David F. Ruccio — Markets, power, and the distribution of income

Joseph Stiglitz usefully explains that there’s more than one theory of the distribution of income. One theory, he writes, focuses on competitive markets (according to which “factors of production” receive their marginal contributions to production, the “just deserts” of capitalism); the other, on power (“including the ability to exercise monopoly control or, in labor markets, to assert authority over workers”).…

The only major problem with Stiglitz’s account is he leaves out a third possibility, an approach that combines a focus on market with power, that is, a class analysis of the distribution of income (which the late Stephen Resnick begins to explain in the lecture above).

According to this class or Marxian theory, markets are absolutely central to capitalism—on both the input side (e.g., when workers sell their labor power to capitalists) and the output side (when capitalists sell the finished goods to realize their value). But so is power: workers are forced to have the freedom to sell their labor to capitalists because it has no use-value for them; and capitalists, who have access to the money to purchase the labor power do so because they can productively consume it in order to appropriate the surplus-value the workers create.…

My only point is to point out there’s a third possibility in the debate over the distribution of income—a theory that combines markets and power and is focused on the role of class in making sense of the grotesque levels of inequality we’re seeing in the United States today.

And, of course, that third approach has policy implications very different from the others—not to force workers to increase their productivity in order to receive higher wages through the labor market or to hope that decreasing market concentration will make the distribution of income more equal, but instead to attack the problem at its source. That would mean changing both markets and power and, thus, eliminating class exploitation.

Occasional Links & Commentary
Markets, power, and the distribution of income
David F. Ruccio | Professor of Economics, University of Notre Dame

David F. Ruccio — Capital in the 18th, 19th, 20th, and 21st centuries

Reading list.

Once again, this coming fall, I’ll be teaching Karl Polanyi’s The Great Transformation in my Topics in Political Economy course.

It’s a course based entirely on books (plus a few political economy films, starting with Charlie Chaplin’s Modern Times). I teach four classic texts of political economy, starting with Adam Smith’s Wealth of Nations and then moving on to different responses to Smith’s theory of capitalism: by Karl Marx (volume 1 of Capital), Thorstein Veblen (The Theory of the Leisure Class), and finally Polanyi.

I match each classic text with a contemporary one: for example, Deirdre McCloskey’s Bourgeois Virtues with Smith, Stephen Resnick and Richard Wolff’s Knowledge and Class with Marx, and Joseph Stiglitz’s The Price of Inequality with Veblen. Next time, I’m planning to teach Thomas Piketty’s Capital in the Twenty-First Century as the follow-up to Polanyi.

Occasional Links & Commentary
Capital in the 18th, 19th, 20th, and 21st centuries
David F. Ruccio | Professor of Economics University of Notre Dame Notre Dame

Dylan Matthews — Inside the offbeat economics department that debunked Reinhart-Rogoff

It’s easy to overestimate the differences between UMass and more mainstream departments. The empirical microeconomics Dube does is not too different from what David Card, David Autor, Raj Chetty, and other macroeconomists in more mainstream departments do. Pollin helped the Department of Energy implement the green portions of the stimulus, which was designed initially by mainstreamers like Larry Summers. And even the “left Keynesians” of Amherst don’t go as far as some of their peers at, say, the University of Missouri – Kansas City in dismissing the possibility of high deficits leading to inflation later on.

“It’s almost a talmudic claim that since no country with its own currency can go bankrupt, no deficit can be bad,” Epstein says. “They’ve made important contributions, and a lot of them are my friends, but we try to look at things more critically and not assume there are absolutes.”

But the department’s radical openness to alternate perspectives still sets it apart. “Learn from Marx, learn from Keynes, learn from Hayek,” Pollin says. “One of the biggest influences on me personally was Milton Friedman. He was very engaged with real world questions, and he made no bones about his ideological predilections.”

The Washington Post — Wonkblog

Inside the offbeat economics department that debunked Reinhart-Rogoff
Dylan Matthews