycle approach, which he labeled ‘dynamic economics’, encompassing all the different areas of economic activity. His dynamic economics stemmed from a critique of both neoclassical and  Keynesian theories, which Prebisch viewed as static representations of capitalism. His dynamics was first applied to a closed economy and then to a center-periphery context. These combined the notion that profit is  the driving motive of  economic activity with a process of forced savings and the idea that the time lag between income circulation and the derived demand, and the time taken in the productive process was the main source of cyclical fluctuations. Prebisch’s dynamic theory, which he never completed, influenced his Development Manifesto (1949).

Full paper available here. From the conclusion:

The long process of development of Prebisch’s economic ideas, which did not stop with his famous Development Manifesto in 1949, from the 1920s culminated in the late 1940 with his dynamic theory. The essence of Prebisch’s dynamic analysis, in which cycle and growth went hand in hand, was the introduction of time lags in a process of continuous disequilibrium. In his model fluctuations result from the difference in the time-period for incomes to circulate within the productive process with the time period required for final production to be brought and sold on the market. In this respect, he was part of a broad tradition of authors trying to formalize macro-dynamics in the wake of the Keynesian Revolution. He maintained elements that were Keynesian in spirit with others that were decidedly neoclassical, while at the same time introducing elements of the old classical school, as it should be expected in a period of transition in the economic profession, and also in an author that was brought up intellectually in a rather eclectic environment.

More importantly, Prebisch stands alone among his contemporaries in trying to explain the cyclical growth of the global economy as the result of the interaction of center and periphery, in which the international division of labor matters. Not only Prebisch introduces the specificity of the problems of managing the peripheral economy, but also he is unique among the economists dealing with cyclical growth to discuss the importance of the change in the global center in the inter-war period from the United Kingdom to the United States.

His conception of the institutional and historical specificity of economic dynamics would eventually develop into what Structuralists at ECLAC would refer to as the Historical-Structural method of analysis, which analyzed the process of structural transformation of underdeveloped economies in historical perspective. In this sense, his understanding of capitalist dynamics, right before he wrote the Development Manifesto and became the Secretary General of ECLAC, was based on a theory that purported to be general and encompassing well beyond the problems of peripheral countries with declining terms of trade, which became the trade mark of his contributions to economic analysis.

A peripheral economist at center stage

A Review of Edgar Dosman's The Life and Times of Raúl Prebisch.

"Raúl Prebisch remains one of the least well-known and most controversial figures in the history of economic ideas. In his native Argentina he is stillseen as a conservative technocratic economist working for the interests of foreign powers, while abroad, particularly in the United States, when his name is recognized, it is often associated with the forefather of the Marxist Dependency School. This is in part the result of the complex evolution of politics in Argentina and the world during the twentieth century, which makes it very difficult to classify the ideas of an original and multi-faceted thinker like Prebisch. It also reflects Prebisch’s often contradictory positions on policy, particularly in Argentina."

Read the rest here.

Whatever happened to Latin American Structuralism or memories of underdevelopment

I was at a conference organized by Luis Bértola (November 5 and 6) on the relevance of the economic ideas of Raúl Prebisch at the Economic Commission for Latin America and the Caribbean (ECLAC, pictured above), and the launch of a new website (in Spanish here; the Spanish version is for now more developed, and soon there will be a Portuguese version too) with resources (e.g. this paper on Prebisch's views on central banking and monetary policy, co-authored with Esteban Pérez) on the second (not first) Executive Secretary of that venerable Latin American institution.

In my view, ECLAC has evolved, like most institutions, partly reflecting its internal dynamics, but also reflecting the evolution of the societies in which they are inserted. In that sense, if Prebisch and the push for Import Substitution Industrialization, and also the overcoming of structural heterogeneity (the fact that the structure of production, and the patterns of consumption and exports are not in sync), dominated the first three decades of the institution, Fernando Fajnzylber (classic book here) and the need for external competitiveness were, and to some extent still are, ubiquitous in the subsequent period. The theoretical basis of his ideas, and of a lot of what is done at ECLAC, is heavily influenced by the neo-Schumpeterian School, but some elements of structuralist/post-Keynesian economics, in particular in what respects to the role of the external constraint remains an essential part of the way of thinking in Santiago.

I'll leave for another post the discussion of the problems that I see in the post-Fajnzylber ECLAC and about some of the limitations of neo-Schumpeterian analysis. I want to concentrate on a few points raised by Mario Cimoli, Ricardo French-Davis, Gabriel Porcile and Osvaldo Sunkel. Cimoli and Porcile (with Verónica Amarante) presented the document Structural Change for Equality. Cimoli suggested that this document goes a long way, even if more work needs to be done, to present a coherent view of development, and emphasized that the ideas are not old, démodé (in his own terms). In part, the ideas are fashionable, according to him, because they follow modern approaches, in particular Schumpterian ones. I find that preoccupation and line of discussion to be a feeble defense of scientific value. Theories should not be measured by their popularity. Sure enough there are fashions in science, as in many other fields, but the ultimate criteria for scientific demarcation is logical consistency and supportive empirical evidence.

Other than that Cimoli suggested that the problems of structural heterogeneity are still with us. Gabriel Porcile presented the macro part, and emphasized the limits associated to the balance of payments, which are to some extent related to the real exchange rate (in this part Amarante presented the numbers on income distribution, including functional income distribution, which I shall comment on another post). He also suggested, I think quite correctly, that Thirlwall's Law, had been in many respects anticipated by Raúl Prebisch.

As the title shows, there is not much that is new in the new report (the 1990 report, based on Fajnzylber ideas, was called Changing Production Patterns with Social Equity). The idea is that external competitiveness (the changing productive patterns and the structural change in both titles) could be achieved without reducing wages (the equity and equality in the titles), and that industrial policy is essential for that goal. What is worrisome to me is that on macroeconomic issues the document seems to be a bit too conventional.

Back in 1990, ECLAC argued for:

"Financing changes in the production patterns naturally calls for some reorganization of fiscal policy in order to increase, public savings that can be used for investment. Every effort should be made to prove the allocation of expenditure, but it seems clear that most of the fiscal adjustment must be through tax reform."

In other words, fiscal adjustment. Now (p. 169 in the current Report) they suggest:

"Implementing a countercyclical fiscal policy involves two major challenges. The first is to create enough fiscal space to undertake the extra spending necessary to boost aggregate demand and economic growth during the contractionary phase of the cycle. This extra fiscal space can be generated by increasing public saving during the boom phase so that the impact of adverse shocks can be absorbed without jeopardizing the financial sustainability of the State."

So now they only ask for fiscal adjustment during the boom phase, moderating the growth in that part of the cycle, but admit that counter-cyclical policies have been effective in the recessive phase. Note that this conclusion might conflict with the ideas put forward on chapter 3 on the business cycle in the region. The document (p. 100) says that:

"It shows that the Latin American and Caribbean region tends to have truncated expansion phases and that they tend to be shorter than in other regions."

But it does not suggest that the causes might be related to macroeconomic policies, including overly restrictive fiscal policies in the boom. It rather suggests that:

"Short expansion cycles reflect the inability of the production structure to transform the momentum of demand growth into sustained endogenous economic growth (through linkages, spillover effects and virtuous circles)."

The paper by Pérez and Pineda (2010), which I had discussed here before, seems to suggest that macroeconomic policies (and the demand side) might be more important than supply side conditions in explaining the poor Latin American performance during booms. Finally, two brief comments about French-Davis and Sunkel's talks. French-Davis noted that the region is extremely vulnerable to a collapse of the terms of trade and thought that there are no structural causes for higher commodity prices. Sunkel suggested that in some countries, and he presented some data on Chile, there is a consumption boom, based on credit, which also puts at risk the expansion in the region. More on those two propositions on another post.

A time to reap

Conceição Tavares worked hard and now is time to reap the benefits. From Marx21 (hat tip Tomas Rotta).

Renowned professor and economist Maria da Conceição Tavares received yesterday, May 17th 2012, the highest scientific prize granted by the Brazilian government. The national foundation for scientific research (CNPq) awarded Conceição Tavares for her lifetime theoretical and practical achievements. Tavares has influenced generations of students, scholars, and state officials. The significance of the award is that it goes to a female Marxist economist. Dilma Rousseff, Brazil’s first female president and herself a former student of Conceição Tavares, personally handed the prize. During the official ceremony Dilma made clear in her brief speech that “Conceição Tavares treated economics as it should be treated, as political economy.”

Read the rest here.

PS: By the way, while it's true that Conceição was certainly influenced by Marx, it's far from clear that one could call her Marxist rather than say Structuralist. Her famous 1978 full professor dissertation (you had to write one to get a chair at a public university then) is basically Kaleckian, and was clearly influenced by Keynes. And as any Brazilian economist she was heavily influenced by Marxist historian Caio Prado and by the quintessential Brazilian structuralist Celso Furtado, beyond several structuralists at ECLAC, like Prebisch and Anibal Pinto. A more detailed story here.

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.

Investigación Económica at 70

Investigación Económica, a journal that has become the most important in México, is turning 70, and Ignacio Perrotini, the editor, is organizing a very interesting conference (disclosure, I'm in the board, and will be at the conference). Jesús Silva Herzog was the founder, and while he cannot be considered a structuralist, it is clear that he was very open to publish the authors that would become central for that school of thought in Latin America, like Juan Noyola Vázquez, the father of the structuralist theory of inflation, Hans Singer, of Prebisch-Singer fame, and Celso Furtado, a central figure in early structuralism and the Economic Commission for Latin America (ECLA) when Prebisch was the Executive Secretary. IE published original and translated articles of the main heterodox economists over the years, and now that it is bilingual it has become a central outlet for high quality heterodox research.  So if you cannot go to the conference, you can check the various issues in the link above.

PS: A partial list of the conference participants includes Amitava Dutt, Anthony Thirlwall, Carlo Panico, Guadalupe Mántey, Tom Palley and Jaime Ros among others.

Rediscovering Prebisch

Yilmaz Akyüz has written a very good post on the boom and bust cycles in the periphery or the less developed countries, resulting from long-term capital inflows and outflows coming from the center or developed countries. He notes that we are entering a fourth cycle since the collapse of Bretton Woods. The basic mechanism can be described as follows, a crisis in the center, which leads to low rates of growth and interest rates, creates the conditions for inflows of capital into the periphery.

The inflows, in turn, lead to a boom in the periphery that goes hand-in-hand with currency appreciation, and in some cases greater indebtedness and asset and commodity price bubbles. The appreciation weakens the external position in the periphery, and eventually something (e.g. higher interest rates in the center, a fall in the price of commodities, etc.) triggers a reversal of capital flows and a crisis in the periphery.

It must be noted that the three previous cycles, to which Akyüz refers, can be also observed in the US economy. The cycles in the periphery have been associated in the US to three debt-led cycles in which the boom was associated to appreciation of the currency, and asset bubbles that allowed consumption to increase, in spite of the stagnation of wages. Arguably, it is the American boom and bust cycles that drive the flows of capital, and the cycles in the periphery. So Raúl Prebisch still has a lot to teach us on the interaction between the center and the periphery!