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Free Market

Free market

A free market is a market where all exchanges are made without coercion; all trades are voluntary. A free market may be said to exist for exchange of a single pair of commodities (for example, money being freely exchanged for bananas at a mutually agreed upon ratio), or the term may be used to refer to an entire economy. Since no national economy in existence fully manifests the ideal of a free market as theorized by economists and ethicists, the term free market economy is used for a nation state's economy that approximates the ideal by virtue of having a government that engages in little or no interventionist economic regulation. If such a government intervenes in private affairs, it only does so to stop coercion that may take place among market participants. As this protection must be funded, such a government taxes only the extent necessary to perform this function. This state of affairs is also known as laissez-faire. In economics and political economy, this is the polar opposite of a command economy all goods and services are produced, and distributed, and priced under government control. Whether the marketplace should or is free is also disputed; many assert that government intervention is necessary to remedy market failure that is held be an inevitable result of absolute adherence to free market principles. Internationally, free markets are advocated by proponents of economic liberalism; in Europe this is usually simply called liberalism. In the United States, support for free market economic structures is a key tenet of U.S. conservatism and libertarianism. Since the 1970s, promotion of a global free-market economy, deregulation and privatisation, is often described as neoliberalism. The term free market economy is sometimes used to describe some economies that exist today, but pro-market groups would only accept that description if the government practices laissez-faire policies, rather than state intervention in the economy. An economy that contains significant economic interventionism by government, while still retaining some characteristics found in a free market, is often called a mixed economy. Since the emergence of a distinct economic system in the Soviet Union, the free market is usually contrasted to a command economy and a centrally planned economy. However, early proponents of a market economy in 18th-century Europe contrasted it with the mediaeval, early-modern, and mercantalist economies which preceded it. For social philosophy, a free market is a system for allocating goods within a society: supply and demand within the market determine who gets what, and what is produced. A free market does not require the existence of competition, however it does require the competition is not being prevented by coercion. Hence, in the lack of coercive barriers it is generally understood that competition flourishes in a free market environment. It often connotates the presence of the profit motive, although neither a profit motive or profit itself necessary for a free market;. All modern free markets are understood to include entrepreneurs, both individuals and businesses. Typically, a modern free market economy would include other features, such as a stock exchange and a financial services sector, but they do not define it.

Origins

Some theories assume that a free market is a natural form of social organization, and that a free market will arise in any society where it is not obstructed. The consensus among economic historians is that the free market economy is a specific historic phenomenon, and that it emerged in late mediaeval and early-modern Europe. Some economic historians see elements of the free market in the economic systems of Classical Antiquity, and in some non-western societies. By the 19th century the market certainly had organized political support, in the form of laissez-faire liberalism. However, it is not clear if the support preceded the emergence of the market, or followed it. Some historians see it as the result of the success of early liberal ideology, combined with the specific interests of the entrepreneur. In Marxist theory, the ideology simply expresses the underlying long-term transition from feudalism to capitalism. Note that the views on this issue - emergence or implementation - do not necessarily correspond to pro-market and anti-market positions. Libertarians would dispute that the market was enforced through government policy, since that has a connotation of repression, and Marxists agree with them, for different reasons.

Theory

The law of supply and demand predominates in the idealized free market, influencing prices toward an equilibrium that balances the demands for the products against the supplies. At these equilibrium prices, the market distributes the products to the purchasers according to each purchaser's use (or utility) for each product and within the relative limits of each buyer's purchasing power. The necessary components for the functioning of an idealized free market include the complete absence of artificial price pressures from taxes, subsidies, tariffs, or government regulation (other than protection from coercion and theft), and no government-granted monopolies (usually classified as coercive monopoly by free market advocates) like the United States Post Office, Amtrak, arguably patents, etc. This equilibrating behaviour of free markets makes certain assumptions about their agents, for instance that they act independently. Some models in econophysics have shown that when agents are allowed to interact locally in a free market (ie. their decisions depend not only on utility and purchasing power, but also on their peers' decisions), prices can become unstable and diverge from the equilibrium, often in an abrupt manner. The behaviour of the free market is thus said to be non-linear (a pair of agents bargaining for a purchase will agree on a different price than 100 identical pairs of agents doing the identical purchase). Speculation bubbles and the type of herd behaviour often observed in stock markets are quoted as real life examples of non-equilibrium price trends. Free-market advocates, especially Austrian school followers, often dismiss this endogenous theory, and blame external influences, such as weather, commodity prices, technological developments, and government meddling on non-equilibrium prices. The distribution of purchasing power in an economy depends to a large extent on social class, labor and financial markets, but also on other , lesser factors such as family relationships, inheritance, gifts and so on. Many theories describing the operation of a free market focus primarily on the markets for consumer products, and their description of the labor market or financial markets tends to be more complicated and controversial. The free market can be seen as facilitating a form of decision-making through what is known as dollar voting, where a purchase of a product is tantamount to casting a vote for a producer to continue producing that product. The effect of economic freedom on society's and individuals' wealth remains a subject of controversy. Kenneth Arrow and Gerard Debreu have shown that under certain idealized conditions, a system of free trade leads to Pareto efficiency. Many advocates of free makets, most notably Milton Friedman, have also argued that there is a direct relationship between economic growth and economic freedom, though this assertion is much harder to prove both theoretically and empirically. Joshua Epstein and Robert Axtell have attempted to predict the properties of free markets in an agent-based computer simulation called sugarscape. They came to the conclusion that, again under idealized conditions, free markets lead to a Pareto distribution of wealth.

Practice

While the free-market is an idealized abstraction, it is useful in understanding real markets whether artificially created and regulated by governments or non-governmental agencies, or phenomena such as the black market and the underground economy, which can be remarkably robust in persisting despite attempts to suppress these markets.

The degree of market freedom

The Heritage Foundation, a conservative think tank, tried to identify the key factors which allow to measure the degree of freedom of economy of a particular country. In 1986 they introduced Index of Economic Freedom, which is based on some fifty variables. This and other similar indices do not define a free market, but measure the degree to which a modern economy is free, meaning in most cases free of state intervention. The variables are divided into the following major groups:
- Trade policy,
- Fiscal burden of government,
- Government intervention in the economy,
- Monetary policy,
- Capital flows and foreign investment,
- Banking and finance,
- Wages and prices,
- Property rights,
- Regulation, and
- Informal market activity. Each group is assigned a numerical value between 1 and 5; IEF is the arithmetical mean of the values, rounded to the hundredth. Initially, countries which were traditionally considered capitalistic received high ratings, but the method improved over time. Today one can see a vivid correlation between EOF value and country's GDP. http://www.heritage.org/research/features/index/downloads/economicFreedomandPerCapita.gif

Ideology and ethics

Support for the free market as an ordering principle of society is above all associated with liberalism, especially during the 19th century. In Europe, the term 'liberalism' retains its connotation as the ideology of the free market, but in American usage it came to be associated with government intervention, and acquired a pejorative meaning for supporters of the free market. Later ideological developments, such as minarchism and libertarianism also support the free market, and insist on its pure form. Although the Western world shares a generally similar form of economy, usage in the United States is to refer to this as capitalism, while in Europe 'free market' is the preferred neutral term. Marxism, communism, and socialism are usually seen as the main ideological opponents of the free market. Modern liberalism (American usage), and in Europe social democracy, seek only to mitigate what they see as the problems of an unrestrained free market, and accept its existence as such. To most right-wing libertarians, there is simply no free market yet, given the degree of state intervention in even the most 'capitalist' of countries. From their perspective, those who say they favor a "free market" are speaking in a relative, rather than an absolute, sense -- meaning (in libertarian terms) they wish that coercion be kept to the minimum that is necessary to maximize economic freedom (such necessary coercion would be taxation, for example) and to maximize market efficiency by lowering trade barriers, making the tax system neutral in its influence on important decisions such as how to raise capital, e.g., eliminating the double tax on dividends so that equity financing is not at a disadvantage vis'a'vis debt financing. However, there are some such as anarcho-capitalists who would not even allow for taxation and governments, instead preferring protectors of economic freedom in the form of private contractors. The ethical justification of free markets takes two forms. One appeals to the intrinsic moral superiority of autonomy and freedom (in the market), see deontology. The other is a form of consequentialism - a belief that decentralised planning by a multitude of individuals making free economic decisions produces better results in regard to a more organized, efficient, and productive economy, than does a centrally-planned economy where a central agency decides what is produced, and allocates goods by non-price mechanisms. An older version of this argument is the metaphor of the Invisible Hand, familiar from the work of Adam Smith, although it is older. In Smith's time there were no centrally planned economies to serve as a comparison, he was simply arguing that the market benefits the common good. Modern theories of self-organization say the internal organization of a system can increase automatically without being guided or managed by an outside source. When applied to the market, as an ethical justification, they are appealing primarily to its intrinsic value as a self-organising entity. Intense admiration for these abilities of the market became a characteristic of some pro-market argument in the 1990's, especially among those who saw the internet as a form of perfect market.

External links

- [http://www.econlib.org/library/Enc/FreeMarket.html Free Market] by Murray N. Rothbard
- [http://www.freemarketdoctors.blogspot.com Free Market Doctors] Utilizing the ideals of a free-market economy to revitalize the healthcare industry
- [http://globalpolitician.com/articles.asp?ID=145 In Defense of the Free Market]
- [http://www.mises.org Mises.org] is the official website of the Ludwig von Mises Institute for Austrian economics and classical liberalism
- [http://www.heritage.org/research/features/index/ IEF]
- [http://www.sprott.com/pdf/pressrelease/TheVisibleHand.pdf Move Over, Adam Smith: The Visible Hand of Uncle Sam] Report concludes that the U.S. government surreptitiously intervenes in the American stock market
- [http://www.fff.org/freedom/0292d.asp Fair versus Free] by Milton Friedman Category:Markets ja:自由市場 th:ตลาดเสรี

Coercion
Coercion is the practice of compelling a person to act by employing threat of harm (usually physical force, sometimes other forms of harm). Often, it involves the use of actual force in order to make the threat credible, but it is the threat of (further) force which brings about cooperation of the person being coerced. In the more general sense, coercion is the process of getting someone to lie to themself by any means. The term usually has a pejorative connotation, implying that such threat or force is unethical. However, coercion may also be used in defense, against one who has initiated coercion. It is directly related to appeal to the stick (a form of argument in logic). As opposition to coercion is central to the philosophy of libertarianism, libertarians present specific definitions of coercion. They typically define it as any use of physical force, the threat of such, or deception (fraud) that alters the way an individual would use his person or property if those elements were not present. It is regarded that any actions that is not subject to the influence of any of these elements is voluntary.
Overview
Any person’s set of feasible choices is obtained from the combination of two elements: the ‘’initial endowment’’ (the perceived initial state of the world, which the chosen actions are going to affect) and the ‘’transformation rules’’ (which state how any chosen action will change the initial endowment, according to the person’s perception). It follows that coercion could in principle take place by purposely manipulating either the transformation rules or the initial endowment (or both). In practice, however, the detailed choice reaction of a victim to a change in initial endowment is generally unpredictable. Hence effective coercion can only be carried out through manipulation of the transformation rules. This is done by the credible ‘’threat’’ of some injury, conditional on the victim’s choice. Often, it involves the actual inflicting of injury in order to make the threat credible, but it is the threat of (further) injury which brings about the change in transformation rules. Coercion does not remove entirely the victim’s ability to choose, nor does it necessarily affect his or her ranking of potential alternatives. As Roman jurists used to say, ‘’coactus volui, tamen volui’’ (I willed under coercion, but still I willed). In the terminology of rational choice theory, coercion does not remove a person’s objective function, but only affects the constraints under which such function is maximised. Yet, the purpose of coercion is to substitute one’s aims to those of the victim. For this reason, many social philosophers have considered coercion as the polar opposite to freedom. One must however distinguish various forms of coercion: first on the basis of the ‘’kind of injury’’ threatened, secondly according to its ‘’aims’’ and ‘’scope’’, and finally according to its ‘’effects’’, from which its legal, social, and ethical implications mostly depend.
Means
Looking at the content of the threat, one can distinguish between physical, psychological and economic coercion.
Physical coercion
Physical coercion is the most commonly considered form, where the content of the conditional threat is the use of force against the person, the dear ones or the property of the victim, An oft-used example is "putting a gun to someone's head" to compel action. Armed forces in many countries use firing squads to maintain discipline. However, there also are non-physical forms of coercion, where the threatened injury does not immediately imply the use of force.
Psychological coercion
In psychological coercion, the threatened injury regards the victim’s relationships with other people. The most obvious example is ‘’blackmail’’, where the threat consists of the dissemination of damaging information. But many other cases are possible, including purposeful threats of rejection from or disapproval by a peers group, or even mere anger or displeasure by a loved one. Another instance is coercive persuasion. Psychological coercion – along with the other varieties - was extensively and systematically used by the government of the People’s Republic of China during the “Thought Reform” campaign of 1951-1952. The process – carried out partly at “revolutionary universities” and partly within prisons – was investigated and reported upon by Robert Jay Lifton, then Research Professor of Psychiatry at Yale University: see Lifton (1961). The techniques used by the Chinese authorities included standard group psychotherapy, aimed at forcing the victims (who were generally intellectuals) to produce detailed and sincere ideological “confessions”. For instance, a professor of Formal Logic called Chin Yueh-lin – who was then regarded as China’s leading authority on his subject – was induced to write: “The new philosophy [of Marxism-Leninism], being scientific, is the supreme truth”. [Lifton (1961) p. 545].
Usage
Some people speak of cultural coercion when the fear of falling out with the group may force people into wearing a certain style of dress, publicly reciting a creed or a pledge of allegiance they find morally reprehensible, starting to smoke when they'd rather not, etc. Within the definitional framework adopted here, all such things amount to (psychological) coercion if and only if the fear of falling out with the group is the result of ‘’purposeful’’ threats by someone. See Peer pressure, Sociology of religion, Pledge of Allegiance. Some people include deception in their definition of (psychological) coercion. Yet deception does not generally involve ‘’any’’ threat at all, as it works by creating a mere ‘’false perception’’ by the victim of his or her ‘’given’’ transformation rules. Although its effects may sometimes be very similar to those of a conditional threat, it may hence be useful to treat deception as separate phenomenon.
Economic coercion
If I am the owner of the only water supply you can use, then my threat to refuse to supply you is a death threat. Yet it only involves my refusal to enter into a contract, without any use of force whatever. This kind of coercion, which can be very powerful indeed, is called ‘’economic coercion’’. As it is obvious from the above example, economic coercion requires market power. My refusal to deal with you would be irrelevant if you had access to many other independent sources of supply. But I can turn my conditional refusal into an important threat only because my pure monopoly power is in the market for an ‘’essential’’ good ‘’with no substitutes’’. An analogous result can also be obtained through pure monopsony power, which is the situation in which I am the only potential buyer of whatever you have to sell. To reverse the above example, suppose that there are numerous independent suppliers of water, who sell it at a competitive market price. But suppose also that you only have potatoes to sell, to get the money for your water, and that I am the only potato buyer you can deal with. Then my simple conditional refusal to buy your potatoes would be a death threat to you, just as before. The idea that market power may imply a power of coercion has been underlined by some social philosophers. It shows that in some cases the social effects of market power may go far beyond those on economic distribution and efficiency. However, it is also important to remember that the intense market power required to produce economic coercion is very rarely found in market economies. Indeed, the maximum degree of market power – and hence potential economic coercion - is attained in those centrally planned economies where a closed group tightly controls all or most means of production.
Aims
The aims of coercion can vary widely from totally ‘’selfish’’ to totally ‘’altruistic’’ ones: from attempts to gain personal wealth and power at the expense of others to efforts aimed at saving other people’s souls.
Predatory coercion
The purely selfish kinds of coercion are a form of predatory behaviour by the coercing party, whose aim is to narrow down the scope of other people’s actions so as to make them instrumental to its own personal interests. According to many social philosophers, this sort of predatory behaviour would become the prevailing one under conditions of social anarchy.
Pedagogic and thought coercion
At the other extreme of the spectrum one finds attempts to use coercion altruistically, as a pedagogical device to improve – in some supposedly objective sense – the way other people ‘’think’’, with particular regard to their basic attitudes and values. Pedagogic coercion may be applied within a strictly educational context, and it is then mostly directed towards children. In this article, however, attention will focus on ‘’thought coercion’’, i.e. the attempt to use coercion to affect the basic values of grown-up people in general. In all forms of ‘’thought coercion’’ the immediate objective is to force other people to act ‘’as if’’ their basic choice rules were identical to those of the coercing party. However, this mere conformity of “outward” behaviour is but a first step. The true and final aim of thought coercion is to induce a change in the victim’s objective function itself, i.e. the basic set of values and rules by which the victim determines his or her own choice among the alternatives of ‘’any’’ feasible set. Thought coercion is thus generally meant to be only ‘’temporary’’. Once the desired change in values has been brought about, the victim is expected to conform spontaneously, without any need for further coercion. Whether and under what conditions this final aim can in fact be stably achieved is a difficult question, and it will be considered in the section devoted to the effects of coercion. Here it is necessary to point out that, whatever its effectiveness, thought coercion has in fact been used very extensively throughout history.
Religious coercion
The most ancient, extensive and durable kind of thought coercion has concerned religion. Religious coercion is a subset of predatory coercion, in which the selfish entity is a supernatural one. The threat typically manifests as a promise by the entity to respond to incorrect behavior with damnation--eternal discomfort. This coercion has taken the form of religious discrimination and persecution, including forced conversions, and on many occasions it has led to religious wars. Christianity's early persecution by Rome had in fact political rather than strictly religious objectives. But its subsequent expansion was associated with a substantial amount of purely religious coercion, mainly by Christians against members of other religions and heretics. Moreover, Christianity’s tendency to strong and systematic religious coercion – particularly but not only by the Roman Catholic Church – has long outlived its first few centuries, and has only been finally checked – though by no means extinguished - by the emergence of modern liberal democracies, with their principle of firm separation between Church and State. Although its past record has shown a somewhat higher degree of religious tolerance (e.g. towards Jews), Islam has also been and continues to be an important and durable source of religious coercion.
Ideological coercion
‘’Ideological coercion’’ is the use of thought coercion in the attempt to modify people’s socio-political philosophy. This is of course quite different from plain propaganda, or even the simple persecution of political opponents, because its objective is to force individual ideological conversions. Unlike religious coercion, it is a quite recent phenomenon, confined to some of the totalitarian regimes of the twentieth century. The most notable single example of ideological coercion was the already mentioned Chinese “Thought Reform” campaign of 1951-52, which signalled itself for both thoroughness and number of people involved. Yet, it must be noticed that by 1966 the Chinese authorities found it necessary to follow that up with a new – albeit slightly milder – campaign, as part of the Maoist “Cultural Revolution” of 1966-1968. Starting from the Soviet purges of the Thirties, similar “brainwashing” techniques were intermittently and less systematically used by most Communist regimes of the twentieth century. By contrast, the Fascist and Nazi regimes of Italy and Germany tended to confine their coercive activities to purely political aims, without any serious attempt to force the ideological conversion of their opponents. The use of (physical) ideological coercion was however theorised by some Fascist philosophers, like Giovanni Gentile.
Disciplinary coercion
Somewhere in the middle between predatory and pedagogic coercion one finds the forms of coercion that are used as the main coordination tools of command systems. These are organisations that use coercion to enforce on their members patterns of division of labour aimed at reaching the organisation’s goals, which for a variety of reasons may not always be consistent with each member’s personal aims. The most typical example of a command system is a military organisation, but any large production team may easily fall into this category. Through the punishment system of disciplinary coercion, each individual member is typically forced into altruistic behaviour in the interest of the whole group. This is why this kind of coercion is not predatory, and – unlike thought coercion – may often be accepted in advance by the members of the group.
Scope
The scope of coercion has to do with who uses a conditional threat against whom. It is closely linked with some of the other aspects already surveyed above, and may be of paramount importance in determining coercion’s effects and implications.
Specific coercion
Specific or ‘’personal’’ coercion is the most commonly considered kind. It takes place when the conditional threat is decided upon by one particular individual or small group, and/or directed against some other individual or small group. All forms of predatory and thought coercion fall into this category.
Unspecific coercion
Under unspecific or ‘’impersonal’’ coercion the conditional threats come from well-known and socially accepted general rules – rather than any individual or sub-group – and are directed against anybody in the stated conditions, according to clearly stated principles of due process. In practice, the narrowing down of individual choice may be here principally aimed at reducing the incidence of specific coercion, rather than forcing on everybody some special sub-set of positive goals. More generally, unspecific coercion may be the form taken by disciplinary coercion, and this appears to be in fact the case within the most effective command systems of the modern world. Unspecific coercion is thus the same thing as the rule of law in its widest sense. This must not however be confused with the ‘’monopoly of coercion by the State’’. First, State coercion may very easily be arbitrary – indeed technically very ‘’specific’’, according to the above definition. Secondly, there are well-documented historical examples of (small) societies that have practiced unspecific coercion ‘’without’’ the help of State institutions – like Iceland in the early Middle Ages. The identification between State and law is but a special ‘’normative’’ principle introduced by (public) Roman law, which according to some, like Maitland, was for this very reason to be treated as the quintessential “law of tyranny”.
Effects
The effects of coercion may differ substantially according to its type and scope. Here they will be considered from the legal, psychological, social and ethical points of view.
Legal effects
In most legal systems, the use of ‘’physical’’ specific coercion by private individuals is a criminal offence in all cases not involving self defence. The picture is less simple for ‘’psychological’’ specific coercion, owing to the general difficulty in finding clear evidence for it. In most systems psychological coercion is treated as a criminal offence when it is aimed at ‘’extortion’’, as is typical of blackmail. It is also punished when it leads to ‘’undue influence’’, defined as a master-slave relationship. Finally, ‘’economic’’ coercion is generally unlawful under most systems of anti-trust legislation, where it can amount to either a criminal offence – as under the Sherman Act of the US – or an administrative offence liable to a mere fine – as under EU legislation on the abuse of a dominant position. It is important however to remember that trade unions and other groups of organised workers are mostly exempted from this general principle for acts of economic coercion (like strikes) against their employers,
Exculpation and nullity
Specific coercion may be used as a legal defence in criminal cases for acts committed under threat of injury. Similarly, one may claim the legal nullity of a contract signed under duress. In both cases, however, the question arises of whether a "reasonable person" would have perceived a threat, and reacted in the same way. Moreover, under most modern legal systems ‘’disciplinary’’ coercion cannot be claimed as an exculpating circumstance for war crimes committed under unlawful orders.
Psychological effects: the effectiveness of thought coercion
As already stated, thought coercion – either religious or ideological – is defined by its ultimate end to alter the fundamental values and beliefs of its victims. To ask whether this can in fact be done is to put a fundamental and age-old question: can conscience be coerced? At the beginning of the sixth century, in a famous letter to the Jews of Genoa, the Gothic king Theodoric the Great, who was an Arian Christian, wrote: “...We cannot command the religion of our subjects, since no-one can be forced to believe against his will”: Hodgkin (1886) p. 219. This idea that conscience ‘’cannot’’ in fact be coerced originated among the Stoic philosophers of ancient Greece, and resurfaced many centuries later during and after the European Renaissance, as one of the basic tenets of classic (or Whig) liberalism. The opposite view was however the dominant one within what Karl Popper (1945) has called the Platonic tradition, which included among other things both mainstream Christianity and Hegel’s philosophy, with its later polar developments of Marxism and Fascism. Yet, though these opposite answers may lead to divergent ethical and political prescriptions, the question itself is about a matter of mere psychological fact, which can be addressed empirically, looking at experience. Lifton (1961) on Chinese thought reform is one of the very few such works, and its findings are thus highly relevant here. Very broadly and on the whole, these findings were that on most victims the impact of thought reform tended to be temporary. In the short run it might be considerable, even leading to something close to a profound religious experience – particularly in subjects of relatively younger age (under thirty). But after a few years, and left to themselves, the victims tended to question the principles they had been indoctrinated with, reverting in most cases to their former values and convictions. If correct, these findings would suggest that thought coercion cannot generally achieve its ultimate goal to ‘’permanently’’ affect people’s basic values. In the Chinese case, this prediction came soon true, with the unorthodox outcomes of the “Hundred Flowers” episode of 1957. More generally, one would hence be led to expect that – far from being temporary – thought coercion would have to become a ‘’stable’’ feature of society, in order to produce any long-lasting result. And indeed – as seen above – such predicted tendency to repeat and institutionalise itself appears to be borne out by the historical record of thought coercion in both Communist regimes and the Catholic Church.
Social effects: coercion and progress

Whig-liberal tradition
According to the Whig-liberal tradition, due to the Scottish moral philosophers of the seventeenth and eighteenth centuries, widespread specific coercion has the general effect of limiting society’s ability to find new and better ways of doing things: see e.g. Hayek (1960). This follows from the view of social culture as the outcome of an evolutionary process of adaptation and selection through trial and error. Since specific coercion restricts the range of potential choices to the whims of only a few individuals, it narrows down society’s chances to experiment and select new solutions, and hence its ability to adapt. Thus, it is predicted that ‘’in the long run’’ the most successful societies would mainly be those where the incidence of specific coercion was less. However, this only applies to ‘’specific’’ coercion. By contrast, it is argued that ‘’unspecific’’ coercion – brought about by the rule of law – does not in itself hinder adaptation in any important way, because it is as uniform and predictable as the constraints following from natural laws. Moreover, the rule of law is the only available way to curb specific coercion. Hence, far from being a hindrance, unspecific coercion is in this view a necessary condition for human progress.
Platonic tradition
Needless to say, those who believe they already know what is best for society, and thus feel no need to rely on any evolutionary process, do not share the Whig-liberal negative view of the social effects of specific coercion. They often opt instead for a so-called social engineering approach, whereby a command system steered by a few competent individuals – and buttressed up by quite specific coercion – is assumed to be the most “rational” way to ensure social progress. The earliest formulation of this alternative view is found in Plato’s ‘’Republic’’. In modern times the idea re-surfaced during the French Revolution, thanks to Rousseau’s famous distinction between the will of all and a supposed “’’general will’’”, which – unlike the former – was defined as embodying the objective “good” for society. According to Rousseau and his followers, social progress required that those who are somehow inspired by the “general will” should be entitled to enforce it through revolutionary coercion on the will of all. Later on, during the nineteenth and early twentieth centuries, this French revolutionary principle – though not of course its specific way to identify the “general will” – percolated into first Socialist and then Fascist political thinking.
Ethical effects: coercion and freedom
To most people, the ethical implications of individual predatory coercion are straightforward. In recent times, some have attempted to extend a similar ethical judgement to non-predatory forms of coercion by individuals. Thus, for instance, the Taking Children Seriously movement has criticised pedagogic coercion by adults, including parents, on children, holding that it is possible and desirable to act with a child in such a way that all activities are consensual. The ethical standing of wider forms of supposedly “altruistic” specific coercion – like political and thought coercion – is however much more controversial, along lines relating to the assumed relationship between coercion and freedom, which is often regarded as an ethical value in itself.
Coercion as the negation of freedom
The Whig-liberal tradition has led to the well-known notion of (negative) freedom as lack of specific coercion. According to this view, any form of specific coercion is then unethical in itself as an injury to freedom, quite apart from its damaging effects on social progress. Indeed, the ethical value of (negative) freedom is grounded on the idea that conscience cannot be coerced, and is thus the ultimate standard of morality. It hence follows that – from an ethical point of view – coercion cannot even be regarded as a lesser evil: since it cannot produce conscientious behaviour, it can never bring about the fulfilment of ‘’any’’ ethical value.
Coercion as a source of freedom
However, the basing of all ethical values on conscience has also produced a diametrically opposed view. Developing the Socratic idea that moral evil is a result of ignorance, the Stoic philosophers had argued that one’s “true” conscience – and hence virtue – could only be attained by freeing oneself from irrationality and passions, through the stern self-control that is typical of wise men. This principle was then fitted into the Christian framework of original sin and the need for “outside” redemption, to produce the idea that on many occasions external specific coercion could and should take the place of self-control in setting ordinary people free from their sinful tendencies. Almost paradoxically, personal spiritual freedom came thus to be often based on specific thought coercion by the inspired few, This alternative approach has percolated far beyond the religious field, and is shared to-day by all those who think they have a privileged access to “true” conscience, thanks to divine revelation, superior “scientific” knowledge or some other special circumstance. A part from religious principles, the “true” conscience involved may be class-consciousness, patriotism, altruism, “social” values, political correctness or any other strongly held ethical world-view. The common element is the firm belief that coercion – ranging from legal State-coercion to terrorism – can and should be used to realize “true” freedom for all.
Examples of coercion

- In the first season of 24, Jack Bauer was coerced into assisting a political assassination, by threat of harm to his wife and daughter.
- By threat of blackmail, the five main characters in The Usual Suspects are coerced into paying back a debt to Keyser Soze.
References

- Anderson, Scott A. (undated), "Towards a Better Theory of Coercion, and a Use for It", The University of Chicago [http://ptw.uchicago.edu/Anderson02.pdf]
- Hayek, Friedrich A. (1960) ‘’The Constitution of Liberty’’, University of Chicago Press.
- Hodgkin, Thomas (1886) (trans.) ‘’Letters of Cassiodorus’’, London: H. Frowde.
- Lifton, Robert J. (1961) ‘’Thought Reform and the Psychology of Totalism’’, Penguin Books.
- Popper, Karl R. (1945) The Open Society and Its Enemies
- Rhodes, Michael R. (2000), "The Nature of Coercion", Journal of Value Inquiry, 34 (2/3)
- Rothbard, Murray N. (1982), "F. A. Hayek and the Concept of Coercion", in ‘’The Ethics of Liberty, Humanities Press [http://www.mises.org/rothbard/ethics/twentyeight.asp] Category:Freedom Category:Legal terms Category:Liberalism Category:Political ideology entry points Category:Political theories Category:Psychological abuse Category:Social philosophy ja:強制

Economist
:This article discusses the profession of studying economics; for the news journal published in London, see The Economist. An economist is an individual who studies economics. Within this field of study, there are many sub-fields, ranging from the broad philosophical theories propounded by thinkers such as Adam Smith and Karl Marx to focused study of minutiae within specific markets, involving statistical analysis and mathematical economics. Any person within any of these fields can properly claim to be an economist, although the broad range of matters coming under this head makes it a practical impossibility for any individual to master all of them. Most major universities have an economics department, where courses are offered in support of potential professional economists. Many economists, however, come from a background in business, sociology, or mathematics.
See also

- List of economists
- Economics Category:Economics Category:Professions th:นักเศรษฐศาสตร์

Nation-state

:This article is about the political concept. For the Internet game, see Jennifer Government: NationStates. A nation-state is a specific form of state (a political entity), which exists to provide a sovereign territory for a particular nation (a cultural entity), and derives its legitimacy from that function. The compact OED defines it as: "a sovereign state of which most of the citizens or subjects are united also by factors which define a nation, such as language or common descent." Typically it is a unitary state with a single system of law and government. It is almost by definition a sovereign state, meaning that there is no external authority above the state itself. Dependent territories of any kind are not considered nation-states, until they achieve independence. The nation-state implies the parallel occurrence of a state and a nation. In the ideal nation-state, the population consists of the nation and only of the nation: the state not only houses it, but protects it and its national identity, that is they coincide exactly: every member of the nation is a permanent resident of the nation-state, and no member of the nation permanently resides outside it. There are no ideal nation-states, however examples of near ideal nation-states would be Japan and Iceland. This ideal has influenced almost all existing sovereign states, and they can not be understood without reference to that model. It also explains how they are different from their predecessor states. Thus, the term nation-state is also used, imprecisely, for a state that attempts to promote a single national identity, often beginning with a single national language, for example France or Germany or Italy. These nation-states did not always exist, and most of the present nation-states are located on territory that once belonged to another, non-national, state, for example, in the case of much of western Europe, the original state was the Roman Empire. They came into existence at least partly as a result of political campaigns by nationalists. The establishment of a nation-state can be considered the central demand of any nationalist movement.

Characteristics

A nation-state is associated with a particular group of people, the nation, and derives its claim to legitimate existence from them. This in contrast to some monarchies, which derived their legitimacy from the ruling dynasty, or ancient land grants to its ancestors. The nation-state is in a sense the historical vehicle of that nation, and tries to ensure its survival as a nation. Almost always, it has an explicit policy to protect the national culture. A nation-state is one of a class of similar states. To distinguish itself, and also to express a shared identity of its own population, it has national symbols, above all a national flag and a national anthem, often a wide range of national emblems. In fact, nation states have promoted a national identity in almost every area of human social and cultural life, from the national library to the national airline to the national language. Nation-states attempt to create and maintain national unity, and at least a minimal internal uniformity. Nation states have a cultural policy and a language policy for this purpose, and the educational system is often subordinated to this goal. That always meant some compulsion, and in some cases brutal repression of minorities and xenophobic campaigns against non-national influences. The desire for uniformity is said to have positive economic effects, because nation-states generally try to reduce internal disparities in income and regional GDP. Most have a regional policy for that purpose.

What states existed before nation-states?

regional policy In Europe, before 1850, the classic non-national state was a multi-ethnic empire. It was a monarchy ruled by a king or emperor, or in the case of the Ottoman Empire, by a Sultan. The population belonged to many ethnic groups and they spoke many languages. The empire was dominated by one ethnic group, and their language was usually the language of public administration. The ruling dynasty was usually, but not always, from that group. This type of state is not specifically European: such empires existed on all continents. Some of the smaller European states were not so ethnically diverse, but were also dynastic states, ruled by a royal house. Their territory could expand by royal marriage, or merge with another state when the dynasty merged. In some parts of Europe, notably Germany, very small territorial units existed. They were recognised by their neighbours as independent, and had their own government and laws. Some were ruled by princes or other hereditary rulers, some were governed by bishops or abbots. Because they were so small, however, they had no separate language or culture: the inhabitants shared the language of the surrounding region. In some cases these states were simply overthrown by nationalist uprisings, which were inspired by the so-called ideal of the nation-state, meaning a state with a uniform state sponsored national identity. In other cases a nation state seems to have grown by accretion of smaller entities. Some grew to unification by trade and political integration. Some were unified by force. The transition was complex, but this so-called nation-state became the standard ideal in Europe, and in the rest of the world because of European dominance of the world. This so-called nation-state, at least in theory, has a uniform population, language and culture. It stops where the nation stops, and it does not swap territory with other states simply, for example, because the king’s daughter got married. For example, at least in theory, there is a uniform French identity which is different from a supposed uniform German identity, despite the fact that the French-German state border is not the French-German ethnic border and there are some who would consider themselves of German ethnicity on the French side of the border and vice versa. The so-called ideal of the nation-state is actually a state which has attempted to define a national identity which justifies its existence, internally and externally; this process is often ironically called nation-building. By this model, non-national entities have survived in Europe: the dependent principalities of Liechtenstein, Andorra, and Monaco, the republic of San Marino, and the Vatican City.

Examples of nation-states

Oddly, the confederation of cantons and former city-states known in English as Switzerland is often called a nation-state, despite having no dominant ethnic group, no national identity, and several national languages, see also Culture_of_Switzerland. This is odd because Switzerland's primary Raison d'être is to protect against a state, internal or external, attempting to enforce a statewide national identity. A classic nation-state, by definition, is inhabited by one ethnic group, who speak one language, have one culture, and share one religion. The population, in other words, is homogeneous. This group is referred to as ‘the nation’ or ‘the people’. They all live inside the border of the nation-state. No other ethnic or cultural group lives there. It is often said that island states are the best place to find something like this, and Iceland is often cited as the best example of a nation-state. Although the inhabitants are ethnically related to other Scandinavian groups, the national culture and language are found only in Iceland. There are no cross-border minorities, the nearest land is too far away. Japan, see also Japan#Demographics and Ethnic issues in Japan, is traditionally seen as a good example, although it includes minorities of ethnically distinct Ryukyuans in the south, Koreans, Chinese, Taiwanese, Filipinos and Brazilians, and in the north, the indigenous Aino minority of Hokkaido. The Republic of Ireland was until recently inhabited almost entirely by ethnic Irish, but the national territory is not considered complete by nationalists because it does not include Northern Ireland. Very few others approach the ideal model of the nation-state: the border does not correspond to the distribution of the national group. Sometimes that is impossible, because population is ethnically mixed, down to the level of individual streets or buildings. Where part of the national group lives in a neighbouring nation-state, it is usually called a national minority. In some cases states have reciprocal national minorities, for instance the Slovaks in Hungary and the Hungarian in Slovakia. National minorities should not be confused with a national diaspora, which is typically located far from the national border. Most modern diasporas result from economic migration. The existence of an Irish diaspora does not make the Republic of Ireland any less a nation-state, and does not affect Northern Ireland, since few emigrants go there anyway. The possession of dependent territories does influence the status of nation-state. A state with large colonial possessions is obviously inhabited by many ethnic groups, and does not conform to the ideal of a single-culture state. However, in most cases, the colonies were not considered an integral part of the motherland anyway, and were separately administered. Some European nation-states have dependent territories in Europe. Denmark contains virtually all ethnic Danes and has relatively few foreign nationals within it. However, it exercises sovereignty over the Faroe Islands and Greenland. If these are considered separate nations, then Denmark is not a classic nation-state.

Minorities and irredentism

So-called nation-states differ from the definition in two main ways: the population includes minorities, and the border does not include all the national group or its territory. Both have led to violent responses by nation-states, and nationalist movements. The nationalist definition of a nation is always exclusive: no nation has open membership. In most cases, there is a clear idea that surrounding nations are different. There are also historical examples of groups within the nation-state's territory who are specifically singled out as outsiders, such as the Roma and Jews in Europe, or Copts in Egypt. Negative responses to minorities within the nation-state have ranged from total assimilation to total extermination. Typically these responses are effected as state policy, though non-state violence in the form of pogroms occurs. However, many so-called nation-states do accept specific minorities as being in some way part of the nation, and the term national minority is often used in this sense. The Sorbs in Germany are an example: for centuries they have lived in German-speaking states, surrounded by a much larger ethnic German population, and they have no other historical territory. They are now generally considered to be part of the German nation, and are accepted as such by the Federal Republic of Germany, which constitutionally guarantees their cultural rights. Of the thousands of minorities and underlying ethnic nationalities in so-called nation-states across the world, only a few have this level of acceptance and protection. :Main article: Irredentism. The response to the non-inclusion of territory and population may take the form of irredentism, demands to annex unredeemed territory and incorporate it into the evolving so-called nation-state, as part of the national homeland. Irredentist claims are usually based on the fact that an identifiable part of the national group lives across the border, in another so-called nation-state. However, they can include claims to territory where no members of that nation live at present, either because they lived there in the past, or because the national language is spoken in that region, or because the national culture has influenced it, or because of geographical unity with the existing territory, or for a wide variety of other reasons. Past grievances are usually involved (see Revanchism). It is sometimes difficult to distinguish irredentism from pan-nationalism, since both claim that all members of an ethnic and cultural natio belong in one specific state. Pan-nationalism is less likely to ethnically specify the nation. For instance, variants of Pan-Germanism has different ideas about what constituted Greater Germany, including the confusing term Grossdeutschland - which in fact implied the inclusion of huge Slavic minorities from the Austro-Hungarian Empire. Typically, irredentist demands are at first made by members of non-state nationalist movements. When they are adopted by a state, they result in tensions, and actual attempts at annexation are always considered a casus belli, a cause for war. In many cases, such claims result in long-term hostile relations between neighbouring states. Irredentist movements typically circulate maps of the claimed national territory, the greater nation-state. That territory, which is often much larger than the existing state, plays a central role in their propaganda. Examples include:
- Greater Albania
- Greater China
- Greater Finland
- Greater Germany, an expression of Pan-Germanism: compare Pan-Slavism
- Greater Greece, expressed in the policy of Megali Idea
- Greater Hungary
- Greater India
- Greater Morocco
- Greater Romania
- Greater Serbia
- Greater Somalia Irredentism should not be confused with claims to overseas colonies, which are not generally considered part of the national homeland. Some French overseas colonies would be an exception: French rule in Algeria did indeed treat the colony legally as a département of France, unsuccessfully. The US was more successful in Hawaii.

Conflicting nationalisms

Iceland not only has clear borders, it is inhabited by people who are either immigrants or self-identify as Icelandic. In many nation-states, all or part of the territory is claimed on behalf of more than one nation, by more than one nationalist movement. The intensity of the claims varies: some are no more than a suggestion, others are backed by armed secessionist groups. Belgium is a classic example of a disputed nation-state. The state was formed by secession from the United Kingdom of the Netherlands in 1830, and the Flemish population in the north speaks a dialect of Dutch. The Flemish identity is also ethnic and cultural, and there is a strong separatist movement. The Walloon identity is linguistic (French-speaking) and regionalist. There is also a unitary Belgian nationalism, several versions of a Greater Netherlands ideal, and a German-speaking region annexed from Prussia in 1920, and re-annexed by Germany in 1940-1944. The fact that a nation-state has a disputed territory in this way, does not make it less of a nation-state. If large sections of the population reject the national identity, the legitimacy of the state is undermined, and the efficiency of government is reduced, That is certainly the case in Belgium, where the inter-communal tensions dominate politics. Most states now declare themselves to be nation-states, that is states that attempt to define and enforce a state sponsored national identity. In the case of very large states, there are many competing claims and often many separatist movements. These movements usually dispute that the larger state is a real nation-state, and refer to it as an empire and what is called nation-building is actually empire-building. There is no objective standard for assessing which claim is correct, they are competing political claims. Large nation-states certainly need to define the nation on a broad basis. China, for example, uses the concept of "Zhonghua minzu," a Chinese people, although it also officially recognises the majority Han ethnic group, and no less than 55 national minorities.

History

The origins of the nation-state are disputed: see the main article on nationalism. Some theories see them as a 19th-century European invention, the product of nationalist movements, facilitated by developments such as mass literacy and the early mass media. Some see the nation-state as emerging in a few specific states, such as France and its rival England. They expanded from core regions, Paris and London, and developed a national consciousness, and sense of national identity (Frenchness and Englishness). Both assimilated peripheral regions and their cultures (Wales, Brittany, Aquitaine and Occitania), where regionalism and nationalism resurfaced in the 19th century. The idea of a nation-state is associated with the rise of the modern system of states, usually dated to the Treaty of Westphalia (1648). The balance of power, which characterises that system, depends for its effectiveness on clearly-defined, centrally controlled, independent entities, whether empires or nation-states. The nation-state received a philosophical underpinning from the era of Romanticism, at first as the 'natural' expression of the individual peoples (romantic nationalism). Since then many varieties of nationalism have developed. The increasing emphasis on the ethnic and racial origins of the nation, during the 19th century, led to a redefinition of the nation-state in ethnic and racial terms. That reached its height in the fascist movements of the 20th century. The combination of 'nation' ('people') and 'state' expressed in such terms as the Völkische Staat made fascist states such as early Nazi Germany qualitatively different from non-fascist nation-states. Obviously minorities, who are not part of the Volk, have no authentic or legitimate role in such a state. (The ultimate development of the Nazi state was determined by the total war which its conquests initiated, rather than Nazi theories of the state). In recent years, the nation-state's claim to absolute sovereignty within its borders has been much criticised. A global political system based on international agreements, and superanational blocs characterized the post-war era. Non-state actors, such as international corporations and non-governmental organizations, are widely seen as eroding the economic and political power of the nation-states.

Laissez-faire

Laissez-faire is short for "laissez faire, laissez passer," a French phrase meaning "let do, let pass." It is pronounced approximately lessEH fare, lessEH pahssEH. First used by the eighteenth century Physiocrats as an injunction against government interference with trade, it is now used as a synonym for strict free market economics. Laissez-faire economic policy is in direct contrast to statist economic policy. Adam Smith played a large role in popularizing laissez-faire economic theories in English-speaking countries, though he was critical of a number of aspects of what is currently thought of as laissez-faire (such as lack of government regulation of business practices). As well as being used in economic management, the term has also been applied more broadly to a style of management and leadership. It describes any form of control where the controlled are given most or all of the decision-making power. Some use the term anarchist as a synonym for this use of laissez-faire. Small Government and Minarchism are other synonyms used when describing this theory being applied to government. Both terms can include economic policy. Some critics of laissez-faire argue that the attainment of pure capitalism is impossible, since, for example, it is difficult to deal with market failures without an active role for government. Laissez-faire (imperative) is distinct from laisser faire (infinitive), which refers to a careless attitude in the application of a policy, implying a lack of consideration or thought.

Economic Theory

The laissez-faire school of economic thought holds a pure or free market view, that the free market is best left to its own devices; that it will dispense with inefficiencies in a more deliberate and quick manner than any legislating body could. The basic idea is that less government interference in private economic decisions such as pricing, production, and distribution of goods and services makes for a better (more efficient) economy.

History

Pre WWII

Thomas Jefferson was one of the first to use the laissez-faire philosophy, as can easily be interpreted through his inaugural speech. Laissez-faire philosophy is dominant throughout the late 19th and early 20th century in the wealthier countries of Europe and North America. Many historians also see that period as the height of laissez-faires implementation in those countries. However, there are critics who suggest that what was described as "laissez-faire" policy was simply pro-business policy, as with large subsidies for businesses to produce the railroads in the United States or the common use of tariffs by Republican presidents there. In this context, laissez-faire rhetoric was used to justify denial of similar subsidies to the poor and working classes. Some believe these claims are still valid. For many, laissez-faire theories fell into disrepute because of their failure to allow governments to deal with managing the economy during and after World War I, and their alleged role in creating the Great Depression However, some libertarians, such as Milton Friedman argue that by the time of the Great Depression, significant government economic regulation had already taken place in most major economies, as workers and employees in all industries organized themselves into trade unions to demand better living standards, as well as various checks and balances to the perceived "tyranny of laissez-faire". Workers succeeded in obtaining minimum wage laws and a progressive income tax in some countries. International trade barriers were also in the policy pipeline (e.g. Smoot-Hawley Tariff in the USA). So, according to the above-mentioned libertarians, the economies that suffered from the Depression, although possibly closer to laissez-faire than any other economic models that were ever used, still did not embrace pure capitalism.
Post WWII
In the Cold War era, state regulation and involvement in the economy reached a peak. Such policies were implemented by most countries, no matter what side of the Iron Curtain they were on. In this environment laissez-faire economics assumed a stronger ideological edge, especially through the Austrian School (cf. Chicago School) and such luminaries as Ludwig von Mises and Friedrich Hayek. Some argued that if the Free World was truly defined by its freedom, then its citizens should have full economic freedoms. Hong Kong was the first Free World territory to embrace laissez-faire economic policy in this era, having officially followed that path since the 1960s and perhaps earlier. During the late 1970's, the Free World experienced many economic difficulties. The government of Prime Minister Margaret Thatcher in the United Kingdom believed that lessening the power of the state in the economy would improve things. Following Thatcher's lead, President Ronald Reagan of the United States, Finance Minister Roger Douglas of New Zealand and Chile's military ruler General Augusto Pinochet also followed a generally laissez-faire path during the 1980's. Other Western leaders implemented more laissez-faire policies at this time, but not to the same extent as these countries. Modern industrialised nations today are not typically representative of laissez-faire principles, as they usually involve significant amounts of government intervention in the economy. This intervention includes minimum wages, significant redistribution through tax, welfare and subsidy programs, government ownership of businesses, regulation of market competition and economic trade barriers. However, much less intervention occurs than did before Thatcher and Reagan's changes were made.
See also
- Economic liberalism
- Liberalism
- Manchester capitalism
Contrast:

- Central planning
- Collectivism
- Communism
- Corporatism
- Dirigisme
- Economic Democracy
- Fascism
- Government ownership
- Market socialism
- Mixed economy
- Planned economy]
- [[Socialism]]
- [[Statism
- Third way Category:Economic ideologies ja:レッセフェール

Political economy

Political economy was the original term for the study of production, the acts of buying and selling, and their relationships to laws, customs and government. It developed in 18th century as the study of the economies of states (also known as polities, hence the word "political" in "political economy"). In contradistinction to the theory of the Physiocrats, in which land was seen as the source of all wealth, political economists proposed the labour theory of value (first introduced by John Locke, developed by Adam Smith and later Karl Marx), according to which labour is the real source of value. Political economists also attracted attention to the accelerating development of technology, whose role in economic and social relationships grew ever more important. In the late 19th century, the term "political economy" was generally superseded by the term economics, which was used by those seeking to place the study of economy on a mathematical and axiomatic basis, rather than studying the structural relationships within production and consumption. (See marginalism, Alfred Marshall) In the present, political economy refers to a variety of different, but related, approaches to studying economic behavior, which range from combining economics with other fields, to using different fundamental assumptions which challenge those of orthodox economics:
- Political economy is most commonly used to refer to interdisciplinary studies that draw on economics, law and political science in order to understand how political institutions and the political environment influence market behavior.
- Within political science, the term refers to modern liberal, realist, marxian, and constructivist theories concerning the relationship between economic and political power among states. This is also of concern to students of economic history and institutional economics.
- "International political economy" (IPE) is an interdisciplinary field comprising a variety of approaches that are concerned with international trade and finance, and state policies that affect international trade, such as monetary and fiscal policy. In the U.S. these approches are associated with the journal International Organization, which became the leading journal of international political economy in the 1970s under the editorship of Robert Keohane; subsequent editors Peter J. Katzenstein and Steven Krasner. They are also associated with the journal The Review of International Political Economy (RIPE), which is edited by both British and U.S. scholars.
- Economists often associate the term with approaches using game theory.
- Others, especially anthropologists, sociologists and geographers, use the term "political economy" to refer to neo-Marxian approaches to development and underdevelopment set forth by Andre Gunder Frank and Immanuel Wallerstein.

History of the term

The term political economy originally meant the study of the conditions under which production was organized in the nation-states of the new-born capitalist system. The term was first used in England in the 18th Century, to replace the earlier approach of the (French) physiocrats. The main exponents of Political Economy are Adam Smith, David Ricardo and Karl Marx. In 1805 Thomas Malthus became Britain's (and possibly the world's) first professor of political economy at the East India Company College at Haileybury in Hertfordshire. By the second half of the 19th century, laissez-faire theorists started to argue that the state should not regulate the market; that politics and markets operated according to different principles; and that political economy should be replaced by two separate disciplines, Political science and Economics, in a move that has been seen, especially by Marxist thinkers, as the beginning of the fragmentation of social science. Around 1870 neoclassical economists such as Alfred Marshall began using the term economics instead of "political economy." Institutions which taught politics and economics jointly, such as Oxford University, did not adopt this terminological preference and appointed the mathematical economist Francis Edgeworth to the Drummond Chair of Political Economy in 1891. The term "liberal" during the 18th and 19th centuries meant the removal of barriers to trade and capitalist economic activity. This included ideas such as reduction of tariffs, standardized systems of weights and measurements, the metric system, central banking and the establishment of a gold standard to facilitate trade. These theories were part of the move to the first age of Globalization based on the theory of comparative advantage put forward by Ricardo. The present-day term "classical liberal" refers to 19th century liberalism. At the same time with the rise of classical liberalism, and in opposition to it, the theories of socialism and communism developed, which stated that unregulated ("laissez-faire") capitalism, the kind of system advocated by the classical liberals, could not correctly allocate resources and products without resulting in unsustainable misery for the vast majority of the people. In the socialist school, the most important thinker was Karl Marx. Marx regarded himself as being in the tradition of Adam Smith, focusing on the labour theory of value, on structures of production and the struggle to control those structures (which he named "class struggle"). Political Economy remained in use for the study of economies seen through the lens of government action, even though many economists also study the effects of government.

The scope of political economy

Political economy is centrally focused on the development of the polity. It pays particular attention to whether the polity is running a surplus or a deficit, since in the view of most political economy, any deficit must be met by selling assets, such as gold or other capital, to other polities - or by some form of borrowing or externalization. Political economy, then, studies the mechanism of human activity in organizing material, and the mechanism of distributing the surplus or deficit that is the result of that activity. Note the difference between this paradigm and that of economics which sees human wants as unlimited, resources as generically scarce, historical context as not particularly important, and income distribution issues as less important than efficiency and growth. While for some there is no difference between the two terms, for others the difference is one of basic method. Economics studies trade-offs through measurable values, whereas political economy focuses on structural relationships. However, there is no generally accepted distinction between these terms, and they are most often used on a case by case basis.

Central concepts of political economy

Political economy studies the means of production, specifically capital, and how this manifests itself in economic activity. Whereas economics focuses on price, and sees production and consumption as "effects" on price, political economy sees economics as a manifestation of underlying reality which is effected by policy and law. The division into "use value" and "exchange value" makes a clear distinction between what would now be called "value" and "price" or "capital value" and "commodity value", in contrast to the denial of intrinsic values separate from prices in, for example, neoclassical economics. In political economy, labour is used to mean human activity which produces change, and capital is the means by which the change from that labour is made greater. The results of labour are commodities which are traded and consumed, which leads to the problem of disposal of the results of consumption. Private exchange occurs in the market, and is based on a legal framework of possession and title, this is also called the private sector. Government exchange occurs through politics, and influences market decisions through policy. The government as a player in the market economy is called the public sector. Political economy in its normative form focuses on the necessities of production, exchange, consumption and disposal, referred to as infrastructure. In its descriptive form it focuses on the classification and detailing of the workings of production, for example as in David Ricardo in On the Principles of Political Economy [http://www.econlib.org/library/Ricardo/ricP.html]. Political economy, because it is concerned with a view of underlying reality, is often required to be multi-disciplinary in its approach. Political economy often talks in terms of "systems" of economy, either Wallerstein's world system or emergent systems, and the free market is often an important subject of discussion.

Production

In political economy, production refers to the use of labour, with the aid of capital, to create a determinate and recognizable thing which has use, or utility (see Utilitarianism). Studying the relationship of production is crucial to political economy, since economics only recognizes general demand, while production is often bottlenecked by specific resources, and political activity is often centered around securing of resources perceived to be creating a bottleneck. Political economy views production as the central activity of an economy, and views the labour available as the ultimate bottleneck for state activity. The polity must supply its needs from its available stock of labour, and thus must have sufficient capital available to allow that labour to be sufficient. Thus the basic equation of political economy may be phrased as: Labour involves not only time in the abstract sense, but the realities of human beings, both as social and economic beings. The basic formula of political economy was described by Adam Smith in his The Wealth of Nations: capital(labour) - investment - consumption = surplus/deficit Capital is the function, into which is put labour. Investment is the amount spent developing the stock of capital, and consumption is the use of utility. A polity which has a surplus is then able to buy assets or capital from abroad, or increase investment or consumption. A polity where investment and consumption taken together are greater than the production will run a deficit, and must borrow or sell assets to make up the difference. The study of production then focuses on how capital interacts with labour, in the broad, rather than narrow sense. This is because labour must, to make use of capital, have the necessary skills and social infrastructure. In Marxian terms, social infrastructure is referred to as consciousness and societies with sufficient social infrastructure to produce what they consume and control their own capital are said to have the "objective" basis for production.

Capital

Capital may be said to be any tool which increases the ability of labour to organize material into usable form. Physical capital refers to tangible objects which, when employed, allow greater production. Intellectual capital refers to concepts, ideas, designs, theories and information which allows an individual to act with greater effectiveness. Physical capital implies an intellectual capital required to use it. Human capital can be described as the readiness of labour to use capital, and includes education, social norms, ethical understanding, networks of relationship and communication, health and general well being. Capital can be for positive production, but, in political economic terms, weapons are also capital. States pursue political economy, in no small degree, to be able to produce the capital of projecting power and force. Often the projection of force is to acquire resources required for production, or the opening of labour to be utilized in production, or to open markets for the results of national production.

Transport

Labour and resources need to be able to get to capital, and commodities need to be moved to where they can be exchanged and consumed. This creates the need for transport - of people, things and information. The need to move labour and resources to within range of capital is seen in the creation of transport grids, such as trains and roads. The need to coordinate production is seen in the creation of communication grids.

Exchange

From the view of political economy, exchange is the process where the producers of commodities or investment exchange with consumers. Each producer is also a consumer, and each consumer is also a producer. The market provides a mechanism for exchange, and money provides a medium of exchange. Consequently, the dynamics of monetary policy are a central focus of much of political economy. The infrastructure of exchange determines the range of market possibilities. Political economy views the long term goal of economic activity as the successive creation of economic rules of order that maximize human comfort and longivity. The market is essential to the division of labor at the heart of political economy. Adam Smith enumerates early in The Wealth of Nations a list of requirements for the functioning of a market, which include stability of exchange and expected rates of profit in various enterprises. The mechanisms of exchange are generally studied through a framework rooted in economics.

Consumption

Consumption is the realization of utility which is the output of production or the enhancement of productivity. This can manifest itself as the consumption of commodities (goods) or as liesure, health, freedom, or longivity. As "goods" are consumed there is a return of material organized by production back to a state of being unusable.

Disposal

Disposal is the least glamorous area of political economics, but in many respects the most vital. People produce waste. Waste, if allowed to accumulate, creates disease and other undesirable effects. Providing the infrastructure of removing that waste, or neutralizing its harmful effects, is a large fraction of the history of urban development. As Fiorello LaGuardia famously remarked "there is no Republican or Democratic way to collect the trash on time". Sewage systems, garbage collection, clean air laws and recycling are all results of the need to dispose of after effects, and take up a significant fraction of the political life of most localities. On the scale of political economy, wastes produced often require more space or expertise than can be managed locally. Green economics and other fields of study that concentrate on externalization of costs focus heavily on the carry capacity of ecological systems and the effect of human activity in them, this includes the effects in human terms of global warming, ecological diversity, soil erosion, water quality, epidemiology and pollution.

Disciplines which relate to political economy

Because political economy is not a unified discipline, there are a variety of studies that use the term which have overlapping subject mater, but radically different viewpoints. Sociology is the study of the effects of involvement in society on individuals as members groups, and how this changes their ability to function. Many sociologists begin from a framework of production determining relationship drawn from Karl Marx. Anthropology often studies political economy by studying the relationship between the world capitalist system and local cultures. Psychology is frequently the fulcrum around which political economy centers, in that it deals with decision making, not as being a black box whose effects are seen only in price decisions, but as being a source of study, and therefore the assumptions in a model of political economy. History since it documents change over time, is often used as a means of arguing in political economy, and often historical works have a framework of political economy which they assume or argue as the basis for the narrative structure. Economics, because it studies activity and price relationships and the effects of scarcity, grew out of political economy. It is often used in political economy to argue policy effects and study the results of actions, and it is often in opposition to political economy, in that many, if not most, practicing economists see political economy as being a hindrance to the operation of economic forces. From the point of view of political economy, economics is a branch of the entire study, and economics has, at its basis, a theory of political economy which should be open to examination. Law since it concerns the creation of policy, or the mediation of policy ends through political acts which have specific individual results, is seen, in political economy, as both political capital and social infrastructure, on one hand - and as the result of the sociology of a society on the other. Ecology is often involved in political economy, because human activity is one of the single largest effects on the environment, and because it is the suitability of the environment for human beings which is one of the central concerns of most human beings. The ecological effects of economic activity on the environment have spurred the creation of a great deal of research studying means of changing the incentives balance of the market economy. This work is particularly controversial in its interaction with economics, since it questions the fundamental econometric assumptions of market economics and their basic validity. See the commons.

General paradigms of political economy

Political economists are divided over the nature of two paradigms: the paradigm of distribution and the paradigm of production. These paradigms may be related, especially at the extremes, but there are a vast number of individuals who hold almost diametrically opposite views on these two paradigms in the same context.

Paradigms of distribution

Societies produce more than isolated individuals, and labour with the aid of capital produces more than labour alone. Societies also generate more waste, and capital makes demands for investment and organization. The first can be referred to as the social surplus and capital surplus respectively, and the second as social costs and capital requirements. One of the most important social costs is war. Indeed the difference between political economy and economics is that, in economics, war is a temporary alteration in price variation, the old joke being that "World War III, should it come, will be noted in two sentences in the Wall Street Journal, with an article inside on its effect on soybean futures." The paradigms of political economy may be classified based on their view of distributing the social costs and benefits, and the capital costs and benefits. Libertarianism: Libertarianism denies that there is any significant difference between capital surplus and social surplus: it claims that all improvements to productivity are capital surplus and belong to the individual. Libertarianism further contends that by paying for inputs, an individual has already paid for the social cost of their activity, and that to avoid disutility, individuals will rationally trade effects of economic activity that are adverse. Libertarians, therefore, generally believe in an absolute standard of value, generally the gold standard. They point to John Locke, Thomas Jefferson, Adam Smith and Ralph Waldo Emerson as antecedents, and argue that they are merely continuing "classical liberalism". In the libertarian framework, since there is no social surplus, any attempt to distribute is unjustified - that is, economics is separate from the political sphere. Libertarianism's main school of thought was the Austrian School of economists, and found expression in laissez-faire economics. Libertarians may be said to be economic and social extreme individualists. Important, or at least widely cited, thinkers in Libertarian thought include Ayn Rand, Friedrich von Hayek, Franz Oppenheimer and Ludwig von Mises. Liberalism: Liberalism believes that capital surplus should accrue to the individual, but that social surplus and cost should be distributed as widely as feasible within the context of maintaining the individuals' expectation to the surplus of their own efforts. Liberals therefore support state intervention in political economy to measure and distribute social costs and benefits. Many thinkers are, therefore, held in common between libertarianism and liberalism - since when the social surplus is perceived of as being low, or in particular areas, liberals believe that there is nothing to distribute. Liberals also agree with Conservatives about the need to protect against the ill effects of social disorganization, even though the manner of doing so differs. Liberalism sees the expansion of individual rights (from the philosophy of Jean-Jacques Rousseau and Thomas Jefferson) as being the entitlement to a certain reasonable standard of life for all members of society. From the pragmatic viewpoint, this is the necessity of human capital sufficient to engage in the full range of production. Liberalism has been proposed by such thinkers as John Dewey, John Rawls, Isaiah Berlin, economists such as John Maynard Keynes and educators such as Mortimer Adler. Conservatism: Conservatism believes that capital surplus accrues to the individual, and that there is little or no social surplus, but that there are significant social costs, which must be distributed across the society. Examples of this include military service, standards of personal morality and charity. Conservative thought became established in English philosophy with the work of Thomas Hobbes, but became a political doctrine with Edmund Burke. Conservatism in the modern period looks to libertarian economic thinkers, but toward the absolute need for social structure enforced by normative institutions such as religion and nationalism. Prominent modern schools of Conservative thought include the work of Leo Strauss in the USA. Socialism: Socialism believes that the ratio of capital surplus to social surplus is very low, that most of the surplus involved in human production is predicated on the producer being a member of society, and therefore argues for social control of the means of production and an egalitarian distribution of wealth, in order to provide benefits to all members of a society. Socialism evolved from critiques of human misery in the late 18th century, such as those of the political philosopher Fourier. In the view of the socialists, the market could never efficiently distribute the social surplus, and private ownership merely substituted one form of tyranny for another (the tyranny of the capitalists replaced the tyranny of feudal lords). In the present day, many social democratic parties believe in some form of socialism which requires that corporations and major public works be guided by political as well as economic factors, for social goals. In addition, most s

Free market

Origins

Theory

Practice

The degree of market freedom

Ideology and ethics

See also

Contrast

External links

Coercion

Overview

Means

Physical coercion

Psychological coercion

Usage

Economic coercion

Aims

Predatory coercion

Pedagogic and thought coercion

Religious coercion

Ideological coercion

Disciplinary coercion

Scope

Specific coercion

Unspecific coercion

Effects

Legal effects

Exculpation and nullity

Psychological effects: the effectiveness of thought coercion

Social effects: coercion and progress

Whig-liberal tradition

Platonic tradition

Ethical effects: coercion and freedom

Coercion as the negation of freedom

Coercion as a source of freedom

Examples of coercion

References

Economist

See also

Nation-state

Characteristics

What states existed before nation-states?

Examples of nation-states

Minorities and irredentism

Conflicting nationalisms

History

See also

Laissez-faire

Economic Theory

History

Pre WWII

Post WWII

See also - Economic liberalism - Liberalism - Manchester capitalism

Contrast:

Political economy

History of the term

The scope of political economy

Central concepts of political economy

Production

Capital

Transport

Exchange

Consumption

Disposal

Disciplines which relate to political economy

General paradigms of political economy

Paradigms of distribution

See also
- Economic liberalism
- Liberalism
- Manchester capitalism