by Daniel Judt
In this interview, Daniel Judt speaks with Jonathan Levy, a renowned historian of economic life in the United States, about his recently published book, The Real Economy: History and Theory (Princeton University Press, 2025). The book brings together essays, both published and unpublished, that Levy wrote over the past decade. Many of these elaborate a theoretical backdrop to his previous book, Ages of American Capitalism (Random House, 2021). Departing from the claim that “no discipline in the humanities or social sciences today has a convincing theory of the economy,” Levy constructs a new account of economic life from the ground up. To do so, the essays in The Real Economy draw together eclectic sources. Ancient accounting practices shed light on the history of the modern corporation; new readings of Keynesian theories of investment accompany psychoanalytic accounts of desire; pragmatist approaches to truth illuminate the process of capital. In what follows, we begin with a discussion of Levy’s methodology before moving to his conception of “the real economy” and its implications for intellectual history and critical theory.
Daniel Judt: I would like to begin with a question about method. In The Real Economy you adopt a particular methodological, and maybe even philosophical, approach to thinking about the economy, namely pragmatism. As I read it, you use pragmatism on two registers in The Real Economy. The first is as a method that encourages both “critique” and “construction”—the titles of the book’s two parts—of the idea of “the real economy.” The second, running underneath that, is a claim that pragmatism helps us capture something about how the economy works. There is a sense in which the process of economic life, especially under capitalism, chimes with a pragmatic process of inquiry. What makes pragmatism useful when it comes to theorizing the economy?
Jonathan Levy: The title of the book, “the real economy,” is a construction that comes from postwar neoclassical economics. In order to model the economy and get the kind of analytical traction that postwar economics desired to achieve mathematically, certain phenomena had to be excluded: chiefly uncertainty, money, and preferences derived from a social context. That is the postwar, neoclassical vision of “the real economy” that my book critiques.
But I do not think that economics as a body of knowledge can just be dismissed through an ideology critique or a critique of its “methodological individualism.” I am much more interested in playing with it. Pragmatism is a very playful way of going about life. I don’t think we can just say, “the last hundred years were a mistake, let’s go back to the prewar period and start again.” A critical engagement with postwar economics is needed. So, the first part of the book looks at what neoclassical economics excluded and tries to make sense of those subjects, to write their histories as a means towards a different positive theory of the real economy. My methods in the first part of the book are mostly historical and empirical. There’s a pragmatist sensibility behind this: if our concepts aren’t working correctly, we need to open ourselves up to the world instead of immediately moving to a higher plane of abstraction!
In the second part of the book, which is called “construction,” I attempt to go beyond critique and offer a positively theorized concept of the economy. But my goal here is not to establish some objective, transcendent definition of the economy to which we could all agree that will exist forever. Instead, the intent is to keep that positive concept open to critique itself, while still seeing that effort at construction as worth it, as productive.
I had not thought about that second register, the connection between pragmatism and the process of capitalism, but that strikes me as right.
DJ: To pull off this double move of critique and construction, you appeal to a moment in economic thought in the early twentieth century—a period that the British economist G. L. S Shackle called “the years of high theory.” Most of the protagonists of your book come from that moment. Thorstein Veblen and J. M. Keynes loom especially large, but there are others, too: American economists like Irving Fisher and Frank Knight, but also Sigmund Freud, who plays a critical role in your examination of Keynes. What do you find generative about that early-twentieth century moment? How do its theorists help us take the measure of “the real economy”?
JL: The modern academic disciplines emerged in the late nineteenth and early twentieth century, but they only solidified in the postwar era. In the pre-WWII period, you still have disciplines—Keynes and Veblen were professors of economics—but they were much more porous. There was more traffic between them and a lot of debate about how the new disciplines would relate to each other. To me, part of the reason to revisit that interwar period, those “years of high theory,” is that a lot of thinkers asked questions like “what are we studying, and how do we know when we are studying it?” Those are the debates that I find particularly generative in reposing the question of what the economy is.
In the postwar period, economics as a discipline became obsessed with method. Partly, this was a very successful move. Enabled to roam across a variety of topics, economics became, in many respects, the gold-standard methodology of the social sciences (and remains so to this day). But the cost of economics’ obsession with methodology was that it completely lost sight of its subject: the economy itself.
DJ: You call for “a renewed era of methodological pluralism” in part because “in our time, the economy must once again be fixed”—held steady as a subject of study. I wonder if what you’re saying here is a corollary to that: we need to unfix our disciplines. There needs to be a little more roaming among hardened, calcified disciplinary boundaries if we are going to get a grip on what our subject of study is.
JL: That is well-put. And there’s an autobiographical aspect to my argument here. I earned my PhD in 2008, just when the financial crisis was happening and there was renewed interest in history departments, especially in US history departments, in broadly economic topics. At that time, “economic history” as a subfield was really not present in history departments at all. During the 1970s and 1980s, the so-called New Economic History in the US had put economic history into economics departments, where the idea was that using the methodology of economics, one could best write economic history. As a result of this, historians (myself included) were not comfortable describing ourselves as economic historians. That smacked too much of a methodology that belonged to economics departments and not history departments.
Still, I found this divide kind of odd. Why did historians not leave political history to political science departments? Why did historians not leave cultural history to anthropology departments or social history to sociology departments? What is so special about economic history? And what is so special about “the economy”? Is it different from other subjects that historians study, whether those are society, culture, or politics? And also, is it true that there’s nothing in the modern discipline of economics that is of any use to historians?
This book is a result of those questions. My sense is that historians do need to engage productively with economics and economic history (as practiced in economics departments)—even historians like me who are critical of the methodology of mainstream neoclassical economics. Put differently, part of my motivation here is to argue that there are literary traditions in economic theory of ecumenical interest. Keynes and Veblen, both economic theorists, are good examples for precisely the reason that you suggest. They thought and wrote at a time when the lines were blurred between what counted as what.
DJ: I think it would be helpful to turn now to your picture of the real economy, and then to work our way back to the critiques and historical narratives that you offer in the first half of the book. Chapter 8, “The General Theory of the Economy,” builds on Keynes to advance a working definition of “the real economy”: “a bounded spatiotemporal order of demand-constrained production, determined by logical accounting relationships among the different stocks of wealth in the economy that generate the different flows of income over time in it.” Can you walk us through that construction? What is the real economy?
JL: Across the book, if there is one wellspring from which I draw, it is accounting. I really think that the economy comes from accounting. Accounting practices originated alongside human writing in ancient Mesopotamia and Egypt, where rulers developed accounting systems to account for how they stored wealth over time. What is the first act that creates the economy? It is neither production nor exchange (market or otherwise). It is the storing of wealth over time, with which I associate investment.
For me, investment is a broad category that has to do with how we relate ourselves to the future. That is a very important scene of action. What is unique about the rise of sedentary human civilization is their storage of things over time. We began to store things when we created the world’s first states and, I argue, the world’s first economies. How do we value, account for, distribute, and conceptualize what we store over time? The economy originates there.
DJ: Though you aim for a theory of the economy in general, you also devote several essays to theorizing capitalism as a historically specific, and perhaps a unique, form of economic life. In Chapter Three, “Capital as Process,” you define capital as follows: “Capital is a particular kind of pecuniary process of valuation, associated with investment, in which capital may (or may not) become a factor of production.” You then go on to argue that capitalism’s “greatest transformation” is “to order present economic action toward an uncertain future, as opposed to the mere replication of the economic past.” Perhaps we could unfurl each of these claims. Is capital a particular form in which we store wealth over time, one that comes with a particular kind of orientation toward the future?
JL: Maybe it would be better to say that capital is how we store value over time. I think of wealth as something materially embodied that has use—you could say “use value” if you want. Capital is, I think, already more intangible. It can be simply captured in the accounts, in the ledgers, on a computer screen, or in the form of value without necessarily corresponding to wealth. One of the weird things about capitalism is that we still do not quite understand how those value relationships interact with the production of wealth. We know that there was a moment in capitalism’s history, roughly around the time of the Industrial Revolution, when those processes were running quite parallel. The accumulation of capital in the form of value was leading to increases in productivity with respect to the generation of wealth. Today, it seems to be much more complicated. Those two dynamics are much more distended.
Because money is a store of value under capitalism, those who own money are always faced with a choice of whether to invest it in production or to continue to store it in liquid forms of wealth. And so that first act—deciding how wealth moves through time, and therefore how the economy moves through time—is always being reenacted.
My sense that a strong distinction needs to be made between wealth and value probably comes from something I overheard Moishe Postone say at a seminar at the University of Chicago 20 years ago. That is an insight that comes from Marx. But I also think that value comes from future expectations. You could get there through Marx, but you would have to circle around a lot of talk about the labor theory of value: dead labor embodied in commodities.
There is a passage in Keynes’s General Theory, which I quote in the book, where he says that all wealth is produced by labor, thus critiquing the notion of capital as a “factor of production.” For Keynes, there is only one factor of production—labor—and I agree with him. Keynes has a labor theory of wealth, but value is a different question. He does not have an axiomatic theory of value—labor, marginalist, or otherwise—at all. Instead he argues, borrowing from a pragmatic line that comes out of Cambridge at the time, especially evident in Wittgenstein, that value is a question of “convention.” Trying to theorize some surreptitious process through which more truly objective values exist within the economy, outside of our active attempts to value things through practices like accounting, is not a helpful way of thinking about value in the economy in my view. At least, it can shade very easily into metaphysics. What is the true value of a commodity? I do not think that there is one.
DJ: Money is one of the concepts that you urge us to bring back into a picture of the real economy, since it has been largely excluded by neoclassical economics. I wonder if we could talk about the role that you see money playing in the real economy, and then also touch on another key concept in your book: desire. If money is a store of wealth over time, and if, especially under capitalism, there is a repeated question about whether to store wealth in money or to send it out into fixed, long-term investments, then the desires that holders of wealth have about how to hold that wealth seem to play a crucial role in economic life.
JL: I think that there is an interesting question prior to that. How do we end up with a theorization of the economy in which money is excluded? Money would seem pretty important to economic life. It is a strange achievement to have conceptualized it as being outside of the real economy! But still, there are a couple of reasons for doing so.
One is that money is a symbol, a sign. That makes it easy to classify money, epistemologically speaking, as epiphenomenal: not part of the material world, i.e. the “base.” A second reason is that you can incorporate money into either Marxism, which we’ve been talking about, or neoclassical economics, but it needs to be a very specific kind of money: either a universal equivalent or a means of exchange. Yet we know that money has other functions in the economy in which we live. One of those functions is to store value. Part of what is distinct about capitalism, from this vantage point, is that money becomes a dominant store of value.
I want to underscore just how thorny the problem of money is. Keynes was a monetary economist. He wrote Treatise on Money, which he thought was going to be his crowning achievement, then he junked it and wrote The General Theory. Part of what he wanted to do with the latterwas to show how money related to the sphere of production. This is a huge challenge, and no one has succeeded in coming up with a concept of the economy that fully integrates monetary dynamics and the realm of production. It is just not easy to do because of the conceptual equipment we have all inherited.
So, to answer your question: in a capitalist economy, money needs to be invested in production for production to happen. Output as a whole, employment as a whole, is determined by the inducement to invest. But the inducement to invest always competes with what Keynes calls liquidity preference, which is a psychological preference under capitalism that can be exercised through saving and hoarding money, the “propensity to hoard.”
How does desire fit into this? In the book, the paradigmatic ‘economic subject’ is not a laborer. Instead, it is the kind of desiring subject that we read about in Freud or in Deleuze and Guattari’s Anti-Oedipus, which I feature in a chapter about how to conceptualize “flow” in economic life. If we use money as a means of exchange, then it is a means to an end, where what we desire is what we buy with money. But once money becomes a store of value, it is possible for it to become desired as an end in and of itself, even pathologically. That is precisely Keynes’s diagnosis of capitalism: it allows us to pathologically hoard money, in the face of uncertainty, such that we under-achieve, with respect to economic potential in the present realms of production and consumption. Given that, thinking about how desire works for economic subjects is very important, because under conditions of uncertainty it is going to determine where investment moves. Does it move into production? Is it hoarded in the form of money? Desire becomes crucial to the dynamics that create the real economy as we know it.
DJ: There are two essays in the book that bring in psychoanalysis most explicitly. In one, “Primal Capital,” you use Freud’s account of obsessional neurosis to explain Keynes’s concept of the “propensity to hoard.” In the other, “Stocks and Flows,” you use Deleuze and Guattari’s Anti-Oedipus as a means to reconceptualize the idea of “flow” in the economy. Rather than a late-twentieth century view of capital as something that flows across space in a globalized age, you view capital as a stock that can divert or regulate flows of income over time.
These claims are central to the more historically minded chapters in The Real Economy. Here I interpret you as narrating the history of American capitalism in the twentieth century as a history of liquidity preference. In some moments or eras, the propensity to hoard is overcome, and for a number of contingent reasons there is a widespread inducement to invest. In other moments, including our own, economic life falls prey to what you call “Keynes’s law”: the propensity to hoard wins out, wealth is saved up for an uncertain future, and a demand constraint begins to bite in the present. Could you elaborate on how your theory of the real economy helps us to understand the transformations of capitalism over the past half century? How is this a useful frame for historians?
JL: Let me underscore the point about neurosis and the “propensity to hoard,” because I think that it is very difficult to understand, or at least it took me a long time to think that I understood it. The essential point is that we should think of hoarding as something that goes beyond the obvious cases (putting money under the mattress, for instance). Keynes believed that speculation itself was a kind of hoarding—a movement of money across different objects of desire, but nothing ever fixing, everything moving so fast that actual investment, actual commitment, never happens. This really clicked for me when I was reading the General Theory while also teaching a class in which I was reading a lot of Freud. Freud talks about the obsessional neurotic’s desire to create uncertainty, which prevents the neurotic from entering the world and living life in a meaningful and rich way. I think that is what Keynes was saying, too. Perhaps we have all had chapters in our lives that felt like they were full of activity but, when you look back, you realize that you have not grown or developed at all. Nothing really happened. I think that is Keynes’s most original diagnosis of capitalism’s pathology. You have some traditional hoarding in capitalism, but you also have this other side of the coin: speculation, where investors cannot fix their desires on an object long enough to make a committed investment.
Now, bringing this to bear on the arc of the twentieth century: we saw a high rate of fixed investment in industrial structures during and after World War Two. That did precisely what Keynes said it would do. It increased production and employment, leading to higher wages and profits. But then something happened in the 1980s: a switch to a much higher liquidity preference, which is still true today. Capital is much more mobile, more unfixed, and we suffer from an inadequate inducement to invest. And it was precisely at that time that economics (and other disciplines, too) began to describe capital as a “flow,” as opposed to a “stock.” That obsession with flow in late-twentieth century academic and political discourse indicates that capital has changed. Capital has become an index of increasing liquidity preference.
As to just how valuable that narrative is, that is for others to decide, but I would say that the challenge, perhaps a weakness, of my account is that it seemingly points to a very psychological, subjective register. One of the reasons why I wanted to spend some time with psychoanalysis in the book is that this psychic register matters for capitalism, and we should analyze it as such. But when it comes to writing history, the question is whether you can connect the psychological register to other registers: what’s happening in politics, culture, and social movements. You have to balance those registers and connect them into a convincing narrative. One of the gambits of the book is that we might be able to do this. I do believe that there are powerful narratives that we could write that are informed by this theoretical perspective.
DJ: As soon as you ask the question, what overcomes the propensity to hoard in the twentieth century U.S.; what are the inducements to invest that end up winning out?, you are plunged into social and historical questions. Perhaps especially, you are plunged into questions about the state. What can the state induce holders of wealth to do with that wealth? Who controls the inducement to invest?
One of the most important chapters of your previous book, Ages of American Capitalism, is an account of how those questions get answered in the immediate postwar U.S., when the labor movement tried and failed to win some modicum of control over the investment process. It seems to me like the political stakes of The Real Economy are similar. The central questions that determine the shape of our economic life are about control over the investment process: whether that control is socialized or individualized, how it gets determined, how we might reconfigure it in our own time. Would you say that is fair?
JL: Yeah, I agree. There is a normative aspect to the book. If you have a high liquidity preference, if you have wealth owners essentially holding on to their wealth, that is going to increase inequality. There are all kinds of reasons to object to that. But it is not enough to say that as long as you are investing in fixed capital, that’s good. Not only the amount of investment, but what we invest in, should be subjected to a democratic test of legitimacy. But even then, one could presumably imagine that there would be a democratic procedure through which we would continue to invest in things like a fossil fuel energy system.
To go back to an earlier point: one of the things about hoarding—and here the image of people stuffing coins under the mattress or in the ground is actually helpful—is that if you cannot get at capital, you cannot contest it. We still suffer from nostalgia in our politics about industrial production. Do I want to build giant, beautiful factories again? No, I do not. But I would like to see capital literally fixed in spaces where people, especially disempowered people, can contest it. Otherwise, you have a situation where ordinary people lack any real leverage on capital, which is what has happened over the last fifty years. It has not been a good thing.
DJ: That pushes us toward two other historical moments that you revisit a couple of times in The Real Economy. These are the emergence of capitalism and, potentially, our emergence from it. A key concern in both cases is the relationship between capitalism and contingency: our ability to exert some agential control over what is, in many ways, a compulsive system. The beginning and the end of capitalism seem like periods of heightened contingency that you are interested in exploring. Let’s start with the beginning. Historians and social theorists have offered a lot of competing accounts of the emergence of capitalism. In the book, you suggest two different origin stories or genealogies. One is the development of the idea of “radical uncertainty,” which is related to the transformation of money into a store of wealth, in the thirteenth-century Mediterranean basin. Another is the boom in state-driven investment in the seventeenth-century British Empire, which you attribute to a spatial enlargement of the economy through colonization. I wonder if you could say something about both of those origin stories. Why focus on them? What would an adequate account of the emergence of capitalism need to demonstrate, in your view?
JL: Both of those accounts proceed from my theorization of a capitalist economy in which the value of capital relates to the future through a certain kind of habitual expectation. How do you get there, historically? How do we expect to have a certain kind of future which then gets fulfilled? That is different from a typical approach to the origins of capitalism, which seeks out the origins of capital accumulation. There, I think that Marx has the best approach. He argues that you do not need primitive accumulation (wealth from the past stored up as capital), but rather a certain kind of society. For Marx, that means a particular kind of social relation, wage labor, but I have a different account.
I wrote the last chapter of the book while doing a reading group on the General Theory with some grad students here in Chicago. One of the students, Patrick Graham, once asked, “When Keynes talks about the value of capital coming from the future and the present being determined by the future, does he mean that our ideas of the future determine the present? Or does he literally mean that there’s some causal pathway running from the future right into the present?” I think it might be the second! So, to bring it back to the formation of “radical uncertainty”: there, in medieval Europe, you have a moralized conception of uncertainty that enters into competition with religious notions of a future that is not open to capitalist economic activity as we would understand it.
The second account I offer is of the geographic enlargement of the economic world as itself a way of introducing a new notion of the future in economic life. In the book, I call the economy a “bounded spatiotemporal order,” by which I mean that it can incorporate “external” demand by either changing future expectations or expanding the spatial boundaries of economic life. So that is the seventeenth-century origin I offer. The discovery of the Americas and the European conquest of the world were ways of opening up and leveraging an external source of demand, which then triggered a new set of expectations with respect to the future, with implications for what I call the “supply side” of the economy, having to do with the structure of enterprise, the use of wage labor, and the turn to fossil fuels (in addition to factors traditionally considered under this category). I see capitalism emerging contingently as the unintended consequence of those developments.
DJ: How should historians think about contingency after that moment—after capitalism has emerged? In The Real Economy you argue that “intrinsic to capitalism is a vulnerability to collective efforts to imagine and achieve economic futures different from the past.” You go on to argue that historians’ narrations of capitalism might help us to exploit that vulnerability in the present. Once the economy becomes capitalist, where do you see moments of contingency that might lead not just to shifts within capitalism, but an emergence from it?
JL: I think that this ties a number of issues together. There is a very Marx-like thought that capitalism was, in its own context, liberating. It makes us think of the future as open and contingent, and something about that is at least potentially emancipatory. But then I think that Keynes’s response would be to say that part of what blocks that emancipatory potential in capitalism is the manipulation of this uncertainty by owners of wealth. Put differently, we should think about how to distinguish between the different kinds of uncertainty that capitalism engenders. It can engender pathological attachments to uncertainty that are tied to inequalities and unequal distributions of power. These block any kind of creativity, tying us back to the pragmatist theme of uncertainty as an invitation to experimentation: generating new possibilities and new futures.
One of the things I really like about Anti-Oedipus, in its critique of Lacan, is Deleuze and Guattari’s argument that no subject ever suffers from a lack of an object. Everyone’s desires fix on an object, no matter how temporarily. If you work from that account and connect it up with some other dots in that chapter, it tells you that even if you do not own wealth, your desire is still located or fixed somewhere. I think that my conception of the economy in the book is open to that kind of thought. That would allow a broader, social vision of the economy, beyond the dynamics of wealth ownership.
If you do think of it that way, one possibility it opens up would be a social history of capitalism that is not written as a declensionist narrative (most people did not want capitalism, and then it was shoved down their throats), as a false nostalgia for a working class that had its revolutionary aspirations foiled, or, equally importantly, as a cynical narrative about the complicity of working people or the working class with capital. There are scholars, like Gabriel Winant, at work on this, which is good, because it is a huge task to break from these out-of-date, hackneyed narratives that dominated the writing of the social history of capitalism in the twentieth century. The need for new, emancipatory forms of thinking about capitalism, including in the form of new histories, could not be more urgent today.
Jonathan Levy is a professor in the Center for History at Sciences Po, Paris. He is the author of Freaks of Fortune: The Emerging World of Capitalism and Risk in America (Harvard UP, 2012) and Ages of American Capitalism: A History of the United States (Random House, 2021). He earned his Phd at the University of Chicago.
Daniel Judt is a PhD candidate in history at Yale University. His research focuses on left-wing social theory and political economy in the late-twentieth century United States.
Featured image: “Grain storage, Ramesseum, New Kingdom” by Flemming Ubbesen, CC BY 3.0 via Wikimedia Commons.
