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ABC's of Political Economy
Terms in this set (67)
Traditional political economy theory of social change.
A political economy theory that attempts to transcend historical materialism. It attempts to understand the relationships between economic, political, kinship and cultural activities, and the forces behind social stability and social change, in a way that neither over nor underestimates the importance of human agency compared to social forces.
Human beings are a social species because they we usually define our needs and desires in cooperation with others.
Because each of us assesses our options and chooses from amoung them on the basis of our evaluation of their consequences
In seeking to meet our needs we identify today, we choose to act in ways that sometimes change our human characteristics, and thereby change our needs and preferences tomorrow.
The collection of people who live within a society including all their needs, powers, personalities, skills and consciousness. This includes our natural and species needs and powers--the results of an evolutionary process that occurred for the most part long before history began.
This is society's particular set of social institutions that are each a conglomeration of interconnected roles, or commonly held expectations about appropriate behavior patterns
4 spheres of social life
economic, political, community, kinship
Webs of Connection
The unique aspect of human sociability that inevitably connect all human begains are women not just by a "resonance of the flesh" but by a shared consciousness and mutual accountability
insists that any pattern of dominance (or non-dominance_ is possible in theory, and therefore which spheres are more or less dominant in any particular society can only be determined by an empirical study on that society. It can also help us to understand why not all forms of oppression will be re-dressed by a social revolution in one sphere of social life--as important as the change may be.
What is equitable distribution of the burden and benefits of economic activity?
Conservative Maxim of Equity
Payment according to the value of one's personal contribution of the productive property one owns Critique: Rockefeller's grandson
Liberal Maxim of Equity
Payment according to the value of one's personal contribution only Critique: why should a brain surgeon get paid more than a garbage collector?
Radical Maxim of Equity
Payment according to effort, or the personal sacrifices one makes Critique: AIDS victim
defined as Pareto optimality
Pareto Optimal Outcome
An outcome where there are no further Pareto improvements possible. This is an outcome where it is impossible to make anyone better off without making someone else worse off.
7 Deadly sins of inefficiency
1. It leaves productive resources idle
2. It uses inefficient technologies, that is, used more of some input that necessary to get a given amount of output.
3. It misallocates resources sp that swapping inputs between two different production units would led to increases in output in both
1. There are undistributed or idle consumption goods
2. Final goods are misdistributed so that 2 consumers could exchange goods and both be better off that under original distribution
Production and Consumer:
1. Goods are miss-allocated between consumers and producers so it is possible for a producer and consumer 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 it impossible to shift productive resources from one industry to another to produce a different mixture of outputs more to consumers taste.
decision-making input in proportion to the degree one is affected
concern for the well-being of others and granting others the same consideration in their endeavors as we ask for ourselves
achieving a diversity of economic life styles and outcomes
Gross Domestic Product (GDP)
Defined as the value of all goods and services produced by a nation in a given year
The study and use of how economic theory and methods influence political ideology. Political economy is the interplay between economics, law and politics, and how institutions develop in different social and economic systems such as capitalism, socialism, and communism. Political economy analyzes how public policy is created and implemented
The well-being of the entire society it is not the same as standard of living, but is more concerned with the quality of environment, level of crime, extent of drug abuse, availability of essential social services, as well as, religious and spiritual aspects of life.
Requires people to be completely self-sufficient
people are free to borrow corn from others and lend corn to others at a rate of interest both the borrower and lender can agree to
political economists define theses s groups of people who play the same economic role as one another but enter into economic relationships with other groups of people playing a different role with whom they have conflicting interests of one sort of another.
Conclusions on domestic corn model
1. As long as there is an unequal distribution of scare seed corn there will be unequal outcomes under autarky, with a labor market, or with a credit market
2. With an inegalitarian distribution of scare seed corn, opening a labor or a credit market increases the efficiency of the economy, but increases the degree of in the economy as well.
3. Whether scare seed corn is initially distributed unequally or equally, opening a credit market and opening a labor market have identical effects on efficiency and the degree of inequality in the economy.
4. However, opening a labor market has a different effect on who manages labor than does opening a credit market.
If u does not change in response to a change in a parameter then output, and income as well, cannot change
Keynesian Theory of Investment
Investment depends on capitalists' animal spriits: psychological and speculative factors that are impossible to explain using formal models
Marxian Theory of Wage Determination
Besides labor productivity, the real wage in capitalist economies will depend on the bargaining strengths of labor and capital
Demonstrates that less developed countries do not need to repress wages to hasten the growth of their stock of productive capital and become more developed.
As capitalists became ever more powerful and pushed real wages farther and farther below labor productivity, stagnant demand and idle capacity may well have created a negative sum game in which profits were lower than they might have otherwise been.
A social institution in which participants can exchange a good or service with one another on terms that are mutually agreeable
If a good is exchanged, anyone can play the role of seller by agreeing to provide the good for a particular amount of money.
The "Law" of Supply
It is expected that the number of units of the goods suppliers will offer to sell to increase if the price they receive for a good is higher.
The "Law" of Demand
It is expected that the number of units of the good's demanders will offer to buy to decrease if the price they have to pay is higher.
The "Law" of Uniform Prices
All units of a good in the market will tend to sell at the same price no matter who the buyer and sellers are.
The buying of a good a t a low price and selling it for much higher
The Micro "Law" of Supply and Demand
Tells us why there should be equalizing forces in a market
The price across from where the supply and demand curve cross
The quantity beneath where the supply and demand cureve crosses.
The invisible hand that guides private interest and the passions of men in the direction in which is the most agreeable to the interest of society as a whole.
The market supply captures the cost borne by actual sellers of goods and services
The market demand captures the benefits enjoyed by actual buyers of goods and services
The difference between private and social cost of production
the difference between private and social benefits of production
Public goods and the free market
Social rationality demands that an individual purchases a public good to the point where the cost of the last unit she purchased is as great as the benefits enjoyed by all who benefit, in sum total, from her purchase of the good
Markets do not yield efficient outcomes when they are out of equilibria even in the absence of external factors, when the equilibrium quantity is the same as the socially efficient quantity to produce and consume in the absence of external effects.
The Macro "Law" of Supply and Demand
Aggregate supply will follow aggregate demand
The supply of all goods and services produced as a whole. It is the same as the GDP
It is composed of consumption demand of all private consumption, C, investment demand, I, and government spending, G.
Keynes believed that household consumption depended positively on disposable income, the only part of any new or additional disposable income would be consumed because part of additional income would be saved, and that even should disposable income sink to zero, consumption would be positive as people dipped into savings or borrowed against future income prospects to finance necessary consumption.
The Pie Principle
The level of income in an economy will always be equal to the value of goods and services produced in the economy because the size of the pie we eat is always equal to the size of the pie we baked.
Any changes in the government spending and/or taxes
Deflationary fiscal policy
reduces aggregate demand and inflationary pressures
Expansionary fiscal policy
increases aggregate demand and raises production closer to potential GDP
An additional increase in aggregate demand, induced by, but clearly different from, the initial increase in government spending
unemployment caused by insufficient aggregate demand for goods and services
unemployment caused when the skills and training of people in the labor force do not match the requirements of jobs available
the resule of the fact that people do not stay in the same job all their lives, and changing jobs takes time, so when we "take a picture" of the economy the photo will show some people without jobs because we have caught them moving from one job to another.
Inflation cause by an unresolved difference of opinions between employers and employees over who deserves what part of the output that plays out in a way that causes wages and prices to spiral downward
simultaneously increasing rates of unemployment and inflation
Demand Pull inflation
A rise in the general level of prices caused by demand for goods and services in excess of
the maximum level of production we are capable of
a self-imposed limit on federal debt which began in 1917 as
part of the Liberty Bond Act to finance World War I
Those who work for a living have greater bargaining power over wages and working
conditions when the labor market is_______, because the more unemployed workers
there are the more vulnerable are the employed
Employers, on the other hand, benefit from a _________ labor market because they can
find willing and capable workers more easily to use to threaten employees with
replacement should they prove demanding
the person that handles the money (example): when someone comes to fix the electric in
your house the target respondent would be the person they would want talk to because they
will be the one who allocates where money is spent and essentially pay the electrician for
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