Contending Exam #1
Define and explain the RPE core values.
-Efficiency: goods/services that satisfy real human needs (Not wasteful) and protect all inputs: environment, health of workers and household labor -quality of life: Job satisfaction, Quality of family, social life and Quality of Community life. Allow individuals to realize their full human capabilities. Quality of community: necessary stability for human life. -equality: in sharing the burdens/ benefits generated by the economic system -democracy: Equal access to civil rights & personal liberties, political resources, & influences
List and briefly explain the strategies capitalists use to circumvent the limits imposed by competition.
-price competition strategies with given technology and market structures: if they raise prices then capacity utilization will fall, if they lower prices then capacity will be more fully utilized. -more dramatic improvement in profits comes from breakthrough strategies whatever the level of the average rate of profit: any kind of innovation allows a firm to break out of the limits of price competition -monopoly strategies that also yield significant improvements in the rate of profit: drive rivals out of the business, formal collusions and/or informal tacit agreements among rival firms not to compete, and prevent new competitors from entering the market.
Give three examples from "Unnatural Causes" of the socio-economic factors that determine health outcomes. Briefly explain your answer ( how these factors determine health outcomes)
1)Education is an important predictor of health because it both shapes and reflects so many other factors that affect people's life chances. Education also matters because it can provide us with the knowledge, skills, confidence, connections and opportunities we need to negotiate the world and exert greater control over our lives. How well we do and how far we get in our schooling impact not only our future earnings potential but also our mastery of our environment and our ability to navigate institutions and gain access to power - all of which are consequential to success and wellbeing. Education is huge, because it relates to people's ability to plan and have hope for the future. Without hope for the future, people tend to make short-term decisions," including engaging in riskier behaviors that endanger health. 2) Food Security:Food security means having adequate access to nutritious things to eat. In the developing world, the issue typically is getting enough food; in the industrialized world, it's more often a matter of getting the right food. Ironically, high-calorie food is cheap and plentiful in poor urban communities, while low-calorie, nutrient-rich food is harder to come by. This leads to a counterintuitive situation in which poverty tends to foster obesity rather than starvation. Key factors are, access (low income areas lack full service supermarkets they rely on fast food places and convenient stores), time (work long hours and have little time to shop and prepare healthy meals for themselves and their families, prepared meals are fast and easy), marketing (commercials), cost (junk food costs less). Food insecurity not only impacts nutrition, it also affects learning, brain development, behavior, immune resistance and in turn, job prospects and life chances over the long term. 3) Income and Wealth: Perhaps the biggest predictor of one's health is one's wealth. It's not just the poor who are suffering; every step down the class pyramid corresponds to worse health. Study after study has shown that those at the top of the class pyramid live on average longer, healthier lives than the rest of us. The middle classes fare worse than those on the top, and the poor get sick more often and die sooner. Wealth doesn't just bring more material comfort, it also provides financial security and access to resources that promote opportunities for better health. For adults, wealth is tied to neighborhood quality, work conditions, food security, access to medical care, and the availability of buffers against stress.
Define and explain the following core concepts of RPE: surplus, necessary consumption, and exploitation.
A surplus product creates an opportunity for nonproducers to consume without doing productive work (Children and elderly in industrialized economies) necessary consumption: Goods/services necessary to maintain the producers at their customary/traditional standard of living (Not biological/ subsistence minimums. Can be high or low depending on labor productivity, the length of the workday, & what is considered customary within a culture.) exploitation: Exploitative, those who are able to force or otherwise coerce the producers to turn their surplus over to them. Systematic exploitation exists when a society's labor productivity has advanced to the point where a surplus is produced.
What is the impact on employment and capitalist control over the production process of labor saving technological change?
Output can be larger or smaller depending on how fast or hard workers can be compelled to work independently of the technology utilized by the capitalist.
What is the post autistic movement in economics? What are the main critiques of NCE by students? Briefly explain each critique.
when students started requesting a pluralism of education about economics instead of just mainstream (NCE) theory. Neoclassical economics is heavily math focused and model oriented but does not apply the math to current problems. It creates perfect economic markets, assumes consumers are all the same, and give no time for reflection.
According to Amartya Sen in "Many Faces of Gender Inequality," what are the main gender inequalities around the globe? Briefly describe each inequality and its causes.
(1) Mortality inequality: In some regions in the world, inequality between women and men directly involves matters of life and death, and takes the brutal form of unusually high mortality rates of women and a consequent preponderance of men in the total population, as opposed to the preponderance of women found in societies with little or no gender bias in health care and nutrition. (2) Natality inequality: sex selected abortion, son preference, statistically significant in India and South Asia (3) Basic Facility: Primary education, literacy, There are other deficiencies in basic facilities available to women, varying from encouragement to cultivate one's natural talents to fair participation in rewarding social functions of the community. (4) Special Opportunity Inequality: higher education, gender bias (5) Professional Inequality: hiring, firing, promotion, pay (6) Ownership Inequality: productive assets (land, capital, homes) The absence of claims to property can not only reduce the voice of women, but also make it harder for women to enter and flourish in commercial, economic and even some social activities. (7) Household Inequality: unequal access to HH resources including food and health care. Unequal burden of unpaid work (housework, childcare, adultcare)
Explain how setting the price of the product lower than the production cost helps eliminate competition.
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What are the three dimensions of the radical approach to studying the economic system? Explain the dimensions.
A horizontal dimension (competition), a vertical dimension (command), and a time dimension (change). Horizontal can be characterized by economic relationships that are voluntary and competitive, like buyers and sellers competing in the market. Vertical takes into account situations where power differences and hierarchy occur, and is about the power to shape or condition the choices of others, and it can happen in the workplace, the market, or even in the household. The time dimension is based off the changing nature of economic systems, how everything changes over time.
Great Depression and the Oil shocks are two great changes in the world economy that led to shifts in macroeconomic theory. Discuss the impact on economic theory and practice of these phenomena. In your answer, be sure to discuss the theories that prevailed prior to each of these phenomena affected the validity/popularity of these theories. What do Supply-side policies in industrialized economies entail in terms of public spending and labor market regulations? Explain your answer.
Before the Great Depression mainstream economics was focused on fully free-markets with little to no government intervention. This was based off of Adam Smiths work and the invisible hand. The idea was that the market will fix itself. After the great depression economists were confused. This is when Keynes wrote The General Theory of Employment Interest and Money. His idea agreed with Adam Smiths but he said in the Short run you need some government intervention to help the economy on it's way but he also said in the long run we are all dead. Keynesian economics took over the majority of economic theory and became the mainstream school of thought. When the Oil shocks occurred economists were then confused even more. Which were neoliberal supply side theory came about. For industrialized countries you need to cut taxes, decrease government spending, deunionizaiton, more banks, and cut in public subsidies. And finally, a revival of neoclassical economics.
According to John Maynard Keynes, is involuntary unemployment in the long-run or a depression possible in market economies? What is his explanation of the Great Depression? What needs to be done, according to Keynes, to get the economy out of the recession? Briefly explain your answer.
Both Krugman and Keynes believed that free markets are not stable and self-correcting. Involuntary unemployment and recessions/depressions are definitely possible in market economies. Both these men understood that markets aren't stable because neoclassical assumptions about perfect markets oversimplify complex problems. People are not always rational, not everyone has perfect information, and financial market assets are not always priced at their intrinsic worth. When there is a shock to the economic system, there can be a shift down in the aggregate demand (AD). There's deficient AD, and people aren't spending (C) or investing (I). The AD formula is C+I+G+Net Exports. Therefore, the only way to shift AD back to fix price levels and output is to increase Government spending (G). This contrasts with the NCE view that markets have a self-adjusting price mechanism. In the long run, prices will always be in equilibrium. Since markets correct themselves, there is no need for government intervention. NCE sees high unemployment rates during recessions as voluntary. Workers are simply choosing not to work until employment conditions become favorable again. NCE is backed up by math models which have been mapped onto real data which is why it's the dominant view, however it fails to explain many things like bubbles, financial crises, etc.
Describe the conflict between capitalists and workers. What are the conflicting goals?
Capitalists want lower wages, higher efficiency and higher labor intensity (work done per hour). Workers want higher wages, higher/lower efficiency and less labor intensity.
According to Barone, why is Econ 288 Contending Economic Perspectives important for a liberal arts education? List and briefly discuss three distinct contributions of the course to the liberal arts curriculum.
Dickinson college mission statement: -intellectual curiosity: students have become better at questioning, thinking about and even challenging what they are being taught in other classes because they know that it's not a truth that all economic accept. -cross-cultural & global competence and sensitivity: students have learned to see that human behavior is determining not just by individual human agency but heavily influenced by social structures including culture. -critical thinking/analytical thinking: students have found that where competing explanations of the same phenomena exist that some kind of convincing argument or evidence is required to sort out the disagreements and that this may not always be easy or even possible.
List and explain the primary mechanisms of divergence and convergence in income equality, according to Piketty.
Diffusion of knowledge and investment in training and skills are the forces of convergence that will reduce income inequality and increase overall productivity growth. Divergence occurs when groups of the population are excluded from better jobs because they don't have the same opportunities as other groups. Also, the top wage earners have the potential to separate themselves from the rest of the pop by a wide margin. The processes of capital accumulation and wealth concentration, central to capitalism, promote greater income inequality. This is particularly a problem when return on capital is high, but economic growth is weak. Share of top wage earners may have grown because those in top positions can set their own salaries which may not represent their productivity at all (overpaid). In slow growing economies, past wealth becomes disproportionately more valuable. Inherited wealth is more valuable than current wage labor, only intensifies wealth accumulation/concentration.
List and briefly explain three competitive profit strategies. Explain the mechanisms through which these strategies are expected to increase the rate of profit.
Efficiency of Labor (e): Improve technology Intensity of Labor (d): Speed up the production line or hire more supervisors to control the pace of work Hourly wages (W): Locate a source of cheaper labor or break up unions
Based on Piketty's findings, list and explain the trends in income inequality in the 1910-1950. Is the income inequality increasing or decreasing? Compare and contrast the trend in income inequality over the 1910-50 period with the period after 1980. How do they compare? Discuss the economic policies that prevailed in each period. How are they different?
From 1910-1950 the U.S. was hugely egalitarian. Income inequality increased very sharply during the 1920s. In 1929 it peaked with more than 50% of national income going to the top decile. After the war it was compressed. From 1930-1940 there was a huge shock from taxes. Overall, inequality in the U.S. started from a lower point before the war but even at its lower point after the war it was still hirer than Europe. From 1950-1980 the top decile claimed 30-35% of national income. After the 1980s, inequality exploded and the top decile claimed 45-50% in the 2000s. This happened due to the internet bubble and the stock market. Also, after a stock market crash the inequality always grows slowly.
What are the distinctive class structure and organization of capitalism from a RPE perspective? In other words, according to RPE, how is capitalism different from other economic systems? List and briefly explain all features.
From an RPE perspective capitalism class structure and organization: generalized commodity production and markets, private ownership of the means of production, wage labor, production for profit, patriarchy and white racism. This is different from NC theory because in the NC market consumers are equal.
Discuss the mechanisms through which expansionary fiscal policy through increase in government spending is expected to help increase GDP and reduce unemployment in the US economy. You may but do not have to illustrate your answer with graphs.
If government spending increases it will decrease taxes, which increases income, which then promotes firms to invest, once investment increases more jobs are created, decreasing unemployment.
Define "labor power" and "labor" and explain the differences between these two concepts.
Labor Power is the abstract of human labor that can be exchanged for money. The laborer chooses to enter a contractual relationship with the employer, who is purchasing the worker's labor power. Labor power has value in exchange. Labor itself has value in use, it's the usefulness of the work provided.
Compare and contrast Marx's and NC views of factors of production (land, labor and capital). Specifically, explain the labor theory of value and compare and contrast the RPE and NC conceptualizations of and returns to land, labor and capital.
Marx says three things are true of production in all societies: 1. Production is transformation of the natural environment into useable products. 2. Nature itself contributes nothing to production. 3. Production is by definition, social. The Neoclassical View is that entrepreneurs enter the market and buy each of these factors of production (land labor & capital) 1. The contribution of each factor to the production process can be precisely determined. 2. The price paid for each of these commodities would equal its productive contribution to production (prices for rent/l
Briefly discuss Piketty's critique of the economics discipline.
Piketty basically says that the economics discipline has to "get over" the heavy use of mathematics to create theoretical, highly ideological speculations about the economy at the expense of historical research and collaboration with other social sciences.
Briefly discuss the main critique of Classical Political Economist of the 18th, early 19th c. By Thomas Piketty.
Piketty's main critique on the Classical Political Economist of the 18th, early 19th c. is the distribution of wealth. He also comments on the prophecies of doom made by Mathus and Young at the time.
List the competitive profit strategies. Explain the mechanism through which these strategies are expected to increase the rate of profit.
Price of output (Pz): Gain market power so that prices can be raised Efficiency of Labor (e): Improve technology Intensity of Labor (d): Speed up the production line or hire more supervisors to control the pace of work Materials & machines used up (M): Develop production methods that reduce amount of wasted materials or broken tools P of materials/machines used up (Pm): Find new supplier with lower prices Hourly wages (W): Locate a source of cheaper labor or break up unions P of capital goods used in prod. (Pc): Find a cheaper supplier of the machines used in production Capital goods in use (CG in use): Develop production methods that use less equipment Capacity util. rat., % of owned C in use (CU): Find markets of additional output, advertise, or lobby government to stimulate the economy, raising aggregate demand so that idle factories or machines can be put to use
According to RPE, is discrimination costly or profitable to businesses? Explain your answer. How does this view of discrimination differ from Gary Becker's theory of Taste for Discrimination?
RPE: Capitalists benefit by having an easily exploitable group that can be hired for very low wages (racism & sexism). Discrimination can be used as a divide-and-conquer strategy by pitting workers against each other (black strikebreakers & racial antagonism) NC theory: discrimination is costly to capitalists because they cannot hire workers on the basis of individual productivity. Dividing workers against each other results in less bargaining power for all workers that results in lower wages and greater intensity of labor
What is the RPE definition of Economics? How is this different from the NC definition?
RPE: The study of labor processes that produce the goods and services, and reproduce the people and social relations necessary to sustain life and society (core value is labor processes) NC: the study of efficient allocation of scarce resources into endless wants (core value is efficiency)
What is the RPE definition of efficiency? How is this different from the NC definition?
RPE: goods/services that satisfy real human needs (Not wasteful) and protect all inputs: environment, health of workers and household labor
List and briefly explain the mechanisms through which capitalists ensure extraction of the most labor out of labor power.
Simple control (drive system) : smalls firms - employer or manager supervision technical control: control over the pace of work (assembly line) bureaucratic control: elaborate multilayered hierarchy, detailed work rules, job ladders, and seniority. Performance is evaluated against their job description
What is the invisible hand theorem? According to this theorem, is involuntary unemployment in the long-run possible? Why/not? Explain your answer
The Invisible Hand theorem is a concept described by Adam Smith in the late 18th century. There are two important concepts: 1) self interest and social optimum for example smith says "It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self interest." 2) built in price adjustment mechanism According to the invisible hand theory, each of us, acting in our own self-interests, generates a demand for goods and services that compels others to deliver those goods and services in the most efficient manner so that they may be able to receive compensation from others and make a profit in doing so. In this process, resources are allocated in the most efficient manner, in contrast to a process that relies on a centrally planned system. No according to this theorem involuntary unemployment in the long run is impossible. Rational choice theorists argue everything is due to rational choice and there is no such thing as unemployment. Smith says free markets are good and stable and there is no need for gov intervention, says the market will sort it out till its back at equilibrium. (Lightbulb joke)
Describe the Marxian analysis of a society.
The Mode of Production (Economic structure) is the substructure of any society. It has a stronger influence on culture than the superstructure. The forces of production are the inputs from the substructure to the superstructure. The Relations of Production are who owns what. For example, the nobility owns land and the serfs work the land. The Superstructure is everything else that is not in economics. The marxist methodology is historical materialism: history + benefits, economic incentives, capitalists benefit from capitalism. In feudalism, there is no education so the serfs actually believe that the landlord is doing what is right.
What are the advantages to a business of being a big business? List and briefly explain the advantages.
The bigger the business means greater ability to lower cost, achieve breakthroughs and achieve monopoly power. Which increases bargaining power with labor, finance, suppliers and the government.
What is the underlying definition of a country's level of development in Human Development index (HDI) How is this different from the GDP/capita as a measure of development? List and briefly discuss two reasons why GDP/capita is a poor measure of development.
The definition of development that is the foundation of the HDI comes from Amartya Sen, an Indian economist. Sen thought development should be seen as the process of expanding human freedoms. Consequently, unfreedoms like tyranny and inequality have to be removed for a country to continue its development. This differs from the GDP/capita view of development because the HDI takes into account a wider range of factors like average life expectancy at birth and mean years of schooling, as well as GNI/capita. Thus, the HDI provides a deeper look into the status of a country. The GDP/capita only represents the average wealth per household. This makes it a poor measure of development because it ignores statistics like income inequality, life expectancy, and education. All of these play a major role in the standard of living a person experiences.
What are the three basic capabilities according to the human development approach? What are the statistical proxies for these capabilities that are used to construct the human development index?
The three basic capabilities are ability to lead a long and healthy life, ability to be knowledgeable and ability to have a decent standard of living. The HDI uses average life expectancy, mean years of schooling, and GNI/capita as a way to measure the capabilities framework that Sen came up with.
Who are "missing women"? Why are they missing? Why is there a "son preference"? List and discuss the social and economic factors that contribute to son preference.
Women die more than men. As a result of this gender bias, the mortality rates of females often exceed those of males in these countries. The idea of "missing women" was devised to show the severity in the amount of women who are simply not there due to the unusually high mortality rate compared with men. For example, if we take the ratio of women to men in sub-Saharan Africa as the standard (there is relatively little bias against women in terms of health care, social status and mortality rates in sub- Saharan Africa), then its female-male ratio of 1.022 can be used to calculate the number of missing women in women-short countries. The lowest ratio we see is .69 so for every 100 males there are 69 females. There are 100 million "missing women" this is the number of women who are not alive today due to unequal access to food and health care. Reasons for Son Preference: 1) Social Causes- carrying on the family name 2) Economic Causes- income earning help from sons as kids and as adults, expectation of old age security
What is the reserve army of labor? What are its functions in capitalist economies?
hired during booms downward pressure on wages
Briefly define and explain the class structure in capitalism according to Marx.
the capitalist class petit bourgeoisie (shopkeepers, independent craftsman, professionals) proletariat (the working class) the poor (cannot work or Reserve Army of Labor)