Introduction to Political Economy of Capitalism

1. Introduction to Political Economy of Capitalism First things first….

2. What is Economics? First things first….

3. Economics as Study of Production & Distribution • Study of particular terrains of human activity • sphere of production/work • sphere of distribution • of consumer goods • of producer goods • Classical economics focused on Labour • unlike Physiocrats (land) & merchantilists (money) • Focus on labour result of centrality of labour in capitalist society

4. Centrality of labour - Historically • Development of Capitalism has involved ever more thorough subordination of life to waged labour • business tries to put more and more people to labour • business has extended itself not only geographically but also into every sphere of life • In 18th - 19th Century, central social conflicts were around length of working day • Business expanded, workers resisted, eventually forced down, 15hrs to 12 hrs to 10 hrs to 8hrs • Business response: colonization of free time

5. Human Activity Work

6. Centrality of labour - Today 8 hours + By Day 5 days + By Week 50 weeks + By Year 7ys- 7yrs- By Life-Cycle

7. Labor Theory of Value • Given recognition of centrality of labour • Classical economists had LABOUR theory of value • Economics was "Political Economy" • study of labour • study of socio-political institutions • study of conflicts over work, distribution, etc. • But "labour" theory became a liability • Used by critics of capitalism, so it was abandoned

8. From Labor to Choice • Mainstream economics abandoned "labor" theory of value and redefined itself in terms of "choice" • This was "neoclassical" revolution • Economics as "theory of allocation of scarce resources among competing ends" • Two key concepts: choice, scarcity • choice = decision making of individuals, firms, govt • scarcity = finite

9. Choice • Microeconomics = choices of individuals & firms • Macroeconomics = choices of governments, micro choices in background • Choice Theory = theory of preference ranking • A prefered to B • B prefered to A • indifferent between A & B • Opportunity Cost

10. Scarcity & Opportunity Cost • Choosing one thing means giving up something else, "cost" of choice = what is given up • Production-possibility frontier guns A = more guns, less butter B = more butter, fewer guns butter

11. Is Economics a Science? • From 'Political Economy' to 'Queen of Social Science" • Economics shares hypothetico-deductive method with 'hard' sciences • But pretense of "positive" science is absurd • choice of subject & methods always involves values • even true in 'hard' sciences • changes in paradigm over time in all fields

12. Critiques of Two Approaches • Critique of traditional "political economy" • largely ignored sphere of consumption, (reproduction) which with reduction in working day has become critical in understanding social development • Critique of economics as choice theory • largely ignores centrality of labour, relegates its study to other social sciences • largely ignores • 1. forces that shape constraints on choice • 2. systematic manipulation of 'scarcity'

13. Sphere of Consumption • Always existed • Importance grew historically • with workers' success in reducing working day, gaining higher wages, expanding "demand" • Business colonization of "consumption" • Some social theorists have argued sphere of consumption has displaced labour as central organising institution of society • But much consumption a function of labour

14. Conclusion • Definition of economics not that important • In terms of understanding the field look at what economists DO, policy oriented - managers of capitalism • What matters to people is identifying what is important • Disciplinary divisions (economics, sociology etc) = obstacle to understanding • Study what you need to to understand what you think is important

15. --END--