Spring Term Lectures all in one document with annotations
4 views 0 purchase
Course
Alternative Perspectives in Economics (ECO00011H)
Institution
The University Of York (UOY)
This document provides you with all the lecture notes with short summaries inspired by the discussions in the lecture. This will really help you if you struggle to take notes during the lectures because I managed to note down most of the important things he was discussing, and I know it can be diff...
SPRING TERM NOTES
Macroeconomic issues – post-Keynesian economics/ literature.
Theories of the State – TOPIC (9)
Political economics – nature of the state. – not normally discussed in orthodox
economics.
Alternative Views of the State
Neoclassical/ Orthodox view
- Benchmark of perfect competition leaves no obvious role for the state
- A case for state intervention requires market failure
- The state is seen as an instrumentally rational agent (a ‘black box’)
- In a democratic economy, the state’s ends are assumed to be either the attainment
of Pareto efficiency or the maximisation of social welfare
- Analysis adopts the normative framework of welfare economics
Micro model – perfect competition >> no role for the state – individual model. No
government, property rights, absence of the state. Theories of welfare economics,
pareto efficiency with no state intervention = free market theory. State is redundant/
not needed.
Real world – does play a role. Using orthodox theory – how to justify state = market
failure (second best argument) – ie: market power, imperfect info, transaction costs.
State to step in and correct market failure. Applied branches of orthodox economics
– political/industrial/health/environmental economics.
Literatures in orthodox economics all based on second best cases.
Modelled as a rational agent – instrumentally rational. Questions of what the
objectives are – elected Government – complex issue but assumed – attain pareto
efficiency after any market failures or (comparing utilities) attain objective function
(optimal tax theory – public/welfare economics). Pareto = non-controversial – agreed
objective > distributional issue. Objective function – very particular values depends
on circumstances >> controversial.
Do not look at composition of the state = black box model. Single rational agent.
Orthodox view – all or nothing. The state is redundant, or the state assumed to push
public interests and solve issues perfectly.
Heterodox – state is somewhere in-between.
New Right/ Public Choice
- Disaggregates the state into rational interest groups pursuing their own ends (e.g.
politicians, bureaucrats)
- Politicians seek to gain election and re-election to office
,- Bureaucrats seek to enhance their salaries, status, budget, etc.
- Day-to-day management of the state is undertaken by bureaucrats, subject to
external constraints imposed by politicians
- Aims of bureaucrats and politicians often conflict with the public interest (hence the
New Right arguments about ‘government failure’)
Free market theorists – public choice. Look within black box – state broken down into
groups assumed to be rational (compositions of the state/ disaggregate it). Groups:
politicians, people who run state = civil servants, bureaucrats, employees don’t
usually get mentioned but could get included.
Politicians – assumed to pursue power – stay in office – need to be popular enough
to win elections = not public interest, personal interests. Set the agenda.
Bureaucrats/civil servants – concerned about working conditions – status, rank, size
of department and influence, salaries, and budget etc. Both self-interested. Manage.
Principle- agent model. Politicians constrain Bureaucrats. Negative view of state –
not pursuing interests of the public. – critical of the state.
Difficult to find positives – they talk about government failure rather than market
failure. No rational for government.
Institutional/Behavioural
- Stresses the complexity of the modern state, divided into many distinct
organisations and departments, each with its own goals
- The multiplicity of goals rules out universal optimising behaviour
- Satisficing behaviour allows simultaneous attainment of diverse goals and targets
(cf. behavioural theories of the firm)
- Political/electoral concerns are one set of goals among others
- Some goals may derive from wider social and economic pressures, not the private
interests of politicians and bureaucrats
Behavioural theory of the firm***
Satisficing approach – distinct divisions beyond politicians and bureaucrats –
departments and sections of government that coexist – breakdown of the state –
within black box in more detail. Optimise separate objectives.
Satisficing model – simultaneous targets - when there is a crisis the government
responds – troubleshooting – take action when things go wrong.
More positive view of government. Issue: complex model – rare model in literature –
not many examples. No general framework – all states are different.
Marxian
- Analysis of the state should be historically specific
, - Economic and political power are inseparable
- Under capitalism, political as well as economic power will be dominated by capital
- The state plays a central role in ensuring that the economic system operates
smoothly and reproduces itself
- The interests of capital become generally perceived as the national interest (even
though most of the electorate depends on labour as its main income source)
Theories of the firm***
Capitalism era/state – nature of capital (dominant factor of production over labour).
Cannot separate economy from politics. Political and economic power dominated by
capital. Capitalist class (ruling class). State – ensures system operates smoothly.
Profitability in firms to make capitalism work. “Permeate the state”
Democratic system but all main parties = pro-capitalist – cannot vote against
capitalism. No real alternatives to capitalism. Marxian’s looking for revolutionary
change.
Economic Functions of the State
Marxian and related approaches identify two main economic functions of the state:
Accumulation
– Some state activities create the conditions for profitability and capital accumulation.
Examples are the establishment of property rights, provision/regulation of
infrastructure, subsidisation of investment and research, control of inflation, and
restrictions on trade union rights.
Legitimisation
– Other activities encourage workers to accept and participate in the economic
system. Examples are state education, regulation of working hours and conditions,
provision of social services and health care, income maintenance policies, and public
control and regulation of the media.
The accumulation function is generally seen as supporting capital, while the
legitimisation function makes concessions to workers in order to ensure their good
will. Consequently, there may be tensions between the two functions and shifts in the
balance between them.
Legitimisation requires high tax levels to support social expenditure, whereas
accumulation implies low taxation of firms so as to protect profits and encourage
investment. Friction between the two functions is visible in the eternal wrangling over
tax levels (‘the fiscal crisis of the state’) Much Marxian debate has concerned exactly
how the economic and political domains are related: this has given rise to various
theoretical strands, notably the instrumental approach (Miliband), the structural
approach (Poulantzas), and the capital logic approach (Altvater). There is no
disagreement, however, about the dominance of capital.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller emcevoyp2001. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $17.04. You're not tied to anything after your purchase.
