As the new subject of my semester, i really looking forward to understand some more things about the political economic's thing, as the main idea of this subject: how political's view could influence the policy in the economy, about how using the power and politics to get what government's and public sector wants for the economic growth?
Tittle : The ABCs of Political Economy : A Modern Approach
Author : Robin Hahnel
Publisher : Pluto Press, 2002 -revised and extended edition, 2014, London
Pages : 349
Economics and Liberating Theory
Political economist have always tried to situate the study of economics within the broader project of understanding. 'The liberating theory' attempts to transcend historical materialism that incorporates insights from feminism, anti-colonial, anti-racist movements, and anarchism, as well as from mainstream psychology, sociology and evolutionary biology.
Throughout history people have create social institutions to help meet their most urgent needs and desires-feudalism, capitalism, centrally planned socialism. What is common to all human societies is the elaboration of social relationship for the joint indentification and pursuit of individual need fulfillment. The human capacity to act purposefully implies the need to exercise that capacity-to be concious: understand and situate themselves in their surroundings.
The economy is not only sphere of social activity, in addition to creating economic institutions to organize our efforts to meet material needs and desires, people have organized community institutions for addresing our cultural and spiritual needs, intricate 'sex-gender' or 'kinship' systems for satisfying our sexual needs and discharging our parental functions, and elaborate political systems for mediating social conflicts and enforcing social decisions. So in addition to the economic sphere we have what we call a community sphere, a kinship sphere, and a political sphere as well. A monist paradigm presumes that one of the spheres always dominant in every society.
What should we demand from our economy?
A pareto optimal outcome is one where it is impossible to make anyone better off without making someone else worse off. The usual way around this problem is to broaden the notion of efficiency from Pareto improvements to changes where the benefits to some outweigh the costs to others. This broader notion of efficiency is called the efficiency criterion and serves as the basis for cost-benefit analysis. Simply put, the efficiency criterion says if the overall benefits to any and all people of doing something outweigh the overall costs to any and all people of doing it, it is 'efficient' to do it. Whereas, if the overall costs to any and all the people outweigh the overall benefits to any and all people of doing something it is 'inefficient; to do it.
Seven deadly sins of inefficiency: (fails to achieve a Pareto optimal outcome):
1. It leaves productive resources idle.
2. It uses inefficient technologies, that is, uses more of some input than necessary to get a given amount of output.
3. It misallocates productive resources so that swapping inputs between two different production units would lead to increases in output in both.
The consumption sector will be inefficient if there are undistributed or idle consumption goods, final goods are misdistributed so that two consumers could exchange goods and both be better off than under the original distribution. And the production and consumption sectors will be inefficiency integrated with one another if : 1) Goods are misallocated between consumers and producers so its possible for them to swap goods and have the output of the producer rise and the satisfaction of the consumer increase as well, 2) Resources are misallocated to different industries so its possible to shift productive resources from one industry to another to produce a different mixture of outputs more to consumer's tastes.
There is two simple corn models presented here to make corn:
Labor intensive technique: 6 days of labor + 0 units of seed corn yields 1 unit of corn
Capital intensive technique : 1 day of labor + 1 unit of seed corn yields 2 units of corn
In this simple situation economy is more efficient the lower average number of days of work per unit of net corn produced. So we can measure the efficiency of the economy by the average number of days worked per unit of net corn produced. Efficiency also means minimizing the ratio of pain to gain, reduced to total number of days worked, or total days worked divided by total net corn production.
Political economist distinguish between outcome (does one person work more or less than another) and decision making process (who decides how the work will be done). In the simple corn model if I decide how I will go about my work, we say my work is self-managed, if someone else decides how I will go about my work, we say my labor is other-directed or alienated.
A market is a social institution in which participants can exchange a good or service with one another on terms they find mutually agreeable. It is part of the institutional boundary of society located in the economic sphere of social life. If a good is exchanged in a 'free' market, anyone can play the role of seller by agreeing to provide the good for a particular amount of money.
Adam Smith noticed something strange but wonderful about free markets. He saw competitive markets as a kind of beneficent, 'invisible hand' that guided 'the private interests and passions of men' in the direction 'which is most agreeable to the interest of the whole society'.
As quoted in 'The Wealth of Nations, 1776'.
"Every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. He intends to only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it from their self-interest. We address ourselves, not their humanity, but to their self-love, and never talk to them of our necessities, but of their advantages.
Adam Smith's law of the market are basically simple, the show us the drive of individual self-interest is an environment of similarly motivated individuals will result in competition; and they further demonstrate how competition will result in the provision of those goods that society wants, in the quantities that society desires.
The failure of markets even with Pareto-optimal results and income distribution was thought to be fair, the market would still fail if it supported an undemocratic structure of power (greed, opportunism, politacl passivity, and indifference toward others), the central idea is that our evaluation of markets and with the market failure concepts, must be expanded to include the effects of markets on both the structure of power and the proccess of human development. (Samuel Bowles, Jully 1991).
Markets and hierarchical decision making economize on the use of valuable but scarce human traits like 'feelings of solidarity with others, the ability to emphatize, the capacity for complex communication and collective decision making. But more importantly, we must consider about the trust and participation across all. Because markets bribe us with the lure of luxury beyond what others can have and beyond what we know we deserve. Markets reward those who are the most efficient taking advantage of their fellow, and penalize those who insist, illogically, on pursuing the golden rule- do unto others as you would have them do unto you. "Its really survival of the fittest here. If you have a cutthroat heart, you can make it, if you are a good person, i dont think you can".
Bandung, 14 August 2018
