The ABCs of Political Economy: A Modern Approach
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This revised edition of ABCs is a lively and accessible introduction to modern political economy. Informed by the work of Marx, Veblen, Kalecki, Robinson, Minsky and other great political economists, Robin Hahnel provides the essential tools needed to understand economic issues today. Dispelling myths about financial liberalisation, fiscal austerity, globalisation and free markets, ABCs offers a critical perspective on our present system and outlines clear alternatives for the future. This second edition applies the analytical tools developed to help readers understand the origins of the financial crisis of 2007, the ensuing 'Great Recession', and why government policies in Europe and North America over the past six years have failed to improve matters for the majority of their citizens. The second edition also helps explain what is causing climate change and what will be required if it is to be resolved effectively and fairly.
simple model deviates from real world conditions in many respects. The assumption that people only wish to consume 1 unit of corn, after which they wish to minimize work time, after which they wish to maximize accumulation is convenient for now. We will consider the implications of people’s preferences for how they work, and who decides how they work, and discuss the effects of more realistic assumptions about consumption and savings later. A Simple Corn Model 47 any “scale” desired. For
In other words, we are assuming what economists call “constant returns to scale.” 3. Remember we are assuming for now that people don’t care whether they work an hour in the labor intensive process or the capital intensive process. 4. Efficiency means minimizing the ratio of “pain” to “gain.” “Pain” in our simple economy has been reduced to total number of days worked, and “gain” has been reduced to the total number of units of net corn produced. So average days worked per unit of net corn, or
become an employee? If the daily wage rate is less than 1 unit of corn the seedy will want to be employers, not employees, because they can earn positive profits as employers without working at all. Moreover, for any wage rate less than 1 unit of corn per day the seedy are better off working for themselves using the capital intensive process since they get 1 unit of net corn per day they work for themselves. So unless the daily wage rate were higher than 1 unit of corn the seedy will not
in the short run in chapter 6. If an economy has a long run tendency to produce at less than full capacity, increasing the real wage may move the economy closer to full capacity utilization by shifting income from capitalists who save more to workers who save less and consume more. Because the redistribution of income from capitalists to workers increases demand for goods, and therefore capacity utilization, it can increase the rate of profit for capitalists even in the long run. We study the
between wages and growth is complicated by demand considerations, and consequently it was not necessarily true that higher wages and higher growth rates were always at odds. The rate of growth of GDP depends not only on the rate of growth of potential GDP but also on how close actual GDP is to potential GDP over the long run. If we hold technology constant, assume no increase in the size of the labor force, and assume no improvements in the quality of either capital or labor inputs, the rate of