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Jonathan Levy, The Real Economy: History and Theory

Étienne Goron et Loïg Pascual
p. 669-677
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Jonathan Levy, The Real Economy: History and Theory, Princeton: Princeton University Press, 2025, 336 pages, 978-069125255-1

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Crédits : Princeton University Press

1When asked the question “what is the economy?” today’s scholars in the social sciences and humanities—whether economists, historians, sociologists, or anthropologists—provide divergent and sometimes incompatible answers, depending on their schools of thought. Facing this conundrum, Sciences Po professor Jonathan Levy sets out to examine the fundamental concepts of economics as an object of study in their own right. While Levy has gained recognition for his work on the history of American capitalism, The Real Economy takes a much more speculative stand. It lays the groundwork of a new conceptual space in order to reestablish a fruitful dialogue between studies of the economy in the 21st century.

2At the center of his approach is the idea of a “return to the real.” The theories that have dominated the field of economics since the mid-20th century have failed to substantially define what the economy is, as a set of social and material conditions. The challenge that Levy addresses, therefore, is to deepen the “real” idea of the economy as an order changing over time—real in the sense that it is analytic and accessible through field research (15). A densely theoretical book, The Real Economy is based on an original reading of historical studies in American capitalism—focusing on accounting practices, taxation, company law—and of Keynesian and psychoanalytic theories of capitalist investment. The breadth of the subjects examined, and the novelty of the proposals make for a fascinating read. However, as an ambitious attempt of crafting a new theory of the economy, The Real Economy’s fortune would essentially depend on the ability of scholars to grasp it and put it to work.

3It is possible to divide the book in four parts: Levy’s critiques of mainstream approaches to economics, a stylized reading of the institutional history of U.S. capitalism (chapters 2-5), a psychoanalytic theory of capitalist investment as the driving force behind the “real economy” (chapters 1 and 6-8) and, finally, a test of his theory in the debate about the origins of European growth (Chapter 8).

4In the introduction, Levy criticizes modern economics for having largely turned away from the conditions of wealth creation—such as factors of production, natural resources, or institutions. The social, political, material, and psychological context of production has been erased in the name of quantification. In the words of Levy, “wealth economics,” from Adam Smith to Karl Marx, has been supplanted by “value economics,” from Léon Walras to Paul Samuelson. By “value economics,” the author refers to the rebuilding of economic science at the end of the 19th century and during the 20th, around the mathematical formalization of behavior in market configurations.

5Levy’s history begins with the development of marginalist tenets. These were formalized in the interwar period thanks to the contributions of Lionel Robbins and John Hicks (in 1935 and 1939, respectively). For Hicks, the functioning of the economy is understood as the more or less harmonious combination of individual preferences. Robbins promoted a representation of economics as the study of individual choices under conditions of scarcity and substitutability of resources (1935, 6). The two colleagues from the London School of Economics laid the foundation of contemporary microeconomics: a theory of individual behavior applied to various resource allocation problems.

6In the aftermath of the Second World War, the definition of economics as a “generalized method for an extraordinarily unspecified subject” became mainstream (6). In line with the heritage of “value economics,” several works sought to bring together the axioms of microeconomics with those of Keynesian macroeconomics. In Foundations of Economic Analysis (1947), Paul Samuelson integrated the principles of general market equilibrium, Robbins’ and Hicks’ theory of maximization under constraint, and Keynes’ global aggregates—albeit under a simplified form. In many versions of the neoclassical synthesis, according to Levy, economics as an object of study is assimilated to an “idealized world” (8). The main trends of development are reconstructed through a combination of stylized functions—including production, growth, and employment. In this conceptualization, some dimensions of reality—currency, uncertainty, and the heterogeneity of agents—are put aside. During the second half of the 20th century, “value economics” was widely adopted in the major research centers. This approach of mathematical perfection, predictive power, and relevance to public decision-making compensated, according to their promoters, for its lack of “realism” (this argument is defended by Milton Friedman, 1953, 8). The universal claim of mathematical functions allowed researchers to consider their extension to every sphere of social life, including those having no direct connection to the market system (Becker, 1976).

7In this overview of 20th-century history of the discipline, Levy highlights the profound neglect that still characterizes economics. The triumph of “value economics” was followed by the withdrawal from traditional topics related to wealth creation. Yet, in the 2000s and 2010s, the very foundations of the paradigm were weakened. What is often referred to as the “credibility revolution” (the questioning of abstract assumptions and the revival of field studies in economics) has, however, not led to a thorough reworking of economic postulates. In the first chapters of the book, the author revisits this line of thought in order to define economics in a more substantive way, starting from social representations and tools for measuring wealth.

8In chapters 2 to 5, writing primarily as a historian of the U.S. economy, Levy points out that measures and representations of wealth have changed widely over the last few centuries. The premise upon which many schools of value economics are based, also known as profit maximization, had many faces while the methods of accounting transformed. Accounting is also deeply entangled with the expansion of the state and the dissemination of knowledge in several activities—including bookkeeping, management, statistics, and law. Following these insights, a primary understanding of major evolutions of the economic sphere emerges.

9To accumulate is to measure a surplus. Before 1850 in the U.S., a farmer’s profit was simply the “excess” of their household and plantation expenses over commercial income. At the end of the 19th century, the systematization of accounting methods, such as double-entry bookkeeping, made it possible for owners to identify the so-called “operating ratio.” Used to compare production costs and sales, this ratio encouraged the rapid acquisition of capital at the expense of trade balance. One of the first to make systematic use of it, Pittsburgh industrial magnate Andrew Carnegie, sought to reduce product costs and gain market shares through “economies of scale, scope, and speed” (48). According to Levy, capital, as a stock of productive assets, began to appear to the layman as something distinct from wealth: the very source of profit.

10Previously simply taken as what remained after the calculus of incomes and expenses, profit became the entrepreneur’s primary “psychological motivation” (50). Andrew Carnegie and John D. Rockefeller Sr., who both started as accountants, were the familiar faces of this new ideology. The spread of profit-oriented industrial practices coincided with the emergence of private companies. Levy traces the origins of the firms in U.S. law, where the long-dominant model had been “republican” (92-93). In the early days of the union, large companies were established through concessions of sovereignty granted by the states or municipalities. For example, charters specified the public missions delegated to a private association by cities. Yet, in the second half of the 19th century, as a result of the popularization of an economic thought that placed private motivations at the source of economic action, free incorporation seeped into state laws (118).

11The concept of private profit, for Levy, is also an artefact of fiscal law. With the construction of the welfare state, the “operating ratio” gave way to “return on investment” (53). This accounting practice brings the focus on the actual use of capital during its life cycle. From the 1920s onwards, industrial capital was a prime target for taxation, which was established by a body of bureaucrats. This, along with the legal definition of corporate personality, set once again a change in commercial practices. Contrary to traditional household accounting, the company was dissociated from family assets, becoming a fiscal entity in its own right, independent from its shareholders. As profits are measured in relation to the capital initially invested by the shareholders, managers have an interest, not in maximizing capital in the manner of Carnegie and Rockefeller, but rather in ensuring its long-term return (123).

12Levy puts developments in private profit into perspective with the history of the nonprofit sector. The specialization of the economy as a profit-seeking sphere at the beginning of the 20th century opens up a new space for philanthropic redistribution, which expanded into “welfare” programs. From these interconnections, a “fiscal triangle” (41) emerges: contributions are extracted from industrial capital to finance social security and public services, while tax credits are granted to companies to encourage donations to the non-profit sector. Born during the New Deal, the “fiscal triangle” has also undergone transformations. While the non-profit sector is prohibited from yielding profit and participating in political campaigns (Unrelated Business Income Tax, 1950), the management of federal public services has increasingly been delegated to it, from the 1960s Great Society programs onwards (131).

13What emerges from these chapters is a view of the economy as a multifaceted system. Its historical trajectory depends on changing norms relating to corporate law, taxation, accounting, and social security. But Levy seeks to further specify the concept of economy. Dynamics of the modern economy cannot be seen exclusively as products of historical compromises between states, entrepreneurs and social actors. They are also based on the driving force of the agents who accumulate wealth.

14Chapters 1, 6, 7 and 8 move away from reflections on the institutions, concepts, and instruments at the origin of the American economy. Laying the groundwork for a general definition of the economy, the author focuses his attention on capitalist investment. The historical narrative moves to the background as Levy adopts a theoretical framework in which money is a resource of prime interest. He draws on a somewhat original reading of John Maynard Keynes’ work, using psychoanalytic theories, in which the concepts of “radical uncertainty” and “preference for liquidity” are key to understanding the basic impulses that drive the modern economy.

15Levy first follows the lines of argument laid out in chapters 12 and 13 of Keynes’ General Theory. According to Keynes, a major feature of the capitalist economy is the functional equivalence between money and wealth. Primary store of value and uniquely liquid asset, money serves to those who have it as a refuge from uncertainty. It is well-known that the Keynesian definition of money is a blow against Jean-Baptiste Say’s classic argument according to which production always yields enough income for its consumption. Introducing money as a “stock”—which can be saved on its own from one period to another, whether through hoarding, rent, or speculation—breaks with Say’s vision of an “accounting identity” between supply and demand (209). In Levy’s reading of Keynes, this raises the fundamental problem of the ways in which money as a stock of wealth travels across periods of time (205). The British economist makes clear that capitalist investment in production is the real source of wealth creation. In this theoretical setup, crucial to the economic analysis is the conversion of liquid assets into illiquid ones: capitalists’ willingness to inject the money back into the circuit is key to understanding global dynamics of accumulation. However, in the General Theory, flows of investment appear often as exogenous. The concepts of “radical uncertainty” and “preference for liquidity” prevent any straightforward conception that would apply the very principles of rational calculation or pursuit of profit: the market prospects for any new product can never be perfectly predicted; and, since speculation can be an attractive option, statistical calculations of risks and benefits, as well as public incentives, are of little help (165).

16In some sections of the General Theory, the contingency factor at work in productive investment is analyzed as a conflict inside capitalists’ psyches. Keynes saw speculative and precautionary behaviors as likely to take pathological proportions under capitalism. The concept of “demand constraint” itself includes allusions to psychological analyses: depending on capitalists’ “expectations”—that is, their inner beliefs about markets’ and consumers’ behaviors in the short- or long-term—monetary demand can be significantly altered. Levy highlights here the influence of Freudian psychoanalysis on Keynes’ work (154). Continuing this line of thought, Levy draws on French philosophers Gilles Deleuze and Félix Guattari to approach investment as a phenomenon related to basic impulses (181-192). In their 1972 book Anti-Oedipus, they elaborate on the concept of desire in capitalist settings. Criticizing the standard understanding of desire for conveying the illusion of a liberation from impulses, Deleuze and Guattari adopt a broad definition. Desire has no beginning and no end; it has no connection with money or the pursuit of profit. As a continuous flow, desire proceeds by free and temporary association, by fixation on objects of investment, which subsequently give rise to new flows. From this point of view, “preference for liquidity” as such, diverts the flows of desire away from creative activities.

17Following a path leading from Keynes to Deleuze and Guattari, Levy locates the source of economic action in unconscious desire (185). He uses this assertion to provide a theoretical perspective, working on both macroeconomic and microeconomic levels, centered on the use of money. In modern institutional and social conditions, wealth is essentially stored in monetary form—which makes money the object of a multitude of psychological investments. The crucial process of converting this liquid asset into an illiquid one cannot be captured through the category of profit.

18Levy uses the debate on the origins of European capitalism to test this psychological theory. He speculates on recent comparative economic historiography (219), in particular the concept of “deep monetization” developed by historian Jan Lucassen who studied the spread of nominal currency in everyday transactions in the Netherlands from 1200 to the present day (Lucassen, 2014). Although he retains the European conquest of America as the modern economy’s founding moment, Levy proposes to complete the supply-side explanations—through the commonplace concepts of “phantom hectares,” “economic institutions,” “primitive accumulation,” or the opening of foreign markets—by adding monetary demand.

19According to Levy, the massive influx of precious metals from South American mines in the 16th and 17th centuries created the conditions for additional demand for liquidity in the English economy. While the forced opening of markets transformed the consumption habits of wealthy Europeans—with goods such as coffee, furs, etc.—the sudden interruption of the influx of metals between 1650 and 1710 set in motion the dissociation of the English currency from material backing. The precious metal value of money declined, but its nominal value remained stable. What happened was a rush towards illiquid assets in a growing monetary economy: the strong demand for colonial products caused a surge in investment by a class of merchants and landowners, backed by the gradual establishment of a credit system (Bank of England, 1694). In imperial China, the influx of silver did not lead to a similar shift towards investment and consumption. The scarcity of precious metals in the mid-17th century led to a monetary crisis, the Kangxi Depression (1660-1690), which, according to Levy, was the result of the hoarding behavior of the elite at the time (225). In the context of global circulation of resources, and through a specific institutional setup in England, the interplay of economic basic impulses made possible the emergence of the economy as we know it.

20With his definition of the “real economy” (209), Levy seeks to open a space for discussion between specialists from different periods and regions. Although essentially modern in scope, it is based on the Keynesian approach of a “spatio-temporal” order in which money has become the dominant form of wealth. In the capitalist economy, changing uses of money are at the root of activity, reshaping the social, legal, and institutional conditions. While locating the specific features of the modern economy through time, Levy highlights the primary theoretical interest of studying the psychology of liquidity preference. What is at stake in this program is to bridge the gap between macro- and micro- perspectives on the economy, and to provide a potential meeting point between a vast array of research topics—revolving around the obstacles to continuous and steady development. Not only does this multilevel theorization seem to meet the ambitions of the book, but it resembles the most prominent theories of history, in particular Reinhart Koselleck’s distinction between “field of experience” and “horizon of expectation,” which shares the goal of articulating different temporalities of social action into analytic concepts.

21But unlike the German historian’s book Futures Past, which was clearly addressed to the practitioners of history (Koselleck, 2004), one may wonder if the lack of systematization of the core argument could impede the reception of The Real Economy. The author claims that his definition of economy is both aimed at fostering dialogue within the field of economics and opened to many areas of scholarship. Yet, by manipulating the results of several fields of inquiry quite freely and without clear guidelines, Levy does not make it easy for peers to appropriate his work. Contrasting with chapters 2 to 5 institutional and legal history, chapters 6 to 8 venture into economic, social, anthropological and psychoanalytic theories. In some passages, the discussion’s theoretical consistency is particularly difficult to assess. In Chapter 6, for instance, the reading of Chapter 23 of the General Theory “Notes on Mercantilism, The Usury Laws, Stamped Money, and Theories of Under-Consumption” as an “indirect reenactment of the plot” of Freud’s Totem and Taboo origins of civilization may be deemed doubtful (155-164). Most importantly, the strategy of borrowing concepts from many disciplines outside economics appears at some point to be lopsided. There is no ambiguity, in the last few chapters, in the preference by the author for psychological theories. However, this choice is made without seriously justifying the lack of interest in other areas of social science. To add more substance to the project, this research would particularly benefit from a deeper exploration of the links between economics and sociology and anthropology of economics. For any theorization of the modern economy as a unified set of practices, one cannot be satisfied with a psychological analysis of a mere fraction of agents who own capital.

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Bibliographie

Becker, Gary S. 1976. The Economic Approach to Human Behavior. Chicago: University of Chicago Press.

Deleuze, Gilles and Félix Guattari. 1972. L’Anti-Œdipe. Capitalisme et schizophrénie. Paris: Editions de Minuit.

Friedman, Milton. 1953. Essays in Positive Economics. Chicago: University of Chicago Press.

Keynes, John M. 1936. The General Theory of Employment, Interest, and Money. Cambridge: Cambridge University Press.

Koselleck, Reinhart. 2004. Futures Past: On the Semantics of Historical Time. New York: Columbia University Press.

Lucassen, Jan. 2014. Deep Monetisation: The Case of the Netherlands 1200-1940. TSEG-The Low Countries Journal of Social and Economic History, 11(3): 73-122.

Robbins, Lionel. 1935. An Essay on the Nature and Significance of Economic Science. London: MacMillan.

Samuelson, Paul A. 1947. Foundations of Economic Analysis. Cambridge: Harvard University Press.

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Étienne Goron et Loïg Pascual, « Jonathan Levy, The Real Economy: History and Theory »Œconomia, 15-4 | 2025, 669-677.

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Étienne Goron et Loïg Pascual, « Jonathan Levy, The Real Economy: History and Theory »Œconomia [En ligne], 15-4 | 2025, mis en ligne le 01 décembre 2025, consulté le 17 janvier 2026. URL : http://journals.openedition.org/oeconomia/19438 ; DOI : https://doi.org/10.4000/15eac

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Auteurs

Étienne Goron

 

 

Université Sorbonne-Nouvelle and Sciences Po Paris. etienne.goron@sorbonne-nouvelle.fr

 

Loïg Pascual

 

 

Université du Québec à Montréal. pascual.loig@courrier.uqam.ca

 

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