The field of political economics is vast and sensitive. Political economics is sensitive in the sense that the decisions that are made as a result it, cause ripples in the society regardless of the weight of the decision. It is important to note that the ubiquity of political economics is guaranteed and supported by the very political science. The two that are political economics and political science are interrelated where political science has a significant and implicit toll on political economics. Poverty, living standards and general public facilitation by the government is affected by the two aforementioned entities. This papers seeks to evaluate literary works on political economics, theories therein criticized and more detail evaluated.
- Recounting Mankiw’s Arguments
- The One Percent
In Mankiw’s work, one percent has overly been used to relate to s certain high end class. The class that is the small one percent is seen to have a very high amount of income that the rest of the society does not seemingly match to. The one percent in page 23 of Mankiw’s work are regarded as the “top 1 percent.” That clearly means that the one percent are on a higher hierarchy precisely the economic aspect. The economic aspect is denoted on page 23 also, where the shaping of the incomes of the top one percent are seen to have a “U shape.” The U shape is in the form of the rise, decline and then recovery of the one percent’s economic state. The one percent is also seen to affect the income of the less endowed people in the society, “If the top 1 percent is earning an extra $1 in some way that reduces the incomes of the middle class and poor by $2, then many people will see that a social problem worth addressing.” That quoted sentence says a lot precisely about the influence and effect the top 1 percent have on the general population.
- i) Economic Inequality in the United States
Economic inequality has been a much contended issue as is well a similar case in other developed countries of the world. As much a country may be rich there will always be inequalities especially in the economic sense. That is because the society was first in an economic equilibrium state in early years (Mankiw, 2013). In the mentioned early years people were in an equal economic state until some individuals realized their potentials through innovations, talent and even embracing research. The likes of Steve Jobs and J.K. Rowling are given, they are seen to produce items for the masses. Steve Jobs pioneers the production of the IPod and Rowling writes her Harry potter books. The mentioned are individuals who among masses produced items that would be embraced by the masses. Steve jobs through technology is able to create demand of the IPod a similar case to Rowling. In the selling of their products, inequality economically is achieved to their advantage. The reason behind the inequality is the fact that the individuals have been able to produce a single product which is generates revenue from a lot of people to one person hence making themselves rich.
Economic inequality is measured in different aspects. The measurements can be done in form of income, wealth, and pre and post-tax calculations. Starting off with income as a measurement of economic inequality, much of what has been said in the preceding paragraph will be echoed. Income clearly discerns economic inequality. There are people such as Steve Jobs, Company CEO’S as well as entertainers who have been able to reach the global platform. In the global platform, the specified people are individuals but have a following of millions that generate revenue to them in form of buying their products or services. Let us considers a global entertainer’s case, he or she has recorded music which has translated to a hit worldwide or rather made several hits. The demand of the artist increases across countries in the world. In every country the artist goes to, travel, food and accommodation expenses are catered for yet their payment from the fans tickets or such waits. Thousands or even millions of people turn up for the event which in turn generates gigantic revenue to the entertainer. A similar case can happen to an artist who is overly wanted for shows locally, in their country. As such, economic inequality is achieved and measured by income.
Further still, wealth is another measurement of economic inequality. There are cases where an individual is born to a family which has a lot of wealth or of well-educated as well as connected persons. The result is that the people born to these families are kin to the families’ wealth such as vast and prime lands. Also, a family made of well-educated and connected persons will translate to amassing of wealth easily than persons in poor families or rather less endowed ones. Mankiw argues that the traits of being well educated are most likely to be inherited by the off springs of the former. The well-connectedness to the society further makes the individuals better placed and advantaged in the society in creation of more wealth. That leaves the less fortunate to struggle in creating their wealth hence the economic inequality.
Lastly on measurements, is the pre-tax versus post-tax income method. There are individuals who evade tax or rather pay tax due to reasons such as being political friends of a ruling regime or even a former. The individuals who may also be owners of large corporates, may have their companies not paying taxes while competing individuals pay tax. When the pre-tax income of the two is calculated, the one for the one who pays taxes is higher (income). Calculation of the two’s post-tax income leaves the one that pays tax at a lesser amount than the one who does not pay. As a result, there has been an influence by the relatedness to the government to bypass some policies hence an economic inequality. In the three measurements though, through their different uses may result into the change of the extent of economic inequality. The application of tax is vital and if made equal to all persons regardless of affiliations then, the extent of economic inequality will be curbed. That is because there will be more funds to the government which also be used to facilitate programs for the poor hence reducing the inequality.
- Legitimizing Economic Inequality
- i) Income Determinant and Income
There are different cases according to Mankiw that an individual generates income. Such ways of generating income are herein called determinants. The determinants are skillfulness as identified in page 23 and inheritance as identified in page 29 of Mankiw’s work.
- ii) Supporting Points
Skillfulness is seen to be developed through education and training where an individual is granted an advantage over the other who is not skilled. As such more opportunities are open to the skilled individual. It is to that effect that Mankiw argues that economic inequality should be legitimized as it is necessary. Inheritance also factors in when creation of wealth is mentioned. A family that has hereditary genes of creativeness and shrewdness in business is most likely to transfer the traits to its generations as a result generation of income. The upper hand that Mankiw refers to as a “leg up” in the society causes the economic inequality. That is because there are different opportunities for income generation to different people in the society. Some people are unskilled while others are from poor background that disadvantage them in their ranking with fellow mates hence the economic inequality.
iii) Is Economic Inequality Inefficient?
According to Mankiw inefficiency is a state that is achieved when a society’s population faces inequality that is otherwise useful to some people while at the same time rips off others the same benefit. In this context, Mankiw considers that those at the top do much to be at their favorable position but similarly the less endowed are not assured of better places in the society as those in the favorable positions are bound to take them away. It is seen that skilled labor offers advantage in the creation of income but how does that socially help the masses or rather the subjects of companies in skilled labor? According to Mankiw in pages 23 and 24, the answer is that the productivity therein generates income to the top persons and keeps the subjects who as well can be employees, forever under dependence on the top persons. As such, inequality is realized since the productivity of the persons at the top deprives their subjects off their time and energy to advance economically.
Political subjugation, skilled labor and financial manipulation are aspects of rent-seeking. Political subjugation helps the advantage use their political friends to have mileage as far as policy is concerned. Policies are made or rather tailored to suit the favorable people to the government disadvantaging those not known to the government. It is required that the people in a society play in economic platform that is fair but the political system does not allow since it also wants some favors. As a result, the less fortunate are subjugated an inequality hence reached. Skilled labor basically discourages the people who have not been able to go through training or education regardless of their background such lack of funds to continue their education. The people who are skilled continue in utilizing fellow skilled statesmen in their income generation. The technology based skilled further locks out the generally skilled. Such a rent-seeing activity is aimed at only streamlining best possible ways for selected individuals to be at the top resulting to economic inequality.
Financial manipulation are characteristics of the banks in a country as well as other financial institutions are not left behind in the trade that structures economic inequality. There is unfair allocation of capital and risk where people known to each other give priority to one another. It is in such situations that some companies will be suppressed in their growth through incompetent allocation of talent while other are given the best talent and financial programs in the finance market. The result of such situations is economic inequality.
Manskiw agrees with the definition of inequality as portrayed in the above paragraphs. That is certain individuals are favored by the systems put in place at the expense of others. The result is having deserving citizens off a nation deprived or equal privileges for their development to pave way for the “well connected” persons.
- iv) Equality of Opportunity
Equality of opportunity is the fairness everyone is entitled to in the growth of the economic pie where their individual contribution is vital (page 25). Joseph Stigliz in the same page measures equality of opportunity through “intergenerational transmission of income.” Mankiw though does not concur with Joseph Stigliz. The reason is that intergenerational transmission of income cannot be achieved because primarily because if it were true every child and person would have been entitled to outright economic prosperity. The prosperity would have been derived from the name tag of America as the land of opportunities, but that is not the case, there are poor people in America. Mankiw argues that such a metric cannot guarantee the providence of equal opportunity. Mankiw exemplifies the heredity of IQ to generations and as such remains specific to a certain lineage. Therefore inequality affects equality of opportunity.
- v) The Big Trade off
The big trade off is the aspect of moving funds from the rich to the poor through taxes. The taxes are moved from the rich to the poor although faced by impunity where some money is lost as the moneys are moved. The role of government in trade off is ensuring flawless policies that ensue a successful tax system. That is followed up by programs that follow up the facilitation of improvement of the poor.
Utilitarianism is linked to Mankiw’s trade off discussion because useful practicality is the aim of the latter. The latter being the big trade off, real results are needed rather creating a good image out of the process of helping the poor through the allocated funds. Utilitarianism is therefore, the aspect of ensuring the best and practical results are achieved where suffering of the poor is reduced, and their general well-being improved.
Redistribution of wealth as far as utilitarianism is concerned has Mankiw arguing that it depends on the elasticity of labor supply. A system where government pays more attention to income and ignorantly pays minimal attention to productivity affects redistribution of wealth. The effect is realized when highly productive people begin behaving like low productive ones in order to benefit from the redistribution process. As such, efficacy is interfered with and the progressive is bound to be retrogressive.
Mankiw argues that in the process of redistribution of wealth tax is a necessary detail. Taxing requires the burden to be shared between the buyer and the seller. Relatively, the case herein has the seller bearing more burden on the tax which gets Mankiw connoting that taxation is less of a tool of promoting economic well-being. The reason behind that is tax is at times redistributed broadly among buyers and will always be affected by policy (page 27).
- The Left
- i) Three Arguments
The three arguments are regressive taxation, the rich’s incomes are not reflective to their taxes and the rich should pay a higher amount of tax as they stand to benefit more from the set infrastructure. Mankiw disagrees with three arguments basically they are flawed and have loopholes. Taxation lies at the center of the three points where the rich feature significantly. The rich are the main topic where it is argued that they should remit more taxes. Mankiw stands to defend the rich because they have the right to their own money as one has the right to have their two kidneys yet only one is needed.
- ii) Elements of Philosophical framework
Two central elements of philosophical framework hold much weight as far as the subtle case of taxes is concerned. First is the choice of where to belong and second is compensation matching one’s contributions (page 32). If one chose where to belong even before birth which is impossible, many would opt for the rich side of life. There more taxes are needed to support the government in its projects. Secondly, every person should be entitled to compensation that matches their contribution. That helps in fair taxation and awarding of any benefits a person is entitled to. The tangible changes that would occur are having a utilitarian state that accords each and every one fairness in the taxation system. Less burden on the taxpayer resulting to the best optimal policy and ample redistribution of productivity.
- Causes and Solutions of Economic Inequality
A skewed distribution of natural resources is the one cause of economic inequality. Such distribution favors specific people who at times may have a lot of incentives but lack productivity but are yet favored by the government. Their low productivity will continue while they disadvantaged the highly productive poor people. The second cause is engaging with the rich on policy and financial platforms leaving the poor behind. That means whichever policies are made, they are meant to favor the rich, who will as a result know how to go about their transactions. Economic inequality is then achieved.
Solutions to the causes is to harmonize the allocation of resources where the highly productive poor people should be given a priority to improve their condition. To the taxation, policy making and financing cause, the poor should have representatives who can talk on their behalf. Policies which are all inclusive will hence be made as well as their financing can be implemented to help progress their economic stature and reduce the economic inequality.
- Expanding on Mankiw’s Argument Using Neoclassical and Political Economic Theory.
- Entry of NeoClassical Theory
The entry point of neoclassical theory is preference, resources and technology.
- What is NeoClassical Theory of Value
Neoclassical theory of value is the talks about consumption. The theory argues that there should be consumption of commodities that are objects to achieve results. The more the consumption of the objects the finer the results.
- How does the entry point inform Theory of Value
The entities mentioned at the entry point are each involved in the achievement of the Theory of Value. The resources help achieve productivity while technology helps market oneself (Wolff & Resnick, 2012).
- Supply and Demand of Commodities
The first assumption is that the change of price of a good resulted from certain key causes such as demand. The second assumption is that certain determinants are essential to the theory’ existence. Thirdly, the causality notion helps combine some objects to create another one.
- Preference Curves
The preference curves are the ones that denote the successful performance of the supply and demand chains of a commodity.
- The preference curves look the way they do because of the unlimited wants that by consumers from limited resources from the supplier.
- The demand curve is derived from the ratios of goods where one can be substituted for another in a public case. Privately, there is the rationality of choosing two goods derived from ones human nature.
- The slope is as a result of the intermittent change of product preference in relation to market pricing. At one time the consumer maintains a specific product then gradually changes to another in relation to pricing and later on goes back to the initial product.
- Mankiw Using Neoclassical Theory of Value
In his work, Mankiw, in pages 22, 23 and 27, talks about the need for productivity where skill is necessary. At the same time, Mankiw talks of production of one a product that is needed by many people yet create satisfaction simultaneously. That is similar to neoclassical theory’s case where there is unlimited wants for limited supply but still satisfaction has to be catered for and importantly, ensured.
- Demand and Supply for Labor
Labor is deemed necessary for every production process. It is true to say that there is much demand of commodities in the neoclassic theory’s cases which outweighs supply of the same. In such a case, the demand of labor is also high where the supply is low because of the unique nature of the business involved.
- Pricing and productivity facilitated by talent allocation are two essential logic elements according to Mankiw. Mankiw’s argument on labor markets relates to neoclassical theory’s view on the same in that pricing affects the buying of a commodity and results to a consumer preferring a substitute which affects labor. Laborers will less be needed because of the limited amount of income being generated. Also, the productivity of individuals in the labor markets is important as it helps maintain supply of products into the market. Continued supply backed by satisfactory demand is worth increasing a significant amount of labor as there is more likeliness of increased demand where customer loyalty is essential.
- Similarities in Mankiw’s and FriedMans’s case are that their labor marlets are made of limited personnel who have to be skilled to earn better wages. The products the aforementioned produce, are essential in shaping the labor needed.
- Elements of Adam Smith in Favor of Division of Labor
- Division of labor is the aspect that different members of a team are divided into specialized groups in order to facilitate easy workmanship. That can be seen in Adam Smith’s piece on page 11 where different members of the team are grouped and when coordinated 4,800 pins a day made (Smith, 2005).
- The primary effect of division of labor is to simplify the team player’s task by assigning them tasks that they can aptly handle hence increasing production.
- The three immediate advantages of division of labor are specialization, time saving and increase in productivity.
- The initial source of division of labor is the need to produce more products with efficient to meet the market needs. That coincides with neoclassical theory which has unlimited demand with limited supply of commodities.
- The above reason holds water in that the limited supply catering for the unlimited demand causes inequality to in Mankiw’s argument. The inequality happens as a result of many people depending on a single person for the supply of a commodity hence attracting a lot of income to the individual.
- i) The central characteristics of the neoclassical arguments about capital markets is that it is scarce and highly volatile as far as investments are concerned. The capital is scarce/limited because the investment ventures are also scarce therefore the prudent use of available funds. On the other hand, the capital is highly volatile as the businesses involved are quite unique and complex that one cannot recuperate easily from losses.
- Say’s Law states that a person should be paid for a product they produce, ehereby from such an income the person is able to order for other goods and services. Capital markets as said earlier are sensitive and as such need strategized and well-calculated handling. Mankiw’s way of Say’s Law is seen with the financing the financial institutions give to pre known candidates specific general benefits a bank should offer to all its clients.
- i) The phrase “invisible hand” according to Adam Smith means being mindless of one self an offering one’s services to another person in a bid to improve the business environment.
- ii) The butcher and baker are both seen to be an integral part of the economy. As such they are relative to the invisible hand because previous regimes made better environments for them to exist businesswise.
iii) The laissez-faire system allows for minimum interruption of the government into its public its economic affairs. The invisible hand is limited to its autonomous privileges that the different existent systems had their way of doing things hence limiting the invisible hand.
- iv) Friedman goes a notch higher in making market relations understood in as far as capitalism and freedom is concerned. Friedman attributes the interjection of different players in the business field which is equally fair, to the existence of freedom that has helped capitalism sail through times.
- v) In neoclassical theory price is determined through harmonized ways and reviews from clientele. Further still, equilibrium in the economy is achieved, the central elements that play a significant role in the realization of price are preferences, production functions and endowments. The three translate to demand and supply which through their acting together help reach a price. Marginal rate of substitution is evaluated through the quality and satisfaction of a commodity in the market. Pareto optimality is achieved when demand and supply forces of a commodity in the market are balanced in the market (page 101).
- vi) Market imperfections were dealt with in a noble manner where labor was well distributed to meet market demands and continue supply. That allowed for production of different products that allowed the consumer the freedom to choose what they wanted.
- a) There are market imperfections found in externalities, monopoly power, transaction costs and information asymmetry. These imperfections are skewed pricing, poor wage paying of laborers as well as a lack of comprehensive data entry to keep statistical growth of the specific business in the market.
- b) The new definition of equilibrium differed to Pareto optimality in that the former, advocates for laborers and staff where their availability is compromised. Having the human capital is the best leverage ever as per the new definition.
Pareto optimality is on the other hand, is achieved by having a balanced state of demand and supply.
- Recounting Specific Critiscisms of Mankiw’s Arguments Using Keynesian and Marxian Political-Economy Theory.
- Compare and Contrast
The difference between Keyne’s and Mankiw’s view of on a wealth tax is that the source of income should be evaluated. The source of income that help generate the wealth an individual one has. Keynes argues that savings are primal in one amassing wealth and thus the wealth should not be taxed as that is taxing savings. Mankiw on the other hand argues that wealth should be taxed because infrastructures earlier put in place helped them develop to their wealth. As such their wealth should be taxed to help improve other infrastructure for the continued development of the society.
The similarity both Keynes and Mankiw ascribes to is that whichever means of tax on wealth is arrived to the process of reaching the facilitators should be “leak free” in order to realize a heightened potential in the use of resources.
Keynes would never defend a tax on wealth even in a recession because of the “bucket leak” the process. There are flaws in the way the tax generated from wealth is transferred and as such Keynes sees it as a way of exploiting people’s hard work. It is further seen that Keynes argues that the government is involved in a lot of transfer funds rather than facilitation of programs to generate more revenue (page 108). That is the case where the government moves funds to cater for recurrent expenditure among other leisure allowances instead of reinventing ways to improve society. As such, a recession would not change Keynes ideology.
- The U.S money system in the 1930’s can be seen to have improved into the current. In the 1930’s there was inflation that led to banking crises that led to a devastated state of the money system. Federal reserves crumbled. Moneys were relatively losing value as at that time people stopped seeing employment as an option. The state continued and the money system would be restored by gold that importers would deposit in the banks. The banks were required to deposit with the federal bank and with time the state normalized but gold formed a larger stake of the reserves which at times would be turned into dollars.
Fast forward to the current time the U.S money system has evolved and can be seen to dominate markets across the world due to the value of the dollar. The federal policy has been developed and able to synchronize the wealth of the nation into good valuation that prompts a less flawed monetary system. The money system has switched to paperless across many regions in the U.S which is a development that 1930’s did not experience. Convenience, reliability stability and security has been ensured and as well vastly developed.
C.i) Marx’s Theory of Value describes the different ways in which labor seeks to bring to an equilibrium the supply and demand of a commodity. Equilibrium is necessary but hardly achievable because of the uncertainties posed by questions. Such include: What amount of labor is necessary? Will the production be more or less to to the market needs? The questions are asked to enable formulate a precise and realistic number of people or machines needed in labor to correspond in the best possible output in terms of productivity hence the term theory of value. Value is at the center of the production process.
- ii) The fundamental class process is where the direct laborers are offered the necessary labor and surplus labor also given to them. On the other hand, the subsumed class process is solely assigned the work of distributing surplus labor.
iii) The Keynesian Theory of Value is centered in ensuring optimal productivity from the laborers. In the process of productivity, the Keynesian Theory echoes that the laborer should be offered reasonable wages. That will also motivate to enhance productivity that as a result guarantees creation and addition of value.
- i) The idea behind increasing of productivity by a single firm to benefit the rest of the rest of the capitalist class is objective. The capitalist class has buying power and more production makes the products more available to them. Their continued buying and relying on the apt and reliable production, triggers an opportunity to employ more laborers to continue production. At the end of the day, it is a win-win situation.
- ii) Real wages are the periodic payments to laborers congruent to their production. Exploitation rate on the other hand is the maximizing the output of laborers to levels where they are overstretched. The extra output by laborers is not met by wages and as such accorded the term exploitation rate. Therefore, an increase in the exploitation rate leads to more productivity which translates to more income. The increased income describes the increased financial power that gives a company the ability to hire more and pay well and also improve wages. The good payment is the real wage. As such, an increase in exploitation rate leads to an increase in real wages.
iii) Alienation happens in four different ways according to Marx. There is the social aspect, liability, ownership and control aspects. The social aspect deprives the laborer the environment to associate with the consumers of the product he or she is part of as far as production is concerned. Liability rests on the employer’s hands as well as the ownership therefor depriving the laborer any right to the product of he or she has produced. Control is the aspect that a person is entitled to when doing is own work. Such a situation denies the worker the privilege to direct themselves, instead, they take orders from their manager in the production process.
In the subsection The Ghost in the Machine Varoufakis displays alienation as a more developed form of the use of the machine. That is because more output can be achieved through the machine leaving the laborer less work which is to manipulate the same machine. The result is that alienation deepens as less laborers are needed as well as the involvement of the laborer in production reduces.
- iv) According to Marx fetishism of a commodity is the aspect in which a the result of a laborers work through their naturally given hands and brain are thereof called products that are pushed into the market.
Keynes explains the supply and demand of labor differently from Mankiw by arguing that laborers’ availability is triggered by wages. It is to such accord laborers choose to be voluntarily unemployed while in Mankiw’s view production necessitates demand. For the demand of commodities to be met the supply of laborers should be adequate as triggered by the demand for the laborers to meet production targets.
- i) Ricardo’s contradiction of capital accumulation is based on the ideology that much has to be saved to enable enhance output through laborers. That is because Ricardo argues that the price of a commodity is dependent on the laborers.
- ii) Marx describes the contradiction of capital accumulation as one that is dependent on class. There are different levels of people in the capitalist society who have different strengths or power per se to save. That therefore, brings about the falling rate of profit because more classes are able to save and engage the less powerful classes. Competition eventually leads to reduction of prices hence profit falls.
iii) Keynes explains supply and demand of capital differently from neoclassical’s view in that Keynes depends on wages and laborers to determine the availability of capital. On the other hand, neoclassics’s view depends on the demand of a commodity in the market to make decisions on the assigning and development of capital.
Ricardo, Marx, Keynes and Mankiw relate to Say’s law which acknowledges that production brings about demand. Economic inequality exists in all the schools of thoughts represented herein. In Ricardo’s case, economic inequality is brought about by a lot of savings that can be considered as hoarding in order to raise capital for laborers for an improved production process.
Marx is a class based system and it obvious that the capitalist minds at the top will always want to be at the top as seen in “Defending the One percent.” As such the junior members of the society and laborers will always be their subjects relating to the economic inequality.
Keynes relies on wages and pricing which is a way of limiting laborers financial power hence the economic inequality. It is argued that if the laborer is paid enough to sustain them, he or she will always be loyal to their boss and as such production and labor is made available.
Economic inequality in Mankiw’s case is dependent on skills developed through training or education. There are people who have talent which is a form of skill such as entertaining. Education also has raised highly ranked persons as the CEO’s. That gives the reason as to why such people attract a huge following to generate a lot of income from the masses to their individual selves. Their continued practice of their profession is production and increases their demand. As a result economic inequality is achieved.
Mankiw’s discussion on the veil of ignorance is similar to Norton’s and Ariely’s thinking in that people strive to be where they are due to preferences. The preferences are always something or someone they feel endeared to in one way or another. As such ignorance looms in where certain people or decisions are made to suit their preferences.
The difference in Mankiw and Norton and Ariely in their views though is that there is much investment to achieve a product and its supply and demand as opposed to Norton and Ariely’s way on giving mere decisions based on preference. Americans agree with Mankiw’s view of the labor market where skill is necessary to allow for quality and competence.
Thomas Malthus blames population especially the poor for an economic crisis. His assumptions are that the poor are made and not born. Malthus identifies relief programs that are way many and encourage the poor being in their sorry state. As such Malthus takes concerns that the population should be curbed to reduced poverty through the heightened fertility of the poor. The working system is also seen not to favor the poor by offering tough conditions where wages are insignificant hence worsening the economic condition of the nation. The poor continue being poor and programs suggested to improve the status of the poor should first deal with the growing population which is a setback according to Thomas Malthus.
Say’s law argues that production brings about demand because when a product is made available to the market and bought, income is generated. The generated income will further result to financial power that helps one to purchase more hence creating demand. Marx’s contradiction of capital accumulation is seen to be affected by the class premonition. The need to save to remain at certain levels of the capitalist class is a setback to capital accumulation. That is because market trends will have changed affecting demand and supply. It is necessary that such an ideology is well calculated to act swiftly to help save with a more noble cause of improving the economy rather than maintain an economic or social class.
Marx sees the metamorphosis of a commodity as one that starts from the laborer as opposed to Say’s Law that directly looks into production not mentioning the laborer. Marx saves to facilitate good payment to the laborer while Say’s Law seems to be ignorant on the same. Marx’s criticism further shows that Say’s and Ricardo are faulty in their dealings because they do not specify what motivate them as class motivates Marx. They in a way engage the laborer blindly by paying them and that does not necessarily motivate the seller.
Crisis in for is Marx’s plausible way of expressing his concerns in the depreciating value of the economy due to capitalist insurgence. Crisis not in substance can be seen as indirect form of devastation of an economy that has a lot of capital moving around causing inflation due to the much payments given to lure laborers. Two causes of crisis( not abstract) are competition and capital. Competition resulted in lowering of pricing for commodities which led to fallen profits and later on a crumbling economy. Capital from the capitalists was much available and cause inflation as explained above as well as falling profits bringing about an economic crisis. The tendency of profits to fall is a proponent of the preceding sentences herein. Forces that counteract the tendency of falling profits are supply and demand in the world markets. As much a country may locally be in an economic crisis, the product can maintain value across global platforms and help it avert the tendency of falling profits. Therefore reliable supply translates to good demand where the class struggle is looking for dominance in the markets.
The two leaps are calls and puts where calls increase the rights to buy stock while puts indicate the right to sell stock. Condorcet’s Secret facilitates the financialization of the U.S economy by holding exercising hidden coercion with the power vested to the unknowing subjects who are citizens. In that, the citizens are not aware of the major transaction taking place through their indirect input hence financing the U.S economy in a major way. Two gremlins of modern capitalism are exploitation and much hoarding. The two resemble Keynes as exploitation takes place to make maximum profits in order to pay more competent workers who will propagate the owner’s business to the next level. At the same time, hoarding happens in order to control supply and demand in the markets and when demand is high with less supply, the hoarding capitalists engage maximally to rake in extra profits which is unfair to the society. Apora is a term used to show the diminishing of hopeful projects by a condition such as the financial crisis in 2008 which was felt globally. Parallax challenge is the fault that miscalculations were made in light of the 2008 predicament while Cretan Minotaur means refers to crumbling expectations that did not meet reasoning behind the same expectations.
The handmaidens to the Global Minotaur were Wall Street, Walmart and trickle down effects to the U.S states. The toxic economic theory would be seen to advocate for less interference in the financial sector by the government. Further still the theory facilitated mergers and takeovers that would see the parties involved rake in attractive and amazing profits in a small amount of time. The historical trends would be seen to be rife with rational expectations accompanied with irrepressible greed that culminated into 2008. The slide into bankruptcy means people were being lured into a scheme that they thought was lucrative only to find their assets were worthless and bankrupt banks would rule the economy (Varoufakis, 2011).
The money was given to un-creditworthy customers to continue creation of inflation as it was one of the goals of the schemers. Mortgages were bought by real estate investors. The buyers of the mortgages invested in buying more assets with their new assigned financial power. The mortgage-baked securities were virtual cash enticements that would attract investors. That is a similar case to credit default swaps where moneys would be credited into ones account virtually and enable the purchase of commodities even on a negative end. People bought the specified mortgages because they were an easy form of investment which was also attractive. The European Central Bank changed the markets mindset and people started being wary of the plan. Housing prices fell due to the growing number of real estate grow ups in the U.S. The credit default swaps did not pay out because of the huge bailouts that would happen rendering the system bankrupt (pages 150-158).
The Geithner Summer plan would see creation of a new account with the US treasury. Scrutiny would be vital as the plan was as a result of learning from failure. Rejuvenation of the economy would be foreseen. Toward a healthy economy, recycling of surplus into new markets would be necessary. Developed countries would be seen to form centers of financial research and promote development in each other through subsidized lending. Those are some of the prospects to a healthy economy in the future.
Mankiw, N. G. (2013). Defending the One Percent. Journal of Economic Perspectives, 27(3), 21-23. AceMyHW.com
Smith, A. (2005). The Wealth of Nations. Philadelphia: Pennsylvania State University.
Varoufakis, Y. (2011). The Global Minotaur. New York: Zed Books.
Wolff, R. D., & Resnick, S. A. (2012). Contending Economic Theories. London: Palgrave Macmillan.