Free-market economists espouse an ideal: eliminate market distortions, and the economy will flourish. This makes them somewhat starry-eyed. Show me a capitalist economy, especially a successful one, without such distortions. They can occur as market ‘imperfections’ such as imperfect competition in the form of oligopoly or monopoly, or as externalities such as the costs of pollution. Continue reading
I sometimes wonder how the thought processes of economists and other social scientists (although this could apply to any kind of thinking) proceed from beginning to their outcome or conclusion. Do we start at the finish line and then work out how to get there, making adjustments to the conclusions along the way if necessary, or do we simply run with our analysis from logical beginning to end? Continue reading
One of the basic tenets of Keynesian economics is the importance of aggregate demand or spending in the economy for the purposes of supporting growth and employment. This spending takes the form of consumption and investment in the private, public and foreign sectors for an economy open to international flows of trade and investment. Continue reading
With the UK election only days away, it is important to know what one is voting for. Even if some of the parties’ manifesto pledges end up being bargained away in the necessity of them forming a governing coalition with a majority in parliament, one hopes that at least a few promises will be kept. Continue reading
When an economy is booming and prosperous, governing politicians like to take much of the credit and put it all down to their successful policies. They may occasionally stray into a more balanced and honest assessment and give credit to the ‘hard-working’ people of the nation. But it seems to be difficult for them to resist a bit of ego-stroking. Continue reading
‘Nowhere is there a principle which is right in all circumstances, or an action that is wrong in all circumstances.’
The header, and following quote, come from the book of Lieh-Tzu, an ancient Chinese book of Taoist fables, and neatly summarises a point that I made in a previous post, that one set of economic policies can be effective in one context, and fail or be less effective in a different context. Continue reading
The emphasis of some Marxist political economists on the innate instability and injustice of the capitalist economy has suggested to me that it may not be a massive leap politically from the Marxist left analysis of capitalism to the free market right. This may sound a little odd, but Marxists often emphasise the production side of a capitalist economy as dominant over the consumption and distributional aspects. Continue reading
These separative qualities are probably a necessity of a society which is, as already mentioned, increasingly complex. Society is evolving faster than the individual human organism. Nevertheless (some) individuals are being driven to achieve their full potential by the forces arising from capitalism. This is all to the good, although these trends have not been examined from the point of view of human welfare and happiness. The forces unleashed by capitalism are driving some kind of evolution for the sake of itself.
The complexity of society then, reflected in these probably rising separative qualities, paradoxically involves many individuals in an increasing alienation from each other, from neighbours in big cities for example, even as they are integrated into a more global society. Where incomes inequality is rising, those at the top of the earnings scale become more and more divorced from those at the bottom, from those outside their gated communities or private clubs. Global production supply chains, whereby goods consumed in one country are part-manufactured in many others, with inputs of natural resources, labour and capital from all corners of the world are another part of this rising complexity.
These trends mean that human and natural resource exploitation can be hidden from the final consumption of goods and services. Of course, the hidden qualities of the production process can be revealed to the consumer and, once aware, he or she can take action to change and improve labour conditions and prevent environmental problems that may have been occurring. This kind of campaigning for forms of corporate social responsibility can be difficult and may involve contradictory processes. Raising the rate of growth of economic and social development may be required for labour conditions to improve, but protecting the environment may require a slower rate of development. The latter may involve internalising environmental externalities and companies realising more fully the costs of their activities.
‘Development’ then may necessitate increasing social complexity, even while the progress of individuals remains negligable biologically. Social transformation can revolutionise the behaviour of individuals, just as the behaviour of individuals can in turn transform society. These two views of progress are usually associated with the ‘left‘ and the ‘right‘ respectively. They remain models of society, simplifications of ‘reality’. I would argue that they are more fruitful when combined in dynamic fashion, moving us beyond simple political affiliations.