Differences between Mainstream Economics and Political Economics
ØOrigin of Profits: Mainstream economics assumes that by working
hard, being frugal and investing in production to produce goods that consumers
want with greatest efficiency capitalists are rewarded with profits. Political
economics holds that control of the means of production (land, labor,
capital) was historically achieved by violence –the enclosure movement,
aggression against other countries, colonial conquest – which secured a large
amount of wealth in a few large capitalist interests.
ØPolitical economics has a broader focus: P.E. is concerned with
institutional relations, bringing in political, social and moral considerations,
not just economic concerns.
ØMainstream economics 1) fails to predict events 2) has a simplistic model
of human behavior 3) is a-historic 4) separates politics from economics 5)
graduate programs perpetuate the model.
Ø Johan Kepler: “To measure is to know”
and Equilibrium concepts (harmony) adopted by Adam Smith
that market economic system tended toward stability at equilibrium
model is natural (i.e. god-like)
model (supply, demand, marginal concepts) could be expressed in quantitative
terms once numerous restrictive assumptions established.
operates like clockwork, i.e., it needs no help from government.
Key feature of the model is the notion of “Economic Man”
purely by self-interest (no altruistic motives)
maximize satisfaction, income, profit
basis of perfect information
unlimited wants (insatiable desires)
has the propensity to truck, barter and exchange one thing for another”
not by the benevolence of the butcher the baker and the brewer that we owe our
daily meal, but by his looking to promote his own interests”
market system operates like an “invisible hand” to ensure consumers get the
right goods in the right quantities at the lowest prices.
trade-off: Work is onerous and will be undertaken only if person is sufficiently
civilizations prior to capitalism that depended solely on reciprocity and/or
current societies that operate(d) to satisfy basic needs and shun excess.
great wealth inherited, not earned.
provides huge tax subsidies to corporations and the wealthy (“…in 1997
[U.S.] corporations received $200 billion in subsidies from state, local and
enforcement of Anti-Trust Laws.
politics and economics are separated only in myth.
Authors: “Government is the executive committee of the capitalist class.”
of Mainstream Approach to Problem (that of pollution)
approach suggests to measure costs and benefits of controlling pollution,
then devise policy solution.
variables are not measurable.
response to “benefit-maximizing, loss-minimizing” approach seems irrational
systemic causes of problem (e.g., tendency to encourage excessive consumption)
disproportionate effects on poor
related power of wealthy who can avoid these costs