Stilwell, Frank. 2012. Political Economy. The Contest of Economy Ideas. Download The Contest of Economy Ideas. 3th edition. Sydney: Oxford University Press. pp. 51-64. Available through Canvas
The Great Thinkers. Adam Smith.
Kennedy, G. (2009). Adam Smith and the invisible hand: From metaphor to ...
Political Economy
September 6, 2023
Lecture 2: Classic Political Economy
Capitalism
Alternative economic systems
- Primitive communalism
- Slavery
- Feudalism
- Capitalism
- Socialism
Defining capitalism
- Cluster of interconnected characteristics
Private ownership of the means of production
- Property rights
- Economic activity is in the hands of private businesses for the purpose of making profit.
- Common interest in perusing the profit.
Labour market
- Buyers of labour have direct contact with sellers of labour.
- Workers are free but the freedom is constrained freedom.
- Capitalism is a system of alienated labour.
o Labour as a commodity.
Capital market.
- Stock Exchange.
o Shares in companies are sold to the public.
- Sometimes companies become independent and can finance their expansion so they no
longer need to raise capital of the Stock Exchange.
Land market
- Land is of fundamental importance in all types of economic organisation.
- Land can be owned by households, businesses, individuals, therefore making some kind
of a feudalism.
- Generality of market processes tend to make land another tradeable commodity.
, Markets for goods and services
- Generalised commodity production.
- Goods produced for exchange.
- If purchases do not match the volume and array of commodities produced, economic
crisis can occur.
Distinctive role of the state
- This state relates to property rights, market, and class relationships.
- The state seeks to redistribute market incomes to the extent necessary to ensure social
stability.
- Capitalism is not a synonym of pure market economy.
Expansionary Tendency
- Dynamic character
- Capitalism works best when it's growing.
o Forward motion for its stability
Economic Theories
Why theorise?
- Process of simplification is the essence of theory construction.
o We simplify the world around us.
Competing schools of thought
- There are always paradigms that go against each other.
- New theories may overthrow existing orthodoxies.
Historical overview
- Political character of economic thought is more obvious when you look at it from
historical perspective.
- Classical PE
o Analyse capacity of the economic system based on market exchange.
- Neoclassical economists
o Equilibrium conditions in competitive markets
- Marxist economists
o Only fundamental transformation of the political economic system can reconcile
economic concerns with social justice and progress.
- Keynesian economy
o State is central.
The Great Thinkers. Adam Smith.
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