MIDTERM 2 Flashcards
How is the economy generally perceived?
- solid, tangible, measurable
- machine that operates according to scientific laws and principles
- economy as a living organism? (healthy, robust)
In reality the economy, according to David Korten, is…
Our global economy is out of control and performing contrary to basic principles of market economics
During colonial times,
Division of labour was mainly based on gender.
Specialization
Each task is carried out by a different person, providing higher quality services and better efficiency
Key assumptions made by economists that geographers denaturalize:
Rationality
Private Property
Quantification
Submerged Activity
Activity in the economy that is not recorded or counted, activities that are unquantifiable.
(deemed non-economic, non-productive)
Economy used to mean
“household economy”
The “invisible hand”
The idea that the economy has the ability to stabilize itself.
- Instead of people regulating or orchestrating it, we should let the economy be. The nature of supply and demand creates this natural equilibrium.
Arguments against invisible hand
Capitalism is not based on the invisible hand but the invisible fist….. (structural violence)
Capitalism is the most ruthless selfish opportunistic, greedy, calculating plunderers applying the most heartless measures in the cold blooded pursuit of corporate interests and wealth accumulation, will produce the best results for all of us… through something called the invisible hand.
Economists borrowed _____ from ___ sciences
Concepts from physical sciences
Economic terms borrowed from physical sciences
utility equilibrium stability elasticity market mechanism frictional force of distance
“Homo economicus “
Idea that everyone acts and makes decisions rationally.
- Concept in neo-classical economic theory
- People behave in a similar rational, consistent manner to maximize their own economic rewards or utility
- Humans as rational, calculating, narrowly self-interested actors (rational choice theory)
- doesn’t consider what about values, ethics, culture, ideology, altruism, status, cooperation, trust, tradition, emotion…?
The theory of economics is built on ____
rational choice theory
Keynesian economics
- (1940s-1970s)
- Adopted during the era of the ‘welfare state’, after the great depression
- fundamental departure from classical economic idealogy
- Government should be responsible for maintaining and stimulating economic growth
- Idea that market economies don’t self correct because prices and wages take time to adjust
John Maynard Keynes developped…
developed theory of management of the national economy (1936)
- saw that classical economic models did not seem of great use in the great depression
Welfare State
a system whereby the government undertakes to protect the health and well-being of its citizens, especially those in financial or social need, by means of grants, pensions, and other benefits.
Examples of economic growth being bad:
Alberta Tar Sands
Palm Oil Production in South East Asia
Things that affect labour market participation:
Personality
Positionally
Perfect competition
The idea that there is one supplier and one origin of demand.
Why is a situation of perfect competition difficult or impossible to find?
- There can be many demanders and or less suppliers and vice versa.
- There can be government that limits the suppliers of something. (i.e. Healthcare in the states)
- Depending on where you are, how many suppliers there area, this affects the price.
- A fair price is not always the result.
- Assumes that markets are always fair
Scale
Area over which phenomena exists
Gross Domestic Product
total market value of all goods and services produced annually in an economy.
GDP: Consumption expenditure \+ Investment expenditure \+ Government expenditure \+ Net exports
Consumption expenditure
The total amount spent by individuals in a given year.
Investment expenditure
The total amount invested by businesses in future productive capacity
Government expenditure
The total amount spent by governments to build infrastructure, provide services etc.
Net Exports
The total amount sold to other economies (minus the amount imported)
Problems with using GDP
- Doesn’t measure things that “aren’t measurable” (quantified) like home labour
- Economic acts are assumed to occur only when money changes hands
- Economic growth assumed to be good regardless of social or environmental impact
- Doesn’t say anything about the distribution of wealth within an economy
- Most activities excluded: Doesn’t account for submerged activities
- Often gets used as a stand-in for welfare
Submerged Activities
Activity in the economy that is not recorded or counted, activities that are unquantifiable. They are deemed non-economic, non-productive.
Gibson-Graham economic iceberg (submerged activity)
The submerged mass of the iceberg:
Lending
Illegal activities (black market)
Volunteer work
Slave labour
Within families
Self provisioning
Informal loans
Gibson-Graham economic iceberg (visible activity)
wage labour and produce for a market in a capitalist system.
System of National Accounts
- Forms the basis for the economy and economic analysis.
- The suggestion is that individual countries use SNA as a guide in constructing their own national accounting systems, to promote international comparability.
- A measure of production, not a measure of welfare
- Created after the second world war
- Peoples’ survival was at stake so it w
In 2008, the SNA was revised to ………..
include some elements of the informal sector, but critiqued by critical scholars (still excludes unpaid housework + childcare, and environmental impacts)
Shadow economies
Illegal sex work, arms, wildlife, drugs, trafficking
Number of humans enslaved today
27 million
New European System of Accounts (ESA)
Implemented in 2014: includes sex work + illegal drugs, thereby boosting GDP (which is ironic)
Some Alternative Measures of the Economy
- Qualitative indicators
- Time use surveys
- Genuine Progress Indicator (GPI)
- Canadian Index of Wellbeing
- Gross National Happiness
- The Happy Planet Index
Genuine Progress Indicator
- Adjusts GDP to account for “negative growth”
- Subtracts social + environmental costs (eg. resource depletion, unemployment, crime, overwork, loss of soils, loss of air quality)
Canadian Index of Wellbeing
?
Gross National Happiness (Bhutan)
Measure of spiritual physical social and environmental health of people and environment.
Four pillars of Gross National Happiness
Good Governance
Sustainable Socio-Economic Development
Preservation and Promotion of Culture
Environmental Conservation
The Happy Planet Index
Measure that tracks national well-being (happiness) against resource use (because a happy life doesn’t have to cost the earth).
Latin american countries rank highest. (costa rica)
if you are INVISIBLE AS A PRODUCER in the economy, then you’re going to be invisible in __________”
in the benefits provided by policies
measuring a country’s progress by GDP suggests that (women)
the work of non-primary producers, most of work women do, macroeconomically is of little or no importance
An economic system based on paying for war
would be in that country’s interest to be that there will always be a market (always be war)
Exxon Valdez oil spill
The 1989 spill in Alaska raised the GDP by $2 billion thanks to intensive cleanup operations.
Insurance costs civil legal proceedings criminal legal proceedings clean up operation compensation to fisher people compensation to tourist industry influx of memberships to green organisations
“all of this added to growth”
Women in Pakistan
women were doing more things a day – 5 hours a day food prep and cooking.
they needed better stoves to increase efficiency.
John Maynard Keynes
John Maynard Keynes was a British economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments
