Economics @ ITT

What Is Enough?

Posted in economics, employment by ittecon on December 26, 2012

Robert Nielsen has been compiling a blog chock-full of thoughts on political economics. His post on A New Economic Theory is too broad of a topic for me to respond to meaningfully in the short time I have, so I may revisit and comment more than once. Given the shoratage of time, I’ll also ask for some liberties in organising my own thoughts, and edits may follow.

To me, the treatment labour theory gets has always been particularly strange in economics, especially with it being treated as a commodity—perfectly competitive—factor. When discussing labour theory and power, I feel it is important—in addition to being in control of means of production—to bring in risk profiles: an employer naturally has more power as s/he has the advantage of being risk neutral whilst more employees (or potential employees) are risk averse, which creates at the onset an imbalance in the ability to negotiate.

On the consumer front, it is interesting that Robert portrays them as powerless—and I agree that many feel that way—, but the fact is that in a demand-driven economy, consumers hold all of the cards, though it is a sticky wicket. It is more a solidarity problem that might be best evaluated using game theory.

However, given that there is indeed some interaction between supply and demand—even if not quite the textbook portrayal—, if consumers stopped demanding, prices would fall, and suppliers could either drop prices or go out of business. The problem is one of paradox: In a consumption-based economy people-as-consumers create demand for product, and this demand provides wages to people-as-workers, as these goods need to be produced. So if people are too successful at voting with their wallets, they could be left out in the cold.

At a more fundamental level, a problem lies in the obsession with the need to work for some 40ish hours and with the notion of full employment. Given historical trends, most people—and not only in industrialised nations—should be able to work 20 – 30 hours a week and be able to enjoy the rest as leisure time. This would also provide opportunities for others who are currently unemployed to fill in the gaps. However, with the current dysfunctional need to keep up with the Joneses—and one-up them—, we are never quite satisfied with enough.

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