I love the theory of capitalism. According to the two fundamental theorems of welfare, perfectly competitive markets can provide economically efficient outcomes and experience suggests that most markets work exceedingly well. A perfectly competitive market would even out inequalities according to the second welfare theory. True, we don't live in a perfectly competitive market, thus we are taking public finance.
In Work and Labor, a sociology class today, I found myself increasingly frustrated with how the professor and text describe capitalism, rather bashing the institution at the theoretical level. I understand that this is from the sociological lens, but one cannot disagree with something they do not understand. Granted I am biased as an econ major, but I can't stop thinking that to have a liberal arts education econ 101 is as, if not more necessary, as two cultures courses. How can one understand people and culture if they do not have a basic grasp of economics?
I really like this post, because I too have run into exceedingly harsh critiques of capitalism, especially in political science and sociology classes, and especially from people who I know have never actually taken an economics course. Culture is by definition, the study of the collective beliefs, practices and exchanges between a group of people. Like Marx believed, the basic economic structure has an almost deterministic effect on culture. The capitalist market influences our lives daily,allowing us to better ourselves through trade, exchange ideas and vote with our dollars. While capitalism is not perfect, it is an integral part of western culture.
ReplyDeleteThe problem here is concurrent with what we spoke about in class the other day. Economic theory (PPF etc) talks from a one economy, one country perspective. The world, however, is not a single economy or country but a multitude of countries and economies. The basis of capitalism and market economics is self interest and, historically, we can see that self interest in the Western countries have had extremely negative effects on third world countries. The 'scramble for Africa' and other such examples breathes life to those people who disagree with capitalism. If the world was one big economy, with every self interested individual would have an equal stake in all the world's resources from an economic standpoint then capitalism would be a godsend from the perspective of all disciplines!
ReplyDeleteSelf-interest is such a dangerous motivation when very few of us have sufficient information to make decisions that truly serve our self-interest. The editorial that I handed out in class is a case in point. Median income is going down: we are redistributing resources to the very wealthy. If markets work relatively well, this distribution will lead to efficient outcomes but most of us will not be able to partake of the outcomes because we lack sufficient income (JJ's point in the preceding post). So, instead of understanding the system and its theoretical underpinnings, we blame each other (unwed mothers, high school grads, people of color, women, felons, etc.). Changing the initial distribution of resources would help. So would using an explicit social welfare function even given all its shortcomings. But, that's a topic for next week.
ReplyDeleteIn previous economics classes I didn't put much thought into the underlying assumptions of 'perfect competition.'
ReplyDelete1. many consumers and firms
2. homogeneous product
3. perfect information for buyers and sellers
4. free entry and exit in the long run
I blame this in large part to the fact that I am also a math major and in math, assumptions are almost always taken as truths when used to prove other theorems and principles. As we found out in class on Thursday, this doesn't seem to be the case in economic theory. Understanding the limitations of these assumptions allows us to understand the limitations of the theory itself.
I am very engulfed into the business and economics realm of thinking, being a senior major in the field and truly believe that other students within the major/minor think similarly. We may not all agree on everything, but when conversing with a philosophy or history major, it's like we speak a different language!
ReplyDeleteWe have been programmed over the last four years to think in a certain way and really cannot expect to see eye to eye with the many different personalities we find here at K, but I like the aspect of differentiation between thought! It is these differences of opinion that have allowed us to grow academically and in so many other ways, which is the beauty of a liberal arts education I suppose
Self interest is indeed dangerous motivation, however, it has become the main type of motivation in this country. Lobbyists, politicians, corporations, and consumers are all generally interested in benefits to themselves. We want to pay the lowest possible price for everything, the corporation wants to charge the highest price for everything. Lobbyists are only concerned with the interests of who they represent. The reality is that, generally, community at large is no more. Unless I can get some benefit from it.
ReplyDeleteIn my Organizational Behavior class, we are currently reading a book about how Ben Cohen and Jerry Greenfield (the founders of Ben & Jerry's Ice Cream) successfully started a values-led business. The basic foundation of a values-led business is to incorporate social values into day-to-day business activities, and one of many ways that they do this is by sourcing locally to stimulate their local economy. The main purpose for their company’s existence is to influence social change, unlike most corporations nowadays which are only in it to maximize profit/shareholder’s wealth; the interesting part is, like Ben and Jerry’s, values-led businesses can actually be highly profitable. I wonder what would happen to our economy if more companies followed Ben and Jerry’s values-led business strategy and cared less about their own self-interest and more about the community.
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