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”
Ø
Atomistic
and Equilibrium concepts (harmony) adopted by Adam Smith
Ø
Accepted
that market economic system tended toward stability at equilibrium
Ø
Market
model is natural (i.e. god-like)
Ø
Market
model (supply, demand, marginal concepts) could be expressed in quantitative
terms once numerous restrictive assumptions established.
Ø
The system
operates like clockwork, i.e., it needs no help from government.
A
Key feature of the model is the notion of “Economic Man”
Ø
Motivated
purely by self-interest (no altruistic motives)
Ø
Acts to
maximize satisfaction, income, profit
Ø
Acts on
basis of perfect information
Ø
Has
unlimited wants (insatiable desires)
Ø
“Man
has the propensity to truck, barter and exchange one thing for another”
Ø
“It’s
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”
Ø
The
market system operates like an “invisible hand” to ensure consumers get the
right goods in the right quantities at the lowest prices.
Ø
Labor/Leisure
trade-off: Work is onerous and will be undertaken only if person is sufficiently
rewarded.
Ø
Whole
civilizations prior to capitalism that depended solely on reciprocity and/or
redistribution.
Ø
Early and
current societies that operate(d) to satisfy basic needs and shun excess.
Ø
Most
great wealth inherited, not earned.
Ø
Government
provides huge tax subsidies to corporations and the wealthy (“…in 1997
[U.S.] corporations received $200 billion in subsidies from state, local and
federal government.”]
Ø
Weak
enforcement of Anti-Trust Laws.
Ø
Consequently,
politics and economics are separated only in myth.
Authors: “Government is the executive committee of the capitalist class.”
Example
of Mainstream Approach to Problem (that of pollution)
Ø
M.E.
approach suggests to measure costs and benefits of controlling pollution,
then devise policy solution.
Ø
But many
variables are not measurable.
Ø
Human
response to “benefit-maximizing, loss-minimizing” approach seems irrational
to M.E.
Ø
Ignores
systemic causes of problem (e.g., tendency to encourage excessive consumption)
Ø
Ignores
disproportionate effects on poor
Ø
Ignores
related power of wealthy who can avoid these costs