Real and financial economy in Marx and Hilferding

Today the dominant economic theory tends to separate analysis of the real economy from analysis of the financial economy. While for the former it focuses on the mechanisms and dynamics of market equilibria, for the latter it favours the speculative aspects, the role of risk and uncertainty, expectations formation, the origin of instability and speculative bubbles. The link between the two spheres of the economy is reduced to their common response to changes in interest rates, to the role of fundamentals in expectations formation and, sometimes, to the effects of the financial architecture on the dynamics of economic development. A different way to analyze the relationship between real and financial spheres can be seen in the heterodox approaches of Marx and Hilferding, where the link between the real economy and financial economics is dealt with organically and systematically, in terms of both the legislative history and the logical relationship between their dynamics. This paper focuses in particular on the role of credit dynamics and the concept of fictitious capital in the work of two authors, who are of great relevance for interpretation of the events of the recent financial crisis.