A Critical Thinker’s Guide to Microeconomics, Essay Example

Report on ”The Economics Anti-Textbook: A critical thinker’s guide to Microeconomics’

In The Economics Anti-Textbook: A Critical Thinker’s Guide to Microeconomics, Hill and Myatt makes a general analysis of the function and role of the capitalist state. Along with that they also particularly analyses the relationship of capitalist state with corporations. They thus pull back the veil of the utopian concept of ‘free market’ and thus reveal a muddle of hidden assumptions, value judgment and market fundamentalism which is presented often as a social science of objective nature. Hill and Myatt explains these judgments with numerous examples from various texts “like a vise on the mind of economists [and policy-makers], who get tetchy when you present results that reveal the behavior of real people to be not as those textbooks assume” (234). Through is article they are also backing the suggestion that efficiency of a firm to produce more might not be the ultimate determinant of happiness and there might be certain things like pervasive externalities or equity costs.

They try to point out to the readers how other books considered as standard texts are selling the idea of perfectly competitive market ignoring the fact that such a perfect market situation does not exist. Thus they clearly point out as to how the concept of achieving efficiency fail to square with ecological imperatives and empirical evidence of behavior and nature of human being. The picture becomes clearer in chapters on determination of wages, free trade, firms’ behavior and government. The biggest failure of economic doctrines that are considered neoclassical is the total absence (perhaps intentional) of theory of power (Kennedy and Learner 39).

Further the book also omits Marxian economics. This might be because the author prefers to cite economists like Kenneth Arrow and Joseph Stiglitz, both Nobel Prize-winners to give more weight to their arguments in a public that is Marx-phobic.

It is felt that author of the book was having an idea in total consonance with the analysis made by Marx. For example author says about monopsony model which means that there is only one buyer and hence counterpart will be monopoly under a situation it was predicted that less payment will be received by workers which will be less than the marginal products and this is the key insight of Marx. Author would have made such connections explicitly in the text book.
Hill and Myatt stands against Marxian theory and thus backs the distortion of his works like those educated laypeople and economics students who fail to recognize Marxian theory. According to me presenting Marx in a heavy manner in the text book might have had a bad effect on that perspective (Duralf, Paul, and Jonathan 674).

From this book it is felt that you can attack fundamentalism of market even if you are not a communist in its essence, which means you need not be a person who does not believe in god. This book clearly states that it is necessary to condemn the organization of neoclassical orthodoxy and for that various perspectives need to be present. It is of very much importance to have various perspectives to condemn the organization of neoclassical orthodoxy. The book discusses about various theories that are likely to serve as a foundation for an economic policy that is saner and why and how such theories reaches to such a target. Thus this book helps to correct or add to already existing economic concepts, especially those that are considered standard in a course of economy.

The book speaks about the current global crisis. It also helps its readers to understand the consequence and cause of this crisis by explaining various methods for this. The book also explains the opportunities that are presented by present economic crisis by explaining the transformation it brings in the economy.

The book is a comprehensive criticism of neo-classical economics. The devastating criticism is of dominant economic paradigm that is presently being taught to economic students. It is to be understood that this neo-classical economic paradigms taught to today’s economic students has already failed in practical life in a spectacular way. The book is successful in offering important insights into present crisis faced by capitalism and its ideological dimensions. It also offers insights into importance of economic ideas and such ideas are mainly questioning the understanding of economy and economics by hegemonic capitalists. It is an attempt of authors to set itself against a paradigm that dominantly exists at present (Duralf, Paul, and Jonathan 664).

The Economics Anti-Textbook places itself with in the economics literature that is heterodox in character. Hill and Myatt are revealing many things in the book which is frightening at many levels. Neo-classical paradigm tries to achieve domination over the full spectrum. Students studying and learning neo-classical paradigm from across the world through text books of economics gets indoctrinated by what is taught by neo-classical paradigm. Those studying economics courses and reading neo-classical paradigm text books are restricted any exposure to economic analysis of other forms like socialist, green, feminist, Marxist, social democratic etc. There is complete absence of any alternative means for the students and this complete absence of any consideration, debate and pluralism means that the students think about economics only in a single way. They come to a conclusion that economics can be thought only in a single way that is neo-classical way (Spanos 157).

They will start to believe that the best way to think of economy and to organize it is capitalist status quo or free market economy. They develop a perspective that it is the only way to think in economics. This is explained by Hills and Myatt as “economics’ has come to be synonymous with the economics of a particular view of capitalism”. But this was not the scenario earlier. Then the text books of economics used to have chapters on other economic systems (249).

Hill and Myatt in their book identify issue with economics textbooks which are equally problematic as neo-classical concept and is also of persuasive character. This is found in majority of text books. The issue is the practice of downgrading various key issues as of second order or marginal in importance. Hill and Myatt explain this as neglect shown by the text books in wealth distribution and income distribution. These text books present issue of income and wealth distribution in terms of a trade-off between equity and efficiency, lack of any empirical proof for some principles and ideas that are key neo-classical in character, like the real world economy where economic activity of the society do not conform perfect competition concept which is from the mythical world. With the consistent downgrading of economic activities social context and communities centrality and lack of analysis of legal structures like contracts, private property or tort etc. will underpin free market (Duralf, Paul, and Jonathan 674).

Hill and Myatt in their anti-textbook present the conventional micro economics text books at first and then skewer them drawing a wide range of resources.

Text book starts with the concept of perfect competition which assumes that in a particular market there exists a single product in market and it is of high demand among buyers is sold by a large number of sellers. But none of these producers are capable enough to influence the price of the product in market. Products are sold by a vast amount of sellers and large number of products is sold in the market. In such a market it is assumed that the buyers and sellers are perfectly rational and are fully informed. Thus there won’t be any spillovers from market like pollution. Such a market will be successful in generating consumer satisfaction at its maximum under the assumptions that there won’t be any spillovers. Such a market will also be able to use its resource to its maximum. It is known to the authors of text books that never there existed any such market with maximum consumer satisfaction and utilization of resources lacking any spill overs. But the authors of textbooks justify the assumption of perfect competition and this is on the ground that perfect competition is simple and it can illustrate basic market tendencies (Kennedy and Learner 40).

Markets in real world even with globalization and advanced communication and information technology is mostly local and such a market has only handful of buyers and sellers. Further in this market there are no uniform products and even the samples provided in text books collide with reality. One sample given commonly in text books is of wheat, but in reality wheat grows in various locations and ripens at various seasons. Though most of the products are from different brands it is only a virtual felling whereas actual product is the same. For example, butter is packed by different companies under various names and marketed. Though the butter, which is the product, looks different due to different packing actual product of all these packing is same, the butter. One such example is Breakstone butter and Land O’ Lakes butter.  Buyers and Sellers comes in different sizes and at times might include monopolists and monopolists. Monopolists are single sellers while monopolists are single buyers. Such market participants can influence the price and they can increase or decrease the price of products for their advantage. Further these market participants are influential people with political power and support sufficient enough to change tax rules and regulatory laws according to their advantage.

An example of monopsony market player is companies like Burger King and McDonald’s. They enjoy monopsony power to fix low wages in labor market. They are not facing any issues like a single market wage and are free to choose the pay rates for their employees, but within a range. If the company is giving lower wages to its employees it will help them to save money while giving higher rate wages to employees will help to gain more permanent employees who will also work harder. Thus even if the employers are changing its wage amount by a small margin it will have a great push for the company upwards in the wage range without any effect on the employment. On the contrary if a company decreases its wage range by a slight amount it will affect the economists adversely and that is called rent control (Spanos 157).

Behavioral economists have been demonstrating the effect of emotions on economy and this has resulted in their operation on rules of thumb as it is very tough to gain complete information. This book details the effect of mental shortcuts and emotion and details how it led to the economic crisis in 2008. The authors say that the assumption that human beings behave rationally, at least in aggregate made economists like Fed chair Alan Greenspan blind folded.

According to economics text books taught to students markets are to be judged solely on the basis of efficiency and effect on inequality or fairness need not be considered to asses market. It is at the same time that Vilfredo Pareto proposed “Pareto optimality”, which is the measure of fairness. If one person cannot be made better without making someone else such a condition is called as “Pareto optimal”. But this is not always true and to prove this Hill and Myatt shows the sample of North freeing slaves without payment. Thus they claim that Pareto optimality is a phenomenon that is associated to status quo and not concerned about illegitimacy or cruelty.

This book suggest that the crisis that is existing in capitalism at present at the level of understanding of financial system and money and at the level of economics ideas have opportunities to transform or reform. What happened during past three decades was the socialization of risk, debt demarcation and profit privatization and unequal distribution of profit and wealth created socially. Various dimensions of birth and expansion of capitalism over last three decades are presented in the book. It exhibits the decisive success and indoctrination in the battle of economy related ideas.

Hill and Myatt establish the case for the establishment of a new economy which is political in form in response to neo liberal economy. This in the adjoining of certain old socialist ideas like economic organization in non-market forms, security collectivization, importance of equality in socio-economic condition along with some different or newer vision. Economic vision of post-growth, vision focusing on well-being instead of income, formation of provisioning economy on the basis of sufficiency principles and not based on maximization and efficiency are examples of such newer visions (Duralf, Paul, and Jonathan 674).

Though this looks naïve and ambiguous due to lack of sufficient theories to reflect the complexities of crisis prevailing in capitalism at present that are multiple in number it is understood that the book is based on a new political economy. The book is considered as opposed in character simple because it is discussing the crisis that is existing within capitalism. New political economy on which the book is based is allied to eco-socialism based political strategy, materialist ecofeminism and a political economy that is radical green. Progressive politics is based in 20^th century

Last chapter of Hill and Myatt’s book discusses globalization and trade. Recognized European Economics like David Ricardo and Adam Smith defines free trade as the arm’s length trade of various commodities like coal, wheat, wine or iron- they are trades that can save cost by a great extent by breaking the monopolies and through specialization. These economists were promoting free trade during a time when a pack led by England was exploiting various countries by making them their colonies after conquering them. They were not alone and the pack consisted of other European countries. The book states that the colonial empires have gone only in name and in reality they are existing as multinational corporations that collaborate with the governments secretly to form trade rules in their favor like the Trans-Pacific Partnership.

Hill and Myatt questions present economic theories that are being taught to students and that is preached and practiced by economists though they know that many of those theories and situations do not exist in reality. The authors argue that the present economic policies that are preached by economists is against reality and most of them are trying to hide real situation. Further they also say that the corporations are acting like the pact created by England with European countries which then conquered countries and made colonies to exploit their resources. Same is happening in present economy where the role of England is taken over by multinationals who reach into agreement with national governments to form rules and regulations of trade for their benefit. Thus the book throws light in to many aspects of todays’ economy which are totally harmful for peaceful existence of human race. Most of such facts revealed in the book is truly shocking for it reveals so many things happening around us but not being recognized by society.

Works Cited

Durlauf, Steven, N, Paul, Johnson and Jonathan, Temple. “Growth econometrics, Handbook of Economic Growth”. Handbook of Economic Growth. 1.8. (2005): 555-677

Kennedy, Peter.  “A Guide to Econometrics”, fifth edition, Bodmin: The MIT Press. (2003) Print.

Leamer, Edward. E. “Let’s take the con out of econometrics”, The American Economic Review, March. 73. 1 (1983): 31- 43. Print

Spanos, Aris. “Early empirical findings on the consumption function, stylized facts or fiction: a retrospective view”, Oxford Economic Papers, 41. 1. (1989):150-69. Print