The relation between short and long term for the main schools of thoughts in economics

A mid-night review of the interpretations of Fernando Jose Cardim de Carvalho.

In Cardim’s view there are two notions of economic activity: On the one hand, classical political economy via reproduction of wealth and in the forms of its appropriation.

Smith’s insights into the wealth of nations, which followed, notably Ricardo and Marx, followed, with important modifications, to the neoclassical tradition associated with Alfred Marshall, including John Maynard Keynes. For the latter, the role of the market was to organize private productive activity, through the compensation offered to each activity, in the form of revenues from the sale of goods and services. As in the thesis of the invisible hand of Adam Smith, what was sought to show was that the coordination of productive activity could be satisfactorily achieved through the spontaneous interaction of the economic agents seeking to favor their own interests. Nevertheless, in a Keynesian view the state can act not only as regulator but also favoring negotiations between individuals.

The other notion of economic activity was conceptualized more consistently by Leon Walras, for whom the exchange, rather than production, is the economic activity that should be the object of the economy. Production as well as consumption and accumulation of material wealth are the results of economic activity.

In both approaches, the role of the market as a place of interaction between private agents is essential, but in the classic and Marshallian tradition, market transactions are one of the phases of the productive process. In the Walrasian tradition, consumption gives meaning to market transactions, but it is trade that matters to the economist. The consumption itself occurs when the market has already closed its activities and the values ​​are already established. The same holds true for productive activity that begins only when the market of factors of production has already fulfilled its task of pricing and distributing the factors by the different firms.

In this way, it does not make sense to qualify the general Walrasian equilibrium as a position of long-term equilibrium. Productive activity is a process with intrinsic temporality. The same goes for capital accumulation. Both bring to the present future results in the form of expectations and are projected into this very future given the duration of productive processes and capital accumulation.


Classical political economy arose from an attempt to show that private agents, operating freely in defense of self-interest, could achieve a degree of coordination of their actions sufficient to guarantee the consistency and replicability of this relationship pattern. Neither Smith nor, indeed, any other classical or later author was actually able to demonstrate this claim, which is assumed as presupposed rather than proved as a result.

The ideal of replicability would imply the regularity of behaviors. It was necessary to identify these laws which imply the possibility of separation between essential relations, which are manifested regularly, and accidental, that do not follow established standards. This separation is obtained in the natural sciences in the laboratory, which is nothing more than an artificial construction in which hypotheses are tested on what constitutes an essential relation simply by the deliberate elimination of the influence of what is considered an accessory. The impossibility of these applications in the social sciences has led the classical political economy to adopt a heroic hypothesis: the neutrality of the short period. Economic activity would be at every moment obeying essential forces and accidental forces. The former would be regular, systematic and would have an identifiable impact on the activity. The latter would be erratic, unpredictable in its occurrence and in its impact. Thus economic activity at every moment would be subject to varied stimuli, complex combinations of essential and accidental forces. Historical observation, in this sense, would allow to separate the essential from the accidental, observing the regularities that would mark what is systematic.

Thus classical political economy rested on a sort of neutrality of the short period, in the sense that what happened at every moment would be the result not only of systematic forces but also of all these accidental shocks that take place all the time. In the long period, only the essential elements would occur with the necessary frequency to allow the identification of the regularities that would then be qualified as laws.

The use of a conception of historical time, therefore, in classical political economy obeyed a double demand: the search for identification of laws through repetition over time, and the postulation that the relevant laws were laws of motion, that is, , Systematic systemic conceptions of economies are based on

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