Basics of the Political
Economy Model
Econ 248: Economics of Poverty
and Discrimination
Prof. Keith Bender
Econ 248, UW-Milwaukee
Political Economy Theory
• Definition: The study of how groups and
institutions interact in obtaining scarce economic
resources.
• Here need to flesh out theory before we can
discuss theories of discrimination and compare
with neoclassical model
• Outline
– 4 C’s of Political Economy theory
– How these C’s affect class, race and gender
• Exploitation, domination, and exclusion
– What is the equilibrium? (Hint: there is no equilibrium
concept in PE theory!)
Econ 248, UW-Milwaukee
First ‘C’: Context
• Political economists believe that the context or
the environment of where the economic
interaction takes place is key
– History, institutions, culture shape and constrain
behavior
– Examples: role of religion, customary roles of groups
in society (like women staying home and raising kids),
legal systems and protections given under the system
• Why important?
– If context matters, then decisions are not individually
driven and exogenous.
– Rather, they are group driven and endogenous (ie
everything causes everything)
Econ 248, UW-Milwaukee
Second ‘C’: Why do fans take off their shirts at
Packer games when the wind chill is below zero?
1. Because they like to.
(answer submitted
by my daughter,
Fiona)
2. Because everyone
else is doing it.
3. Because they are
hot.
4. Because they are
too poor to afford
shirts.
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Econ 248, UW-Milwaukee
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Second ‘C’: Collective Behavior
• Answer #2 – implies this
– (And your parents would then say, “If they all jumped
off a cliff – would you jump too?!”)
• Lack of power in an individual context
• Implies need for collective behavior to have any
‘power’ in obtaining economic resources.
• Key is in unequal balance of power and power is
defined in groups – both obtaining and
maintaining power
Econ 248, UW-Milwaukee
Third ‘C’: My daughters sit down for dessert. There is only
one piece of pie. I allow Sophie to cut the pie and take a
piece. Fiona, the other daughter, will say…
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Econ 248, UW-Milwaukee
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“Thank you, Sophie, for
allowing me a piece of your
pie.”
“Hey, your piece is bigger
than mine!”
“Sophie, look at that neat bird
outside the window.”
(Whereupon Fiona takes
both pieces of pie and runs
away!)
“Watch out!! Dad is stealing
both pieces!!”
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1.
Third ‘C’: Conflicting Interests
• While #4 is possible (!), #2 is most likely. Why?
• There is a fixed amount of pie (it is a limited
resource), so the only way to get more, is for
someone else to get less
• Implies that economic interaction is a ‘Win-lose’
situation
– Compared to ‘Win-Win’ in NC economics
• Here, we’ll focus on three main conflicts
– Class
– Racial
– Gender
Econ 248, UW-Milwaukee
Fourth ‘C’: As the saying goes,
“Nothing in life is constant except
competition.”
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Econ 248, UW-Milwaukee
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Fourth ‘C’: Change
• Here, we are looking at ‘change’
– Defined as: the instability created by
conflicting interests and limited resources.
• Equivalent of the ‘market’ but more
dynamic
• Note that change may be either ‘good’ or
‘bad’ – it depends on your point of view.
Econ 248, UW-Milwaukee
Focus on Conflict
• Many types of conflict – here will focus on three
examples: class, race, and gender
• General issues
–
–
–
–
–
–
–
Conflicts not mutually exclusive
Social categories
Choice over group
Relativistic in nature (must have counterpart group)
Site
Fight over ‘surplus’
Ways to generate ‘surplus’ (‘oppression’)
Econ 248, UW-Milwaukee
Example 1: Class Conflict
• Definition:
– Social relations defined by a relationship to the means of
production
– Initial writers: Karl Marx and Friedrich Engels
• Groups: Workers and Capitalists
• Fighting over ‘surplus’
– Definition: output above that needed to replace capital and labor
used in the production process
– Similar to idea of profit
– Conflict comes about in generation and distribution
• Site: Place of production (firm)
• (Above is extreme view – reality is more murky.)
Econ 248, UW-Milwaukee
Example 2: Race/Ethnic Conflict
• Definition:
– Social relations that are associated with racial,
cultural, or ethnic differences
• Groups: Different races, cultures, ethnicities
• Fighting over ‘social surplus’
– Some proportion of aggregated class generated
surplus
– How is it distributed across races/ethnicities?
• Site: Communities, cities, regions
– Ex: provision of public services: transportation,
schools, economic development
Econ 248, UW-Milwaukee
Example 3: Gender Conflict
• Definition:
– Socially created distinctions between men and
women
– Key is NOT biological distinctions, but differences in
behaviors and social roles
• Groups: Women and Men
– Although not always against the other gender
• Fighting over ‘household surplus’
– Definition: the surplus generated in household
– Combination of outside resources and household
production
• Site: Household/family
Econ 248, UW-Milwaukee
‘Ways to Oppress’
•
•
All conflict is over ‘surplus’, but how is it generated and/or
distributed is key.
Many ways to oppress – here focus on three
1.
Exploitation
–
–
–
2.
Exclusion
–
–
–
3.
Definition: control by one group of another’s work for monetary or
material gain
Generally (but not exclusively) class conflict
Capitalists have resources, workers don’t
Definition: physical or social isolation of a group to diminish their roles
and opportunities
Generally (but not exclusively) racial/ethnic conflict
Ex: relegation of minorities to underresourced areas (ghettos)
Domination
–
–
–
Definition: social roles or forms of coercion which assure that one group is
submissive to another
Generally (but not exclusively) gender conflict
Ex: sexual division of labor, sexual harassment
Econ 248, UW-Milwaukee
‘Matrix of Oppression’
Schiller, p. 136
Econ 248, UW-Milwaukee
X
Why doesn’t the idea of the NC model of the
market work for PE theorists?
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Econ 248, UW-Milwaukee
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The NC market assumes that the
distribution of economic resources is
a ‘win-lose’ situation.
The NC market is inefficient
sometimes.
You cannot capture the idea of
context in the market.
Since resources are limited, conflict
shows that economic outcomes are
‘win-lose’, not ‘voluntary’ as the NC
model assumes.
The PE model does not allow for
groups to interact, so markets are
superfluous.
Th
1.
PE and the Market
• #4 on the previous slide gets closest to the
answer.
• Key is that all this conflict means that PE
assumes that there are definite winners and
losers.
– Markets are generally NOT voluntary, since you need
economic resources to survive.
– Existence of winners and losers means that
competition cannot ‘cure’ oppression.
– Unequal power relationship, too
• Use of ‘divide-and-conquer’ techniques
Econ 248, UW-Milwaukee
The Final C - Change
• Economy is in a constant state of flux – very
dynamic.
• Change is key here
– Distributions of economic resources are not stable
since all sides want more ‘surplus’
– Again, though, change is not necessarily good
• However, vein in literature (actually from Marx)
that says that the alienation of groups in society
decreases the amount of resources available in
society
– Even the powerful see this and may not ‘oppress’ as
much so to increase resources available
Econ 248, UW-Milwaukee
Comprehension Question 1: Which of the
following is not one of the Four C’s of PE theory?
1. Collective
behavior
2. Change
3. Competition
4. Context
5. Conflict
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Econ 248, UW-Milwaukee
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Comprehension Question 2: According to PE
theory, if women are not in the labor force, they
cannot be oppressed.
1. True
2. False
3. Uncertain
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Econ 248, UW-Milwaukee
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Questions for me?
Next Lecture:
Basics of Work and Wages in the PE Model
Econ 248, UW-Milwaukee