PART A
Answer 1: John Locke talked about law and property and how the two are related. Locke believed that law was made for two reasons. To protect property from government and to protect it from citizens. He believed that the extent of the government power is till outside a person’s property and that any government has no arbitrary right to seize property or apply tax, and such characteristics would show tyrannies. He believed that man had complete control over his property, which enabled him to be free and do what he pleases on his property. John Locke claimed that the right to own property made man free and gave the security of being protected in his property and liberty to look after his own self-interests. This right came to us from the fact that God gave the world to men in common and it was given to them so they could benefit and live off it, but you can’t believe that God wants it to stay that way, instead because he wanted us to reap the fruits of the world, he did not mean it to remain common and uncultivated but rather it was to give the industrious or rational to benefit from it. Locke believes God didn’t contemplate scarcity and greed, which is human made. He believes scarcity is a result of ignorance and greed rather than a plain shortage of supplies.
However Karl Marx spoke out against property and exploitation. He believed owning of property open the doors to exploitation of fewer means. Karl argued that the freedom illustrated by the free market, wasn’t really freedom but rather a ploy or hoax put about by the bourgeoisie to make more capital and finance their social and political authority and the fact that they were using law and government as means to securing capital provided proof that the freedom of the market was a illusion, the proletariat were falling for. Karl Marx argued that law should never be higher than the structure of society, and basing our lives according to the law was not the way rather the law should be based on the society and it should help empower the society as a whole and not individuals.
Answer 2: Ronald Coase wrote “The problem of social cost” in 1960. Coase believed the without any transaction costs and with well-defined property rights, negotiation will leave to more efficient resolutions. Coase introduced the “reciprocal harm” notion in terms of two entity’s “A” and “B”. In which “A” harms “B”. Coase believes the problem is far greater than “A” harming “B”, the problem cannot simply be solved by restricting “A” from the activity. This is due to the reciprocal nature of the problem; “A” harms “B” but restricting “A” from doing the activity that harms “B” would harm “A”. Thus, in order to make the right decision about it, we must analyze which harm is more serious. In economic terms, we would need to analyze that is the gain from stopping “A” is greater than the loss of not stop “A”. He believed these decisions should be calculated in two ways, firstly the marginal utility of it to the individual and the effect on the economy of such decision.
Coase’s analysis does privilege the economic reasoning over the legal, Coase believed that economist are focused on how to maximize the value of production, and judges base their decisions on the legal rights and thus, economists are better suited to handle decisions. I do agree with Coase’s understanding of harm, because it provides a better way to analyze a problem and fix it based on what’s best for society and the individual.
Answer 3: Hanson and Yosifon believed that we act not out of rationality but because of our situations. Yosifon and Hanson defined situational character as a person who does not act with total freedom and does not often get to choose the stage. It is a person that makes his or her decision because of the situation they are in. However power economics can be defined as market actors using power or influence to manipulate or situationally manipulate operations or out comes.
I personally faced a decision that made me act as a situational character in accordance with Hanson, when I was unable to give my phone bill for 2 months, I was forced by my situation to eventually buy the phone I had on contract and finish my contract or else my credit would have been effected. Thus, because of my situation I had to make a decision important to my finances. A example of power economics is the company Apple using their influence to remove the earphone input slot off their phones, and created the need for Bluetooth earphones. Then Apple made Bluetooth headphones to go with the new technology. The used their company’s sphere of power and influence to manipulate consumer tastes and choices.
I believe situation characters do exist, and although a person would wish to act rationally, he/she is forced or coerced by their situation to make a decision’s of economic importance.
Answer 4: Galbraith explains that economics today is a system of personal belief. Being a critic of the neoclassical approach he argues that the system of economics should be more beneficial for the consumer and the public. He believes politicians and economists alike are using economics to further their agenda. He believes the government and economists control the economy and pass it of as a science to the people. The government passes this of as the best and most efficient way of allocating our resources but they are actually controlling it. Galbraith believes that producers can control what the people want and don’t want because at the end of the day the producer has to produce, and it is his choice what to produce. The need to control human likes comes from the modern industrial life we live in, the companies all have agendas and by limiting or choosing to produce one item instead of the other helps them fulfill their agendas. Galbraith challenged the orthodox economic thought in two ways. Firstly, by claiming that it is not a science but a system run by economists and politicians to control us and fulfill their agenda. Secondly, he challenged the theory of the rational man, by explaining that because our tastes and desires are being manipulated and producer sovereignty exists. Consumer sovereignty meaning consumer choice and likes are not completely self-determining but are caused by the situation the system puts us in. Consumer sovereignty cannot exist and thus we cannot act as a rational economic man because the system is not in our control.
PART B
Neo-classical economists are economist’s that study economics’ methodically via mathematical term. Neo-classical economists define the term homo economicus or the rational economic man. This economic mad, is a free individual who pursues his own self-interests, knows what his self-interests are and can measure his own self interests in economic terms and act accordingly. Adam smith who described this self-interest as a part of nature explained the term.
However, Mercuro and Medema explain institutional economics has been a very popular field of study and it is a alternate approach compared to the neo-classical approach. Institutional economics is the study of the institutions of the economic system. Some early institutional economists like Veblen defined institutions as “widely followed habits of thought and the practices which prevail at any given period.” Herbert Davenport defined it as “ A working consensus of human though or habits – a generally established attitude of mind and a generally-adopted custom of action as, for example, private property, inheritance, government, taxation, competition and credit.”
Instituantionist believe economic behavior is not based on our self-interest or motivation but is the result of the institutions and environment of the individual.
They believe that that along with history economics also evolves and change is what defines our economy and society. They believe that technological change marks our era and technological changes dictate the nature of our economy. Institutional economist’s claim that the neo-classical approach is wrong about the market being self-regulating and it is comprised of competition and conflict. Due to the market being so complex they believe economic analysis needs more than just mathematical methods but also needs law, psychology and anthropology to study and understand the human economic behavior better. Institutional economists power is the ability to influence and it is important to calculate it in a individuals social position or capacity to act, because power comes from influence we cannot believe that everyone is the same in society.
The critical race theory argue against neo-classical economists believing much like the institutional economist that the economy is based on human and social conflict. They believe that the legal system has been corrupted by the orthodox law and economics and has voided its analysis of ethics and morality the result of which is just to their standards but not just at all. Critical theory is involved with redistribution of wealth and power and de-racializng society.
The Ferguson report was research conducted by the US department of justice to investigate the murder of Michael brown by police in august 2014. It outlines the practices of the city’s police were focused more on revenue than public safety. This resulted in compromised institutional character, i.e. the integrity and the character on the institution was being called to question. It focus on revenue led to unconstitutional policing. Racial discrimination was found, as officers saw African-American people as potential offenders and sources of revenues rather than people who needed t be protected. The report highlights how racial and class differences made the police treat individuals differently. The power the police were endowed with and the institutional focus of their organization was revenue, which lead to less than desired policing standards. The economic relationship they shared was focused on revenue and not social benefit, which is why policing standards, fell.
The neo-classical approach concentrates on mathematical economics which provides accurate mathematical data, but the institutional and critical approach offer a more in depth understanding of the economic behavior of humans and helps us solve and highlight important social issues as well.
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