Session 8
Session 8. Efficiency Arguments for Capitalism: (1) The Argument that the More You Use the Free Market, the More Efficiently Information Is Allocated. (2) The Argument that a Perfectly Competitive Economy in Equilibrium Is the Optimal Form of Satisfying the Desires of Sovereign Consumers and Free Producers (General Equilibrium Theory). (3) How Applicable to the Real World Are The Assumptions of GE Theory?
PAPER PROPOSAL DUE IN CLASS!
Read first: F. A. Hayek, "The Use of Knowledge in Society," "The Meaning of Competition," Individualism and Economic Order, pp. 77-91, 92-106.
Then read: John Hicks, "The Concept of Equilibrium," Capital and Growth (Oxford UP,. 1965), 15-20.
Next: Daniel Hausman, "What Is General Equilibrium Theory?" Essays on Philosophy and Economic Methodology (Cambridge UP, 1992), 165-171 [ClassesV2]
Then: Allen Buchanan, "Efficiency Arguments for the Market," Ethics, Efficiency, and the Market, pp. 14-18.
So you’d like to know more…Click here for materials on efficiency arguments and general equilibrium theory.
Hayek, "Economics and Knowledge," Individualism and Economic Order, pp. 33-57.
Hayek, "Individualism: True and False," Individualism and Economic Order, pp. 1-33.
Sets out the moral principles and assumptions about how people do and can act to which Hayek appeals in choosing capitalism over more statist systems of political economy. A famous statement of methodological individualism.
Charles Fourier, "Critique of Commerce," "Work and Industry in Civilization," The Utopian Vision of Charles Fourier (Boston: Beacon Press, 1971), pp. 107-138.
[ClassesV2]
Fourier’s famous tabulation and expose of the inefficiencies and waste in the capitalism of his time. He had been a cloth merchant, so he had first-hand experience of this.
John Kenneth Galbraith, "The Dependence Effect," The Affluent Society, 40th anniversary edn. (Boston: Houghton Mifflin, 1998), pp. 124-131. [ClassesV2]
A famous challenge to the idea that consumers are sovereign over what gets produced: advertising and marketing lead them to buy.
Jon Elster, "Theories of capitalist crises," Making Sense of Marx, pp. 154-165. [Available at bottom of this page]
A good short account of Marx's theory of how and why crashes and slumps occur in capitalism,
E. J. Mishan, "The Myth of Consumer Sovereignty," The Costs of Economic Growth, revised edn. (London: Weidenfeld & Nicholson, 1993), pp. 61-75.
Another realistic challenge to consumer sovereignty.
Richard W. Miller, "A Minimal Case for Capitalism," Moral Differences (Princeton University Press, 1992), pp. 277-281.
An informative thumbnail sketch of an empirically-informed argument for why capitalist production is more efficient than centrally-planned production.