Credit for the first formal statement of the structuralist theory of inflation is due to a Mexican economist, Juan Noyola Vazquez, who in an article published in a Mexican journal in 1956 argued that, especially in underdeveloped countries, inflation is not a monetary phenomenon but the result of interaction between two factors, 'basic inflationary pressures' due to structural rigidities and the 'propagating mechanism’ of competing income claims accommodated by monetary expansion.

After this initial Mexican contribution, the structuralist theory of inflation was developed in Santiago, at ECLA (the UN Economic Commission of Latin America of which Prebisch was Executive Secretary) and at the Institute of Economics of the University of Chile. The chapter on Chile in the ECLA Economic Survey of Latin America for 1957 contained a brief statement of the view that Chile’s inflation was a structural phenomenon, but what has been called the locus classicus of the structuralist theory of inflation is an article, first published in Spanish in December 1958 by Osvaldo Sunkel. He stated the central position of structuralism concisely:

“Basic Inflationary Pressures. These are fundamentally governed by the structural limitations, rigidity or inflexibility of the economic system. In fact, the inelasticity of some productive sectors to adjust to changes in demand – or, in short, the lack of mobility of productive resources and the defective functioning of the price system – are chiefly responsible for structural inflationary disequilibria.”

The intriguing fact is that both Sunkel and Noyola (to whom Sunkel expressed his indebteness) cited, as the authority for their statements about structural factors, an article by Kalecki published in Mexico in 1955. Noyola referred to ‘the analysis by Kalecki which stresses the importance of the rigidity of supply and the degree of monopoly in the economic system’. Sunkel cited both Kalecki’s article and the UN World Economic Survey 1956 written after Kalecki had ceased to be in charge of the Survey but no doubt still under his influence.

The chief point of Kalecki’s article, based on lectures he gave in Mexico in 1953, was to stress that in LDC’s ‘the supply of food may be fairly rigid’, and that the inelastic supply of food will, if aggregate demand increases and raises food prices, ‘cause a fall in real wages and will generate an inflationary price-wage spiral’. The UN World Economic Survey spelled out the structuralist doctrine more fully:

“An additional key element in inflationary pressure in underdeveloped countries is the high degree of immobility of resources..., which prevents the structure of production from adapting itself sufficiently to the pattern of demand.... Thus, in underdeveloped countries with limited supplies of food and other essential consumer goods, severe inflationary pressures may be generated even in the absence of budget deficits and with relatively low rates of investment.”

In its survey of “who is who” in the development of the structuralist theory of inflation, the text leads us to the following conclusions:

Item 0 - Juan Noyola wrote the first and most complete version of the theory.

É correto afirmar:

Item 1 - O paradoxo de Bertrand afirma que duopolistas que usam como estratégias os preços dos produtos que oferecem não se comportam racionalmente.

Credit for the first formal statement of the structuralist theory of inflation is due to a Mexican economist, Juan Noyola Vazquez, who in an article published in a Mexican journal in 1956 argued that, especially in underdeveloped countries, inflation is not a monetary phenomenon but the result of interaction between two factors, 'basic inflationary pressures' due to structural rigidities and the 'propagating mechanism’ of competing income claims accommodated by monetary expansion.

After this initial Mexican contribution, the structuralist theory of inflation was developed in Santiago, at ECLA (the UN Economic Commission of Latin America of which Prebisch was Executive Secretary) and at the Institute of Economics of the University of Chile. The chapter on Chile in the ECLA Economic Survey of Latin America for 1957 contained a brief statement of the view that Chile’s inflation was a structural phenomenon, but what has been called the locus classicus of the structuralist theory of inflation is an article, first published in Spanish in December 1958 by Osvaldo Sunkel. He stated the central position of structuralism concisely:

“Basic Inflationary Pressures. These are fundamentally governed by the structural limitations, rigidity or inflexibility of the economic system. In fact, the inelasticity of some productive sectors to adjust to changes in demand – or, in short, the lack of mobility of productive resources and the defective functioning of the price system – are chiefly responsible for structural inflationary disequilibria.”

The intriguing fact is that both Sunkel and Noyola (to whom Sunkel expressed his indebteness) cited, as the authority for their statements about structural factors, an article by Kalecki published in Mexico in 1955. Noyola referred to ‘the analysis by Kalecki which stresses the importance of the rigidity of supply and the degree of monopoly in the economic system’. Sunkel cited both Kalecki’s article and the UN World Economic Survey 1956 written after Kalecki had ceased to be in charge of the Survey but no doubt still under his influence.

The chief point of Kalecki’s article, based on lectures he gave in Mexico in 1953, was to stress that in LDC’s ‘the supply of food may be fairly rigid’, and that the inelastic supply of food will, if aggregate demand increases and raises food prices, ‘cause a fall in real wages and will generate an inflationary price-wage spiral’. The UN World Economic Survey spelled out the structuralist doctrine more fully:

“An additional key element in inflationary pressure in underdeveloped countries is the high degree of immobility of resources..., which prevents the structure of production from adapting itself sufficiently to the pattern of demand.... Thus, in underdeveloped countries with limited supplies of food and other essential consumer goods, severe inflationary pressures may be generated even in the absence of budget deficits and with relatively low rates of investment.”

In its analysis of Kalecki’s contributions, the text makes it plain that:

Item 0 - The source of supply rigidities is ascribed entirely to agriculture

Indique a afirmativa correta:

Item 4 - Na discriminação de 3º grau, o grupo com demanda menos elástica paga um preço unitário maior que o grupo com demanda mais elástica.

Interest in the subject reached its climax with a monster conference on ‘Inflation and Growth in Latin America’ held in Rio de Janeiro in January 1963.

The structuralist theory of inflation did not emerge unscathed from the intensive discussion. Arthur Lewis, in his summing up, stressed the need to distinguish between the original cause and the spiral mechanism. The structuralist argument about supply inelasticity related entirely to the former, but in this respect there was no difference between Chile and (say) India. Why then has inflation been so much more of a problem in Chile? ‘The difference is that Chile is in the grip of the spiral process to a much greater degree than India.’ Another participant, T.E. Davis, spelled this out. Inflation in Chile has been a ‘conscious policy that constitutes a common second best’ for powerful interest groups; conservatives that have the power to block any attempts to reduce real wages; and large private firms that have sufficient power to insist that bank credit to the private sector expands pari passu with that to government. ‘Stabilization programs are politically feasible only when it appears to these groups that inflation might conceivably “get out of hand”; but opposition reappears when the rate of inflation has been reduced to what historically seem to constitute “safe” levels’.

If this was the crux of the problem of inflation in Latin America, it had little if anything to do with all the arguments about inelastic supply, immobility of resources and the other alleged defects of the price mechanism. The problem of excess income claims by organized sectional interests had, after all, long been recognized as one form of ‘cost push’, although not always, it must be admitted, given its due by hard-line monetarists.

Oddly enough, the same conclusion was already implicit in the very first statement of the structuralist theory of inflation, by Noyola. While he attributed inflation in Chile and Mexico fundamentally to structural factors – chiefly instability of export earnings and capacity to import in Chile and inelastic supply of food due to earlier land reform and government agricultural policies in Mexico – he explained the much more severe inflation in Chile by the fact that the ‘propagating mechanism’ was much weaker in Mexico because its huge labor surplus in agriculture depressed real wages and weakened the trade unions. It was the strong organization in Chile of the major social groups with their competing income claims, in other words the ‘propagating mechanism’ rather than the initiating ‘structural factors’, that accounted for Chile’s much more serious inflation problem.

The structuralist theory of inflation was criticized at the 1963 Rio de Janeiro conference. According to the text, the chief criticisms leveled against it were:

Item 4 - The role of structural rigidities as the basic cause of inflation in Latin America is open to questioning

The Doctrine of Market Failure

In the nineteenth century and well into the twentieth, socialist and other critics of capitalism condemned it chiefly on two grounds. First, that it was unjust and exploitative. Secondly, that it was unstable, prone to crises and doomed to collapse. Rarely if ever, was capitalism criticized on the ground that its quintessential mechanism of market forces operating through the price system fails to work. This third line of criticism, which may be called the doctrine of market failure, was developed, chiefly in Britain, in the 1930s and 1940s, though traces of it can of course be found earlier in many places.

Socialist critics of capitalism condemn it on the grounds that it

Item 0 - is unfair,