By LEDA PAULANI*
Personal and political considerations about such social science
In this text,[1] I will touch on theoretical and metatheoretical issues and, recounting some decisive episodes in my training, I hope to also talk about the world in which we live. I chose this path because I think that my trajectory helps to explain the vision that I have of what economic science is and should be.
Onions and marginal cost
I was born into a poor family, descendants of Italian immigrants who arrived in Brazil during the primary export economy, but after the end of slavery, to work as settlers on coffee farms in the interior of São Paulo.
Their children and grandchildren experienced the turn towards industry, urban life and the growing importance of the domestic market. When I read the famous chapter 32 of Economic Formation of Brazil of Celso Furtado, whose birth centenary is being celebrated this year, I couldn't stop thinking about my family's history and how it was the living expression of this transformation in the country.
With the family of farmers already living in the city, my mother worked from 14 to 28 years old, that is, until she got married, nine hours a day standing in front of a machine, as a textile worker, in a factory in the neighborhood of Ipiranga, in Sao Paulo. She and her sisters, who shared the same fate.
When I first read Chapter XIII of Book I of The capital of Karl Marx, where he affirms that with machinery there is a real subsumption or subordination of work to capital and that the worker functions there as a watchman of the machine, I could not help thinking of my mother.
My father's family had practically the same origin. My aunts, his sisters, were also textile workers in the Ipiranga factories. My father, however, very hardworking, wanting to study, but unable to do so, managed as best he could, studying Portuguese and accounting — in addition to Latin! — by correspondence and studying English alone, after having obtained a primary level diploma (today fundamental I) in a course of Madureza (today called Supletivo). That's why he didn't work in a factory, but in an office, but without having a formal degree, he always earned very little, never more than two minimum wages, even working as an administrator.
Despite my material needs, I was very lucky, because I lived happily in a well-structured family, with a father and a mother who, since we were very young, encouraged my sister and I to study, but mainly by receiving high-quality education in a school public.
In 1973 I entered FEA/USP to study Economics, a subject that began to intrigue me when I was 10 or 11 years old, when I heard my father comment on a news report that reported that onion producers were throwing onions into rivers or burning tons of them. .
What do you mean, I thought, burn onions? Are they not planted to be consumed, to feed people? Why destroy them after they are born? I asked my father why that was and he said: sometimes that happens. At the time of Getúlio, coffee was burned. I was even more intrigued.
It wasn't for that reason, however, it wasn't looking for answers to intriguing childhood questions that, years later, I decided to study Economics. At that time, the beginning of the 1970s, it was not known exactly what was being studied in a course like this. There was not much information available, at least in working-class families, about the different areas of higher education. Something was known about the traditional courses: Law, Medicine, Engineering, but… Economics? It seemed to me something that somehow combined History with Mathematics, two disciplines that I really liked.
Nor had I any idea that I was entering a field that was still almost 100% male (we were no more than 20 or 25 girls in a class of 180 students). I only realized this when my father commented to an uncle of mine, my mother's younger brother, the only one who had managed to study out of a line of 10 children, he had studied Administration, commented to him that I had entered USP, in the Economics course . He frowned and declared that Economics, for a woman, never. Nor was Administration an area open to women. What I would get, at most, would be a good position as an executive secretary.
Anyway, when I started the course, I remembered those questions and thought that studying economics should help answer them. The first year was a total blast – introductory course for all sides: Law, Sociology, Administration, Accounting, Informatics, and, of course, Introduction to Economics; but in the latter I only learned the famous law of supply and demand and why the price of lettuce is lower at the end than at the beginning of the street market.
I was not discouraged. I thought that from then on, when the ordeal of introductions had been overcome, from the second year onwards, things would get better and I would start to study economics for real. It got 500% worse. At that time, at FEA, there were no elective subjects, and subjects such as Economic History or Development Theory or History of Economic Thought only appeared in the third year. In the second year it was just Microeconomics, Statistics a thousand, Calculus, Financial Mathematics. I was already getting discouraged about this thing, wondering when I was going to study the real world.
Meanwhile, the years of the dictatorship ran by and colleagues disappeared from classrooms, the academic center was invaded. I didn't understand much because, in addition to coming from a culturally peripheral family, as I said, what political references I had came from my father, who was quite conservative, a reader of Times, had served in the army at the time of World War II, expressed appreciation for the military and, given what he had experienced as a young man, for the moment the world was going through at that time, he expressed enormous admiration for the USA; in short, he thought right.
However, honor be done to him, he always remembers my husband Airton Paschoa. Conservative though, he couldn't have given us a more feminist education, and for which he, a naughty writer that only! he says he is eternally grateful to his “grandfather”: “You have to study so you don’t depend on any man!”
Anecdote aside, I thought that such economics, which, from my point of view, I had not yet studied, had to have something to do with those generals in dark glasses and with that pandemonium that made my classmates disappear. Faced with all that concern, the content of microeconomics made me increasingly exasperated with our science. I thought: so this is economic science? What a strange science! What does it explain anyway? How come there are infinite firms? What do you mean normal profit is zero? What does marginal cost have to do with burning onions?
I was so intrigued by all this that one day I asked my father, who, as I said, worked as a kind of administrator without a degree, and his job was in a commercial and industrial company, which sold new tires, but also retreaded old tires and resold them, so I asked him if he knew what marginal cost and marginal revenue were and/or if his bosses knew. He said he had never heard of it; he knew about income and expenses, debit and credit, labor charges, taxes, tax incidence, he had already heard about the famous law of supply and demand and even understood how it worked, but marginal cost, marginal revenue, he didn't know that. The bosses hadn't been presented with the terms either (he had asked).
It was 1974 and, in the second semester, right at the beginning of the Microeconomics II course, the professor spoke again about the so-called theory of utility value. And, of course, it wasn't the first time he'd mentioned her. In the Microeconomics I course, he had used this expression several times. Then it dawned on me: why utility value theory? Why not just value theory? If he speaks of the theory of utility value, it is because he must have another one. So I asked: professor, why do you talk all the time about the theory of utility value, do you have another one? He stopped a little and said: yes, Leda. I got excited and asked: and what is this other one? He said: it is the labor theory of value. The name alone sounded more interesting to me than the one we learned, it was a name that seemed to make sense. So immediately I asked: and how is this labor theory of value? He said: oh, I don't know that one...
Despite "not knowing" the labor theory of value (of course I knew something, but I certainly didn't want to go into the merits, because after all, times were dangerous), the professor's answer helped me a lot, because I went after that theory of the work value. There, fiat luxury, things started to fall into place. I discovered Adam Smith and Ricardo and also began to understand why that Marx was so important.
But my first contact with the old bearded man took place in the third year, in a subject of Development Theory, where our professor, Hélio Nogueira da Cruz, in a risky decision, allowed us to study, on the basis of seminars, some texts that we wanted. One of the texts chosen was a chapter from the book by Paul Sweezy Theory of Capitalist Development, which I ended up reading in full and was a kind of initiation into Marx's theory. That contact, even if indirect, confirmed to me that the path to a true economic science had to pass through there.
I finally began to understand what value was, even without knowing how to name it, which I only achieved years later, already in my doctorate, realizing that value is a social form, that it has a substance, also social, that is work, and that the prices of goods and services have to do with it, even though the prices at which things are effectively exchanged also have to do with that law of supply and demand.
When I studied Adam Smith, already in the last year, in the History of Economic Thought course, one of the things I liked the most was that distinction between natural price and market price, because it put things in the right place. It was a bit of a Newtonian explanation, but it made a lot of sense. He showed how prices were formed through labor time and how these natural prices functioned as a center of gravity around which the so-called market prices fluctuated, now above and now below them. Only one question remained for me: how could science have regressed so much? If it was born that way, straight, making everything understandable from the labor theory of value, why was this theory left out?
And it was based on this and other reflections that I started doing on my own, and, of course, by living with politicized colleagues, due to the political situation in the country that was boiling — in 1975, for example, there was the murder of Vladimir Herzog, professor from the School of Communications and Arts (ECA), very close to the FEA, leading to a half-year strike in protest, and stirring up even more tempers in the student movement; Due to all this, I was putting together the pieces of what I saw and learned inside and outside the classroom: economics, capitalism, the military, dictatorship, Latin America, imperialism, onion burning...
In 1976, I left college as a decidedly left-wing person who was very clear that if there was an economic science, if that science explained something about the world we really live in, it did not live in introductory economics books, even less in the textbooks of economics. microeconomics, in short, would not find it in what is mainstream economics or its mainstream.
True economic science resided in Political Economy, in the science as it had been born in the hands of Smith in the last quarter of the eighteenth century. I had read very little of Marx myself until then, the first chapter of The capital with a group of colleagues, everything kind of on the sly, obviously, and the text Salary, Price and Profit. But curiously, Marx was not an author I fell in love with at first sight... it was a mature passion, the kind we carry with us for the rest of our lives.
Many years later, I became director, vice president, twice president, and today I am again director, of the Brazilian Society of Political Economy, SEP, an institution that brings together heterodox professors, that is, critics of neoclassical orthodoxy, from various currents , with some predominance of Marxists, and which was formed in 1996, trying to face the neoliberal uprising, or, as Prof. Mário Possas in famous text,[2] the flood of mainstream in the mid-1990s.
A few years ago, talking to a young professor, he asked me why I became a Marxist. I replied that I became a Marxist not out of political passion, but because I think that it was Marx who scientifically managed to unravel the phenomena of modern capital society.
In the criticism of mainstream, we cannot forget the postmodern currents, which row in favor of the orthodox tide, transforming everything into narrative, into rhetoric, which relativize all truths and thereby displace science from its emancipatory vocation. If the post-modern surge that took philosophy and epistemological reflection by storm from the 1980s onwards was of any use, it was to cultivate the ideological soil from which horrible sprouts sprouted, such as post-truth, from which flat earthism is based. only the most visible and scandalous example.
At the same time, we have to recognize, in the wake of the Frankfurt School, the incorporation of science into the productive forces, its perhaps irremediable compromise. Modern positivism, the critical rationalism of Popper's matrix, so opposed by Adorno and raging today in almost all fields of knowledge, is an almost insurmountable obstacle. Despite everything, and paraphrasing our Gramsci inversely, it is a case of pessimism in action and optimism in intelligence...
Science with its back to the world
In the History of Economic Thought course, along with natural prices and market prices, I also came into contact with the theorists of the so-called marginalist revolution, which took place in the last quarter of the XNUMXth century and dethroned the classical political economy that had been born with Smith a century ago. before. In addition to the Frenchman León Walras, whom I had already heard about in Microeconomics classes, I learned that the Englishman Stanley Jevons and the Austrian Carl Menger had also contributed to this revolution and, from my point of view, to the setback of economic science.
I also learned that behind the microeconomics manuals and the popularization of the new paradigm, converting the complicated and formalized theoretical developments into knowledge that was easy to be taught and disseminated, was the Englishman Alfred Marshall. He was, therefore, the father of the graphics festival that decorated my Micro I and Micro II notebooks and which, in my opinion, were of little use to understand the world in which we actually live.
But what I want to highlight here is what, in my view, is behind all conventional economic science, which is the Walrasian world, if not the Walrasian model itself, certainly the notion of equilibrium, the background of all assertions and of all theorizations, and indirectly also the notion of perfect competition, which collaborates for the same purpose. This creates a fairy-tale, old-fashioned world that shouldn't worry us — it shouldn't rule the practical world and the economic policy of almost all governments, including the so-called left-wing ones, with drastic consequences.
To show what I want, I return to David Ricardo, another of the theorists of classical political economy, and delve a little into the metatheoretical question, that is, the question of the appropriate method for the science of economics. Unlike Smith, Ricardo was not a philosopher, but an active businessman and a member of the English Parliament. He had a way of reasoning guided by the deductive method, that is, a reasoning where the results are logical consequences of the premises. This was, therefore, how he discussed economic facts, through a sequence of logically connected propositions. Apparently, within the scope of economic science, this is where the idea of creating models to understand reality was born.
The deductive character of Ricardo's explanations was so pronounced that it bothered Henry Brougham, his partner in the English parliament, who commented on his colleague: “Mr. David Ricardo are indeed abundantly theoretical, sometimes too refined for their audience, sometimes extravagant, thanks to the propensity that Mr. Ricardo has to carry a principle to the last consequences, as if he were a being from another world, or as if he were an engineer who builds a machine without taking into account the resistance of the air in which it will operate and the strength, weight and the friction of the parts that compose it”.[3]
The discomfort of Ricardo's pragmatic companion was, clearly, with the absolutely abstract nature of his formulations, even though they were intended, after all, to endorse concrete propositions of economic policy. It seemed obvious to Ricardo that, if he managed to demonstrate the logical truth of his theses, his proposals would have to be unconditionally accepted. It is because of this that Joseph Schumpeter, already in the XNUMXth century, called “Ricardian vice” the linking of abstract formulations to practical issues.
Note that another English economist, Frank Hahn, one of the theorists who most contributed to the development of the Walrasian theory of general equilibrium, complains, in one of his books, about precisely this, the persistence of this Ricardian vice, the undue use that monetarists in general they used (and continue to use) the Walrasian paradigm, as if he were describing real economies, in order to make their control viable. Monetarists are economists who understand what currency and money are in a way that converges with the neoclassical world, with its theoretical assumptions based on marginalist principles, and which guides the hegemonic monetary policy agenda in the world, in a very radical way. , since at least the 1980s.
Hahn then says: “Having spent most of my life as an economist of this theory, I confess that such an interpretation never occurred to me. In fact, it was clear from the start that we only had half a theory, since there was (and is) no rigorous explanation of how the Arrow-Debreu equilibrium comes to be established. But it was quickly realized that even this half we had had serious flaws: it couldn't explain money or inventory changes; increasing returns were not possible; there was no theory of real exchanges, etc. (…) If one takes the Walrasian theory seriously, one cannot take seriously the monetarists' use of it”.[4]
Frank Hahn speaks with the authority of someone who actively participated in the making of the most logically consistent theoretical artifact with the idea of economics as a deductive explanation ever produced. The Arrow-Debreu model you cite (actually it is the Arrow-Debreu-Hahn model, as he was also part of the trinity of theorists who elaborated it) is the most well-developed Walrasian model ever built, a model that solves many of the problems and gaps that Walras had left, many of which were simply due to the fact that the mathematics of his time was not yet sufficiently developed to provide the instruments capable of solving them.
The main objective of the Walrasian model is to prove the existence, in the market economy, of an equilibrium price vector, that is, to mathematically demonstrate that the market, by its very functioning, always finds a price vector that balances offers and demands of goods. to satisfy all desires. It is surprising, therefore, surprising and applauding, that Hahn was so outspoken in his admission of the utter inadequacy of the general equilibrium paradigm to explain the world in which we actually live. But that immediately leads us to ask: if it's not about that, then what is it about? Is economic science like art, an end in itself? Can you afford to turn your back on the real world?
On this issue, it will not be too much to remember, less because of its anecdotal character than because of what this type of conception of economics reveals, an episode that occurred precisely with the French economist Gérard Debreu – the Debreu of the Arrow-Debreu model – during the ceremony of receiving of his Nobel Prize in Economics in 1983. According to reports, at the end of the event, amid dozens of journalists who surrounded him, he was asked what he thought, at that time the most celebrated economist on the planet, about the president's interest rate policy Reagan, who had astounded the world for her extreme toughness, then becoming the favorite subject of specialized circles. To the astonishment and astonishment of everyone present, Debreu simply replied that he had no idea about the subject, as he was not concerned with economic policy matters, he only made abstract models...
To the uninformed, the unexpected response may have seemed just the silliness of an arrogant Frenchman, who wanted to subtly reveal his contempt for American affairs. But evidently that was not what it was about, but a new outburst of sincerity from a general equilibrium theorist, of an identical nature to the manifestation of Frank Hahn that we have just commented on. If Debreu did not really have anything to say, if all his knowledge of economic theory, which had earned him a Nobel, did not allow him to utter a single word about such an outrageously economic object, it is up to us to repeat the question we had already asked: what is this theory about then? what world is she talking about? what knowledge is this?
It is the flagrant unrealism of the assumptions of general equilibrium theory that makes it difficult if not impossible to use its theoretical findings to explain the real world and make policy prescriptions without incurring the Ricardian vice. For Frank Hahn, as we have seen, the champions of this error are the monetarists. Because it was precisely the father of monetarism, the American economist Milton Friedman, who wrote the most influential article on methodology in the entire history of economics precisely to defend this use, that is, to defend the use of unrealistic assumptions in the elaboration of theoretical models.[5]
It is true that Friedman is referring there not to the Walrasian version of the equilibrium paradigm, but to the Marshallian version of it, which deals with partial equilibria. His criticism of the Walrasian model, however, was based on its inability to provide testable hypotheses, ― not on the unreality of the world he constructed. Friedman's essay had an extraordinary impact and marked entire generations of economists affiliated with the mainstream. The militant pragmatism there, so warmly defended by Friedman, provided the followers of the current with the best arguments to defend the criticism, systematically made to them, that the neoclassical theory of extraction was based on unrealistic assumptions and should, therefore, be abandoned.
But, through Friedman, we came across the theme I studied in my doctorate: money.
A cup of coffee at the IPE and an obscure object called money
After completing the course in 1976, I left FEA, migrated to the neighboring school, ECA, in order to study journalism at night, and went to work as a macroeconomic analyst at a large bank.
The work was narrow, sometimes repetitive, the environment almost 100% male, in the worst sense of the word; for a woman, it was almost unbreathable (I remembered my uncle). Sometimes I had to go with the director of my department to general meetings between the various departments of the bank (it was an investment bank), always being the only woman. The big director, a super macho guy, never spoke to me directly. He called everyone present a doctor (and no one was a doctor there, all of them just bachelors, like me) and when he wanted to say something about the work I was developing, generally sectoral studies, or analyzes of monetary policy and the inflationary process, he would go to my boss and say: you need to tell the young lady this and that, etc. The girl there was me... My desire to disappear from there and go back to the university, to try a teaching career, was enormous, and understandable.
(It should be said in disapproval of the “big director” that it was not just him or his time. Secretary of Planning in the Haddad government, already in the second decade of the XNUMXst century, in the various meetings at the City Council, with the presence of other secretaries, the only woman and doctor was never addressed like that. I was always simply Madam... Doctors - only male secretaries, and graduates.)
Since 1979 he had led a double life, since he was active in a clandestine Trotskyist organization, which later joined the PT, practicing the so-called “entrismo”. At the time, the arduous battle for the legalization of the PT had also begun. Liberdade e Luta, today the object of even a documentary, was the name of the organization in the student movement. Alexandra's life (my nom de guerre) removed some of the gray with which the bank environment painted my day to day. But something else also helped me to endure all that: ECA. Going there at night after spending the day at the bank was a stopgap. I breathed there and didn't let me get dumb. It was also there that I had more intense contact with an area of knowledge that was not entirely unknown to me because of the Economic History classes at FEA, taught by Prof. Iraci del Nero da Costa, in which Hegel had sneaked in. Having to study, due to the curriculum of the journalism course, the phenomena related to the so-called cultural industry, I immersed myself in the Frankfurt School and was fascinated by Adorno, Horkheimer, Marcuse and Benjamin (whose tragic death by suicide to escape the Nazi forces completed in September, by the way, eighty years).
Captured by Philosophy, which would awaken in me an appreciation for interdisciplinarity that never diminished, the narrowness of work in the financial sector seemed even more suffocating. Leaving the bank, risking your luck at the academy, however, was not an easy or viable decision for someone who wasn't born with a golden cradle. One fine day, however, I decided to face the challenge. I took the Anpec exam and in March 1983 there I was, finally, back home, a student at IPE—the Economic Research Institute at FEA/USP, responsible for the graduate course.
It was almost insanity to study the disciplines of the master's degree in Economics and continue to work in the private sector, but the material contingencies of my life did not leave me any other way out and the good results I obtained earned me a recommendation to go straight to a doctorate. The perspective, distant then, of remaining at FEA as a teacher became a little less utopian. I seized the opportunity and decided to take over the academy once and for all, with all the uncertainty that this represented in financial terms.
From there, everything happened in a whirlwind. The chair experience came much sooner than I could have imagined and when, in August 1985, I stepped into a classroom at FEA, for the first time as a professor and not as a student (approved that I had gone to a substitute professorship in the area of macroeconomics ), the feeling was one of pride… and panic. In September 1988, I received with great joy the result of a competition to occupy a teaching position (this time no longer temporary) in the Department of Economics.
I had to finish my doctorate. The question was what to write. Initially leaning towards the area of economic history, which had always fascinated me, I began to take a liking to theoretical discussion, in particular to heterodox views, especially in the materialist aspect (I had already read a lot more Marx by then). I didn't know, however, what exactly to dedicate myself to. Money was an object that intrigued me, but I was in doubt whether a thesis on it would yield something original... But the episode that I am now going to relate made my decision easier.
One afternoon, at a time when there was always a cup of coffee among the graduate students, one of our colleagues appears and, with the face of someone who had made a discovery worthy of Einstein, tells us resolutely: “Guys, I discovered something, money does not exist. !” "Like this?" we all ask. To which he replied: “money has no logical place, and if it has no logical place, it does not exist”. Needless to mention the teasing that soon followed, with everyone saying, “okay, then pass that thing in your pocket to mine…”, “I'll give you my details for transferring your bank balances” etc.
Aware of Marx's main considerations on merchandise, money and capital, as well as other theories on money, I was sure where the enormity of that statement came from. The colleague was studying the theory of general equilibrium, by León Walras. And in fact, in this theory, in the model that manages to prove in the most perfect way possible the existence of a general equilibrium based on the functioning of the market and the price system, — money does not exist. If you remember the Frank Hahn quote I read a moment ago, he says exactly that: “In fact, it was clear from the beginning that we only had half a theory (…) But it was quickly realized that even that half that we had had serious flaws: she could not explain the money (…)”.
I then began to think that there was something very wrong with a science that does not support its most characteristic object, like a medicine that refuses to understand human blood, or a chemistry that ignores the periodic table. I kept imagining what a layman would think, passing by that unsuspectingly and hearing a phrase like that… If the doctoral student was not crazy, he could even sue the faculty for embezzlement of public money; after all, everyone there received research grants from public development institutions. I decided, after all, on money as the object of study for the thesis.
What is money? The apparently simple question, capable of being answered without difficulty by any child, refers to an object that is far from being simple. Firstly, because it is not a natural object, however naturalized the social reality of our market economy may be. Furthermore, as a slippery object, it does not allow itself to be easily subjected to the vicissitudes of the representation process, playing tricks on many good people. When one tries to specify it, its ambiguity contaminates the discourse and makes the analyst lose his footing. Just when you think you've got him caught up in your conceptual loops, he's already slipped away and hidden himself in his predicate, or in one of his roles.
The aforementioned Milton Friedman, number one advocate of the unrealism of assumptions, father of monetarism, got very irritated, not by chance, when a graduate student asked him to conceptualize currency. He asked the student, with good reason: “In your model, money is the basic concept, and yet you still haven't told us what money is in exact conceptual terms. Could you help us understand it now?” Friedman crushed him, telling him that he knew nothing about scientific methodology, that Newton didn't need to tell you what gravity was, just show what it does, and that the same was true of money.[6]
And what else to expect from someone who defends the unrealism of theoretical assumptions? But then conventional, or orthodox, science is like this: the father of the theory that bears the name of an object, says that you don't need to know what that object is. The problem is the Ricardian vice, because you take it from there, from this scientific knowledge sui generis, and nobelized, economic policies that in the end slaughter lives across the world.
Up until now I have used the terms currency and money interchangeably, as synonyms, but in fact they do not mean the same thing. In reality one contradicts the other, even though both are one and the same thing. The monetarist theory, for example, sees money only as currency, it does not fully see it. But obviously I'm not going to try to explain my thesis here and what I wrote about money, because we wouldn't have time; I'm just saying that I tried precisely, based on Marx, read through Hegel's lens, to capture money in its obscurity, with a discourse that is also slippery and that embraces contradiction.
An obscure object, read contradictory, to capture it, the same discourse of obscurity is required. When one tries to capture it with clear discourse, that is, when one tries to define, clarify an obscure object, the contradiction that belongs to the object passes to the discourse and the discourse contradicts itself. In the thesis, I analyzed the thinking about money in general equilibrium theory, in neoclassical theory, in classical theory, and even in Keynesian theory, indicating how the contradiction of the object contradicts these discourses.
The thesis about money, in short, is that, being logically a substitute for the commodity, it is, in its essence, pure form (a social form), but that it has to appear as the opposite of that, as absolute matter. Part of the turmoil experienced today by the global economy stems from the historical unfolding of this constitutive contradiction of money.
In a very original approach, Prof. João Sayad says that money is a myth, whose existence and functionality depend on the belief and faith of those who use it, as well as the religious saints; and the myth cannot be demystified.[7] That is why it is so difficult to tame it through the process of representation that constitutes knowledge (in this case, economic science, which, more often than not, according to Sayad, ends up forging a monetary theory without money). And if money is a myth, the inflation targeting regimes and the periodic meetings of committees that issue papal bulls with the rules for handling them figure, for him, as the necessary rituals, in times of money without backing, in order to conserve money. myth and save it from rationalization, which would destroy it. Sayad's conclusions are not very far from mine and they also give us important clues to think about the emergence, nowadays, of the so commented MMT, the Modern Money Theory, or Modern Theory of Money (which, in fact, of modern has little).[8]
From here we could start discussing contemporary capitalism, financialization and rentism, topics that I have been researching lately, but I would like to say a few words about an area in which I also worked a lot and which was very important for my education, the area of methodology. My senior thesis deals precisely with metatheoretical themes, in addition to contemporary capitalism. But I'm bringing it here to add to the critique we've made of economic orthodoxy so far one more element. This time, however, it is not the critique of heterodoxy, by Leda Paulani, an openly Marxist (and eventually Keynesian) economist, but by a celebrated author, none other than Friedrich Hayek, the father of neoliberalism.
O hippie peace and the defense of the market economy
In mid-2003, after having spent just over two years in the position of chief advisor to the office of the Finance Department of the São Paulo City Hall, where my friend Prof. João Sayad – under the administration of Marta Suplicy, then a PT member – I decided to resume the teaching assistantship project, which had been interrupted at that time in order to be able to respond to Sayad's invitation. I took a number of essays, written over the years on the occasion of a CNPq productivity grant, linked them in a different way, wrote three new essays and presented the volume in the aforementioned competition under the title Modernity and Economic Discourse (Boitempo, 2005).
The title of the thesis, which became a book, was inspired by a work by the German philosopher Jürgen Habermas, The Philosophical Discourse of Modernity. In all these years, my passion for philosophy, the lack of training in the area and the need to deepen my knowledge within Marxist theory led me to take several courses as a listener, at FFLCH, two with Prof. Ruy Fausto, one on Marx's Economic-Philosophical Manuscripts and another on Hegel's Logic, one with Prof. Paulo Arantes on Hegel's Phenomenology of Spirit and a fourth on the cited book by Habermas, with Prof. Ricardo Terra.
What I try to do in the thesis is to indicate the contradiction of the conventional economic discourse, at the same time as trying to demonstrate what were the material constraints that produced certain theoretical and metatheoretical results. In this way, I wanted to answer one of my questions when, astonished, I attended Microeconomics classes in my undergraduate course at FEA: what had happened to our science?
The book deals with many things, many objects, all related to the need to criticize conventional economic discourse. That's why Hayek had to be there. The highly respected Austrian professor had been brought from Austria in 1933 to London School of Economics by another compatriot, the economist Ludwig von Mises, well known today due to the rise of extreme right groups around the world. Mises had sought out Hayek to face the Keynesian dragon looming on the horizon, and even before the General Theory of Employment, Interest and Money of the bloody English, it shuddered at the free market principles that guided Mises' theoretical production.
Hayek didn't get the job done. A scholar tells of Hayek's trajectory[9] that throughout the 1930s the English academy saw Hayek initially emerge as a star of the first magnitude in the constellation of economists and, later, end the decade completely erased, overshadowed by Keynesian glory. But what interests us here is Hayek's critique of the neoclassical approach. The approach, which, as already mentioned, has the Walrasian model behind it, is entirely based on the idea of the rational economic man, so that the balance that emerges there is always the result of this vision of the agents...
Defender of this conception during a substantive time of his intellectual life, Hayek, however, radically changes his posture in the mid-1930s. Economics and Knowledge, from 1937, Hayek carries out a devastating critique of neoclassical theory and its idea of the individual. Briefly, he asserts that by taking the individual and his behavior as given beforehand, neoclassical theory takes for granted what it should resolve. The balance that appears as a result of its development is actually hypostatized, and, with that, the neoclassical theory, which should function as the “scientific” proof that the market society manages to produce the social optimum, is nothing more than a vicious circle — in which the end, to be proved, is in the origin, postulated.
Indeed, according to Prof. Sayad on the ear of the book that resulted from the thesis of Habilitation,[10] neoclassical theory and the economic man it presupposes do not match the image we have of capitalist society, of visionary entrepreneurs, entire populations uprooted and displaced to work in mines or in plantations in the New World, generations impoverished to death because of new inventions, or driven to death because of the price of potatoes... or rice. The economic individual of the theory fits only a Robinson Crusoe who makes rational and calm decisions, isolated on an island lost in the middle of the ocean; or with a hippie quiet place of the 1970s, choosing between two goods, thinking only of the most necessary and at peace with the world.
Having arrived at the deplorable conclusion that the theory that should scientifically advocate the market economy was nothing more than a fallacy, Hayek simply abandons economic theory and starts to take care of other themes, Legislation, Law, etc. When, in 1947, he intellectually commanded the founding of the Mont Pelérin Society, a sort of baptismal certificate of neoliberalism, he was already aware of the impossibility of scientifically defending the market economy, that it would only be possible to defend it as an end in itself, while unique ground for the realization of individual freedom, etc. etc. Raw ideology, in short.
In the aforementioned part of the book, Prof. Sayad further writes: “Leda shows that Hayek's thought abandons the economists' debate on the functioning of the capitalist economy and starts to defend it as an end in itself [...] Capitalism and the market economy no longer require justification or rational analysis. Hence, economic thought becomes shallow, or impossible to be discussed rationally. Privatization is preferable because it is private, the market because it is a market. It is this unjustified choice that the author points out as the defining feature of neoliberal thought”.
And so we have one more reason to disapprove of the continuation of the Ricardian vice, which intends to build a bridge between the scientific demonstration of the virtuous character of the market economy and the prescriptions of economic policy to be followed to maintain it. Given Hayek's withdrawal, the person who would most like to have a weapon like this, the proof simply isn't there.
With that, we arrive at the final chapter of my story, my most recent productions, all of them linked to the critique of neoliberalism, in Brazil and abroad, and to the transformations experienced by contemporary capitalism, especially the process of financialization of the economy, which is, for me , just one of the phenomena associated with a movement of greater scope, which I call rentism.
Before starting, however, it is convenient, for the sake of intellectual honesty, to say a word about the conventional paradigm. So it's absolutely useless? Serves, yes; serves, for example, to explain why the second beer, on a hot day, is not as delicious as the first,[11] or to explain, as I said, why lettuce is cheaper at the end of the fair than at the beginning…
current paths
Having defended my professorship, I ended my journey to the planet of epistemology and metatheory and gradually returned to my original object, money. Meanwhile, the continuity of the neoliberal management of capitalism, as well as the political and economic progress of the country, opened ways to associate such research, more theoretical, with the concrete events that were marking the country and the world in these first decades of the XNUMXst century.
I studied the autonomy of social forms and how they take over the accumulation process. I tried to show how this somehow explains the persistence of what is conventionally called the financialization of the economy, as well as the continued growth of financial wealth, since at least the beginning of the 1980s, at a rate three times greater than the growth of real wealth.
All this stemmed from a worldwide movement to resume the famous section V of Book III of The capital, where Marx will talk about financial capital, which he calls interest-bearing capital, and fictitious capital, and where he will show how interest-bearing capital closes the system. Marx starts from the commodity, goes to value and money, arrives from there at capital and finally returns to the commodity, since interest-bearing capital is nothing more than capital itself transformed into a commodity, that is, it is the commodity. capital.
This theoretical movement, which involved several Marxist economists, aimed, of course, to account for the new stage of capitalist history, which began in the early 1980s, with the debacle of the Keynesian vision and the crisis that erupted in the 1970s, a crisis of overaccumulation, in my view. In this new stage, financial capital will be the protagonist, commanding the accumulation process. The neoliberal uprising that was observed at the time, led by Thatcher in England and Reagan in the USA, sought to restore the conditions for capital appreciation, damaged by excessive accumulated capital, by wage pressure in times of continued full employment and, in part, also by the rights conquered by workers. In short, it sought to recover the rate of profit, but it also sought to free the world from the complex system of regulations and expedients commanded by the State that, throughout the so-called thirty glorious years and under the auspices of the Bretton Woods Agreement, had placed fetters on the vocation of autonomizing finance, forcing it to become a partner in production.
The capital commodity is the one most in need of freedom. Dollars invested today at Bovespa must have the freedom to be invested tomorrow in government bonds in Nepal and the day after tomorrow in debentures of English companies in the City of London or on Wall Street. How to live in a world full of chains, quarantines and regulations and gates and ordinances?
But financialization for me, as I mentioned, is just one of the elements of a broader process, it's just one of the forms of rent. I came to that conclusion by rereading the forgotten section VI of Book III of The capital. In it, as is known, Marx analyzes the forms according to which surplus value appears, namely, Profit, Interest and Income, but the latter was overshadowed, for a time, by the abundant discussion on interest-bearing capital and financialization . The growth of phenomena such as the knowledge commodity rescues section VI, revealing very important things that we can use to understand today's capitalism and the open challenges. I don't have space here to comment on them, but I think that political economy, if it really wants to contribute to the understanding of the contemporary world, has to keep going.
I'll stop here. I would still have a lot to talk about, for example, everything I wrote about our country and its development in this century, about the Brazil Delivery (Boitempo, 2008), on left-wing governments and right-wing economic policies, on articles that dialectically discuss the nature of the work process today, on the development of economic science in Brazil and the very original thesis of inertial inflation, which not by chance was born here, about neo-developmentalism and the great Celso Furtado, in short, about many things that perhaps deserved some mention.
I just leave one last observation. I think that the content of this master class will, at the very least, raise the flag of pluralism in economics teaching, which is absolutely essential at this time. The university is not a church, which only promotes a certain creed and whose perorations are based on a bible. The university has to be the opposite of that, it has to be plural. It is the university's obligation to introduce students to the various existing paradigms, especially when it comes to science in which the struggle for paradigms has never ceased to exist, in science, above all, which carries so many social consequences, most of the time — tragic ones.
We live in apocalyptic times, with enormous setbacks, where knowledge and research are attacked in every way. Restricting teaching to a single vision, whatever it may be, means supporting the process of devastation of life on the planet.
*Leda Maria Paulani is a senior professor at FEA-USP. Author, among other books, of Modernity and economic discourse (Boitempo). [https://amzn.to/3x7mw3t]
Notes
[1] Modified version of Aula Magna of the Economic Sciences course at the Federal University of ABC (UFABC) delivered on 9/10/2020.
I thank professors Fábio Terra, Fernanda Cardoso and Ramón Fernández for the honorable invitation. From December 2017 to November 2019, I was a researcher and visiting professor at Needs― Nucleus for Strategic Studies in Democracy, Development and Sustainability, at UFABC. On behalf of professors Olympio Barbanti Jr. and Gabriel Rossini, coordinators of the nucleus during the time I was there, I would also like to take this opportunity to thank all my colleagues for their generous welcome.
[2]POSSAS, ML The Flood of the Mainstream: commentary on the directions of economic science. Contemporary Economy Magazine, volume 1, no 1, January-June 1997
[3]Talk about Ricardo's companion found in: DAVIS, JB “David Ricardo”. In DAVIS, JB, HANDS, DW and MÄKI, U.The Handbook of Economic Methodology, (eds). Cheltenham, UK, Edward Elgard Publishing Ltd, 1998, p. 423
[4]HAHN, F. Equilibrium and Macroeconomics. Oxford, Basil Blackwell, 1984, p. 309
[5] This is the well-known test The Methodology of Positive Economics, first published in 1953.
[6] The episode is reported to Arjo Klamer by the well-known American economist James Tobin in Conversations with Economists, São Paulo, Edusp, 1988, p. 109-110
[7]Such theses can be found in: SAYAD, J. Money, Money – Inflation, Financial Crises, Unemployment and Banking. São Paulo, Portfolio Penguin, 2015. I use, in this paragraph, some reflections I made on the back of the book.
[8] Check the interview of Prof. André Roncaglia from Unifesp to Nassif: https://www.youtube.com/watch?v=H5e3Ec4Fseo&t=254s&ab_channel=TVGGN
[9] ANDRADE, R. de. “Friedrich A. Hayek: The Liberal Counterposition”. In CARNEIRO, R. (org.) Classics of Economics. São Paulo, Ática, volume 2, p. 177
[10]Modernity and Economic Discourse. Sao Paulo, Boitempo, 2005
[11] For non-economists: neoclassical microeconomics works from incremental variations in variables. Thus, the satisfaction (utility) provided by the first beer is necessarily greater than that provided by the second, which, in turn, will be greater than that provided by the third, etc. This is the principle of diminishing marginal utility (each additional unit of a good adds a quantum smaller than the utility that the agent already has). It is this principle that lies behind the downward sloping demand curve for textbooks. In practical terms, this means that each agent is willing to pay more for the first few units of a good than for subsequent ones.
