Basics of the Political Economy Model

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Basics of the Political Economy Model

• Econ 248 Economics of Poverty and Discrimination
• Prof. Keith Bender

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Political Economy Theory

• Definition The study of how groups and
  institutions interact in obtaining scarce
  economic resources.
• Here need to flesh out theory before we can
  discuss theories of discrimination and compare
  with neoclassical model
• Outline
• 4 Cs of Political Economy theory
• How these Cs affect class, race and gender
• Exploitation, domination, and exclusion
• What is the equilibrium? (Hint there is no
  equilibrium concept in PE theory!)

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First C Context

• Political economists believe that the context or
  the environment of where the economic interaction
  takes place is key
• History, institutions, culture shape and
  constrain behavior
• Examples role of religion, customary roles of
  groups in society (like women staying home and
  raising kids), legal systems and protections
  given under the system
• Why important?
• If context matters, then decisions are not
  individually driven and exogenous.
• Rather, they are group driven and endogenous (ie
  everything causes everything)

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Second C Why do fans take off their shirts at
Packer games when the wind chill is below zero?

• Because they like to. (answer submitted by my
  daughter, Fiona)
• Because everyone else is doing it.
• Because they are hot.
• Because they are too poor to afford shirts.

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Second C Collective Behavior

• Answer 2 implies this
• (And your parents would then say, If they all
  jumped off a cliff would you jump too?!)
• Lack of power in an individual context
• Implies need for collective behavior to have any
  power in obtaining economic resources.
• Key is in unequal balance of power and power is
  defined in groups both obtaining and
  maintaining power

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Third C My daughters sit down for dessert.
There is only one piece of pie. I allow Sophie
to cut the pie and take a piece. Fiona, the
other daughter, will say

• Thank you, Sophie, for allowing me a piece of
  your pie.
• Hey, your piece is bigger than mine!
• Sophie, look at that neat bird outside the
  window. (Whereupon Fiona takes both pieces of
  pie and runs away!)
• Watch out!! Dad is stealing both pieces!!

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Third C Conflicting Interests

• While 4 is possible (!), 2 is most likely.
  Why?
• There is a fixed amount of pie (it is a limited
  resource), so the only way to get more, is for
  someone else to get less
• Implies that economic interaction is a Win-lose
  situation
• Compared to Win-Win in NC economics
• Here, well focus on three main conflicts
• Class
• Racial
• Gender

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Fourth C As the saying goes, Nothing in life
is constant except

• competition.
• cramps.
• children.
• change.
• cruddy professors.

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Fourth C Change

• Here, we are looking at change
• Defined as the instability created by
  conflicting interests and limited resources.
• Equivalent of the market but more dynamic
• Note that change may be either good or bad
  it depends on your point of view.

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Focus on Conflict

• Many types of conflict here will focus on three
  examples class, race, and gender
• General issues
• Conflicts not mutually exclusive
• Social categories
• Choice over group
• Relativistic in nature (must have counterpart
  group)
• Site
• Fight over surplus
• Ways to generate surplus (oppression)

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Example 1 Class Conflict

• Definition
• Social relations defined by a relationship to the
  means of production
• Initial writers Karl Marx and Friedrich Engels
• Groups Workers and Capitalists
• Fighting over surplus
• Definition output above that needed to replace
  capital and labor used in the production process
• Similar to idea of profit
• Conflict comes about in generation and
  distribution
• Site Place of production (firm)
• (Above is extreme view reality is more murky.)

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Example 2 Race/Ethnic Conflict

• Definition
• Social relations that are associated with racial,
  cultural, or ethnic differences
• Groups Different races, cultures, ethnicities
• Fighting over social surplus
• Some proportion of aggregated class generated
  surplus
• How is it distributed across races/ethnicities?
• Site Communities, cities, regions
• Ex provision of public services
  transportation, schools, economic development

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Example 3 Gender Conflict

• Definition
• Socially created distinctions between men and
  women
• Key is NOT biological distinctions, but
  differences in behaviors and social roles
• Groups Women and Men
• Although not always against the other gender
• Fighting over household surplus
• Definition the surplus generated in household
• Combination of outside resources and household
  production
• Site Household/family

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Ways to Oppress

• All conflict is over surplus, but how is it
  generated and/or distributed is key.
• Many ways to oppress here focus on three
• Exploitation
• Definition control by one group of anothers
  work for monetary or material gain
• Generally (but not exclusively) class conflict
• Capitalists have resources, workers dont
• Exclusion
• Definition physical or social isolation of a
  group to diminish their roles and opportunities
• Generally (but not exclusively) racial/ethnic
  conflict
• Ex relegation of minorities to underresourced
  areas (ghettos)
• Domination
• Definition social roles or forms of coercion
  which assure that one group is submissive to
  another
• Generally (but not exclusively) gender conflict
• Ex sexual division of labor, sexual harassment

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Matrix of OppressionSchiller, p. 136
X
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Why doesnt the idea of the NC model of the
market work for PE theorists?

• The NC market assumes that the distribution of
  economic resources is a win-lose situation.
• The NC market is inefficient sometimes.
• You cannot capture the idea of context in the
  market.
• Since resources are limited, conflict shows that
  economic outcomes are win-lose, not voluntary
  as the NC model assumes.
• The PE model does not allow for groups to
  interact, so markets are superfluous.

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PE and the Market

• 4 on the previous slide gets closest to the
  answer.
• Key is that all this conflict means that PE
  assumes that there are definite winners and
  losers.
• Markets are generally NOT voluntary, since you
  need economic resources to survive.
• Existence of winners and losers means that
  competition cannot cure oppression.
• Unequal power relationship, too
• Use of divide-and-conquer techniques

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The Final C - Change

• Economy is in a constant state of flux very
  dynamic.
• Change is key here
• Distributions of economic resources are not
  stable since all sides want more surplus
• Again, though, change is not necessarily good
• However, vein in literature (actually from Marx)
  that says that the alienation of groups in
  society decreases the amount of resources
  available in society
• Even the powerful see this and may not oppress
  as much so to increase resources available

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Comprehension Question 1 Which of the following
is not one of the Four Cs of PE theory?

• Collective behavior
• Change
• Competition
• Context
• Conflict

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Comprehension Question 2 According to PE
theory, if women are not in the labor force, they
cannot be oppressed.

• True
• False
• Uncertain

X
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Questions for me?

• Next Lecture
• Basics of Work and Wages in the PE Model