From: Jerry Levy (Gerald_A_Levy@MSN.COM)
Date: Tue Nov 28 2006 - 08:41:38 EST
Hi Dogan: The belief that capitalism is inefficient and irrational is implied by mainstream economic theory. Consider a production possibilities curve for the macroeconomy. Label the axes 'guns' and 'butter' if you like. On the production possibilities curve, all resources (land, labor, capital) are being fully and efficiently utilized. If there is unemployment, however, then it necessarily follows (within the context of the PPC graph) that the economy is not on the curve itself (rather, it is to the left of the curve) and is therefore *not* fully and efficiciently utilizing all available resources because it is not fully and efficiently utilizing all *labor* resources. To the extent that one could claim that there is a structural association between periodic unemployment and capitalism, one can conclude -- *using only mainstream theory!* -- that capitalism has an element of inefficiency and irrationality to its operation. This is a point which is often overlooked by mainstream economists themselves. (The more important point here, though, is not that capitalism is inefficient but rather that the concepts associated with mainstream theory -- in this case, opportunity costs, scarcity, choice -- are not capable of fully grasping the dynamic of capitalism.) In reply to Martin, you wrote: > From the entrepreneurs point of view it does not matter whether > there is unemployment. I strongly disagree: whether there is unemployment or not has huge consequences for individual capitalists. Putting aside the issue for now of demand-effects, if there is unemployment then capitalists will be in a stronger bargaining position to get wage-workers to work for lower wages and benefits, increase the length of the working day, increase the intensity of labor, etc. In solidarity, Jerry
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