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 Full contents

List of contributors xiii

Acknowledgements xiv

Introduction: the need for a heterodox approach to

economic analysis 1
Louis-Philippe Rochon and Sergio Rossi

PART I ECONOMICS, ECONOMIC ANALYSIS AND

ECONOMIC SYSTEMS

1 What is economics? 21
Louis-Philippe Rochon and Sergio Rossi
Introduction 21
The role of ideology in economics 25
Is economics a science? 28
The use of models and of mathematics 30
Economics and the social sciences 33
What then is economics? 36
Micro- versus macroeconomics 38
A portrait of Adam Smith (1723–90) 41

2 The history of economic theories 42

Heinrich Bortis
Why are these topics important? 44
Two broad groups of economic theories 44
The history of economics 46
The history of political economy 54
Neoclassical–Walrasian economics and classical–Keynesian
political economy assessed 72
A portrait of David Ricardo (1772–1823) 75

3 Monetary economies of production 76

Louis-Philippe Rochon
Why are these topics important? 77
The neoclassical/mainstream view 77

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 viii · An introduction to macroeconomics

The heterodox view 80

Conclusion 90
A portrait of John Maynard Keynes (1883–1946) 93

PART II MONEY, BANKS AND FINANCIAL ACTIVITIES

4 Money and banking 97

Marc Lavoie and Mario Seccareccia
Why are these topics important? 98
Money, banks, and their origins 98
Understanding the heterodox approach to banks
and the modern payment system from a simple
balance-sheet perspective 107
Concluding remarks 114
A portrait of Alain Parguez (1940–) 116

5 The financial system 117

Jan Toporowski
Why are these topics important? 118
Mainstream economic theory 119
What is wrong with the textbook approach? 123
The financing needs of modern capitalism 126
The economic consequences of long-term finance 128
Finance in Keynes’s analysis 130
A portrait of Hyman Philip Minsky (1919–96) 133

6 The central bank and monetary policy 134

Louis-Philippe Rochon and Sergio Rossi
Why are these topics important? 135
The mainstream perspective 136
The heterodox perspective 141
A portrait of Alfred S. Eichner (1937–88) 148

PART III THE MACROECONOMICS OF THE SHORT

AND LONG RUN

7 Aggregate demand 151

Jesper Jespersen
Why are these topics important? 152
The National Accounting System: some principles
and definitions 152
From statistical concepts to macroeconomic theory 154

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 Full contents · ix

The neoclassical theory of aggregate demand 156

The Keynesian theory of aggregate demand and
output 159
The income multiplier 164
Expected aggregate demand and supply: effective demand 166
Demand management policies 168
A portrait of Richard Kahn (1905–89) 171

8 Inflation and unemployment 172

Alvaro Cencini and Sergio Rossi
Why are these topics important? 173
Inflation 174
Unemployment 180
Towards a monetary macroeconomic analysis of
inflation and unemployment 183
A portrait of Bernard Schmitt (1929–2014) 192

9 The role of fiscal policy 193

Malcolm Sawyer
Why are these topics important? 194
Is there a need for fiscal policy? 194
The role of automatic stabilizers 200
Functional finance and the post-Keynesian
approach to fiscal policy 201
Conclusion 207
Appendix A 208
Appendix B 209
A portrait of Michał Kalecki (1899–1970) 210

10 Economic growth and development 211

Mark Setterfield
Why are these topics important? 212
Economic growth: the statistical record 213
Supply versus demand in the determination of
long-run growth 218
What forces shape demand formation and growth
in the long run? 220
Keynesian growth theory 222
Properties of Keynesian growth theory 225
A portrait of Nicholas Kaldor (1908–86) 232

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 x · An introduction to macroeconomics

11 Wealth distribution 233

Omar Hamouda
Why are these topics important? 234
Some introductory remarks 235
Mainstream economic theory of wealth distribution 236
States of income distribution: a description 241
Heterodox perspectives 246
A new macroeconomics approach: stock of wealth
and social well-being 250
Some concluding remarks 254
A portrait of Karl Marx (1818–83) 256

PART IV INTERNATIONAL ECONOMY

12 International trade and development 259

Robert A. Blecker
Why are these topics important? 260
The orthodox approach: the theory of comparative
advantage 261
The heterodox alternative: imbalanced trade,
unemployment, and absolute competitive
advantages 267
Long-run development and infant-industry
protection 271
Trade liberalization and trade agreements 273
Manufactured exports and the fallacy of
composition 276
Conclusions 278
A portrait of Joan Robinson (1903–83) 281

13 Balance-of-payments-constrained growth 282

John McCombie and Nat Tharnpanich
Why are these topics important? 283
The determination of the balance-of-payments
equilibrium growth rate 284
The Harrod foreign trade multiplier and the Hicks
supermultiplier 286
Price and non-price competitiveness in
international trade 288
The role of the growth of capital flows 290
Resource-constrained, policy-constrained and
balance-of-payments-constrained growth 292

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 Full contents · xi

Structural change and the multi-sectoral Thirlwall’s

Law 294
Tests of the model and empirical evidence 294
A portrait of Paul Davidson (1930–) 299

14 European monetary union 300

Sergio Rossi
Why are these topics important? 301
The mainstream perspective 301
The heterodox perspective 306
A portrait of Robert Triffin (1911–93) 315

PART V RECENT TRENDS

15 Financialization 319
Gerald A. Epstein
Why are these topics important? 320
What is financialization? 320
How old is financialization? 322
Dimensions of financialization 322
Impacts of financialization 327
Conclusion 331
A portrait of Karl Paul Polanyi (1886–1964) 334

16 Imbalances and crises 336

Robert Guttmann
Why are these topics important? 337
The mainstream view of a self-adjusting economy 337
Overproduction versus underconsumption 338
Growth and distribution 342
Cyclical growth dynamics 343
External imbalances and adjustments 349
Concluding remarks 354
A portrait of Mikhail Tugan-Baranovsky
(1865–1919) 358

17 Sustainable development 359

Richard P.F. Holt
Why are these topics important? 360
The neoclassical model of economic growth and
development 361
The debate over ‘strong’ and ‘weak’ sustainability 362

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 xii · An introduction to macroeconomics

Growth versus development 365

Heterodox economics and true economic
development 367
Investments for sustainable development 371
Measuring a new standard of living for sustainable
development 374
Conclusion 376
A portrait of Amartya Sen (1933–) 380

Conclusion: do we need microfoundations for

macroeconomics? 381
John King
Why are these topics important? 382
The mainstream perspective 383
A heterodox critique 388
Why it all matters 395
A portrait of Robert Skidelsky (1939–) 398

Index 399

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 Contributors

Robert A. Blecker, American University, Washington, DC, United States

Heinrich Bortis, University of Fribourg, Switzerland
Alvaro Cencini, University of Lugano, Switzerland
Gerald A. Epstein, University of Massachusetts Amherst, United States
Robert Guttmann, Hofstra University, New York, United States and CEPN–
Université Paris XIII, France
Omar Hamouda, York University, Canada
Richard P.F. Holt, Southern Oregon University, Ashland, United States
Jesper Jespersen, University of Roskilde, Denmark
John King, La Trobe University, Melbourne, Australia and Federation
University Australia
Marc Lavoie, University of Ottawa, Canada
John McCombie, University of Cambridge, United Kingdom
Louis-Philippe Rochon, Laurentian University, Sudbury, Canada
Sergio Rossi, University of Fribourg, Switzerland
Malcolm Sawyer, University of Leeds, United Kingdom
Mario Seccareccia, University of Ottawa, Canada
Mark Setterfield, New School for Social Research, New York and Trinity
College, Connecticut, United States
Nat Tharnpanich, Trade Policy and Strategy Office, Ministry of Commerce,
Thailand
Jan Toporowski, School of Oriental and African Studies, University of
London, United Kingdom

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 Acknowledgements

The editors would like to thank all the contributors to this book for their
collaboration in preparing this volume to enhance the understanding of eco-
nomic analysis in a pluralistic perspective. They also wish to express their
gratitude to Edward Elgar Publishing for their enthusiastic and professional
support during the development of the book. Finally, they are most grateful
to Amos Pesenti for his excellent research assistance, to Denise Converso–
Grangier for her contribution in preparing the full typescript for the pub-
lication process, and to Dee Compson for her professional efficiency in
copy-editing the whole book.

Louis-Philippe Rochon and Sergio Rossi

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 Introduction: the need for
a heterodox approach to
economic analysis
Louis-Philippe Rochon and Sergio Rossi

This textbook explains that there is an urgent need to consider a heterodox

approach to economic analysis, as regards macroeconomic theory as well as
policy. To be sure, the global financial and economic crisis that erupted in
2007–08 illustrates this need; this crisis is eventually a crisis of economics,
since it originates in an essentially wrong approach to the working of our
economic systems. Hence, it does not come as a surprise that the majority
of economic policy actions taken in the aftermath of this crisis do not work
as expected by their proponents. In fact, neither ‘fiscal consolidation’ (that
is, austerity) measures nor ‘quantitative easing’ policies can live up to their
promises, which amount to wishful thinking (to jump-start the economic
engine dramatically hit by the crisis). A fundamentally different approach to
economic analysis is actually necessary in order to understand and eventually
solve this crisis for good.

In this introduction we provide a detailed overview of the contents of this

volume, and point out its distinguishing features with respect to ortho-
dox thinking. We thereby show that another, largely different perspective
is required to avoid the fundamental flaws of orthodox economic analyses.
This allows us also to point out the need for pluralism in economic research
and education, because the lack of it led the economics profession astray
under the neoliberal regime that has been increasingly dominating the global
economy since the demise of the Bretton Woods system in the early 1970s.

The first chapter, written by the co-editors of this textbook, explains the
meaning and purpose of economic analysis. In the first section, the authors
present and criticize the mainstream definition of economics, which aims at
the ‘efficient allocation of scarce resources’. This definition includes three
main concepts, each with very specific and powerful meanings in economics,

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 2 · An introduction to macroeconomics

namely, efficiency, allocation and scarcity. In this view, the main issue to
address thereby is how to allocate a given supply of resources. The first
section also briefly discusses the differences between microeconomics and
macroeconomics, emphasizing how mainstream macroeconomics is cru-
cially built on the key assumption of aggregating individuals’ behaviour, that
is, on microeconomic foundations. Rochon and Rossi also point out that
there is no need for money to exist in mainstream models. Indeed, orthodox
models explaining consumption, investment, and economic growth contain
no money essentially. Money is introduced much later, as part of a discus-
sion about the banking system, as an afterthought, or as an attempt to make
these economic models appear more realistic. This is the reason why the
first chapter offers an alternative interpretation of the scope and contents of
economics.

First, the authors argue that macroeconomics should not be a simple aggre-
gation of individual behaviour and microeconomic magnitudes, that there
are characteristics special to macroeconomics, and that social classes (or
macro-groups) play an important role in determining economic outcomes.
Based on macro-groups, economic dynamics become very important in
explaining consumption, investment, prices and economic growth. Further,
by emphasizing groups, one can ask a different set of questions and cast these
questions within the framework of political economy rather than econom-
ics, as clearly explained in Chapter 2. The first chapter shows thereby that
markets are not free, but governed by laws and institutions that play a central
role in any economic activity. Moreover, in casting this view with regard to
social groups, the importance of power becomes paramount, notably, the
power over the determination of wages, the power over access to credit, and
the power of the state. Ultimately, we live in a money-using economy, so, as
Schumpeter argued, money should be introduced at the beginning of the
discussion of economics (Chapter 3 delves into this subject matter in more
detail). That is why this textbook, in contrast to all other macroeconomics
textbooks, begins with an explanation of money (Chapter 3) and the banking
system and finance (Chapters 4, 5 and 6) after a survey chapter on the history
of economic theories, which is required in order to understand the general
framework of any economic analysis, be it theoretical or policy oriented.

Chapter 2, contributed by Heinrich Bortis, therefore presents the bigger

picture within which economic theories have developed, ranging between
two camps, namely, economics and political economy. The first section of
this chapter provides the essential reason for studying the history of eco-
nomic thought – dealing with differing or even contradictory theories of
value, distribution, employment and money induces one to independent and

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 Introduction · 3

open-minded thinking, that is, what John Maynard Keynes (1926) called
the ‘emancipation of the mind’. This should enable students of the history of
economic thought to distil the most plausible theoretical principles, which
are the grounds on which policy proposals may be eventually made. Indeed,
economic theorizing must be based on the history of economic thinking
to have an informed broader picture of the state of the art. In light of this,
the second section presents two broad groups of theories – economics and
political economy – to bring into the open the fundamental differences in
economic theorizing. In economics, the great problems (value and price,
distribution and employment) are market issues essentially, and money is
neutral. By contrast, the starting point of political economy is the social and
circular process of production: the fundamental prices are the prices of pro-
duction, not market prices; income and wealth distribution are governed by
social forces, and employment by effective demand; money and finance play
an essential role. The third and fourth sections sketch the historical develop-
ment of economics and political economy respectively. Economics starts with
Adam Smith, who conceived of the economy and society as a self-regulating
system. Jean-Baptiste Say (a follower of Adam Smith) claimed therefore that
there can be no unemployment. The great systems of economics were then
created in the course of the Marginalist Revolution (1870–90). Léon Walras
worked out the general equilibrium model; Alfred Marshall the partial equi-
librium approach. Both became constitutive of contemporary mainstream
economics. By contrast, the French surgeon François Quesnay is at the origin
of the political economy line. He considered the flows of goods and money
within the social and circular process of production to produce the net
output at the free disposal of society. As regards production, David Ricardo
worked out the labour value principle and the surplus principle of distribu-
tion. Piero Sraffa revived the classical (Ricardian–Marxian) approach, which
had been submerged by the Marginalist Revolution. John Maynard Keynes
elaborated the principle of effective demand, represented by the multiplier
relation, implying the existence of involuntary unemployment. At the time of
writing, the post-Keynesian and classical–Keynesian followers of Sraffa and
Keynes form, together with Marxists, the core of modern political economy,
representing an alternative to the neoclassical mainstream. The last section
of Chapter 2 discusses the plausibility of these two approaches. The capital-
theory debate emerges thereby as the theoretical watershed between eco-
nomics and political economy.

The third chapter focuses on monetary economies of production. Everybody

knows the old song, ‘Money makes the world go round’. In reality, this is
a good approximation of how our economic system operates. Indeed,
as Louis-Philippe Rochon explains in this chapter, we live in a monetary

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 4 · An introduction to macroeconomics

economy. This means that we cannot purchase goods without money; we

cannot invest without money; we cannot hire workers without paying them a
wage in money. Money is indeed at the core of our economic system. While
this may be quite apparent to many, money does not feature in neoclassical
economics, or if it does, it is merely there to give some semblance of reality
to an otherwise unrealistic view of the world. This chapter first discusses
the barter view of money in neoclassical analysis, and how in this view what
serves as ‘money’ has evolved through time. In this framework money is
introduced to facilitate trade and has no other purposes. In this sense, there
is no need for money in discussing employment, wages, supply and demand,
investment, and economic growth. In fact, there is no need for money even to
discuss prices in neoclassical analysis. This chapter offers a criticism and an
alternative view, which is focused on the creation and circulation of money,
and its relationship with debt, which characterizes a ‘revolutionary’ approach.
To be sure, money is necessary to explain production, employment as well as
economic growth.

Chapter 4, written by Marc Lavoie and Mario Seccareccia, elaborates on this.

It provides a brief analysis of the historical evolution of money and recalls
some debates about it. Since money, in its essence, is merely the outcome of
a balance-sheet operation, banks play a key role in any monetary economy.
The purpose of this chapter is to describe why all aspects of macroeconomic
analysis in a modern economy must necessarily involve the monetary system.
Monetary relations result from the existence of a group of key institutions in
a monetary economy, namely banks, which, together with the central bank,
are crucial in the modern payment system and are the purveyors of liquidity
to the whole economy. This chapter starts therefore with an explanation of
how banks are the principal creators of money in nearly all modern econo-
mies, and why, by their very nature, they are private–public partnerships,
especially evident at times of crisis when the public ‘trust’ that is so critical to
their existence is broken, therefore requiring a regulatory framework within
which the activity of creators of money is severely circumscribed. Lavoie
and Seccareccia consider the composition of this creation of money by the
banking system, including the central bank, and show why it varies with the
performance of the economic system. This is followed by an investigation of
the logic of money creation in the traditional analysis of the monetary circuit
and how this has been transformed somewhat under the so-called regime of
financialization (which is discussed in Chapter 15), especially with the per-
verse incentives generated by off-balance-sheet operations via securitization.
As in most first-year textbooks, Lavoie and Seccareccia begin by discuss-
ing the specifics of bank balance-sheet operations and how bank money is
created endogenously either to finance productive activity, as in the tradi-

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 Introduction · 5

tional circuit model of financing production, or more recently through the

financing of household consumption spending. They thus consider how dif-
ferent forms of spending behaviour by either the private or public sector lead
to the creation or destruction of money. They thereby comment on the role
that the public sector plays on the asset side of banks’ balance sheets, which
is also critical to how the banking sector’s net worth is usually re-established
after recessions. Finally, this chapter provides a discussion of payment and
settlement systems and of the role played by the interbank market, where
the central bank can set the overnight rate of interest and thus largely control
interest rates in the economy. The interbank rate of interest is a critical
instrument for the conduct of monetary policy. This discussion establishes
a bridge with Chapters 5 and 6 (on the financial system and monetary policy
respectively).

Chapter 5, by Jan Toporowski, explains notably that the financial system

emerges out of the financing needs of production and exchange in a capital-
ist economy. A special role is played by the financing needs of the state, for
which are created the institutional foundations of the long-term debt markets
that characterize the modern capitalist economy (that is, stock markets,
insurance, and investment funds). These markets develop further with finan-
cial innovations that provide new scope for financial operations alongside
production and exchange. Financial operations are a distinguishing feature
of Marxist political economy – in the case of Hilferding’s Finanzkapital
(Hilferding, [1910] 1981) and the financial theories of Kalecki and Steindl
derived from Hilferding’s work – as well as Keynes’s macroeconomics and
post-Keynesian theories. By way of contrast, consistently with the irrelevance
of money in neoclassical economics as explained in Chapter 3, mainstream
macroeconomics and portfolio theory do not integrate the financial sector
within a theory of how a capitalist economy operates with a complex finan-
cial system. The mainstream view also confuses saving with credit, exem-
plified in the theory of interest. The financial approach to macroeconomic
theory is developed, by way of contrast, in the ‘financial instability hypoth-
esis’ of Hyman Minsky, considering how debt changes over a business cycle.
Minsky’s view is distinguished from post-Keynesian theories by Minsky’s
denial of Keynes’s interest rate theory of investment, but has contributed the
notion of usury (due to excessive debt) common in post-Keynesian theories
of financialization, as explained in Chapter 15.

Chapter 6, written by Louis-Philippe Rochon and Sergio Rossi, points

out the specific role of the central bank in domestic payment and settle-
ment systems – as money and credit provider. It focuses on the emission
of central bank money as the means of final payment for every transaction

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 6 · An introduction to macroeconomics

on the interbank market. It thereby distinguishes between the monetary

intermediation carried out by the central bank as a matter of routine – and
necessity – and the financial intermediation that it carries out, as a lender
of last resort, when its counterparties are not in a position to obtain enough
credit on the interbank market. The authors show thereby that the central
bank is crucial for financial stability, thus introducing the reader to the need
to go much beyond price stability (particularly as measured on the goods
market) for monetary policy-making. This chapter then focuses on mon-
etary policy strategies, instruments and transmission mechanisms. Two
major strategies (monetary targeting and inflation targeting) are discussed,
criticizing their conceptual framework, and observing their macroeconomic
costs as measured by so-called ‘sacrifice ratios’ with respect to output and
employment losses. As the authors explain, monetary policy must contribute
to macroeconomic stabilization and not just worry about price stability on
the goods market. This discussion is elaborated on to present traditional as
well as ‘unconventional’ monetary policy tools, critically considering their
consequences on the whole economy. This framework is further expanded to
present the ‘transmission channels’ of monetary policy, considering also the
ongoing discussion about regulatory capital and financial reforms as well as
banking supervision at national and international levels that aim to influence
aggregate demand and thus achieve the relevant monetary policy goals.

Chapter 7, contributed by Jesper Jespersen, explains that aggregate demand

comprises private consumption, private investment, government expendi-
ture and net exports. Connected with this, it points out that neoclassical
economists consider aggregate demand as rather unimportant. They argue
that output (gross domestic product – GDP) is determined mainly by the
supply of labour and capital, quite independently of demand. They consider
the market system as self-adjusting, which leads them to conclude that, in
the long run, ‘the supply of goods creates their demand’. By contrast, accord-
ing to heterodox economists and Keynesian macroeconomic theory, aggre-
gate demand is an important analytical concept: it is the major driving force
behind the level of output and employment in the short and longer run.
This consideration makes demand management policies instrumental for
creating macroeconomic stability and economic growth. Richard Kahn was
notably one of the first Keynesian economists who contributed to the theory
of aggregate demand: he invented the analytical concept of the investment
multiplier as a short-run dynamic phenomenon. This chapter expands on
this, presenting Keynesian demand management policies, notably in periods
where aggregate demand is lower than potential GDP: fiscal policy, mon-
etary policy, and exchange rate policy should be expansionary in recessions,
and might be restrictive in boom periods. Demand management policies can

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 Introduction · 7

thus close output gaps and make the macroeconomic system more stable.
Against this background, neoclassical scepticism builds on the assumption
that the macroeconomic system is self-adjusting: if wages are fully flexible,
then the labour market will adjust by itself to full employment. In such cases
aggregate demand, also by itself, adjusts to potential output (GDP) via
changes in real wealth and/or changes in net foreign trade. Hence, demand
management policies are at best superfluous in the orthodox view. As shown
by this chapter, these different analytical outcomes depend on the theoretical
macroeconomic framework: Keynesian aggregate demand analysis leaves the
future open, which creates room for demand management policy; by way of
contrast, the neoclassical assumption of automatic market adjustment makes
aggregate demand equal to potential supply of output – thereby excluding
both inflation and unemployment over the long run, unless the state inter-
venes, disturbing this ‘free market equilibrium’.

Chapter 8, written by Alvaro Cencini and Sergio Rossi, focuses therefore on

inflation and unemployment. It starts with an overview of both pathologies,
explaining several basic concepts like the consumer price index, the purchas-
ing power of money, inflation, deflation, unemployment and stagflation. It
then points out their relevance and effects: income redistribution and mon-
etary instability caused by inflation; social and economic disruptions caused
by unemployment. The next stage is devoted to a critical analysis of the way
mainstream economics has attempted to explain inflation and unemploy-
ment. In particular this chapter shows that inflation should not be confused
with a rise in the cost of living and that neither demand–pull nor supply–
push price variations cause a loss in the purchasing power of money, as only
the agents’ purchasing power is affected by a price variation originating in
either demand or supply on the market for produced goods and services. It
also shows that agents’ forms of behaviour cannot reduce total demand and
thereby be at the origin of an excess in total supply leading to unemployment.
In the last section of this chapter the authors explain that inflation and unem-
ployment are the twin outcomes of one single macroeconomic cause, that is,
a pathological process of capital accumulation and overaccumulation. Their
analysis is entirely macroeconomic and rests on Keynes’s identities between
total supply and total demand, and between savings and investment at the
macroeconomic level. These two identities necessitate an analysis capable
of reconciling them with the numerical disequilibria defining inflation and
deflation. With regard to this, the authors argue that from a macroeconomic
point of view only pathological unemployment matters and that involun-
tary unemployment, in Keynes’s terms, is the consequence of an excess in
total supply, that is to say, deflation. By investigating the process of capital
accumulation the authors reveal the mechanisms leading to both inflation

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 8 · An introduction to macroeconomics

and deflation and so make sense of the global economic crisis that erupted
after the bursting of the financial bubble in 2007–08.

Chapter 9, by Malcolm Sawyer, explains the role of fiscal policy. It explains

that fiscal policy relates to the balance between government expenditures
and tax revenues, which is important for the level of employment and eco-
nomic activity. In doing so, the chapter points out that the need for fiscal
policy arises from the perspective, generally denied by mainstream econo-
mists, that the capitalist economy is subject to cyclical fluctuations as well as
to unemployment arising from inadequacy of aggregate demand, as discussed
in Chapter 7. As a matter of fact, the private sector exhibits instabilities and
suffers from insufficient aggregate demand to underpin full employment and
capacity utilization. Fiscal policy is one instrument (amongst a number) to
address these features, through public budget positions that offset inadequate
private demand and through automatic stabilizers and discretionary fiscal
policy to offset variations in demand. This chapter sets up the arguments
relating to fiscal policy in the framework of a closed economy (for simplicity).
It explains the equilibrium condition that (in ex ante terms) injections equals
leakages: I + G = S + T (with I private investment, G government expendi-
ture, S private savings and T tax revenues). If S > I, then G > T is required.
The chapter explains the implications of that in terms of realization of savings
and for budget deficits. As regards the mainstream view, the latter argues that
at equilibrium S = I, and the mechanisms by which this is said to occur refer
to the (‘natural’) interest rate. Further, in this view, the so-called ‘Ricardian
equivalence’ between agents’ taxation and public debt to finance government
spending leads to the ‘crowding out’ effect of expansionary fiscal policies, as
explained in Chapter 7. By contrast, the heterodox view that I and S tend not
to be equal explains that budget deficits can be funded when S > I. Indeed,
appropriate budget deficits do not put pressure on interest rates, particularly
in a recession, because there are excessive savings with respect to desired
investment by the business sector of the economic system. This chapter also
briefly discusses the so-called ‘functional finance’ approach, thus pointing
out that the objective of fiscal policy should be high levels of employment
and not balanced budgets per se.

In Chapter 10, Mark Setterfield focuses on economic growth and develop-

ment. He first provides a definition of economic growth, followed by an
overview of its statistical record. Three salient features of the growth record
are thus emphasized: the extent and unevenness of economic growth (result-
ing in the processes of ‘catching up’ and – for most – ‘falling behind’); the
unbalanced nature of economic growth (resulting in structural change, as
exemplified by deindustrialization); and fluctuations in the pace of eco-

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 Introduction · 9

nomic growth over time (which can be interpreted either as growth cycles
or discrete and historically specific episodes of growth). This chapter then
considers whether economic growth is a supply-led or demand-led process,
contrasting mainstream neoclassical (supply-led) and alternative post-
Keynesian (demand-led) views. Simple analytics (such as shifting produc-
tion possibility frontiers, with economies operating either on these shifting
frontiers – neoclassical case – or within their interiors – post-Keynesian
case) are used to illustrate the differences between views. Next, the chapter
invites further consideration of the post-Keynesian (demand-led) view of
economic growth. Both Kaleckian and Kaldorian growth theories are thus
sketched using simple analytics (on a par with multiplier analysis), drawing
attention to the different sources of autonomous demand that each theory
considers to be the key ‘driver’ of long-run growth. Various properties of eco-
nomic growth (inspired by the post-Keynesian view of the growth process)
are then considered. These include the paradox of thrift (an increase in the
saving rate is harmful to economic growth); income distribution and eco-
nomic growth, including discussion of the fact that raising the profit share
of income may be harmful to GDP growth; technical progress (‘Verdoorn’s
Law’); and interaction of supply and demand in long-run growth (endogene-
ity of potential output to actual output; the two-way interaction of actual and
potential output, resulting in self-reinforcing virtuous and vicious circles of
growth). This last topic invites further consideration of the role of supply
factors in demand-led growth theory, as taken up in Chapter 17 (on sustain-
able development).

Chapter 11, by Omar Hamouda, expands on income and wealth distribu-

tion. Whether from the micro- or macroeconomic perspective, the purpose
of studying economics has always been and will continue to be to focus on
two fundamental questions: (1) How and what to produce in terms of goods
and services? (2) Who receives what from the ongoing creation of wealth?
Whether the economic aspects of these two questions are interrelated and
uniquely determined, as the neoclassical approach maintains, or are deter-
mined separately by different sets of forces, as held by many other schools
of thought, the implication – in terms of understanding what is meant by
income distribution – is subject to controversial interpretations. The object
of this chapter is to expose and elucidate various perspectives on the concepts
of income share, and income distribution and redistribution in relation to the
distribution of contribution and effort. In this chapter, income distribution
is understood as the share that the remunerating factors of production get for
their contribution to the creation of wealth. Income redistribution refers to
income reallocation among members of a community regardless of whether
they participate or not in the creation of wealth. In different eras in history,

ROCHON 9781782549369 PRINT (M3984).indd 9 23/06/2016 13:59

 10 · An introduction to macroeconomics

stages of economic development, political structures as well as the type of

moral guidance dictated how, when, and who gets what from the proceeds
derived from the common effort in producing what is required to satisfy
human needs. This chapter is thus devoted first to exploring the general con-
ception of shared income derived from the wealth of a nation. This wealth
is referent to more than just economic criteria, especially in pre-industrial
economies or those that do not adhere to market forces. The focus of this
chapter then turns to how income is distributed under purely economic con-
siderations, as explained and justified in the classical and the neoclassical
schools of thought. Finally, the chapter reviews how the post-World War II
‘welfare state’ has slowly shaped and created a system of income redistribu-
tion decided by economic policies and regulation.

In Chapter 12, Robert A. Blecker focuses on trade and development. He

begins this chapter with a brief review of the conventional arguments for
free trade in general, and for a policy of economic openness as the best
route to long-run growth and development. In fact, exports can be an
important part of a development strategy, especially when they grow as part
of a ‘virtuous circle’ of industrialization and rising incomes at home, but
policies of pure free trade have not historically been the most successful.
The most successful developing nations since the late nineteenth century
have been those that have combined a significant role for the public sector
in economic management with active promotion of exports and selective
reliance on markets (but not complete state domination of markets). In
addition, the comparative advantage model rests on the twin assumptions
of full employment and balanced trade, which do not generally hold in
reality, and without which the global trading system does not necessarily
work in the mutually beneficial ways implied by standard theories. In the
real world, some countries use mercantilist policies (which this chapter
defines) to foster absolute competitive advantages and to increase national
employment at the expense of their trading ‘partners’. As a result, mercan-
tilist strategies have generally outperformed neoliberal strategies based on
open markets with little state direction. The chapter also includes a brief
discussion and update of Joan Robinson’s view of ‘new mercantilism’, for
example as regards currency undervaluation (more recently dubbed ‘cur-
rency war’). Multinational corporations and global financial investors can
profit from free access to foreign markets and foreign mercantilist practices
(like undervalued currencies and repressed wages), leading to a world in
which ‘outsourcing’ or ‘offshoring’ undermines distributional equity and
the social fabric in the advanced economies without guaranteeing equitable
development in the Global South.

ROCHON 9781782549369 PRINT (M3984).indd 10 23/06/2016 13:59

Another random document with
no related content on Scribd:
dame tú la fuerça y yo porne la
voluntad. Las cosas de onrra que
pones delante conozcolas con la
razon y niegolas con ella misma.
Digo que las conozco y aprueuo
si las ha de vsar onbre libre de mi
pensamiento, y digo que las niego
para comigo pues pienso avnque
busque graue pena que escogí
onrrada muerte. El trabaio que
por mi as recebido y el deseo que
te he visto me obligauan á ofrecer
por tí la vida todas las vezes que
fuere menester, mas pues lo
menos della me queda de beuir
seate satisfacion lo que quisiera y
no lo que puedo. Mucho te ruego
pues esta será la final buena obra
que tú me podras hazer y yo
recebir que quieras leuar á
Laureola en vna carta mia nueuas
con que se alegre, porque della
sepa como me despido de la vida
y de mas dalle enoio, la qual en
esfuerço que la leuarás quiero
començar en tu presencia y las
razones della sean estas.

CARTA DE LERIANO Á
LAUREOLA
Pues el galardon de mis afanes
auie de ser mi sepoltura ya soy a
tiempo de recebirlo. Morir no
creas que me desplaze, que
aquel es de poco iuyzio que
aborrece lo que da libertad. ¿Mas
que haré que acabará comigo el
esperança de verte graue cosa
para sentir? Dirás que cómo tan
presto en vn año ha o poco mas
que ha que soy tuyo desfallescio
mi sofrimiento; no te deues
marauillar que tu poca esperança
y mi mucha pasion podian bastar
para más de quitar la fuerça al
sofrir, no pudiera pensar que á tal
cosa dieras lugar si tus obras no
me lo certificaran.
Siempre crey que forçara tu
condicion piadosa á tu voluntad
porfiada, como quiera que en esto
si mi vida recibe el daño mi dicha
tiene la culpa, espantado estoy
cómo de tí misma no te dueles.
Dite la libertad, ofrecite el
coraçon, no quise ser nada mio
por serlo del todo tuyo, pues,
¿cómo te querrá seruir ni tener
amor quien sopiere que tus
propias cosas destruyes? Por
cierto tú eres tu enemiga. Si no
me querias remediar porque me
saluara yo, deuieraslo hazer
porque no te condenaras tú.
Porque en mi perdicion ouiese
algund bien deseo que te pese
della, mas si el pesar te avie de
dar pena no lo quiero, que pues
nunca biuiendo te hize seruicio no
seria iusto que moriendo te
causase enoio. Los que ponen los
oios en el sol quanto mas lo miran
mas se ciegan, y assi quanto yo
más contenplo tu hermosura mas
ciego tengo el sentido. Esto digo
porque de los desconciertos
escritos no te marauilles: verdad
es que á tal tienpo escusado era
tal descargo, porque segund
quedo mas estó en disposicion de
acabar la vida que de desculpar
las razones.
Pero quisiera que lo que tú auias
de ver fuera ordenado, porque no
ocuparas tu saber en cosa tan
fuera de tu condicion. Si
consientes que muera porque se
publique que podiste matar, mal
te aconseiaste, que sin
esperiencia mia lo certificava la
hermosura tuya; si lo tienes por
bien porque no era merecedor de
tus mercedes, pensaua alcançar
por fé lo que por desmerecer
perdiese, y, con este
pensamiento, osé tomar tal
cuydado. Si por ventura te plaze
por parecerte que no se podria
remediar sin tu ofensa mi cuyta,
nunca pense pedirte merced que
te causase culpa. ¿Cómo auia de
aprouecharme el bien que á ti te
viniese mal? Solamente pedí tu
respuesta por primero y
postrimero galardon. Dexadas
mas largas te suplico, pues
acabas la vida que onrres la
muerte, porque si en lugar donde
van las almas desesperadas ay
algun bien, no pediré otro si no
sentido para sentir que onrraste
mis huesos por gozar aquel poco
espacio de gloria tan grande.

EL AUCTOR
Acabada la habla y carta de
Leriano, satisfaziendo los oios por
las palabras con muchas
lagrimas, sin poderle hablar
despedime dél, auiendo aquella,
segund le vi, por la postrimera vez
que lo esperaua ver; y puesto en
el camino puse su sobrescrito á
su carta porque Laureola en
seguridad de aquel la quisiese
recebir. Y llegado donde estaua,
acordé de gela dar, la qual
creiendo que era de otra calidad
recebio, y començo y acabó leer;
y como en todo aquel tiempo que
la leya nunca partiese de su
rostro mi vista, vi que quando
acabó de leerla quedó tan
enmudecida y turbada como si
gran mal touiera, y como su
turbacion de mirar la mia no le
escusase, por asegurarme hizo
me preguntas y hablas fuera de
todo proposito, y para librarse de
la conpañia que en semeiantes
tienpos es peligrosa, porque las
mudanças públicas no
descubriessen los pensamientos,
retraxose. Y assí estuuo aquella
noche sin hablarme nada en el
propósito, y otro dia de mañana
mandome llamar y despues que
me dixo quantas razones
bastauan para descargarse del
consentimiento que daua en la
pena de Leriano, dixome que le
tenia escrito pareciéndole
inumanidad perder por tan poco
precio un onbre tal; y porque con
el plazer de lo que le oya estaua
desatinado en lo que hablaua, no
escriuo la dulceza y onestad que
ouo en su razonamiento. Quien
quiera que la oyera pudiera
conocer que aquel estudio auie
vsado poco: ya de enpachada
estaua encendida, ya de turbada
se tornaua amarilla. Tenia tal
alteracion y tan sin aliento la
habla como si esperara sentencia
de muerte; en tal manera le
tenblaua la boz que no podía
forçar con la discrecion al miedo.
Mi respuesta fué breve porque el
tienpo para alargarme no me
daua lugar, y despues de besalle
las manos recebi su carta, las
razones de la qual eran tales.

CARTA DE LAUREOLA Á
LERIANO
La muerte que esperauas tú de
penado merecia yo por culpada si
en esto que hago pecase mi
voluntad, lo que cierto no es assí,
que más te escriuo por redemir tu
vida que por satisfazer tu deseo.
Mas, triste de mi, que este
descargo solamente aprouecha
para conplir comigo, porque si
deste pecado fuese acusada no
tengo otro testigo para saluarme
sino mi intencion, y por ser parte
tan principal no se tomaria en
cuenta su dicho, y con este
miedo, la mano en el papel, puse
el coraçon en el cielo, haziendo
iuez de mi fin aquel á quien la
verdad de las cosas es
manifiesta.
Todas las vezes que dudé en
responderte fue porque sin mi
condenacion no podias tú ser
asuelto. Como agora parece que
puesto que tú solo y el levador de
mi carta sepays que escreui, qué
sé yo los iuycios que dareys
sobre mi; y digo que sean sanos
sola mi sospecha me amanzilla.
Ruegote mucho quando con mi
respuesta en medio de tus
plazeres estés mas vfano, que te
acuerdes de la fama de quien los
causó, y auiso te desto, porque
semeiantes fauores desean
publicarse teniendo mas
acatamiento á la vitoria dellos que
á la fama de quien los da. Quanto
meior me estouiera ser afeada
por cruel que amanzillada por
piadosa, tú lo conosces, y por
remediarte vsé lo contrario. Ya tú
tienes lo que deseauas y yo lo
que temia. Por Dios te pido que
enbueluas mi carta en tu fe,
porque si es tan cierta como
confiesas no se te pierda ni de
nadie pueda ser vista, que quien
viese lo que te escriuo pensaria
que te amo, y creeria que mis
razones antes eran dichas por
disimulacion de la verdad que por
la verdad. Lo qual es al reues,
que por cierto mas las digo, como
ya he dicho, con intencion
piadosa que con voluntad
enamorada. Por hazerte creer
esto querria estenderme y por no
ponerte otra sospecha acabo, y
para que mis obras recibiesen
galardon iusto auia de hazer la
vida otro tanto.

EL AUCTOR
Recibida la carta de Laureola
acordé de partirme para Leriano,
el qual camino quise hazer
acompañado, por leuar comigo
quien á él y á mí ayudase en la
gloria de mi enbaxada, y por
animarlos para adelante llamé los
mayores enemigos de nuestro
negocio que eran
Contentamiento, y Esperança, y
Descanso, y Plazer, y Alegría, y
Holgança. Y porque si las
guardas de la prision de Leriano
quisiesen por leuar conpañía
defenderme la entrada, pense de
yr en orden de guerra, y con tal
pensamiento, hecha vna batalla
de toda mi conpañía, seguí mi
camino, y allegado á vn alto
donde se parecia la prision,
viendo los guardadores della mi
seña que era verde y colorada, en
lugar de defenderse pusieronse
en huyda tan grande que quien
mas huya mas cerca pensaua
que yua del peligro. Y como
Leriano vido sobre á ora tal
rebato, no sabiendo qué cosa
fuese, pusose á vna ventana de la
torre, hablando verdad, mas con
flaqueza de espíritu que con
esperança de socorro. Y como
me vio venir en batalla de tan
hermosa gente, conocio lo que
era, y lo vno de la poca fuerça y lo
otro de supito, bien perdido el
sentido, cayó en el suelo de
dentro de la casa. Pues yo que no
leuaua espacio, como llegué al
escalera por donde solia sobir
eché á descanso delante, el qual
dió estraña claridad á su tinibra, y
subido á donde estaua el ya
bienauenturado, quando le ví en
manera mortal pense que yua á
buen tienpo para llorarlo y tarde
para darle remedio, pero socorrio
luego Esperança que andaua allí
la mas diligente y echandole vn
poco de agua en el rostro tornó
en su acuerdo, y por más
esforçarle dile la carta de
Laureola, y entre tanto que la leya
todos los que leuaua comigo
procurauan su salud. Alegria le
alegraua el coraçon, Descanso le
consolaua el alma, Esperança le
bolvia el sentido, Contentamiento
le aclaraua la vista, Holgança le
restituya la fuerça, Plazer le
abiuaua el entendimiento, y en tal
manera lo trataron que quando lo
que Laureola le escrebió acabó
de leer estaua tan sano como si
ninguna pasion vuiera tenido. Y
como vido que mi diligencia le dio
libertad echabame muchas vezes
los brazos encima, ofreciendome
á él y á todo lo suyo, y pareciale
poco precio segund lo que
merecia mi seruicio. De tal
manera eran sus ofrecimientos
que no sabía responderle como
yo deuia y quien él era. Pues
despues que entre él y mí
grandes cosas pasaron, acordó
de yrse á la corte, y antes que
fuesse estuuo algunos dias en
vna villa suya por rehazerse de
fuerças y atauios para su partida,
y como se vido en disposicion de
poderse partir pusolo en obra, y
sabido en la corte como yua,
todos los grandes señores y
mancebos cortesanos salieron á
recebirle. Mas como aquellas
cerimonias vieias touiesse
sabidas, mas vfana le daua la
gloria secreta que la onrra
pública, y así fue acompañado
hasta palacio. Quando besó las
manos á Laureola pasaron cosas
mucho de notar, en especial para
mí que sabia lo que entre ellos
estaua: al vno le sobraua
turbacion, al otro le faltaua color;
ni él sabie qué dezir, ni ella qué
responder, que tanta fuerça tienen
las pasiones enamoradas que
sienpre traen el seso y discrecion
debaxo de su vandera; lo que allí
vi por clara esperiencia.
Y puesto que de las mudanças
dellos ninguno touiese noticia por
la poca sospecha que de su
pendencia auia, Persio, hijo del
señor de Gavia miró en ellas,
trayendo el mismo pensamiento
que Leriano traya; y como las
sospechas celosas escudriñan las
cosas secretas, tanto miró de allí
adelante las hablas y señales dél,
que dió crédito á lo que
sospechaua: y no solamente dió
fé á lo que veya, que no era nada,
mas á lo que ymaginaua él que
era todo. Y con este maluado
pensamiento, sin más
deliberacion ni conseio, apartó al
rey en vn secreto lugar y dixole
afirmadamente que Laureola y
Leriano se amauan y que se
veyan todas las noches despues
que él dormia, y que gelo hazia
saber por lo que deuie á la onrra y
á su seruicio. Turbado el rey de
cosa tal, estouo dubdoso y
pensatiuo sin luego determinarse
á responder, y despues que
mucho dormio sobre ello, tovolo
por verdad, creyendo segund la
virtud y auctoridad de Persio que
no le diria otra cosa. Pero con
todo esso primero que deliberase
quiso acordar lo que deuie hazer,
y puesta Laureola en vna carcel
mandó llamar á Persio y dixole
que acusase de traydor á Leriano,
segun sus leyes, de cuyo
mandamiento fue mucho
afrontado. Mas como la calidad
del negocio le forçaua á otorgarlo,
respondió al rey que aceutaua su
mando y que daua gracias á Dios
que le ofrecia caso para que
fuesen sus manos testimonio de
su bondad; y como semeiantes
autos se acustumbran en
Macedonia hazer por carteles y
no en presencia del rey, enbió en
vno Persio á Leriano las razones
siguientes:

CARTEL DE PERSIO PARA

LERIANO
Pues procede de las virtuosas
obras la loable fama, iusto es que
la maldad se castigue porque la
virtud se sostenga, y con tanta
diligencia deue ser la bondad
anparada que los enemigos della
si por voluntad no la obraren, por
miedo la vsen. Digo esto, Leriano,
porque la pena que recebirás de
la culpa que cometiste sera
castigo para que tú pagues y
otros teman, que si á tales cosas
se diese lugar no sería menos
fauorecida la desvirtud en los
malos, que la nobleza en los
buenos.
Por cierto mal te as aprovechado
de la limpieza que eredaste; tus
mayores te mostraron hazer
bondad y tú aprendiste obrar
trayzion; sus huessos se
leuantarian contra tí si supiesen
como ensuziaste por tal error sus
nobles obras. Pero venido eres á
tienpo que recibieras por lo
hecho, fin en la vida y manzilla en
la fama. Malauenturados aquellos
como tú que no saben escoger
muerte onesta; sin mirar el
seruicio de tu rey y la obligacion
de tu sangre touiste osada
desuerguença para enamorarte
de Laureola, con la qual en su
camara, despues de acostado el
rey, diuersas vezes as hablado,
escureciendo por seguir tu
condicion tu claro linage, de cuya
razon te rebto por traydor, y
sobrello te entiendo matar ó echar
del canpo; ó lo que digo hazer
confesar por tu boca, donde
quanto el mundo durare sere en
exenplo de lealtad; y atreuome á
tanto confiando en tu falsía y mi
verdad. Las armas escoge de la
manera que querras y el canpo.
Yo de parte del rey lo hago
seguro.

RESPUESTA DE LERIANO
Persio, mayor seria mi fortuna
que tu malicia si la culpa que me
cargas con maldad no te diese la
pena que mereces por iusticia. Si
fueras tan discreto como malo,
por quitarte de tal peligro antes
deuieras saber mi intencion que
sentenciar mis obras. Á lo que
agora conozco de tí, mas curauas
de parecer bueno que de serlo.
Teniendote por cierto amigo todas
mis cosas comunicaua contigo y
segund parece yo confiaua de tu
virtud y tú vsauas de tu condicion.
Como la bondad que mostrauas
concertó el amistad, assi la
falsedad que encobrías causó la
enemiga. ¡Ó enemigo de tí
mismo! que con razon lo puedo
dezir, pues por tu testimonio
dexarás la memoria con cargo y
acabarás la vida con mengua.
¿Por que pusiste la lengua en
Laureola que sola su bondad
basta a si toda la del mundo se
perdiese para tornarla á cobrar?
Pues tú afirmas mentira clara y yo
defiendo causa iusta, ella quedará
libre de culpa y tu onrra no de
verguença. No quiero responder á
tus desmesuras porque hallo por
mas onesto camino vencerte con
la persona que satisfazerte con
las palabras. Solamente quiero
venir a lo que haze al caso, pues
allí está la fuerça de nuestro
debate. Acusasme de traydor y
afirmas que entré muchas vezes
en su camara de Laureola
despues del rey retraydo. Á lo vno
y á lo otro te digo que mientes,
como quiera que no niego que
con voluntad enamorada la miré.
Pero si fuerça de amor ordenó el
pensamiento, lealtad virtuosa
causó la lynpieza dél; assi que
por ser della fauorecido y no por
ál lo pensé. Y para mas afearte te
defendere no solo que no entré
en su camara, mas que palabras
de amores iamás le hablé, pues
quando la intencion no peca saluo
está el que se iuzga, y porque la
determinacion desto ha de ser
con la muerte del vno y no con las
lenguas dentramos, quede para el
dia del hecho la sentencia, la qual
fio en Dios se dara por mí, porque
tú reutas con malicia y yo
defiendo con razon y la verdad
determina con iusticia. Las armas
que á mí son de señalar sean a la
bryda segund nuestra costumbre,
nosotros armados de todas
pieças, los cauallos con cubiertas
y cuello y testera, lanças yguales
y sendas espadas sin ninguna
otra arma de las vsadas, con las
quales defendiendo lo dicho, ó
(te) haré desdezir ó echaré del
campo sobrello.

EL AUCTOR
Como la mala fortuna enbidiosa
de los bienes de Leriano vsase
con él de su natural condicion,
diole tal reues quando le vido
mayor en prosperidad. Sus
desdichas causauan pasion á
quien las vio y conbidan á pena á
quien las oye. Pues desando su
cuyta para hablar en su reuto,
despues que respondio al cartel
de Persio como es escrito,
sabiendo el rey que estauan
concertados en la batalla,
aseguró el canpo, y señalando el
lugar donde hiziesen, y
ordenadas todas las cosas que en
tal auto se requerian segund las
ordenanças de Macedonia,
puesto el rey en vn cadahalso,
vinieron los caualleros cada vno
acompañado y fauorecido como
merecía y guardadas en ygualdad
las onrras dentrambos entraron
en el canpo: y como los fieles los
dexaron solos, fueronse el vno
para el otro donde en la fuerça de
los golpes mostraron la virtud de
los animos, y quebradas las
lanças en los primeros encuentros
pusieron mano á las espadas, y
assi se conbatian que quien
quiera ouiera enbidia de lo que
obrauan y compasion de lo que
padecian.
Finalmente, por no detenerme en
esto que parece cuento de
ystorias vieias, Leriano le cortó á
Persio la mano derecha, y como
la meior parte de su persona le
viese perdida dixole: Persio,
porque no pague tu vida por la
falsedad de tu lengua deues te
desdezir. El qual respondio: haz lo
que as de hazer, que aunque me
falta el braço para defender no
me fallece coraçon para morir. Y
oyendo Leriano tal respuesta
diole tanta priesa que lo puso en
la postrimera necesidad; y como
ciertos caualleros sus parientes le
viesen en estrecho de muerte
suplicaron al rey mandase echar
el baston, que ellos le fiauan para
que dél hiziese iusticia si
claramente se hallase culpado; lo
qual el rey assi les otorgó. Y
como fuesen despartidos, Leriano
de tan grande agrauio con mucha
razon se sentio, no podiendo
pensar porqué el rey tal cosa
mandase. Pues como fueron
despartidos, sacaronlos del canpo
yguales en cerimonia avnque
desyguales en fama, y assi los
leuaron á sus posadas donde
estuvieron aquella noche; y otro
dia de mañana avido Leriano su
conseio, acordó de yr á palacio á
suplicar y requerir al rey en
presencia de toda su corte, le
mandase restituir en su onrra
haziendo iusticia de Persio. El
qual como era malino de
condicion y agudo de iuyzio, en
tanto que Leriano lo que es
contado acordaua, hizo llamar
tres onbres muy conformes de
sus costumbres que tenia por
muy suyos, y iuramentandolos
que le guardasen secreto dió á
cada uno infinito dinero porque
dixesen y iurasen al rey que
vieron hablar á Leriano con
Laureola en lugares sospechosos
y en tienpos desonestos, los
quales se profirieron á afirmarlo y
iurarlo hasta perder la vida
sobrello. No quiero dezir lo que
Laureola en todo esto sentia
porque la pasion no turbe el
sentido para acabar lo
començado, porque no tengo
agora menos nueuo su dolor que
quando estaua presente. Pues
tornando á Leriano que mas de su
prision della se dolia que de la
Vitoria dél se gloriaua, como supo
que el rey era leuantado fuese á
palacio y presentes los caualleros
de su corte hizole una habla en
esta manera.
 LERIANO AL REY
Por cierto, señor, con mayor
voluntad sufriera el castigo de tu
iusticia que la verguença de tu
presencia, si ayer no leuara lo
meior de la batalla, donde si tú lo
ouieras por bien, de la falsa
acusacion de Persio quedara del
todo libre: que puesto que á vista
de todos yo le diera el galardon
que merecia, gran ventaia va de
hizieralo á hizolo. La razon por
que despartir nos mandaste no la
puedo pensar, en especial
tocando á mi mismo el debate,
que aunque de Laureola
deseases vengança, como
generoso no te faltaria piedad de
padre, comoquiera que en este
caso, bien creo quedaste
satisfecho de tu descargo. Si lo
heziste por conpasion que auias
de Persio, tan iusto fuera que la
vuieras de mi onrra como de su
vida, siendo tu natural. Si por
ventura lo consentiste por verte
aquexado de la suplicacion de
sus parientes, quando les
otorgaste la merced deuieras
acordarte de los seruicios que los
mios te hizieron, pues sabes con
quanta costança de coraçon,
quantos dellos en muchas
batallas y combates perdieron por
tu seruicio las vidas. Nunca
hueste iuntaste que la tercia parte
dellos no fuese. Suplicote que por
iuyzio me satisfagas la onrra que
por mis manos me quitaste: cata
que guardando las leyes se
conseruan los naturales. No
consientas que biua onbre que
tan mal guarda las preeminencias
de sus pasados, porque no
corronpan su benino los que con
él participaren. Por cierto no
tengo otra culpa sino ser amigo
del culpado, y si por este indicio
merezco pena, damela avn que
mi inocencia della me asuelua,
pues conserué su amistad
creyendole bueno y no iuzgandole
malo. Si le das la vida por seruirte
del, digote que te sera el mas leal
cizañador que puedas hallar en el
mundo. Requierote contigo
mismo, pues eres obligado á ser
ygual en derecho, que en esto
determines con la prudencia que
tienes y sentencies con la iusticia
que vsas. Señor, las cosas de
onrra deuen ser claras, y si á este
perdonas por ruegos, ó por ser
principal en tu reyno, ó por lo que
te plazera, no quedará en los
iuyzios de las gentes por
desculpado del todo; que si vnos
creyeren la verdad por razon,
otros la turbarán con malicia: y
digote que en tu reyno lo cierto se
sepa. Nunca la fama leua lexos lo
cierto; como sonará en los otros
lo que es pasado, si queda sin
castigo publico; por Dios, señor,
dexa mi onrra sin disputa, y de mi
vida y lo mio ordena lo que
quisieres.

EL AUCTOR
Atento estuuo el rey á todo lo que
Leriano quiso dezir, y acabada su
habla respondiole que el auria su
conseio sobre lo que deuiese
hazer, que en cosa tal con
deliberacion se auie de dar la
sentencia. Verdad es que la
respuesta del rey no fue tan dulce
como deuiera, lo qual fue porque
si á Laureola daua por libre
segund lo que vido, él no lo
estaua de enoio; porque Leriano
penso de seruilla auiendo por
culpado su pensamiento avnque
no lo fuese su entencion: y asi por
esto como por quitar el escandalo
que andaua entre su parentela y
la de Persio mandóle yr á vna villa
suya que estaua dos leguas de la
corte, llamada Susa, entre tanto
que acordaua en el caso. Lo que
luego hizo con alegre coraçon
teniendo ya á Laureola por
desculpada, cosa que él tanto
deseaua.
Pues como del rey fue despedido,
Persio que siempre se trabaiaua
en ofender su onrra por condicion
y en defenderla por malicia, llamó
los coniurados antes que