Basics of the Political Economy Model

1. Basics of the Political Economy Model Econ 248: Economics of Poverty and Discrimination Prof. Keith Bender Econ 248, UW-Milwaukee

2. Political Economy Theory • Definition: The study of how groups and institutions interact in obtaining scarce economic resources. • Here need to flesh out theory before we can discuss theories of discrimination and compare with neoclassical model • Outline • 4 C’s of Political Economy theory • How these C’s affect class, race and gender • Exploitation, domination, and exclusion • What is the equilibrium? (Hint: there is no equilibrium concept in PE theory!) Econ 248, UW-Milwaukee

3. First ‘C’: Context • Political economists believe that the context or the environment of where the economic interaction takes place is key • History, institutions, culture shape and constrain behavior • Examples: role of religion, customary roles of groups in society (like women staying home and raising kids), legal systems and protections given under the system • Why important? • If context matters, then decisions are not individually driven and exogenous. • Rather, they are group driven and endogenous (ie everything causes everything) Econ 248, UW-Milwaukee

4. Second ‘C’: Why do fans take off their shirts at Packer games when the wind chill is below zero? • Because they like to. (answer submitted by my daughter, Fiona) • Because everyone else is doing it. • Because they are hot. • Because they are too poor to afford shirts. Econ 248, UW-Milwaukee

5. Second ‘C’: Collective Behavior • Answer #2 – implies this • (And your parents would then say, “If they all jumped off a cliff – would you jump too?!”) • Lack of power in an individual context • Implies need for collective behavior to have any ‘power’ in obtaining economic resources. • Key is in unequal balance of power and power is defined in groups – both obtaining and maintaining power Econ 248, UW-Milwaukee

6. Third ‘C’: My daughters sit down for dessert. There is only one piece of pie. I allow Sophie to cut the pie and take a piece. Fiona, the other daughter, will say… • “Thank you, Sophie, for allowing me a piece of your pie.” • “Hey, your piece is bigger than mine!” • “Sophie, look at that neat bird outside the window.” (Whereupon Fiona takes both pieces of pie and runs away!) • “Watch out!! Dad is stealing both pieces!!” Econ 248, UW-Milwaukee

7. Third ‘C’: Conflicting Interests • While #4 is possible (!), #2 is most likely. Why? • There is a fixed amount of pie (it is a limited resource), so the only way to get more, is for someone else to get less • Implies that economic interaction is a ‘Win-lose’ situation • Compared to ‘Win-Win’ in NC economics • Here, we’ll focus on three main conflicts • Class • Racial • Gender Econ 248, UW-Milwaukee

8. Fourth ‘C’: As the saying goes, “Nothing in life is constant except • competition.” • cramps.” • children.” • change.” • cruddy professors.” Econ 248, UW-Milwaukee

9. Fourth ‘C’: Change • Here, we are looking at ‘change’ • Defined as: the instability created by conflicting interests and limited resources. • Equivalent of the ‘market’ but more dynamic • Note that change may be either ‘good’ or ‘bad’ – it depends on your point of view. Econ 248, UW-Milwaukee

10. Focus on Conflict • Many types of conflict – here will focus on three examples: class, race, and gender • General issues • Conflicts not mutually exclusive • Social categories • Choice over group • Relativistic in nature (must have counterpart group) • Site • Fight over ‘surplus’ • Ways to generate ‘surplus’ (‘oppression’) Econ 248, UW-Milwaukee

11. Example 1: Class Conflict • Definition: • Social relations defined by a relationship to the means of production • Initial writers: Karl Marx and Friedrich Engels • Groups: Workers and Capitalists • Fighting over ‘surplus’ • Definition: output above that needed to replace capital and labor used in the production process • Similar to idea of profit • Conflict comes about in generation and distribution • Site: Place of production (firm) • (Above is extreme view – reality is more murky.) Econ 248, UW-Milwaukee

12. Example 2: Race/Ethnic Conflict • Definition: • Social relations that are associated with racial, cultural, or ethnic differences • Groups: Different races, cultures, ethnicities • Fighting over ‘social surplus’ • Some proportion of aggregated class generated surplus • How is it distributed across races/ethnicities? • Site: Communities, cities, regions • Ex: provision of public services: transportation, schools, economic development Econ 248, UW-Milwaukee

13. Example 3: Gender Conflict • Definition: • Socially created distinctions between men and women • Key is NOT biological distinctions, but differences in behaviors and social roles • Groups: Women and Men • Although not always against the other gender • Fighting over ‘household surplus’ • Definition: the surplus generated in household • Combination of outside resources and household production • Site: Household/family Econ 248, UW-Milwaukee

14. ‘Ways to Oppress’ • All conflict is over ‘surplus’, but how is it generated and/or distributed is key. • Many ways to oppress – here focus on three • Exploitation • Definition: control by one group of another’s work for monetary or material gain • Generally (but not exclusively) class conflict • Capitalists have resources, workers don’t • Exclusion • Definition: physical or social isolation of a group to diminish their roles and opportunities • Generally (but not exclusively) racial/ethnic conflict • Ex: relegation of minorities to underresourced areas (ghettos) • Domination • Definition: social roles or forms of coercion which assure that one group is submissive to another • Generally (but not exclusively) gender conflict • Ex: sexual division of labor, sexual harassment Econ 248, UW-Milwaukee

15. ‘Matrix of Oppression’Schiller, p. 136 Econ 248, UW-Milwaukee X

16. Why doesn’t the idea of the NC model of the market work for PE theorists? • The NC market assumes that the distribution of economic resources is a ‘win-lose’ situation. • The NC market is inefficient sometimes. • You cannot capture the idea of context in the market. • Since resources are limited, conflict shows that economic outcomes are ‘win-lose’, not ‘voluntary’ as the NC model assumes. • The PE model does not allow for groups to interact, so markets are superfluous. Econ 248, UW-Milwaukee

17. PE and the Market • #4 on the previous slide gets closest to the answer. • Key is that all this conflict means that PE assumes that there are definite winners and losers. • Markets are generally NOT voluntary, since you need economic resources to survive. • Existence of winners and losers means that competition cannot ‘cure’ oppression. • Unequal power relationship, too • Use of ‘divide-and-conquer’ techniques Econ 248, UW-Milwaukee

18. The Final C - Change • Economy is in a constant state of flux – very dynamic. • Change is key here • Distributions of economic resources are not stable since all sides want more ‘surplus’ • Again, though, change is not necessarily good • However, vein in literature (actually from Marx) that says that the alienation of groups in society decreases the amount of resources available in society • Even the powerful see this and may not ‘oppress’ as much so to increase resources available Econ 248, UW-Milwaukee

19. Comprehension Question 1: Which of the following is not one of the Four C’s of PE theory? • Collective behavior • Change • Competition • Context • Conflict Econ 248, UW-Milwaukee

20. Comprehension Question 2: According to PE theory, if women are not in the labor force, they cannot be oppressed. • True • False • Uncertain Econ 248, UW-Milwaukee X

21. Questions for me? Next Lecture: Basics of Work and Wages in the PE Model Econ 248, UW-Milwaukee