Political Economy in a Globalising World Flashcards
What are the 3 economic questions?
WHAT to produce? (Allocation)
HOW to produce? (Production)
WHO gets it? (Distribution)
Explain distribution?
Who gets the good or service. People could queue, random distribution, a competition or give it to the most deserving.
Is this fair? Discriminatory?
Explain allocation?
How a society decides what to produce and what to prioritise, how to use resources. Market systems connect resources to make a sale.
Bored workers? Environmental damage?
Explain production?
Varies according to the system.
State 3 visions of the global system?
1) Privately owned property
2) Labour commodified
3) Production for profit
Where did capitalism first develop?
In the UK, agricultural revolution was a turning point. Subsistence farming reformed into commercial farming.
Few get property control-excluded the many-hired labour power of the many
Name 3 types of capitalists?
1) Financial
2) Merchant
3) Commercial Landowners
Outline the expansion of capitalism?
New markets, cheap labour, natural resources, invest surplus. Through colonialism, capitalism spread to the third world, creation of the proletariat happened in colonies. Trend in buying towards Africa. Spread of market relationships, growth in consumption and investment in industrial production.
What is mercantilism?
A doctrine of political economy. A relatively closed economy that takes advantage of trade barriers to build up domestic industry. Profit usually based on worker exploitation.
What is invest surplus?
Create markets and overcome over-production and underconsumption crisis.
Micro-economics refers to the way the market works, consumers and producers want to maximise what?
Producers: maximise profit
Consumers: maximise happiness
What is supply?
The relationship between price of a good and amount firms are willing to supply. The relationship is ‘hypothetical’.
What is the supply curve?
Curve that curves from bottom left to top right and is affected by costs of production, reliant upon 3 categories:
- Land, Capital and Labour
What is demand?
The total amount that would be demanded by consumers at any given price, means person is willing and able to buy. Depends on what people would do at each price.
What is the demand curve?
Curves from bottom right to top left and when demand rises, price falls. Exceptions are ‘snop goods’ like nice cars and speculation.
Name some factors influencing demand?
Changes in:
- Taste and fashion
- weather
- population
- income
If a good hardly changes when its price changes it is…
Inelastic
If a line is horizontally straight on a table of elasticity it is…
Perfectly elastic, infinite
What does equilibrium refer to?
Price of a product where S&D are equal. At this price, everyone who demands it can have it, there is zero waste.
What happens if there is no equilibrium?
It will adjust until we do, any surplus will be sold without profit.
What are the 3 points to distributive efficiency?
Price (people are willing to pay)
Value (people who value the product the most)
Choice (people who freely decide to buy it)
What does the free market assume?
- People take rational action
- Perfect knowledge
- Perfect mobility of resources
- Perfect competition
Market failures include….
- Overproduction of de-merit goods (tend to be over-consumed, fail to take the social costs into mind)
- Undersupply of merit goods (demand for these is lower)
- Missing markets (collective public goods, non-rival, non-excludable)
- Negative externalities (buyers and sellers only consider private benefits and costs of economic activity)
- Monopoly can become more efficient than competition (natural monopolies exist and other suppliers are wasting materials)
- Lack of competition can be inefficient
Some state responsibilities include…
Regulation, Ban, Tax, Provide, Public Information Campaign
Problems with State regulation?
Rules and regulations may become a burden, may increase costs for firms etc.
Regulatory capture, more sympathetic to the industries interests than consumers.
Issues with de-linking producing profit from price?
Misallocation of resources- lack incentive to produce efficiently.
Problems with the state providing things for free?
There will always be a shortage, or excess demand as distribution is delinked from price. Product may have to be rationed.
What is the problem with providing things through monopoly?
Absence or reduction of competition reduced incentives.
Quasi-market competition
What are the central assumptions of neo-liberalism?
Free market efficiency, distribution of knowledge
Individualistic social system, maximises worth
Political freedom, separate economic sphere
What aims are on the neo-liberal agenda?
- Reduce the state
- Privatisation
- Eliminate rules
- Cut taxes
- Reduce spending on government services
- Reduce welfare
What are the 4 government aims for the economy?
- Economic growth
- Low inflation
- Low unemployment
- Trade balance
In terms of economic growth, what are government aims?
To increase potential growth which will result in resources, labour and capital.
If actual growth was below potential growth we would see…
A recession and severe unemployment
What does GDP measure?
Estimates income by counting spending. GDP measures flow rather than wealth. Total income, total output and total expenditure are all equal.