Why do economists, politicians and the media ignore the "political economy"?

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DrKrbyLuv's picture
DrKrbyLuv
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Why do economists, politicians and the media ignore the "political economy"?

Political economy originally was the term for studying production, buying and selling, and their relations with law, custom, and government. Political economy originated in moral philosophy. It developed in the 18th century as the study of the economies of states—polities, hence political economy.

Political economy most commonly refers to interdisciplinary studies drawing upon economics, law, and political science in explaining how political institutions, the political environment, and the economic system...implicating public policy, such as monopoly, market protection, government fiscal policy..."  - Wikipedia

The term "political economy" has vanished and been replaced by subjective economics.  We are bombarded with continuous discussions about inflation, currencies, the IMF, quantitative easing, derivatives, stocks, the Fed's balance sheet, etc.  The political economy is much more important...I'll provide some contrasting examples to make my point:

Economics - "Free trade is a system in which goods, capital, and labor flow freely between nations, without barriers which could hinder the trade process. Many nations have free trade agreements, and several international organizations promote free trade between their members."

Political economy - NAFTA and CAFTA and other free trade agreements have decimated our economy and productive capacity by moving jobs and factories out of the country.  Why don't we protect our jobs and markets with trade barriers?
____________________________________________________________________

Economics - American workers can't compete.

Political economy - American workers should not have to compete with foreign sweat shops.  Henry Ford shocked the world when he doubled the wages of thousands of his employees.  He reasoned that his workers deserved to share in the profits and better pay enabled them to buy more of his cars.  Then he cut the work week from 6 days a week to 5 days while maintaining the same weekly pay.  His policies helped build a strong middle class.
____________________________________________________________________

Economics - We have to take on more debt to reduce unemployment, e.g. bail-outs.

Political economy - High unemployment means there isn't enough money in circulation.  There isn't enough money because there is too much debt.
____________________________________________________________________

Economics - Austerity measures and more taxes are needed (erosion of our quality of life) to balance the budget.

Political economy - We can no longer endure the usury of the private monopoly that creates all money as debt.  It is impossible to reduce government debt without further contracting the money supply as the national debt IS the money supply (national debt $13 trillion and the broad money supply is $13 trillion).  The banks lend the government it's own money and this must stop. 

Larry

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Re: Why do economists, politicians and the media ignore the ...

Dr KrbyLuv

You have raised an interesting issue and provided good examples.  I think the essence of the answer is in this quote. 

There was a guy named von Clausewitz who said, 'War is a continuation of politics by other means'.  (I say) Politics is a continuation of economics by other means.  --  Michael Ruppert

Economics as an academic discipline is fairly recent.  Not much over 100 years old I think.  To gain respectability economist have worked hard to divorce themselves from the political sphere and portray their work as an objective science.  They largely ignore the shared assumptions and biases they build upon and the political influences these reflect.

Modern economies are so complex that simplifications are required to explain anything.  For example, economist are notorious for ignoring the human factors by assuming everyone acts rationally.  When business school graduates enter the real world they quickly have to jettison much of the knowledge they paid a high price to acquire, if they want to survive.

Over the past few decades economists have tried to be more “rigorous” by focusing on models based on complex math.  In the process they increasing ignore reality as they admire the beauty of their elegant theories.

It is now clear that most economist have misread past and current trends to such an extent that they have shown how bankrupt their profession is.  Many of them have prostituted themselves by justifying the actions of the people who pay them well, and acting as cheerleaders to bring in more suckers.  They provide a respectable front for the pirates.  One thing they have done very well – they have thoroughly discredited themselves.

 

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Re: Why do economists, politicians and the media ignore the ...

To Capitalist elites, 'political economy' is code for Communism.  I was told that it used to be widely taught, a few decades ago, but was edged out of the curiculae of most universities because it was considered too subversive. Although Capitalism purports to be a competetive model, it hasn't allowed the most basic ideological challenges to it's own assumptions and dominance in an open market place of ideas.  Universities have become institutions of conformity that crank out free marketeers, like sausages links, in a factory system where all individuality has been rendered out.

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Re: Why do economists, politicians and the media ignore the ...

Travlin wrote:

It is now clear that most economist have misread past and current trends to such an extent that they have shown how bankrupt their profession is. Many of them have prostituted themselves by justifying the actions of the people who pay them well, and acting as cheerleaders to bring in more suckers. They provide a respectable front for the pirates. One thing they have done very well – they have thoroughly discredited themselves.

Well said Travlin!  International corporations purchase professors, academic departments and of course economists.  The "political economy" included a social conscience, a sense of justice and the nation's best interests.  

agitating prop wrote:

To Capitalist elites, 'political economy' is code for Communism. I was told that it used to be widely taught, a few decades ago, but was edged out of the curiculae of most universities because it was considered too subversive.

Don't know who told you that but I have to disagree.  There has been a lot of disinformation spread around as noted by Travlin above.  If by "capitalist elites" you mean the masters of industry then I would be more inclined to call them "monopoly capitalist elites" because they hate competition and strive to control the world economy - heck with the people.

Larry

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Re: Why do economists, politicians and the media ignore the ...

i listen to bloomberg radio for an hour every morning driving into work.  i have been doing this for 12 years.  basically, except for a short period where the equity markets were tanking to the max pretty much every week, they tend to talk about all the green shoots an other positive stuff like increasing profits being reported by various US companies.  on bloomberg surveillance, the morning show, they have various economists and other financial industry big shots on talking about whatever is on their mind.  right up until the entire mess went south a couple of years ago it was all roses and wonderful.  then the entire thing was eating poop for a while and they actually talked about it.  When the GDP stopped shrinking (the way it is measured by economists), it turned around and started being all roses again.  the next bull market, the buying opportunity of a lifetime, etc..  i am still trying to figure out what a jobless recovery means.  these days that term is used every day on the bloomberg morning show.  i do not believe there is such a thing as a jobless recovery.  and now, over the last few weeks, the talk has turned a little bit toward what i have been thinking for some time now - the government (in its various forms) is on an out of control spending spree and taxes are going to be raised and over time raised quite a bit, and we are all in big big trouble as a result.  i have actually heard a few people actually saying this recently.  this kind of talk is a very rare thing on bloomberg's morning show for some reason.  i would like to blame it on "talking up the book" or some behavior other than pure ignorance or outright lies but i am having trouble deriving a sensible reason.

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Re: Why do economists, politicians and the media ignore the ...
DrKrbyLuv wrote:

 

agitating prop wrote:

To Capitalist elites, 'political economy' is code for Communism. I was told that it used to be widely taught, a few decades ago, but was edged out of the curiculae of most universities because it was considered too subversive.

Don't know who told you that but I have to disagree.  There has been a lot of disinformation spread around as noted by Travlin above.  If by "capitalist elites" you mean the masters of industry then I would be more inclined to call them "monopoly capitalist elites" because they hate competition and strive to control the world economy - heck with the people.

Larry

Capitalism uses the winnowing process of competition to concentrates power in fewer hands. That is how it works, moreover that is it's stated objective, that there will be some winners and many losers.  Captains of industry may start out as movers, shakers and a vitalizing economic force but given time the  healthy tissue growth phase of capitalism becomes a cancerous lesion sucking the life force out of the economy and political life. That's where the term 'elite' comes in.  Because there is so little discussion in the mainstream media about legislation that prevents the formation of corporate leviathons, very few people realize that the intense wave of mergers and acquisitions, common in the last couple of decades are part and parcel of a mileu that restricts or frames discussions about such activity in a self serving way.

The anti-trust laws in the telecommunication industry, for example, broke up the Bell monopoly but have not been implemented where the Baby Bells are concerned.  The babies were taken to be a sign that anti trust worked for the common good, for competition, but they  have since reformed into just a few terrible toddlers with pricing power.  It's the same story with major oil refiners---and of course it's endemic in the entertainment industry. Monopoly's can be regulated or broken up for the 'common good' but  oligopolies are more difficult to define, control, gain leverage over.

Wikipedia article on Mergers Acquisitions and anti-trust:

Mergers and acquisitions

A merger or acquisition involves, from a competition law perspective, the concentration of economic power in the hands of fewer than before.[90] This usually means that one firm buys out the shares of another. The reasons for oversight of economic concentrations by the state are the same as the reasons to restrict firms who abuse a position of dominance, only that regulation of mergers and acquisitions attempts to deal with the problem before it arises, ex ante prevention of market dominance.[91] In the United States merger regulation began under the Clayton Act, and in the European Union, under the Merger Regulation 139/2004 (known as the "ECMR"[92]). Competition law requires that firms proposing to merge gain authorisation from the relevant government authority, or simply go ahead but face the prospect of demerger should the concentration later be found to lessen competition. The theory behind mergers is that transaction costs can be reduced compared to operating on an open market through bilateral contracts.[93] Concentrations can increase economies of scale and scope. However often firms take advantage of their increase in market power, their increased market share and decreased number of competitors, which can adversely affect the deal that consumers get. Merger control is about predicting what the market might be like, not knowing and making a judgment. Hence the central provision under EU law asks whether a concentration would if it went ahead "significantly impede effective competition... in particular as a result of the creation or strengthening off a dominant position..."[94] and the corresponding provision under US antitrust states similarly,

http://en.wikipedia.org/wiki/Competition_law

 

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Re: Why do economists, politicians and the media ignore the ...
DrKrbyLuv wrote:

Political economy originally was the term for studying production, buying and selling, and their relations with law, custom, and government. Political economy originated in moral philosophy. It developed in the 18th century as the study of the economies of states—polities, hence political economy.

Political economy most commonly refers to interdisciplinary studies drawing upon economics, law, and political science in explaining how political institutions, the political environment, and the economic system...implicating public policy, such as monopoly, market protection, government fiscal policy..."  - Wikipedia

The term "political economy" has vanished and been replaced by subjective economics.  We are bombarded with continuous discussions about inflation, currencies, the IMF, quantitative easing, derivatives, stocks, the Fed's balance sheet, etc.  The political economy is much more important.

I agree with your assessment.  I believe a significant clue to the answer to the title question lies in the Wikipedia quote.  Interdisciplinary studies drawing upon economics, law and political science.  Such studies are for specialists in a world of specialists expected, if not required, to stay on task and to take all other specialists for granted (the new live and let live).  I realize as I write this that I'm moving close to what makes me uncomfortable with CM's valuation of (anticipatory nostalgia for) the social complexity we've gotten from fossil fuel consumption.  That complexity is an illusion that eclipses the natural and true complexity of any human population, as each of us is unique and would contribute uniquely if the meaning of social structures and processes was please present your gifts today and every day.  In reality, each of us is a specialist when we arrive; to live with everyone else we can add a generalist dimension that enables us to work common ground, best by far when not at the expense of our individuality.

The well-rounded, attentive and engaged citizen concerned with common goods and consensus limits on reaching and pushing has been replaced by the worker-consumer concerned with getting by and getting the chosen thing among latest things.  A turn-around is called for, but so few can detect the plea in the noise (the bombarding discussions you listed, and more) of our time.  In this economy and resulting culture, the sensitivity is not a specialty that pays.

David

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Re: Why do economists, politicians and the media ignore the ...

The Political Economy; Alonzo Potter, written in 1840

"Definition of the Science.—The Study of the Happiness of Societies so far as it depends on the Abundance and Distribution of their Wealth.—Its Principles capable only of Moral, not Mathematical Proof.

Political Economy teaches the art of managing the pecuniary resources of a society to the best advantage of its members. It embraces the moral and religious education, the political constitution, or the personal protection of a people no farther than these influence the production or distribution of properly, i. e., of those things which are the result of labour and the objects of exchange; and which, when accumulated to any considerable extent, are ordinarily spoken of as wealth.

There is much difficulty in defining with precision the province of Political Economy. Its title would lead us to suppose that, in its practical bearings, it must be to a state what domestic economy is to a household. It is, however, much less comprehensive; including, of State Economy, only so much as relates to the production and distribution of property. By most writers, again, such production or distribution are considered as the ultimate objects of inquiry ; while some hold with the author, that happiness or welfare being the great end of a wise public economy, only that production and distribution of wealth is to be considered which conduces to this end."

The "Political Economy" compels a society to consider how economic policies affect both the individual and nation.  Like many things there needs to be some balance. 

On one extreme we end up with a totally managed economy which may stifle innovation and efficiency.  The other extreme is a disregard of how policies may effect people.  A dog eat dog society, everyone grabs what they can no matter how damaging it may be.

I think we are at an extreme today, the pendulum has swung towards predatory practices that are destroying the people and will ultimately destroy the nation.  Protectionism has become a bad word, but it is an important function of government to protect the people. 

This was inevitable as something very important has changed.  The international bank cartel and supranational corporations have usurped the government and they decide what our economic policies should be.  Not surprisingly, their interests trump ours.  

"...we believe that the right to coin money and issue money is a function of government. We believe it. We believe it is a part of sovereignty and can no more with safety be delegated to private individuals than can the power to make penal statutes or levy laws for taxation.

Those who are opposed to this proposition tell us that the issue of paper money is a function of the bank and that the government ought to go out of the banking business. I stand with Jefferson rather than with them, and tell them, as he did, that the issue of money is a function of the government and that the banks should go out of the governing business."  - William Jenning Bryan 

Larry 

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Re: Why do economists, politicians and the media ignore the ...
DrKrbyLuv wrote:

The term "political economy" has vanished and been replaced by subjective economics.  We are bombarded with continuous discussions about inflation, currencies, the IMF, quantitative easing, derivatives, stocks, the Fed's balance sheet, etc.  The political economy is much more important...I'll provide some contrasting examples to make my point:

I would propose that the issue is one of microeconomics versus macroeconomics. And yes, it is true that the emphasis and focus is on the micro and not the macro.

Perhaps some partial explanations for why this is so can be seen by examining the current status of the theoretical side of macroeconomics, which is undergoing a tectonic shift as a result of several factors:

1.)    The recent financial collapse.

2.)    The effects of the recent stimulus programs, which offered (?) a very rare case study into the effects of injecting large amounts of capital into an economy, largely based on macroeconomic theory.

3.)    The availability of advanced computational methods to model and test macroeconomic principles.

The sum of these and other recent events has accelerated a profound change in the fundamental belief systems of macroeconomics, and the results are raising serious challenges to what has been considered correct theory. At the core, the discipline of macroeconomics is to not only represent the areas that you mention, but to also undertake the self enforced objective of convincing policy makers that they are able to successfully map financial considerations, market behavior, and business policy to benefit and optimize large scale society. As you may have noticed, this is not going so well.

Consider:

-         The (economists) practice of extrapolating individual indifference curves to try and predict large scale sociological behavior has been seriously challenged as being a bogus assumption. As much of the neoclassical and Keynesian theories are based upon scaling these indifference curves to describe the macro effect, we have in fact a failure of first principles.

-         In another sense, much of current theory is stuck on another fatal scaling error, that which tries to describe large scale macroeconomic behavior as a phase of static equilibrium, in fact, virtually all of modern mainstream theory tries to design policies and approaches to try and satisfy static (freeze frame if you will) conditions. This is a totally unrealistic and frankly, impossible objective. The idea that dynamic behavior can be predicted by simply stitching together simple time zero static observations and equations is patently false.

These are but two examples of first principle defects which are getting assimilated into a Post Keynesian series of theories, and as near as I can tell, these are still largely incomplete. In plain English, the entire subject matter and basic theories are being rewritten, because as most now know, it was all wrong.

To expand on Agitating Props’ excellent post, there may be other reasons that macroeconomics is not being discussed prominently, other than the (apparent) recognition by the practitioners that their theories are flawed, and that may well be that the implications of any new or revised theories may not bode well for the near universal reverence that capitalism enjoys.

Baseline neoclassical theory is fixated on the capitalist principle that people are inclined to pursue maximum utility, and that capitalism is driven by consumption. When the word consumption is substituted for accumulation, we have a very different set of conditions that can and do occur, some of which are describd by AP’s post.

The recognition of these factors into modern macroeconomic theory is disturbing at best, and one can hardly imagine if these modifications can be validated in general theory, how the average Joe six pack is going to react to the message and conclusions that are part and parcel.

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Re: Why do economists, politicians and the media ignore the ...

 

Darbikrash said 

Baseline neoclassical theory is fixated on the capitalist principle that people are inclined to pursue maximum utility, and that capitalism is driven by consumption. When the word consumption is substituted for accumulation, we have a very different set of conditions that can and do occur, some of which are describd by AP’s post.

The recognition of these factors into modern macroeconomic theory is disturbing at best, and one can hardly imagine if these modifications can be validated in general theory, how the average Joe six pack is going to react to the message and conclusions that are part and parcel.

 

One of the founding principles of economists is that people will pursue maximum utility in a logical and self serving manner.  This completely fails to tke into account at either a macro or micro level, the vagaries of human nature.   Friedman et al, believed that humans, if presented with a set of options would always take that option which most profited themselves.  This is simply not true.  The fairly new discipline (I will not use the word science in regards to any aspect of economics) of behavioral economics comes closer,  but they have thus far mostly failed to apply their understanding to the macro level.    In the meantime that economists are clinging to their insistence that humanity is logical the political economists are busy using humanity's ignorance and fear to profit.     The worst part is many of them actually believe themselves.

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Re: Why do economists, politicians and the media ignore the ...
DrKrbyLuv wrote:

The "Political Economy" compels a society to consider how economic policies affect both the individual and nation.  Like many things there needs to be some balance. 

On one extreme we end up with a totally managed economy which may stifle innovation and efficiency.  The other extreme is a disregard of how policies may effect people.  A dog eat dog society, everyone grabs what they can no matter how damaging it may be.

I think we are at an extreme today, the pendulum has swung towards predatory practices that are destroying the people and will ultimately destroy the nation.  Protectionism has become a bad word, but it is an important function of government to protect the people. 

Yep.  You nailed it.  As the middle class is being steadily destroyed, people are finally catching on.

darbikrash & land2341

Thanks for your insights into modern economics.   They were very helpful.

Travlin 

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