Category: Economics

Ronald Coase: The Institutional Structure of Production. 1991

Neoclassical economics focuses on the economic exchange process itself, driven by “sovereign” consumers and producers. There is a strong reliance on the market as self-equilibrating, and it is assumed that the collective action of self-interested economic agents still produces a socially beneficial outcome for all. But the focus on exchange and consumption neglects the sphere of production itself. This was pointed out by Ronald Coase in his Nobel Prize Lecture in 1991. He described Neoclassical economics as a theory fit only for the analysis of ‘lone individuals exchanging nuts and berries on the edge of the forest’. Source: “Ronald H....

Karl Marx and Friedrich Engels on free trade (1848/1888)

Introduction Marx’s speech on free trade was given before the Democratic Association of Brussels on January 9, 1848. It was published in French in Brussels, in early February 1848. The German translation appeared in the same year and was done by Joseph Weydemeyer – a friend of Marx and Engels. In compliance with a wish expressed by Engels, this speech was appended to the first German edition of The Poverty of Philosophy (1885). It is usually included in an appendix in the various editions of that book ever since. Below is the final part of the speech where Marx, after...

Schumpeter: Creative Destruction. 1942

The following excerpt is Chapter 7 of Joseph Schumpeter’s book “Capitalism, Socialism, Democracy, originally written in 1942. It describes Capitalism as an evolutionary process, with continuous creative destruction of old structures. The theories of monopolistic and oligopolistic competition and their popular variants may in two ways be made to serve the view that capitalist reality is unfavorable to maximum performance in production. One may hold that it always has been so and that all along output has been expanding in spite of the secular sabotage perpetrated by the managing bourgeoisie. Advocates of this proposition would have to produce evidence to...

Joseph Schumpeter: State Imperialism and Capitalism (1919)

These are selected passages from an essay on the “Sociology of Imperialism” (1919) written by Joseph Schumpeter (1883-1950). For a short time, he was the Finance Minister of Austria in 1919, and later he became a Harvard professor of economics. He is famous for [easyazon_link identifier=”B00AWO0CYI” locale=”US” tag=”mainacademicsite-20″]Capitalism, Socialism and Democracy[/easyazon_link] (1942). Schumpeter’s analysis of imperialism contradicts the analysis of Lenin. Imperialism is not seen as the most advanced stage of capitalism but as the clear sign that pre-capitalistic (i.e. feudal) aspects survive in capitalism. This results from the subservience of the capitalists to state rulers from whom they ask for “protection...

Kevin Kelly: Ten Rules for the Networking Economy.

This is a short summary from “New Rules for the New Economy“, originally written in 1998. Kevin Kelly is one of the co-founders of Wired Magazine and has been at the forefront of the technology revolution and its consequences for society. The following passages from Kevin Kelly’s “New Rules for the New Economy” maybe almost 20 years old, but they are still relevant today. The central focus is on the network and on what happens when a multitude of nodes connect and interact. Kelly explores possibilities already more or less visible around us, and he offers suggestions for operating in...

Interfaith Declaration: Code of Ethics on International Business for Christians, Muslims, and Jews (1994)

The following description was written by Simon Webley, of the British-North American Research Association, who also worked on the text itself. INTRODUCTION A series of Interfaith consultations began in 1984 under the patronage of HRH Prince Philip, the Duke of Edinburgh, and HRH Crown Prince Hassan Bin Talal of Jordan. Followers of the three monotheistic faiths Christianity, Islam and Judaism took part, under the auspices of St. George’s House, Windsor and the Al Albait Foundation and the Arab Thought Forum in Amman. More recently Sir Evelyn de Rothschild has joined Their Royal Highnesses as a patron in this endeavor. A group of...

Demographic Trends and Economic Prosperity

I am teaching  a class on the philosophy of environmental science and policy, and the question that comes up again and again is how the earth will cope with the tremendous population increase that we are experiencing since 1900. This is an ethical, political, humanitarian, and environmental problem of historic proportions. Less population growth is good, but on the other hand, population growth fuels economic growth. A shrinking population not only causes economic contraction, but it also shifts the median age upward. This means that fewer and fewer young people have to support an increasing number of old people, to...

Marx: Economic and Philosophical Manuscripts (1844)

The 1844 Economic and Philosophical Manuscripts remained unpublished during Marx’s lifetime and did not surface until 1927, about 44 years after his death. These manuscripts illustrate the young Marx’s transition from philosophy to political economy. Marx’s emerging interest in the economy is apparent – an interest that distinguishes him from other followers of Hegel – but his writing in these texts is much more philosophical, abstract, and speculative than his later works. For example, the concept of a species, of what it means to belong to the human species, is essentially a philosophical question. He also develops a concept of alienation that is...

Market Mechanism Explained

It seems to be fairly simple, but it raises many questions. To start with: Did Adam Smith describe a law of economics akin to a natural law, or is the market mechanism only a model or idealization that describes an optimal way to produce and distribute goods and services? When economists refer to price in a market, they try to keep considerations of fairness and justice out of the picture and, analyze price simply as an outcome of the forces of supply and demand. But what are these forces and what determines them? The following points describe the mechanism, a...

Milton Friedman: Stockholder Theory.

The Social Responsibility of Business is to Increase its Profits Article by Milton Friedman (Quoted from: The New York Times Magazine, September 13, 1970.) When I hear businessmen speak eloquently about the “social responsibilities of business in a free-enterprise system,” I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free enterprise when they declaim that business is not concerned “merely” with profit but also with promoting desirable “social” ends; that business has a “social conscience” and takes...

China, India, and the United States: A Comparison

Why does the United States need urgent economic and political reform? An economic comparison between China, India, and the US reveals the stagnation of the US economy since 2000. The US has engaged in two useless and wasteful wars, and has failed to invest in infrastructure, education, research, health care, etc.The Obama Government is bogged down in a political stalemate with the Republicans, who lost the last two Presidential elections by relatively wide margins. Nevertheless, Republicans use a constitutional system of checks and balances, which was meant to protect political minorities and foster compromise, in order to block many Government...

China

China is one of the most dynamic and interesting countries today; it’s emerging power will shape the 21st century. Here are some facts about the country that I find useful to understand it better. Population China is the largest country in the world with 1,349,585,838 people, (July 2013 estimate), or roughly 1.35 billion people. By comparison, India has 1.22 billion people, but is slowly overtaking China, because of a higher birth rate. The whole continent of Africa has 1.11 billion people in 2013, but China has a population density that is almost 4 times as high as Africa. Life expectancy...

Economics

Economics is a social science that analyzes the production, distribution, and consumption of goods and services. In this definition, Economics is one of the more fundamental sciences, because it examines the material reproduction of societies. Since it’s object is very complex, the science of economics must be interdisciplinary, and can be exercised in a variety of ways. Economists can focus on how economic agents behave or interact, or they can examine economies as a whole. Accordingly, textbooks often distinguish between microeconomics and macroeconomics. Microeconomics examines the behavior of basic elements in the economy, including individual agents (such as households and firms,...

Russia

Russia has an estimated population of 142 Million in mid-2013, with a slightly negative growth rate. It is geographically the largest country in the world, with 1.8 times the size of the US. This means that it is very sparsely populated, with vast, open, and empty landscapes. Of these 142 Million Russians, 73.8% live in urban centers, and the largest city by far is Moscow, with 10.5 Million people, followed by Saint Petersburg, with 4.5 Million inhabitants. The total median age is only 38.8 years, and the life expectancy at birth differs widely between men and women: Men reach an...

Marx: Commodity Fetishism

The Fetishism of commodities is explained in Section 4. of Chapter 1 of Capital: A commodity appears, at first sight, a very trivial thing, and easily understood. Its analysis shows that it is, in reality, a very queer thing, abounding in metaphysical subtleties and theological niceties. So far as it is a value in use, there is nothing mysterious about it, whether we consider it from the point of view that by its properties it is capable of satisfying human wants, or from the point that those properties are the product of human labour. It is as clear as noon-day,...

The Transformation of Money into Capital

“The Transformation of Money into Capital” is a section in Karl Marx’ book Capital, 1867. It is Part II of Volume 1, and it explains how money gets created and transformed in the  process of circulating commodities.  Money, as described by Marx, can only be transformed into capital through the circulation of commodities. Money originates not as capital, but only as means of exchange. Money becomes capital when it is used as a standard for exchange. The circulation of commodities has two forms that make up the general formula: C-M-C and M-C-M. C-M-C represents the process of first selling a commodity...