Microeconomics

[Great Helmsman]

Hi, I'm currently enrolled in an entry economics course, and I've found a lot of concepts troublesome. It seems to come from a mostly conservative-liberal view of the market, and I feel like a creationist in a biology class when the professor invokes the overwhelming scientific consensus of economists on issues like the minimum wage, rent controls, and free trade.

It also seems to be economic 'common sense' that one must sacrifice efficiency for equality, the text book doesn't succinctly explain why this (although I may be missing a piece of the puzzle). Of course I can think of a bounty of examples where these principles haven't worked in reality, but I would like to read some theory to explain this.

[rouchambeau]

Economics is a field loaded with unaddressed premises that all serve the interests of capital. It's a lot of bullshit. I would advise not studying it any more than you need to.

EDIT: and by studying I mean taking courses in it, not doing poorly in the class.

[Red Rebel]

If you want to pass econ, you have to be objective as you can about it sadly. You can argue with your professor but in the end it is rather useless.


It also seems to be economic 'common sense' that one must sacrifice efficiency for equality

Socialism is or will be more efficent than capitalism. In the most basic sense, it is because the capitalist syphon greats deals of wealth (surplus value) from the workers and horde it into their own pockets.

[Raúl Duke]

I take AP economics class in High School and one thing I noticed is that I think it makes un-backed assumptions/statements.

One example: It says scarcity will never end...is that true? (the book doesn't argue for it...it just states it...; but since we have this thread I would like to present this question)

[Kwisatz Haderach]

It is incorrect to say that all economics is irredeemably bourgeois or capitalist. Certainly, the mainstream of economic thought - the stuff you learn in high school and most of the stuff you can learn in college - is neoliberal and typically more capitalist and reactionary than even the status quo. However, economics as such is merely the study of the production and distribution of goods and services, and there are plenty of socialist and revolutionary outlooks on economic questions - they're the things you are not told in school, and you need to know where to look in order to find them.


Originally posted by Electronic Light+--> (Electronic Light)Hi, I'm currently enrolled in an entry economics course, and I've found a lot of concepts troublesome. It seems to come from a mostly conservative-liberal view of the market, and I feel like a creationist in a biology class when the professor invokes the overwhelming scientific consensus of economists on issues like the minimum wage, rent controls, and free trade.[/b]
All economics is based on assumptions about reality and human behaviour. I will say this as often as I can, because it is the cause of most bad ideas in economics. Economists start by assuming something and then drawing conclusions based on those assumptions. If your assumptions are not actually true in the real world, then all your high logic and math are worthless. If you want to argue with your professors, always challenge their assumptions. They might actually back down - a lot of the stuff taught in intro classes is based on highly simplified and faulty assumptions that even capitalists can debunk.

Take minimum wage for example. First of all, note that minimum wage is an issue that only affects capitalist economies. A socialist economy does not have private property over the means of production, therefore it does not have wages determined in a labour market, therefore it has no such thing as a "minimum wage". Thus, there is no particular reason for revolutionary leftists to support the minimum wage - we want to abolish capitalism and wage labour altogether.

But I will defend the minimum wage anyway, for the sake of the argument. No doubt you were taught that the minimum wage, being a price floor set above the equilibrium point of the market, will result in excess supply in the labour market. In other words, there will be more people offering work than people demanding work - thus increasing unemployment.

This assumes that the supply curve for labour is actually upward sloping. In other words, it assumes that more people will be willing to work if you offer them more money (which is equivalent to saying that some people will choose not to work if they are not offered high enough wages). Is this the case in the kind of unskilled labour market where the minimum wage applies? Of course not. Workers don't have a choice about offering their labour to employers. They MUST work in order to live. The supply curve in the unskilled labour market is pretty damn near vertical - it doesn't matter how high or low wages are, people will still want to work.

Likewise, the demand curve isn't terribly affected by a few dollars' worth of wage increases either. Companies always try to keep their costs down, so they will hire the lowest number of workers they can, regardless of the wages they have to pay. Buying labour is not like buying a product. If you hire less workers than you need, your productivity will suffer. When faced with a minimum wage increase, companies are more likely to try to reduce costs elsewhere than to fire workers. Still, unlike the supply curve, the demand curve is not vertical - but it is rather steep. Taken together, what this means is that a minimum wage may cause some unemployment, but only a very small amount of unemployment.

And that's assuming that the labour market is a perfectly competitive market, which it isn't... By the time you take into account all the relevant factors, like market power, training costs and so on, you will find that there is no relationship between minimum wages and unemployment.


Electronic Light
It also seems to be economic 'common sense' that one must sacrifice efficiency for equality, the text book doesn't succinctly explain why this (although I may be missing a piece of the puzzle).
"Efficiency" is a vague word that can mean any number of things. Has your book explained exactly what it means by "efficiency"?

To make a long story short, neoliberal economics defines "efficiency" in such a way that a perfectly competitive market is "efficient" by definition. Thus, any move away from a perfectly competitive market - such as a redistribution of wealth - reduces efficiency. Basically, the argument can be reduced to this: "I declare that capitalism is good. Given that capitalism is good, I will demonstrate that anything other than capitalism is bad."

By the way, perfectly competitive markets are a theoretical model that never actually exists in reality. Real markets turn out to have a wide range on inefficiencies, even by capitalist standards. Have you discussed barriers to entry, externalities, or market power? Have you discussed economies of scale, and how they limit the number of firms in a market?

Remember, all economics is based on assumptions about reality and human behaviour. If you start from faulty assumptions, it doesn't matter how good your logic is - you'll still arrive at faulty conclusions. In 90% of cases, the error of bourgeois economics lies in the fact that bourgeois economists start out from wrong assumptions.

[Kwisatz Haderach]

Originally posted by JohnnyDarko+September 14, 2007 03:18 am--> (JohnnyDarko @ September 14, 2007 03:18 am) I take AP economics class in High School and one thing I noticed is that I think it makes un-backed assumptions/statements. [/b]
Precisely.


JohnnyDarko
One example: It says scarcity will never end...is that true? (the book doesn't argue for it...it just states it...; but since we have this thread I would like to present this question)
To say that scarcity will never end is to say that people want to consume an ever-increasing amount of stuff.

That may be true in some cases but not in others. There are limits to how much people can consume of a given product. Take food for example: there are limits to how much you can eat (and all-you-can-eat restaurants are living proof of it). It is possible to grow so much food that everyone can eat their fill - in fact we have the technology to do this right now - thus eliminating the scarcity of food.

[bootleg42]

Just want to say, I am also taking intro to economics in my college (college here in the U.S. is petty bourgeoisie white suburbian DOMINATED, completely different from where i live, the inner city but that's another issue) and well I'm also realizing the way they teach it.

I believe in order to be "fair", they should tell the students that they are learning about a "Capitalist Economy" and that there are other options that will not be taught in the course. Of course the economy professors assume that what they teach is like natural law and it's everywhere.

Also most of the economy students in my college piss me off (well almost all the kids in my college piss me off). They all have that "capitalist ambition" to want to "be someone" when in fact all they talk about is making money and when I present the topic of the poor, they tend to play "realist". Fuck all those assholes.

With all that said, I think it's important for us to understand capitalist economics so we can know how to debunk it, how to face it and destroy it. How are we going to get rid of something if we're not knowledgeable about it.

So Electronic Light, take the courses, learn but don't get fooled. Learn it not to use it for capital profit or to believe it....learn it so you can know how to destroy it.

[Die Neue Zeit]

a lot of the stuff taught in intro classes is based on highly simplified and faulty assumptions that even capitalists can debunk

^^^ Corporate finance/accounting gives a better, more practical, and [most importantly] more structural exposure to the capitalist system. :P

Not only does it limit the economics stuff to two or three courses (micro, macro, and perhaps managerial economics), but corporate f/a talks about the end-result financial and management accounting, strategic management, business environments (SWOT analysis), IT, etc.

Of course, you'd be exposed to more right-wing biases, but at least you know it's there. [Personally, if you're gonna follow my suggestion, try to get instructors who actually had jobs and management positions in the business world, instead of lecturing in the business school academia for eons.]

[Great Helmsman]

Thanks for the insight and support. I guess the course will be useful in explaining the (bankrupt) theory of the capitalist system. Surely you have to know something about it if you want to fault it.

On the issue of the economists consensus, could it be that those who study heterodox economics aren't attractive enough to be hired, and so they don't succeed like the neolibs do, and don't pass on their knowledge? That would be very depressing if it were true, because then capitalism is destroying ideas that challenge it; reinforcing false assumptions.

My books describe efficiency as "the property of society getting the most it can from scare resources." It also has a couple of LOL assumptions like:
>Welfare reduces the incentive of the poor to work hard.
>Higher standards of living are the result of workers being more productive, not unions or social programs.
>Central planners failed because they tried to run the economy with the invisible hand of the market tied behind their back. (yeah I know :rolleyes: )

I'm not really interested in making myself a pariah or wasting the prof's time so I'll apply my criticism to the course content privately.

[grove street]

I'm too currently studying Macro-Economics at University.

In general economics is the study of Scarcity. This is where the problem of Neo-Liberal economics lies. Evidence shows that our current means of production is so high that we have the means to feed the world 12x over and provide a high standard of living to everyone on Earth.

The only true form of material scarcity that does exist is controlled false scarcity.

The very pillar of neo-liberal economics (scarcity) is false.

[Die Neue Zeit]

Originally posted by Electronic [email protected] 13, 2007 10:35 pm
>Welfare reduces the incentive of the poor to work hard.
>Higher standards of living are the result of workers being more productive, not unions or social programs.
>Central planners failed because they tried to run the economy with the invisible hand of the market tied behind their back. (yeah I know :rolleyes: )
Oh boy, the "invisible hand" crap again. :rolleyes:

Business school pierces that myth like a really sharp sword. In fact, some right-wing folks actually say blatantly that corporations are little "centrally planned economies," and that markets are only out there to test one such "economy" against another.

Do you know who supplies the seat systems, door panels, etc. to GM, Ford, Toyota, AND Daimler-Chryster (among others)? Lears (http://www.trendsimwatching.com/2005/10/the_global_big_.html). Where's the glory of "free enterprise" there? The economic force known as "economies of scale" (better known amongst us as being a part of the process involving capital accumulation, concentration, and centralization, with a practical result being de facto monopoly power) trumps any market force any day of the week. :lol:


I'm not really interested in making myself a pariah or wasting the prof's time so I'll apply my criticism to the course content privately.

"Luckily," I had a rather Keynesian PhD prof teaching the course. Still, I kept my mouth shut and realized that INTRO econ is just than - an INTRO.

If you're interested in "higher learning," check out my Research and Online Classes thread questioning the validity of the mainstream GDP and national income formulas (consumption + investment + government $$$ + net exports) as a measure of economic "health."



P.S. - Even a course as scientific as high-school chemistry has its faults, still employing the Bohr model (of course, university chemistry probably involves statistical probabilities and calculus in coughing up the current model).

[Kwisatz Haderach]

Originally posted by Electronic Light+September 14, 2007 07:35 am--> (Electronic Light @ September 14, 2007 07:35 am) Thanks for the insight and support. I guess the course will be useful in explaining the (bankrupt) theory of the capitalist system. Surely you have to know something about it if you want to fault it.



[/b]
Yes, absolutely. Not only will it be easier for you to find the faults, but you will also be able to debunk a lot of the technical mumbo-jumbo that neoliberal economists often throw around to make themselves sound like they know what they're talking about.


Originally posted by Electronic Light+--> (Electronic Light)On the issue of the economists consensus, could it be that those who study heterodox economics aren't attractive enough to be hired, and so they don't succeed like the neolibs do, and don't pass on their knowledge? That would be very depressing if it were true, because then capitalism is destroying ideas that challenge it; reinforcing false assumptions.[/b]
Well, heterodox economists are more dangerous than any other critics of the status quo, because they attack the very heart of capitalist ideology. If someone merely points out that there is a lot of suffering in the world, capitalists can just claim they'll fix it eventually. But if someone points out that capitalism inevitably causes that suffering... quick, make them shut up!

Of course capitalism is trying to destroy ideas that challenge it and reinforce false assumptions - it MUST do that in order to survive.


Originally posted by Electronic Light
My books describe efficiency as "the property of society getting the most it can from scare resources."
That sounds vaguely like Pareto efficiency (and I mean vaguely). As far as I know, there is no way to actually measure if society is "getting the most it can from scare resources." Even assuming that an economy composed entirely of ideal markets would be perfectly efficient (which is a big assumption to make), how would you go about determing the aggregate loss in efficiency caused by the fact that real economies are not actually made up of ideal markets? How efficient is the economy right now, exactly?


Electronic [email protected]
It also has a couple of LOL assumptions like:
>Welfare reduces the incentive of the poor to work hard.
>Higher standards of living are the result of workers being more productive, not unions or social programs.
>Central planners failed because they tried to run the economy with the invisible hand of the market tied behind their back. (yeah I know :rolleyes: )
Does it actually say those things the way you just presented them? Even my old intro book wasn't that blatantly (and stupidly) biased. I mean, "the invisible hand of the market tied behind their back?" Seriously. :rolleyes: And who the fuck said anything about central planners failing? They call it failure when a country goes from an impoverished agricultural society to being the second largest industrial economy in the world and putting a man into space, all in the span of 25 years and despite being ravaged by a world war?

All these "invisible hand" metaphors are getting on my nerves, but here's my favourite: "The only thing the invisible hand is good for is mental masturbation."


Electronic Light
I'm not really interested in making myself a pariah or wasting the prof's time so I'll apply my criticism to the course content privately.
Unless you can come up with short witty remarks in class - those are always fun, and seed some doubt into the minds of your fellow students. ;)

You should also be on the lookout for issues that apply only within capitalist economies and would disappear in a planned socialist economy. Minimum wage is one of them, as I pointed out in my previous post. Taxation is another. Why does a capitalist government require tax money? Because it needs that money to buy things on the market. Under socialism, the economic planning board can just increase production of a certain good if it needs more of that good. There are no taxes in socialism.

[Raúl Duke]

All economics is based on assumptions about reality and human behaviour. I will say this as often as I can, because it is the cause of most bad ideas in economics. Economists start by assuming something and then drawing conclusions based on those assumptions. If your assumptions are not actually true in the real world, then all your high logic and math are worthless. If you want to argue with your professors, always challenge their assumptions. They might actually back down - a lot of the stuff taught in intro classes is based on highly simplified and faulty assumptions that even capitalists can debunk.

This hit the nail on the head.

Even the book says something to that affect. (That "the course is about the studies of [behaviors] individuals, governments, businesses, etc have towards scarcity and incentives". When it comes to behaviors it makes many assumptions on that part, such as the scarcity issue.)

Although I'm not sure how I can debunk this...(since it does use alot of "language and charts")

(Interestingly, I made some complaints on how "narrow", it only wants you to analyze things in its framework, etc, the economic book is and the teacher agrees.)

[ComradeRed]

I think the most accessible criticism is a book called Debunking Economics by Steve Keen.

He really dissects bourgeois economics (both micro and macro) to demonstrate the circular reasoning that it is.

A rather comical part is when he gives a statistic of the number of managers in West Germany in the 1950s that would behave according to Marginalist theory. It's so small that it's a statistical fluke :lol:

[Die Neue Zeit]

Originally posted by Edric [email protected] 14, 2007 12:22 am
They call it failure when a country goes from an impoverished agricultural society to being the second largest industrial economy in the world and putting a man into space, all in the span of 25 years and despite being ravaged by a world war?
Indeed, the USSR under Stalin probably had the most productive form of "pre-revolutionary" state monopoly capitalism ever employed in history. I only wonder if the czarist regime were overthrown in the mid- to late 19th century (the material conditions were there, including military defeats) and someone exactly like Stalin took over and super-industrialized with an comparably massive bureaucracy (to make Napoleon III look like a slow-poke).

[At least the alternate-universe Stalin wouldn't be so worrisome to Lenin and revolutionary Marxists, and would probably have stuck with such (or remain an incompetent secret police agent).]