pge liberalism

8/8/2019 PGE Liberalism

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LiberalismiberalismiberalismiberalismI. Three Theories and Three. Three Theories and ThreeQuestionsuestionsuestionsuestionsII. LiberalismI. LiberalismA Th Q iTh Q i. Three Questions. Three Questions

B. Policy Implications. Policy ImplicationsIII. VariantsII. VariantsIV. Strengths and WeaknessesV. Strengths and Weaknesses Adam SmithIV. Strengths and WeaknessesV. Strengths and Weaknesses


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Liberalismiberalismiberalismiberalism -- Mercantilismercantilism (Economic Nationalism)(Economic Nationalism) Structuralismtructuralism (Marxism)(Marxism)


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How does the economy work?ow does the economy work?ow does the economy work?ow does the economy work? FUNCTIONFUNCTION

What is the economy for?hat is the economy for?

3. What is the relationship between politics and. What is the relationship between politics and. What is the relationship between politics and. What is the relationship between politics andeconomics?conomics?

STATESTATE--MARKET NEXUSMARKET NEXUS


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Liberalism: How does theLiberalism: How does the

economy work?economy work?

..

Markets use PRICES to connect buyers toMarkets use PRICES to connect buyers to

Cumulated across whole economy, meansCumulated across whole economy, meansresources put to est useresources put to est use

If rely on markets, get higher economic growthIf rely on markets, get higher economic growth

(because of more efficient use of resources).(because of more efficient use of resources).


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(Relationships between

prices and quantities)

Shifts in Supply and

Demand Curves


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Liberalism: How does the economyLiberalism: How does the economy

work?work?

--

interestinterest

,,

brewer, or the baker that we expect our dinner, butbrewer, or the baker that we expect our dinner, but

from re ard to their own interest.from re ard to their own interest. Adam SmithAdam Smith

Liberals see the collective interest as being bestLiberals see the collective interest as being best

interest (tempered by competition)interest (tempered by competition)

Invisible HandInvisible HandInvisible Handnvisible Hand


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mprove e econom c con on omprove e econom c con on o

ACTORS (individuals, firms, entrepreneurs)ACTORS (individuals, firms, entrepreneurs)

Best achieved by increasing OVERALL growthBest achieved by increasing OVERALL growth

(Bigger economic pie)(Bigger economic pie) Less concerned with distribution of wealthLess concerned with distribution of wealth

Market ustice v. distributive usticeMarket ustice v. distributive ustice

Poor best served by a strong economyPoor best served by a strong economy


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Liberalism: What is the relationshipLiberalism: What is the relationship

between politics and economics?between politics and economics?

((government failureovernment failure)) LaissezLaissez--faire laissezfaire laissez-- asser let be let assasser let be let ass

State which governs least governs bestState which governs least governs best

Government sets rules of the game (i.e., competitionGovernment sets rules of the game (i.e., competitionpolicy) and serves as a referee (i.e., antitrust enforcement)policy) and serves as a referee (i.e., antitrust enforcement)

Direct intervention ONLY with:Direct intervention ONLY with:

bli dli d public goodsublic goods n v s e an nexc u a en v s e an nexc u a e (clearlear) market failuremarket failure (when markets fail to bring about socially(when markets fail to bring about socially

desirable outcomesdesirable outcomes

EX: Basic (nonEX: Basic (non--patentable) researchpatentable) research


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Liberalism: Three AnswersLiberalism: Three Answers1. How does the economy work?. How does the economy work? MARKETS guided by PRICES increase economic efficiencyMARKETS guided by PRICES increase economic efficiency2. What is the economy for?. What is the economy for? To increase INDIVIDUALS economic wellTo increase INDIVIDUALS economic well--beingbeing

3. What is the relationship between politics and. What is the relationship between politics andi ??conomics?conomics? The two realms are/should be SEPARATEThe two realms are/should be SEPARATE

IF governments dont interfereIF governments dont interfere increased economic growthincreased economic growthincreased wealthincreased wealth increased personal wellincreased personal well--beingbeing

Markets allow EVERYONE to WIN!!!arkets allow EVERYONE to WIN!!!


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Orthodox Liberalismrthodox Liberalismrthodox Liberalismrthodox Liberalism Laissezaissez-FaireaireInterventionist Liberalism (Keynesianism)nterventionist Liberalism (Keynesianism)nterventionist Liberalism (Keynesianism)nterventionist Liberalism (Keynesianism) Developed by John Maynard Keyneseveloped by John Maynard Keynes Countercyclical Demand Managementountercyclical Demand Managementountercyclical Demand Managementountercyclical Demand Management

International Liberalism (Hegemonic Stability)nternational Liberalism (Hegemonic Stability) International Public Goodsnternational Public Goodsnternational Public Goodsnternational Public Goods Free Rider Problemree Rider Problem

Ordoliberalism (social market economies)rdoliberalism (social market economies)rdoliberalism (social market economies)rdoliberalism (social market economies)


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Collective BehaviorCollective Behavior

Clear Guide to PolicyClear Guide to Policy--MakersMakers Maximizes Personal FreedomMaximizes Personal Freedom


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Favors Efficiency over Equity (or other values)Favors Efficiency over Equity (or other values)

ssumes a eve ay ng essumes a eve ay ng e

Role of theRole of the State (especially in current crisis)State (especially in current crisis)

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