1. Introduction to Political Economy of Capitalism First things first….

2. What is Economics? First things first….

3. Economics as Study of Production & Distribution Study of particular terrains of human activity Study of particular terrains of human activity –sphere of production/work –sphere of distribution »of consumer goods »of producer goods Classical economics focused on Labour Classical economics focused on Labour –unlike Physiocrats (land) & merchantilists (money) Focus on labour result of centrality of labour in capitalist society Focus on labour result of centrality of labour in capitalist society

4. Centrality of labour - Historically Development of Capitalism has involved ever more thorough subordination of life to waged labour Development of Capitalism has involved ever more thorough subordination of life to waged labour –business tries to put more and more people to labour –business has extended itself not only geographically but also into every sphere of life In 18th - 19th Century, central social conflicts were around length of working day In 18th - 19th Century, central social conflicts were around length of working day Business expanded, workers resisted, eventually forced down, 15hrs to 12 hrs to 10 hrs to 8hrs Business expanded, workers resisted, eventually forced down, 15hrs to 12 hrs to 10 hrs to 8hrs Business response: colonization of free time Business response: colonization of free time

5. Work Human Activity

6. Centrality of labour - Today By Day By Week By Year By Life-Cycle 8 hours + 5 days + 50 weeks + 7ys-7yrs-

7. Labor Theory of Value Given recognition of centrality of labour Given recognition of centrality of labour Classical economists had LABOUR theory of value Classical economists had LABOUR theory of value Economics was "Political Economy" Economics was "Political Economy" –study of labour –study of socio-political institutions –study of conflicts over work, distribution, etc. But "labour" theory became a liability But "labour" theory became a liability Used by critics of capitalism, so it was abandoned Used by critics of capitalism, so it was abandoned

8. From Labor to Choice Mainstream economics abandoned "labor" theory of value and redefined itself in terms of "choice" Mainstream economics abandoned "labor" theory of value and redefined itself in terms of "choice" This was "neoclassical" revolution This was "neoclassical" revolution Economics as "theory of allocation of scarce resources among competing ends" Economics as "theory of allocation of scarce resources among competing ends" Two key concepts: choice, scarcity Two key concepts: choice, scarcity –choice = decision making of individuals, firms, govt –scarcity = finite

9. Choice Microeconomics = choices of individuals & firms Microeconomics = choices of individuals & firms Macroeconomics = choices of governments, micro choices in background Macroeconomics = choices of governments, micro choices in background Choice Theory = theory of preference ranking Choice Theory = theory of preference ranking –A prefered to B –B prefered to A –indifferent between A & B Opportunity Cost Opportunity Cost

10. Scarcity & Opportunity Cost Choosing one thing means giving up something else, "cost" of choice = what is given up Choosing one thing means giving up something else, "cost" of choice = what is given up Production-possibility frontier Production-possibility frontier guns butter A = more guns, less butter B = more butter, fewer guns

11. Is Economics a Science? From 'Political Economy' to 'Queen of Social Science" From 'Political Economy' to 'Queen of Social Science" Economics shares hypothetico-deductive method with 'hard' sciences Economics shares hypothetico-deductive method with 'hard' sciences But pretense of "positive" science is absurd But pretense of "positive" science is absurd –choice of subject & methods always involves values –even true in 'hard' sciences –changes in paradigm over time in all fields

12. Critiques of Two Approaches Critique of traditional "political economy" Critique of traditional "political economy" –largely ignored sphere of consumption, (reproduction) which with reduction in working day has become critical in understanding social development Critique of economics as choice theory Critique of economics as choice theory –largely ignores centrality of labour, relegates its study to other social sciences –largely ignores »1. forces that shape constraints on choice »2. systematic manipulation of 'scarcity'

13. Sphere of Consumption Always existed Always existed Importance grew historically Importance grew historically –with workers' success in reducing working day, gaining higher wages, expanding "demand" –Business colonization of "consumption" Some social theorists have argued sphere of consumption has displaced labour as central organising institution of society Some social theorists have argued sphere of consumption has displaced labour as central organising institution of society But much consumption a function of labour But much consumption a function of labour

14. Conclusion Definition of economics not that important Definition of economics not that important In terms of understanding the field look at what economists DO, policy oriented - managers of capitalism In terms of understanding the field look at what economists DO, policy oriented - managers of capitalism What matters to people is identifying what is important What matters to people is identifying what is important Disciplinary divisions (economics, sociology etc) = obstacle to understanding Disciplinary divisions (economics, sociology etc) = obstacle to understanding Study what you need to to understand what you think is important Study what you need to to understand what you think is important

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