Recap for 3/28

This past week we discussed capitalism in relation to the Great Depression and the idea of changing neoclassical economics through Keynesian influences. Up to this point, what was known as "American capitalism" was seen as almost a solid fact of life that shouldn't be tampered with. The hit the Great Depression put on the economy changed this perspective forever. People began to doubt the system they loved and knew. Times of hardship brought some to believe that unchecked capitalist systems would continuously bring times of depression and recession, damaging the working class and poor to a severe extent.

Before the Great Depression, there was the prosperous 20's. A time when everyone was raking in the big bucks and the U.S. economy was flourishing. This all came tumbling down in 1929 when the stock market crashed and the Great Depression began. The capitalist economy that Americans loved had failed them and their belief in the system was in the balance. Appleby explains that "the Depression had exposed two great weaknesses of capitalism: its wayward oscillations between good and bad times and the vastly unequal distribution of wealth it produced" (291).  According to her claim, capitalism fluctuates between good and bad times often and the unequal distribution of wealth was causing issues with the working classes.

American leaders knew a change had to be made to capitalism in order to avoid another disaster and central planning wasn't the answer so Keynesian ideals were adopted and more government involvement over the market was introduced. Neoclassical economics had failed the American public so changes weren't the worst idea, but some were weary to a new version of capitalism.

I think it's interesting that that capitalism of the early 1900's doesn't really exist anymore because the Depression caused people to reflect upon the pros and cons of capitalism and decide what changes were necessary. This reminds me of the financial crisis of 2008. Unchecked bank and financial business practices took a wrong turn and had the potential to cripple the economy on an international scale. Global leaders and economists reflected upon the situation and current state of capitalism and had to make decisions on government involvement and the good for all. I think we're still trying to figure out how to best organize our economy. What are your thoughts on the relation between the Depression and crisis of 2008? Do you think adjustments still need to be made in order to further avoid catastrophes that capitalism may cause (according to Appleby)?

Excellent article on income inequality and global capitalist trends

You should read this piece, which discusses a new book by Piketty (a French economist) that argues 21st century capitalism is where the system's central contradiction is becoming more and more evident, leading to staggering income inequality. Some of his argues echo ones we've encountered in class. Can any of you identify some connections?

http://m.newyorker.com/online/blogs/johncassidy/2014/03/piketty-looks-at-inequality-in-six-charts.html?utm_source=dlvr.it&utm_medium=twitter

Neoclassical Economics isn't working!

In class this week we focused on why neoclassical economics wasn’t working. It is an economic system based on exchanges. People exchange labor for wages then that money is exchanged to buy commodities. It also preached the individuals wants to maximizing profits. The idea of individualism asks many questions. Individual liberty creates the betterment for individuals but is it better everyone? When people make choices that help them become wealthy does it help the betterment of others?  For neoclassical economics to work everyone involved would need to be a rational economic actor. As Dr. Gannon asked us in class most of the time people don’t know what to do with their money. It is because we cannot predict the future. If we could predict the future then we would all make the best economic choices and be well off financially. These theories are always good on paper but do not make sense in real life. When questions about the 2008 crisis were not able to be answered by neoclassical economist the tides seemed to be turning to a Paradigm shift.

March 7 recap on challenging Neoclassical Economics

The readings for Friday offer us the author's critique on Neoclassical Economics. The author describe several guiding and mathematical principles used in Neoclassical thinking as well as a few of the shakier concepts that it is based on. In short, consumers will always seek to get the highest utility within their means, and entrepreneurs will always seek the greatest profit. According to Neoclassical Economics as long as consumers and entrepreneurs fulfill their duties in this regard social welfare will benefit. It is postulated that their is a 'bliss point' or a Pareto Optimum in which once all labor and capital is harnessed for maximum efficiency individuals living standards will be as good as they can get.

As our authors point out, Neoclassical economists take it for granted the a free market capitalist society will always work toward this 'bliss point' for granted, and that if you consider other possibilities it doesn't hold up based on the mathematical principles they've put forward. His other critique is on the methodology used in Neoclassical microeconomics which take individual human choices as being constant and uniform. Using Hedonist psychology, it is assumed that all goods have the same worth to everyone, and that all human behavior is based on maximizing utility based on that. The way that society reaches the bliss point is through 'Pareto improvements' which are changes that increase the welfare of some or all without decreasing the welfare of anyone.

Why do you think, as our author claims, that Neoclassical economics the most prevalent school of economic thought today? If we say that the bliss point is just an arrow with Neoclassical Economics being the bulls eye painted around it is there anything that could be realistically substituted that would allow these theories to still hold true?

Recap of 3/7

In this week’s class the word we most talked about was imperialism. Imperialism is a policy of extending a country’s power and influence through diplomacy or military. In class we discussed how capitalism is just like imperialism. In class we also got see all of the country’s that were taken over because of imperialism.

There is several similarities between capitalism and imperialism. A couple of examples would be that both have social injustices that go along with capitalism (rich get richer) and imperialism (invading and annexing another country).  Expansion and wealth are key in both. Competition is key because you want to get rid of all you competitors. The last example is consumerism if you want something and that weak country has it then go get it.