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Introduction to Political Economy

Introduction to Political Economy. Week 1. Mainstream Economics. Based on assumption of rational economic man. Analogies from physics: equilibrium Mathematical models of optimization given constraints. Abstraction from “non-economic” factors such as institutions, customs, cultures.

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Introduction to Political Economy

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  1. Introduction to Political Economy Week 1

  2. Mainstream Economics • Based on assumption of rational economic man. • Analogies from physics: equilibrium • Mathematical models of optimization given constraints. • Abstraction from “non-economic” factors such as institutions, customs, cultures.

  3. Historical Dimension In mainstream economics, institutions, customs, cultures are taken as given. “exogenous to the model” In P.E. we consider how they evolved and are evolving

  4. Economics as a Science Mainstream economics claims to be scientific because like physics, theories are presented mathematically. Critics say the true test of a science is its ability to predict, something on which mainstream economics fails.

  5. Karl Polyani, The Great Transformation All economic systems known to us up to the end of feudalism in Western Europe were organized either on the principles of reciprocity or redistribution, or householding, or some combination of the three … In this framework, the orderly production and distribution of goods was secured through a great variety of individual motives … Among these motives, gain was not prominent.

  6. Property is Theft "The liberty and security of the rich do not suffer from the liberty and security of the poor; far from that, they mutually strengthen and sustain each other. The rich man’s right of property, on the contrary, has to be continually defended against the poor man’s desire for property."

  7. Property is Theft, cont. "Then if we are associated for the sake of liberty, equality, and security, we are not associated for the sake of property; then if property is a natural right, this natural right is not social, but anti-social. Property and society are utterly irreconcilable institutions." Pierre-Joseph Proudhon 1840

  8. Does the institution of private property lead to prosperity? Does it lead to peace?

  9. Peruvian economist bringing back an appreciation for private property. Identifies secure property rights as the key to economic development. Hernando de Soto

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